<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ONSALE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7389 77-0408319
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
----------------
1861 LANDINGS DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 428-0600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JOHN F. SAUERLAND
CHIEF FINANCIAL OFFICER
ONSALE, INC.
1861 LANDINGS DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 428-0600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
----------------
COPIES TO:
LAIRD H. SIMONS III, ESQ. THOMAS A. BEVILACQUA, ESQ.
MARK C. STEVENS, ESQ. THERESE A. MROZEK, ESQ.
ADAM W. WEGNER, ESQ. KEITH M. ROBERTS, ESQ.
ROBERT Y. CHOW, ESQ. BROBECK, PHLEGER & HARRISON LLP
FENWICK & WEST LLP TWO EMBARCADERO PLACE
TWO PALO ALTO SQUARE 2200 GENG ROAD
PALO ALTO, CALIFORNIA 94306 PALO ALTO, CALIFORNIA 94303
(415) 494-0600 (415) 424-0160
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
----------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$0.001 per share....... 3,220,000 shs. $10.00 $32,200,000 $9,757.58
================================================================================
</TABLE>
(1) Includes 420,000 shares that the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(a) solely for the purpose of calculating
the amount of the registration fee.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED DECEMBER 20, 1996
2,800,000 SHARES
[LOGO OF ONSALE(TM)]
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by ONSALE,
Inc. ("ONSALE" or the "Company"). Prior to this offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price will be between $8.00 and $10.00 per
share. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The Company has applied to have
its Common Stock approved for quotation on the Nasdaq National Market under the
symbol "ONSL."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
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<S> <C> <C> <C>
Per Share..................................... $ $ $
Total (3)..................................... $ $ $
================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting offering expenses payable by the Company estimated at
$850,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 420,000 additional shares of Common Stock, solely to cover over-
allotments, if any. If the Underwriters exercise this option in full, the
Price to Public will total $ , the Underwriting Discount will total $
and the Proceeds to Company will total $ . See "Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them, and subject to their right
to reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1997.
-----------
MONTGOMERY SECURITIES ALEX. BROWN & SONS
INCORPORATED
, 1997
<PAGE>
[PICTURES ]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus.
THE COMPANY
ONSALE is a leading electronic retailer pioneering a new sales format, the
interactive 24-hour online auction, designed to serve as an efficient and
entertaining marketing channel. The Company currently specializes in selling
refurbished and close-out computers, peripherals and consumer electronics over
the Internet's World Wide Web (the "Web"). ONSALE's online auctions provide an
exciting sales format that leverages the unique characteristics of the Web,
such as interactivity and a sense of community. The Company believes that the
consumer enthusiasm generated by its auction format, the emergence of the
Internet as an effective new sales medium and the Company's highly automated
infrastructure combine to create a significant retailing opportunity.
ONSALE has sold over $35 million of merchandise to more than 50,000 customer
accounts since its first auction in May 1995. To date, the Company has
auctioned over 200,000 merchandise items, of which over 65,000 were auctioned
in the third quarter of 1996. More than 1.0 million unique Internet users have
visited ONSALE's electronic auctions. Over 100,000 of these users are
registered bidders, with over 30,000 registering in the third quarter of 1996
alone.
The Internet is an increasingly significant global medium for communication
and commerce. International Data Corporation ("IDC") estimates that the total
value of goods and services purchased on the Web will increase from $318
million in 1995 to $95 billion in the year 2000. The Internet is evolving into
a unique marketing channel, just as retail stores, mail order catalogs and
television shopping have previously evolved as unique channels.
The Company believes the Internet is particularly well suited for selling
certain types of merchandise, such as refurbished and close-out merchandise,
because a large target market can be reached quickly and inexpensively. The
disposal of refurbished and close-out merchandise represents a substantial
burden on many manufacturers because such merchandise rapidly declines in value
making it difficult to establish a market price. Manufacturers have an interest
in accessing a distribution channel that enables them to dispose of significant
quantities of merchandise quickly and at the best prices possible, without
affecting their traditional sales channels.
The Company's auction sales format leverages a chief advantage of the
Internet--the ability to change dynamically merchandise mix, prices and visual
presentations. Currently, the Company auctions over 1,500 items each week.
These items generally range in price from $50 to $1,500 and are sold in
quantities of one to several hundred per auction. Customers can bid 24 hours a
day, 7 days a week. As customer bids are received, ONSALE's Web pages are
instantly updated to display the current high bidders' initials, city and
state, and an optional comment to personalize the bidding. The entire auction
process, from the posting of the items for auction through notification of the
winners, has been automated by the Company through internally developed
proprietary software. In addition, the Company has developed proprietary
software that automates product fulfillment functions, including billing,
shipping and tracking.
The Company's objective is to be one of the dominant retailers on the
Internet. The Company intends to leverage its position as a leading Internet
retailer of refurbished and close-out merchandise by enhancing its brand
recognition, continuing to provide a compelling shopping experience, developing
incremental revenue opportunities and building on its leading technology.
Moreover, ONSALE intends to increase the percentage of merchandise it purchases
for its own account with the goal of expanding gross margins and improving
customer service.
In addition, ONSALE believes that relationships with merchandise vendors are
critical to its long-term success. The Company employs a staff of experienced
buyers from the computer and consumer electronics industries to build
relationships with and purchase inventory from manufacturers and other vendors.
The Company intends to hire additional merchandise buying staff and enhance its
automated systems in order to expand and strengthen such relationships.
ONSALE's merchandise currently includes brands such as AT&T, Aiwa, Apple,
Canon, Compaq, Dell, Hewlett-Packard, Intel, JVC, Kenwood, Lexmark, NEC,
Packard Bell, Seagate, Sega, Sherwood and Toshiba.
3
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered by the Company................ 2,800,000 shares
Common Stock to be outstanding after this offering. 16,648,060 shares(1)
Use of proceeds.................................... Working capital and other
general corporate
purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol............. ONSL
</TABLE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
QUARTER ENDED INCEPTION NINE MONTHS
--------------------------- (JULY 1994) TO ENDED
MAR. 31, JUNE 30, SEPT. 30, DECEMBER 31, SEPTEMBER 30,
1996 1996 1996 1995 1996
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<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenue.......... $ 577 $ 1,810 $ 3,576 $ 140 $ 5,963
Gross profit........... 159 430 911 113 1,500
Income (loss) from
operations............ 17 111 115 (440) 243
Net income (loss)...... 15 100 106 (440) 221
Net income (loss) per
share(2).............. $ 0.00 $ 0.00 $ 0.01 $ (0.03) $ 0.01
Shares used to compute
net income (loss) per
share(2).............. 15,221 15,221 15,221 15,221 15,221
SUPPLEMENTAL FINANCIAL
DATA:
Gross merchandise
sales(3).............. $ 1,792 $ 5,290 $ 9,246 $ 1,252 $ 16,328
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------
PRO AS
ACTUAL FORMA(4) ADJUSTED(5)
--------- -------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................ $ 3,216 $ 4,666 $ 27,252
Working capital.......................... 1,883 3,829 26,415
Total assets............................. 4,291 5,741 28,327
Long-term debt........................... -- -- --
Total stockholders' equity............... 2,172 4,118 26,704
</TABLE>
- --------
(1) Based on shares outstanding as of September 30, 1996. Includes 608,730
shares issued upon the exercise of outstanding warrants, which will occur
prior to the closing of this offering. Does not include 1,196,760 shares
issuable upon the exercise of options outstanding as of such date under the
Company's 1995 Equity Incentive Plan, at a weighted average per share
exercise price of $0.31, or an aggregate of 2,553,240 shares available for
future grant or issuance under the Company's employee benefit plans. See
"Management--Director Compensation" and "Management--Employee Benefit
Plans."
(2) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used to compute net income (loss) per
share.
(3) Represents what the Company's total revenue would have been if sales where
the Company acted as a commissioned auction agent for its vendors ("Agent
Sales") were recorded as transactions where the Company purchased or
accepted consignment of merchandise from vendors for resale at auction
("Principal Sales"). This increased sales amount does not affect the
Company's gross profit or net income. Management believes that gross
merchandise sales provide a more consistent comparison between historical
periods and to future periods than does total revenue. Gross merchandise
sales should not be considered in isolation or as a substitute for other
information prepared in accordance with generally accepted accounting
principles ("GAAP"). See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 1 of Notes to Financial
Statements.
(4) Reflects the exercise of all outstanding warrants for aggregate proceeds to
the Company of approximately $1.9 million and the repayment by the Company
of $496,000 of advances from two of its founders, both of which will occur
before the closing of this offering.
(5) Adjusted to reflect the sale of 2,800,000 shares of Common Stock in this
offering at an assumed initial public offering price per share of $9.00 and
after deducting the estimated underwriting discount and offering expenses.
----------------
Except where otherwise indicated, all share and per share data in this
Prospectus have been adjusted to reflect (i) the conversion of all outstanding
shares of Preferred Stock of the Company into shares of Common Stock, (ii) the
reincorporation of the Company as a Delaware corporation and associated changes
in the Company's charter documents and (iii) the adoption and amendment of
certain employee benefit plans, all of which will occur before the closing of
this offering. See "Description of Capital Stock." In addition, unless
otherwise indicated, all information in this Prospectus (i) assumes the
Underwriters' over-allotment option will not be exercised and (ii) reflects a
three-for-one stock split of the Company's Common Stock effective on November
1, 1996.
4
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the Common Stock offered hereby. This Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ significantly from the results discussed
in the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed below.
LIMITED OPERATING HISTORY
The Company was founded in July 1994 and began conducting auctions on the
Internet in May 1995. Accordingly, there is an extremely limited operating
history upon which to base an evaluation of the Company and its business and
prospects. The Company's business and prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in new and rapidly
evolving markets such as electronic commerce. Such risks for the Company
include a dependence on key vendors for merchandise, an evolving and
unpredictable business model, management of growth, the Company's ability to
anticipate and adapt to a developing market, acceptance by consumers of the
Company's Internet auctions and refurbished and close-out merchandise sold at
such auctions, development of equal or superior Internet auctions by
competitors, and the ability to identify, attract, retain and motivate
qualified personnel. To address these risks, the Company must, among other
things, continue to expand its vendor channels and buyer resources, manage
product obsolescence and pricing risks, maintain its customer base and attract
significant numbers of new customers, respond to competitive developments,
implement and execute successfully its business strategy and continue to
develop and upgrade its technologies and retailing services. There can be no
assurance that the Company will be successful in doing what is required to
address these risks. The Company's revenue depends substantially upon the
level of auction activity, which is, in turn, related to the availability of
merchandise from the Company's vendors and the expansion of its customer base.
This availability is difficult to forecast with any degree of certainty.
Accordingly, a substantial reduction in merchandise availability would have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company has relatively low operating
margins and plans to increase its operating expenses significantly in order to
increase the size of its staff, expand its marketing efforts, purchase larger
volumes of merchandise to be sold at auction, and support its growing
infrastructure. To the extent that increases in such operating expenses
precede or are not subsequently followed by increased revenues, the Company's
business, results of operations and financial condition will be materially
adversely affected. Further, in view of the rapidly evolving nature of the
Company's business and its extremely limited operating history, the Company
believes that period-to-period comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of
future performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results have fluctuated in the past, and are
expected to continue to fluctuate in the future, due to a number of factors,
many of which are outside the Company's control. These factors include (i) the
Company's ability to attract new customers at a steady rate, manage its
inventory mix and the mix of products offered at auction, meet certain pricing
targets, liquidate its inventory in a timely manner, maintain gross margins
and maintain customer satisfaction, (ii) the availability and pricing of
merchandise from vendors, (iii) product obsolescence and pricing erosion, (iv)
consumer confidence in encrypted transactions in the Internet environment, (v)
the amount and timing of costs relating to expansion of the Company's
operations, (vi) the announcement or introduction of new types of merchandise
or customer services by the Company or its competitors, (vii) technical
difficulties with respect to consumer use of the auction format on the
Company's Web site, (viii) delays in revenue recognition at the end of a
fiscal period as a result of shipping or logistical problems, (ix) the level
of merchandise returns experienced by the Company and (x) general economic
conditions and economic conditions specific to the Internet and electronic
commerce. As a strategic response to changes in the competitive environment,
the Company may from time to time make certain service, marketing or supply
decisions or
5
<PAGE>
acquisitions that could have a material adverse effect on the Company's
quarterly results of operations and financial condition. The Company also
expects that, in the future, it like other retailers may experience
seasonality in its business. Due to all of the foregoing factors, in some
future quarter the Company's operating results may fall below the expectations
of securities analysts and investors. In such event, the trading price of the
Company's Common Stock would likely be materially adversely affected. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RELIANCE ON MERCHANDISE VENDORS
The Company is entirely dependent upon vendors to supply it with merchandise
for sale through the Company's Internet auctions and the availability of
merchandise is unpredictable. In the first nine months of 1996, approximately
38% of the Company's gross merchandise sales was derived from merchandise
acquired from only four vendors and one vendor accounted for approximately 20%
of gross merchandise sales. The Company has no long-term contracts or
arrangements with its vendors that guarantee the availability of merchandise
for its auctions. There can be no assurance that the Company's current vendors
will continue to sell merchandise to the Company or otherwise provide
merchandise for sale in the Company's auctions or that the Company will be
able to establish new vendor relationships that ensure merchandise will be
available for auction on the Company's Web site. The Company also relies on
many of its vendors to process and ship merchandise to customers. The Company
has limited control over the shipping procedures of its vendors, and shipments
by these vendors have often been subject to delays. Although most merchandise
sold by the Company carries a warranty supplied either by the manufacturer or
the vendor and the Company is not obligated to accept merchandise returns, the
Company in fact has accepted returns from customers for which the Company did
not receive reimbursements from its vendors or manufacturers. If the Company
is unable to develop and maintain satisfactory relationships with vendors on
acceptable commercial terms, if the Company is unable to obtain sufficient
quantities of merchandise, if the quality of service provided by such vendors
falls below a satisfactory standard or if the Company's level of returns
exceeds its expectations, the Company's business, results of operations and
financial condition will be materially adversely affected. See "Business--
Merchandise," "Business--Vendor Relationships" and "Business--Customer Support
and Service."
RELIANCE ON OTHER THIRD PARTIES
In addition to its merchandise vendors, the Company's operations depend on a
number of third parties. The Company has limited control over these third
parties and no long-term relationships with any of them. The Company does not
own a gateway onto the Internet, but instead relies on an Internet service
provider to connect the Company's Web site to the Internet. From time to time,
the Company has experienced temporary interruptions in its Web site connection
and also its telecommunications access. Continuous or prolonged interruptions
in the Company's Web site connection or in its telecommunications access would
have a material adverse effect on the Company's business, results of
operations and financial condition. The Company's internally-developed auction
software depends on operating system, database and server software that was
developed and produced by and licensed from third parties. The Company has
from time to time discovered errors and defects in the software from these
third parties and, in part, relies, on these third parties to correct these
errors and defects in a timely manner. The Company does not currently own or
lease warehouse space and relies instead on contract warehouses, such as FedEx
Logistics Services ("FedEx") and Gage Marketing Group ("Gage"). Accordingly,
any service interruptions experienced by these warehouses as a result of labor
problems or otherwise could have a material adverse effect on the Company's
business, results of operations and financial condition. The Company entered
into its relationship with Gage in December 1996, intends to shift most of its
business from FedEx to Gage and will therefore be subject to all the risks
inherent in such a transition. The Company has no experience on which to
assess whether Gage will be capable of adequately providing the warehouse and
distribution services that it currently requires or will require if the
Company expands its volume. If the Company is unable to develop and maintain
satisfactory relationships with such third parties on acceptable commercial
terms, or the quality of products and services provided by such third parties
falls below a satisfactory standard, the Company's business, results of
operations and financial condition will be materially adversely affected. See
"Business--Merchandise Distribution" and "Business--Technology and
Operations."
6
<PAGE>
RISKS OF A PRINCIPAL SALES MODEL
Historically, the Company had little inventory or price risk because it
either acted as a sales agent for vendors that retained title to the
merchandise auctioned by the Company or took merchandise from vendors on
consignment. Recently, the Company has begun purchasing merchandise from
vendors and thereby assuming the inventory and price risks of these products
to be sold at auction. These risks are especially significant because the
merchandise currently auctioned by the Company--computers, peripherals and
consumer electronics--is characterized by rapid technological change,
obsolescence and price erosion. As the Company transitions to the Principal
Sales model, its success will depend on its ability to liquidate its inventory
rapidly through its auctions and the ability of its buying staff to purchase
inventory at attractive prices relative to its resale value at auction. Due to
the inherently unpredictable nature of auctions, it is impossible to determine
with any certainty whether an item will sell for more than the price paid by
the Company. Further, because minimum bid prices for the merchandise listed on
the Company's Web site generally are lower than the Company's acquisition
costs for such merchandise, there can be no assurance that the Company will
achieve positive gross margins on any given sale. If the Company is unable to
liquidate its purchased inventory rapidly, if the Company's buying staff fails
to purchase inventory at attractive prices relative to its resale value at
auction, or if the Company fails to predict with accuracy the resale prices
for its purchased merchandise, the Company may be forced to sell its inventory
at a discount or at a loss and the Company's business, results of operations
and financial condition would be materially adversely affected. See
"Business--Merchandise" and "Business--Vendor Relationships."
COMPETITION
The electronic commerce market, particularly on the Internet, is new,
rapidly evolving and intensely competitive, and the Company expects
competition to intensify in the future. The Company currently or potentially
competes with a variety of other companies depending on the type of
merchandise and sales format offered to customers. These competitors include
(i) various small Internet auction houses, (ii) a number of indirect
competitors that specialize in electronic commerce or derive a substantial
portion of their revenue from electronic commerce, including Internet Shopping
Network, a wholly-owned subsidiary of Home Shopping Network Inc., New England
Circuit Exchange, America Online, Inc. and CUC International Inc., (iii) a
variety of other companies that offer merchandise similar to that of the
Company but through physical auctions and with which the Company competes for
sources of supply and (iv) companies with substantial customer bases in the
computer and peripherals catalog business, including Micro Warehouse, Inc. and
CDW Computer Centers, Inc., which may devote more resources to Internet
commerce in the future. In particular, the Company believes Micro Warehouse,
Inc. is contemplating the introduction of an online auction site in the near
future.
Current and potential competitors have established or may establish
cooperative relationships among themselves or directly with vendors to obtain
exclusive or semi-exclusive sources of merchandise. Accordingly, it is
possible that new competitors or alliances among competitors and vendors may
emerge and rapidly acquire market share. In addition, manufacturers might
elect to liquidate their products directly. Increased competition is likely to
result in reduced operating margins, loss of market share and a diminished
brand franchise, any one of which could materially adversely affect the
Company's business, results of operations and financial condition. Many of the
Company's current and potential competitors have significantly greater
financial, technical, marketing and other resources than the Company. As a
result, they may be able to secure merchandise from vendors on more favorable
terms than the Company, and they may be able to respond more quickly to
changes in customer preferences or to devote greater resources to the
development, promotion and sale of their merchandise than can the Company. See
"Business--Competition."
MANAGEMENT OF GROWTH; LIMITED SENIOR MANAGEMENT RESOURCES
The Company has rapidly and significantly expanded its operations and
anticipates that significant expansion of its operations will continue to be
required in order to address potential market opportunities. This rapid growth
has placed, and is expected to continue to place, a significant strain on the
Company's management, operational and financial resources. From June 30, 1996
to November 30, 1996, the Company expanded from 14 to 55 employees and its
sales increased from approximately 3,200 units per week to approximately
10,000 units per week. The Company's new employees include a number of key
managerial and technical employees who
7
<PAGE>
have not yet been fully integrated into the Company's management team, and the
Company expects to add additional key personnel in the near future. In
particular, the Company intends to hire a Vice President of Merchandising.
Increases in the number of employees and the volume of merchandise sales have
placed significant demands on the Company's management, which includes only
three executive officers. In order to manage the expected growth of its
operations, the Company will be required to expand existing operations,
particularly with respect to customer service and merchandising, to improve
existing and implement new operational, financial and inventory systems,
procedures and controls, including improvement of its financial and other
internal management systems, on a timely basis, and to train, manage and
expand its already growing employee base. The Company also will be required to
expand its accounting staff. Further, the Company's management will be
required to maintain relationships with various merchandise vendors, freight
companies, warehouse operators, other Web sites and services, Internet service
providers and other third parties and to maintain control over the strategic
direction of the Company in a rapidly changing environment. In addition, the
Company expects to begin offering credit to certain of its customers and,
accordingly, will be required to manage the associated risks of accounts
receivable expansion and collection. There can be no assurance that the
Company's current personnel, systems, procedures and controls will be adequate
to support the Company's future operations, that management will be able to
identify, hire, train, retain, motivate and manage required personnel or that
management will be able to manage and exploit existing and potential market
opportunities successfully. If the Company is unable to manage growth
effectively, the Company's business, results of operations and financial
condition will be materially adversely affected. See "Business--Employees" and
"Management."
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGE; DEPENDENCE ON THE INTERNET
The Internet and electronic commerce industries are characterized by rapid
technological change, changes in user and customer requirements, frequent new
service or product introductions embodying new technologies and the emergence
of new industry standards and practices that could render the Company's
existing Web site and proprietary technology obsolete. The Company's
performance will depend, in part, on its ability to license leading
technologies, enhance its existing services, develop new proprietary
technology that addresses the increasingly sophisticated and varied needs of
its prospective customers, and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The
development of Web site and other proprietary technology entails significant
technical and business risks. There can be no assurance that the Company will
be successful in using new technologies effectively or adapting its Web site
and proprietary technology to customer requirements or emerging industry
standards. If the Company is unable, for technical, legal, financial or other
reasons, to adapt in a timely manner in response to changing market conditions
or customer requirements, or if the Company's Web site and proprietary
technology do not achieve market acceptance, the Company's business, results
of operations and financial condition would be materially adversely affected.
The success of the Company's services will depend in large part upon the
development of an infrastructure for providing Internet access and services.
The Internet could lose its viability due to delays in the development or
adoption of new standards and protocols intended to handle increased levels of
Internet activity or due to increased governmental regulation. There can be no
assurance that the infrastructure or complementary services necessary to make
the Internet a viable commercial marketplace will be developed or that, if
they are developed, the Internet will become a viable marketing and sales
channel for refurbished and close-out merchandise such as that offered by the
Company. If the infrastructure or complementary services necessary to make the
Internet a viable commercial marketplace are not developed or if the Internet
does not become a viable commercial marketplace, the Company's business,
results of operations and financial condition will be materially adversely
affected. See "Business--Industry Background" and "Business--Technology and
Operations."
8
<PAGE>
DEVELOPING MARKET; UNCERTAIN ACCEPTANCE OF THE INTERNET AS A MEDIUM FOR
COMMERCE
The market for the Company's services has only recently begun to develop and
is rapidly changing. As is typical for a new and rapidly evolving industry,
demand and market acceptance for recently introduced services and products
over the Internet are subject to a high level of uncertainty and there exist
few proven services and products. Moreover, since the market for the Company's
Internet auctions is new and evolving, it is difficult to predict the size of
this market or its future growth rate, if any. The success of the Company's
Internet auctions will depend upon the adoption of the Internet as a medium
for commerce by a broad base of consumers and vendors. There can be no
assurance that widespread acceptance of Internet commerce in general, or of
the Company's Internet auctions in particular, will occur. The Company has
historically relied on consumers and vendors who have historically used
traditional means of commerce to purchase and sell merchandise. For the
Company to be successful, these consumers and vendors must accept and utilize
novel ways of conducting business and exchanging information. In addition,
vendors must be persuaded to adopt new selling models. Moreover, critical
issues concerning the commercial use of the Internet, such as ease of access,
security, reliability, cost and quality of service, remain unresolved and may
affect the growth of Internet use or the attractiveness of conducting commerce
online. There can be no assurance that there will be broad acceptance of the
Internet as an effective medium for commerce by consumers and vendors or that
the market for the Company's Internet auctions will develop successfully or
achieve widespread acceptance. If the market for Internet-based online
auctions fails to develop, develops more slowly than expected or becomes
saturated with competitors, or if the Company's Internet auctions do not
achieve market acceptance, the Company's business, results of operations and
financial condition will be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Business Strategy."
UNCERTAIN ACCEPTANCE OF THE ONSALE BRAND
The Company believes that the importance of brand recognition will increase
as more companies engage in commerce over the Internet. Development and
awareness of the ONSALE brand will depend largely on the Company's success in
maintaining its position as a leader in Internet commerce. If vendors do not
perceive the Company as an effective marketing and sales channel for their
merchandise, or consumers do not perceive the Company as offering an
entertaining and desirable way to purchase merchandise, the Company will be
unsuccessful in promoting and maintaining its brand. To the extent the Company
expands the focus of its operations beyond the auction and sale of refurbished
and close-out computers, peripherals and consumer electronics or explores the
use of the Company's Web site as an advertising medium for services and
products of other companies, the Company risks diluting its brand, confusing
consumers and decreasing interest from vendors. Furthermore, in order to
attract and retain customers and to promote and maintain the ONSALE brand in
response to competitive pressures, the Company may find it necessary to
increase its marketing and advertising budgets or otherwise to increase
substantially its financial commitment to creating and maintaining brand
loyalty among vendors and consumers. If the Company is unable to or incurs
significant expenses in an attempt to achieve or maintain a leading position
in Internet commerce or to promote and maintain its brand, the Company's
business, results of operations and financial condition will be materially
adversely affected. See "Business--Business Strategy" and "Business--Sales and
Marketing."
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, laws
applicable to auction companies and auctioneers, and laws or regulations
directly applicable to access to or commerce on the Internet. However, due to
the increasing popularity and use of the Internet, it is possible that a
number of laws and regulations may be adopted with respect to the Internet,
covering issues such as user privacy, pricing, and characteristics and quality
of products and services. Furthermore, the growth and development of the
market for Internet commerce may prompt calls for more stringent consumer
protection laws that may impose additional burdens on those companies
conducting business over the Internet. The adoption of any additional laws or
regulations may decrease the growth of the Internet, which, in turn, could
decrease the demand for the Company's Internet auctions and increase the
Company's cost
9
<PAGE>
of doing business or otherwise have an adverse effect on the Company's
business, results of operations and financial condition. Moreover, the
applicability to the Internet of existing laws in various jurisdictions
governing issues such as property ownership, auction regulation, sales tax,
libel and personal privacy is uncertain and may take years to resolve. Any
such new legislation or regulation, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to the Company's
business, could have a material adverse effect on the Company's business,
results of operations and financial condition.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL
The Company's future performance depends to a significant degree upon the
continued contributions of members of the Company's senior management and
other key personnel, particularly its founder, President and Chief Executive
Officer, S. Jerrold Kaplan, and its founder, Vice President of Development and
Operations and Chief Technical Officer, Alan S. Fisher. The loss of either of
these individuals could have a material adverse effect on the Company's
business, results of operation and financial condition. The Company does not
have long-term employment agreements with any of its key personnel and
maintains no key person life insurance. In addition, the Company believes that
its future success will depend upon its ability to identify, attract, hire,
train, motivate and retain other highly skilled managerial, merchandising,
engineering, marketing and customer service personnel. Competition for such
personnel is intense. There can be no assurance that the Company will be
successful in attracting, assimilating or retaining the necessary personnel,
and the failure to do so could have a material adverse effect on the Company's
business, results of operations and financial condition. See "Business--
Employees" and "Management."
RISK OF SYSTEM FAILURE; SINGLE SITE
The Company's success is largely dependent upon its communications hardware
and computer hardware, substantially all of which are located at a leased
facility in Mountain View, California. The Company's systems are vulnerable to
damage from earthquake, fire, floods, power loss, telecommunications failures,
break-ins and similar events. The Company does not presently have redundant
systems or a formal disaster recovery plan. A substantial interruption in
these systems would have a material adverse effect on the Company's business,
results of operations and financial condition. The Company's coverage limits
on its property and business interruption insurance may not be adequate to
compensate the Company for all losses that may occur. Despite the
implementation of network security measures by the Company, its servers are
also vulnerable to computer viruses, physical or electronic break-ins and
similar disruptive problems. Computer viruses, break-ins or other problems
caused by third parties could lead to interruptions, delays, loss of data or
cessation in service to users of the Company's services and products. The
occurrence of any of these risks could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Business--Facilities."
INTERNET COMMERCE SECURITY RISKS
A significant barrier to electronic commerce and communications is the
secure transmission of confidential information over public networks. The
Company relies on encryption and authentication technology licensed from third
parties to provide the security and authentication necessary to effect secure
transmission of confidential information. There can be no assurance that
advances in computer capabilities, new discoveries in the field of
cryptography or other events or developments will not result in a compromise
or breach of the algorithms used by the Company to protect customer
transaction data. If any such compromise of the Company's security were to
occur, it could have a material adverse effect on the Company's business,
results of operations and financial condition. A party who is able to
circumvent the Company's security measures could misappropriate proprietary
information or cause interruptions in the Company's operations. The Company
may be required to expend significant capital and other resources to protect
against the threat of such security breaches or to alleviate problems caused
by such breaches. Concerns over the security of Internet transactions and the
privacy of users may also inhibit the growth of the Internet generally, and
the Web in particular, especially as a means of conducting commercial
transactions. To the extent that activities of the Company or third party
contractors involve the storage and transmission of proprietary information,
such as credit card numbers, security breaches could expose the Company to a
risk of loss or litigation and possible liability. There can be no assurance
10
<PAGE>
that the Company's security measures will prevent security breaches or that
failure to prevent such security breaches will not have a material adverse
effect on the Company's business, results of operations and financial
condition. See "Business--Technology and Operations."
PROTECTION OF INTELLECTUAL PROPERTY
The Company's performance and ability to compete are dependent to a
significant degree on its proprietary technology. The Company relies on a
combination of patent, trademark, copyright and trade secret laws, as well as
confidentiality agreements and technical measures to establish and protect its
proprietary rights. The Company has applied for five patents in the United
States covering various aspects of electronically managed Internet auctions
and various aspects of providing customer service via automated email. There
can be no assurance that patents will issue from any of the Company's pending
applications, that any patents granted to the Company will not be challenged
and invalidated, or that any claims allowed from pending patents will be of
sufficient scope or strength to provide meaningful protection or any
commercial advantage to the Company. The Company has registered the ONSALE(R)
trademark in the United States and claims trademark rights in, and has applied
for trademark registrations in the United States for, a number of other marks.
There can be no assurance that the Company will be able to secure significant
protection for these trademarks. It is possible that competitors of the
Company or others will adopt product or service names similar to "ONSALE" and
the Company's other trademarks, thereby impeding the Company's ability to
build brand identity and possibly leading to customer confusion. The inability
of the Company to protect the name "ONSALE" adequately would have a material
adverse effect on the Company's business, results of operations and financial
condition. The Company's proprietary software is protected by copyright laws.
The source code for the Company's proprietary software also is protected as a
trade secret. As part of its confidentiality procedures, the Company generally
enters into agreements with its employees and consultants and limits access to
and distribution of its software, documentation and other proprietary
information. There can be no assurance that the steps taken by the Company
will prevent misappropriation of its technology or that agreements entered
into for that purpose will be enforceable. Notwithstanding the precautions
taken by the Company, it might be possible for a third party to copy or
otherwise obtain and use the Company's software or other proprietary
information without authorization or to develop similar software
independently. Policing unauthorized use of the Company's technology is
difficult, particularly because the global nature of the Internet makes it
difficult to control the ultimate destination or security of software or other
data transmitted. The laws of other countries may afford the Company little or
no effective protection of its intellectual property.
The Company may in the future receive notices from third parties claiming
infringement by the Company's software or other aspects of the Company's
business. While the Company is not currently subject to any such claim, any
future claim, with or without merit, could result in significant litigation
costs and diversion of resources, including the attention of management, and
require the Company to enter into royalty and licensing agreements, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. Such royalty and licensing agreements, if
required, may not be available on terms acceptable to the Company or at all.
In the future, the Company may also need to file lawsuits to enforce the
Company's intellectual property rights, to protect the Company's trade
secrets, to determine the validity and scope of the proprietary rights of
others. Such litigation, whether successful or unsuccessful, could result in
substantial costs and diversion of resources, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.
The Company also relies on a variety of technology that it licenses from
third parties, including its database and Internet server software, which is
used in the Company's Web site to perform key functions. There can be no
assurance that these third party technology licenses will continue to be
available to the Company on commercially reasonable terms. The loss of or
inability of the Company to maintain or obtain upgrades to any of these
technology licenses could result in delays in completing its proprietary
software enhancements and new development until equivalent technology could be
identified, licensed or developed and integrated. Any such delays would
materially adversely affect the Company's business, results of operations and
financial condition. See "Business--Intellectual Property and Other
Proprietary Rights."
11
<PAGE>
CONTROL BY PRINCIPAL STOCKHOLDERS, OFFICERS AND DIRECTORS
Upon completion of this offering, the Company's officers, directors and
greater than 5% stockholders (and their affiliates) will, in the aggregate,
beneficially own approximately 80.5% of the Company's outstanding Common Stock
(78.5% if the Underwriters' over-allotment option is exercised in full). As a
result, such persons, acting together, will have the ability to control all
matters submitted to stockholders of the Company for approval (including the
election and removal of directors and any merger, consolidation or sale of all
or substantially all of the Company's assets) and to control the management
and affairs of the Company. Accordingly, such concentration of ownership may
have the effect of delaying, deferring or preventing a change in control of
the Company, impede a merger, consolidation, takeover or other business
combination involving the Company or discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of the
Company, which in turn could have an adverse effect on the market price of the
Company's Common Stock. See "Management" and "Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Company's Common Stock (including shares
issued upon the exercise of outstanding options) in the public market after
this offering could adversely affect the market price of the Common Stock.
Such sales also might make it more difficult for the Company to sell equity or
equity-related securities in the future at a time and price that the Company
deems appropriate. In addition to the 2,800,000 shares of Common Stock offered
hereby (assuming no exercise of the Underwriters' over-allotment option), as
of the date of this Prospectus, there will be 13,848,060 shares of Common
Stock outstanding, all of which are restricted shares ("Restricted Shares")
under the Securities Act of 1933, as amended (the "Securities Act"). As of
such date, no Restricted Shares will be eligible for sale in the public market
in addition to the shares offered hereby. Approximately 9,143,747 Restricted
Shares will be available for sale in the public market following the
expiration of 180-day lock-up agreements with the representatives of the
Underwriters. Of the remaining Restricted Shares, 250,000 shares held by
Messrs. Kaplan, Fisher and Mohiuddin will become eligible each month
thereafter until July 21, 1998 as certain repurchase rights of the Company
with respect to those shares lapse and 1,704,303 shares will be eligible for
sale upon the achievement of a two-year holding period. Montgomery Securities
also may, in its sole discretion and at any time without notice, release all
or any portion of the securities subject to lock-up agreements. In addition,
beginning six months after the offering, the holders of 13,704,303 Restricted
Shares will be entitled to certain rights with respect to registration of such
shares for sale in the public market. If such holders sell in the public
market, such sales could have a material adverse effect on the market price of
the Company's Common Stock.
Soon after the offering, the Company expects to register approximately
3,750,000 shares of Common Stock reserved for issuance under its stock option
and purchase plans. As of September 30, 1996, options to purchase a total of
1,196,760 shares were outstanding (although all of the shares issuable upon
exercise of such options will be subject to lock-up restrictions on sale for
180 days after the Effective Date) and 2,553,240 shares of Common Stock were
reserved for future issuance under the Company's stock option and purchase
plans. See "Shares Eligible for Future Sale."
BROAD MANAGEMENT DISCRETION IN ALLOCATION OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby at an assumed initial public offering price of $9.00 per share,
after deducting the estimated underwriting discount and offering expenses, are
estimated to be approximately $22.6 million. The Company has no specific plan
for such net proceeds. The Company intends to use the net proceeds, over time,
primarily for working capital (including expansion of the Company's accounts
receivable and inventory) and for other general corporate purposes. A portion
of the net proceeds also may be used for the acquisition of businesses,
products and technologies that are complementary to those of the Company.
Accordingly, the Company's management will retain broad discretion as to the
allocation of the proceeds of this offering. The failure of management to
apply such funds effectively could have a material adverse effect on the
Company's business, results of operations and financial condition. See "Use of
Proceeds."
12
<PAGE>
NO PRIOR MARKET FOR COMMON STOCK
Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active public market will
develop or be sustained after this offering or that investors will be able to
sell the Common Stock should they desire to do so. The initial public offering
price will be determined by negotiations between the Company and the
representatives of the Underwriters and may bear no relationship to the price
at which the Common Stock will trade upon completion of this offering. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the shares of Common Stock is likely to be highly
volatile and could be subject to wide fluctuations in response to factors such
as actual or anticipated variations in the Company's results of operations,
announcements of technological innovations, new sales formats by the Company
or its competitors, developments with respect to patents, copyrights or
proprietary rights, changes in financial estimates by securities analysts,
conditions and trends in the Internet and electronic commerce industries,
adoption of new accounting standards affecting the retail sales industry,
general market conditions and other factors. Further, the stock markets, and
in particular the Nasdaq National Market, have experienced extreme price and
volume fluctuations that have particularly affected the market prices of
equity securities of many technology companies and that often have been
unrelated or disproportionate to the operating performance of such companies.
The trading prices of many technology companies' stocks are at or near
historical highs and reflect price earnings ratios substantially above
historical levels. There can be no assurance that these trading prices and
price earnings ratios will be sustained. These broad market factors may
adversely affect the market price of the Company's Common Stock. These market
fluctuations, as well as general economic, political and market conditions
such as recessions, interest rates or international currency fluctuations, may
adversely affect the market price of the Common Stock. In the past, following
periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such
company. Such litigation, if instituted, could result in substantial costs and
a diversion of management's attention and resources, which would have a
material adverse effect on the Company's business, results of operations and
financial condition.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of the Common Stock in this offering will suffer immediate and
substantial dilution of $7.40 per share in the net tangible book value of the
Common Stock from the initial public offering price. To the extent that
outstanding options to purchase the Company's Common Stock are exercised,
there may be further dilution. See "Dilution."
13
<PAGE>
THE COMPANY
ONSALE was incorporated in California in July 1994 and is expected to
reincorporate in Delaware in January 1997. As used in this Prospectus, unless
the context otherwise requires, the terms "Company" and "ONSALE" refer to
ONSALE, a California corporation, and its successor Delaware corporation,
ONSALE, Inc. The Company's Web site is located at http://www.onsale.com.
Information contained in the Company's Web site shall not be deemed to be a
part of this Prospectus. The Company's principal executive offices are located
at 1861 Landings Drive, Mountain View, California 94043. The Company's
telephone number is (415) 428-0600.
ONSALE(R) is a registered trademark, and the ONSALE tag logo, Dutch
Auction(TM), Yankee Auction(TM), Put your money where your mouse is(TM) and
Steals and Deals(TM) are trademarks, of the Company. This Prospectus also
includes trade names and trademarks of other companies.
The Company intends to furnish to its stockholders annual reports containing
audited financial statements and an opinion thereon expressed by independent
certified public accountants.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,800,000 shares of
Common Stock offered hereby are estimated to be $22.6 million at an assumed
initial public offering price of $9.00 per share and after deducting the
estimated underwriting discount and offering expenses ($26.1 million if the
over-allotment option is exercised in full). The primary purposes of this
offering are to obtain additional capital, to create a public market for the
Common Stock and to facilitate future access to public markets. The Company
has no specific plan for the net proceeds of the offering. The Company expects
to use the net proceeds, over time, primarily for working capital (including
expansion of the Company's accounts receivable and merchandise inventory) and
other general corporate purposes. A portion of the proceeds may also be used
to acquire or invest in complementary businesses or products or to obtain the
right to use complementary technologies. From time to time, in the ordinary
course of business, the Company evaluates potential acquisitions of such
businesses, products or technologies. However, the Company has no present
understandings, commitments or agreements with respect to any material
acquisition of businesses, products or technologies. Pending use of the net
proceeds for the above purposes, the Company intends to invest such funds in
short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
The Company has not paid any cash dividends on its capital stock to date.
The Company currently anticipates that it will retain any future earnings for
use in its business and does not anticipate paying any cash dividends in the
foreseeable future.
14
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of September 30, 1996, the capitalization of the Company on a pro forma basis
to give effect to the exercise of all outstanding warrants and the conversion
of all outstanding shares of Preferred Stock into Common Stock, and the pro
forma capitalization of the Company as adjusted to give effect to the sale of
the 2,800,000 shares of Common Stock offered hereby (at an assumed initial
public offering price of $9.00 per share and after deducting the estimated
underwriting discount and offering expenses).
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-----------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Stockholders' equity(1):
Preferred Stock, $0.001 par value; 2,000,000
shares authorized:
Convertible Series A; 600,000 shares
designated; 365,191 shares issued and
outstanding, actual; no shares designated,
issued or outstanding, pro forma and as
adjusted...................................... $ 1 $ -- $ --
Convertible Series B; 204,521 shares
designated; no shares
issued or outstanding, actual; no shares
designated, issued or outstanding, pro forma
and as adjusted............................... -- -- --
Common Stock, $0.001 par value; 30,000,000
shares authorized: 12,143,757 shares issued and
outstanding, actual; 13,848,060 shares issued
and outstanding, pro forma; 16,648,060 shares
issued and outstanding, as adjusted(2)......... 12 14 17
Additional paid-in capital...................... 2,378 4,323 26,906
Accumulated deficit............................. (219) (219) (219)
------ ------ -------
Total stockholders' equity.................... 2,172 4,118 26,704
------ ------ -------
Total capitalization......................... $2,172 $4,118 $26,704
====== ====== =======
</TABLE>
- --------
(1) See Notes 4 and 5 of Notes to Financial Statements.
(2) Excludes (i) 1,196,760 shares of Common Stock issuable upon exercise of
stock options outstanding as of September 30, 1996 under the Company's
1995 Equity Incentive Plan, at a weighted average per share exercise price
of $0.31, (ii) 2,303,240 shares reserved for future grants under its 1995
Equity Incentive Plan, (iii) 100,000 shares reserved for future grants
under its 1996 Directors Stock Option Plan and (iv) 150,000 shares
reserved for future issuances under its 1996 Employee Stock Purchase Plan.
See "Management--Director Compensation," "Management--Employee Benefit
Plans" and Notes 6 and 9 of Notes to Financial Statements.
15
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of September 30,
1996, assuming the exercise of all outstanding warrants for an aggregate
purchase price of approximately $1.9 million as a result thereof and the
conversion of all outstanding shares of Preferred Stock into shares of Common
Stock, was approximately $4.1 million, or $0.30 per share of Common Stock.
"Pro forma net tangible book value per share" is determined by dividing the
number of outstanding shares of Common Stock into the net tangible book value
of the Company (total tangible assets less total liabilities). After giving
effect to the sale by the Company of the 2,800,000 shares of Common Stock
offered hereby (based upon an assumed initial public offering price of $9.00
per share and after deducting the estimated underwriting discount and offering
expenses), the pro forma net tangible book value of the Company as of
September 30, 1996 would have been approximately $26.7 million, or $1.60 per
share. This represents an immediate increase in pro forma net tangible book
value of $1.30 per share to existing stockholders and an immediate dilution of
$7.40 per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $9.00
Pro forma net tangible book value per share as of September 30,
1996........................................................... $0.30
Increase in pro forma net tangible book value per share
attributable to new investors.................................. 1.30
-----
Pro forma net tangible book value per share after offering...... 1.60
-----
Dilution per share to new investors............................. $7.40
=====
</TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1996, the number of shares of Common Stock purchased from the Company, the
total consideration paid to the Company and the average price per share paid
by the existing stockholders and by the investors purchasing shares of Common
Stock in this offering, based upon an assumed initial public offering price of
$9.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 13,848,060 83.2% $ 4,344,000 14.7% $0.31
New investors............... 2,800,000 16.8 25,200,000 85.3 $9.00
---------- ----- ----------- -----
Total..................... 16,648,060 100.0% $29,544,000 100.0%
========== ===== =========== =====
</TABLE>
The foregoing table assumes (i) the exercise of all outstanding warrants for
an aggregate purchase price of approximately $1.9 million and the conversion
of all outstanding shares of Preferred Stock into shares of Common Stock and
(ii) no exercise of the Underwriters' over-allotment option or stock options
outstanding under the Company's 1995 Incentive Stock Plan as of September 30,
1996. As of September 30, 1996, there were options outstanding under the
Company's 1995 Equity Incentive Plan to purchase a total of 1,196,760 shares
of Common Stock, at a weighted average exercise price of $0.31 per share. To
the extent that any of these options is exercised, there will be further
dilution to new investors. See "Capitalization" and Note 6 of Notes to
Financial Statements.
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
Company's financial statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. The statement of operations data for
the period from inception (July 1994) through December 31, 1995 and for the
nine months ended September 30, 1996 and the balance sheet data as of December
31, 1995 and September 30, 1996 are derived from financial statements of the
Company that have been audited by Price Waterhouse LLP, independent
accountants, and are included elsewhere in this Prospectus. The statement of
operations data for the quarters ended March 31, 1996, June 30, 1996 and
September 30, 1996 are derived from unaudited financial statements of the
Company and include, in the opinion of the Company, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the Company's results of operations for those periods. The
historical results are not necessarily indicative of future results.
<TABLE>
<CAPTION>
PERIOD FROM
QUARTERS ENDED INCEPTION NINE MONTHS
-------------------------------- (JULY 1994) TO ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
1996 1996 1996 1995(1) 1996
---- ---- ---- ------- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Merchandise............ $ 468 $1,493 $2,990 $ 30 $ 4,951
Commission............. 109 317 586 110 1,012
------ ------ ------ ------ -------
Total revenue.......... 577 1,810 3,576 140 5,963
Cost of merchandise
revenue................ 418 1,380 2,665 27 4,463
------ ------ ------ ------ -------
Gross profit............ 159 430 911 113 1,500
------ ------ ------ ------ -------
Operating expenses:
Sales and marketing.... 58 103 279 144 440
General and
administrative........ 32 119 363 227 514
Engineering............ 52 97 154 182 303
------ ------ ------ ------ -------
Total operating
expenses.............. 142 319 796 553 1,257
------ ------ ------ ------ -------
Income (loss) from
operations............. 17 111 115 (440) 243
Interest and other
income................ -- -- 3 -- 3
------ ------ ------ ------ -------
Income (loss) before
income taxes........... 17 111 118 (440) 246
Provision for income
taxes................. (2) (11) (12) -- (25)
------ ------ ------ ------ -------
Net income (loss)....... $ 15 $ 100 $ 106 $ (440) $ 221
====== ====== ====== ====== =======
Net income (loss) per
share(2)............... $ 0.00 $ 0.00 $ 0.01 $(0.03) $ 0.01
====== ====== ====== ====== =======
Shares used to compute
net income (loss) per
share(2)............... 15,221 15,221 15,221 15,221 15,221
====== ====== ====== ====== =======
SUPPLEMENTAL FINANCIAL
DATA:
Gross merchandise
sales(3).............. $1,792 $5,290 $9,246 $1,252 $16,328
====== ====== ====== ====== =======
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................... $ 20 $3,216
Working capital (deficiency)................ (449) 1,883
Total assets................................ 73 4,291
Long-term obligations....................... -- --
Total stockholders' equity (deficit)........ (419) 2,172
</TABLE>
- -------
(1) The Company's results of operations for the period from inception (July
1994) to December 31, 1994 have been combined with the results of
operations for the year ended December 31, 1995 due to the Company's
limited activity during the earlier period. During 1994, the Company
incurred expenses and reported a net loss of $41,000.
(2) See Note 1 of Notes to Financial Statements for an explanation of the
determination of the number of shares used to compute net income (loss)
per share.
(3) Represents what the Company's total revenue would have been if sales where
the Company acted as a commissioned auction agent for its vendors ("Agent
Sales") were recorded as transactions where the Company purchased or
accepted consignment of merchandise from vendors for resale at auction
("Principal Sales"). This increased sales amount does not affect the
Company's gross profit or net income. Management believes that gross
merchandise sales provide a more consistent comparison between historical
periods and to future periods than does total revenue. Gross merchandise
sales should not be considered in isolation or as a substitute for other
information prepared in accordance with GAAP. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Note 1
of Notes to Financial Statements.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
OVERVIEW
ONSALE is a leading electronic retailer pioneering a new sales format, the
interactive 24-hour online auction, designed to serve as an efficient and
entertaining marketing channel. The Company currently specializes in selling
refurbished and close-out computers, peripherals and consumer electronics over
the Internet's World Wide Web (the "Web"). The Company was incorporated in
July 1994 and commenced offering products for auction on the Internet in May
1995. For the period from inception (July 1994) to December 31, 1995, the
Company's operating activities related primarily to recruiting personnel,
purchasing operating assets, establishing vendor relationships and developing
the computer infrastructure necessary to conduct live auctions on the
Internet. During that period, the Company had total revenue of $140,000. The
Company achieved profitability in the first quarter of 1996 and thereafter has
increased its revenue and net income in each quarter.
The Company obtains merchandise from vendors through one of two primary
arrangements, either the Principal Sales model or the Agent Sales model. For
certain of its vendors, the Company purchases or takes on consignment
merchandise for resale in its auctions ("Principal Sales"). In Principal Sales
transactions, the Company is responsible for the billing and shipping of the
merchandise and recognizes the full sales amount as revenue upon verification
of the credit card transaction authorization and shipment of the merchandise.
In Principal Sales transactions, the Company bears both inventory risk and
credit risk with respect to sales of its inventory. The Company believes its
ability to liquidate its inventory quickly through its Internet auctions
somewhat mitigates the cost of carrying inventory and the price erosion risk.
In instances where credit card authorization has been received but the
merchandise has not been shipped, the Company defers revenue recognition until
the merchandise is shipped. With other vendors, the Company acts as an agent,
conducts electronic auctions and processes orders in exchange for a commission
on the sale of the vendors' merchandise ("Agent Sales"). In Agent Sales
transactions, the Company recognizes the commissions as revenue upon
completion of the auction process and forwarding of the auction sales
information to the vendor. The Company is not subject to inventory risk under
Agent Sales arrangements but does bear credit risk with respect to collection
of receivables from its vendors. In certain circumstances, the Company will
allow customers to return products and, accordingly, provides for allowances
for estimated future returns at the time of shipment. See "Risk Factors--Risks
of a Principal Sales Model."
The Company's relationships with its vendors have evolved from a purely
Agent Sales business, from its inception through most of 1995, to a business
that now includes a significant percentage of Principal Sales transactions.
For the nine months ended September 30, 1996, the portion of the Company's
gross merchandise sales derived from Principal Sales increased to 30.3%, and
the Company expects that this percentage will increase in the future. Gross
merchandise sales amounts shown on the Company's statement of operations
represent what the Company's total revenue would have been if all Agent Sales
had been made as Principal Sales. Due to the ongoing evolution in the
Company's operations toward the Principal Sales model, management believes
that the information on gross merchandise sales is relevant to a reader of the
Company's financial statements since it provides a more consistent comparison
between historical periods and a more accurate comparison to future periods
than does total revenue. Gross merchandise sales should not be considered in
isolation or as a substitute for other information prepared in accordance with
GAAP.
The Company has an extremely limited operating history upon which to base an
evaluation of the Company and its business and prospects. The Company's
business and prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such
as electronic commerce. Although the Company has
18
<PAGE>
experienced significant growth in merchandise and commission revenue in recent
periods, there can be no assurance that the Company's revenue will continue at
its current level or increase. The Company's revenue depends substantially
upon the level of auction activity on its Web site, which, in turn, depends
upon the availability of merchandise from the Company's vendors. This
availability is difficult to forecast with any degree of certainty.
Accordingly, a substantial reduction in merchandise availability would have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company has relatively low operating
margins and plans to increase its operating expenses significantly in order to
increase the size of its staff, expand its marketing efforts, purchase larger
volumes of merchandise to be sold at auction and support its growing
infrastructure. Through 1996, neither the Company's President nor its Vice
President of Development and Operations received any salary or bonus.
Commencing January 1, 1997, each will receive a salary at the annual rate of
$100,000. See "Management--Executive Compensation." To the extent that
increases in operating expenses precede or are not subsequently followed by
increased revenue, the Company's business, results of operations and financial
condition will be materially adversely affected. See "Risk Factors--Limited
Operating History."
RESULTS OF OPERATIONS
Total Revenue
Total revenue is comprised of commissions on Agent Sales and the gross value
of Principal Sales including shipping paid to the Company by a customer. The
Company had only $140,000 of total revenue in the period from inception (July
1994) to December 1995, most of which was derived from Agent Sales. Gross
merchandise sales for that period were $1.3 million. In the first nine months
of 1996, total revenue and gross merchandise sales grew to $6.0 million and
$16.3 million, respectively. The Company's revenue growth was due to the
significant growth of the Company's customer base and the amount of
merchandise obtained from vendors. During the first nine months of 1996, the
portion of the Company's gross merchandise sales derived from Principal Sales
increased to 30.3%.
Cost of Merchandise Revenue
Cost of merchandise revenue (i.e., costs under the Principal Sales model)
primarily consists of the costs of merchandise acquired under the Principal
Sales model and the costs of warehouse handling, credit card processing and
inbound and outbound shipping . Cost of merchandise revenue was minimal in
absolute dollars and as a percentage of gross merchandise sales in the period
from inception (July 1994) to December 31, 1995 because most transactions were
structured as Agent Sales, which have no significant associated costs. Cost of
merchandise revenue increased significantly in absolute dollars in the first
nine months of 1996 both as a result of growth in the Company's overall
business and as a result of the ongoing shift from the Agent Sales model to
the Principal Sales model.
Gross Profit
Gross profit was $113,000 in the period from inception (July 1994) to
December 31, 1995 and $1.5 million in the nine months ended September 30,
1996. In the latter period, gross profit on Principal Sales (which is
calculated after credit card processing costs and warehousing costs) was
$488,000 or 9.9% of gross merchandise sales made under the Principal Sales
model. The remainder of gross profit ($1.0 million), which is attributable to
Agent Sales, represented 8.9% of gross merchandise sales made under the Agent
Sales model.
Operating Expenses
The Company's operating expenses have increased significantly since the
Company's inception. This trend reflects the costs associated with the
formation of the Company, recruiting of personnel, the development of its
infrastructure, increased efforts to expand and market its services, and the
Company's continued focus on enhancing its internal accounting policies and
controls. The Company believes that continued expansion of its operations is
essential to enhancing its brand name and maintaining its market share.
19
<PAGE>
Sales and Marketing. Sales and marketing expenses consist primarily of
payroll and related expenses for sales and marketing personnel, advertising
expenditures and promotional material. Sales and marketing expenses were
$144,000 and $440,000 for the period from inception (July 1994) to December
31, 1995 and for the nine months ended September 30, 1996, respectively. Sales
and marketing expenses as a percentage of gross merchandise sales were 11.5%
and 2.7% for the period from inception (July 1994) to December 31, 1995 and
for the nine months ended on September 30, 1996, respectively. The dollar
increase in sales and marketing expenses was primarily attributable to
expansion of the Company's Internet and print advertising, increases in the
Company's marketing staff and increased expenses associated with promotion and
marketing of the Company's services. The Company expects sales and marketing
expenses to increase in absolute dollars but not to increase as a percentage
of gross merchandise sales. However, there can be no assurance that gross
merchandise sales will increase as rapidly as sales and marketing expenses.
General and Administrative. General and administrative expenses consist of
payroll and related expenses for customer service, merchandising, executive,
accounting and logistical personnel, recruiting and other general corporate
expenses. General and administrative expenses were $227,000 and $514,000 for
the period from inception (July 1994) to December 31, 1995 and for the nine
months ended September 30, 1996, respectively. General and administrative
expenses as a percentage of gross merchandise sales were 18.1% and 3.1% for
the period from inception (July 1994) to December 31, 1995 and for the nine
months ended September 30, 1996, respectively. The dollar increase in general
and administrative expenses was due to an increase in salaries and benefits,
primarily due to the hiring of additional personnel, and facilities expenses.
The Company expects general and administrative expenses to increase in
absolute dollars in the future as the Company incurs additional costs related
to being a public company, expands its staff and facilities and begins
compensating its President, Mr. Kaplan, in January 1997 (see "Management--
Executive Compensation"), but to decline as a percentage of gross merchandise
sales. However, there can be no assurance that gross merchandise sales will
increase more rapidly than general and administrative expenses.
Engineering. Engineering expenses consist primarily of payroll and related
expenses for engineering personnel and consultants who develop, operate and
monitor the Company's Web site and related systems. Engineering expenses were
$182,000 and $303,000 for the period from inception (July 1994) to December
31, 1995 and for the nine months ended September 30, 1996, respectively.
Engineering costs as a percentage of gross merchandise sales were 14.5% and
1.9% for the period from inception (July 1994) to December 31, 1995 and for
the nine months ended September 30, 1996, respectively. The dollar increase in
engineering expenses was primarily attributable to increased staffing and
associated costs relating to enhancing the features and functionality of the
Company's Web site and related systems. To date, all engineering costs have
been expensed as incurred. The Company did not compensate Mr. Fisher, its Vice
President of Development and Operations during these periods but expects to
begin compensating Mr. Fisher in January 1997. The Company expects engineering
expenses to increase in absolute dollars in the future but not to increase as
a percentage of gross merchandise sales. However, there can be no assurance
that gross merchandise sales will increase more rapidly than engineering
expenses.
Income Taxes
The Company had a net loss for the period from inception (July 1994) to
December 31, 1995 and no provision for income taxes was recorded for that
period. For the nine months ended September 30, 1996, the Company generated
income before income taxes of $246,000 and recorded a provision for income
taxes of $25,000, representing an effective income tax rate of 10.2%. This
effective tax rate was below the statutory rate primarily because the Company
utilized its net operating loss carryforwards. As of September 30, 1996, the
Company had fully utilized its net operating loss carryforwards for federal
and state income tax purposes. See Note 7 of Notes to Financial Statements.
20
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly statement of
operations data for the seven quarters in the period ended September 30, 1996.
In the opinion of management, this information has been prepared substantially
on the same basis as the financial statements appearing elsewhere in this
Prospectus, and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below to present fairly
the unaudited quarterly results when read in conjunction with the financial
statements of the Company and related notes thereto appearing elsewhere in
this Prospectus. The operating results for any quarter are not necessarily
indicative of the operating results for any future period.
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1995 (1) 1995 1995 1995 1996 1996 1996
-------- -------- --------- -------- -------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Merchandise............ $ -- $ -- $ -- $ 30 $ 468 $1,493 $2,990
Commission............. -- 17 23 70 109 317 586
---- ---- ----- ----- ------ ------ ------
Total revenue......... -- 17 23 100 577 1,810 3,576
Cost of merchandise rev-
enue................... -- -- -- 27 418 1,380 2,665
---- ---- ----- ----- ------ ------ ------
Gross profit............ -- 17 23 73 159 430 911
---- ---- ----- ----- ------ ------ ------
Operating expenses:
Sales and marketing.... 1 30 44 69 58 103 279
General and
administrative........ 54 49 61 63 32 119 363
Engineering............ 31 25 49 77 52 97 154
---- ---- ----- ----- ------ ------ ------
Total operating
expenses............. 86 104 154 209 142 319 796
---- ---- ----- ----- ------ ------ ------
Income (loss) from oper-
ations................. (86) (87) (131) (136) 17 111 115
Interest and other
income................ -- -- -- -- -- -- 3
---- ---- ----- ----- ------ ------ ------
Income (loss) before in-
come taxes............. (86) (87) (131) (136) 17 111 118
Provision for income
taxes................. -- -- -- -- (2) (11) (12)
---- ---- ----- ----- ------ ------ ------
Net income (loss)....... $(86) $(87) $(131) $(136) $ 15 $ 100 $ 106
==== ==== ===== ===== ====== ====== ======
SUPPLEMENTAL FINANCIAL
DATA:
Gross merchandise sales
(2)................... $ -- $226 $ 199 $ 827 $1,792 $5,290 $9,246
==== ==== ===== ===== ====== ====== ======
</TABLE>
- --------
(1) The Company's results of operations for the period from inception (July
1994) to December 31, 1994 have been combined with the results of
operations for the quarter ended March 31, 1995 due to the Company's
limited activity during the earlier period. During 1994, the Company
incurred expenses and reported a net loss of $41,000.
(2) Represents what the Company's total revenue would have been if sales where
the Company acted as a commissioned auction agent for its vendors ("Agent
Sales") were recorded as transactions where the Company purchased or
accepted consignment of merchandise from vendors for resale at auction
("Principal Sales"). This increased sales amount does not affect the
Company's gross profit or net income. Management believes that gross
merchandise sales provide a more consistent comparison between historical
periods and to future periods than does total revenue. Gross merchandise
sales should not be considered in isolation or as a substitute for other
information prepared in accordance GAAP. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 1 of
Notes to Financial Statements.
21
<PAGE>
The Company's merchandise revenue, commission revenue, total revenue and
gross merchandise sales have all increased significantly from one quarter to
the next since the quarter ended September 30, 1995. Merchandise revenue has
increased as a percentage of gross merchandise sales each quarter since
September 30, 1995, representing 3.6%, 26.1%, 28.2% and 32.3% of such sales in
the quarters ended December 31, 1995, March 31, 1996, June 30, 1996 and
September 30, 1996, respectively.
Cost of merchandise revenue as a percentage of merchandise revenue remained
relatively constant in the last four quarters, varying from 89.1% to 92.4% and
yielding a gross margin from 7.6% to 10.9%. Gross margin on Agent Sales
increased from 8.3% to 9.4% in the same four quarters. However, because
commission revenue has no cost of revenue associated with it, the Company's
gross profit as a percentage of gross merchandise sales has declined in each
quarter since September 30, 1995 (except the quarter ended September 30, 1996)
as gross merchandise sales from Agent Sales became a smaller percentage of the
Company's gross merchandise sales.
All three operating expense categories have increased each quarter since
March 31, 1995 except the quarter ended March 31, 1996. Each category of
operating expenses decreased in that quarter because the Company implemented a
cost reduction policy. Each category of operating expenses has decreased as a
percentage of gross merchandise sales each quarter since September 30, 1995
except general and administrative expenses, which increased as a percentage of
such sales in the quarters ended June 30 and September 30, 1996 as a result of
growth in the Company's infrastructure, and sales and marketing expenses,
which increased as a percentage of gross merchandise sales in the quarter
ended September 30, 1996 as a result of increased Internet and print
advertising and a promotion program for a single product offering.
FLUCTUATION IN OPERATING RESULTS
The Company's operating results have fluctuated in the past, and are
expected to continue to fluctuate in the future, due to a number of factors,
many of which are outside the Company's control. These factors include (i) the
Company's ability to attract new customers at a steady rate, manage its
inventory mix and the mix of products offered at auction, meet certain pricing
targets, liquidate its inventory in a timely manner, maintain gross margins
and maintain customer satisfaction, (ii) the availability and pricing of
merchandise from vendors, (iii) product obsolescence and pricing erosion, (iv)
consumer confidence in encrypted transactions in the Internet environment, (v)
the amount and timing of costs relating to expansion of the Company's
operations, (vi) the announcement or introduction of new types of merchandise
or customer services by the Company or its competitors, (vii) technical
difficulties with respect to consumer use of the auction format on the
Company's Web site, (viii) delays in revenue recognition at the end of a
fiscal period as a result of shipping or logistical problems, (ix) the level
of merchandise returns experienced by the Company and (x) general economic
conditions and economic conditions specific to the Internet and electronic
commerce. As a strategic response to changes in the competitive environment,
the Company may from time to time make certain service, marketing or supply
decisions or acquisitions that could have a material adverse effect on the
Company's quarterly results of operations and financial condition. The Company
also expects that, in the future, it like other retailers may experience
seasonality in its business. Due to all of the foregoing factors, in some
future quarter the Company's operating results may fall below the expectations
of securities analysts and investors. In such event, the trading price of the
Company's Common Stock would likely be materially adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
the private sale of convertible preferred stock for approximately $2.3
million, cash flows from operations and advances from its founders of
$496,000. Net cash used in operating activities for the period from inception
(July 1994) to December 31, 1995 was $210,000 and net cash provided by
operating activities for the nine months ended September 30, 1996 was
$873,000. The net cash used in operating activities from inception (July 1994)
to December 31, 1995 was primarily attributable to the net loss from
operations of $440,000, partially offset by increases in accounts payable and
accrued expenses of $103,000 and $117,000, respectively. The net cash provided
by operating activities during the nine months ended September 30, 1996 was
primarily attributable to net income of $221,000 and increases in accounts
payable of $711,000, accrued expenses of $319,000 and deferred revenue of
$371,000, partially offset by increases in accounts receivable and inventory
of $329,000 and $273,000, respectively.
22
<PAGE>
Net cash of $270,000 provided by financing activities from inception (July
1994) to December 31, 1995 resulted almost entirely from advances from two of
the Company's founders. In the nine months ended September 30, 1996, a venture
capital group purchased Series A Preferred Stock and certain warrants for
approximately $2.3 million, two of the founders advanced to the Company an
additional $226,000 and the Company sold $25,000 of its Common Stock. Net cash
used in investment activities comprised purchases of property and equipment of
$40,000 and $273,000 for the period from inception (July 1994) to December 31,
1995 and for the nine months ended September 30, 1996, respectively.
As of September 30, 1996, the Company had approximately $3.2 million of cash
and cash equivalents. As of that date, the Company's principal commitments
consisted of $496,000 of advances due to the founders and obligations
outstanding under its operating leases. The Company intends to repay the
advances during the fourth quarter of 1996. Although the Company has no
material commitments for capital expenditures, it anticipates purchasing
approximately $500,000 of property and equipment in 1997, primarily for
computer equipment and furniture and fixtures. As the Company continues to
enter into more transactions structured as Principal Sales, the Company will
need to commit more cash to support a larger merchandise inventory. Also, as a
result of the Company's intention to offer credit to certain customers, the
Company may require additional cash to support growth in account receivables.
The Company believes that the net proceeds from this offering, together with
its current cash and cash equivalents, the approximately $1.9 million of cash
to be received upon the exercise of the outstanding warrants and its cash
flows from operations, if any, will be sufficient to meet it anticipated cash
needs for working capital and capital expenditures for at least the next 12
months. Thereafter, if cash generated from operations is insufficient to
satisfy the Company's liquidity requirements, the Company may seek to sell
additional equity or convertible debt securities or obtain a credit facility.
The sale of additional equity or convertible debt securities could result in
additional dilution to the Company's stockholders. There can be no assurance
that financing will be available to the Company in amounts or on terms
acceptable to the Company.
23
<PAGE>
BUSINESS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
OVERVIEW
ONSALE is a leading electronic retailer pioneering a new sales format, the
interactive 24-hour online auction, designed to serve as an efficient and
entertaining marketing channel. The Company currently specializes in selling
refurbished and close-out computers, peripherals and consumer electronics over
the Internet's World Wide Web. ONSALE's online auctions provide an exciting
sales format that leverages the unique characteristics of the Web, such as
interactivity and a sense of community. The Company believes that the consumer
enthusiasm generated by its auction format, the emergence of the Internet as
an effective new sales medium and the Company's highly automated
infrastructure combine to create a significant retailing opportunity.
ONSALE has sold over $35 million of merchandise to more than 50,000 customer
accounts since its first auction in May 1995. To date, the Company has
auctioned over 200,000 merchandise items, of which over 65,000 were auctioned
in the third quarter of 1996. More than 1.0 million unique Internet users have
visited ONSALE's electronic auctions. Over 100,000 of these users are
registered bidders, with over 30,000 registering in the third quarter of 1996
alone.
INDUSTRY BACKGROUND
Electronic Commerce on the Internet
The Internet is an increasingly significant global medium for communication
and commerce. Growth in Internet usage has been driven by the emergence of the
Web, which uses graphical user interface technology to simplify the
transmission and retrieval of information over the Internet. IDC estimates the
number of active Web users will increase from 16 million at the end of 1995 to
approximately 34 million at the end of 1996 and to approximately 163 million
by the year 2000. As the number of users has grown, retailers have been
attracted to the Internet as a medium for reaching millions of consumers at
low cost. IDC estimates that the total value of goods and services purchased
on the Web will increase from $318 million in 1995 to $95 billion in the year
2000.
The Internet is evolving into a unique marketing channel, just as retail
stores, mail order catalogs and television shopping have previously evolved as
unique channels. By directly operating their own Web sites, Internet retailers
can interact with customers in real-time by frequently adjusting their product
mix, pricing and visual presentation. In addition, the global reach of the
Internet allows retailers to build large, geographically-dispersed customer
bases more quickly than traditional retailers and catalog marketers. Unlike
traditional marketing channels, Internet retailers do not have the burdensome
costs of a significant retail store infrastructure, the continuous printing
and mailing costs of a catalog marketer or the store personnel or call center
costs borne by traditional retailers and catalog marketers.
Historically, online "shopping malls" available on the larger private
networks, like America Online and CompuServe, as well as on the Internet, have
offered merchandise from major catalog and retail firms, such as Land's End,
Damark and L.L. Bean. In these online malls, the customer shops by moving from
one page to the next in an online catalog until an item of interest is
located. While straightforward in concept, this method of selling has
limitations. The merchandise available online is usually identical to that
available through the merchants' own catalogs and retail stores, providing no
unique advantage to online retailing. There typically is no price advantage to
online merchandise, because the merchants do not wish to compete with their
own catalogs and retail stores on the basis of price. As a result, traditional
implementations of online catalogs fail to exploit a chief advantage of the
Internet medium--the ability to change dynamically product mix, pricing and
visual presentation.
24
<PAGE>
Market for Refurbished and Close-out Merchandise
Each year, manufacturers dispose of significant volumes of refurbished and
close-out merchandise. Refurbished products are those that typically require a
nominal amount of service, such as minor repairs, cleaning and repackaging
prior to being sold as refurbished goods. Close-out merchandise includes new
products that have or will shortly become obsolete, typically due to a change
in selling seasons or the introduction of new models.
While the market for refurbished and close-out products is difficult to
measure, the Company believes that tens of billions of dollars of such
merchandise are sold each year. The PC and consumer electronics markets in
particular are characterized by significant quantities of such merchandise due
to short product life cycles and the prevalence of returned items through the
consumer retailing channel. According to IDC, the total PC market was
estimated to be greater than $160 billion in 1996. The Company estimates that
at least 7% of this market is comprised of refurbished goods, resulting in a
market for refurbished PCs estimated to exceed $11 billion in 1996.
The disposal of refurbished and close-out goods represents a substantial
burden on many manufacturers. Refurbished and close-out goods are sold through
a fragmented industry consisting of auction houses, catalogs, company stores
or "outlets," resellers and specialized retailers, as well as large
superstores and mass merchants that are not committed to the resale of these
goods and generally sell them as a supplementary product line or "loss
leader." Since manufacturers lack control over pricing and product placement
in this fragmented channel, the prices they realize on products are often
affected. These channel conflicts also undermine channel loyalty and the
vendor's brand image. Manufacturers have an interest in accessing a
distribution channel that enables them to dispose of significant quantities of
merchandise quickly and at the best prices possible, without affecting their
traditional sales channels.
ONSALE TODAY
ONSALE is a leading electronic retailer pioneering a new sales format, the
interactive 24 hour online auction, designed to serve as an efficient and
entertaining marketing channel. The Company currently specializes in selling
refurbished and close-out computers, peripherals and consumer electronics over
the Internet's World Wide Web. ONSALE's online auctions provide an exciting
sales format that leverages the unique characteristics of the Web, such as
interactivity and a sense of community. The Company believes that the consumer
enthusiasm generated by its auction format, the emergence of the Internet as
an effective new sales medium and the Company's highly automated
infrastructure combine to create a significant retailing opportunity.
ONSALE has sold over $35 million of merchandise to more than 50,000 customer
accounts since its first auction in May 1995. To date, the Company has
auctioned over 200,000 merchandise items, of which over 65,000 were auctioned
in the third quarter of 1996. More than 1.0 million unique Internet users have
visited ONSALE's electronic auctions. Over 100,000 of these users are
registered bidders, with over 30,000 registering in the third quarter of 1996
alone.
The Company posts online descriptions and images of merchandise for sale on
its Web site on a continuing basis. Currently, the Company operates three
auctions per week in two-day auction cycles. ONSALE generally offers over 500
different items at any given time, selling quantities from one to several
hundred of each item with items that generally range in price from $50 to
$1,500 each. Customers can bid 24 hours a day 7 days a week. Each week, tens
of thousands of customers visit the Company's site to review the latest
merchandise and bid on items of interest. When customers are outbid, they
receive an email message alerting them and permitting them to increase their
bid by return email or via the Company's Web site. At the designated closing
time, the winning bidders are selected and an email message is sent to them
confirming their purchases. The entire auction process, from the posting of
the items for auction through notification of the winners, has been automated
by the Company through the use of internally developed proprietary software.
In addition, the Company has developed proprietary software that automates
product fulfillment functions, including billing, shipping and tracking.
The Company believes that online auctions represent an exciting sales format
that leverages the unique characteristics of the Internet, such as
interactivity and the sense of community built by customers competitively
bidding in an auction environment. Furthermore, the Company believes the
knowledge, interests and spending
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habits of the typical Internet user make computers, peripherals and consumer
electronics ideal merchandise for this sales format and that refurbished and
close-out merchandise are particularly well suited for the online auction
format because there is no widely accepted fair market value for those items.
The difference of opinion among potential purchasers regarding the value of
such goods permits the spirited bidding of the interactive auction process. In
contrast to the market for new merchandise where vendors traditionally set a
fixed price, both the vendors and customers for refurbished and close-
out merchandise accept variability in pricing. The Company's Internet auctions
are designed to offer customers the following benefits:
. Compelling Merchandise and Pricing. The Company's rotating merchandise
mix gives customers the opportunity to bid on desirable items and
includes a number of different product categories, mostly from well
known, name brand manufacturers. Every auction cycle includes new items,
which keeps the Web site fresh and appealing. This changing product/price
mix and the auction format give the Company's visitors the impression
that they may be able to obtain exceptional deals every time they visit
the site. This compelling sales format has led to repeat customers who
bid on average 5.3 times during the quarter ended September 30, 1996.
. Entertainment and Excitement. The Company's auctions are designed to be
fun and exciting, adding the "lure of the bargain" and "thrill of the
hunt" to the retailing experience. The Company's customers do not simply
purchase merchandise--they "win" it. Competition and gamesmanship are
inherent in the Company's auction format, which the Company believes
enables it to attract and maintain a large and loyal customer base.
During September 1996, the average visitor to the Company's Web site
spent approximately 42 minutes watching and bidding in auctions,
according to a survey conducted by PC Meter.
. Community. As part of their bids, bidders are allowed to place brief
comments that are displayed in the list of currently winning bids on each
merchandise item page. Bidders use these comments to communicate with
other bidders in attempts to "psyche out" or cooperate with other
bidders. These comments, which generally are humorous, good-natured and
in the spirit of competition, build a sense of community. This
interactive shopping medium creates a sense of being "where the action
is."
. Convenience. The Company brings retail shopping directly into consumers'
homes and offices. Customers do not need to travel to fixed locations
during limited hours to purchase items. ONSALE's Web site enables
customers to place bids at any time during the day or night, in an
unintimidating atmosphere and without the pressure of salespeople or
auctioneers.
The Company believes that it also provides substantial benefits to vendors.
By pioneering a novel sales format in a new medium available to a very broad
audience, the Company believes that it offers vendors a way to sell
refurbished and close-out merchandise quickly at attractive prices with
minimal interference with other marketing channels. The Company's business
format is designed to offer vendors the following benefits:
. Efficient Distribution Solution. ONSALE's frequently updated electronic
auction format provides manufacturers a distribution channel designed to
accommodate unpredictable, odd lot quantities and to reach a
geographically broad group of consumers. The Company believes it
represents an efficient alternative to existing channels and a practical
solution to a large and growing problem for vendors--the disposal of
refurbished and close-out merchandise.
. Resolution of Channel Conflict. Sales of refurbished and close-out
merchandise through ONSALE are designed to avoid the channel conflicts
inherent in other distribution channels, where similar or identical
merchandise sell at different prices. By selling to a geographically-
broad customer base, the Company reduces the cannibalizing effect that
the sales of refurbished and close-out merchandise can have on the
distribution of new products.
. Superior Inventory Liquidation. Manufacturers and vendors in the process
of liquidating refurbished and close-out merchandise are compelled to
liquidate inventory in a quick and expedient manner due to rapid price
declines while attempting to get the best prices possible for their
merchandise, increasing the frequency of the Company's auctions and its
ability to add new items continuously, the Company is able to post the
inventory items for auction immediately upon receipt of the merchandise
and increase the vendors' ability to dispose of inventory quickly. By
selling inventory quickly, vendors are able to avoid
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some of the inventory price erosion that is typical in other channels and
to obtain attractive prices for their products. In addition, the Company's
automated systems simplify the liquidation process, creating a convenient
sales channel for vendors.
BUSINESS STRATEGY
The Company's objective is to become one of the dominant retailers on the
Internet. The Company intends to leverage its position as a leading Internet
retailer of refurbished and close-out merchandise by pursuing the following key
strategies:
Increase Market Awareness and Brand Recognition
The Company believes that ONSALE is a leading brand name in Internet
commerce. The Company operates in a market in which its brand franchise is
critical to attracting high quality vendors and a high level of customer
traffic. Accordingly, the Company's strategy is to promote, advertise and
increase its visibility through a variety of marketing and promotional
techniques including advertising on leading Internet sites and in printed
media, conducting an ongoing public relations campaign and obtaining links from
other Web sites.
Provide Compelling Retailing Experience for Customers
The Company believes auction buyers are attracted by the perceived bargain
prices and the inherent excitement of competitively winning desired
merchandise. Accordingly, the Company intends to continue offering customers a
wide array of opportunities to buy desired merchandise at bargain prices by
increasing the frequency of the Company's auctions (currently three cycles per
week) and continuing to rotate the selection of merchandise.
Expand and Strengthen Long-Term Vendor Relationships
The Company's ability to attract, secure and obtain large quantities of
branded merchandise for its Internet auctions is key to its success. The
Company is aggressively building its merchandise buying staff to facilitate
securing long-term relationships with a variety of merchandise vendors. The
Company seeks to be its vendors' preferred choice for liquidating refurbished
and close-out merchandise. The Company intends to strengthen its vendor
relationships by offering better purchasing terms and more convenient service
through more automated order processing and superior logistical arrangements.
In addition, the Company believes its rapid auction process makes it a
convenient sales channel for vendors to liquidate large volumes of merchandise.
Emphasize Principal Sales Model
When the Company commenced operations, it performed most of its business on
an agency basis by conducting auctions on behalf of its vendors, which
fulfilled orders and collected payment. The Company is increasing the number of
vendor relationships where it acts as a principal and performs or arranges most
of the order fulfillment, payment and shipping functions, as well as provides
limited customer support. By purchasing merchandise and undertaking these
additional functions, the Company believes that it will be able to expand gross
margins, improve customer service and control its costs more efficiently.
Develop Incremental Revenue Opportunities
The Company believes that a significant opportunity exists to develop
incremental revenue opportunities, including expanding its product mix with
other products that are well suited for the Internet's electronic format. The
Company also believes that the high level of traffic on its Web site provides
an attractive alternative for advertising on its Web site. In addition, the
Company is considering expanding its sales to customers outside its current
markets of the United States and Canada.
Build on Leading Technology
The Company believes that one of its competitive advantages is its internally
developed proprietary software that is specifically designed for Internet
auctions. This software conducts automated auctions with thousands of
customers, processes those customers' orders and payments, coordinates and
performs order fulfillment and provides certain customer support functions. The
Company intends to enhance its software to provide an even more compelling
shopping experience, as well as to streamline its order processing, warehousing
and distribution, and customer support functions.
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THE ONSALE PROCESS
The entire ONSALE auction process is fully automated. The Company posts
descriptions and images of the merchandise being offered for auction on its
Web site. The Company generally offers customers the opportunity to bid for
merchandise through the "Yankee auction" format. In this format, a number of
identical items of merchandise are offered for sale at the same time. When the
auction closes, the highest bidders win the available inventory at their
actual bid price. Thus, each winning bidder may pay a price that is different
from the prices paid by other winning bidders. When bidders' prices are equal,
then bids for larger quantities and with earlier initial bid times prevail.
This allows customers to employ a variety of strategies that make bidding
interesting.
To bid, a customer completes and submits a simple electronic registration
form found on the Company's Web site. Once registered, the customer can bid
and buy at will. As bids are received, ONSALE's Web pages are instantly
updated to display the current high bidders' initials, city and state, and an
optional comment to personalize the bidding. Customers are notified by email
when they are outbid and can then respond by return email or via the Company's
Web site to increase the bid. In addition, customers can monitor their bid
status on ONSALE's Web site. Once auctions have closed, the Company's auction
software informs the winning bidders by email and creates an order. The
customer's credit card is then charged and the merchandise is shipped either
by the Company or its vendor.
The Company from time to time uses other auction formats, including the
following: (i) the "Dutch auction," in which the Company offers a number of
identical items for sale at the same time and the highest bidders win the
available inventory at the lowest successful bidder's price; (ii) the
"Standard" auction for the auction of a single item of merchandise, in which
the auctioned item goes to the highest bidder; (iii) the "Buy or Bid" auction,
in which the Company permits customers to bid on an item either at the posted
asking price, or below the asking price in the hope of receiving the item at
the lower price; and (iv) the "Straight Sale," in which the Company posts each
item at a listed price and customers' orders immediately are accepted at the
listed price.
MERCHANDISE
The Company offers more than 500 different merchandise items for auction
three times per week. This merchandise consists primarily of refurbished and
close-out computers, peripherals and consumer electronics. The Company
believes that rotating its merchandise mix keeps its Web site fresh and
appealing and encourages customers to revisit the site frequently. The Company
believes a well-coordinated merchandise assortment is key to its success, and
employs a staff of seasoned buyers from the computer and consumer electronics
industries to achieve this goal.
The Company primarily offers merchandise in the following categories:
Personal Computers. The Company offers PCs, including desktops,
notebooks and microcomputers.
Printers, Monitors and Scanners. The Company offers laser, laser jet
and color jet printers, color and black and white monitors, related
accessories and toner cartridges, and flatbed scanners.
Computer Peripherals. The Company sells memory chips, disc drives, CPU
chips, controllers, CD-ROMs, multimedia accessories, modems,
motherboards, video cards, mice and keyboards.
Network Equipment. The Company sells a variety of network equipment,
including file servers, repeaters, hubs and routers, and Ethernet and
token ring cards and accessories.
Consumer Electronics. The Company sells home theater items (such as
VCRs, receivers, speakers and CD players), photography equipment (such
as camcorders and cameras), portable televisions, portable audio and
car stereo equipment (such as AM/FM cassette and CD players, speakers
and tuners) and home office items (such as facsimile machines,
answering machines and telephones). The Company is continuing to expand
its offerings of consumer electronics.
Software. The Company sells home gameplayer, PC, educational, and home
and office software.
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The Company's merchandise includes brands such as AT&T, Aiwa, Apple, Canon,
Compaq, Dell, Hewlett-Packard, Intel, JVC, Kenwood, Lexmark, NEC, Packard
Bell, Seagate, Sega, Sherwood and Toshiba. Regardless of the source of the
merchandise, most merchandise sold by the Company carries a warranty provided
by the vendor, which greatly reduces the Company's customer service expenses.
The Company is entirely dependent upon vendors to supply it with merchandise
for sale through the Company's Internet auctions and the availability of
merchandise is unpredictable. In the first nine months of 1996, approximately
38% of the Company's gross merchandise sales was derived from merchandise
acquired from only four vendors and one vendor accounted for approximately 20%
of gross merchandise sales. The Company has no long-term contracts or
arrangements with its other vendors that guarantee the availability of
merchandise for its auctions. There can be no assurance that the Company's
current vendors will continue to sell merchandise to the Company or otherwise
provide merchandise for sale in the Company's auctions or that the Company
will be able to establish new vendor relationships that ensure merchandise
will be available for auction on the Company's Web site. The Company also
relies on many of its vendors to process and ship merchandise to customers.
The Company has limited control over the shipping procedures of its vendors,
and shipments by these vendors have often been subject to delays. Although
most merchandise sold by the Company carries a warranty supplied either by the
manufacturer or the vendor and the Company is not obligated to accept
merchandise returns, the Company in fact has accepted returns from customers
for which the Company did not receive reimbursements from its vendors or
manufacturers. If the Company is unable to develop and maintain satisfactory
relationships with vendors on acceptable commercial terms, if the Company is
unable to obtain sufficient quantities of merchandise, if the quality of
service provided by such vendors falls below a satisfactory standard or if the
Company's level of returns exceeds its expectations, the Company's business,
results of operations and financial condition will be materially adversely
affected.
VENDOR RELATIONSHIPS
The Company obtains merchandise directly from computer and electronics
manufacturers, such as Apple Computer, Hewlett-Packard, Lexmark, NEC, Packard
Bell and Toshiba, and indirectly through other vendors, such as Vircom. One of
the Company's vendors, NEC, accounted for 20% of the Company's gross
merchandise sales in the first nine months of 1996. No other vendor accounted
for more than 10% of the Company's gross merchandise sales, although four of
the Company's vendors accounted for over 38% of its gross merchandise sales in
the first nine months of 1996. Since merchandise availability is
unpredictable, strong vendor relationships are critical to the Company's
success. See "Risk Factors--Reliance on Merchandise Vendors." As a result, the
Company's buying staff maintains ongoing contact, frequently on a daily basis,
with its vendors to learn when new merchandise becomes available. The Company
obtains merchandise from vendors through one of two primary arrangements,
either the Principal Sales model or the Agent Sales model.
. Principal Sales Model. The Company acts as a direct purchaser of
merchandise or consignment seller for vendors. By purchasing merchandise,
the Company assumes the full inventory and price risk involved in selling
such merchandise. The Company believes its ability to liquidate its
inventory quickly through its Internet auctions somewhat mitigates the
cost of carrying inventory and the price erosion risk. The Company
intends to increase its purchasing of merchandise from vendors,
particularly from manufacturers, because the Company believes it will
achieve higher gross margins by purchasing merchandise. The Company's
ability to achieve higher gross margins, however, depends on the ability
of its buying staff to purchase inventory at attractive prices relative
to the resale value of the inventory at auction, and there can be no
assurance that the Company's buying staff will continue to purchase items
at attractive prices relative to their resale value at auction. Sales of
purchased inventory accounted for 21% of the Company's gross merchandise
sales in the third quarter of 1996.
For sales on consignment, the Company negotiates a percentage fee that
it takes out of the total proceeds of the sale and returns the net amount
to the vendor, plus shipping costs if the vendor is shipping the
merchandise on behalf of the Company. The Company's profit margin on a
given consignment sales is generally fixed. The Company charges a
customer's credit card and either ships the merchandise itself
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or delivers information to the vendor, which ships the merchandise to the
customer. The Company's consignment arrangements usually provide for the
Company to return merchandise to the vendor for credit in the event of a
customer return. By selling merchandise on consignment, the Company
avoids the risk that it will not be able to liquidate its inventory in a
timely manner. Consignment sales represented 11% of the Company's gross
merchandise sales in the third quarter of 1996. See "Risk Factors--Risks
of a Principal Sales Model."
. Agent Sales Model. The Company also sells merchandise by acting as a
sales agent for vendors. Under this arrangement, at the conclusion of an
auction the Company forwards the order information to the vendor, which
then charges the customer's credit card and ships the merchandise. The
Company receives a commission based upon a percentage of the price. In an
agency relationship, the Company does not take title to the merchandise,
and the vendor bears the risk of credit card charge backs. The Company,
however, must rely on the vendor to charge customers and ship merchandise
on a timely basis. In the third quarter of 1996, Agent Sales accounted
for 68% of the Company's gross merchandise sales. See "Risk Factors--
Reliance on Merchandise Vendors."
SALES AND MARKETING
The Company sells to end users, small and home office purchasers, and
others. During the quarter ended September 30, 1996, the Company believes
that, on average, more than 25,000 unique Internet users visited its Web site
each day, that approximately 10% of new visitors became bidders, and that the
average winning bid was approximately $225. See "Risk Factors--Developing
Market; Uncertain Acceptance of the Internet as a Medium for Commerce: and
Risk Factors--Uncertain Acceptance of the ONSALE Brand."
To achieve its objective of becoming one of the dominant retailers on the
Internet, the Company has developed a marketing strategy based on
strengthening its brand name and increasing customer traffic to its Web site.
The Company employs a mix of media and promotional activities to achieve these
goals.
Internet Advertising. The Company places advertisements on various high-
profile and high-traffic conduit Web sites, including c|net, Lycos, Excite,
Yahoo! and Infoseek. These advertisements usually take the form of banners
that encourage readers to click through directly to the Company's Web site.
Print Media Advertising. The Company engages in a coordinated program of
print advertising in general circulation newspapers and magazines, such as The
Wall Street Journal and USA Today, and in trade publications such as Computer
Shopper.
Public Relations Campaign. The Company's marketing team launched an ongoing
public relations campaign in July 1996. This campaign has resulted in the
Company's being featured on television shows such as "CNN Financial News,"
MSNBC's "The Site" and PBS's "Computer Chronicles" and in the publication of
articles in The Wall Street Journal, Business Week, Internet Week, Computer
Reseller News, PC Week and the Los Angeles Times. The Company was awarded the
1996 Lighthouse Award for Excellence by the Channelmarker Letter.
Links from Other Web Sites. Approximately 1,000 Web sites have links to
ONSALE's Web site, including links from prominent "What's Cool" pages. The
Company believes such links are a significant factor in increasing brand
awareness and generating customer traffic to the Company's Web site.
Customer Electronic Mail Broadcasts. The Company actively markets to its own
base of customers through email broadcasts. All bidders in the Company's
auctions are automatically added to the Company's electronic mailing list,
which presently numbers over 100,000 registrants. The Company currently sends
more than 300,000 email messages each week announcing new items available at
auction.
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Promotional Contests. The Company runs contests and give-away programs from
its Web site to promote bidding by regular customers and new visitors to the
site. The contests usually ask the participant to guess the answer to a
question by placing a zero cost bid in exchange for the chance to win a free
prize, such as a cordless phone. Such contests and give-away programs
acclimate substantial numbers of new customers to the bidding process by
allowing them to bid in a risk-free environment.
MERCHANDISE DISTRIBUTION
The Company does not currently own or lease warehouse space and relies
instead on contract fulfillment warehouses for the bulk of its fulfillment and
logistics requirements. The Company currently uses FedEx, although it is in
the process of switching to Gage. The Company is evaluating whether to alter
its distribution strategy for purchased inventory by establishing or acquiring
its own warehouse and distribution facilities, although it has no present
intention to do so. The Company also relies on many of its vendors to process
and ship merchandise to customers. The Company has limited control over the
shipping procedures of its vendors and shipments by these vendors have often
been subject to delays. See "Risk Factors--Reliance on Merchandise Vendors"
and "Risk Factors--Reliance on Other Third Parties."
CUSTOMER SUPPORT AND SERVICE
The Company believes that its ability to establish and maintain long-term
relationships with its customers and encourage repeat visits and purchases is
dependent, in part, on the strength of its customer support and service
operations and staff. The Company currently employs a staff of nine full-time
customer support and service personnel who are responsible for handling
customer inquiries, answering customer questions about the bidding process,
tracking shipments, investigating problems with merchandise, and acting as
liaisons between customers and the Company's vendors. In addition, the Company
has automated certain of its customer support and service functions. The
Company is actively working to enhance its customer support and service
operations, through a variety of measures including improved customer
reporting systems. The Company plans to introduce a software system that will
allow customers to track the shipment of their purchases through the Company's
Web site. See "Risk Factors--Reliance on Merchandise Vendors" and "Risk
Factors--Management of Growth; Limited Senior Management Resources."
TECHNOLOGY AND OPERATIONS
The Company uses a combination of its own proprietary technology and
licensed commercially available technology to conduct its Internet auctions.
Proprietary Technology
The Company has devoted significant resources to developing its proprietary
software technology. The Company believes that its success depends, in part,
on the Company's internally developed proprietary auction management software,
which implements a variety of customized auction, markdown and sales formats.
See "Risk Factors--Risks Associated with Technological Change; Dependence on
the Internet." The Company's proprietary software components are organized
into the following groups:
Auction Management Applications. The Company uses a set of continuously
running application programs that manage the auctions and sales, update
merchandise Web pages to show the currently winning bidders, send a variety
of email messages to customers informing them that they have been outbid or
have won merchandise, and process incoming bid increases via email.
Transaction Processing Applications. The Company uses a set of
applications for receiving and validating bids, entering registrations to
place the customer on the Company's mailing list, listing currently active
and recent winning and losing bids, and reviewing and submitting customer
service requests.
Order Processing Applications. The Company uses a set of applications for
processing successful bids as they are converted into customer orders.
These applications charge customer credit cards, print order information,
transmit order information electronically to the Company's contract
warehouses and vendors, and deposit transaction information into the
Company's accounting system.
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Marketing Applications. The Company has developed a set of email
applications for sending broadcast emails to customers on a frequent basis.
This software extracts email addresses from the Company's mailing list,
sends emails to the designated recipients and automatically services
requests from customers to remove them from the mailing list.
Commercially Available Licensed Technology
The Company's strategy has been to license commercially available technology
whenever possible rather than seek a custom-made or internally-developed
solution. The Company believes that this strategy enables it to lower its
operating costs and to respond to changing demands due to growth and
technological shifts. This strategy also allows the Company to focus its
development efforts on creating and enhancing the specialized, proprietary
software that is unique to the Company's business. The Company currently uses
the following commercially available software: Microsoft Windows NT as its
operating environment; Netscape FastTrack Internet server as its front-end for
presenting its merchandise pages and related Web pages to customers who can
use any Web browser; Microsoft Exchange Server to complement its automated
email bidding and broadcast email marketing systems for sending and receiving
email messages to customers; and an Oracle relational database for storing its
customer, bid and merchandise records.
Engineering
The Company's engineering staff currently consists of 18 software
development engineers. The Company historically has developed and expects to
continue to develop its proprietary auction management and marketing software.
The Company's engineering strategy includes the enhancement of features and
functionality of its existing software components, the development of
additional new software components, and the integration of off-the-shelf
components into its environment. The Company currently is investing
significant resources in software development and expects to continue to do so
in the future. The Company believes its future success depends on its ability
to continue developing and enhancing its proprietary software.
Operations
The Company's Web site operations staff consists of four systems
administrators who manage, monitor and operate the Company's Web site. The
continued uninterrupted operation of the Company's Web site is essential to
its business, and it is the job of the site operations staff to ensure, to the
greatest extent possible, the reliability of the Company's Web site. The
Company uses the services of UUNet, an Internet service provider, to provide
connectivity to the Internet over a dedicated T-1 line provided by Pacific
Telesis. UUNet provides Internet traffic and data routing services to the
Company as well as email services. The Company believes that these
telecommunication and Internet service facilities are essential to the
Company's operation and anticipates upgrading these facilities to faster,
though more costly, telecommunication services in the future. See "Risk
Factors--Management of Growth; Limited Senior Management Resources" and "Risk
Factors--Risk of System Failure; Single Site."
COMPETITION
The electronic commerce market, particularly over the Internet, is new,
rapidly evolving and intensely competitive, and the Company expects
competition to intensify in the future. The Company currently or potentially
competes with a variety of other companies depending on the type of
merchandise and sales format offered to customers. These competitors include
(i) various small Internet auction houses, (ii) a number of indirect
competitors that specialize in electronic commerce or derive a substantial
portion of their revenue from electronic commerce, including Internet Shopping
Network, a wholly-owned subsidiary of Home Shopping Network Inc, New England
Circuit Exchange, America Online, Inc. and CUC International Inc., (iii) a
variety of other companies that offer merchandise similar to that of the
Company but through physical auctions and with which the Company competes for
sources of supply, and (iv) companies with substantial customer bases in the
computer and peripherals catalog business, including Micro Warehouse, Inc. and
CDW Computer Centers, Inc., which may devote more resources to Internet
commerce in the future. In particular, the Company believes Micro Warehouse,
Inc. is contemplating the introduction of an online auction site in the near
future.
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The Company believes that the principal competitive factors affecting its
market include its ability to secure merchandise for sale, attract new
customers to its site at favorable customer acquisition costs, operate its Web
site in an uninterrupted manner, and develop and enhance its proprietary
auction management software. Although the Company believes that it currently
competes favorably with respect to such factors, there can be no assurance
that the Company can maintain its competitive position against current and
potential competitors, especially those with greater financial, marketing,
service, support, technical and other resources than the Company.
Current and potential competitors have established or may establish
cooperative relationships among themselves or directly with vendors to obtain
exclusive or semi-exclusive sources of merchandise. Accordingly, it is
possible that new competitors or alliances among competitors and vendors may
emerge and rapidly acquire market share. In addition, manufacturers might
elect to liquidate their products directly. Increased competition is likely to
result in reduced operating margins, loss of market share and a diminished
brand franchise, any one of which could materially adversely affect the
Company's business, results of operations and financial condition. Many of the
Company's current and potential competitors have significantly greater
financial, technical, marketing and other resources than the Company. As a
result, they may be able to secure merchandise from vendors on more favorable
terms than the Company, and they may be able to respond more quickly to
changes in customer preferences or to devote greater resources to the
development, promotion and sale of their merchandise than can the Company.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company's performance and ability to compete are dependent to a
significant degree on its proprietary technology. The Company relies on a
combination of patent, trademark, copyright and trade secret laws, as well as
confidentiality agreements and technical measures, to establish and protect
its proprietary rights. The Company has applied for five patents in the United
States covering various aspects of electronically managed Internet auctions
and various aspects of providing customer service via automated email. There
can be no assurance that patents will issue from any of the Company's pending
applications, that any patents granted to the Company will not be challenged
and invalidated, or that any claims allowed from pending patents will be of
sufficient scope or strength to provide meaningful protection or any
commercial advantage to the Company. The Company has registered the ONSALE(R)
trademark in the United States and claims trademark rights in, and has applied
for trademark registrations in the United States for a number of other marks.
There can be no assurance that the Company will be able to secure significant
protection for these trademarks. It is possible that competitors of the
Company or others will adopt product or service names similar to "ONSALE" and
the Company's other trademarks, thereby impeding the Company's ability to
build brand identity and possibly leading to customer confusion. The inability
of the Company to protect the name "ONSALE" adequately would have a material
adverse effect on the Company's business, results of operations and financial
condition. The Company's proprietary software is protected by copyright laws.
The source code for the Company's proprietary software also is protected as a
trade secret. As part of its confidentiality procedures, the Company generally
enters into agreements with its employees and consultants and limits access to
and distribution of its software, documentation and other proprietary
information. There can be no assurance that the steps taken by the Company
will prevent misappropriation of its technology or that agreements entered
into for that purpose will be enforceable. Notwithstanding the precautions
taken by the Company, it might be possible for a third party to copy or
otherwise obtain and use the Company's software or other proprietary
information without authorization or to develop similar software
independently. Policing unauthorized use of the Company's technology is
difficult, particularly because the global nature of the Internet makes it
difficult to control the ultimate destination or security of software or other
data transmitted. The laws of other countries may afford the Company little or
no effective protection of its intellectual property.
The Company may in the future receive notices from third parties claiming
infringement by the Company's software or other aspects of the Company's
business. While the Company is not currently subject to any such claim, any
future claim, with or without merit, could result in significant litigation
costs and diversion of resources including the attention of management, and
require the Company to enter into royalty and licensing agreements, which
could have a material adverse effect on the Company's business, results of
operations and
33
<PAGE>
financial condition. Such royalty and licensing agreements, if required, may
not be available on terms acceptable to the Company or at all. In the future,
the Company may also need to file lawsuits to enforce the Company's
intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of the proprietary rights of others. Such
litigation, whether successful or unsuccessful, could result in substantial
costs and diversion of resources, which could have a material adverse effect
on the Company's business, results of operations and financial condition.
The Company also relies on a variety of technology that it licenses from
third parties, including its database and Internet server software, which is
used in the Company's Web site to perform key functions. There can be no
assurance that these third party technology licenses will continue to be
available to the Company on commercially reasonable terms. The loss of or
inability of the Company to maintain or obtain upgrades to any of these
technology licenses could result in delays in completing its proprietary
software enhancements and new development until equivalent technology could be
identified, licensed or developed and integrated. Any such delays would
materially adversely affect the Company's business, results of operations and
financial condition.
EMPLOYEES
As of November 30, 1996, the Company employed 55 people, including 22 in
engineering support and operations, quality assurance, and technical
documentation, 10 in merchandise acquisition and marketing, 9 in customer
support and service, 7 in order processing and logistics, and 7 in finance and
administrative functions. The Company also employs independent contractors for
software development, technical documentation, artistic design and product
fulfillment. None of the Company's employees is represented by a labor union,
and the Company considers its employee relations to be good. Competition for
qualified personnel in the Company's industry is intense, particularly among
software development and other technical staff. The Company believes that its
future success will depend in part on its continued ability to attract, hire
and retain qualified personnel. See "Risk Factors--Management of Growth;
Limited Senior Management Resources" and "Risk Factors--Dependence on Key
Personnel; Need For Additional Personnel."
FACILITIES
The Company's principal administrative, engineering, merchandising and
marketing facilities total approximately 10,392 square feet, and are located
in three separate buildings within an office complex in Mountain View,
California under leases that expire in October 1997, May 1998 and July 1999.
The Company believes that it has adequate space for its current needs. As the
Company expands, it expects that suitable additional space will be available
on commercially reasonable terms, although no assurance can be made in this
regard. The Company does not own any real estate.
The Company does not currently own or lease warehouse space and relies
instead on contract warehouses for the bulk of its fulfillment and logistics
requirements. The Company may, at some point in the future, acquire or lease
its own warehouse space rather than rely on contract warehouse services.
34
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS MANAGEMENT
The following table sets forth certain information regarding the executive
officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
S. Jerrold Kaplan............... 44 President, Chief Executive Officer,
Secretary and Director
Alan S. Fisher.................. 36 Vice President of Development and
Operations, Chief Technical Officer and
Director
John F. Sauerland............... 46 Chief Financial Officer
Peter L. Harris(1)(2)........... 52 Director
Kenneth J. Orton(1)(2).......... 45 Director
</TABLE>
--------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Each director will hold office until the next Annual Meeting of Stockholders
and until his successor is elected and qualified or until his earlier
resignation or removal. Each officer serves at the discretion of the Board of
Directors (the "Board").
S. Jerrold Kaplan has been President, Chief Executive Officer and a director
of the Company since co-founding the Company in July 1994. Mr. Kaplan has been
Secretary of the Company since July 1995. From September 1989 to October 1993,
Mr. Kaplan served as Chairman for GO Corporation, a developer of pen-based
computers. From September 1987 to September 1989, he served as Chief Executive
Officer of GO Corporation. Mr. Kaplan received his B.A. in History and
Philosophy of Science from the University of Chicago and received his M.S.E.
and Ph.D. in Computer and Information Science from the University of
Pennsylvania.
Alan S. Fisher has been Vice President of Development and Operations, Chief
Technical Officer and a director of the Company since co-founding the Company
in July 1994. He also served as Chief Financial Officer of the Company from
July 1994 to July 1996. Mr. Fisher is also President and Chairman of Software
Partners, Inc., a developer and publisher of software products, which he co-
founded in August 1988, although he devotes minimal time to this enterprise.
From April 1984 to August 1988, Mr. Fisher served as Technical Marketing
Manager and Product Development Manager for Teknowledge, Inc., a developer of
artificial intelligence software products. From June 1981 to April 1984, he
served as a member of the technical staff for AT&T Bell Laboratories, a
research and development division for American Telephone & Telegraph Company.
Mr. Fisher received his B.S. in Electrical Engineering from the University of
Missouri and received his M.S. in Electrical Engineering from Stanford
University.
John F. Sauerland joined the Company in July 1996 as its Chief Financial
Officer. From March 1995 to July 1996, Mr. Sauerland served as Chief Financial
Officer with ICVerify, Inc., a developer of software. From May 1992 to March
1995, Mr. Sauerland served as Senior Vice President of Finance, Chief
Financial Officer and Secretary for Natural Wonders, Inc., a specialty
retailer. From March 1989 to May 1992, Mr. Sauerland served as Vice President
of Finance and Chief Financial Officer for Natural Wonders, Inc. From January
1989 to March 1989, he served as controller for Natural Wonders, Inc. Mr.
Sauerland received his B.S. in Business Administration from St. Mary's College
and received his M.B.A. in Finance and Accounting from the University of Santa
Clara.
Peter L. Harris has been a director of the Company since December 1996. He
has served as Chairman, Chief Executive Officer and President of Expressly
Portraits, a family portrait studio chain, since August 1995. Previously, Mr.
Harris was Chairman of Accolade, Inc., a publisher of interactive
entertainment software, from May 1994 to January 1996, and Chief Executive
officer of Accolade, Inc. from May 1994 to June 1995. From July 1992 to May
1994, he served as a management consultant. Prior to that, Mr. Harris was
President and Chief Executive Officer of F.A.O. Schwarz from 1985 to July
1992. Mr. Harris serves as a director of Boomtown, Inc. and Pacific Sunwear of
California, Inc. Mr. Harris received his B.A. in Business Administration from
Whittier College.
35
<PAGE>
Kenneth J. Orton has been a director of the Company since October 1996. Mr.
Orton has been President and Chief Operating Officer for Preview Travel, Inc.,
an online travel service, since April 1994. From September 1989 to March 1994,
he served as Vice President and General Manager for Epsilon, Inc., a wholly-
owned subsidiary of American Express TRS, a database marketing company. Mr.
Orton received his B.A. in Business Administration and Marketing from
California State University, Fullerton.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board consists of Messrs. Orton and
Harris. In October 1996, the Company granted Mr. Orton options to purchase
19,800 shares of Common Stock, with an exercise price of $1.50 per share. In
December 1996, the Company granted Mr. Harris an option to purchase 18,000
shares of Common Stock with an exercise price of $5.00 per share, and Mr.
Harris purchased 20,000 shares of the Company's Common Stock for an aggregate
purchase price of $100,000 paid with a full recourse promissory note secured
by the shares. The Company expects Mr. Harris to repay his note in January
1997.
DIRECTOR COMPENSATION
Directors of the Company do not receive cash compensation for their services
as directors but are reimbursed for their reasonable expenses in attending
meetings of the Board.
In December 1996, the Board adopted the 1996 Directors Stock Option Plan
(the "Directors Plan") and reserved a total of 100,000 shares of the Company's
Common Stock for issuance thereunder. The Company's stockholders are expected
to approve the Directors Plan in January 1997. Members of the Board who are
not employees of the Company, or any parent, subsidiary or affiliate of the
Company, are eligible to participate in the Directors Plan. Each eligible
director who first becomes a member of the Board on or after the date on which
this offering is declared effective by the Securities and Exchange Commission
("Effective Date") will initially be granted an option for 15,000 shares
("Initial Grant") on the later of the Effective Date or the date such director
first becomes a director. On each anniversary of a director's Initial Grant
(or previous grant if such director was ineligible to receive an Initial
Grant), each eligible director will automatically be granted an additional
option to purchase 5,000 shares if such director has served continuously as a
member of the Board since the date of such director's Initial Grant (or
previous grant if such director did not receive an Initial Grant). All options
issued under the Directors Plan will vest as to 12.5% of the shares six months
from the date of grant and as to 2.083% of the shares on the last date of each
month thereafter, provided the optionee continues as a member of the Board or
as a consultant to the Company. The exercise price of all options granted
under the Directors Plan must be the fair market value of the Common Stock on
the date of grant.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid for services rendered to the Company in all capacities during 1996 by the
Company's Chief Executive Officer. No other executive officer who held office
at December 31, 1996 met the definition of "most highly compensated executive
officer" within the SEC's executive compensation disclosure rules for this
period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
AWARDS
------------------
1996 ANNUAL COMPENSATION
---------------------------------
OTHER ANNUAL SECURITIES
NAME AND PRINCIPAL POSITIONS SALARY(1) BONUS COMPENSATION(2) UNDERLYING OPTIONS
- ---------------------------- --------- ------- --------------- ------------------
<S> <C> <C> <C> <C>
S. Jerrold Kaplan......... $ -- $ -- $26 --
President and Chief
Executive Officer
</TABLE>
- --------
(1) John F. Sauerland, who was appointed the Company's Chief Financial Officer
in July 1996, is currently being compensated at the rate of $100,000 per
year. As of January 1, 1997, the Company intends to pay both Mr. Kaplan
and Alan S. Fisher, the Company's Vice President of Development and
Operations and Chief Technical Officer, at the annual salary rate of
$100,000. Neither Mr. Kaplan nor Mr. Fisher received any salary or bonus
during 1996.
(2) Represents the portion of Mr. Kaplan's health and life insurance premium
paid by the Company.
Neither Mr. Kaplan nor Mr. Fisher has been granted options by the Company.
For information on options granted to Mr. Sauerland, see "Employment
Agreement" below.
36
<PAGE>
EMPLOYMENT AGREEMENT
Mr. Sauerland's offer letter provides for an initial annual salary of
$100,000 and a review to bring his salary in line with industry standard
practice immediately following this offering. It also provides that, should
Mr. Sauerland be terminated without formal "cause" following the first six
months of his employment, he would receive severance pay in the amount of six
months' salary. In addition, it provides that Mr. Sauerland will participate
in any appropriate executive incentive plans. At the commencement of Mr.
Sauerland's employment in July 1996, the Company granted to him stock options
to purchase 225,000 shares of Common Stock with an exercise price of $0.67 per
share. The options will vest as to 28,125 shares on February 1, 1997 and as to
4,687.5 shares on the first day of each month thereafter. Further, if an
initial public offering occurs prior to the time that the option is fully
vested, 20% of the unvested shares become vested upon the closing of the
offering and the remaining unvested shares vest monthly pro rata over the
remainder of the four-year vesting period. Mr. Sauerland's offer letter
provides that 25% of the unvested options would vest immediately upon Mr.
Sauerland's termination without formal "cause" following a "change of control"
transaction.
EMPLOYEE BENEFIT PLANS
1995 Equity Incentive Plan. In November 1995, the Board adopted and the
Company's stockholders approved the Company's 1995 Equity Incentive Plan (the
"1995 Equity Incentive Plan") and reserved 1,500,000 shares of Common Stock
for issuance thereunder. The 1995 Equity Incentive Plan was amended in August
1996 to increase the number of shares reserved for issuance thereunder from
1,500,000 to 3,032,250. As of September 30, 1996, options to purchase an
aggregate of 1,196,760 shares of Common Stock were outstanding under the 1995
Equity Incentive Plan with exercise prices ranging from $0.033 to $1.50 per
share, and options to purchase 2,303,240 shares were available for grant. In
December 1996, the 1995 Equity Incentive Plan was amended to allow the
issuance of options thereunder to qualify under the exemption contained in
Section 25102(o) of the California Corporate Securities Law of 1968. The
Company's stockholders approved the amendment in December 1996. In December
1996, the Board further amended and restated the 1995 Equity Incentive Plan to
become effective upon the Effective Date. The Company's stockholders are
expected to approve the amendment and restatement of the 1995 Equity Incentive
Plan in January 1997. The amendment and restatement of the 1995 Equity
Incentive Plan increased the shares reserved for issuance from 3,032,250 to
3,500,000.
The 1995 Equity Incentive Plan provides for the grant of stock options and
the issuance of restricted stock and stock bonuses by the Company to its
employees, officers, directors, consultants, independent contractors and
advisers. No person will be eligible to receive more than 250,000 shares in
any calendar year pursuant to grants under the 1995 Equity Incentive Plan,
other than new employees of the Company who will be eligible to receive up to
a maximum of 750,000 shares in the calendar year in which they commence
employment with the Company. The 1995 Equity Incentive Plan is administered by
the Compensation Committee of the Board, consisting of Messrs. Orton and
Harris, both of whom are "outside directors" as that term is defined in
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The 1995 Equity Incentive Plan permits the Compensation Committee to grant
options that are either incentive stock options (as defined in Section 422 of
the Code) or nonqualified stock options, on terms (including the vesting
schedule and the exercise price, which may not be less than 85% of the fair
market value of the Company's Common Stock in the case of nonqualified stock
options and 100% in the case of incentive stock options) determined by the
Compensation Committee, subject to certain statutory and other limitations in
the 1995 Equity Incentive Plan. In addition to, or in tandem with, awards of
stock options, the Compensation Committee may grant participants restricted
stock awards to purchase the Company's Common Stock for not less than 85% of
its fair market value at the time of grant or stock bonuses for services
rendered. The other terms of such restricted stock awards may be determined by
the Compensation Committee. No person may receive (i) restricted stock awards,
(ii) stock bonus awards or (iii) options with an exercise price below fair
market value for more than 100,000 shares over the term of the 1995 Equity
Incentive Plan, and the sum of such awards may not exceed 200,000 shares over
the term of the 1995 Equity Incentive Plan. The 1995 Equity Incentive Plan
will terminate in November 2005 unless terminated earlier in accordance with
the provisions of the 1995 Equity Incentive Plan. Under the 1995 Equity
Incentive Plan, shares that (i) are subject to issuance upon exercise of an
option but cease to be subject to such option for any reason other than
exercise of such option, (ii) are subject to an award granted under the 1995
Equity Incentive Plan but are forfeited or are repurchased by the Company at
the original issue price or (iii) are subject to an award that otherwise
terminates without shares being issued will again be available for grant and
issuance in connection with future awards under the 1995 Equity Incentive
Plan.
37
<PAGE>
1996 Employee Stock Purchase Plan. In December 1996, the Board adopted the
1996 Employee Stock Purchase Plan (the "Purchase Plan") and reserved a total
of 150,000 shares of the Company's Common Stock for issuance thereunder. The
Company's stockholders are expected to approve the Purchase Plan in January
1997. The Purchase Plan will become effective on the first business day on
which price quotations for the Company's Common Stock are available on the
Nasdaq National Market. The Purchase Plan permits eligible employees to
acquire shares of the Company's Common Stock through payroll deductions. The
Purchase Plan is intended to qualify as an "employee stock purchase plan"
under Section 423 of the Code. Except for the initial offering, each offering
under the Purchase Plan will be for a period of twenty-four months (the
"Offering Period") commencing on February 1 and August 1 of each year and
ending on January 31 and July 31 of each year. The first Offering Period will
begin on the date on which price quotations for the Company's Common Stock are
first available on the Nasdaq National Market and will end on January 31,
1999, unless otherwise determined by the Board prior to the beginning of such
Offering Period. Except for the first Offering Period, each Offering Period
will consist of four purchase periods, each six months in length ("Purchase
Period"). The Board has the power to change the duration of Offering Periods
or Purchase Periods without stockholder approval, provided that the change is
announced at least 15 days prior to the scheduled beginning of the first
Offering Period or Purchasing Period to be affected. Eligible employees may
select a rate of payroll deduction between 2% and 15% of their compensation,
up to an aggregate total payroll deduction for each employee not to exceed
$21,250 in any Purchase Period. Eligible employees may purchase up to 1,500
shares in any Purchase Period. The purchase price for the Company's Common
Stock purchased under the Purchase Plan is 85% of the lesser of the fair
market value of the Company's Common Stock on the first day of the applicable
Offering Period or on the last day of the respective Purchase Period.
401(k) Plan. The Board maintains the ONSALE, Inc. 401(k) Plan (the "401(k)
Plan"), a defined contribution profit-sharing plan intended to qualify under
Section 401 of the Code. All employees who are at least 21 years old are
eligible to participate in the 401(k) plan. An eligible employee of the
Company may begin to participate in the 401(k) Plan on the earlier of the
first day of January or the first day of July coincident with or immediately
following the later of (i) the date such employee attains age 21 and (ii) the
employee's date of hire. A participating employee may make pre-tax
contributions, subject to limitations under the Code, of a percentage (not to
exceed 15%) of his or her eligible compensation. Employee contributions and
the investment earnings thereon are fully vested at all times. The Company, at
its discretion, may make matching contributions for the benefit of eligible
employees in an amount not to exceed $250 per year. One quarter of the
Company's contributions and the investment earnings thereon become vested upon
the employee's completion of one year of service with the Company and an
additional quarter for each year of service thereafter. The Company made a
$458 contribution to the 401(k) Plan in the fourth quarter of 1996.
INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF
LIABILITY
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation includes a provision that eliminates the personal
liability of its directors for monetary damages for breach of fiduciary duty
as a director except for liability (i) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law or (iv) for any transaction from which the director derived an improper
personal benefit.
As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Company provide that (i) the Company is required to indemnify
its directors and executive officers to the fullest extent permitted by the
Delaware General Corporation Law, (ii) the Company may indemnify its other
officers, employees and agents to the extent permitted by the Delaware General
Corporation Law, (iii) the Company is required to advance expenses, as
incurred, to its directors and executive officers in connection with a legal
proceeding to the fullest extent permitted by the Delaware General Corporation
Law, (iv) the rights conferred in the Bylaws are not exclusive and (v) the
Company is authorized to enter into indemnity agreements with its directors,
officers, employees and agents.
The Company plans to enter into Indemnity Agreements with each of its
directors and executive officers to give such directors and executive officers
additional contractual assurances regarding the scope of the indemnification
set forth in the Company's Bylaws and to provide additional procedural
protections. At present, there is no pending litigation or proceeding
involving a director, officer or employee of the Company regarding which
indemnification is sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification.
38
<PAGE>
CERTAIN TRANSACTIONS
Since the Company's inception (July 1994), there has not been, nor is there
currently proposed, any transaction or series of similar transactions to which
the Company was or is to be a party in which the amount involved exceeds
$60,000 and in which any director, executive officer or holder of more than 5%
of the Common Stock of the Company had or will have a direct or indirect
material interest other than (i) compensation arrangements that are described
where required under "Management," (ii) the transactions described under
"Compensation Committee Interlocks and Insider Participation" and (iii) the
transactions described below.
PROMOTERS' TRANSACTIONS
Each of S. Jerrold Kaplan, Alan S. Fisher, Razi Mohiuddin and Software
Partners, Inc., a Delaware corporation (collectively the "Founders"), were
involved in the founding and organization of the Company and may be considered
a promoter of the Company. Described below are items of value received by each
of the Founders in connection with services provided to the Company.
At its inception in July 1994, the Company issued 6,000,000 shares to Mr.
Kaplan and 6,000,000 shares to Software Partners, Inc. ("SPI"). Mr. Kaplan
purchased his shares by contributing a business plan that he had prepared for
the Company and SPI purchased its shares by contributing certain software that
it had developed for the Company. The Board valued each person's contribution
at $10,000. In July 1994, SPI distributed its 6,000,000 shares of the
Company's Common Stock to its shareholders, Mr. Fisher and Mr. Mohiuddin, with
Mr. Fisher receiving 3,793,185 shares of the Company's Common Stock and Mr.
Mohiuddin receiving 2,206,815 shares of the Company's Common Stock (the "SPI
Distribution"). At the time of the SPI Distribution, Mr. Fisher and Mr.
Mohiuddin also entered into a voting trust agreement pursuant to which SPI
would act as voting trustee for the shares of the Company's Common Stock held
of record by Mr. Fisher and Mr. Mohiuddin. The Company has the right to
repurchase at their original cost the shares owned by Messrs. Kaplan, Fisher
and Mohiuddin, which right commenced lapsing monthly as to 1/48th of each of
their shares on July 21, 1994 and continues to lapse so long as, in the case
of Mr. Kaplan, Mr. Kaplan and, in the case of Messrs. Fisher and Mohiuddin,
Mr. Fisher is rendering substantial services to the Company.
From inception (July 1994) through mid-1996, Mr. Kaplan and SPI provided
certain advances to the Company for working capital and property and equipment
purchases. At December 31, 1995, the Company owed $56,000 and $214,000 to Mr.
Kaplan and SPI, respectively. At September 30, 1996, the Company owed $62,000
and $434,000 to Mr. Kaplan and SPI, respectively. These advances do not bear
interest. The Company repaid a portion of these advances in October 1996 and
the balance in December 1996.
Since July 1994, the Company has leased certain of its facilities from SPI.
From inception (July 1994) to December 31, 1995 and for the nine months ended
September 30, 1996, the Company paid rent of $18,000 and $22,000, respectively
for use of these facilities. The lease costs for these facilities approximate
the actual cost incurred by SPI.
In June 1996, Mr. Kaplan and SPI agreed to act as guarantors of the
Company's obligations under the Company's agreement with First USA Merchant
Services, Inc. ("First USA") to have First USA process credit card
transactions for the Company. Mr. Kaplan and SPI each are liable to First USA
for any liability or indebtedness the Company owes to First USA.
SECURITIES ISSUANCES
In September 1996, the Company sold an aggregate of 365,191 shares of its
Series A Preferred Stock at a purchase price of $6.39 per share and warrants
to purchase an aggregate of 202,910 shares of Series B Preferred Stock at an
exercise price of $9.59 to the following funds affiliated with Kleiner Perkins
Caufield & Byers ("KPCB"), a beneficial owner of more than 5% of the Company's
Common Stock in the amounts indicated: KPCB VIII (356,061 shares of Series A
Preferred Stock and a warrant to purchase 197,837 shares of Series B Preferred
Stock) and KPCB Information Sciences Zaibatsu Fund II (9,130 shares of Series
A Preferred Stock and a warrant to purchase 5,073 shares of Series B Preferred
Stock). Each share of Preferred Stock will be converted automatically into
three shares of Common Stock upon the closing of this offering. Both entities
have advised the Company that they intend to exercise their warrants in total
for cash immediately prior to the completion of this offering.
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of September
30, 1996 by (i) each stockholder known by the Company to be the beneficial
owner of more than 5% of the Company's Common Stock, (ii) each director and
(iii) all executive officers and directors as a group. This table assumes the
cash exercise of all outstanding warrants and the conversion of all
outstanding Preferred Stock as of that date.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES ---------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) BEFORE OFFERING AFTER OFFERING(2)
- ------------------------ --------------------- --------------- -----------------
<S> <C> <C> <C>
S. Jerrold Kaplan(3)(4). 6,000,000 43.3% 36.0%
Alan S. Fisher(4)(5).... 6,000,000 43.3 36.0
Software Partners, Inc.
Razi Mohiuddin(4)(5)(6). 2,206,815 15.9 13.3
Kleiner Perkins Caufield
& Byers(7)............. 1,704,303 12.3 10.2
Peter L. Harris(8)...... -- -- --
Kenneth J. Orton(9)..... -- -- --
All executive officers
and directors as
a group (5
persons)(10)........... 12,000,000 86.7 72.1
</TABLE>
- --------
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all
shares beneficially owned, subject to community property laws where
applicable. Shares of Common Stock subject to options or warrants that
are currently exercisable or exercisable within 60 days of September 30,
1996 are deemed to be outstanding and to be beneficially owned by the
person holding such options for the purpose of computing the percentage
ownership of such person but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Assumes that the Underwriters' over-allotment option to purchase up to
420,000 shares from the Company is not exercised.
(3) Represents 5,685,000 shares held of record by Mr. Kaplan, 300,000 shares
held of record by Layne Kaplan (Mr. Kaplan's former spouse) and 15,000
shares held of record by Amy Kaplan Eckman, trustee of the Lily Layne
Kaplan Irrevocable Trust. On April 30, 1996, the Company, Mr. Kaplan and
Layne Kaplan entered into a voting trust agreement pursuant to which Mr.
Kaplan was authorized to act as voting trustee for the 300,000 shares
held of record by Layne Kaplan. This voting trust agreement will
terminate upon the closing of this offering. Mr. Kaplan is President,
Chief Executive Officer, Secretary and a director of the Company. The
address of Mr. Kaplan is c/o ONSALE, Inc., 1861 Landings Drive, Mountain
View, California 94043.
(4) The Company has the right to repurchase at their original cost the shares
owned by Messrs. Kaplan, Fisher and Mohiuddin, which right commenced
lapsing monthly as to 1/48th of each of their shares on July 21, 1994 and
continues to lapse so long as he is rendering substantial services to the
Company. At September 30, 1996, Messrs. Kaplan, Fisher and Mohiuddin
beneficially owned 3,250,000 shares, 2,054,641 shares and 1,195,358
shares, respectively, that were no longer subject to the Company's
repurchase rights.
(5) Represents 3,718,185 shares held of record by Mr. Fisher, 75,000 shares
held of record by the Kelly Elizabeth Fisher Irrevocable Trust and
2,206,815 shares held of record by Mr. Mohiuddin and the Mohiuddin
Children's Trust (as described in note (6) below), all of which are
subject to a voting trust agreement under which Software Partners, Inc.
has the right to vote the shares. Software Partners, Inc. is owned by
Messrs. Fisher and Mohiuddin. Mr. Fisher is a director, President and
more than 50% shareholder of Software Partners, Inc. The address of
Software Partners, Inc. and Mr. Fisher is 1953 Landings Drive, Mountain
View, California 94043. Mr. Fisher is Vice President of Development and
Operations, Chief Technical Officer and a director of the Company.
40
<PAGE>
(6) Represents 2,056,815 shares held of record by Mr. Mohiuddin and 150,000
shares held or record by the Mohiuddin Children's Trust. The address of
Mr. Mohiuddin is c/o Software Partners, Inc., 1953 Landings Drive,
Mountain View, California 94043.
(7) Represents 1,095,573 shares issuable upon the conversion of Series A
Preferred Stock and 608,730 shares issuable upon the exercise of warrants
for Series B Preferred Stock and the subsequent conversion of Series B
Preferred Stock. Of the 1,704,303 shares beneficially owned by KPCB,
1,661,694 shares are held of record by KPCB VIII and 42,609 shares are
held of record by KPCB Information Sciences Zaibatsu Fund II. The address
of KPCB VIII and KPCB Information Sciences Zaibatsu Fund II is 2750 Sand
Hill Road, Menlo Park, California 94025.
(8) Mr. Harris is a director of the Company.
(9) Mr. Orton is a director of the Company.
(10) Represents the shares described in notes (3) and (5).
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock, $0.001 par value per share, and 2,000,000 shares of Preferred
Stock, $0.001 par value per share. As of September 30, 1996, and assuming the
exercise of all outstanding warrants and the conversion of all outstanding
Preferred Stock into Common Stock immediately prior to the closing of this
offering, there were outstanding 13,848,060 shares of Common Stock held of
record by 11 stockholders and options to purchase 1,196,760 shares of Common
Stock.
COMMON STOCK
Subject to preferences that may apply to any Preferred Stock outstanding at
the time, the holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available therefor at such times and
in such amounts as the Board of Directors may from time to time determine.
Each stockholder is entitled to one vote for each share of Common Stock held
on all matters submitted to a vote of stockholders. Cumulative voting for the
election of directors is not provided for in the Company's Certificate of
Incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election. The Common Stock is
not entitled to preemptive rights and is not subject to conversion or
redemption. Upon liquidation, dissolution or winding-up of the Company, the
assets legally available for distribution to stockholders are distributable
ratably among the holders of the Common Stock and any participating Preferred
Stock outstanding at that time after payment of liquidation preferences, if
any, on any outstanding Preferred Stock and payment of other claims of
creditors. Each outstanding share of Common Stock is, and all shares of Common
Stock to be outstanding upon completion of this offering will be, fully paid
and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of Preferred Stock
(the "Convertible Preferred") will be converted into shares of Common Stock.
See Note 4 of Notes to Financial Statements for a description of the
Convertible Preferred. The Board of Directors is authorized, subject to any
limitations prescribed by Delaware law, to provide for the issuance of
additional shares of Preferred Stock in one or more series, to establish from
time to time the number of shares to be included in each such series, to fix
the powers, designations, preferences and rights of the shares of each wholly
unissued series and any qualifications, limitations or restrictions thereon
and to increase or decrease the number of shares of any such series (but not
below the number of shares of such series then outstanding) without any
further vote or action by the stockholders. The Board of Directors may
authorize the issuance of Preferred Stock with voting or conversion rights
that could adversely affect the voting power or other rights of the holders of
Common Stock. Thus, the issuance of Preferred Stock may have the effect of
delaying, deferring or preventing a change in control of the Company. The
Company has no current plan to issue any shares of Preferred Stock.
DELAWARE'S ANTI-TAKEOVER LAW
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Anti-Takeover Law") regulating corporate
takeovers. The Anti-Takeover Law prevents certain Delaware corporations,
including those whose securities are listed on the Nasdaq National Market,
from engaging, under certain circumstances, in a "business combination" (which
includes a merger or sale of more than 10% of the corporation's assets) with
any "interested stockholder" (a stockholder who owns 15% or more of the
corporation's outstanding voting stock) for three years following the date
that such stockholder became an "interested stockholder." The effect of the
Anti-Takeover Law may be to discourage takeover attempts, including attempts
that might result in a premium over the market price of the Common Stock. A
Delaware corporation may "opt out" of the Anti-Takeover Law with an express
provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
The Company has not "opted out" of the provisions of the Anti-Takeover Law.
42
<PAGE>
REGISTRATION RIGHTS
Beginning six months after the date of this offering, the holders of
1,704,303 shares of Common Stock (the "Registrable Securities") will have
certain rights with respect to the registration of those shares under the
Securities Act. If requested by holders of at least 50% of the Registrable
Securities, the Company must file a registration statement under the
Securities Act covering all Registrable Securities requested to be included by
all holders of such Registrable Securities. The Company may be required to
effect up to two such registrations. The Company has the right to delay any
such registration for up to 90 days under certain circumstances. All expenses
incurred in connection with such registrations (other than underwriters'
discounts and commissions) will be borne by the Company. These demand
registration rights expire six years after the closing of this offering.
Further, holders of Registrable Securities may require the Company to
register all or any portion of their Registrable Securities on Form S-3 when
such form becomes available to the Company, subject to certain conditions and
limitations. The Company may be required to effect up to two such
registrations per year. All expenses incurred in connection with such
registrations (other than underwriters' or brokers' discounts and commissions)
will be borne by the Company. These Form S-3 registration rights expire six
years after the closing of this offering.
In addition, if the Company proposes to register any of its shares of Common
Stock under the Securities Act other than in connection with a Company
employee benefit plan or a corporate reorganization, the holders of the
Registrable Securities and Messrs. Kaplan, Fisher and Mohiuddin may require
the Company to include all or a portion of their shares in such registration,
although the managing underwriter of any such offering has certain rights to
limit the number of shares in such registration. All expenses incurred in
connection with such registrations (other than underwriters' or brokers'
discounts and commissions) will be borne by the Company. These "piggy-back"
registration rights expire six years after the closing of this offering.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is The First
National Bank of Boston.
43
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of the
Company and there can be no assurance that a significant public market for the
Common Stock will develop or be sustained after this offering. Future sales of
substantial amounts of Common Stock in the public market could adversely
affect market prices prevailing from time to time and could impair the
Company's ability to raise capital through sale of its equity securities. As
described below, no shares outstanding prior to this offering will be
available for sale immediately after this offering due to certain contractual
restrictions on resale. Sales of substantial amounts of Common Stock of the
Company in the public market after the restrictions lapse could adversely
affect the prevailing market price and the ability of the Company to raise
equity capital in the future.
Upon completion of this offering, the Company will have outstanding
16,648,060 shares of Common Stock, assuming no exercise of outstanding
employee options. Of these shares, the 2,800,000 shares sold in this offering
will be freely tradable without restriction under the Securities Act unless
purchased by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act. The remaining shares held by existing stockholders
are subject to lock-up agreements providing that, with certain limited
exceptions, the stockholder will not offer, sell, contract to sell, grant an
option to purchase, make a short sale or otherwise dispose of or engage in any
hedging or other transaction that is designed or reasonably expected to lead
to a disposition of any shares of Common Stock or any option or warrant to
purchase shares of Common Stock or any securities exchangeable for or
convertible into shares of Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of Montgomery
Securities. As a result of these lock-up agreements, notwithstanding possible
earlier eligibility for sale under the provisions of Rules 144, 144(k) and
701, none of these shares will be salable until 180 days after the date of
this Prospectus. Beginning 180 days after the date of this Prospectus,
9,143,747 of these shares will be eligible for sale in the public market
although all but 143,757 shares will be subject to certain volume limitations.
Of the remaining Restricted Shares, an aggregate of 250,000 shares held by
Messrs. Kaplan, Fisher and Mohiuddin will become eligible each month
thereafter until July 21, 1998 as certain repurchase rights of the Company
with respect to those shares lapse and 1,704,303 shares will be eligible for
sale upon the achievement of a two-year holding period.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned Restricted Shares for at least two years (including
the holding period of any prior owner except an affiliate) would be entitled
to sell within any three-month period a number of shares that does not exceed
the greater of: (i) 1% of the number of shares of Common Stock then
outstanding (which will equal approximately 164,000 shares immediately after
this offering); or (ii) the average weekly trading volume of the Common Stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about the Company. Under Rule 144(k), a person who is not deemed
to have been an affiliate of the Company at any time during the 90 days
preceding a sale, and who has beneficially owned the shares proposed to be
sold for at least three years (including the holding period of any prior owner
except an affiliate), is entitled to sell such shares without complying with
the manner of sale, public information, volume limitation or notice provisions
of Rule 144. The Securities and Exchange Commission has proposed to reduce the
Rule 144 holding periods. If enacted, such modification will have a material
effect on the timing of when shares of Common Stock will become eligible for
resale.
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period
requirement, of Rule 144. Any employee, officer or director of or consultant
to the Company who purchased his or her shares pursuant to a written
compensatory plan or contract may be entitled to rely on the resale provisions
of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144.
Rule 701 further
44
<PAGE>
provides that non-affiliates may sell such shares in reliance on Rule 144
without having to comply with the holding period, public information, volume
limitation or notice provisions of Rule 144. All holders of Rule 701 shares
are required to wait until 90 days after the date of this Prospectus before
selling such shares. However, all shares issued pursuant to Rule 701 are
subject to lock-up agreements and will only become eligible for sale at the
earlier of the expiration of the 180-day lock-up agreements or no sooner than
90 days after the offering upon obtaining the prior written consent of the
representatives of the Underwriters.
Immediately after this offering, the Company intends to file a registration
statement under the Securities Act covering shares of Common Stock subject to
outstanding options under the Company's 1995 Equity Incentive Plan or reserved
for issuance under the Company's stock option and stock purchase plans. Based
on the number of shares subject to outstanding options at September 30, 1996
and currently reserved for issuance under all such plans, such registration
statement would cover approximately 3,750,000 shares. Such registration
statement will automatically become effective upon filing. Accordingly, shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to affiliates of the Company, be available for sale in
the open market immediately after the 180-day lock-up agreements expire. Also
beginning six months after the date of this offering, certain holders of
shares of Common Stock will be entitled to certain rights with respect to
registration of such shares of Common Stock for offer and sale to the public.
See "Description of Capital Stock--Registration Rights."
45
<PAGE>
UNDERWRITING
The Underwriters named below, represented by Montgomery Securities and Alex.
Brown & Sons Incorporated (the "Representatives"), have severally agreed,
subject to the terms and conditions set forth in the Underwriting Agreement,
to purchase from the Company the number of shares of Common Stock indicated
below opposite their respective names at the initial public offering price
less the underwriting discount set forth on the cover page of this Prospectus.
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the shares of Common Stock are subject to
certain conditions precedent, and that the Underwriters are committed to
purchase all of such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
Montgomery Securities..............................................
Alex. Brown & Sons Incorporated....................................
---------
Total............................................................ 2,800,000
=========
</TABLE>
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public on the terms set
forth on the cover page of this Prospectus. The Underwriters may allow to
selected dealers a concession of not more than $ per share, and the
Underwriters may allow, and such dealers may reallow, a concession of not more
than $ per share to certain other dealers. After this offering, the price
and concessions and reallowances to dealers may be changed by the
Representatives. The Common Stock is offered subject to receipt and acceptance
by the Underwriters and to certain other conditions, including the right to
reject orders in whole or in part.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to a
maximum of 420,000 additional shares of Common Stock to cover over-allotments,
if any, at the same price per share as the initial 2,800,000 shares to be
purchased by the Underwriters. To the extent the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with this offering.
All of the Company's stockholders and optionees have agreed that, for a
period of 180 days after the date of this Prospectus, they will not, without
the prior written consent of Montgomery Securities, directly or indirectly
sell, offer to sell to or otherwise dispose of any such shares of Common Stock
or any right to acquire such shares. In addition, the Company has agreed that,
for a period of 180 days after the date of this Prospectus, it will not,
without the prior written consent of Montgomery Securities, issue, offer,
sell, grant options to purchase or otherwise dispose of any of the Company's
equity securities or any other securities convertible into or exchangeable for
the Common Stock or other equity security, other than the grant of options to
purchase Common Stock or the issuance of shares of Common Stock under the
Company's stock option and stock purchase plans and the issuance of shares of
Common Stock pursuant to the exercise of outstanding options and warrants.
The Representatives have informed the Company that the Underwriters do not
expect to make sales to accounts over which they exercise discretionary
authority in excess of 5% of the number of shares of Common Stock offered
hereby.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act, or will contribute to payments the Underwriters may
be required to make in respect thereof.
46
<PAGE>
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined by
negotiations between the Company and the Representatives. Among the factors to
be considered in such negotiations will be the history of, and the prospects
for, the Company and the industry in which it competes, an assessment of the
Company's management, the Company's past and present operations, its past and
present financial performance, the prospects for future earnings of the
Company, the present state of the Company's development, the general condition
of the securities markets at the time of the offering and the market prices of
and demand for publicly traded common stock of comparable companies in recent
periods.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Fenwick & West LLP, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the Underwriters by Brobeck, Phleger & Harrison LLP, Palo
Alto, California. Fenwick & West LLP owns an aggregate of 100,359 shares of
Common Stock of the Company.
EXPERTS
The financial statements of the Company as of December 31, 1995 and
September 30, 1996, for the period from inception (July 1994) to December 31,
1995, and for the nine months ended September 30, 1996 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act
with respect to the shares of Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedule thereto. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement and the exhibits and schedule filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or any other document to which reference is made are not necessarily complete,
and, in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. A copy of the
Registration Statement and the exhibits and schedule thereto may be inspected
without charge at the offices of the Commission at Judiciary Plaza, 450 Fifth
Street, Washington, D.C. 20549, and copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of
the Commission, Washington, D.C. 20549 upon the payment of the fees prescribed
by the Commission. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission. Information concerning the Company is also available for
inspection at the offices of the Nasdaq National Market, Reports Section, 1735
K Street, N.W., Washington, D.C. 20006.
47
<PAGE>
ONSALE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................................ F-2
Balance Sheet as of December 31, 1995 and September 30, 1996............. F-3
Statement of Operations for the Period from Inception (July 1994) to
December 31, 1995 and the Nine Months Ended September 30, 1996.......... F-4
Statement of Cash Flows for the Period from Inception (July 1994) to
December 31, 1995 and the Nine Months Ended September 30, 1996.......... F-5
Statement of Stockholders' Equity (Deficit) for the Period from Inception
(July 1994) to December 31, 1995 and the Nine Months Ended September 30,
1996.................................................................... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of ONSALE, Inc.
The reorganization of ONSALE, Inc. in Delaware and the adoption of the
employee stock purchase plan and the directors' stock option plan
(collectively, the "Plans") described in Note 9 of Notes to Financial
Statements have not been consummated or approved at December 20, 1996. When the
reincorporation has been consummated and the Plans approved, we will be in a
position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related
statements of operations, of cash flows and of stockholders' equity
(deficit) present fairly, in all material respects, the financial
position of ONSALE, Inc. at December 31, 1995 and September 30, 1996
and the results of its operations and its cash flows for the period
from inception (July 1994) to December 31, 1995, and the nine months
ended September 30, 1996 in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above."
Price Waterhouse LLP
San Jose, California
December 20, 1996
F-2
<PAGE>
ONSALE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 20,000 $ 3,216,000
Restricted cash.................................... -- 80,000
Accounts receivable, net of allowances of $16,000
and $39,000....................................... 22,000 351,000
Merchandise inventory.............................. 1,000 274,000
Prepaid expenses and other current assets.......... -- 81,000
-------- -----------
Total current assets.......................... 43,000 4,002,000
-------- -----------
Property and equipment, net......................... 30,000 277,000
Other assets........................................ -- 12,000
-------- -----------
Total assets.................................. $ 73,000 $ 4,291,000
======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................... $103,000 $ 814,000
Accrued expenses................................... 117,000 436,000
Deferred revenue................................... 2,000 373,000
Advances due related parties....................... 270,000 496,000
-------- -----------
Total current liabilities..................... 492,000 2,119,000
-------- -----------
Commitments (Note 8)
Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value;
2,000,000 shares authorized:
Series A; 600,000 shares designated; no and
365,191 shares issued and outstanding............ -- 1,000
Series B; 204,521 shares designated; no shares
issued and outstanding........................... -- --
Common stock, $0.001 par value; 30,000,000 shares
authorized; 12,043,398 and 12,143,757 shares
issued and outstanding............................ 12,000 12,000
Additional paid-in capital......................... 9,000 2,378,000
Accumulated deficit................................ (440,000) (219,000)
-------- -----------
Total stockholders' equity (deficit).......... (419,000) 2,172,000
-------- -----------
Total liabilities and stockholders' equity
(deficit).................................... $ 73,000 $ 4,291,000
======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
ONSALE, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 1994) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- -------------
<S> <C> <C>
Revenue:
Merchandise...................................... $ 30,000 $ 4,951,000
Commission....................................... 110,000 1,012,000
----------- -----------
Total revenue.................................. 140,000 5,963,000
Cost of merchandise revenue....................... 27,000 4,463,000
----------- -----------
Gross profit...................................... 113,000 1,500,000
----------- -----------
Operating expenses:
Sales and marketing.............................. 144,000 440,000
General and administrative....................... 227,000 514,000
Engineering...................................... 182,000 303,000
----------- -----------
Total operating expenses....................... 553,000 1,257,000
----------- -----------
Income (loss) from operations..................... (440,000) 243,000
Interest and other income......................... -- 3,000
----------- -----------
Income (loss) before income taxes................. (440,000) 246,000
Provision for income taxes........................ -- (25,000)
----------- -----------
Net income (loss)................................. $ (440,000) $ 221,000
=========== ===========
Net income (loss) per share....................... $ (0.03) $ 0.01
=========== ===========
Shares used to compute net income (loss) per
share............................................ 15,221,000 15,221,000
=========== ===========
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 1994) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- -------------
<S> <C> <C>
SUPPLEMENTAL FINANCIAL DATA:
Gross merchandise sales (see Note 1).............. $ 1,252,000 $16,328,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
ONSALE, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 1994) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ (440,000) $ 221,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation..................................... 10,000 26,000
Issuance of common stock......................... 21,000 --
Changes in assets and liabilities:
Restricted cash................................. -- (80,000)
Accounts receivable, net........................ (22,000) (329,000)
Merchandise inventory........................... (1,000) (273,000)
Prepaid expenses and other current assets....... -- (81,000)
Other assets.................................... -- (12,000)
Accounts payable................................ 103,000 711,000
Accrued expenses................................ 117,000 319,000
Deferred revenue................................ 2,000 371,000
---------- ----------
Net cash provided by (used in) operating
activities.................................... (210,000) 873,000
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment................ (40,000) (273,000)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of preferred stock and
warrants......................................... -- 2,345,000
Common stock issued for cash...................... -- 25,000
Advances due related parties...................... 270,000 226,000
---------- ----------
Net cash provided by financing activities....... 270,000 2,596,000
---------- ----------
Net increase in cash............................... 20,000 3,196,000
Cash and cash equivalents at beginning of period... -- 20,000
---------- ----------
Cash and cash equivalents at end of period......... $ 20,000 $3,216,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
ONSALE, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B
CONVERTIBLE CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL
---------------- ---------------- ------------------ PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
-------- ------- ------- ------- ---------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock
to founders............ -- $ -- -- $ -- 12,000,000 $12,000 $ 8,000 $ -- $ 20,000
Issuance of common
stock.................. -- -- -- -- 43,398 -- 1,000 -- 1,000
Net loss................ -- -- -- -- -- -- -- (440,000) (440,000)
-------- ------- ------- ------- ---------- ------- ---------- --------- ----------
Balance at December 31,
1995................... -- -- -- -- 12,043,398 12,000 9,000 (440,000) (419,000)
Issuance of common stock
upon the exercise of
warrants............... -- -- -- -- 100,359 -- 25,000 -- 25,000
Issuance of Series A
convertible preferred
stock at $6.39 per
share and warrants for
cash................... 365,191 1,000 -- -- -- -- 2,344,000 -- 2,345,000
Net income.............. -- -- -- -- -- -- -- 221,000 221,000
-------- ------- ------- ------- ---------- ------- ---------- --------- ----------
Balance at September 30,
1996................... 365,191 $ 1,000 -- $ -- 12,143,757 $12,000 $2,378,000 $(219,000) $2,172,000
======== ======= ======= ======= ========== ======= ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND A SUMMARY OF ITS SIGNIFICANT ACCOUNTING POLICIES:
The Company
ONSALE, Inc. (the "Company" or "ONSALE") is a leading electronic retailer
pioneering a new sales format, the interactive 24-hour online auction,
designed to serve as an efficient and entertaining marketing channel for
refurbished and close-out merchandise. The Company was incorporated in
California in July 1994 and commenced operations in May 1995. The Company
conducts its business within one industry segment.
The Company's results of operations from inception (July 1994) to December
31, 1994 have been combined with the results of operations for the year ended
December 31, 1995 due to the Company's limited activity during such period.
During 1994, the Company incurred expenses and reported a net loss of $41,000.
SIGNIFICANT ACCOUNTING POLICIES
Revenue recognition
The Company obtains merchandise from vendors in one of two primary
arrangements. For certain of its vendors, the Company purchases or takes on
consignment merchandise for resale in its auctions ("Principal Sales"). In
Principal Sales transactions, the Company is responsible for the billing and
shipping of the merchandise and recognizes the full sales amount as revenue
upon verification of the credit card transaction authorization and shipment of
the merchandise. In Principal Sales transactions, the Company bears both
inventory risk and credit risk with respect to sales of its inventory. In
instances where credit card authorization has been received but the
merchandise has not been shipped, the Company defers revenue recognition until
the merchandise is shipped. With other vendors, the Company acts as an agent,
conducts electronic auctions and processes orders in exchange for a commission
on the sale of the vendors' merchandise ("Agent Sales"). In Agent Sales
transactions, the Company recognizes the commissions as revenue upon
completion of the auction process and forwarding the auction sales information
to the vendor. In certain circumstances, the Company will allow customers to
return products and, accordingly, provides for allowances for estimated future
returns at the time of shipment based on historical data.
Supplemental financial data
The Company's relationships with its vendors have evolved from a purely
Agent Sales business at the Company's inception to a business that now
includes a significant percentage of Principal Sales transactions. Gross
merchandise sales amounts shown on the Company's Statement of Operations
represent what the Company's total revenue would have been if all Agent Sales
had been made as Principal Sales. Due to the ongoing evolution in the
Company's operations toward the Principal Sales model, management believes
that the information on gross merchandise sales is relevant to a reader of the
Company's financial statements since it provides a more consistent comparison
between historical periods and a more accurate comparison to future periods
than does total revenue. Gross merchandise sales should not be considered in
isolation or as a substitute for other information prepared in accordance with
generally accepted accounting principles.
Cash, cash equivalents and restricted cash
All highly liquid investments with a maturity of three months or less from
the date of purchase are considered cash equivalents. Restricted cash of
$80,000 at September 30, 1996 relates to a deposit with a bank to establish
electronic credit card services for processing of transactions with customers.
The Company has adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" and,
accordingly, classifies investment securities as either held-to-maturity,
trading or available-for-sale. At December 31, 1995 and September 30, 1996,
the Company did not hold any investment securities.
F-7
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Merchandise inventory
Inventory is stated at the lower of cost or market, cost being determined on
a first-in, first-out basis.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the respective
assets, generally 3 years.
Engineering expenses
Engineering expenses include expenses incurred by the Company to develop,
enhance, manage, monitor and operate the Company's Web-site. Engineering costs
are expensed as incurred.
Income taxes
The Company provides for income taxes using an asset and liability approach
that recognizes deferred tax assets and liabilities for expected future tax
consequences of temporary differences between the book and tax bases of assets
and liabilities.
Dependence on merchandise vendors
The Company does not manufacture any of the merchandise that it auctions.
The Company's strategy has been to develop and maintain relationships with
brokers and original equipment manufacturers to secure a continuing supply of
merchandise to be auctioned.
Concentration of credit risk
The Company's accounts receivable are derived from Agent Sales earned from
merchants located in the United States and Canada. Principal Sales made
through credit cards are preapproved. The Company maintains reserves for
potential credit losses, which historically have been immaterial.
Stock split
On November 1, 1996, the Board of Directors declared a three-for-one split
of the outstanding shares of the Company's common stock. All common share and
per share data have been retroactively adjusted to reflect the stock split.
Net income (loss) per share
Net income (loss) per share is computed using the weighted average number of
common and common equivalent shares outstanding during the period. Common
equivalent shares consist of convertible preferred stock and warrants (using
the "if converted" method) and stock options (using the "treasury stock"
method). Common equivalent shares are excluded from the computation if their
effect is antidilutive, except that, pursuant to a Securities and Exchange
Commission Staff Accounting Bulletin, convertible preferred stock (using the
"if converted" method) and common equivalent shares (using the "treasury
stock" method and the assumed initial public offering price) issued subsequent
to September 1995 have been included in the computation as if they were
outstanding for all periods presented.
F-8
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Stock-based compensation
The Company applies Accounting Principles Board Opinion 25 "Accounting for
Stock Issued to Employees" and related interpretations in accounting for its
stock-based compensation plans, as permitted by the Financial Accounting
Standards Board's Statement No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation." SFAS 123 defines a "fair value" based method of accounting for
an employee stock option or similar equity instrument and encourages, but does
not require, entities to adopt that method of accounting for their employee
stock compensation plans. The pro forma disclosures of the difference between
compensation cost included in net income (loss) and the related cost measured
by the fair value method are presented in Note 6.
Management estimates and assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Proposed public offering of common stock (unaudited)
If the offering contemplated by this Prospectus (the "Offering") is
consummated, all of the convertible preferred stock outstanding as of the
closing date will automatically be converted on a three-for-one basis into an
aggregate of 1,095,573 shares of common stock (based on the shares of
convertible preferred stock outstanding as of September 30, 1996) and 608,730
shares of common stock will be issued upon the anticipated exercise of the
warrants that were issued in connection with the sale of the Series A
convertible preferred stock (see Note 4). Unaudited pro forma stockholders'
equity at September 30, 1996, adjusted for the conversion of the preferred
stock and the anticipated exercise of the outstanding warrants, is as follows:
<TABLE>
<S> <C>
Convertible preferred stock, $0.001 par value; 2,000,000
shares authorized:
Series A; 600,000 shares designated; no shares issued and
oustanding.................................................. $ --
Series B; 204,521 shares designated; no shares issued and
outstanding................................................. --
Common stock, $0.001 par value; 30,000,000 shares authorized;
13,848,060 shares issued and outstanding..................... 14,000
Additional paid-in capital.................................... 4,323,000
Accumulated deficit........................................... (219,000)
----------
$4,118,000
==========
</TABLE>
F-9
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2--DETAILS OF BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Property and equipment:
Computer equipment............................... $ 40,000 $263,000
Furniture and fixtures........................... -- 50,000
-------- --------
40,000 313,000
Less: accumulated depreciation.................... (10,000) (36,000)
-------- --------
$ 30,000 $277,000
======== ========
Accrued expenses:
Accrued sales and marketing...................... $ -- $143,000
Accrued sales taxes.............................. 22,000 64,000
Other accrued expenses........................... 95,000 229,000
-------- --------
$117,000 $436,000
======== ========
</TABLE>
NOTE 3--RELATED PARTY TRANSACTIONS:
From inception (July 1994) through mid-1996, two of the Company's
significant stockholders provided certain advances to the Company for working
capital and property and equipment purchases. At December 31, 1995 and
September 30, 1996, the Company owed $270,000 and $496,000, respectively, to
such stockholders. The advances do not bear interest and the Company repaid
these advances in December 1996.
Since July 1994, the Company has leased certain of its facilities from a
significant stockholder. From inception (July 1994) to December 31, 1995 and
for the nine months ended September 30, 1996, the Company paid rent of $18,000
and $22,000 for use of these facilities. The lease costs for these facilities
approximates the actual cost incurred by the significant stockholder.
In June 1996, two of the Company's significant stockholders agreed to act as
guarantors of the Company's obligations under the Company's agreement with
First USA Merchant Services, Inc. ("First USA") to have First USA process
credit card transactions for the Company. The two stockholders are each liable
to First USA for any liability or indebtedness the Company owes to First USA.
NOTE 4--CONVERTIBLE PREFERRED STOCK AND WARRANTS:
The certificate of incorporation of the Company, as amended, authorize
2,000,000 shares of convertible preferred stock, of which 600,000 and 204,521
shares have been designated as Series A and Series B, respectively. In
September 1996, the Company issued 365,191 shares of its Series A convertible
preferred stock (Series A shares) at a purchase price of $6.39 per share for
aggregate proceeds of $2,353,000. In connection with the issuance of the
Series A shares, the Company issued warrants to two investors to purchase an
aggregate of up to 202,910 shares of the Company's Series B convertible
preferred stock at $9.59 per share. The warrants expire on the earlier of
September 1998 or the consummation of an initial public offering of at least
$7,500,000 and a per share price equal to at least $5.32 per share, after
giving effect to the three-for-one split of the Company's common stock (see
Note 1). The Company has reserved 202,910 shares of Series B convertible
preferred stock common stock for issuance upon the exercise of the warrants.
The shares of convertible preferred stock and the related purchase price per
share have not been adjusted to reflect the three-for-one split (see Note 1).
On an as if converted basis the Series A shares would be convertible into
1,095,573 shares of common stock and the initial purchase price would have
been $2.13.
The Series A and Series B shares have certain rights with respect to voting,
dividends, liquidation and conversion, as follows:
F-10
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Voting
Series A and Series B shares have voting rights equal to the shares of
common stock into which they may be converted.
Dividends
Holders of Series A and Series B shares are entitled to receive
noncumulative dividends at the rate of $0.5112 and $0.7672 per share,
respectively, per annum, when and if declared by the Company's Board of
Directors, prior to and in preference to any declaration or payment of any
dividend on the Company's common stock.
Liquidation
In the event of liquidation and to the extent assets are available, the
holders of Series A and Series B shares are entitled to receive, prior to and
in preference to any distribution to the holders of common stock, the amount
of $6.39 and $9.59 per share, respectively, plus any accrued but unpaid
dividends.
Conversion
Each Series A and Series B share is convertible into three shares of common
stock as a result of the common stock split (see Note 1), and the conversion
ratio is subject to further adjustments in the case of certain dilutive
events. Each Series A share will automatically convert into common stock upon
(i) the affirmative vote of a majority of the holders of Series A shares
outstanding at the time of such vote or (ii) the closing of an underwritten
public offering in which the aggregate offering price is not less than
$7,500,000 and the per share price is not less than $5.32 per share, after
giving effect to the three-for-one split of the Company's common stock (see
Note 1), subject to further adjustment for dilution.
At September 30, 1996, 1,704,303 shares of common stock were reserved for
issuance upon conversion of the convertible preferred stock and warrants.
NOTE 5--COMMON STOCK:
The Company has the right to repurchase, at the original issue price, a
declining percentage of certain of the shares of common stock issued to the
founders under written agreements with such individuals. The Company's right
to repurchase such stock lapses in 48 equal monthly increments commencing in
July 1994 as long as the employee is continuously employed by the Company. At
September 30, 1996, 5,500,000 shares of common stock were subject to
repurchase by the Company.
In July 1994, the Company issued a warrant to purchase 100,359 shares of
common stock at $0.25 per share in exchange for legal services. No value was
ascribed to the warrant as its fair value at the time of issuance was
considered nominal. The warrant was exercised in July 1996, resulting in
aggregate proceeds to the Company of $25,000.
NOTE 6--EMPLOYEE BENEFIT PLANS:
Under the Company's 1995 Equity Incentive Plan (the "1995 Plan"), 3,032,250
shares of common stock have been reserved for issuance pursuant to stock
options, restricted stock and stock bonuses that may be granted to employees,
directors and consultants. This reserve was increased to 3,500,000 shares in
December 1996. Incentive stock options must be granted with exercise prices of
at least the fair market value of the Company's common stock on the date of
grant (at least 110% of the fair market value of the Company's common stock in
the case of holders of more than 10% of the Company's voting stock), and
nonqualified stock options must be granted at not less than 85% of fair market
value of the Company's common stock on the date of grant. Options generally
vest over a 48-month period and expire over terms not exceeding ten years from
the date of grant.
F-11
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
OPTIONS PRICE
--------- -----------
<S> <C> <C>
Balance at December 31, 1994......................... -- --
Granted............................................. 776,250 $ 0.033
Exercised........................................... -- --
Canceled............................................ -- --
--------- -----------
Balance at December 31, 1995......................... 776,250 $ 0.033
Granted............................................. 479,760 $0.067-1.50
Exercised........................................... -- --
Canceled............................................ (59,250) $0.033-1.50
--------- -----------
Balance at September 30, 1996........................ 1,196,760 $0.033-1.50
========= ===========
</TABLE>
At September 30, 1996, 212,595 options were fully vested and exercisable at
prices ranging from $0.033 to $1.50, and 2,303,240 options were reserved for
future grant, which includes the increase in shares reserved to 3,500,000.
Subsequent to September 30, 1996, the Company granted options to purchase an
aggregate of 397,650 shares of common stock with exercise prices of $1.50 to
$7.00 per share.
The following table summarizes information about employee stock options
outstanding at September 30, 1996:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OUTSTANDING REMAINING WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES AT SEPTEMBER 30, 1996 CONTRACTUAL LIFE EXERCISE PRICE
------------------------ --------------------- ---------------- ----------------
<S> <C> <C> <C>
$0.033.................. 772,500 9.2 $0.033
0.067.................. 105,000 9.6 0.067
0.667.................. 204,750 9.8 0.667
1.50................... 114,510 10.0 1.50
---------
1,196,760
=========
</TABLE>
Fair Value Disclosures
Had compensation cost for the 1995 Plan been determined based on the fair
value of each stock option grant on its grant date, as prescribed in SFAS 123,
the Company's net income (loss) and net income (loss) per share would have
been as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 1994) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- -------------
<S> <C> <C>
Net income (loss):
As reported.................................... $(440,000) $221,000
Pro forma...................................... $(448,000) $130,000
Net income (loss) per share:
As reported.................................... $ (0.03) $ 0.01
Pro forma...................................... $ (0.03) $ 0.01
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions used for grants during
the applicable period: dividend yield of 0% for both periods;
F-12
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
risk-free interest rate of 5.51% for options granted during the period from
inception (July 1994) through December 31, 1995 and 6.48% to 6.64% for options
granted during the nine months ended September 30, 1996; and a weighted
average expected option term of five years for both periods.
Because the determination of the fair value of all options granted after the
Company becomes a public entity will include an expected volatility factor in
addition to the factors described in the preceding paragraph and, because
additional option grants are expected to be made each year, the above pro
forma disclosures are not representative of the pro forma effects of option
grants on reported net income for future years.
401(k) plan
Effective November 1996, the Company adopted the ONSALE 401(k) Plan (the
"401(k) Plan") that qualifies as a deferred salary arrangement under Section
401 of the Internal Revenue Code. Under the 401(k) Plan, participating
employees may defer a portion of their pretax earnings not to exceed 15% of
their total compensation. The Company, at its discretion, may make
contributions for the benefit of eligible employees.
NOTE 7--INCOME TAXES:
No provision for income taxes was recorded from inception (July 1994)
through December 31, 1995 as the Company incurred net operating losses during
the period. The provision for income taxes for the nine months ended September
30, 1996 consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1996
-------------
<S> <C>
Current
Federal....................................................... $ 71,000
State......................................................... 20,000
--------
91,000
--------
Deferred
Federal....................................................... (66,000)
State......................................................... --
--------
(66,000)
--------
$ 25,000
========
</TABLE>
The provision for income taxes differs from the amount determined by
applying the U.S. statutory income tax rate to income before income taxes as
summarized below.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 1994) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- -------------
<S> <C> <C>
Tax provision at statutory rate................. $(150,000) $ 83,000
State income taxes, net of federal benefit...... (26,000) 10,000
Effect of net operating losses.................. 176,000 (66,000)
Other........................................... -- (2,000)
--------- --------
$ -- $ 25,000
========= ========
</TABLE>
F-13
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Deferred income taxes reflect the tax effects of temporary differences
between carrying amounts of assets and liabilities for financial reporting and
income tax purposes. The Company provides a valuation allowance for deferred
tax assets when it is more likely than not, based on currently available
evidence, that some portion of all of the deferred tax assets will not be
realized. Based on reevaluation of the realizability of future tax benefits
based on income earned in fiscal 1996, creating available tax carrybacks, the
Company reversed a portion of the previously established valuation allowance
during the nine months ended September 30, 1996. Significant components of the
Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Net operating loss carryforwards.................. $ 90,000 $ --
Reserves and accruals............................. 82,000 111,000
Other............................................. 4,000 (4,000)
--------- --------
176,000 107,000
Valuation allowance............................... (176,000) (41,000)
--------- --------
Net deferred tax asset............................ $ -- $ 66,000
========= ========
</TABLE>
Under the Tax Reform Act of 1986, the amounts of and benefits from net
operating losses and credits that can be carried forward may be impaired or
limited in certain circumstances. Events that may cause limitations in the
amount of net operating losses and credits that the Company may utilize in any
one year include, but are not limited to, a cumulative ownership change of
more than 50%. Such a change would not have a material financial impact on the
Company.
NOTE 8--COMMITMENTS:
The Company leases office space for its corporate headquarters.
Future annual minimum lease payments under all noncancellable operating
leases as of September 30, 1996 were as follows:
<TABLE>
<S> <C>
Year Ending December 31,
------------------------
1996.............................................................. $ 28,000
1997.............................................................. 111,000
1998.............................................................. 87,000
1999.............................................................. 40,000
--------
$266,000
========
</TABLE>
Total rent expense for the period from inception (July 1994) to December 31,
1995 and the nine months ended September 30, 1996 was approximately $18,000
and $31,000, respectively.
NOTE 9--SUBSEQUENT EVENTS:
Delaware reincorporation
In December 1996, the Company's Board of Directors authorized the
reincorporation of the Company in Delaware and the associated exchange of each
share of each series of stock of the predecessor company into one share of
each corresponding series of stock of the Delaware successor. The
reincorporation will occur prior to the completion of the offering. These
financial statements have been prepared giving effect to the reincorporation
in all periods presented.
F-14
<PAGE>
ONSALE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
Employee stock purchase plan
In December 1996, the Company's Board of Directors adopted, subject to
stockholder approval, the 1996 Employee Stock Purchase Plan (the "Purchase
Plan") and reserved 150,000 shares of common stock for issuance thereunder.
The Company's stockholders are expected to approve the Purchase Plan in
January 1997. The Purchase Plan permits eligible employees to acquire shares
of the Company's common stock through periodic payroll deductions of up to 15%
of their annual compensation not to exceed $21,250. Eligible employees may
purchase up to 1,500 shares in any calendar year. The price at which the
common stock is purchased under the Purchase Plan is 85% of the lesser of the
fair market value of the Company's common stock on the first day of the
applicable offering period or on the last day of the respective purchase
period. Each offering period will have a maximum duration of 24 months and
shares of common stock will be purchased for each participant at semi-annual
intervals during each offering period. The initial offering period will
commence on the effectiveness of the Offering and will end on July 31, 1997.
Directors stock option plan
In December 1996, the Company's Board of Directors adopted, subject to
stockholder approval, the 1996 Directors Stock Option Plan (the "Directors
Plan") and reserved 100,000 shares of common stock for issuance thereunder.
The Company's stockholders are expected to approve the Directors Plan in
January 1997. Only outside directors may be granted options under the
Directors Plan. The Directors Plan provides for an initial grant to outside
directors of 15,000 shares. In addition, the Directors Plan provides for
automatic annual grants of 5,000 shares thereafter. The exercise price must be
100% of the fair market value of the Company's common stock on the date of
grant.
F-15
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus, and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or any of the Underwriters. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the shares of Common Stock to which it relates or an offer to, or a
solicitation of, any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company since the date hereof or
that the information contained herein is correct as of any time subsequent to
the date hereof.
-------------------
TABLE OF CONTENTS
-------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 5
The Company............................................................... 14
Use of Proceeds........................................................... 14
Dividend Policy........................................................... 14
Capitalization............................................................ 15
Dilution.................................................................. 16
Selected Financial Data................................................... 17
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 18
Business.................................................................. 24
Management................................................................ 35
Certain Transactions...................................................... 39
Principal Stockholders.................................................... 40
Description of Capital Stock.............................................. 42
Shares Eligible for Future Sale........................................... 44
Underwriting.............................................................. 46
Legal Matters............................................................. 47
Experts................................................................... 47
Additional Information.................................................... 47
Index to Financial Statements............................................. F-1
</TABLE>
-------------------
Until , 1997 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock, whether or not participating in
this distribution, may be required to deliver a Prospectus. This is in addition
to the obligation of dealers to deliver a Prospectus when acting as
Underwriters and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,800,000 SHARES
ONSALE, INC.
[LOGO OF ONSALE(TM)]
COMMON STOCK
----------------
PROSPECTUS
----------------
MONTGOMERY SECURITIES
ALEX. BROWN & SONS
INCORPORATED
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be paid by the Registrant in connection with this
offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $
NASD filing fee....................................................
Nasdaq National Market filing fee..................................
Accounting fees and expenses.......................................
Legal fees and expenses............................................
Road show expenses.................................................
Printing and engraving expenses....................................
Blue sky fees and expenses.........................................
Transfer agent and registrar fees and expenses.....................
Miscellaneous......................................................
--------
Total............................................................ $850,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Certificate of Incorporation includes a provision that eliminates
the personal liability of its directors to the Registrant or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. In
addition, as permitted by Section 145 of the Delaware General Corporation Law,
the Bylaws of the Registrant provide that: (i) the Registrant is required to
indemnify its directors and officers to the fullest extent permitted by the
Delaware General Corporation Law; (ii) the Registrant may, in its discretion,
indemnify other officers, employees and agents as set forth in the Delaware
General Corporation Law; (iii) upon receipt of an undertaking by an officer or
director to repay advances if indemnification is determined to be unavailable,
the Registrant is required to advance expenses, as incurred, to its directors
and officers to the fullest extent permitted by the Delaware General
Corporation Law in connection with a proceeding (except if the Registrant
directly brings a claim that such director or officer has breached his or her
duty of loyalty, committed an act or omission not in good faith or that
involves intentional misconduct or a knowing violation of law, or derived
improper personal benefit from a transaction); (iv) the rights conferred in
the Bylaws are not exclusive and the Registrant is authorized to enter into
indemnification agreements with its directors, officers and employees and
agents; and (v) the Registrant may not retroactively amend the Bylaw
provisions relating to indemnity.
The Registrant intends to enter into indemnity agreements with each of its
directors and executive officers. The indemnity agreements provide that to the
extent not covered by directors and officers liability insurance, each
director and executive officer will be indemnified and held harmless to the
fullest possible extent permitted by law including against all expenses
(including attorneys' fees), judgments, fines and settlement amounts paid or
reasonably incurred by him in any action, suit or proceeding, on account of
his services as a director, officer, employee or agent of the Registrant or as
a director, officer, employee or agent of any other company or enterprise when
he is serving in such capacity at the request of the Registrant. The indemnity
agreements further provide that to the extent not covered by directors and
officers liabiality insurance directors and officers will be indemnified and
held harmless to the fullest extent permitted by law against all expenses
(including attorneys' fees but excluding judgments, fines and settlement
amounts paid in a settlement of a proceeding) incurred by him in any
derivative action by or in the right of the Registrant on account of his
services as a director, officer, employee or agent of the Registrant or as a
director, officer, employee or agent of the Registrant or as a director,
II-1
<PAGE>
officer, employee or agent of any other company or enterprise when he is
serving in such capacity at the request of the Registrant. The Registrant will
not be obligated pursuant to the agreements to indemnify or advance expenses to
an indemnified party with respect to proceedings or claims (i) initiated by the
indemnified party and not by way of defense, except with respect to a
proceeding authorized by the Board of Directors and successful proceedings
brought to enforce a right to indemnification under the Indemnity Agreement,
(ii) for any amounts paid in settlement of a proceeding unless the Registrant
consents to such settlement, (iii) on account of any suit in which judgment is
rendered against the indemnified party for an accounting of profits made from
the purchase or sale by the indemnified party of securities of the Registrant
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and related laws, (iv) on account of conduct by a director or officer
which is finally adjudged to have been in bad faith or conduct that the
director did not reasonably believe to be in, or not opposed to, the best
interests of the Registrant, (v) on account of any criminal action or
proceeding arising out of conduct that the director or officer had reasonable
cause to believe was unlawful or (vi) if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful.
The indemnity agreement also provides for contribution in certain situations
in which the Registrant and a director or officer are jointly liable but
indemnification is unavailable, such contribution to be based on the relative
benefits received and the relative fault of the Registrant and the director or
officer. Contribution is not allowed in connection with a Section 16(b)
judgment, an adjudication of bad faith or conduct that a director or executive
officer did not reasonably believe to be in, or not opposed to, the best
interests of the Registrant or a proceeding arising out of conduct a director
or officer had reasonable cause to believe was unlawful.
The Registrant is required to advance expenses, provided that the director or
officer reimburses the Registrant for all expenses advanced only to the extent
it is ultimately determined that the director or officer is not entitled, under
Delaware law, the Bylaws, the indemnity agreement or otherwise, to be
indemnified for such expenses. The indemnity agreement provides that it is not
exclusive of any rights a director or officer may have under the Certificate of
Incorporation, Bylaws, other agreements, any majority-in-interest vote of the
stockholders or vote of disinterested directors, the Delaware law or otherwise.
The indemnification provision in the Bylaws, and the indemnity agreements
entered into between the Registrant and its directors and officers, may be
sufficiently broad to permit indemnification of the Registrant's executive
officers and directors for liabilities arising under the Securities Act of
1933, as amended (the "Securities Act").
The Registrant, with approval by the Board, expects to purchase director and
officer liability insurance.
See also the undertakings set out in response to Item 17.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
DOCUMENT EXHIBIT NUMBER
-------- --------------
<S> <C>
Form of Underwriting Agreement................................ 1.01
Registrant's Certificate of Incorporation..................... 3.01
Registrant's Bylaws........................................... 3.02
Form of Indemnity Agreement................................... 10.04
</TABLE>
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The Common Stock, Preferred Stock, options and warrants of the Registrant
issued to stockholders and option holders of ONSALE, a California corporation,
in connection with the reincorporation into Delaware were not deemed "sold" as
a result of Rule 145(a)(2) promulgated under the Securities Act. The following
table sets forth information regarding all securities sold by the Registrant's
California predecessor since its inception (July 1994).
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PURCHASE PRICE
CLASS OF PURCHASERS DATE OF SALE TITLE OF SECURITIES SECURITIES AND FORM OF CONSIDERATION
------------------- ---------------- --------------------- ---------- -------------------------
<S> <C> <C> <C> <C>
Two founders 7/21/94 Common Stock 12,000,000 Software and a
business plan, each
valued at $10,000
The Company's law firm 7/22/94 Warrant to purchase -- --
100,359 shares of
Common Stock at
$0.25 per share
11/21/95 Common Stock 43,398 Services valued at
A consultant $1,446
The Company's law firm 8/22/96 Common Stock 100,359 $25,000 cash
Two affiliated venture 9/12/96 Series A Preferred 365,191 $2,333,570 cash
capital funds Stock
Two affiliated venture 9/12/96 Warrants to purchase -- $19,459 cash
capital funds 202,910 shares of
Series B Preferred
Stock at $9.59 per
share
An employee optionee 10/26/96 Common Stock 7,500 $500 cash
12/6/96 Common Stock 20,000 $100,000 promissory
A director note
Officers, directors and 12/11/95 through Options to purchase -- --
employees 12/15/96 shares of Common
Stock under the 1995
Equity Incentive
Plan(1)
</TABLE>
- --------
(1) With respect to the grant of the stock options and the warrant issued to
the Company's law firm, exemption from registration under the Securities
Act was unnecessary in that none of such transactions involved a "sale" of
securities as such term is used in Section 2(3) of the Securities Act.
The securities acquired by the two founders, the consultant, the Company's
law firm and the Company's officers, directors and employees were made in
reliance on Rule 701 under the Securities Act. All sales were made in reliance
on Section 4(2) of the Securities Act and/or Regulation D promulgated under
the Securities Act. The securities were sold to a limited number of people
with no general solicitation or advertising. The purchasers were sophisticated
investors with access to all relevant information necessary to evaluate the
investment who represented to the Registrant that the shares were being
acquired for investment.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
1.01 Form of Underwriting Agreement.
Form of Agreement and Plan of Reorganization between the Registrant
2.01 and ONSALE.
3.01 Registrant's Certificate of Incorporation.
3.02 Registrant's Bylaws.
4.01 Investors Rights Agreement, dated as of September 12, 1996.
4.02 Registrant's Certificate of Incorporation (see Exhibit 3.01).
4.03 Registrant's Bylaws (See Exhibit 3.02).
Opinion of Fenwick & West LLP regarding legality of the securities
5.01 being registered.*
9.01 Voting Trust Agreement, dated as of July 21, 1994, by and among
Software Partners, Inc.,
Alan Fisher and Razi Mohiuddin.
10.01 Registrant's 1995 Equity Incentive Plan and related documents.
10.02 Registrant's 1996 Directors Stock Option Plan and related documents.
10.03 Registrant's 1996 Employee Stock Purchase Plan and related documents.
10.04 Form of Indemnity Agreement entered into by Registrant with each of
its directors and executive
officers.
10.05 Offer letter to Mr. Sauerland, dated as of July 11, 1996.*
Lease Agreement between The Landmark and Registrant, dated as of May
10.06 20, 1996.
Sublease Agreement between RogueWave, Inc. and Registrant, dated as of
10.07 October 19, 1996.
10.08 Sublease Agreement between Software Partners, Inc. and the Registrant,
dated as of November 18, 1996.
10.09 Auction Agreement between Vircom Computers, Inc. and the Registrant,
dated as of December , 1996.*
10.10 Service Agreement between Gage Marketing Group and the Registrant,
dated as of December 4, 1996.**
10.11 Hewlett-Packard and ONSALE Agreement between Hewlett-Packard Company
and the Registrant, dated as of July 31, 1996.**
10.12 Credit Card Processing Services Agreement between First USA Merchant
Services, Inc. and the Registrant, dated as of June 16, 1996.
10.13 Merchant Card Services Agreement between Wells Fargo Bank and the
Registrant, dated as of March 6, 1996.
10.14 Founder's Restricted Stock Purchase Agreement between S. Jerrold
Kaplan and the Registrant, dated as of July 21, 1994.
10.15 Founder's Restricted Stock Purchase Agreement between Software
Partners, Inc. and the Registrant, dated as of July 21, 1994.
10.16 Assignment Agreement between Software Partners, Inc. and the
Registrant, dated as of July 21, 1994.
11.01 Statement regarding computation of net income (loss) per share.
23.01 Consent of Fenwick & West LLP (included in Exhibit 5.01).*
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
------- -------------
<C> <S>
23.02 Consent of Price Waterhouse LLP, independent accountants.
24.01 Power of Attorney (see Page II-6 of this Registration Statement).
27.01 Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
** Confidential treatment is being sought with respect to certain portions of
this agreement. Such portions have been omitted from this filing and have
been filed separately with the Securities and Exchange Commission.
(b) The following financial statement schedule is filed herewith:
Schedule II--Valuation and Qualifying Accounts and Reserves.
Other financial statement schedules are omitted because the information
called for is not required or is shown either in the financial statements or
the notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MOUNTAIN VIEW, STATE OF
CALIFORNIA, ON THE 19TH DAY OF DECEMBER, 1996.
ONSALE, INC.
By: /s/ S. Jerrold Kaplan
-------------------------------
S. Jerrold Kaplan President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints S. Jerrold Kaplan, Alan S. Fisher and
John F. Sauerland, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act, and all post-effective amendments
thereto, and to file the same, with all exhibits thereto and all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or his or their
substitute or substitutes, may lawfully do or cause to be done or by virtue
hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON
THE DATE INDICATED.
NAME TITLE DATE
---- ----- ----
PRINCIPAL EXECUTIVE OFFICER:
/s/ S. Jerrold Kaplan President, Chief December 19, 1996
_________________________________ Executive Officer,
S. Jerrold Kaplan Secretary and Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ John F. Sauerland Chief Financial Officer December 19, 1996
_________________________________
John F. Sauerland
ADDITIONAL DIRECTORS:
/s/ Alan S. Fisher Vice President of December 19, 1996
_________________________________ Development and
Alan S. Fisher Operations, Chief
Technical Officer and
Director
/s/ Peter L. Harris Director December 19, 1996
_________________________________
Peter L. Harris
/s/ Kenneth J. Orton Director December 19, 1996
_________________________________
Kenneth J. Orton
II-6
<PAGE>
SCHEDULE II
ONSALE, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
----------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Period from Inception (July 1994)
to December 31, 1995
Allowance for doubtful accounts. $ -- $16 $ -- $16
Nine Months Ended September 30,
1996
Allowance for doubtful accounts. $ 16 $50 $(27) $39
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT EXHIBIT TITLE NUMBERED PAGE
------- ------------- -------------
<C> <S> <C>
1.01 Form of Underwriting Agreement.
2.01 Form of Agreement and Plan of Reorganization between
the Registrant and ONSALE.
3.01 Registrant's Certificate of Incorporation.
3.02 Registrant's Bylaws.
4.01 Investors Rights Agreement, dated as of September 12,
1996.
4.02 Registrant's Certificate of Incorporation (see Exhibit
3.01).
4.03 Registrant's Bylaws (see Exhibit 3.02).
5.01 Opinion of Fenwick & West LLP regarding legality of
the securities being registered.*
9.01 Voting Trust Agreement, dated as of July 21, 1994, by
and among Software Partners, Inc., Alan Fisher and
Razi Mohiuddin.
10.01 Registrant's 1995 Equity Incentive Plan and related
documents.
10.02 Registrant's 1996 Directors Stock Option Plan and
related documents.
10.03 Registrant's 1996 Employee Stock Purchase Plan and
related documents.
10.04 Form of Indemnity Agreement entered into by Registrant
with each of its directors and executive officers.
10.05 Offer letter to Mr. Sauerland, dated as of July 11,
1996.*
10.06 Lease Agreement between The Landmark and Registrant,
dated as of May 20, 1996.
10.07 Sublease Agreement between RogueWave, Inc. and
Registrant, dated as of October 19, 1996.
10.08 Sublease Agreement between Software Partners, Inc. and
the Registrant, dated as of November 18, 1996.
10.09 Auction Agreement between Vircom Computers, Inc. and
the Registrant, dated December , 1996.*
10.10 Service Agreement between the Registrant and Gage
Marketing Group, dated as of December 4, 1996.**
10.11 Hewlett-Packard and ONSALE Agreement between Hewlett-
Packard Company and the Registrant, dated as of July
31, 1996.**
10.12 Credit Card Processing Services Agreement between
First USA Merchant Services, Inc. and the Registrant,
dated as of June 16, 1996.
10.13 Merchant Card Services Agreement between Wells Fargo
Bank and the Registrant, dated as of March 6, 1996.
10.14 Founder's Restricted Stock Purchase Agreement between
S. Jerrold Kaplan and the Registrant, dated as of July
21, 1994.
10.15 Founder's Restricted Stock Purchase Agreement between
Software Partners, Inc. and the Registrant, dated as
of July 21, 1994.
10.16 Assignment Agreement between Software Partners, Inc.
and the Registrant, dated as of July 21, 1994.
11.01 Statement regarding computation of net income (loss)
per share.
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT EXHIBIT TITLE NUMBERED PAGE
------- ------------- -------------
<C> <S> <C>
23.01 Consent of Fenwick & West LLP (included in Exhibit
5.01).*
23.02 Consent of Price Waterhouse LLP, independent
accountants.
24.01 Power of Attorney (see Page II-6 of this Registration
Statement).
27.01 Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
** Confidential treatment is being sought with respect to certain portions of
this agreement. Such portions have been omitted from this filing and have
been filed separately with the Securities and Exchange Commission.
<PAGE>
EXHIBIT 1.01
DRAFT
2,800,000 Shares/1/
ONSALE, Inc.
Common Stock
UNDERWRITING AGREEMENT
----------------------
January ___, 1997
MONTGOMERY SECURITIES
ALEX. BROWN & SONS INCORPORATED
As Representatives of the several Underwriters
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Ladies and Gentlemen:
SECTION 1. Introductory. ONSALE, Inc., a Delaware corporation (the
------------
"Company"), proposes to issue and sell 2,800,000 shares of its authorized but
unissued Common Stock, $0.001 par value (the "Common Stock"), to the several
underwriters named in Schedule A annexed hereto (the "Underwriters"), for whom
you are acting as Representatives. These 2,800,000 shares are herein called the
"Firm Common Shares." In addition, the Company proposes to grant to the
Underwriters an option to purchase up to 420,000 additional shares of Common
Stock (the "Optional Common Shares"), as provided in Section 5 hereof. The Firm
Common Shares and, to the extent such option is exercised, the Optional Common
Shares are hereinafter collectively referred to as the "Common Shares."
You have advised the Company that the Underwriters propose to make a
public offering of their respective portions of the Common Shares on the
effective date of the registration statement hereinafter referred to, or as soon
thereafter as in your judgment is advisable.
The Company hereby confirms its agreements with respect to the
purchase of the Common Shares by the Underwriters as follows:
SECTION 2. Representations and Warranties of the Company. The
---------------------------------------------
Company hereby represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-_______)
with respect to the Common Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended
(the "Act"), and the rules and regulations (the "Rules and Regulations") of
the Securities and Exchange Commission (the "Commission") thereunder, and
has been filed with the Commission. The Company has prepared and has filed
or proposes to file prior to the effective date of such registration
statement an amendment or amendments to such
- -----------------------------
/1/ Plus an option to purchase from the Company up to 420,000 additional
shares of Common Stock to cover over-allotments, if any.
1.
<PAGE>
registration statement, which amendment or amendments have been or will be
similarly prepared. There have been delivered to you two signed copies of
such registration statement and amendments, together with two copies of
each exhibit filed therewith. Conformed copies of such registration
statement and amendments (but without exhibits) and of the related
preliminary prospectus have been delivered to you in such reasonable
quantities as you have requested for each of the Underwriters. The Company
will next file with the Commission one of the following: (i) prior to
effectiveness of such registration statement, a further amendment thereto,
including the form of final prospectus, (ii) a final prospectus in
accordance with Rules 430A and 424(b) of the Rules and Regulations, or
(iii) a term sheet (the "Term Sheet") as described in and in accordance
with Rules 434 and 424(b) of the Rules and Regulations. As filed, the
final prospectus, if one is used, or the Term Sheet and Preliminary
Prospectus (as hereinafter defined), if a final prospectus is not used,
shall include all Rule 430A Information (as hereinafter defined) and,
except to the extent that you shall agree in writing to a modification,
shall be in all substantive respects in the form furnished to you prior to
the date and time that this Agreement was executed and delivered by the
parties hereto, or, to the extent not completed at such date and time,
shall contain only such specific additional information and other changes
(beyond that contained in the latest Preliminary Prospectus (as hereinafter
defined)) as the Company shall have previously advised you in writing would
be included or made therein.
The term "Registration Statement" as used in this Agreement shall
mean such registration statement at the time such registration statement
becomes effective and, in the event any post-effective amendment thereto
becomes effective prior to the First Closing Date (as hereinafter defined),
shall also mean such registration statement as so amended; provided,
however, that such term shall also include (i) all Rule 430A Information
deemed to be included in such registration statement at the time such
registration statement becomes effective as provided by Rule 430A of the
Rules and Regulations and (ii) a registration statement, if any, filed
pursuant to Rule 462(b) of the Rules and Regulations relating to the Common
Shares. The term "Preliminary Prospectus" shall mean any preliminary
prospectus referred to in the preceding paragraph and any preliminary
prospectus included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as used
in this Agreement shall mean either (i) the prospectus relating to the
Common Shares in the form in which it is first filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations, or (ii) if a Term
Sheet is not used and no filing pursuant to Rule 424(b) of the Rules and
Regulations is required, the form of final prospectus included in the
Registration Statement at the time such registration statement becomes
effective, or (iii) if a Term Sheet is used, the Term Sheet in the form in
which it is first filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations, together with the Preliminary Prospectus included in
the Registration Statement at the time it becomes effective. The term
"Rule 430A Information" means information with respect to the Common Shares
and the offering thereof permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430A of the Rules and
Regulations.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects to the requirements of
the Act and the Rules and Regulations and, as of its date, has not included
any untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and at the time the
Registration Statement becomes effective, and at all times subsequent
thereto up to and including each Closing Date hereinafter mentioned, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto, will contain all material statements and information
required to be included therein by the Act and the Rules and Regulations
and will in all material respects conform to the requirements of the Act
and the Rules
2.
<PAGE>
and Regulations, and neither the Registration Statement nor the Prospectus,
nor any amendment or supplement thereto, will include any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, no representation or warranty contained in this
subsection 2(b) shall be applicable to information contained in or omitted
from any Preliminary Prospectus, the Registration Statement, the Prospectus
or any such amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by or on behalf of any
Underwriter, directly or through the Representatives, specifically for use
in the preparation thereof.
(c) The Company does not own or control, directly or indirectly,
any corporation, association or other entity. The Company has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with full power and authority
(corporate and other) to own and lease its properties and conduct its
business as described in the Prospectus; the Company is in possession of
and operating in compliance with all authorizations, licenses, permits,
consents, certificates and orders material to the conduct of its business,
all of which are valid and in full force and effect; the Company is duly
qualified to do business and in good standing as a foreign corporation in
each jurisdiction in which the ownership or leasing of properties or the
conduct of its business requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect upon the Company; and no proceeding has been instituted in
any such jurisdiction, revoking, limiting or curtailing, or seeking to
revoke, limit or curtail, such power and authority or qualification.
(d) The Company has an authorized and outstanding capital stock
as set forth under the heading "Capitalization" in the Prospectus; the
issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in
compliance with all federal and state securities laws, were not issued in
violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities, are not subject to any rescission
rights, and conform to the description thereof contained in the Prospectus.
Except as disclosed in or contemplated by the Prospectus and the financial
statements of the Company, and the related notes thereto, included in the
Prospectus, the Company does not have outstanding any options to purchase,
or any preemptive rights or other rights to subscribe for or to purchase,
any securities or obligations convertible into, or any contracts or
commitments to issue or sell, shares of its capital stock or any such
options, rights, convertible securities or obligations. The description of
the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(e) The Common Shares to be sold by the Company have been duly
authorized and, when issued, delivered and paid for in the manner set forth
in this Agreement, will be duly authorized, validly issued, fully paid and
nonassessable, and will conform to the description thereof contained in the
Prospectus. No preemptive rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Common Shares
by the Company pursuant to this Agreement. No stockholder of the Company
has any right which has not been waived to require the Company to register
the sale of any shares owned by such stockholder under the Act in the
public offering contemplated by this Agreement. No further approval or
authority of the stockholders or the Board of Directors of the Company will
be required for the issuance and sale of the Common Shares to be sold by
the Company as contemplated herein.
(f) The Company has full legal right, power and authority to
enter into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly
3.
<PAGE>
authorized, executed and delivered by the Company and constitutes a valid
and binding obligation of the Company in accordance with its terms. The
making and performance of this Agreement by the Company and the
consummation of the transactions herein contemplated will not violate any
provisions of the certificate of incorporation or bylaws, or other
organizational documents, of the Company, and will not conflict with,
result in the breach or violation of, or constitute, either by itself or
upon notice or the passage of time or both, a default under any agreement,
mortgage, deed of trust, lease, franchise, license, indenture, permit or
other instrument to which the Company is a party or by which the Company or
any of its respective properties may be bound or affected, any statute or
any authorization, judgment, decree, order, rule or regulation of any court
or any regulatory body, administrative agency or other governmental body
applicable to the Company or any of its properties. No consent, approval,
authorization or other order of any court, regulatory body, administrative
agency or other governmental body is required for the execution and
delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement, except for compliance with the Act, the
Securities Exchange Act of 1934, as amended, the Blue Sky laws applicable
to the public offering of the Common Shares by the several Underwriters and
the clearance of such offering with the National Association of Securities
Dealers, Inc. (the "NASD").
(g) Price Waterhouse LLP, who have expressed their opinion with
respect to the financial statements and schedule filed with the Commission
as a part of the Registration Statement and included in the Prospectus and
in the Registration Statement, are independent accountants as required by
the Act and the Rules and Regulations.
(h) The financial statements and schedule of the Company, and the
related notes thereto, included in the Registration Statement and the
Prospectus present fairly the financial position of the Company as of the
respective dates of such financial statements and schedule, and the results
of operations and cash flows of the Company for the respective periods
covered thereby. Such statements, schedules and related notes have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis as certified by the independent accountants
named in subsection 2(g). No other financial statements or schedules are
required to be included in the Registration Statement. The selected
financial data set forth in the Prospectus under the captions
"Capitalization" and "Selected Financial Data" fairly present the
information set forth therein on the basis stated in the Registration
Statement.
(i) Except as disclosed in the Prospectus, and except as to
violations, defaults or breaches which individually or in the aggregate
would not be material to the Company, the Company is not in violation or
default of any provision of its certificate of incorporation or bylaws, or
other organizational documents, or is not in breach of or default with
respect to any provision of any agreement, judgment, decree, order,
mortgage, deed of trust, lease, franchise, license, indenture, permit or
other instrument to which it is a party or by which it or any of its
properties are bound; and there does not exist any state of facts which
constitutes an event of default on the part of the Company as defined in
such documents or which, with notice or lapse of time or both, would
constitute such an event of default.
(j) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the Rules and Regulations which
have not been described or filed as required. The contracts so described
in the Prospectus are in full force and effect on the date hereof and
conform to the descriptions thereof contained in the Prospectus; and
neither the Company, nor to the best of the Company's knowledge, any other
party is in breach of or default under any of such contracts.
4.
<PAGE>
(k) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened to which the Company is or may be a party
or of which property owned or leased by the Company is or may be the
subject, or related to environmental or discrimination matters, which
actions, suits or proceedings might, individually or in the aggregate,
prevent or adversely affect the transactions contemplated by this Agreement
or result in a material adverse change in the condition (financial or
otherwise), properties, business, results of operations or prospects of the
Company; and no labor disturbance by the employees of the Company exists or
is imminent which might be expected to affect adversely such condition,
properties, business, results of operations or prospects. The Company is
not a party or subject to the provisions of any material injunction,
judgment, decree or order of any court, regulatory body, administrative
agency or other governmental body.
(l) The Company has good and marketable title to all the
properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Prospectus), subject to no lien,
mortgage, pledge, charge or encumbrance of any kind except (i) those, if
any, reflected in such financial statements (or elsewhere in the
Prospectus), or (ii) those which are not material in amount and do not
adversely affect the use made and proposed to be made of such property by
the Company. The Company holds its leased properties under valid and
binding leases, with such exceptions as are not materially significant in
relation to the business of the Company. Except as disclosed in the
Prospectus, the Company owns or leases all such properties as are necessary
to its operations as now conducted or as proposed to be conducted.
(m) Since the respective dates as of which information is given
in the Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company has not
incurred any material liabilities or obligations, indirect, direct or
contingent, or entered into any material verbal or written agreement or
other transaction which is not in the ordinary course of business or which
could result in a material reduction in the future earnings of the Company;
(ii) the Company has not sustained any material loss or interference with
its respective business or properties from fire, flood, windstorm, accident
or other calamity, whether or not covered by insurance; (iii) the Company
has not paid or declared any dividends or other distributions with respect
to its capital stock and the Company is not in default in the payment of
principal or interest on any outstanding debt obligations; (iv) there has
not been any change in the capital stock (other than upon the sale of the
Common Shares hereunder and upon the exercise of options and warrants
described in the Registration Statement) or indebtedness material to the
Company and its subsidiaries (other than in the ordinary course of
business); and (v) there has not been any material adverse change in the
condition (financial or otherwise), business, properties, results of
operations or prospects of the Company.
(n) Except as disclosed in or specifically contemplated by the
Prospectus, the Company has sufficient trademarks, trade names, patent
rights, mask works, copyrights, licenses, approvals and governmental
authorizations to conduct its business as now conducted and as proposed to
be conducted in the Prospectus; the expiration of any trademarks, trade
names, patent rights, mask works, copyrights, licenses, approvals or
governmental authorizations would not have a material adverse effect on the
condition (financial or otherwise), business, results of operations or
prospects of the Company; and the Company has no knowledge of any material
infringement by it of trademark, trade name rights, patent rights, mask
works, copyrights, licenses, trade secret or other similar rights of
others, and there is no claim being made against the Company regarding
trademark, trade name, patent, mask work, copyright, license, trade secret
or other infringement which could have a material adverse effect on the
condition (financial or otherwise), business, results of operations or
prospects of the Company.
5.
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(o) The Company has not been advised, and has no reason to
believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all applicable local,
state and federal environmental laws and regulations; except where failure
to be so in compliance would not materially adversely affect the condition
(financial or otherwise), business, results of operations or prospects of
the Company.
(p) The Company has filed all necessary federal, state and
foreign income and franchise tax returns and has paid all taxes shown as
due thereon; and the Company has no knowledge of any tax deficiency which
has been or might be asserted or threatened against the Company which could
materially and adversely affect the business, operations or properties of
the Company.
(q) The Company is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not distribute prior
to the First Closing Date any offering material in connection with the
offering and sale of the Common Shares other than the Prospectus, the
Registration Statement and the other materials permitted by the Act.
(s) The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business, including, but not
limited to, insurance covering real and personal property owned or leased
by the Company against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is in
full force and effect.
(t) The Company has not at any time during the last five years
(i) made any unlawful contribution to any candidate for foreign office, or
failed to disclose fully any contribution in violation of law, or (ii) made
any payment to any federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States of any
jurisdiction thereof.
(u) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Common Shares.
(v) The Common Stock has been approved for quotation as a
national market system security on The Nasdaq Stock Market upon notice of
issuance.
(w) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in Cuba
in violation of Section 517.075 of the Florida Statutes.
SECTION 3. Representations and Warranties of the Underwriters. The
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Representatives, on behalf of the several Underwriters, represent and warrant to
the Company that the information set forth (i) on the cover page of the
Prospectus with respect to price, underwriting discounts and commissions and
terms of offering and (ii) under "Underwriting" in the Prospectus was furnished
to the Company by and on behalf of the Underwriters for use in connection with
the preparation of the Registration Statement and the Prospectus and is correct
in all material respects. The Representatives represent and warrant that they
have
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been authorized by each of the other Underwriters as the Representatives to
enter into this Agreement on its behalf and to act for it in the manner herein
provided.
SECTION 4. Purchase, Sale and Delivery of Common Shares. On the
--------------------------------------------
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Underwriters 2,800,000 of the Firm Common Shares. The
Underwriters agree, severally and not jointly, to purchase from the Company the
number of Firm Common Shares described below. The purchase price per share to
be paid by the several Underwriters to the Company shall be
$____________________ per share.
The obligation of each Underwriter to the Company shall be to purchase
from the Company that number of full shares which (as nearly as practicable, as
determined by you) bears to 2,800,000 the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares.
Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriters and payment therefor shall be made at the offices of Montgomery
Securities, 600 Montgomery Street, San Francisco, California (or such other
place as may be agreed upon by the Company and the Representatives) at such time
and date, not later than the third (or, if the Firm Common Shares are priced, as
contemplated by Rule 15c6-1(c) of the Exchange Act after 4:30 P.M. Washington
D.C. Time, the fourth) full business day following the first date that any of
the Common Shares are released by you for sale to the public, as you shall
designate by at least 48 hours' prior notice to the Company (or at such other
time and date, not later than one week after such third or fourth, as the case
may be, full business day as may be agreed upon by the Company and the
Representatives) (the "First Closing Date"); provided, however, that if the
Prospectus is at any time prior to the First Closing Date recirculated to the
public, the First Closing Date shall occur upon the later of the third or
fourth, as the case may be, full business day following the first date that any
of the Common Shares are released by you for sale to the public (as set forth
above) or the date that is 48 hours after the date that the Prospectus has been
so recirculated.
Delivery of certificates for the Firm Common Shares shall be made by
or on behalf of the Company to you, for the respective accounts of the
Underwriters with respect to the Firm Common Shares to be sold by the Company
against payment by you, for the accounts of the several Underwriters, of the
purchase price therefor by certified or official bank checks payable in next day
funds to the order of the Company. The certificates for the Firm Common Shares
shall be registered in such names and denominations as you shall have requested
at least two full business days prior to the First Closing Date, and shall be
made available for checking and packaging on the business day preceding the
First Closing Date at a location in New York, New York, as may be designated by
you. Time shall be of the essence, and delivery at the time and place specified
in this Agreement is a further condition to the obligations of the Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants an option to the several Underwriters to
purchase, severally and not jointly, up to an aggregate of 420,000 Optional
Common Shares at the purchase price per share to be paid for the Firm Common
Shares, for use solely in covering any over-allotments made by you for the
account of the Underwriters in the sale and distribution of the Firm Common
Shares. The option granted hereunder may be exercised at any time (but not more
than once) within 30 days after the first date that any of the Common Shares are
released by you for sale to the public, upon notice by you to the Company
setting forth the aggregate number of Optional Common Shares as to which the
Underwriters are exercising the option, the names and denominations in which the
certificates for such shares are to be registered and the time and place at
which such certificates will be delivered. Such time of delivery (which may not
be earlier than the First Closing Date), being herein
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referred to as the "Second Closing Date," shall be determined by you, but if at
any time other than the First Closing Date shall not be earlier than three nor
later than five full business days after delivery of such notice of exercise.
The number of Optional Common Shares to be purchased by each Underwriter shall
be determined by multiplying the number of Optional Common Shares to be sold by
the Company pursuant to such notice of exercise by a fraction, the numerator of
which is the number of Firm Common Shares to be purchased by such Underwriter as
set forth opposite its name in Schedule A and the denominator of which is
2,800,000 (subject to such adjustments to eliminate any fractional share
purchases as you in your discretion may make). Certificates for the Optional
Common Shares will be made available for checking and packaging on the business
day preceding the Second Closing Date at a location in New York, New York, as
may be designated by you. The manner of payment for and delivery of the Optional
Common Shares shall be the same as for the Firm Common Shares purchased from the
Company as specified in the two preceding paragraphs. At any time before lapse
of the option, you may cancel such option by giving written notice of such
cancellation to the Company. If the option is cancelled or expires unexercised
in whole or in part, the Company will deregister under the Act the number of
Optional Common Shares as to which the option has not been exercised.
Notwithstanding the foregoing, in the event that the Registration Statement is
amended or the Prospectus is supplemented between the date hereof and any
Closing Date, the Underwriters shall have the right to delay the Closing Date to
a date which will allow the Underwriters the time necessary to distribute the
Prospectus as amended or supplemented.
You have advised the Company that each Underwriter has authorized you
to accept delivery of its Common Shares and to make payment and deliver a
receipt therefor. You, individually and not as the Representatives of the
Underwriters, may (but shall not be obligated to) make payment for any Common
Shares to be purchased by any Underwriter whose funds shall not have been
received by you by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose
to make a public offering of their respective portions of the Common Shares as
soon after the effective date of the Registration Statement as in the judgment
of the Representatives is advisable and at the public offering price set forth
on the cover page of and on the terms set forth in the Prospectus.
SECTION 5. Covenants of the Company. The Company covenants and
------------------------
agrees that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereto, if not effective at the
time and date that this Agreement is executed and delivered by the parties
hereto, to become effective. If the Registration Statement has become or
becomes effective pursuant to Rule 430A of the Rules and Regulations, or
the filing of the Prospectus is otherwise required under Rule 424(b) of the
Rules and Regulations, the Company will file the Prospectus, properly
completed, pursuant to the applicable paragraph of Rule 424(b) of the Rules
and Regulations within the time period prescribed and will provide evidence
satisfactory to you of such timely filing. The Company will promptly
advise you in writing (i) of the receipt of any comments of the Commission,
(ii) of any request of the Commission for amendment of or supplement to the
Registration Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus or for additional information,
(iii) when the Registration Statement shall have become effective and (iv)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of any
proceedings for that purpose. If the Commission shall enter any such stop
order at any time, the Company will use its best efforts to obtain the
lifting of such order at the earliest possible moment. The Company will
not file any amendment or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or the
Prospectus of which you have not been
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furnished with a copy a reasonable time prior to such filing or to which
you reasonably object or which is not in compliance with the Act and the
Rules and Regulations.
(b) The Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the
Registration Statement or the Prospectus which in your judgment may be
necessary or advisable to enable the several Underwriters to continue the
distribution of the Common Shares and will use its best efforts to cause
the same to become effective as promptly as possible. The Company will
fully and completely comply with the provisions of Rule 430A of the Rules
and Regulations with respect to information omitted from the Registration
Statement in reliance upon such Rule.
(c) If at any time within the nine-month period referred to in
Section 10(a)(3) of the Act during which a prospectus relating to the
Common Shares is required to be delivered under the Act any event occurs,
as a result of which the Prospectus, including any amendments or
supplements, would include an untrue statement of a material fact, or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, or if it is necessary at any
time to amend the Prospectus, including any amendments or supplements, to
comply with the Act or the Rules and Regulations, the Company will promptly
advise you thereof and will promptly prepare and file with the Commission,
at its own expense, an amendment or supplement which will correct such
statement or omission or an amendment or supplement which will effect such
compliance and will use its best efforts to cause the same to become
effective as soon as possible; and, in case any Underwriter is required to
deliver a prospectus after such nine-month period, the Company upon
request, but at the expense of such Underwriter, will promptly prepare such
amendment or amendments to the Registration Statement and such Prospectus
or Prospectuses as may be necessary to permit compliance with the
requirements of Section 10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days after the
end of the first quarter ending after one year following the "effective
date of the Registration Statement" (as defined in Rule 158(c) of the Rules
and Regulations), the Company will make generally available to its security
holders an earnings statement (which need not be audited) covering a period
of 12 consecutive months beginning after the effective date of the
Registration Statement which will satisfy the provisions of the last
paragraph of Section 11(a) of the Act.
(e) During such period as a prospectus is required by law to be
delivered in connection with sales by an Underwriter or dealer, the
Company, at its expense, but only for the nine-month period referred to in
Section 10(a)(3) of the Act, will furnish to you or mail to your order
copies of the Registration Statement, the Prospectus, the Preliminary
Prospectus and all amendments and supplements to any such documents in each
case as soon as available and in such quantities as you may request, for
the purposes contemplated by the Act.
(f) The Company shall cooperate with you and your counsel in
order to qualify or register the Common Shares for sale under (or obtain
exemptions from the application of) the Blue Sky laws of such jurisdictions
as you designate, will comply with such laws and will continue such
qualifications, registrations and exemptions in effect so long as
reasonably required for the distribution of the Common Shares. The Company
shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any such jurisdiction where it is
not presently qualified or where it would be subject to taxation as a
foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such exemption
relating to) the Common Shares for offering, sale or trading in any
jurisdiction or any initiation or threat of any proceeding for any such
purpose, and in the event of the issuance of any
9.
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order suspending such qualification, registration or exemption, the
Company, with your cooperation, will use its best efforts to obtain the
withdrawal thereof.
(g) During the period of five years hereafter, the Company will
furnish to the Representatives and, upon request of any Representative, to
each of the other Underwriters: (i) as soon as practicable after the end
of each fiscal year, copies of the Annual Report of the Company containing
the balance sheet of the Company as of the close of such fiscal year and
statements of income, stockholders' equity and cash flows for the year then
ended and the opinion thereon of the Company's independent public
accountants; (ii) as soon as practicable after the filing thereof, copies
of each proxy statement, Annual Report on Form 10-K, Quarterly Report on
Form 10-Q, Current Report on Form 8-K or other report filed by the Company
with the Commission, the NASD or any securities exchange; and (iii) as soon
as available, copies of any report or communication of the Company mailed
generally to holders of its Common Stock.
(h) During the period of 180 days after the first date that any
of the Common Shares are released by you for sale to the public, without
the prior written consent of Montgomery Securities (which consent may be
withheld at the sole discretion of Montgomery Securities), the Company will
not other than pursuant to outstanding stock options and warrants disclosed
in the Prospectus issue, offer, pledge, sell, grant options to purchase or
otherwise dispose of, directly or indirectly, any of the Company's equity
securities or any other securities convertible into or exchangeable with
its Common Stock or other equity security, other than pursuant to its 1995
Equity Incentive Plan.
(i) The Company will apply the net proceeds of the sale of the
Common Shares sold by it substantially in accordance with its statements
under the caption "Use of Proceeds" in the Prospectus.
(j) The Company will use its best efforts to qualify or register
its Common Stock for sale in non-issuer transactions under (or obtain
exemptions from the application of) the Blue Sky laws of the State of
California (and thereby permit market making transactions and secondary
trading in the Company's Common Stock in California), will comply with such
Blue Sky laws and will continue such qualifications, registrations and
exemptions in effect for a period of five years after the date hereof.
(k) The Company will use its best efforts to maintain the Common
Stock as a national market system security on The Nasdaq Stock Market.
You, on behalf of the Underwriters, may, in your sole discretion,
waive in writing the performance by the Company of any one or more of the
foregoing covenants or extend the time for their performance.
SECTION 6. Payment of Expenses. Whether or not the transactions
-------------------
contemplated hereunder are consummated or this Agreement becomes effective or is
terminated, the Company agrees to pay all costs, fees and expenses incurred in
connection with the performance of its obligations hereunder and in connection
with the transactions contemplated hereby, including without limiting the
generality of the foregoing, (i) all expenses incident to the issuance and
delivery of the Common Shares (including all printing and engraving costs), (ii)
all fees and expenses of the registrar and transfer agent of the Common Stock,
(iii) all necessary issue, transfer and other stamp taxes in connection with the
issuance and sale of the Common Shares to the Underwriters, (iv) all fees and
expenses of the Company's counsel and the Company's independent accountants, (v)
all costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement, each
Preliminary Prospectus and the
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Prospectus (including all exhibits and financial statements) and all amendments
and supplements provided for herein, this Agreement, the Agreement Among
Underwriters, the Selected Dealers Agreement, the Underwriters' Questionnaire,
the Underwriters' Power of Attorney and the Blue Sky memorandum, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Common Shares for offer
and sale under the Blue Sky laws, (vii) the filing fee of the National
Association of Securities Dealers, Inc., and (viii) all other fees, costs and
expenses referred to in Item 25 of the Registration Statement. Except as
provided in this Section 6, Section 8 and Section 10 hereof, the Underwriters
shall pay all of their own expenses, including the fees and disbursements of
their counsel (excluding those relating to qualification, registration or
exemption under the Blue Sky laws and the Blue Sky memorandum referred to
above).
SECTION 7. Conditions of the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the several Underwriters to purchase and pay for the Firm Common
Shares on the First Closing Date and the Optional Common Shares on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company herein set forth as of the date hereof and
as of the First Closing Date or the Second Closing Date, as the case may be, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:00 P.M. (or, in the case of a registration statement filed
pursuant to Rule 462(b) of the Rules and Regulations relating to the Common
Shares, not later than 10:00 P.M.), Washington, D.C. Time, on the date of
this Agreement, or at such later time as shall have been consented to by
you; if the filing of the Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b) of the Rules and Regulations, the
Prospectus shall have been filed in the manner and within the time period
required by Rule 424(b) of the Rules and Regulations; and prior to such
Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or shall be pending or, to the knowledge
of the Company or you, shall be contemplated by the Commission; and any
request of the Commission for inclusion of additional information in the
Registration Statement, or otherwise, shall have been complied with to your
satisfaction.
(b) You shall be satisfied that since the respective dates as of
which information is given in the Registration Statement and Prospectus,
(i) there shall not have been any change in the capital stock other than
pursuant to the exercise of outstanding options and warrants disclosed in
the Prospectus of the Company or any material change in the indebtedness
(other than in the ordinary course of business) of the Company, (ii) except
as set forth or contemplated by the Registration Statement or the
Prospectus, no material verbal or written agreement or other transaction
shall have been entered into by the Company, which is not in the ordinary
course of business or which could result in a material reduction in the
future earnings of the Company, (iii) no loss or damage (whether or not
insured) to the property of the Company shall have been sustained which
materially and adversely affects the condition (financial or otherwise),
business, results of operations or prospects of the Company, (iv) no legal
or governmental action, suit or proceeding affecting the Company which is
material to the Company or which affects or may affect the transactions
contemplated by this Agreement shall have been instituted or threatened and
(v) there shall not have been any material change in the condition
(financial or otherwise), business, management, results of operations or
prospects of the Company which makes it impractical or inadvisable in the
judgment of the Representatives to proceed with the public offering or
purchase the Common Shares as contemplated hereby.
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(c) There shall have been furnished to you, as Representatives of
the Underwriters, on each Closing Date, in form and substance satisfactory
to you, except as otherwise expressly provided below:
(i) An opinion of Fenwick & West LLP, counsel for the
Company, addressed to the Underwriters and dated the First Closing
Date, or the Second Closing Date, as the case may be, to the effect
that:
(1) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, is duly qualified to do business
as a foreign corporation and is in good standing in all other
jurisdictions where the ownership or leasing of properties or the
conduct of its business requires such qualification, except for
jurisdictions in which the failure to so qualify would not have a
material adverse effect on the Company, and has full corporate
power and authority to own its properties and conduct its
business as described in the Registration Statement;
(2) The authorized, issued and outstanding capital
stock of the Company is as set forth under the caption
"Capitalization" in the Prospectus and conforms as of the date
set forth therein and as of the applicable Closing Date as to
legal matters in all material respects to the description
thereof contained in the Registration Statement and the
Prospectus under the caption "Description of Capital Stock";
all necessary and proper corporate proceedings have been taken
in order to authorize validly such authorized Common Stock; all
outstanding shares of Common Stock (including the Firm Common
Shares and any Optional Common Shares) have been duly and
validly issued, are fully paid and nonassessable, have been
issued in compliance with federal and state securities laws,
and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase
any securities and conform to the description thereof contained
in the Prospectus; without limiting the foregoing, there are no
preemptive or other rights to subscribe for or purchase any of
the Common Shares to be sold by the Company hereunder;
(3) The certificates evidencing the Common Shares to be
delivered hereunder are in due and proper form under Delaware
law, and when duly countersigned by the Company's transfer agent
and registrar, and delivered to you or upon your order against
payment of the agreed consideration therefor in accordance with
the provisions of this Agreement, the Common Shares represented
thereby will be duly authorized and validly issued, fully paid
and nonassessable, will not have been issued in violation of or
subject to any preemptive rights or other rights to subscribe for
or purchase securities and will conform in all respects to the
description thereof contained in the Prospectus;
(4) Except as disclosed in or specifically contemplated
by the Prospectus, to the best of such counsel's knowledge,
there are no outstanding options, warrants or other rights
calling for the issuance of, and no commitments, plans or
arrangements to issue, any shares of capital stock of the
Company or any security convertible into or exchangeable for
capital stock of the Company;
(5) (a) The Registration Statement has become effective
under the Act, and, to the best of such counsel's knowledge, no
stop order proceeding
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suspending the effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued and no
proceedings for that purpose have been instituted or are pending
or contemplated by the Commission; any required filing of the
Prospectus and any supplement thereto pursuant to Rule 424(b) of
the Rules and Regulations has been made in the manner and within
the time period required by such Rule 424(b);
(b) The Registration Statement, the Prospectus and each
amendment or supplement thereto (except for the financial
statements and schedules included therein as to which such
counsel need express no opinion) comply as to form in all
material respects with the requirements of the Act and the Rules
and Regulations;
(c) To the best of such counsel's knowledge, there are
no franchises, leases, contracts, agreements or documents of a
character required to be disclosed in the Registration Statement
or Prospectus or to be filed as exhibits to the Registration
Statement which are not disclosed or filed, as required;
(d) To the best of such counsel's knowledge, there are
no legal or governmental actions, suits or proceedings pending or
threatened against the Company which are required to be described
in the Prospectus which are not described as required; and
(6) The Company has full right, power and authority to enter
into this Agreement and to sell and deliver the Common Shares to
be sold by it to the several Underwriters; this Agreement has
been duly and validly authorized by all necessary corporate
action by the Company, has been duly and validly executed and
delivered by and on behalf of the Company, and is a valid and
binding agreement of the Company in accordance with its terms,
except as enforceability may be limited by general equitable
principles, bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and except as to
those provisions relating to indemnity or contribution for
liabilities arising under the Act as to which no opinion need be
expressed; and no approval, authorization, order, consent,
registration, filing, qualification, license or permit of or with
any court, regulatory, administrative or other governmental body
or agency is required for the execution and delivery of this
Agreement by the Company or the consummation of the transactions
contemplated by this Agreement, except such as have been obtained
and are in full force and effect under the Act and such as may be
required under applicable Blue Sky laws in connection with the
purchase and distribution of the Common Shares by the
Underwriters and the clearance of such offering with the NASD;
(7) The execution and performance of this Agreement and the
consummation of the transactions herein contemplated will not
conflict with, result in the breach of, or constitute, either by
itself or upon notice or the passage of time or both, a default
under, any agreement, mortgage, deed of trust, lease, franchise,
license, indenture, permit or other instrument to which the
Company is a party or by which the Company or any of its property
may be bound or affected which is material to the Company, or
violate any of the provisions of the certificate of incorporation
or bylaws or other organizational documents of the Company, or
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violate any statute, judgment, decree, order, rule or regulation
of any court or governmental body having jurisdiction over the
Company or any of its property;
(8) The Company is not in violation of its certificate of
incorporation or bylaws, or other organizational documents, or in
breach of or default with respect to any provision of any
agreement, mortgage, deed of trust, lease, franchise, license,
indenture, permit or other instrument to which the Company is a
party or by which it or any of its properties may be bound or
affected, except where such default would not materially
adversely affect the Company; and, to the best of such counsel's
knowledge, the Company is in compliance with all laws, rules,
regulations, judgments, decrees, orders and statutes of any court
or jurisdiction to which it is subject, except where
noncompliance would not materially adversely affect the Company;
(9) No holders of securities of the Company have rights
which have not been waived to the registration of shares of
Common Stock or other securities, because of the filing of the
Registration Statement by the Company or the offering
contemplated hereby;
In rendering such opinion, such counsel may rely, as to matters of
local law, on opinions of local counsel, and as to matters of fact, on
certificates of officers of the Company and of governmental officials, in which
case their opinion is to state that they are so doing and that the Underwriters
are justified in relying on such opinions or certificates and copies of said
opinions or certificates are to be attached to the opinion. Such counsel shall
also state that they have participated in conferences with officials and other
representatives of the Company, the Representatives, counsel to the Underwriters
and the independent certified public accountants of the Company, at which such
conferences the contents of the Registration Statement and Prospectus and
related matters were discussed. Such counsel shall further include a statement
to the effect that nothing has come to such counsel's attention that would lead
such counsel to believe that either at the effective date of the Registration
Statement or at the applicable Closing Date the Registration Statement or the
Prospectus, or any such amendment or supplement, contains any untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading.
(ii) Such opinion or opinions of Brobeck, Phleger &
Harrison LLP, counsel for the Underwriters dated the First Closing
Date or the Second Closing Date, as the case may be, with respect to
the incorporation of the Company, the sufficiency of all corporate
proceedings and other legal matters relating to this Agreement, the
validity of the Common Shares, the Registration Statement and the
Prospectus and other related matters as you may reasonably require,
and the Company shall have furnished to such counsel such documents
and shall have exhibited to them such papers and records as they may
reasonably request for the purpose of enabling them to pass upon
such matters. In connection with such opinions, such counsel may
rely on representations or certificates of officers of the Company
and governmental officials.
(iii) A certificate of the Company executed by the Chairman
of the Board or President and the chief financial or accounting
officer of the Company, dated the First Closing Date or the Second
Closing Date, as the case may be, to the effect that:
(1) The representations and warranties of the
Company set forth in Section 2 of this Agreement are true and
correct as of the date of this Agreement and as of the First
Closing Date or the Second Closing Date, as the case may be,
14.
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and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or
satisfied on or prior to such Closing Date;
(2) The Commission has not issued any order preventing or
suspending the use of the Prospectus or any Preliminary
Prospectus filed as a part of the Registration Statement or any
amendment thereto; no stop order suspending the effectiveness of
the Registration Statement has been issued; and to the best of
the knowledge of the respective signers, no proceedings for that
purpose have been instituted or are pending or contemplated under
the Act;
(3) Each of the respective signers of the certificate has
carefully examined the Registration Statement and the Prospectus;
in his opinion and to the best of his knowledge, the Registration
Statement and the Prospectus and any amendments or supplements
thereto contain all statements required to be stated therein
regarding the Company; and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto includes
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading;
(4) Since the initial date on which the Registration
Statement was filed, no agreement, written or oral, transaction
or event has occurred which should have been set forth in an
amendment to the Registration Statement or in a supplement to or
amendment of any prospectus which has not been disclosed in such
a supplement or amendment;
(5) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and
except as disclosed in or contemplated by the Prospectus, there
has not been any material adverse change or a development
involving a material adverse change in the condition (financial
or otherwise), business, properties, results of operations,
management or prospects of the Company; and no legal or
governmental action, suit or proceeding is pending or threatened
against the Company which is material to the Company, whether or
not arising from transactions in the ordinary course of business,
or which may adversely affect the transactions contemplated by
this Agreement; since such dates and except as so disclosed, the
Company has not entered into any verbal or written agreement or
other transaction which is not in the ordinary course of business
or which could result in a material reduction in the future
earnings of the Company or incurred any material liability or
obligation, direct, contingent or indirect, made any change in
its capital stock, made any material change in its short-term
debt or funded debt or repurchased or otherwise acquired any of
the Company's capital stock; and the Company has not declared or
paid any dividend, or made any other distribution, upon its
outstanding capital stock payable to stockholders of record on a
date prior to the First Closing Date or Second Closing Date; and
(6) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus and except
as disclosed in or contemplated by the Prospectus, the Company
has not sustained a material loss or damage by strike, fire,
flood, windstorm, accident or other calamity (whether or not
insured).
15.
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(iv) On the date before this Agreement is executed and also
on the First Closing Date and the Second Closing Date a letter
addressed to you, as Representatives of the Underwriters, from Price
Waterhouse LLP, independent accountants, the first one to be dated the
day before the date of this Agreement, the second one to be dated the
First Closing Date and the third one (in the event of a Second
Closing) to be dated the Second Closing Date, in form and substance
satisfactory to you.
(v) On or before the First Closing Date, letters from each
holder of one percent (1%) or more of the Company's Common Stock and
each director and officer of the Company, in form and substance
satisfactory to you, confirming that for a period of 180 days after
the first date that any of the Common Shares are released by you for
sale to the public, such person will not directly or indirectly offer
to sell, pledge, sell or contract to sell or otherwise dispose of any
shares of Common Stock or any right to acquire such shares or
securities convertible into or exchangeable for any shares of Common
Stock without the prior written consent of Montgomery Securities,
which consent may be withheld at the sole discretion of Montgomery
Securities.
(vi) The Common Stock shall have been approved for quotation
as a national market system security on The Nasdaq Stock Market upon
notice of issuance.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are satisfactory to you and
to Brobeck, Phleger & Harrison LLP, counsel for the Underwriters. The Company
shall furnish you with such manually signed or conformed copies of such
opinions, certificates, letters and documents as you request. Any certificate
signed by any officer of the Company and delivered to the Representatives or to
counsel for the Underwriters shall be deemed to be a representation and warranty
by the Company to the Underwriters as to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you as
Representatives to the Company without liability on the part of any Underwriter
except for the expenses to be paid or reimbursed by the Company pursuant to
Sections 6 and 8 hereof and except to the extent provided in Section 10 hereof.
SECTION 8. Reimbursement of Underwriters' Expenses. Notwithstanding
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any other provisions hereof, if this Agreement shall be terminated by you
pursuant to Section 7 or Section 13 hereof, or if the sale to the Underwriters
of the Common Shares at the First Closing is not consummated because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse you and the other Underwriters upon demand for all out-of-pocket
expenses that shall have been reasonably incurred by you and them in connection
with the proposed purchase and the sale of the Common Shares, including but not
limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, telegraph and telefax charges and telephone charges relating
directly to the offering contemplated by the Prospectus. Any such termination
shall be without liability of any party to any other party except that the
provisions of this Section, Section 6 and Section 10 shall at all times be
effective and shall apply.
SECTION 9. Effectiveness of Registration Statement. You and the
---------------------------------------
Company will use your and its best efforts to cause the Registration Statement
to become effective, to prevent the issuance of any stop order suspending the
effectiveness of the Registration Statement and, if such stop order be issued,
to obtain as soon as possible the lifting thereof.
16.
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SECTION 10. Indemnification.
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(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act against any losses, claims, damages, liabilities or
expenses, joint or several, to which such Underwriter or such controlling
person may become subject, under the Act, the Exchange Act, or other
federal or state statutory law or regulation, or at common law or otherwise
(including in settlement of any litigation, if such settlement is effected
with the written consent of the Company), insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state in any of them a material fact required to be
stated therein or necessary to make the statements in any of them not
misleading, or arise out of or are based in whole or in part on any
inaccuracy in the representations and warranties of the Company contained
herein or any failure of the Company to perform its obligations hereunder
or under law; and will reimburse each Underwriter and each such controlling
person for any legal and other expenses as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
Company will not be liable in any such case to the extent that any such
loss, claim, damage, liability or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto in reliance upon and
in conformity with the information furnished to the Company pursuant to
Section 3 hereof. In addition to its other obligations under this Section
10(a), the Company agrees that, as an interim measure during the pendency
of any claim, action, investigation, inquiry or other proceeding arising
out of or based upon any statement or omission, or any alleged statement or
omission, or any inaccuracy in the representations and warranties of the
Company herein or failure to perform its obligations hereunder, all as
described in this Section 10(a), it will reimburse each Underwriter on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of
a judicial determination as to the propriety and enforceability of the
Company's obligation to reimburse each Underwriter for such expenses and
the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, each
Underwriter shall promptly return it to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
announced from time to time by Bank of America NT&SA, San Francisco,
California (the "Prime Rate"). Any such interim reimbursement payments
which are not made to an Underwriter within 30 days of a request for
reimbursement, shall bear interest at the Prime Rate from the date of such
request. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Underwriter will severally indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of the Act, against any losses, claims, damages,
liabilities or expenses to which the Company, or any such director,
officer, or controlling person may become subject, under the Act, the
Exchange Act, or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter),
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof as contemplated below) arise out of or
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<PAGE>
are based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with the information furnished to the
Company pursuant to Section 3 hereof; and will reimburse the Company, or
any such director, officer, or controlling person for any legal and other
expense reasonably incurred by the Company, or any such director, officer,
or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action. In addition to its other obligations under this Section
10(b), each Underwriter severally agrees that, as an interim measure during
the pendency of any claim, action, investigation, inquiry or other
proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, described in this Section 10(b) which
relates to information furnished to the Company pursuant to Section 3
hereof, it will reimburse the Company (and, to the extent applicable, each
officer, director, or controlling person) on a quarterly basis for all
reasonable legal or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Underwriters'
obligation to reimburse the Company (and, to the extent applicable, each
officer, director, or controlling person) for such expenses and the
possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. To the extent that any such interim
reimbursement payment is so held to have been improper, the Company (and,
to the extent applicable, each officer, director, or controlling person)
shall promptly return it to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such
interim reimbursement payments which are not made to the Company or its
officers, directors or controlling persons, as the case may be, within 30
days of a request for reimbursement, shall bear interest at the Prime Rate
from the date of such request. This indemnity agreement will be in
addition to any liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying
party under this Section, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party for contribution or otherwise than under the indemnity agreement
contained in this Section or to the extent it is not prejudiced as a
proximate result of such failure. In case any such action is brought
against any indemnified party and such indemnified party seeks or intends
to seek indemnity from an indemnifying party, the indemnifying party will
be entitled to participate in, and, to the extent that it may wish, jointly
with all other indemnifying parties similarly notified, to assume the
defense thereof with counsel reasonably satisfactory to such indemnified
party; provided, however, if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in conducting
the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from
or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to assume
such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of
notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to
such
18.
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indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed such
counsel in connection with the assumption of legal defenses in accordance
with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses
of more than one separate counsel, approved by the Representatives in the
case of paragraph (a), representing the indemnified parties who are parties
to such action) or (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
the action, in each of which cases the fees and expenses of counsel shall
be at the expense of the indemnifying party.
(d) If the indemnification provided for in this Section 10 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under
paragraphs (a), (b) or (c) in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then each applicable
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of any losses, claims, damages, liabilities
or expenses referred to herein (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company, and the Underwriters
from the offering of the Common Shares or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company, and the
Underwriters in connection with the statements or omissions or inaccuracies
in the representations and warranties herein which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The respective relative benefits received by the
Company and the Underwriters shall be deemed to be in the same proportion,
in the case of the Company as the total price paid to the Company for the
Common Shares sold by it to the Underwriters (net of underwriting
commissions but before deducting expenses), and in the case of the
Underwriters as the underwriting commissions received by them bears to the
total of such amounts paid to the Company and received by the Underwriters
as underwriting commissions. The relative fault of the Company and the
Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact or the inaccurate or
the alleged inaccurate representation and/or warranty relates to
information supplied by the Company or the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable
by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in subparagraph (c) of this Section 10, any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth
in subparagraph (c) of this Section 10 with respect to notice of
commencement of any action shall apply if a claim for contribution is to be
made under this subparagraph (d); provided, however, that no additional
notice shall be required with respect to any action for which notice has
been given under subparagraph (c) for purposes of indemnification. The
Company and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 10 were determined solely by pro
rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this subparagraph
(d). Notwithstanding the provisions of this Section 10, no Underwriter
shall be required to contribute any amount in excess of the amount of the
total underwriting commissions received by such Underwriter in connection
with the Common Shares underwritten by it and distributed to the public.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11 of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute
19.
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pursuant to this Section 10 are several in proportion to their respective
underwriting commitments and not joint.
(e) It is agreed that any controversy arising out of the
operation of the interim reimbursement arrangements set forth in Sections
10(a) and 10(b) hereof, including the amounts of any requested
reimbursement payments and the method of determining such amounts, shall be
settled by arbitration conducted under the provisions of the Constitution
and Rules of the Board of Governors of the New York Stock Exchange, Inc. or
pursuant to the Code of Arbitration Procedure of the NASD. Any such
arbitration must be commenced by service of a written demand for
arbitration or written notice of intention to arbitrate, therein electing
the arbitration tribunal. In the event the party demanding arbitration
does not make such designation of an arbitration tribunal in such demand or
notice, then the party responding to said demand or notice is authorized to
do so. Such an arbitration would be limited to the operation of the
interim reimbursement provisions contained in Sections 10(a) and 10(b)
hereof and would not resolve the ultimate propriety or enforceability of
the obligation to reimburse expenses which is created by the provisions of
such Sections 10(a) and 10(b) hereof.
SECTION 11. Default of Underwriters. It shall be a condition to this
-----------------------
Agreement and the obligation of the Company to sell and deliver the Common
Shares hereunder, and of each Underwriter to purchase the Common Shares in the
manner as described herein, that, except as hereinafter in this paragraph
provided, each of the Underwriters shall purchase and pay for all the Common
Shares agreed to be purchased by such Underwriter hereunder upon tender to the
Representatives of all such shares in accordance with the terms hereof. If any
Underwriter or Underwriters default in their obligations to purchase Common
Shares hereunder on either the First or Second Closing Date and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters agreed
but failed to purchase on such Closing Date does not exceed 10% of the total
number of Common Shares which the Underwriters are obligated to purchase on such
Closing Date, the non-defaulting Underwriters shall be obligated severally, in
proportion to their respective commitments hereunder, to purchase the Common
Shares which such defaulting Underwriters agreed but failed to purchase on such
Closing Date. If any Underwriter or Underwriters so default and the aggregate
number of Common Shares with respect to which such default occurs is more than
the above percentage and arrangements satisfactory to the Representatives and
the Company for the purchase of such Common Shares by other persons are not made
within 48 hours after such default, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company except
for the expenses to be paid by the Company pursuant to Section 6 hereof and
except to the extent provided in Section 10 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties, the
Representatives or the Company shall have the right to postpone the First or
Second Closing Date, as the case may be, for not more than five business days in
order that the necessary changes in the Registration Statement, Prospectus and
any other documents, as well as any other arrangements, may be effected. As
used in this Agreement, the term "Underwriter" includes any person substituted
for an Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
SECTION 12. Effective Date. This Agreement shall become effective
--------------
immediately as to Sections 6, 8, 10, 13 and 14 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement has
not become effective, at 2:00 P.M., California Time, on the first full business
day following the effectiveness of the Registration Statement, or (ii) if at the
time of execution of this Agreement the Registration Statement has been declared
effective, at 2:00 P.M., California Time, on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you
20.
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may determine on and by notice to the Company or by release of any of the Common
Shares for sale to the public. For the purposes of this Section 12, the Common
Shares shall be deemed to have been so released upon the release for publication
of any newspaper advertisement relating to the Common Shares or upon the release
by you of telegrams (i) advising Underwriters that the Common Shares are
released for public offering, or (ii) offering the Common Shares for sale to
securities dealers, whichever may occur first.
SECTION 13. Termination. Without limiting the right to terminate
-----------
this Agreement pursuant to any other provision hereof:
(a) This Agreement may be terminated by the Company by notice to
you or by you by notice to the Company at any time prior to the time this
Agreement shall become effective as to all its provisions, and any such
termination shall be without liability on the part of the Company to any
Underwriter (except for the expenses to be paid or reimbursed by the
Company pursuant to Sections 6 and 8 hereof and except to the extent
provided in Section 10 hereof) or of any Underwriter to the Company (except
to the extent provided in Section 10 hereof).
(b) This Agreement may also be terminated by you prior to the
First Closing Date by notice to the Company (i) if additional material
governmental restrictions, not in force and effect on the date hereof,
shall have been imposed upon trading in securities generally or minimum or
maximum prices shall have been generally established on the New York Stock
Exchange or on the American Stock Exchange or in the over the counter
market by the NASD, or trading in securities generally shall have been
suspended on either such Exchange or in the over the counter market by the
NASD, or a general banking moratorium shall have been established by
federal, New York or California authorities, (ii) if an outbreak of major
hostilities or other national or international calamity or any substantial
change in political, financial or economic conditions shall have occurred
or shall have accelerated or escalated to such an extent, as, in the
judgment of the Representatives, to affect adversely the marketability of
the Common Shares, (iii) if any adverse event shall have occurred or shall
exist which makes untrue or incorrect in any material respect any statement
or information contained in the Registration Statement or Prospectus or
which is not reflected in the Registration Statement or Prospectus but
should be reflected therein in order to make the statements or information
contained therein not misleading in any material respect, or (iv) if there
shall be any action, suit or proceeding pending or threatened, or there
shall have been any development or prospective development involving
particularly the business or properties or securities of the Company or any
of its subsidiaries or the transactions contemplated by this Agreement,
which, in the reasonable judgment of the Representatives, may materially
and adversely affect the Company's business or earnings and makes it
impracticable or inadvisable to offer or sell the Common Shares. Any
termination pursuant to this subsection (b) shall be without liability on
the part of any Underwriter to the Company or on the part of the Company to
any Underwriter (except for expenses to be paid or reimbursed by the
Company pursuant to Sections 6 and 8 hereof and except to the extent
provided in Section 10 hereof.
SECTION 14. Representations and Indemnities to Survive Delivery. The
---------------------------------------------------
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Common Shares sold hereunder and any termination of this Agreement.
SECTION 15. Notices. All communications hereunder shall be in
-------
writing and, if sent to the Representatives shall be mailed, delivered,
telefaxed, or telegraphed and confirmed to you at 600 Montgomery Street, San
Francisco, California 94111, Attention: David Baylor, with a copy to Brobeck,
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Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng Road, Palo Alto,
California 94303, Attention: Therese Mrozek; and if sent to the Company shall be
mailed, delivered or telegraphed and confirmed to the Company at 1861 Landings
Drive, Mountain View, California 94043, Attention: Jerry Kaplan, with a copy to
Fenwick & West LLP, Two Palo Alto Square, Palo Alto, California 94306,
Attention: Laird H. Simons III. The Company or you may change the address for
receipt of communications hereunder by giving notice to the others.
SECTION 16. Successors. This Agreement will inure to the benefit of
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and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 11 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 10, and in each case their
respective successors, personal representatives and assigns, and no other person
will have any right or obligation hereunder. No such assignment shall relieve
any party of its obligations hereunder. The term "successors" shall not include
any purchaser of the Common Shares as such from any of the Underwriters merely
by reason of such purchase.
SECTION 17. Representation of Underwriters. You will act as
------------------------------
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you
jointly or by Montgomery Securities, as Representative, will be binding upon all
the Underwriters.
SECTION 18. Partial Unenforceability. The invalidity or
------------------------
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 19. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of Delaware.
SECTION 20. General. This Agreement constitutes the entire agreement
-------
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company and you.
22.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon it
will become a binding agreement between the Company and the several Underwriters
including you, all in accordance with its terms.
Very truly yours,
ONSALE, INC.
By: _________________________________
S. Jerrold Kaplan,
President
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as of
the date first above written.
MONTGOMERY SECURITIES
ALEX. BROWN & SONS INCORPORATED
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By MONTGOMERY SECURITIES
By: ________________________________________
Managing Director
23.
<PAGE>
SCHEDULE A
Number of Firm
Common Shares
Name of Underwriter to be Purchased
- ------------------- ---------------
Montgomery Securities................................
Alex. Brown & Sons Incorporated......................
TOTAL............................................. 2,800,000
=========
A-1
<PAGE>
EXHIBIT 2.01
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Merger Agreement") is made as
----------------
of [JANUARY] ___, 1997 by and between ONSALE, a California corporation ("ONSALE
------
California"), and ONSALE, Inc., a Delaware corporation ("ONSALE Delaware").
- ---------- ---------------
ONSALE California and ONSALE Delaware are hereinafter sometimes collectively
referred to as the "Constituent Corporations."
------------------------
R E C I T A L S
- - - - - - - -
A. ONSALE California was incorporated on July 21, 1994. Its current
authorized capital stock consists of: (1) 8,000,000 shares of Common Stock, no
par value ("ONSALE California Common Stock"), of which 12,143,757 shares are
------------------------------
issued and outstanding, and (2) 850,000 shares of Preferred Stock no par value
("ONSALE California Preferred Stock"), including (a) 600,000 shares of Series A
---------------------------------
Preferred Stock ("ONSALE California Series A Stock"), of which 365,191 shares
--------------------------------
are issued and outstanding, (b) 204,521 shares of Series B Preferred Stock
("ONSALE California Series B Stock"), of which no shares are issued and
- ----------------------------------
outstanding and (c) 45,479 shares of Preferred Stock which are undesignated.
B. ONSALE Delaware was incorporated on December 12, 1996. Its
authorized capital stock consists of: (1) 30,000,000 shares of Common Stock,
with a par value of $0.001 per share ("ONSALE Delaware Common Stock"), of which
----------------------------
1,000 shares are issued and outstanding; and (2) 2,000,000 shares of Preferred
Stock, $0.001 par value ("ONSALE Delaware Preferred Stock") of which (a) 365,191
-------------------------------
shares have been designated Series A Preferred Stock ("ONSALE Delaware Series A
------------------------
Stock"), none of which shares are issued and outstanding, (b) 202,910 shares
- -----
have been designated Series B Preferred Stock ("ONSALE Delaware Series B
------------------------
Stock"), none of which shares are issued and outstanding.
C. The Boards of Directors of ONSALE California and ONSALE Delaware
deem it advisable and to the advantage of each of the Constituent Corporations
that ONSALE California merge with and into ONSALE Delaware upon the terms and
subject to the conditions set forth in this Merger Agreement for the purpose of
effecting a change of the state of incorporation of ONSALE California from
California to Delaware.
D. The Boards of Directors of each of the Constituent Corporations
have approved this Merger Agreement.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
set forth in this Merger Agreement and do hereby agree that ONSALE California
shall merge with and into ONSALE Delaware on the following terms, conditions and
other provisions:
1. MERGER AND EFFECTIVE DATE. On the Effective Date (as defined
-------------------------
below), ONSALE California shall be merged with and into ONSALE Delaware (the
<PAGE>
"Merger"), and ONSALE Delaware shall be the surviving corporation of the Merger
- -------
(the "Surviving Corporation"). The Merger shall become effective upon the close
---------------------
of business on the date when a duly executed copy of this Merger Agreement,
along with all required officers' certificates, is filed with the Secretary of
State of the State of Delaware (the "Effective Date").
--------------
2. EFFECT OF MERGER. On the Effective Date, the separate corporate
----------------
existence of ONSALE California shall cease; the corporate identity, existence,
powers, rights and immunities of ONSALE Delaware as the Surviving Corporation
shall continue unimpaired by the Merger; and ONSALE Delaware shall succeed to
and shall possess all the assets, properties, rights, privileges, powers,
franchises, immunities and purposes, and be subject to all the debts,
liabilities, obligations, restrictions and duties of ONSALE California, all
without further act or deed.
3. GOVERNING DOCUMENTS. On the Effective Date, the Certificate of
-------------------
Incorporation of ONSALE Delaware in effect immediately prior to the Effective
Date shall become the Certificate of Incorporation of the Surviving Corporation
and the Bylaws of ONSALE Delaware in effect immediately prior to the Effective
Date shall become the Bylaws of the Surviving Corporation.
4. DIRECTORS AND OFFICERS. On the Effective Date, the directors and
----------------------
officers of ONSALE Delaware shall be and become the directors and officers
(holding the same titles and positions) of the Surviving Corporation, and after
the Effective Date shall serve in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
5. SHARES OF ONSALE CALIFORNIA. On the Effective Date, each share of
---------------------------
ONSALE California Common Stock outstanding immediately prior thereto shall be
automatically changed and converted into one (1) fully paid and nonassessable,
issued and outstanding share of ONSALE Delaware Common Stock. On the Effective
Date, each share of ONSALE California Series A Stock outstanding immediately
prior thereto shall be automatically changed and converted into one (1) fully
paid and nonassessable, issued and outstanding share of ONSALE Delaware Series A
Stock, and each share of ONSALE California Series B Stock outstanding
immediately prior thereto shall be automatically changed and converted into one
(1) fully paid and nonassessable, issued and outstanding share of ONSALE
Delaware Series B Stock.
6. SHARES OF ONSALE DELAWARE. On the Effective Date, all of the
-------------------------
previously issued and outstanding shares of ONSALE Delaware Common Stock shall
be automatically retired and canceled.
-2-
<PAGE>
7. STOCK CERTIFICATES. On and after the Effective Date, all of the
------------------
outstanding certificates that, prior to that date, represented shares of ONSALE
California Common Stock shall be deemed for all purposes to evidence ownership
of and to represent the number of shares of ONSALE Delaware Common Stock into
which such shares of ONSALE California Common Stock are converted as provided
herein. On and after the Effective Date, all of the outstanding certificates,
if any, that, prior to that date, represented shares of ONSALE California Series
A Stock or Series B Stock shall be deemed for all purposes to evidence ownership
of and to represent the number of shares of ONSALE Delaware Series A Stock or
Series B Stock, respectively, into which such shares of ONSALE California Series
A Stock or Series B Stock are converted as provided herein. The registered
owner on the books and records of ONSALE California of any such outstanding
stock certificate for ONSALE California Common Stock or ONSALE California Series
A Stock or Series B Stock shall, until such certificate shall have been
surrendered for transfer or otherwise accounted for to ONSALE Delaware or its
transfer agent, be entitled to exercise any voting and other rights with respect
to, and to receive any dividend and other distributions upon, the shares of
ONSALE Delaware Common Stock or ONSALE Delaware Series A Stock or Series B
Stock, respectively, evidenced by such outstanding certificate as above
provided.
8. OPTIONS; WARRANTS. Upon the Effective Date, under the terms
-----------------
thereof, all outstanding and unexercised portions of all options to purchase
ONSALE California Common Stock under the ONSALE California 1995 Equity Incentive
Plan, as amended on December __, 1996, and all other outstanding options or
warrants to purchase ONSALE California Common Stock or ONSALE California Series
A Stock or Series B Stock, shall become options or warrants to purchase the same
number of shares of ONSALE Delaware Common Stock or ONSALE Delaware Series A
Stock or Series B Stock, respectively, with the same exercise, price, term,
vesting schedule and other material terms and conditions. Additionally, upon
the Effective Date, ONSALE Delaware shall adopt and assume the ONSALE California
1995 Equity Incentive Plan, as amended on December 5, 1996, and all outstanding
options thereunder.
9. FRACTIONAL SHARES. No fractional shares of ONSALE Delaware Common
-----------------
Stock or Preferred Stock will be issued in connection with the Merger. In lieu
thereof, ONSALE Delaware shall pay each shareholder of ONSALE California who
would otherwise be entitled to receive a fractional share of ONSALE Delaware
Common Stock or Preferred Stock (assuming the aggregation of all shares held by
the same holder of more than one stock certificate representing shares of ONSALE
California Common Stock or Preferred Stock, as the case may be) a cash amount
equal to the applicable fraction multiplied by the fair market value of a share
of ONSALE Delaware Common Stock or Preferred Stock, as the case may be, as
determined by the Board of Directors of ONSALE Delaware in good faith (the "Fair
----
Market Value Per Share"). Upon exercise of each assumed option of ONSALE
- ----------------------
California to purchase ONSALE Delaware Common Stock, cash will be paid by ONSALE
Delaware in lieu of any fractional share of ONSALE Delaware Common Stock,
respectively, issuable upon exercise of such option, and the amount of cash
received for such fractional share shall be the Fair Market Value Per Share upon
exercise thereof multiplied by the applicable fraction, less the unpaid exercise
price per share for such fraction.
-3-
<PAGE>
10. EMPLOYEE BENEFIT PLANS. On the Effective Date, the obligations of
----------------------
ONSALE California under or with respect to every plan, trust, program and
benefit then in effect or administered by ONSALE California for the benefit of
the directors, officers and employees of ONSALE California or any of its
subsidiaries, including without limitation the 401(k) Plan of the Company, shall
become the lawful obligations of ONSALE Delaware and shall be implemented and
administered in the same manner and without interruption until the same are
amended or otherwise lawfully altered or terminated. Effective upon the
Effective Date, ONSALE Delaware hereby expressly adopts and assumes all
obligations of ONSALE California under such employee benefit plans.
11. FURTHER ASSURANCES. From time to time, as and when required by
------------------
the Surviving Corporation or by its successors or assigns, there shall be
executed and delivered on behalf of ONSALE California such deeds, assignments
and other instruments, and there shall be taken or caused to be taken by it all
such further action, as shall be appropriate, advisable or necessary in order to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation
the title to and possession of all property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of ONSALE California,
and otherwise to carry out the purposes of this Merger Agreement. The officers
and directors of the Surviving Corporation are fully authorized in the name of
and on behalf of ONSALE California, or otherwise, to take any and all such
actions and to execute and deliver any and all such deeds and other instruments
as may be necessary or appropriate to accomplish the foregoing.
12. CONDITION. The consummation of the Merger is subject to the
---------
approval of this Merger Agreement and the Merger contemplated hereby by the
shareholders of ONSALE California and by the sole stockholder of ONSALE
Delaware, prior to or on the Effective Date.
13. ABANDONMENT. At any time before the Effective Date, this Merger
-----------
Agreement may be terminated and the Merger abandoned by the Board of Directors
of ONSALE California or ONSALE Delaware, notwithstanding approval of this Merger
Agreement by the Boards of Directors and shareholders of Constituent
Corporations ONSALE California and ONSALE Delaware.
14. AMENDMENT. At any time before the Effective Date, this Merger
---------
Agreement may be amended, modified or supplemented by the Boards of Directors of
the Constituent Corporations, notwithstanding approval of this Merger Agreement
by the shareholders of ONSALE California and by the sole stockholder of ONSALE
Delaware; provided, however, that any amendment made subsequent to the adoption
-------- -------
of this Agreement by the shareholders of ONSALE California or the sole
stockholder of ONSALE Delaware shall not: (a) alter or change the amount or kind
of shares, securities, cash, property and/or rights to be received in exchange
for or upon conversion of any shares of any class or series of ONSALE California
stock, (b) alter or change of any of the
-4-
<PAGE>
terms of the Certificate of Incorporation of the Surviving Corporation to be
effected by the Merger, or (c) alter or change any of the terms or conditions of
this Agreement if such alteration or change would adversely affect the holders
of any shares of any class or series of ONSALE California or ONSALE Delaware
stock.
15. TAX-FREE REORGANIZATION. The Merger is intended to be a tax-free
-----------------------
plan of reorganization within the meaning of Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended.
16. GOVERNING LAW. This Agreement shall be governed by and construed
-------------
under the internal laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California, without reference to the principles of conflicts of law or choice of
laws, except to the extent that the laws of the State of Delaware would apply in
matters relating to the internal affairs of ONSALE Delaware and the Merger.
17. COUNTERPARTS. In order to facilitate the filing and recording of
------------
this Merger Agreement, it may be executed in any number of counterparts, each of
which shall be deemed to be an original.
IN WITNESS WHEREOF, this Merger Agreement is hereby executed on behalf
of each of the Constituent Corporations and attested by their respective
officers thereunto duly authorized.
ONSALE, a California corporation ONSALE, INC., a Delaware corporation
By: By:
-------------------------------- --------------------------------
S. JERROLD KAPLAN, President and S. JERROLD KAPLAN, President and
Chief Executive Officer Chief Executive Officer
ATTEST: ATTEST:
- ------ ------
-------------------------------- --------------------------------
S. JERROLD KAPLAN JOHN SAUERLAND
Secretary Secretary
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
-5-
<PAGE>
EXHIBIT 3.01
CERTIFICATE OF INCORPORATION
OF
ONSALE, INC.
ARTICLE I
The name of the corporation is ONSALE, Inc.
ARTICLE II
The registered office of the corporation in the State of Delaware is
located at 15 East North Street, City of Dover, 19901, County of Kent. The name
of its registered agent at that address is Incorporating Services, Ltd.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware (the "General Corporation Law").
-----------------------
ARTICLE IV
The total number of shares of all classes of stock which the
corporation has authority to issue is Thirty-Two Million (32,000,000) shares,
consisting of two classes: Thirty-Million (30,000,000) shares of Common Stock,
$0.001 par value per share, and Two Million (2,000,000) shares of Preferred
Stock, $0.001 par value per share.
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the issuance of
the shares of Preferred Stock in one or more series, and, by filing a
certificate of designation pursuant to the applicable law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations or restrictions
thereof, and to increase or decrease the number of shares of any such series
(but not below the number of shares of such series then outstanding). The
number of authorized shares of Preferred Stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the stock of the corporation entitled to
vote, unless a vote of any other holders is required pursuant to a certificate
or certificates establishing a series of Preferred Stock.
Except as expressly provided in any certificate of designation
designating any series of Preferred Stock pursuant to the foregoing provisions
of this Article IV, any new series
-1-
<PAGE>
of Preferred Stock may be designated, fixed and determined as provided herein by
the Board of Directors without approval of the holders of Common Stock or the
holders of Preferred Stock, or any series thereof, and any such new series may
have powers, preferences and rights, including, without limitation, voting
rights, dividend rights, liquidation rights, redemption rights and conversion
rights, senior to, junior to or pari passu with the rights of the Common Stock,
the Preferred Stock, or any future class or series of Preferred Stock or Common
Stock.
ARTICLE V
The Board of Directors of the corporation shall have the power to
adopt, amend or repeal the Bylaws of the corporation.
ARTICLE VI
Election of directors need not be by written ballot unless the Bylaws
of the corporation shall so provide.
ARTICLE VII
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for monetary damages for breach of fiduciary duty as
a director. Without limiting the effect of the preceding sentence, if the
Delaware General Corporation Law is hereafter amended to authorize the further
elimination or limitation of liability of a director, then the liability of a
director of the corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment, repeal or modification of this Article VII, nor
the adoption of any provision of this Certificate of Incorporation inconsistent
with this Articles VII, shall eliminate, reduce or otherwise adversely affect
any right or protection of a director of the corporation under this Article VII
that existed at or prior to the time of such amendment, repeal or modification.
ARTICLE VIII
Effective immediately after the closing of an underwritten public offering
of shares of the corporation's Common Stock pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission,
actions shall be taken by the corporation's stockholders only at annual or
special meetings of stockholders, and the corporation's stockholders shall not
be able to act by written consent.
-2-
<PAGE>
ARTICLE IX
The name and mailing address of the incorporator is Michael J. Patrick, c/o
Fenwick & West, LLP, Two Palo Alto Square, Suite 800, Palo Alto, CA 94306.
The undersigned incorporator hereby acknowledges that the foregoing
certificate is his act and deed and that the facts stated herein are true.
Dated: December 12, 1996
/s/ Michael J. Patrick
----------------------------------
Michael J. Patrick, Incorporator
-3-
<PAGE>
EXHIBIT 3.02
BYLAWS
OF
ONSALE, INC.
(a Delaware corporation)
As Adopted December, 1996
<PAGE>
BYLAWS
OF
ONSALE, INC.
A Delaware Corporation
TABLE OF CONTENTS
PAGE
----
ARTICLE I - STOCKHOLDERS............................................. 1
Section 1.1: Annual Meetings.............................. 1
Section 1.2: Special Meetings............................. 1
Section 1.3: Notice of Meetings........................... 1
Section 1.4: Adjournments................................. 1
Section 1.5: Quorum....................................... 2
Section 1.6: Organization................................. 2
Section 1.7: Voting; Proxies.............................. 2
Section 1.8: Fixing Date for Determination of Stockholders
of Record.................................... 3
Section 1.9: List of Stockholders Entitled to Vote........ 3
Section 1.10: Action by Written Consent of Stockholders.... 4
Section 1.11: Inspectors of Elections...................... 4
Section 1.12: Notice of Stockholder Business; Nominations.. 6
ARTICLE II - BOARD OF DIRECTORS...................................... 8
Section 2.1: Number; Qualifications....................... 8
Section 2.2: Election; Resignation; Removal; Vacancies.... 8
Section 2.3: Regular Meetings............................. 8
-i-
<PAGE>
BYLAWS
OF
ONSALE, INC.
A Delaware Corporation
TABLE OF CONTENTS (CONT'D)
PAGE
----
Section 2.4: Special Meetings.............................. 8
Section 2.5: Telephonic Meetings Permitted................. 9
Section 2.6: Quorum; Vote Required for Action.............. 9
Section 2.7: Organization.................................. 9
Section 2.8: Written Action by Directors................... 9
Section 2.9: Powers........................................ 9
Section 2.10: Compensation of Directors..................... 9
ARTICLE III - COMMITTEES.............................................. 9
Section 3.1: Committees.................................... 9
Section 3.2: Committee Rules............................... 10
ARTICLE IV - OFFICERS................................................. 10
Section 4.1: Generally..................................... 10
Section 4.2: Chief Executive Officer....................... 11
Section 4.3: Chairman of the Board......................... 11
Section 4.4: President..................................... 11
Section 4.5: Vice President................................ 11
Section 4.6: Chief Financial Officer....................... 12
Section 4.7: Treasurer..................................... 12
Section 4.8: Secretary..................................... 12
-ii-
<PAGE>
BYLAWS
OF
ONSALE, INC.
A Delaware Corporation
TABLE OF CONTENTS (CONT'D)
PAGE
----
Section 4.9: Delegation of Authority...................... 12
Section 4.10: Removal...................................... 12
ARTICLE V - STOCK.................................................... 12
Section 5.l: Certificates................................. 12
Section 5.2: Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates................. 12
Section 5.3: Other Regulations............................ 13
ARTICLE VI - INDEMNIFICATION......................................... 13
Section 6.1: Indemnification of Officers and Directors.... 13
Section 6.2: Advance of Expenses.......................... 13
Section 6.3: Non-Exclusivity of Rights.................... 14
Section 6.4: Indemnification Contracts.................... 14
Section 6.5: Effect of Amendment.......................... 14
ARTICLE VII - NOTICES................................................ 14
Section 7.l: Notice....................................... 14
Section 7.2: Waiver of Notice............................. 14
ARTICLE VIII - INTERESTED DIRECTORS.................................. 15
Section 8.1: Interested Directors; Quorum................. 15
-iii-
<PAGE>
BYLAWS
OF
ONSALE, INC.
A Delaware Corporation
TABLE OF CONTENTS (CONT'D)
PAGE
----
ARTICLE IX - MISCELLANEOUS............................................ 15
Section 9.1: Fiscal Year................................... 15
Section 9.2: Seal.......................................... 15
Section 9.3: Form of Records............................... 15
Section 9.4: Reliance Upon Books and Records............... 16
Section 9.5: Certificate of Incorporation Governs.......... 16
Section 9.6: Severability.................................. 16
ARTICLE X - AMENDMENT................................................. 16
Section 10.1: Amendments.................................... 16
-iv-
<PAGE>
BYLAWS
OF
ONSALE, INC.
(a Delaware corporation)
As Adopted December , 1996
ARTICLE I
STOCKHOLDERS
Section 1.1: Annual Meetings. An annual meeting of stockholders shall be
----------- ---------------
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as the Board of Directors shall each year fix.
Any other proper business may be transacted at the annual meeting.
Section 1.2: Special Meetings. Special meetings of stockholders for any
----------- ----------------
purpose or purposes may be called at any time by the Chairman of the Board, the
Chief Executive Officer, the President, the holders of shares of the Corporation
that are entitled to cast not less than ten percent (10%) of the total number of
votes entitled to be cast by all shareholders at such meeting, or by a majority
of the members of the Board of Directors. Special meetings may not be called by
any other person or persons. If a special meeting of stockholders is called by
any person or persons other than by a majority of the members of the Board of
Directors, then such person or persons shall call such meeting by delivering a
written request to call such meeting to each member of the Board of Directors,
and the Board of Directors shall then determine the time, date and place of such
special meeting, which shall be held not more than one hundred twenty (120) nor
less than thirty-five (35) days after the written request to call such special
meeting was delivered to each member of the Board of Directors.
Section 1.3: Notice of Meetings. Written notice of all meetings of
----------- ------------------
stockholders shall be given stating the place, date and time of the meeting and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise required by applicable law or the Certificate of
Incorporation of the Corporation, such notice shall be given not less than ten
(10) nor more than sixty (60) days before the date of the meeting to each
stockholder entitled to vote at such meeting.
Section 1.4: Adjournments. Any meeting of stockholders may adjourn from
----------- ------------
time to time to reconvene at the same or another place, and notice need not be
given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken; provided, however,
-------- -------
that if the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, then a
-1-
<PAGE>
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting. At the adjourned meeting the Corporation may
transact any business that might have been transacted at the original meeting.
Section 1.5: Quorum. At each meeting of stockholders the holders of a
----------- ------
majority of the shares of stock entitled to vote at the meeting, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business, except if otherwise required by applicable law. If a quorum shall
fail to attend any meeting, the chairman of the meeting or the holders of a
majority of the shares entitled to vote who are present, in person or by proxy,
at the meeting may adjourn the meeting. Shares of the Corporation's stock
belonging to the Corporation (or to another corporation, if a majority of the
shares entitled to vote in the election of directors of such other corporation
are held, directly or indirectly, by the Corporation), shall neither be entitled
to vote nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of the Corporation or any other corporation
to vote any shares of the Corporation's stock held by it in a fiduciary
capacity.
Section 1.6: Organization. Meetings of stockholders shall be presided
----------- ------------
over by such person as the Board of Directors may designate, or, in the absence
of such a person, the Chairman of the Board, or, in the absence of such person,
the President of the Corporation, or, in the absence of such person, such person
as may be chosen by the holders of a majority of the shares entitled to vote who
are present, in person or by proxy, at the meeting. Such person shall be
chairman of the meeting and, subject to Section 1.11 hereof, shall determine the
order of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seems to him or her to be
in order. The Secretary of the Corporation shall act as secretary of the
meeting, but in his or her absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 1.7: Voting; Proxies. Unless otherwise provided by law or the
----------- ---------------
Certificate of Incorporation, and subject to the provisions of Section 1.8 of
these Bylaws, each stockholder shall be entitled to one (1) vote for each share
of stock held by such stockholder. Each stockholder entitled to vote at a
meeting of stockholders, or to express consent or dissent to corporate action in
writing without a meeting, may authorize another person or persons to act for
such stockholder by proxy. Such a proxy may be prepared, transmitted and
delivered in any manner permitted by applicable law. Voting at meetings of
stockholders need not be by written ballot unless such is demanded at the
meeting before voting begins by a stockholder or stockholders holding shares
representing at least one percent (1%) of the votes entitled to vote at such
meeting, or by such stockholder's or stockholders' proxy; provided, however,
that an election of directors shall be by written ballot if demand is so made by
any stockholder at the meeting before voting begins. If a vote is to be taken
by written ballot, then each such ballot shall state the name of the stockholder
or proxy voting and such other information as the chairman of the meeting deems
appropriate. Directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Unless otherwise provided by applicable law,
the Certificate of Incorporation or these Bylaws, every matter other than the
election of directors shall be decided by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote thereon
-2-
<PAGE>
that are present in person or represented by proxy at the meeting and are voted
for or against the matter.
Section 1.8: Fixing Date for Determination of Stockholders of Record.
----------- -------------------------------- ----------------------
(a) Generally. In order that the Corporation may determine the
---------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not precede the date upon which the resolution fixing the record
date is adopted by the Board of Directors and which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed by the
Board of Directors, then the record date shall be as provided by applicable law.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) Stockholder Request for Action by Written Consent. Any stockholder of
-------------------------------------------------
record seeking to have the stockholders authorize or take corporate action by
written consent without a meeting shall, by written notice to the Secretary of
the Corporation, request the Board of Directors to fix a record date for such
consent. Such request shall include a brief description of the action proposed
to be taken. The Board of Directors shall, within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
Such record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and shall not be more than ten
(10) days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the
Board of Directors within ten (10) days after the date on which such a request
is received, then the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the Corporation by delivery to its registered office in
the State of Delaware, to its principal place of business, or to any officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. If no record date has been fixed by the Board of Directors
and prior action by the Board of Directors is required by applicable law, then
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on the
date on which the Board of Directors adopts the resolution taking such prior
action.
Section 1.9: List of Stockholders Entitled to Vote. A complete list of
----------- -------------------------------------
stockholders entitled to vote at any meeting of stockholders, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder,
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<PAGE>
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present at the
meeting.
Section 1.10: Action by Written Consent of Stockholders.
------------ -----------------------------------------
(a) Procedure. Unless otherwise provided by the Certificate of
---------
Incorporation, and except as set forth in Section 1.8(b) above, any action
required or permitted to be taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Written stockholder consents shall bear the date of signature of each
stockholder who signs the consent and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, to its principal
place of business or to any officer or agent of the Corporation having custody
of the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. No written consent
shall be effective to take the action set forth therein unless, within sixty
(60) days of the earliest dated consent delivered to the Corporation in the
manner provided above, written consents signed by a sufficient number of
stockholders to take the action set forth therein are delivered to the
Corporation in the manner provided above.
(b) Notice of Consent. Prompt notice of the taking of corporate action by
-----------------
stockholders without a meeting by less than unanimous written consent of the
stockholders shall be given to those stockholders who have not consented thereto
in writing and, in the case of a Certificate Action (as defined below), if the
Delaware General Corporation Law so requires, such notice shall be given prior
to filing of the certificate in question. If the action which is consented to
requires the filing of a certificate under the Delaware General Corporation Law
(a "Certificate Action"), then if the Delaware General Corporation Law so
------------------
requires, the certificate so filed shall state that written stockholder consent
has been given in accordance with Section 228 of the Delaware General
Corporation Law and that written notice of the taking of corporate action by
stockholders without a meeting as described herein has been given as provided in
such section.
Section 1.11: Inspectors of Elections.
------------ -----------------------
(a) Applicability. Unless otherwise provided in the Corporation's
-------------
Certificate of Incorporation or required by the Delaware General Corporation
Law, the following provisions of this Section 1.11 shall apply only if and when
the Corporation has a class of voting stock that is: (i) listed on a national
securities exchange; (ii) authorized for quotation on an interdealer quotation
system of a registered national securities association; or (iii) held of record
by more
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<PAGE>
than 2,000 stockholders; in all other cases, observance of the provisions of
this Section 1.11 shall be optional, and at the discretion of the Corporation.
(b) Appointment. The Corporation shall, in advance of any meeting of
-----------
stockholders, appoint one or more inspectors of election to act at the meeting
and make a written report thereof. The Corporation may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If
no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting shall appoint one or more inspectors to act at
the meeting.
(c) Inspector's Oath. Each inspector of election, before entering upon the
----------------
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best of his
ability.
(d) Duties of Inspectors. At a meeting of stockholders, the inspectors of
--------------------
election shall (i) ascertain the number of shares outstanding and the voting
power of each share, (ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period of time a record of the disposition
of any challenges made to any determination by the inspectors, and (v) certify
their determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The inspectors may appoint or retain
other persons or entities to assist the inspectors in the performance of the
duties of the inspectors.
(e) Opening and Closing of Polls. The date and time of the opening and the
----------------------------
closing of the polls for each matter upon which the stockholders will vote at a
meeting shall be announced by the inspectors at the meeting. No ballot, proxies
or votes, nor any revocations thereof or changes thereto, shall be accepted by
the inspectors after the closing of the polls unless the Court of Chancery upon
application by a stockholder shall determine otherwise.
(f) Determinations. In determining the validity and counting of proxies
--------------
and ballots, the inspectors shall be limited to an examination of the proxies,
any envelopes submitted with those proxies, any information provided in
connection with proxies in accordance with Section 212(c)(2) of the Delaware
General Corporation Law, ballots and the regular books and records of the
Corporation, except that the inspectors may consider other reliable information
for the limited purpose of reconciling proxies and ballots submitted by or on
behalf of banks, brokers, their nominees or similar persons which represent more
votes than the holder of a proxy is authorized by the record owner to cast or
more votes than the stockholder holds of record. If the inspectors consider
other reliable information for the limited purpose permitted herein, the
inspectors at the time they make their certification of their determinations
pursuant to this Section 1.11 shall specify the precise information considered
by them, including the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained and the basis for the inspectors' belief that such
information is accurate and reliable.
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<PAGE>
Section 1.12: Notice of Stockholder Business; Nominations.
------------ -------------------------------------------
(a) Annual Meeting of Stockholders.
------------------------------
(i) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders shall be made at
an annual meeting of stockholders (A) pursuant to the Corporation's notice of
such meeting, (B) by or at the direction of the Board of Directors or (C) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of the notice provided for in this Section 1.12, who is entitled to vote
at such meeting and who complies with the notice procedures set forth in this
Section 1.12.
(ii) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (C) of subparagraph (a)(i)
of this Section 1.12, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice must be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
sixtieth (60th) day nor earlier than the close of business on the ninetieth
(90th) day prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
-------- -------
meeting is more than thirty (30) days before or more than sixty (60) days after
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or the close of
business on the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made by the Corporation. Such
stockholder's notice shall set forth: (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), including such person's written consent to being named in
------------
the proxy statement as a nominee and to serving as a director if elected; (b) as
to any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made; and (c) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made (1) the name and address of such stockholder, as they appear on
the Corporation's books, and of such beneficial owner, and (2) the class and
number of shares of the Corporation that are owned beneficially and held of
record by such stockholder and such beneficial owner.
(iii) Notwithstanding anything in the second sentence of subparagraph
(a)(ii) of this Section 1.12 to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement by the
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<PAGE>
Corporation naming all of the nominees for director or specifying the size of
the increased board of directors at least seventy (70) days prior to the first
anniversary of the preceding year's annual meeting (or, if the annual meeting is
held more than thirty (30) days before or sixty (60) days after such anniversary
date, at least seventy (70) days prior to such annual meeting), a stockholder's
notice required by this Section 1.12 shall also be considered timely, but only
with respect to nominees for any new positions created by such increase, if it
shall be delivered to the Secretary of the Corporation at the principal
executive office of the Corporation not later than the close of business on the
tenth (10th) day following the day on which such public announcement is first
made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of such meeting. Nominations
of persons for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of such meeting (i) by or at the direction of the Board of
Directors or (ii) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice of
the special meeting, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 1.12. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by subparagraph (a)(ii) of this Section 1.12 shall
be delivered to the Secretary of the Corporation at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(c) General.
-------
(i) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.12. Except as otherwise provided by law or these
bylaws, the chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made or proposed, as the case may be, in accordance with the procedures set
forth in this Section 1.12 and, if any proposed nomination or business is not in
compliance herewith, to declare that such defective proposal or nomination shall
be disregarded.
(ii) For purposes of this Section 1.12, the term "public announcement"
-------------------
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
section 13, 14 or 15(d) of the Exchange Act.
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<PAGE>
(iii) Notwithstanding the foregoing provisions of this Section 1.12,
a stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights
of stockholders to request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1: Number; Qualifications. The Board of Directors shall consist
----------- ----------------------
of one or more members. The initial number of directors shall be five (5), and
thereafter shall be fixed from time to time by resolution of the Board of
Directors. No decrease in the authorized number of directors constituting the
Board of Directors shall shorten the term of any incumbent director. Directors
need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. The Board of
----------- -----------------------------------------
Directors shall initially consist of the person or persons elected by the
incorporator or named in the Corporation's initial Certificate of Incorporation.
Each director shall hold office until the next annual meeting of stockholders
and until his or her successor is elected and qualified, or until his or her
earlier death, resignation or removal. Any director may resign at any time upon
written notice to the Corporation. Subject to the rights of any holders of
Preferred Stock then outstanding: (i) any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors and (ii) any
vacancy occurring in the Board of Directors for any cause, and any newly created
directorship resulting from any increase in the authorized number of directors
to be elected by all stockholders having the right to vote as a single class,
may be filled by the stockholders, by a majority of the directors then in
office, although less than a quorum, or by a sole remaining director.
Section 2.3: Regular Meetings. Regular meetings of the Board of Directors
----------- ----------------
may be held at such places, within or without the State of Delaware, and at such
times as the Board of Directors may from time to time determine. Notice of
regular meetings need not be given if the date, times and places thereof are
fixed by resolution of the Board of Directors.
Section 2.4: Special Meetings. Special meetings of the Board of Directors
----------- ----------------
may be called by the Chairman of the Board, the President or a majority of the
members of the Board of Directors then in office and may be held at any time,
date or place, within or without the State of Delaware, as the person or persons
calling the meeting shall fix. Notice of the time, date and place of such
meeting shall be given, orally or in writing, by the person or persons calling
the meeting to all directors at least four (4) days before the meeting if the
notice is mailed, or at least twenty-four (24) hours before the meeting if such
notice is given by telephone, hand delivery, telegram, telex, mailgram,
facsimile or similar communication method. Unless otherwise indicated in the
notice, any and all business may be transacted at a special meeting.
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<PAGE>
Section 2.5: Telephonic Meetings Permitted. Members of the Board of
----------- -----------------------------
Directors, or any committee of the Board, may participate in a meeting of the
Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to
conference telephone or similar communications equipment shall constitute
presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. At all meetings of the
----------- --------------------------------
Board of Directors a majority of the total number of authorized directors shall
constitute a quorum for the transaction of business. Except as otherwise
provided herein or in the Certificate of Incorporation, or required by law, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
Section 2.7: Organization. Meetings of the Board of Directors shall be
----------- ------------
presided over by the Chairman of the Board, or in his or her absence by the
President, or in his or her absence by a chairman chosen at the meeting. The
Secretary shall act as secretary of the meeting, but in his or her absence the
chairman of the meeting may appoint any person to act as secretary of the
meeting.
Section 2.8: Written Action by Directors. Any action required or
----------- ---------------------------
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board or
such committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the Board or committee,
respectively.
Section 2.9: Powers. The Board of Directors may, except as otherwise
------------ ------
required by law or the Certificate of Incorporation, exercise all such powers
and do all such acts and things as may be exercised or done by the Corporation.
Section 2.10: Compensation of Directors. Directors, as such, may receive,
------------ -------------------------
pursuant to a resolution of the Board of Directors, fees and other compensation
for their services as directors, including without limitation their services as
members of committees of the Board of Directors.
ARTICLE III
COMMITTEES
Section 3.1: Committees. The Board of Directors may, by resolution passed
----------- ----------
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of the committee, the
member or members thereof present at any meeting of such committee who are not
disqualified from voting, whether or not he, she or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such
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<PAGE>
absent or disqualified member. Any such committee, to the extent provided in a
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
------
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors as provided in subsection (a) of Section 151 of the Delaware
General Corporation Law, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the Corporation, or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the Corporation, or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), adopting an agreement of merger or
consolidation under Sections 251 or 252 of the Delaware General Corporation Law,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the Bylaws of the Corporation; and unless the resolution of the
Board of Directors expressly so provides, no such committee shall have the power
or authority to declare a dividend, authorize the issuance of stock or adopt a
certificate of ownership and merger pursuant to section 253 of the Delaware
General Corporation Law.
Section 3.2: Committee Rules. Unless the Board of Directors otherwise
----------- ---------------
provides, each committee designated by the Board may make, alter and repeal
rules for the conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these Bylaws.
ARTICLE IV
OFFICERS
Section 4.1: Generally. The officers of the Corporation shall consist of
----------- ---------
a Chief Executive Officer and/or a President, one or more Vice Presidents, a
Secretary, a Treasurer and such other officers, including a Chairman of the
Board of Directors and/or Chief Financial Officer, as may from time to time be
appointed by the Board of Directors. All officers shall be elected by the Board
of Directors; provided, however, that the Board of Directors may empower the
Chief Executive Officer of the Corporation to appoint officers other than the
Chairman of the Board, the Chief Executive Officer, the President, the Chief
Financial Officer or the Treasurer. Each officer shall hold office until his or
her successor is elected and qualified or until his or her earlier resignation
or removal. Any number of offices may be held by the same person. Any officer
may resign at any time upon written notice to the Corporation. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise may be filled by the Board of Directors.
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<PAGE>
Section 4.2: Chief Executive Officer. Subject to the control of the Board
----------- -----------------------
of Directors and such supervisory powers, if any, as may be given by the Board
of Directors, the powers and duties of the Chief Executive Officer of the
Corporation are:
(a) To act as the general manager and, subject to the control of the Board
of Directors, to have general supervision, direction and control of the business
and affairs of the Corporation;
(b) To preside at all meetings of the stockholders;
(c) To call meetings of the stockholders to be held at such times and,
subject to the limitations prescribed by law or by these Bylaws, at such places
as he or she shall deem proper; and
(d) To affix the signature of the Corporation to all deeds, conveyances,
mortgages, guarantees, leases, obligations, bonds, certificates and other papers
and instruments in writing which have been authorized by the Board of Directors
or which, in the judgment of the Chief Executive Officer, should be executed on
behalf of the Corporation; to sign certificates for shares of stock of the
Corporation; and, subject to the direction of the Board of Directors, to have
general charge of the property of the Corporation and to supervise and control
all officers, agents and employees of the Corporation.
The President shall be the Chief Executive Officer of the Corporation unless the
Board of Directors shall designate another officer to be the Chief Executive
Officer. If there is no President, and the Board of Directors has not
designated any other officer to be the Chief Executive Officer, then the
Chairman of the Board shall be the Chief Executive Officer.
Section 4.3: Chairman of the Board. The Chairman of the Board shall have
----------- ---------------------
the power to preside at all meetings of the Board of Directors and shall have
such other powers and duties as provided in these bylaws and as the Board of
Directors may from time to time prescribe.
Section 4.4: President. The President shall be the Chief Executive
----------- ---------
Officer of the Corporation unless the Board of Directors shall have designated
another officer as the Chief Executive Officer of the Corporation. Subject to
the provisions of these Bylaws and to the direction of the Board of Directors,
and subject to the supervisory powers of the Chief Executive Officer (if the
Chief Executive Officer is an officer other than the President), and subject to
such supervisory powers and authority as may be given by the Board of Directors
to the Chairman of the Board and/or to any other officer, the President shall
have the responsibility for the general management the control of the business
and affairs of the Corporation and the general supervision and direction of all
of the officers, employees and agents of the Corporation (other than the Chief
Executive Officer, if the Chief Executive Officer is an officer other than the
President) and shall perform all duties and have all powers that are commonly
incident to the office of President or that are delegated to the President by
the Board of Directors.
Section 4.5: Vice President. Each Vice President shall have all such
----------- --------------
powers and duties as are commonly incident to the office of Vice President, or
that are delegated to him or her by
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<PAGE>
the Board of Directors or the Chief Executive Officer. A Vice President may be
designated by the Board to perform the duties and exercise the powers of the
Chief Executive Officer in the event of the Chief Executive Officer's absence or
disability.
Section 4.6: Chief Financial Officer. Subject to the direction of the
----------- -----------------------
Board of Directors and the President, the Chief Financial Officer shall perform
all duties and have all powers that are commonly incident to the office of chief
financial officer.
Section 4.7: Treasurer. The Treasurer shall have custody of all monies
----------- ---------
and securities of the Corporation. The Treasurer shall make such disbursements
of the funds of the Corporation as are authorized and shall render from time to
time an account of all such transactions. The Treasurer shall also perform such
other duties and have such other powers as are commonly incident to the office
of Treasurer, or as the Board of Directors or the President may from time to
time prescribe.
Section 4.8: Secretary. The Secretary shall issue or cause to be issued
----------- ---------
all authorized notices for, and shall keep, or cause to be kept, minutes of all
meetings of the stockholders and the Board of Directors. The Secretary shall
have charge of the corporate minute books and similar records and shall perform
such other duties and have such other powers as are commonly incident to the
office of Secretary, or as the Board of Directors or the President may from time
to time prescribe.
Section 4.9: Delegation of Authority. The Board of Directors may from
----------- -----------------------
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.10: Removal. Any officer of the Corporation shall serve at the
------------ -------
pleasure of the Board of Directors and may be removed at any time, with or
without cause, by the Board of Directors. Such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation.
ARTICLE V
STOCK
Section 5.1: Certificates. Every holder of stock shall be entitled to
----------- ------------
have a certificate signed by or in the name of the Corporation by the Chairman
or Vice-Chairman of the Board of Directors, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, certifying the number of shares
owned by such stockholder in the Corporation. Any or all of the signatures on
the certificate may be a facsimile.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New
----------- -------------------------------------------------------------
Certificates. The Corporation may issue a new certificate of stock in the place
- ------------
of any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the
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<PAGE>
owner of the lost, stolen or destroyed certificate, or such owner's legal
representative, to agree to indemnify the Corporation and/or to give the
Corporation a bond sufficient to indemnify it, against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 5.3: Other Regulations. The issue, transfer, conversion and
----------- -----------------
registration of stock certificates shall be governed by such other regulations
as the Board of Directors may establish.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification of Officers and Directors. Each person who
----------- -----------------------------------------
was or is made a party to, or is threatened to be made a party to, or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding"), by reason of the fact that he
----------
or she (or a person of whom he or she is the legal representative), is or was a
director or officer of the Corporation or a Reincorporated Predecessor (as
defined below) or is or was serving at the request of the Corporation or a
Reincorporated Predecessor (as defined below) as a director or officer of
another corporation, or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by the Delaware General Corporation Law, against all expenses, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes and
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that the Corporation shall indemnify any such person seeking
- -------- -------
indemnity in connection with a proceeding (or part thereof) initiated by such
person only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. As used herein, the term "Reincorporated
--------------
Predecessor" means a corporation that is merged with and into the Corporation in
- -----------
a statutory merger where (a) the Corporation is the surviving corporation of
such merger; (b) the primary purpose of such merger is to change the corporate
domicile of the Reincorporated Predecessor to Delaware.
Section 6.2: Advance of Expenses. The Corporation shall pay all expenses
----------- -------------------
(including attorneys' fees) incurred by such a director or officer in defending
any such proceeding as they are incurred in advance of its final disposition;
provided, however, that if the Delaware General Corporation Law then so
requires, the payment of such expenses incurred by such a director or officer in
advance of the final disposition of such proceeding shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it should be determined
ultimately that such director or officer is not entitled to be indemnified under
this Article VI or otherwise; and provided, further, that the Corporation shall
-------- -------
not be required to advance any expenses to a person against whom the Corporation
directly brings a claim, in a proceeding, alleging that such person has breached
his or her duty of loyalty to the Corporation, committed an act or omission not
in good faith or that
-13-
<PAGE>
involves intentional misconduct or a knowing violation of law, or derived an
improper personal benefit from a transaction.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any
------------ -------------------------
person in this Article VI shall not be exclusive of any other right that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, Bylaw, agreement, vote or consent of stockholders
or disinterested directors, or otherwise. Additionally, nothing in this Article
VI shall limit the ability of the Corporation, in its discretion, to indemnify
or advance expenses to persons whom the Corporation is not obligated to
indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board of Directors is
----------- -------------------------
authorized to cause the Corporation to enter into indemnification contracts with
any director, officer, employee or agent of the Corporation, or any person
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including employee benefit plans, providing indemnification rights
to such person. Such rights may be greater than those provided in this Article
VI.
Section 6.5: Effect of Amendment. Any amendment, repeal or modification
----------- -------------------
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or protection conferred on a person pursuant to this
Article VI and existing at the time of such amendment, repeal or modification.
ARTICLE VII
NOTICES
Section 7.1: Notice. Except as otherwise specifically provided herein or
----------- ------
required by law, all notices required to be given pursuant to these Bylaws shall
be in writing and may in every instance be effectively given by hand delivery
(including use of a delivery service), by depositing such notice in the mail,
postage prepaid, or by sending such notice by prepaid telegram, telex, overnight
express courier, mailgram or facsimile. Any such notice shall be addressed to
the person to whom notice is to be given at such person's address as it appears
on the records of the Corporation. The notice shall be deemed given (i) in the
case of hand delivery, when received by the person to whom notice is to be given
or by any person accepting such notice on behalf of such person, (ii) in the
case of delivery by mail, upon deposit in the mail, (iii) in the case of
delivery by overnight express courier, on the first business day after such
notice is dispatched, and (iv) in the case of delivery via telegram, telex,
mailgram, or facsimile, when dispatched.
Section 7.2: Waiver of Notice. Whenever notice is required to be given
----------- ----------------
under any provision of these bylaws, a written waiver of notice, signed by the
person entitled to notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting at the beginning of the meeting to
-14-
<PAGE>
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
ARTICLE VIII
INTERESTED DIRECTORS
Section 8.1: Interested Directors; Quorum. No contract or transaction
----------- ----------------------------
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board or committee thereof that authorizes
the contract or transaction, or solely because his, her or their votes are
counted for such purpose, if: (i) the material facts as to his, her or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board or committee
in good faith authorizes the contract or transaction by the affirmative votes of
a majority of the disinterested directors, even though the disinterested
directors be less than a quorum; (ii) the material facts as to his, her or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders;
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee thereof, or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
ARTICLE IX
MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be
----------- -----------
determined by resolution of the Board of Directors.
Section 9.2: Seal. The Board of Directors may provide for a corporate
----------- ----
seal, which shall have the name of the Corporation inscribed thereon and shall
otherwise be in such form as may be approved from time to time by the Board of
Directors.
Section 9.3: Form of Records. Any records maintained by the Corporation
----------- ---------------
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, magnetic tape,
diskettes, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
-15-
<PAGE>
Section 9.4: Reliance Upon Books and Records. A member of the Board of
----------- -------------------------------
Directors, or a member of any committee designated by the Board of Directors
shall, in the performance of his or her duties, be fully protected in relying in
good faith upon records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or committees of the Board of Directors, or by any other
person as to matters the member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any
----------- ------------------------------------
conflict between the provisions of the Corporation's Certificate of
Incorporation and Bylaws, the provisions of the Certificate of Incorporation
shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be held
----------- ------------
to be invalid, illegal, unenforceable or in conflict with the provisions of the
Corporation's Certificate of Incorporation, then such provision shall
nonetheless be enforced to the maximum extent possible consistent with such
holding and the remaining provisions of these Bylaws (including without
limitation, all portions of any section of these Bylaws containing any such
provision held to be invalid, illegal, unenforceable or in conflict with the
Certificate of Incorporation, that are not themselves invalid, illegal,
unenforceable or in conflict with the Certificate of Incorporation) shall remain
in full force and effect.
ARTICLE X
AMENDMENT
Section 10.1: Amendments. Stockholders of the Corporation holding a
------------ ----------
majority of the Corporation's outstanding voting stock shall have the power to
adopt, amend or repeal Bylaws. To the extent provided in the Corporation's
Certificate of Incorporation, the Board of Directors of the Corporation shall
also have the power to adopt, amend or repeal Bylaws of the Corporation, except
insofar as Bylaws adopted by the stockholders shall otherwise provide.
-16-
<PAGE>
CERTIFICATION OF BYLAWS
OF
ONSALE, INC.
(A DELAWARE CORPORATION)
KNOW ALL BY THESE PRESENTS:
I, John Sauerland, certify that I am Secretary of ONSALE, Inc. a Delaware
corporation (the "Company"), that I am duly authorized to make and deliver this
-------
certification, that the attached Bylaws are a true and correct copy of the
Bylaws of the Company in effect as of the date of this certificate.
Dated: December , 1996
John Sauerland
------------------------------
John Sauerland, Secretary
<PAGE>
EXHIBIT 4.01
INVESTORS RIGHTS AGREEMENT
This Investors Rights Agreement (this "Agreement") is made and entered into
------------------------------------------------
as of September 12, 1996 by and among ONSALE, a California corporation (the
"Company"), the Investors listed in Schedule 1 hereto (each, an "Investor" and
- -------- --------
collectively the "Investors"), S. Jerrold Kaplan, Alan Fisher and Razi Mohiuddin
---------
(collectively, the "Shareholders").
------------
R E C I T A L S
- - - - - - - -
A. The Investors have agreed to purchase from the Company, and the Company
has agreed to sell to the Investors, shares of the Company's Series A Preferred
Stock ("Series A Stock"), and a certain investor has agreed to purchase from the
--------------
Company, and the Company has agreed to sell to such Investor, a call option to
purchase shares of the Company's Series B Preferred Stock ("Series B Stock")
--------------
(the "Call Options"), all on the terms and conditions set forth in that certain
------------
Stock and Call Option Purchase Agreement, dated of even date herewith by and
between the Company and the Investors (the "Purchase Agreement"). The Series A
------------------
Stock and the Series B Stock will be collectively hereinafter referred to as the
"Preferred Stock".
---------------
B. The Purchase Agreement provides that the Investors shall be granted
certain information and registration rights and rights of first refusal, all as
more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises hereinafter set forth, the parties hereto agree as follows:
1. INFORMATION RIGHTS.
------------------
1.1 Financial Information. The Company covenants and agrees that,
---------------------
commencing on the date of this Agreement, for so long as an Investor holds any
shares of Preferred Stock issued under the Purchase Agreement or the Call
Option, or shares of Common Stock of the Company ("Common Stock") issued upon
------------
the conversion of such shares of Preferred Stock ("Conversion Stock") the
----------------
Company will:
(a) Annual Reports. Furnish to the Investor, as soon as
--------------
practicable and in any event within 90 days after the end of each fiscal year of
the Company, a consolidated Balance Sheet as of the end of such fiscal year, a
consolidated Statement of Income and a consolidated Statement of Cash Flows of
the Company and its subsidiaries for such year, setting forth in each case in
comparative form the figures from the Company's previous fiscal year (if any),
all prepared in accordance with generally accepted accounting principles and
practices and audited by nationally recognized independent certified public
accountants;
(b) Quarterly Reports. Furnish to the Investor as soon as
-----------------
practicable, and in any case within forty-five (45) days of the end of each
fiscal quarter of the Company (except the last quarter of the Company's fiscal
year), quarterly unaudited financial statements, including an unaudited Balance
Sheet and an unaudited Statement of Income;
<PAGE>
(c) Monthly Reports. Provided an Investor holds at least 100,000
---------------
shares of Preferred Stock issued under the Purchase Agreement, the Call Option
and/or the equivalent number (on an as-converted basis) of shares of Conversion
Stock, furnish to the Investor as soon as practicable, and in any case within
forty-five (45) days of the end of each calendar month (except the last month of
the Company's fiscal year), monthly unaudited financial statements, including
and an unaudited Balance Sheet an unaudited Statement of Income; and
(d) Annual Budget. Provided an Investor holds at least 100,000
-------------
shares of Preferred Stock issued under the Purchase Agreement, the Call Option
and/or the equivalent number (on an as-converted basis) of shares of Conversion
Stock, furnish to the Investor as soon as practicable and in any event no later
than thirty (30) days after the close of each fiscal year of the Company, an
annual operating plan and budget, prepared on a monthly basis, for the next
immediate fiscal year. The Company shall also furnish to such Investor, within a
reasonable time of its preparation, amendments to the annual budget, if any.
(e) Confidentiality. Each Investor agrees to hold all
---------------
information received pursuant to this Section in confidence, and not to use or
disclose any of such information to any third party, except to the extent such
information may be made publicly available by the Company.
1.2 Inspection Rights. Provided an Investor holds at least 100,000
-----------------
shares of Preferred Stock issued under the Purchase Agreement and/or the
equivalent number (on an as-converted basis) of shares of Conversion Stock, the
Company shall permit the Investor, at such Investor's expense, to visit and
inspect the Company's properties, to examine its books of account and records
and to discuss the Company's affairs, finances and accounts with its officers,
all at such reasonable times as may be requested by such Investor. Each
Investor agrees to hold all information received from such inspections in
confidence, and not to use or disclose any of such information to any third
party, except to the extent such information may be made publicly available by
the Company.
1.3 Termination of Certain Rights. The Company's obligations under
-----------------------------
Sections 1.1 and 1.2 above will terminate upon the closing of the Company's
initial public offering of Common Stock pursuant to an effective registration
statement filed under the U.S. Securities Act of 1933, as amended (the
"Securities Act").
- ---------------
2. REGISTRATION RIGHTS.
-------------------
2.1 Definitions. For purposes of this Section 2:
-----------
(a) Registration. The terms "register," "registered," and
------------ -------- ----------
"registration" refer to a registration effected by preparing and filing a
- -------------
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
-2-
<PAGE>
(b) Registrable Securities. The term "Registrable Securities" means:
---------------------- ----------------------
(1) all the shares of Common Stock of the Company issued or issuable upon the
conversion of any shares of Preferred Stock issued under the Purchase Agreement
or the Call Option, provided, however, any such shares issued under the Call
-------- -------
Option shall not be deemed Registrable Securities for purposes of Section 3, (2)
any shares of Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, all such shares of Common Stock described in clause (1) of this
subsection (b) and (3) for purposes of Section 2.3 only, any shares of Common
Stock of the Company issued at any time to each of S. Jerrold Kaplan, Alan
Fisher, Razi Mohiuddin (collectively, the "Shareholders' Shares"); excluding in
-------------------- ---------
all cases, however, any Registrable Securities sold by a person in a transaction
in which rights under this Section 2 are not assigned in accordance with this
Agreement or any Registrable Securities sold to the public or sold pursuant to
Rule 144 promulgated under the Securities Act.
(c) Registrable Securities Then Outstanding. The number of shares of
---------------------------------------
"Registrable Securities then outstanding" shall mean the number of shares of
---------------------------------------
Common Stock which are Registrable Securities and (1) are then issued and
outstanding or (2) are then issuable pursuant to the exercise or conversion of
then outstanding and then exercisable options, warrants or convertible
securities.
(d) Holder. For purposes of this Section 2 and Sections 3 and 4
------
hereof, the term "Holder" means any person owning of record Registrable
------
Securities that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any assignee of record of such
Registrable Securities to whom rights under this Section 2 have been duly
assigned in accordance with this Agreement; provided, however, that for purposes
-------- -------
of this Agreement, a record holder of shares of Preferred Stock convertible into
such Registrable Securities shall be deemed to be the Holder of such Registrable
Securities; and provided, further, that the Company shall in no event be
-------- -------
obligated to register shares of Preferred Stock and that Holders of Registrable
Securities will not be required to convert their shares of Preferred Stock into
Common Stock in order to exercise the registration rights granted hereunder,
until immediately before the closing of the offering to which the registration
relates.
(e) Form S-3. The term "Form S-3" means such form under the
-------- --------
Securities Act as is in effect on the date hereof or any successor registration
form under the Securities Act subsequently adopted by the SEC which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(f) SEC. The term "SEC" or "Commission" means the U.S. Securities
--- --- ----------
and Exchange Commission.
2.2 Demand Registration.
-------------------
(a) Request by Holders. If the Company shall receive at any time
------------------
after the later of (i) September __, 1998, or (ii) six (6) months after the
effective date of the Company's initial public offering of its securities
pursuant to a registration filed under the
-3-
<PAGE>
Securities Act, a written request from the Holders of at least 50% of the
Registrable Securities then outstanding that the Company file a registration
statement under the Securities Act covering the registration of Registrable
Securities pursuant to this Section 2.2, then the Company shall, within ten (10)
business days of the receipt of such written request, give written notice of
such request ("Request Notice") to all Holders, and effect, as soon as
--------------
practicable, the registration under the Securities Act of all Registrable
Securities which Holders request to be registered and included in such
registration by written notice given by such Holders to the Company within
twenty (20) days after receipt of the Request Notice, subject only to the
limitations of this Section 2.2; provided that the Registrable Securities
--------
requested by all Holders to be registered pursuant to such request must either
(i) be at least fifty percent (50%) of all Registrable Securities then
outstanding or (ii) have an anticipated aggregate public offering price (before
any underwriting discounts and commissions) of not less than $10,000,000.
(b) Underwriting. If the Holders initiating the registration request
------------
under this Section 2.2 ("Initiating Holders") intend to distribute the
------------------
Registrable Securities covered by their request by means of an underwriting,
then they shall so advise the Company as a part of their request made pursuant
to this Section 2.2 and the Company shall include such information in the
written notice referred to in subsection 2.2(a). In such event, the right of
any Holder to include its Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the managing underwriter or
underwriters selected for such underwriting by the Holders with the consent of
the Company, which will not be unreasonably withheld. Notwithstanding any other
provision of this Section 2.2, if the underwriter(s) advise(s) the Company in
writing that marketing factors require a limitation of the number of securities
to be underwritten then the Company shall so advise all Holders of Registrable
Securities which would otherwise be registered and underwritten pursuant hereto,
and the number of Registrable Securities that may be included in the
underwriting shall be reduced as required by the underwriter(s) and allocated
among the Holders of Registrable Securities on a pro rata basis according to the
number of Registrable Securities then outstanding held by each Holder requesting
registration (including the Initiating Holders); provided, however, that the
-------- -------
number of shares of Registrable Securities to be included in such underwriting
and registration shall not be reduced unless all other securities of the Company
are first entirely excluded from the underwriting and registration. Any
Registrable Securities excluded and withdrawn from such underwriting shall be
withdrawn from the registration.
(c) Maximum Number of Demand Registrations. The Company is obligated
--------------------------------------
to effect only two (2) such registrations pursuant to this Section 2.2.
(d) Deferral. Notwithstanding the foregoing, if the Company shall
--------
furnish to Holders requesting the filing of a registration statement pursuant to
this Section 2.2, a certificate signed by the President or Chief Executive
Officer of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be filed and it is therefore
-4-
<PAGE>
essential to defer the filing of such registration statement, then the Company
shall have the right to defer such filing for a period of not more than 90 days
after receipt of the request of the Initiating Holders; provided, however, that
-------- -------
the Company may not utilize this right more than once in any twelve (12) month
period.
(e) Expenses. All expenses incurred in connection with a registration
--------
pursuant to this Section 2.2, including without limitation all registration and
qualification fees, printers' and accounting fees, fees and disbursements of
counsel for the Company, (but excluding underwriters' discounts and
commissions), shall be borne by the Company. Each Holder participating in a
registration pursuant to this Section 2.2 shall bear such Holder's proportionate
share (based on the total number of shares sold in such registration other than
for the account of the Company) of all discounts, commissions or other amounts
payable to underwriters or brokers in connection with such offering and the fees
and disbursements of any counsel for the participating Holders. Notwithstanding
the foregoing, the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to this Section 2.2 if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered, unless the Holders of a majority of
the Registrable Securities then outstanding agree to forfeit their right to one
(1) demand registration pursuant to this Section 2.2 (in which case such right
shall be forfeited by all Holders of Registrable Securities); provided, further,
-------- -------
however, that if at the time of such withdrawal, the Holders have learned of a
- -------
material adverse change in the condition, business, or prospects of the Company
not known to the Holders at the time of their request for such registration and
have withdrawn their request for registration with reasonable promptness after
learning of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to this
Section 2.2.
2.3 Piggyback Registrations. The Company shall notify all Holders of
-----------------------
Registrable Securities in writing at least thirty (30) days prior to filing any
registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to any registration
---------
under Section 2.2 or Section 2.4 of this Agreement or to any employee benefit
plan or a corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by such Holder shall, within twenty (20) days after receipt of
the above-described notice from the Company, so notify the Company in writing,
and in such notice shall inform the Company of the number of Registrable
Securities such Holder wishes to include in such registration statement. If a
Holder decides not to include all of its Registrable Securities in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
(a) Underwriting. If a registration statement under which the Company
------------
gives notice under this Section 2.3 is for an underwritten offering, then the
Company
-5-
<PAGE>
shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first, to the
-----
Company, second, to each of the Investors requesting inclusion of their
------
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Investor,
and third, to each of the other Holders requesting inclusion of their
-----
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Registrable Securities then held by each such Holder,
provided however, that the right of the underwriters to exclude shares
- -------- -------
(including Registrable Securities) from the registration and underwriting as
described above shall be restricted so that the number of Registrable Securities
included in any such registration is not reduced below twenty-five percent (25%)
of the shares included in the registration, except for a registration relating
to the Company's initial public offering from which all Registrable Securities
may be excluded. If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter, delivered at least ten (10) business days prior
to the effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder which is a partnership or corporation,
the partners, retired partners and shareholders of such Holder, or the estates
and family members of any such partners and retired partners and any trusts for
the benefit of any of the foregoing persons shall be deemed to be a single
"Holder", and any pro rata reduction with respect to such "Holder" shall be
based upon the aggregate amount of shares carrying registration rights owned by
all entities and individuals included in such "Holder", as defined in this
sentence.
(b) Expenses. All expenses incurred in connection with a
--------
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company shall be borne by the Company.
2.4 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 and any related qualification
or compliance with respect to all or a part of the Registrable Securities owned
by such Holder or Holders, then the Company will:
(a) Notice. Promptly give written notice of the proposed
------
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders of Registrable Securities; and
-6-
<PAGE>
(b) Registration. As soon as practicable, effect such
------------
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
-----------------
obligated to effect any such registration, qualification or compliance pursuant
to this Section 2.4:
(1) if Form S-3 is not available for such offering by the
Holders;
(2) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $250,000;
(3) if the Company shall furnish to the Holders a certificate
signed by the President or Chief Executive Officer of the Company stating that
in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement no more
than once during any twelve month period for a period of not more than 90 days
after receipt of the request of the Holder or Holders under this Section 2.4;
(4) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4; or
(5) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Expenses. Subject to the foregoing, the Company shall file
--------
a Form S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered pursuant to this Section 2.4 as soon as
practicable after receipt of the request or requests of the Holders for such
registration. The Company shall pay all expenses incurred in connection with
each registration requested pursuant to this Section 2.4 (excluding
underwriters' or brokers' discounts and commissions), including without
limitation all filing, registration and qualification, printers' and accounting
fees, and counsel for the Company.
(d) Not Demand Registration. Form S-3 registrations shall not be
-----------------------
deemed to be demand registrations as described in Section 2.2 above.
-7-
<PAGE>
2.5 Obligations of the Company. Whenever required to effect the
--------------------------
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by them that are included in such registration.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such Registrable
Securities are delivered to the underwriters for sale, if such securities are
being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated as of such date, of
the counsel representing the Company for the purposes of such registration, in
form and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of the
Holders requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a
"comfort" letter
-8-
<PAGE>
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable Securities.
2.6 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
2.7 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.8 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law, the
--------------
Company will indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended, (the "1934 Act"), against any losses, claims, damages, or
--------
liabilities (joint or several) to which they may become subject under the
Securities Act, the l934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (collectively a "Violation"):
---------
(i) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto;
(ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make
the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of
the Securities Act, the 1934 Act, any federal or state securities
law or any rule or regulation promulgated under the Securities
Act, the 1934 Act or any federal or state securities law in
connection with the offering covered by such registration
statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in
-9-
<PAGE>
connection with investigating or defending any such loss, claim, damage,
liability or action; provided however, that the indemnity agreement contained in
----------------
this subsection 2.8(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
such Holder, partner, officer, director, underwriter or controlling person of
such Holder.
(b) By Selling Holders. To the extent permitted by law, each
------------------
selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company within the meaning of the Securities
Act, any underwriter and any other Holder selling securities under such
registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder within the meaning of the
Securities Act or the 1934 Act, against any losses, claims, damages or
liabilities (joint or several) to which the Company or any such director,
officer, controlling person, underwriter or other such Holder, partner or
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the 1934 Act or other federal or state law, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
- -----------------
2.8(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder, which consent shall not be unreasonably withheld; and provided
--------
further, that the total amounts payable in indemnity by a Holder under this
- -------
Section 2.8(b) in respect of any Violation shall not exceed the net proceeds
received by such Holder in the registered offering out of which such Violation
arises.
(c) Notice. Promptly after receipt by an indemnified party
------
under this Section 2.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
-----------------
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within
-10-
<PAGE>
a reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 2.8, but the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 2.8.
(d) Defect Eliminated in Final Prospectus. The foregoing
-------------------------------------
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "Final
-----
Prospectus), such indemnity agreement shall not inure to the benefit of any
- ----------
person if a copy of the Final Prospectus was furnished to the indemnified party
and was not furnished to the person asserting the loss, liability, claim or
damage at or prior to the time such action is required by the Securities Act.
(e) Contribution. In order to provide for just and equitable
------------
contribution to joint liability under the Securities Act in any case in which
either (i) any Holder exercising rights under this Agreement, or any controlling
person of any such Holder, makes a claim for indemnification pursuant to this
Section 2.8 but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 2.8 provides
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any such selling Holder or any such controlling
person in circumstances for which indemnification is provided under this Section
2.8; then, and in each such case, the Company and such Holder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that such Holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Securities offered by and sold under the
registration statement bears to the public offering price of all securities
offered by and sold under such registration statement, and the Company and other
selling Holders are responsible for the remaining portion; provided, however,
-------- -------
that, in any such case, (A) no such Holder will be required to contribute any
amount in excess of the public offering price of all such Registrable Securities
offered and sold by such Holder pursuant to such registration statement; and (B)
no person or entity guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) will be entitled to contribution from
any person or entity who was not guilty of such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and Holders under
--------
this Section 2.8 shall survive the completion of any offering of Registrable
Securities in a registration statement, and otherwise.
2.9 "Market Stand-Off" Agreement. Each Holder hereby agrees that it
---------------------------
shall not, to the extent requested by the Company or an underwriter of
securities of the Company, sell or otherwise transfer or dispose of any
Registrable Securities or other shares of stock of the Company then owned by
such Holder (other than to donees or partners of the Holder who agree
-11-
<PAGE>
to be similarly bound) for up to one hundred eighty (180) days following the
effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that:
-------- -------
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers securities to be sold on its
behalf to the public in an underwritten offering but not to Registrable
Securities sold pursuant to such registration statement; and
(b) all officers and directors of the Company then holding
Common Stock of the Company and all persons and entities each holding in excess
of one percent 1% of the then outstanding shares of the Company's Common Stock
enter into similar agreements.
In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the shares
subject to this Section and to impose stop transfer instructions with respect to
the Registrable Securities and such other shares of stock of each Holder (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
2.10 Rule 144 Reporting. With a view to making available the
------------------
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the 1934 Act (at any time after it has become subject to such
reporting requirements); and
(c) So long as a Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after 90 days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the 1934 Act (at any time after it has become
subject to the reporting requirements of the 1934 Act), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration (at any time after the Company has become
subject to the reporting requirements of the 1934 Act).
2.11 Termination of the Company's Obligations. The Company shall
----------------------------------------
have no obligations pursuant to Sections 2.2 through 2.4 with respect to: (i)
any request or requests for registration made by any Holder on a date more than
six (6) years after the closing date of the
-12-
<PAGE>
Company's initial public offering; or (ii) any Registrable Securities proposed
to be sold by a Holder in a registration pursuant to Section 2.2, 2.3 or 2.4 if,
in the opinion of counsel to the Company, all such Registrable Securities
proposed to be sold by a Holder may be sold in a three-month period without
registration under the Securities Act pursuant to Rule 144 under the Securities
Act.
3. RIGHT OF FIRST REFUSAL.
----------------------
3.1 General. Each Holder (as defined in Section 2.1(d)) and any
-------
party to whom such Holder's rights under this Section 3 have been duly assigned
in accordance with Section 4.1(b) (each such Holder or assignee being
hereinafter referred to as a "Rights Holder") has the right of first refusal to
-------------
purchase such Rights Holder's Pro Rata Share (as defined below), of all (or any
part) of any "New Securities" (as defined in Section 3.2) that the Company may
from time to time issue after the date of this Agreement. A Rights Holder's
"Pro Rata Share" for purposes of this right of first refusal is the ratio of (a)
- ---------------
the number of Registrable Securities as to which such Rights Holder is the
Holder (and/or is deemed to be the Holder under Section 2.1(d)), to (b) a number
of shares of Common Stock of the Company equal to the sum of (i) the total
number of shares of Common Stock of the Company then outstanding plus (ii) the
total number of shares of Common Stock of the Company into which all then
outstanding shares of Preferred Stock of the Company are then convertible plus
(iii) the number of shares of Common Stock of the Company reserved for issuance
under stock purchase and stock option plans of the Company and outstanding
warrants and options.
3.2 New Securities. "New Securities" shall mean any Common Stock or
-------------- --------------
Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; provided, however, that
-------- -------
the term "New Securities" does not include:
---- --- -------
(i) any shares of the Company's Common Stock (and/or options or
warrants therefor) issued or issuable to employees, officers, directors,
contractors, advisors or consultants of the Company pursuant to incentive
agreements or plans approved by the Board of Directors of the Company;
(ii) any shares of Preferred Stock issued under the Purchase
Agreement as such agreement may be amended.
(iii) any securities issuable upon conversion of or with respect
to any then outstanding shares of Preferred Stock of the Company or Common Stock
or other securities issuable upon conversion thereof;
(iv) any securities issuable upon exercise of any options,
warrants or rights to purchase any securities of the Company outstanding on the
date of this Agreement, including securities issuable upon exercise of the Call
Option ("Warrant Securities") and any securities issuable upon the conversion of
------------------
any Warrant Securities;
-13-
<PAGE>
(v) shares of the Company's Common Stock or Preferred Stock
issued in connection with any stock split or stock dividend;
(vi) securities offered by the Company to the public pursuant to
a registration statement filed under the Securities Act;
(vii) any shares of the Company's stock (and/or options or
warrants therefor) issued or issuable to employees, directors, consultants, or
other parties pursuant to contracts or other arrangements that are approved by
the Board of Directors of the Company;
(viii) any shares of the Company's stock (and/or options or
warrants therefor) issued or issuable to banks, equipment leasing organizations
or similar entities pursuant to any transaction in which the Company borrows
money or anything else of value; or
(ix) securities issued pursuant to the acquisition of another
corporation or entity by the Company by consolidation, merger, purchase of all
or substantially all of the assets, or other reorganization in which the Company
acquires, in a single transaction or series of related transactions, all or
substantially all of the assets of such other corporation or entity or fifty
percent (50%) or more of the voting power of such other corporation or entity or
fifty percent (50%) or more of the equity ownership of such other entity.
3.3 Procedures. In the event that the Company proposes to undertake
----------
an issuance of New Securities, it shall give to each Rights Holder written
notice of its intention to issue New Securities (the "Notice"), describing the
------
type of New Securities and the price and the general terms upon which the
Company proposes to issue such New Securities. Each Rights Holder shall have
ten (10) days from the date of mailing of any such Notice to agree in writing to
purchase such Rights Holder's Pro Rata Share of such New Securities for the
price and upon the general terms specified in the Notice by giving written
notice to the Company and stating therein the quantity of New Securities to be
purchased (not to exceed such Rights Holder's Pro Rata Share). If any Rights
Holder fails to so agree in writing within such ten (10) day period to purchase
such Rights Holder's full Pro Rata Share of an offering of New Securities (a
"Nonpurchasing Holder"), then such Nonpurchasing Holder shall forfeit the right
- ---------------------
hereunder to purchase that part of his Pro Rata Share of such New Securities
that he did not so agree to purchase and the Company shall promptly give each
Rights Holder who has timely agreed to purchase his full Pro Rata Share of such
offering of New Securities (a "Purchasing Holder") written notice of the failure
-----------------
of any Nonpurchasing Holder to purchase such Nonpurchasing Rights Holder's full
Pro Rata Share of such offering of New Securities (the "Overallotment Notice").
--------------------
Each Purchasing Holder shall have a right of overallotment such that such
Purchasing Holder may agree to purchase a portion of the Nonpurchasing Holders'
unpurchased Pro Rata Shares of such offering on a pro rata basis according to
the relative Pro Rata Shares of the Purchasing Rights Holders, at any time
within five (5) days after receiving the Overallotment Notice.
3.4 Failure to Exercise. In the event that the Rights Holders fail
-------------------
to exercise in full the right of first refusal within such ten (10) plus five
(5) day period, then the Company shall have 90 days thereafter to sell the New
Securities with respect to which the Rights Holders' rights
-14-
<PAGE>
of first refusal hereunder were not exercised, at a price and upon general terms
not materially more favorable to the purchasers thereof than specified in the
Company's Notice to the Rights Holders. In the event that the Company has not
issued and sold the New Securities within such 90 day period, then the Company
shall not thereafter issue or sell any New Securities without again first
offering such New Securities to the Rights Holders pursuant to this Section 3.
3.5 Termination. This right of first refusal shall terminate (i)
-----------
immediately before the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public, or (ii) upon (a) the acquisition of all or
substantially all the assets of the Company or (b) an acquisition of the Company
by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) or more of the voting
power of the corporation or other entity surviving such transaction pursuant to
this Section 3.
4. ASSIGNMENT AND AMENDMENT.
------------------------
4.1 Assignment of Registration Rights. Notwithstanding anything
---------------------------------
herein to the contrary, the registration rights of a Holder under Section 2
hereof may be assigned only to (i) a party who acquires at least 100,000 shares
of Preferred Stock issued under the Purchase Agreement, the Call Option and/or
an equivalent number (on an as-converted basis) of Registrable Securities issued
upon conversion thereof, (ii) any partner or retired partner of any Holder which
is a partnership, or (iii) any family member or trust for the benefit of any
Holder who is an individual; provided, however that no party may be assigned any
-------- -------
of the foregoing rights unless the Company is given written notice by the
assigning party at the time of such assignment stating the name and address of
the assignee and identifying the securities of the Company as to which the
rights in question are being assigned; and provided further that any such
-------- -------
assignee shall receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 4.
4.2 Amendment of Rights. Any provision of this Agreement may be
-------------------
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors (and/or any of their permitted
successors or assigns) holding shares of Preferred Stock and/or Conversion Stock
representing and/or convertible into a majority of all the Investors' Shares (as
defined below), provided, however, that the piggyback registration rights
-------- -------
granted to the Shareholders under Section 2.3 of this Agreement may not be
eliminated or materially and adversely changed without the written consent of
persons holding a majority of the Shareholders' Shares; and provided, further,
-------- -------
that the grant to third parties of piggyback registration rights under Section
2.3 hereof on a pari passu basis with the piggyback registration rights of the
Shareholders' Shares under Section 2.3 shall not be deemed to be a material and
adverse change to the piggyback registration rights of the Shareholders under
this Agreement. As used herein, the term "Investors' Shares" shall mean the
-----------------
shares of Common Stock then issuable upon conversion of all then outstanding
shares of Preferred Stock issued under the Purchase
-15-
<PAGE>
Agreement and the Call Option plus all then outstanding shares of Conversion
Stock that were issued upon the conversion of any shares of Preferred Stock
issued under the Purchase Agreement and the Call Option. Any amendment or waiver
effected in accordance with this Section 4.2 shall be binding upon the Investor,
each Holder, each permitted successor or assignee of the Investor or such Holder
and the Company.
5. GENERAL PROVISIONS.
------------------
5.1 Notices. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows: if to the
Investor, at the address for such Investor indicated in Exhibit A hereto and if
---------
to the Company, at:
ONSALE
1953 Landings Drive
Mountain View, CA 94043
Phone: (415) 428-0600
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the manner set forth above.
5.2 Entire Agreement. This Agreement, together with all the Exhibits
----------------
hereto, constitutes and contains the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior negotiations, correspondence, agreements, understandings, duties or
obligations between the parties respecting the subject matter hereof.
5.3 Governing Law. This Agreement shall be governed by and construed
-------------
exclusively in accordance with the internal laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California, excluding that body of law relating to
conflicts of law and choice of law.
5.4 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
5.5 Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
5.6 Successors And Assigns. Subject to the provisions of Section
----------------------
4.1, the provisions of this Agreement shall inure to the benefit of, and shall
be binding upon, the successors and permitted assigns of the parties hereto.
-16-
<PAGE>
5.7 Captions. The captions to sections of this Agreement have been
--------
inserted for identification and reference purposes only and shall not be used to
construe or interpret this Agreement.
5.8 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
5.9 Costs And Attorneys' Fees. In the event that any action, suit or
-------------------------
other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
5.10 Adjustments for Stock Splits, Etc. Wherever in this Agreement
----------------------------------
there is a reference to a specific number of shares of Common Stock or Preferred
Stock of the Company of any class or series, then, upon the occurrence of any
subdivision, combination or stock dividend of such class or series of stock, the
specific number of shares so referenced in this Agreement shall automatically be
proportionally adjusted to reflect the affect on the outstanding shares of such
class or series of stock by such subdivision, combination or stock dividend.
5.11 Aggregation of Stock. All shares held or acquired by affiliated
--------------------
entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
THE COMPANY: INVESTOR:
- ----------- --------
ONSALE Kleiner Perkins Caufield & Byers VIII
a California corporation 2750 Sand Hill Road
Menlo Park, CA 94025
Name: /s/ S. Jerrold Kaplan Name: /s/ L. John Doerr
---------------------------- ----------------------------
By: S. Jerrold Kaplan By: L. John Doerr
---------------------------- ----------------------------
Title: President Title: Partner
---------------------------- ----------------------------
INVESTOR:
- --------
KPCB Information Sciences Zaibatsu Fund II
2750 Sand Hill Road
Menlo Park, CA 94025
Name: /s/ L. John Doerr
----------------------------
By: L. John Doerr
----------------------------
Title: Partner
----------------------------
S. JERROLD KAPLAN: ALAN FISHER:
- ----------------- -----------
/s/ S. Jerrold Kaplan /s/ Alan Fisher
- ---------------------------- ----------------------------
RAZI MOHIUDDIN:
- --------------
/s/ Razi Mohiuddin
- ----------------------------
[SIGNATURE PAGE TO INVESTORS RIGHTS AGREEMENT]
-18-
<PAGE>
EXHIBIT 9.01
VOTING TRUST AGREEMENT
FOR STOCK OF INTERMALL, INC.
This Voting Trust Agreement ( the "Agreement") for certain stock InterMall Inc.,
a California corporation (the "Company") made as of this 21st day of July,
1994, between the holder of voting stock of the Company listed on the signature
page hereof (the "Stockholder") and Software Partners, Inc. (the "Voting
Trustee").
WITNESSETH:
WHEREAS, it is desire of the Stockholder to promote continuity in the Company's
business policy by establishing a voting trust (the "Trust") for his shares of
voting stock of the Company on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and the promises and agreements
herein mutually and severally made by and between the Stockholder and Voting
Trustee, it is hereby agreed as follows:
SHARES SUBJECT TO THE AGREEMENT. The number of shares of voting stock of the
Company set forth opposite to the signature of the Stockholder on the
signature pages of this Agreement, and such additional shares of such voting
stock as shall be transferred to the voting Trustee pursuant to the terms
hereof, shall be subject to the provisions of the Agreement until its
termination pursuant to Section 9.
TRANSFER OF SHARES TO VOTING TRUSTEE. Simultaneously with his entry into this
Agreement the Stockholder is assigning, transferring and delivering the
certificate or certificates (duly endorsed or accompanied by duly executed
stock powers) representing the shares of voting stock set forth opposite his
signature on the signature page of the Agreement to the Voting Trustee, who
shall surrender the same to the proper offices of the Company for cancellation
and reissuance to itself as Voting Trustee.
LEGENDS. All certificates of voting stock held by the Voting Trustee pursuant
to this Agreement shall bear the following legend, in addition to any legends
required under any other agreement or that are necessary to comply with
federal and state securities laws:
THIS CERTIFICATE AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A VOTING
TRUST AGREEMENT (THE "AGREEMENT") FOR STOCK OF INTERMALL, INC. (THE
"COMPANY"), DATED AS OF JULY 21, 1994, BY AND AMONG A CERTAIN STOCKHOLDER OF
THE COMPANY AND THE VOTING TRUSTEE, A COPY OF WHICH AGREEMENT IS FILED IN THE
REGISTERED OFFICE OF THE COMPANY IN MOUNTAIN VIEW, CALIFORNIA, AND IS OPEN TO
THE INSPECTION OF ANY STOCKHOLDER OF THE COMPANY OR ANY BENEFICIARY OF THE
TRUST UNDER THE AGREEMENT DAILY DURING BUSINESS HOURS.
The above written legend shall also be stated in the stock ledger of the
Company.
ADDITIONAL SHARES. During the term of this Agreement, upon the prior consent of
the Voting Trustee, any of the voting stock of the Company that is not made or
required to be made subject to the Agreement may be made subject to all of the
terms and conditions hereof by the holder thereof endorsing and delivering the
certificate(s) thereof to the Voting Trustee in the manner described in
Section 2 hereof and signing and delivering to the Voting Trustee a
counterpart of this Agreement.
TRUST CERTIFICATES. Upon the execution of the Agreement and the delivery to the
Voting Trustee of the stock certificates required to be delivered hereunder,
the Voting Trustee shall deliver to the Stockholder a trust certificate
("TRUST CERTIFICATE") for the number of shares deposited by him; and
<PAGE>
upon receipt of certificates for additional shares of voting stock of the
company in accordance with the terms hereof, the Voting Trustee shall deliver
to the Stockholder a Trust Certificate for the number of additional shares so
deposited by him. Said Trust Certificate should be substantially in the form
attached hereto as Exhibit A. Said Trust Certificate is subject to all
restrictions on transfer referred to therein or herein and is subject to all
of the terms and conditions hereof. Subject to such restrictions, a Trust
Certificate (and the beneficial interest represented thereby) may be
transferred by endorsement by the person to whom issued, or by his attorney-
in-fact, or by the administrator, executor or guardian of his estate, and
delivery of the same to the Voting Trustee; but such transfer shall not be
binding upon the Voting Trustee until the Trust Certificate, duly endorsed as
aforesaid, is surrendered to him, a counterpart of this Agreement executed by
the proposed transferee is delivered to the Voting Trustee and transfer is
entered upon records to be kept by him. The Voting Trustee shall treat the
person in whose name a Trust Certificate is from time to time issued as the
absolute owner thereof for all purposes and shall not be bound by any notice
to the contrary. After compliance with all the terms of this Section 5, every
transferee of an outstanding Trust Certificate issued hereunder shall be
treated for all purpose as a party hereto with like effect as though an
original party hereto and shall be included within the meaning of the term
"STOCKHOLDER" wherever used herein.
VOTING RIGHTS. During the term of this Agreement, the Voting Trustee, or a
proxy appointed by the Voting Trustee, shall possess and be entitled to
exercise the exclusive right to vote all of the shares of voting stock of the
Company standing in the name of or held by the Voting Trustee, at all regular
and special meetings of the stockholders of the Company, and may vote for, do
or assent or consent to, any act or proceeding which the stockholder might or
could vote for, do or assent or consent to, and shall have all the powers,
rights and privileges of a stockholder of the Company, including, without
limitation, the election of its nominee(s) as a director of the Company and
taking any other action in respect of matters in which it (in its individual
capacity) has an interest. (The rights, powers and privileges conferred on
the Voting Trustee by the foregoing sentence are herein called the "VOTING
RIGHTS.") The Stockholder hereby irrevocably constitutes and appoints the
Voting Trustee the true and lawful attorney, agent and proxy of the
Stockholder with full power of substitution, to exercise the Voting Rights
(the Stockholder, hereby agreeing and acknowledging that, for all purposes
whatsoever, such proxy is and shall be deemed to be coupled with an interest).
DIVIDENDS. The company is hereby authorized to pay all distributions and
dividends that are paid in cash, stock (other than voting stock) or other
property directly to the Stockholder holding Trust Certificates issued in
respect of the stock on which such distributions or dividends are declared, as
such stockholder is shown on the records of Voting Trustee. All shares of
voting stock issued as dividends on shares of stock that are subject to this
Agreement shall also be subject to this Agreement. The stock certificates for
such shares shall be issued in the name of and delivered to the Voting Trustee
to be held hereunder, subject to all of the provisions hereof, and the Voting
Trustee shall issue additional Trust Certificates in respect of such shares to
the Stockholder entitled thereto.
SUBSCRIPTION RIGHTS. In case the Company shall at any time issue any stock or
other securities to which the holders of the voting stock of the Company shall
be entitled to subscribe, by way of preemptive right or otherwise, the Voting
Trustee shall promptly give notice of such right to subscribe and of the terms
hereof, to the Stockholder at his address registered with the Voting Trustee;
and the Stockholder upon providing the Voting Trustee with funds in the
requisite amount, shall have the right, pro rata, subject to such reasonable
regulations as may be prescribed by the Voting Trustee, to instruct the Voting
Trustee to subscribe for such stock or other securities, or any part thereof,
upon such terms as the Voting Trustee may prescribe; and to the extent that
the Stockholder shall fail to exercise such rights the Voting Trustee shall be
entitled, in his absolute discretion, to permit such right to subscribe to
lapse.
Upon receiving proper instructions in writing, the Voting Trustee shall
subscribe for such stock or other securities (but only out of funds provided
by the Stockholder for the purpose) and shall distribute the same to the
Stockholder, except that voting stock of the Company when so subscribed for
and received
<PAGE>
by the Voting Trustee shall not be distributed but shall be held hereunder,
subject to all provisions hereof, and the Voting Trustee shall issue new or
additional Trust Certificates in respect of such shares to the Stockholder.
TERMINATION. This Agreement shall terminate upon the earliest of
(i) the fourth anniversary of the effective date hereof, or
(ii) upon the written consent of the Voting Trustee and the owners of Trust
Certificates representing a majority of the number of shares then subject to
this Agreement.
Upon the termination of the Agreement, the certificates representing all of
the shares of stock so held under this Agreement and then remaining in the
hands of the Voting Trustee shall be delivered (duly endorsed or accompanied
by duly executed stock powers) to the parties then entitled thereto as shown
by Trust Certificates then outstanding, upon surrender to the Voting Trustee
(duly endorsed or accompanied by duly executed instruments of surrender) of
the Trust Certificates issued in respect of said shares.
ACCEPTANCE. The Voting Trustee hereby accepts the position of Voting Trustee
hereunder subject to all the terms, conditions and reservations herein
contained, and agrees that he will exercise the powers and perform the duties
of Voting Trustee as herein set forth. Nothing in this Section 10 or
elsewhere in this Agreement shall be construed to prevent the Voting Trustee
from resigning from such position as set forth in Section 11.
RESIGNATION OF VOTING TRUSTEE. The Voting Trustee may resign its position as
such by giving written notice to the Stockholder. Such resignation shall
become effective on the day specified in such notice or upon the election or
appointment of such Voting Trustee's successor and such successor's acceptance
of such election or appointment, whichever is earlier.
LIABILITY OF VOTING TRUSTEE. The Voting Trustee shall not incur any
responsibility as a stockholder, Voting Trustee or otherwise by reason of any
error of judgment or mistake of law or other mistake, or for any act or
omission of any agent or attorney, or for any misconstruction of the
Agreement, or any action of any sort taken or omitted hereunder and believed
by him to be in accordance with the provisions and intents hereof or
otherwise, except for his own individual willful misconduct. The Voting
Trustee may act and receive compensation as a director, officer, agent or
member or any committee of the Company or of any controlled or subsidiary or
affiliated company, or be otherwise associated therewith; and he or any
entity in which he may hold an interest or a position, or any person
associated with any such entity, may, to the extent permitted by law, and
without liability in any way or under any circumstances by reason hereof,
contract or otherwise deal with the Company or with any controlled or
subsidiary or affiliated company, as fully as though the Voting Trustee were
not a trustee.
INDEMNIFICATION. The Stockholder agrees to indemnify and hold the Voting
Trustee harmless from and against any and all liability arising out of the
holding by the Voting Trustee any stock hereunder or any action taken by him
hereunder (except for its own willful misconduct). The Voting Trustee shall
receive no compensation for its services hereunder.
FILING WITH SECRETARY OF THE COMPANY. Copies of the Agreement and of any
extension agreements and consents executed pursuant to Section 9 hereof shall
be filed with the Secretary of the Company, which copies shall be open to the
inspection of any stockholder of the Company or any holder of a Voting Trustee
Certificate daily during business hours on the same terms as the record of
stockholders is open to inspection to stockholders.
ASSIGNMENT; RESTRICTIONS ON TRANSFERS. This Agreement shall be binding on, and
shall inure to the benefit of, the parties to it and their respective
executors, administrators, successors and assigns as the case may be,
PROVIDED, HOWEVER, that this Agreement and all rights, obligations and claims
<PAGE>
hereunder and all interests herein are subject to all of the same restrictions
on transfer that are applicable to the Trust Certificates.
HEADINGS. The subject headings of the sections of the Agreement are included
for purposes of convenience only, and shall not affect the construction or
interpretation of any of its provisions.
ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations and
understandings of the parties pertaining to such subject matter. No
supplement, modification, amendment or waiver of the Agreement shall be
binding unless executed in writing by the holder(s) of the beneficial interest
in the shares then subject to the Agreement and the Voting Trustee. No waiver
of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver.
COUNTERPARTS. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instruments.
NOTICES. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on
the date of service if served personally on the party to whom notice is to be
given, or on the tenth day after mailing if mailed to the party to whom notice
is to be given, by first class mail registered or certified, postage prepaid,
and properly addressed to such party at the address listed on the signature
line hereof. Any party may change its address for purpose of this section by
giving the other parties written notice of the new address in the manner set
forth above.
GOVERNING LAW. This Agreement shall in all respects be construed, interpreted
and enforced in accordance with and governed by the laws of the State of
California.
SEVERABILITY. If any provision of the Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable as to a particular
application, then such provision shall be deemed modified to exclude such
application, and such provision in all other applications, and all other
provisions of this Agreement, shall continue in full force and effect without
being modified, impaired or invalidated in any way. It is the intent and
agreement of the parties hereto that this Agreement be given the maximum
force, effect and application (not, however, exceeding its express terms)
permissible under applicable law.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
has caused this Agreement to be executed on its behalf by its officers thereunto
duly authorized, as the case may be, all as of the date and year first above
written.
STOCKHOLDER NUMBER OF SHARES/CLASS/SERIES
By: /s/ Alan Fisher 1,264,395 Common shares
------------------------
Name: ALAN S. FISHER
Address: 40859 CALIDO PLACE, FREMONT, CA 94539
<PAGE>
VOTING TRUSTEE
Software Partners, Inc.
By: /s/ Alan Fisher
_____________________
Name: ALAN S. FISHER
Title: PRESIDENT
Address:
1953 Landings Drive
Mountain View, CA 94043
CONSENT OF THE SPOUSE OF STOCKHOLDER
The undersigned hereby represents, warrants and agrees as follows:
She is the spouse of a party to the attached Voting Trust Agreement for Stock of
InterMall, Inc., dated as of July 21, 1994;
She has read this foregoing Agreement and has received such legal and other
counsel about it as she desires; she is fully aware of all of the terms
thereof; and she fully consents and agrees to be bound by all such terms.
Without limiting the foregoing, she specifically agrees that any interest that
she may now have or hereafter acquire in any or all of the shares of voting
stock of InterMall, Inc., whether as community property, quasi-community
property or separate property, shall be subject to all of the terms of the
Agreement.
/s/ Ann Fisher
___________________________
ANN E. MARQUIS-FISHER
EXHIBIT A
TRUST CERTIFICATE
THIS IS TO CERTIFY that the undersigned Voting Trustee has received a
certificate or certificates issued in the name of ALAN S. FISHER, evidencing the
ownership of 1,264,395 shares of common stock of InterMall, Inc., a California
corporation (the "Company"), and that said shares of stock are held by said
Voting Trustee under the terms of that certain Voting Trust Agreement for Stock
of InterMall, Inc. ((the "Agreement") dated as of July 21, 1994, between the
undersigned Voting Trustee and the stockholder of the company who has executed
the same (the "Stockholder"), a copy of which Agreement is on file with the
Secretary of the Company. During the term of the Agreement, said Voting Trustee
under the Agreement is entitled to exercise the right to vote and otherwise
represent all of said shares of stock for all purposes, it being agreed that no
voting rights shall accrue to the Stockholder by virtue of the ownership of the
Trust Certificate. Upon the termination of the Agreement, the undersigned will,
upon endorsement and surrender
<PAGE>
of this Trust Certificate to him, assign and deliver a stock certificate
representing a like number of said shares of stock.
THE SECURITIES REPRESENTED BY THIS TRUST CERTIFICATE HAVE BEEN ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NO INTEREST
THEREIN MAY BE TRANSFERRED EXCEPT IN COMPLIANCE, ESTABLISHED TO THE SATISFACTION
OF THE COMPANY, WITH SAID ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER BY THE SECURITIES AND EXCHANGE COMMISSION.
July 21, 1994
VOTING TRUSTEE
Software Partners, Inc.
By: /s/ Alan Fisher
__________________
Name: ALAN S. FISHER
Title: PRESIDENT
VOTING TRUST AGREEMENT
FOR STOCK OF INTERMALL, INC.
This Voting Trust Agreement ( the "Agreement") for certain stock InterMall Inc.,
a California corporation (the "Company") made as of this 21st day of July,
1994, between the holder of voting stock of the Company listed on the signature
page hereof (the "Stockholder") and Software Partners, Inc. (the "Voting
Trustee").
WITNESSETH:
WHEREAS, it is desire of the Stockholder to promote continuity in the Company's
business policy by establishing a voting trust (the "Trust") for his shares of
voting stock of the Company on the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and the promises and agreements
herein mutually and severally made by and between the Stockholder and Voting
Trustee, it is hereby agreed as follows:
SHARES SUBJECT TO THE AGREEMENT. The number of shares of voting stock of the
Company set forth opposite to the signature of the Stockholder on the
signature pages of this Agreement, and such additional shares of such voting
stock as shall be transferred to the voting Trustee pursuant to the terms
hereof, shall be subject to the provisions of the Agreement until its
termination pursuant to Section 9.
TRANSFER OF SHARES TO VOTING TRUSTEE. Simultaneously with his entry into this
Agreement the Stockholder is assigning, transferring and delivering the
certificate or certificates (duly endorsed or accompanied by duly executed
stock powers) representing the shares of voting stock set forth opposite his
signature on the signature page of the Agreement to the Voting Trustee, who
shall surrender the same to the proper offices of the Company for cancellation
and reissuance to itself as Voting Trustee.
<PAGE>
LEGENDS. All certificates of voting stock held by the Voting Trustee pursuant
to this Agreement shall bear the following legend, in addition to any legends
required under any other agreement or that are necessary to comply with
federal and state securities laws:
THIS CERTIFICATE AND THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO A VOTING
TRUST AGREEMENT (THE "AGREEMENT") FOR STOCK OF INTERMALL, INC. (THE
"COMPANY"), DATED AS OF JULY 21, 1994, BY AND AMONG A CERTAIN STOCKHOLDER OF
THE COMPANY AND THE VOTING TRUSTEE, A COPY OF WHICH AGREEMENT IS FILED IN THE
REGISTERED OFFICE OF THE COMPANY IN MOUNTAIN VIEW, CALIFORNIA, AND IS OPEN TO
THE INSPECTION OF ANY STOCKHOLDER OF THE COMPANY OR ANY BENEFICIARY OF THE
TRUST UNDER THE AGREEMENT DAILY DURING BUSINESS HOURS.
The above written legend shall also be stated in the stock ledger of the
Company.
ADDITIONAL SHARES. During the term of this Agreement, upon the prior consent of
the Voting Trustee, any of the voting stock of the Company that is not made or
required to be made subject to the Agreement may be made subject to all of the
terms and conditions hereof by the holder thereof endorsing and delivering the
certificate(s) thereof to the Voting Trustee in the manner described in
Section 2 hereof and signing and delivering to the Voting Trustee a
counterpart of this Agreement.
TRUST CERTIFICATES. Upon the execution of the Agreement and the delivery to the
Voting Trustee of the stock certificates required to be delivered hereunder,
the Voting Trustee shall deliver to the Stockholder a trust certificate
("TRUST CERTIFICATE") for the number of shares deposited by him; and upon
receipt of certificates for additional shares of voting stock of the company
in accordance with the terms hereof, the Voting Trustee shall deliver to the
Stockholder a Trust Certificate for the number of additional shares so
deposited by him. Said Trust Certificate should be substantially in the form
attached hereto as Exhibit A. Said Trust Certificate is subject to all
restrictions on transfer referred to therein or herein and is subject to all
of the terms and conditions hereof. Subject to such restrictions, a Trust
Certificate (and the beneficial interest represented thereby) may be
transferred by endorsement by the person to whom issued, or by his attorney-
in-fact, or by the administrator, executor or guardian of his estate, and
delivery of the same to the Voting Trustee; but such transfer shall not be
binding upon the Voting Trustee until the Trust Certificate, duly endorsed as
aforesaid, is surrendered to him, a counterpart of this Agreement executed by
the proposed transferee is delivered to the Voting Trustee and transfer is
entered upon records to be kept by him. The Voting Trustee shall treat the
person in whose name a Trust Certificate is from time to time issued as the
absolute owner thereof for all purposes and shall not be bound by any notice
to the contrary. After compliance with all the terms of this Section 5, every
transferee of an outstanding Trust Certificate issued hereunder shall be
treated for all purpose as a party hereto with like effect as though an
original party hereto and shall be included within the meaning of the term
"STOCKHOLDER" wherever used herein.
VOTING RIGHTS. During the term of this Agreement, the Voting Trustee, or a
proxy appointed by the Voting Trustee, shall possess and be entitled to
exercise the exclusive right to vote all of the shares of voting stock of the
Company standing in the name of or held by the Voting Trustee, at all regular
and special meetings of the stockholders of the Company, and may vote for, do
or assent or consent to, any act or proceeding which the stockholder might or
could vote for, do or assent or consent to, and shall have all the powers,
rights and privileges of a stockholder of the Company, including, without
limitation, the election of its nominee(s) as a director of the Company and
taking any other action in respect of matters in which it (in its individual
capacity) has an interest. (The rights, powers and privileges conferred on
the Voting Trustee by the foregoing sentence are herein called the "VOTING
RIGHTS.") The Stockholder hereby irrevocably constitutes and appoints the
Voting Trustee the true and lawful attorney, agent and proxy of the
Stockholder with full power of substitution, to exercise the Voting Rights
(the Stockholder, hereby agreeing and acknowledging that, for all purposes
whatsoever, such proxy is and shall be deemed to be coupled with an interest).
<PAGE>
DIVIDENDS. The company is hereby authorized to pay all distributions and
dividends that are paid in cash, stock (other than voting stock) or other
property directly to the Stockholder holding Trust Certificates issued in
respect of the stock on which such distributions or dividends are declared, as
such stockholder is shown on the records of Voting Trustee. All shares of
voting stock issued as dividends on shares of stock that are subject to this
Agreement shall also be subject to this Agreement. The stock certificates for
such shares shall be issued in the name of and delivered to the Voting Trustee
to be held hereunder, subject to all of the provisions hereof, and the Voting
Trustee shall issue additional Trust Certificates in respect of such shares to
the Stockholder entitled thereto.
SUBSCRIPTION RIGHTS. In case the Company shall at any time issue any stock or
other securities to which the holders of the voting stock of the Company shall
be entitled to subscribe, by way of preemptive right or otherwise, the Voting
Trustee shall promptly give notice of such right to subscribe and of the terms
hereof, to the Stockholder at his address registered with the Voting Trustee;
and the Stockholder upon providing the Voting Trustee with funds in the
requisite amount, shall have the right, pro rata, subject to such reasonable
regulations as may be prescribed by the Voting Trustee, to instruct the Voting
Trustee to subscribe for such stock or other securities, or any part thereof,
upon such terms as the Voting Trustee may prescribe; and to the extent that
the Stockholder shall fail to exercise such rights the Voting Trustee shall be
entitled, in his absolute discretion, to permit such right to subscribe to
lapse.
Upon receiving proper instructions in writing, the Voting Trustee shall
subscribe for such stock or other securities (but only out of funds provided
by the Stockholder for the purpose) and shall distribute the same to the
Stockholder, except that voting stock of the Company when so subscribed for
and received by the Voting Trustee shall not be distributed but shall be held
hereunder, subject to all provisions hereof, and the Voting Trustee shall
issue new or additional Trust Certificates in respect of such shares to the
Stockholder.
TERMINATION. This Agreement shall terminate upon the earliest of
(i) the fourth anniversary of the effective date hereof, or
(ii) upon the written consent of the Voting Trustee and the owners of Trust
Certificates representing a majority of the number of shares then subject to
this Agreement.
Upon the termination of the Agreement, the certificates representing all of
the shares of stock so held under this Agreement and then remaining in the
hands of the Voting Trustee shall be delivered (duly endorsed or accompanied
by duly executed stock powers) to the parties then entitled thereto as shown
by Trust Certificates then outstanding, upon surrender to the Voting Trustee
(duly endorsed or accompanied by duly executed instruments of surrender) of
the Trust Certificates issued in respect of said shares.
ACCEPTANCE. The Voting Trustee hereby accepts the position of Voting Trustee
hereunder subject to all the terms, conditions and reservations herein
contained, and agrees that he will exercise the powers and perform the duties
of Voting Trustee as herein set forth. Nothing in this Section 10 or
elsewhere in this Agreement shall be construed to prevent the Voting Trustee
from resigning from such position as set forth in Section 11.
RESIGNATION OF VOTING TRUSTEE. The Voting Trustee may resign its position as
such by giving written notice to the Stockholder. Such resignation shall
become effective on the day specified in such notice or upon the election or
appointment of such Voting Trustee's successor and such successor's acceptance
of such election or appointment, whichever is earlier.
LIABILITY OF VOTING TRUSTEE. The Voting Trustee shall not incur any
responsibility as a stockholder, Voting Trustee or otherwise by reason of any
error of judgment or mistake of law or other mistake, or for any act or
omission of any agent or attorney, or for any misconstruction of the
Agreement, or any
<PAGE>
action of any sort taken or omitted hereunder and believed by him to be in
accordance with the provisions and intents hereof or otherwise, except for his
own individual willful misconduct. The Voting Trustee may act and receive
compensation as a director, officer, agent or member or any committee of the
Company or of any controlled or subsidiary or affiliated company, or be
otherwise associated therewith; and he or any entity in which he may hold an
interest or a position, or any person associated with any such entity, may, to
the extent permitted by law, and without liability in any way or under any
circumstances by reason hereof, contract or otherwise deal with the Company or
with any controlled or subsidiary or affiliated company, as fully as though
the Voting Trustee were not a trustee.
INDEMNIFICATION. The Stockholder agrees to indemnify and hold the Voting
Trustee harmless from and against any and all liability arising out of the
holding by the Voting Trustee any stock hereunder or any action taken by him
hereunder (except for its own willful misconduct). The Voting Trustee shall
receive no compensation for its services hereunder.
FILING WITH SECRETARY OF THE COMPANY. Copies of the Agreement and of any
extension agreements and consents executed pursuant to Section 9 hereof shall
be filed with the Secretary of the Company, which copies shall be open to the
inspection of any stockholder of the Company or any holder of a Voting Trustee
Certificate daily during business hours on the same terms as the record of
stockholders is open to inspection to stockholders.
ASSIGNMENT; RESTRICTIONS ON TRANSFERS. This Agreement shall be binding on, and
shall inure to the benefit of, the parties to it and their respective
executors, administrators, successors and assigns as the case may be,
PROVIDED, HOWEVER, that this Agreement and all rights, obligations and claims
hereunder and all interests herein are subject to all of the same restrictions
on transfer that are applicable to the Trust Certificates.
HEADINGS. The subject headings of the sections of the Agreement are included
for purposes of convenience only, and shall not affect the construction or
interpretation of any of its provisions.
ENTIRE AGREEMENT; MODIFICATION; WAIVER. This Agreement constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations and
understandings of the parties pertaining to such subject matter. No
supplement, modification, amendment or waiver of the Agreement shall be
binding unless executed in writing by the holder(s) of the beneficial interest
in the shares then subject to the Agreement and the Voting Trustee. No waiver
of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver.
COUNTERPARTS. This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instruments.
NOTICES. All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given on
the date of service if served personally on the party to whom notice is to be
given, or on the tenth day after mailing if mailed to the party to whom notice
is to be given, by first class mail registered or certified, postage prepaid,
and properly addressed to such party at the address listed on the signature
line hereof. Any party may change its address for purpose of this section by
giving the other parties written notice of the new address in the manner set
forth above.
GOVERNING LAW. This Agreement shall in all respects be construed, interpreted
and enforced in accordance with and governed by the laws of the State of
California.
SEVERABILITY. If any provision of the Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable as to a particular
application, then such provision shall be deemed modified to
<PAGE>
exclude such application, and such provision in all other applications, and
all other provisions of this Agreement, shall continue in full force and
effect without being modified, impaired or invalidated in any way. It is the
intent and agreement of the parties hereto that this Agreement be given the
maximum force, effect and application (not, however, exceeding its express
terms) permissible under applicable law.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement, or
has caused this Agreement to be executed on its behalf by its officers thereunto
duly authorized, as the case may be, all as of the date and year first above
written.
STOCKHOLDER NUMBER OF SHARES/CLASS/SERIES
By: /s/ Razi Mohiuddin 735,605 Common shares
__________________________
Name: RAZI MOHIUDDIN
Address: 19805 OAKHAVEN DRIVE, SARATOGA, CA 95070
VOTING TRUSTEE
Software Partners, Inc.
By: /s/ Alan Fisher
_____________________
Name: ALAN S. FISHER
Title: PRESIDENT
Address:
1953 Landings Drive
Mountain View, CA 94043
CONSENT OF THE SPOUSE OF STOCKHOLDER
The undersigned hereby represents, warrants and agrees as follows:
She is the spouse of a party to the attached Voting Trust Agreement for Stock of
InterMall, Inc., dated as of July 21, 1994;
She has read this foregoing Agreement and has received such legal and other
counsel about it as she desires; she is fully aware of all of the terms
thereof; and she fully consents and agrees to be bound by all such terms.
Without limiting the foregoing, she specifically agrees that any interest that
she may now have or hereafter acquire in any or all of the shares of voting
stock of InterMall, Inc., whether as community
<PAGE>
property, quasi-community property or separate property, shall be subject to
all of the terms of the Agreement.
/s/ Tahseen Mohiuddin
- ---------------------------
TAHSEEN MOHIUDDIN
EXHIBIT A
TRUST CERTIFICATE
THIS IS TO CERTIFY that the undersigned Voting Trustee has received a
certificate or certificates issued in the name of RAZI MOHIUDDIN, evidencing the
ownership of 735,605 shares of common stock of InterMall, Inc., a California
corporation (the "Company"), and that said shares of stock are held by said
Voting Trustee under the terms of that certain Voting Trust Agreement for Stock
of InterMall, Inc. ((the "Agreement") dated as of July 21, 1994, between the
undersigned Voting Trustee and the stockholder of the company who has executed
the same (the "Stockholder"), a copy of which Agreement is on file with the
Secretary of the Company. During the term of the Agreement, said Voting Trustee
under the Agreement is entitled to exercise the right to vote and otherwise
represent all of said shares of stock for all purposes, it being agreed that no
voting rights shall accrue to the Stockholder by virtue of the ownership of the
Trust Certificate. Upon the termination of the Agreement, the undersigned will,
upon endorsement and surrender of this Trust Certificate to him, assign and
deliver a stock certificate representing a like number of said shares of stock.
THE SECURITIES REPRESENTED BY THIS TRUST CERTIFICATE HAVE BEEN ISSUED WITHOUT
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND NO INTEREST
THEREIN MAY BE TRANSFERRED EXCEPT IN COMPLIANCE, ESTABLISHED TO THE SATISFACTION
OF THE COMPANY, WITH SAID ACT AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER BY THE SECURITIES AND EXCHANGE COMMISSION.
July 21, 1994
VOTING TRUSTEE
Software Partners, Inc.
By: /s/ Alan Fisher
__________________
Name: ALAN S. FISHER
Title: PRESIDENT
<PAGE>
EXHIBIT 10.01
ONSALE, INC.
1995 EQUITY INCENTIVE PLAN
As Amended and Restated December 19, 1996
1. PURPOSE. The purpose of this Plan, as amended herein, (the
-------
"AMENDMENT AND RESTATEMENT") is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are
important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future performance
through awards of Options, Restricted Stock and Stock Bonuses. Capitalized
terms not defined in the text are defined in Section 23.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 Number of Shares Available. Subject to Sections 2.2 and 18,
--------------------------
the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 3,500,000 Shares. Subject to Sections 2.2 and 18,
Shares that: (a) are subject to issuance upon exercise of an Option but cease to
be subject to such Option for any reason other than exercise of such Option; (b)
are subject to an Award granted hereunder but are forfeited or are repurchased
by the Company at the original issue price; or (c) are subject to an Award that
otherwise terminates without Shares being issued will again be available for
grant and issuance in connection with future Awards under this Plan. At all
times the Company shall reserve and keep available a sufficient number of Shares
as shall be required to satisfy the requirements of all outstanding Options
granted under this Plan and all other outstanding but unvested Awards granted
under this Plan. No Participant may receive (a) Restricted Stock Awards, (b)
Stock Bonus Awards, or (c) Options with an Exercise Price below Fair Market
Value for more than 100,000 Shares over the term of the Plan, and the sum of
such awards issued under this Plan may not exceed 200,000 Shares in the
aggregate over the term of the Plan.
2.2 Adjustment of Shares. In the event that the number of
--------------------
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan, (b) the
Exercise Prices of and number of Shares subject to outstanding Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the
Company and compliance with applicable securities laws; provided, however, that
-----------------
fractions of a Share will not be issued but will either be replaced by a cash
payment equal to the Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISO (as defined in Section 5 below) may be granted
-----------
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. All other Awards may
be granted to employees, officers, directors, consultants, independent
contractors and advisors of the Company or any Parent or Subsidiary of the
Company; provided such consultants, contractors and advisors render bona fide
--------
services not in connection with the offer and sale of securities in a capital-
raising transaction. No person will be eligible to receive more than 250,000
Shares in any calendar year under this Plan pursuant to the grant of Awards
hereunder, other than new employees of the Company or of a Parent or Subsidiary
of the Company (including new employees who are also officers and directors of
the Company or any Parent or Subsidiary of the Company) who are eligible to
receive up to a maximum of 750,000 Shares in the calendar year in which they
commence their employment. A person may be granted more than one Award under
this Plan.
<PAGE>
4. ADMINISTRATION.
--------------
4.1 Committee Authority. This Plan will be administered by the
-------------------
Committee or by the Board acting as the Committee. Subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan.
Without limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and any
other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and regulations relating to
this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration subject to
Awards;
(f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to,
other Awards under this Plan or any other incentive or
compensation plan of the Company or any Parent or Subsidiary of
the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;
(j) determine whether an Award has been earned; and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the
--------------------
Committee with respect to any Award will be made in its sole discretion at the
time of grant of the Award or, unless in contravention of any express term of
this Plan or Award, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Award under
this Plan. The Committee may delegate to one or more officers of the Company
the authority to grant an Award under this Plan to Participants who are not
Insiders of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons and
-------
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSO"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
--------------------
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the
-------------
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
-2-
<PAGE>
5.3 Exercise Period. Options may be exercisable within the times
---------------
or upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
-------- -------
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
----------------
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("TEN PERCENT STOCKHOLDER") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines.
5.4 Exercise Price. The Exercise Price of an Option will be
--------------
determined by the Committee when the Option is granted and may not be less than
85% of the Fair Market Value of the Shares on the date of grant; provided that:
(i) the Exercise Price of an ISO will not be less than 100% of the Fair Market
Value of the Shares on the date of grant; and (ii) the Exercise Price of any ISO
granted to a Ten Percent Stockholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 8 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
------------------
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.
5.6 Termination. Notwithstanding the exercise periods set forth
-----------
in the Stock Option Agreement, exercise of an Option will always be subject to
the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then the Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than three (3)
months after the Termination Date (or such shorter or longer time
period not exceeding five (5) years as may be determined by the
Committee, with any exercise beyond three (3) months after the
Termination Date deemed to be an NQSO), but in any event, no later
than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's death or
Disability (or the Participant dies within three (3) months after
a Termination other than because of Participant's death or
Disability), then Participant's Options may be exercised only to
the extent that such Options would have been exercisable by
Participant on the Termination Date and must be exercised by
Participant (or Participant's legal representative or authorized
assignee) no later than twelve (12) months after the Termination
Date (or such shorter or longer time period not exceeding five (5)
years as may be determined by the Committee, with any such
exercise beyond (a) three (3) months after the Termination Date
when the Termination is for any reason other than the
Participant's death or Disability, or (b) twelve (12) months after
the Termination Date when the Termination is for Participant's
death or Disability, deemed to be an NQSO), but in any event no
later than the expiration date of the Options.
(c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is determined by the Board to have committed an act of
theft, embezzlement, fraud, dishonesty or a breach of fiduciary
duty to the Company or Subsidiary, neither the Participant, the
Participant's estate nor such other person who may then hold the
Option shall be entitled to exercise any Option with respect to
any Shares whatsoever, after termination of service, whether or
not after termination of service the Participant may receive
payment from the Company or
-3-
<PAGE>
Subsidiary for vacation pay, for services rendered prior to
termination, for services rendered for the day on which
termination occurs, for salary in lieu of notice, or for any other
benefits. In making such determination, the Board shall give the
Participant an opportunity to present to the Board evidence on his
behalf. For the purpose of this paragraph, termination of service
shall be deemed to occur on the date when the Company dispatches
notice or advice to the Participant that his service is
terminated.
5.7 Limitations on Exercise. The Committee may specify a
-----------------------
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISO. The aggregate Fair Market Value
------------------
(determined as of the date of grant) of Shares with respect to which ISO are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company, Parent
or Subsidiary of the Company) will not exceed $100,000. If the Fair Market
Value of Shares on the date of grant with respect to which ISO are exercisable
for the first time by a Participant during any calendar year exceeds $100,000,
then the Options for the first $100,000 worth of Shares to become exercisable in
such calendar year will be ISO and the Options for the amount in excess of
$100,000 that become exercisable in that calendar year will be NQSO. In the
event that the Code or the regulations promulgated thereunder are amended after
the Effective Date of this Plan to provide for a different limit on the Fair
Market Value of Shares permitted to be subject to ISO, such different limit will
be automatically incorporated herein and will apply to any Options granted after
the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
----------------------------------
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
-------- -------
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in
-------------------
this Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
----------------
Company to sell to an eligible person Shares that are subject to restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the person may purchase, the price to be paid (the "PURCHASE PRICE"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a
------------------------------
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If
such person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within thirty (30) days,
then the offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant
--------------
to a Restricted Stock Award will be determined by the Committee and will be at
least 85% of the Fair Market Value of the Shares on the date the Restricted
Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case
-4-
<PAGE>
the Purchase Price will be 100% of the Fair Market Value. Payment of the
Purchase Price must be made in accordance with Section 8 of this Plan.
6.3 Restrictions. Restricted Stock Awards will be subject to
------------
such restrictions (if any) as the Committee may impose. The Committee may
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or part, based on length of service,
performance or such other factors or criteria as the Committee may determine.
7. STOCK BONUSES.
-------------
7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares
-----------------------
(which may consist of Restricted Stock) for services rendered to the Company or
any Parent or Subsidiary of the Company. A Stock Bonus may be awarded for past
services already rendered to the Company, or any Parent or Subsidiary of the
Company (provided that the Participant pays the Company the par value of the
shares awarded by such Stock Bonus in cash) pursuant to an Award Agreement (the
"STOCK BONUS AGREEMENT") that will be in such form (which need not be the same
for each Participant) as the Committee will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan. A Stock
Bonus may be awarded upon satisfaction of such performance goals as are set out
in advance in the Participant's individual Award Agreement (the "PERFORMANCE
STOCK BONUS AGREEMENT") that will be in such form (which need not be the same
for each Participant) as the Committee will from time to time approve, and will
comply with and be subject to the terms and conditions of this Plan. Stock
Bonuses may vary from Participant to Participant and between groups of
Participants, and may be based upon the achievement of the Company, Parent or
Subsidiary and/or individual performance factors or upon such other criteria as
the Committee may determine.
7.2 Terms of Stock Bonuses. The Committee will determine the
----------------------
number of Shares to be awarded to the Participant and whether such Shares will
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction
of performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee will determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "PERFORMANCE PERIOD") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of Shares that may be awarded to the
Participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.
7.3 Form of Payment. The earned portion of a Stock Bonus may be
---------------
paid currently or on a deferred basis with such interest or dividend equivalent,
if any, as the Committee may determine. Payment may be made in the form of
cash, whole Shares, including Restricted Stock, or a combination thereof, either
in a lump sum payment or in installments, all as the Committee will determine.
7.4 Termination During Performance Period. If a Participant is
-------------------------------------
Terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of Termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee will
determine otherwise.
-5-
<PAGE>
8. PAYMENT FOR SHARE PURCHASES.
---------------------------
8.1 Payment. Payment for Shares purchased pursuant to this Plan
-------
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such shares were
purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares); or (2) were
obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such terms as
may be approved by the Committee and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483 and
1274 of the Code; provided, however, that Participants who are not
-------- -------
employees or directors of the Company will not be entitled to
purchase Shares with a promissory note unless the note is
adequately secured by collateral other than the Shares; provided,
further, that the portion of the Purchase Price or Exercise Price
equal to the par value of the Shares, if any, must be paid in
cash.
(d) by waiver of compensation due or accrued to the Participant for
services rendered; provided, however, that the portion of the
Purchase Price or Exercise Price equal to the par value of the
Shares, if any, must be paid in cash.
(e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from the Participant and
a broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD DEALER") whereby the
Participant irrevocably elects to exercise the Option and to
sell a portion of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise
Price directly to the Company; or
(2) through a "margin" commitment from the Participant and a NASD
Dealer whereby the Participant irrevocably elects to exercise
the Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company;
or
(f) by any combination of the foregoing.
8.2 Loan Guarantees. The Committee may help the Participant pay
---------------
for Shares purchased under this Plan by authorizing a guarantee by the Company
of a third-party loan to the Participant.
9. WITHHOLDING TAXES.
-----------------
9.1 Withholding Generally. Whenever Shares are to be issued in
---------------------
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan,
payments in satisfaction of Awards are to be made in cash, such payment will be
net of an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
-6-
<PAGE>
9.2 Stock Withholding. When, under applicable tax laws, a
-----------------
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee
10. PRIVILEGES OF STOCK OWNERSHIP.
-----------------------------
10.1 Voting and Dividends. No Participant will have any of the
--------------------
rights of a stockholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a stockholder and have all the rights of a stockholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
--------
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
-------- -------
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's original Purchase Price pursuant to Section
12.
10.2 Financial Statements. The Company will provide financial
--------------------
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
-------- -------
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
11. TRANSFERABILITY. Awards granted under this Plan, and any interest
---------------
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as determined by the Committee and
set forth in the Award Agreement with respect to Awards that are not ISOs..
During the lifetime of the Participant an Award will be exercisable only by the
Participant, and any elections with respect to an Award may be made only by the
Participant unless otherwise determined by the Committee and set forth in the
Award Agreement with respect to Awards that are not ISOs.
12. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.
13. CERTIFICATES. All certificates for Shares or other securities
------------
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares
-7-
<PAGE>
under this Plan will be required to pledge and deposit with the Company all or
part of the Shares so purchased as collateral to secure the payment of
Participant's obligation to the Company under the promissory note; provided,
--------
however, that the Committee may require or accept other or additional forms of
- -------
collateral to secure the payment of such obligation and, in any event, the
Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be required to
execute and deliver a written pledge agreement in such form as the Committee
will from time to time approve. The Shares purchased with the promissory note
may be released from the pledge on a pro rata basis as the promissory note is
paid.
15. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
-----------------------------
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.
16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
----------------------------------------------
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable; and/or (b) completion of any registration
or other qualification of such Shares under any state or federal law or ruling
of any governmental body that the Company determines to be necessary or
advisable. The Company will be under no obligation to register the Shares with
the SEC or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated quotation
system, and the Company will have no liability for any inability or failure to
do so.
17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award
-----------------------
granted under this Plan will confer or be deemed to confer on any Participant
any right to continue in the employ of, or to continue any other relationship
with, the Company or any Parent or Subsidiary of the Company or limit in any way
the right of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
18. CORPORATE TRANSACTIONS.
----------------------
18.1 Assumption or Replacement of Awards by Successor. In the
------------------------------------------------
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant. In the event such
successor corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Subsection 18.1,
such Awards will expire on such transaction at such time and on such conditions
as the Committee will determine, provided, however, that the
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<PAGE>
Committee may, in its sole discretion, provide that the vesting of any or all
Awards granted pursuant to this Plan will accelerate. If the Committee exercises
such discretion with respect to options, such options will become exercisable in
full prior to the consummation of such event at such times and on such
conditions as the Committee determines, and if such options are not exercised
prior to the consummation of the corporate transaction, they shall terminate in
accordance with the provisions of this Plan.
18.2 Other Treatment of Awards. Subject to any greater rights
-------------------------
granted to Participants under the foregoing provisions of this Section 18, in
the event of the occurrence of any transaction described in Section 18.1, any
outstanding Awards will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
18.3 Assumption of Awards by the Company. The Company, from time
-----------------------------------
to time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
- -------
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
19. ADOPTION AND STOCKHOLDER APPROVAL. This Amendment and Restatement
---------------------------------
will become effective on the date on which the registration statement filed by
the Company with the SEC under the Securities Act registering the initial public
offering of the Company's Common Stock is declared effective by the SEC (the
"EFFECTIVE DATE"); provided, however, that if the Effective Date does not occur
-------- -------
on or before December 31, 1997, this Amendment and Restatement will terminate
having never become effective. This Amendment and Restatement shall be approved
by the stockholders of the Company (excluding Shares issued pursuant to this
Amendment and Restatement), consistent with applicable laws, within twelve (12)
months before or after the date this Amendment and Restatement is adopted by the
Board.
20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
--------------------------
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This
Plan and all agreements thereunder shall be governed by and construed in
accordance with the laws of the State of California.
21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
--------------------------------
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan.
22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
--------------------------
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.
23. DEFINITIONS. As used in this Plan, the following terms will have
-----------
the following meanings:
"AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
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<PAGE>
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no such committee is appointed, the Board. The
Committee, if appointed, will consist of not less than two members of the Board.
"COMPANY" means ONSALE, Inc. or any successor corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, within the meaning of Section 22(e)(3) of the Code, as
determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an Option
may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of
the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
-----------------------
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The Wall
--------
Street Journal;
--------------
(d) in the case of an Award made on the Effective Date, the price per
share at which shares of the Company's Common Stock are initially
offered for sale to the public by the Company's underwriters in
the initial public offering of the Company's Common Stock pursuant
to a registration statement filed with the SEC under the
Securities Act; or
(e) if none of the foregoing is applicable, by the Committee in good
faith.
"INSIDER" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.
"OPTION" means an award of an option to purchase Shares pursuant
to Section 5.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this
Plan.
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<PAGE>
"PLAN" means this ONSALE, Inc. 1995 Equity Incentive Plan, as
amended from time to time.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.
"STOCK BONUS" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means "Unvested Shares" as defined in the Award
Agreement.
"VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.
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<PAGE>
EXHIBIT 10.02
ONSALE, INC.
1996 DIRECTORS STOCK OPTION PLAN
As Adopted December 19, 1996
1. PURPOSE. This 1996 Directors Stock Option Plan (this "PLAN") is
established to provide equity incentives for nonemployee members of the Board of
Directors of ONSALE, Inc. (the "COMPANY"), who are described in Section 6.1
below, by granting such persons options to purchase shares of stock of the
Company.
2. ADOPTION AND STOCKHOLDER APPROVAL. After this Plan is adopted by the
Board of Directors of the Company (the "BOARD"), this Plan will become effective
on the time and date (the "EFFECTIVE DATE") on which the registration statement
filed by the Company with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT"), to register the
initial public offering of the Company's Common Stock is declared effective by
the SEC; provided, however, that if the Effective Date does not occur on or
-------- -------
before December 31, 1997, this Plan will terminate having never become
effective. This Plan shall be approved by the stockholders of the Company,
consistent with applicable laws, within twelve (12) months after the date this
Plan is adopted by the Board.
3. TYPES OF OPTIONS AND SHARES. Options granted under this Plan shall be
non-qualified stock options ("NQSOS"). The shares of stock that may be
purchased upon exercise of Options granted under this Plan (the "SHARES") are
shares of the Common Stock of the Company.
4. NUMBER OF SHARES. The maximum number of Shares that may be issued
pursuant to Options granted under this Plan (the "MAXIMUM NUMBER") is 100,000
Shares, subject to adjustment as provided in this Plan. If any Option is
terminated for any reason without being exercised in whole or in part, the
Shares thereby released from such Option shall be available for purchase under
other Options subsequently granted under this Plan. At all times during the
term of this Plan, the Company shall reserve and keep available such number of
Shares as shall be required to satisfy the requirements of outstanding Options
granted under this Plan; provided, however that if the aggregate number of
-------- -------
Shares subject to outstanding Options granted under this Plan plus the aggregate
number of Shares previously issued by the Company pursuant to the exercise of
Options granted under this Plan equals or exceeds the Maximum Number, then
notwithstanding anything herein to the contrary, no further Options may be
granted under this Plan until the Maximum Number is increased or the aggregate
number of Shares subject to outstanding Options granted under this Plan plus the
aggregate number of Shares previously issued by the Company pursuant to the
exercise of Options granted under this Plan is less than the Maximum Number.
5. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "COMMITTEE"). As used in this Plan, references to the Committee shall
mean either such Committee or the Board if no Committee has been established.
The interpretation by the Committee of any of the provisions of this Plan or any
Option granted under this Plan shall be final and binding upon the Company and
all persons having an interest in any Option or any Shares purchased pursuant to
an Option.
<PAGE>
6. ELIGIBILITY AND AWARD FORMULA.
6.1 Eligibility. Options shall be granted only to directors of the
-----------
Company who are not employees of the Company or any Parent, Subsidiary or
Affiliate of the Company, as those terms are defined in Section 17 below (each
such person referred to as an "OPTIONEE").
6.2 Initial Grant. Each Optionee who on or after the Effective Date
-------------
becomes a member of the Board will automatically be granted an Option for 15,000
Shares (an "INITIAL GRANT") on the later of the Effective Date or the date such
Optionee first becomes a member of the Board.
6.3 Succeeding Grants. On each annual anniversary of an Optionee's
-----------------
Initial Grant (or previous grant if such Optionee was ineligible to receive an
Initial Grant) provided the Optionee is a member of the Board on such
anniversary date and has served continuously as a member of the Board since the
date of the Optionee's Initial Grant or previous grant, as the case may be, the
Optionee will automatically be granted an Option for 5,000 Shares (a "SUCCEEDING
GRANT").
7. TERMS AND CONDITIONS OF OPTIONS. Subject to the following and to
Section 6 above:
7.1 Form of Option Grant. Each Option granted under this Plan shall
--------------------
be evidenced by a written Stock Option Grant ("GRANT") in such form (which need
not be the same for each Optionee) as the Committee shall from time to time
approve, which Grant shall comply with and be subject to the terms and
conditions of this Plan.
7.2 Vesting. Options granted under this Plan shall be exercisable as
-------
they vest. The date an Optionee receives an Initial Grant or a Succeeding Grant
is referred to in this Plan as the "START DATE" for such Option.
(a) Initial Grants. Each Initial Grant will vest as to twelve
--------------
and one half percent (12.5%) of the Shares on the last day of the sixth month
after the Start Date for such Initial Grant and thereafter as to two and eighty-
three one thousandths percent (2.083%) of the Shares at the end of each
succeeding month.
(b) Succeeding Grants. Each Succeeding Grant will vest as to
-----------------
twelve and one half percent (12.5%) of the Shares on the last day of the sixth
month after the Start Date for such Succeeding Grant and thereafter as to two
and eighty-three one thousandths percent (2.083%) of the Shares at the end of
each succeeding month.
7.3 Exercise Price. The exercise price of an Option shall be the Fair
--------------
Market Value (as defined in Section 17.4) of the Shares, at the time that the
Option is granted.
7.4 Termination of Option. Except as provided below in this Section,
---------------------
each Option shall expire ten (10) years after its Start Date (the "EXPIRATION
DATE"). The Option shall cease to vest when the Optionee ceases to be a member
of the Board or a consultant of the Company. The date on which the Optionee
ceases to be a member of the Board or a consultant of the Company shall be
referred to as the "TERMINATION DATE". An Option may be exercised after the
Termination Date only as set forth below:
(a) Termination Generally. If the Optionee ceases to be a member
---------------------
of the Board or consultant of the Company for any reason except death of the
Optionee or disability of the Optionee (whether temporary or permanent, partial
or total, as determined by the Committee), then each Option then held by such
Optionee, to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the Termination Date, may be exercised by the
Optionee no later than ninety (90) days after the Termination Date, but in no
event later than the Expiration Date.
(b) Death or Disability. If the Optionee ceases to be a member
-------------------
of the Board or consultant of the Company because of the death of the Optionee
or the disability of the Optionee (whether temporary or permanent, partial or
total, as determined by the Committee), then each Option then held by such
Optionee, to the extent (and only to the extent) that it would have been
exercisable by the Optionee on the
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<PAGE>
Termination Date, may be exercised by the Optionee (or the Optionee's legal
representative) no later than twelve (12) months after the Termination Date, but
in no event later than the Expiration Date.
8. EXERCISE OF OPTIONS.
8.1 Exercise Period. Subject to the provisions of Section 8.5 below,
---------------
Options shall be exercisable as they vest.
8.2 Notice. Options may be exercised only by delivery to the Company
------
of an exercise agreement in a form approved by the Committee stating the number
of Shares being purchased, the restrictions imposed on the Shares and such
representations and agreements regarding the Optionee's investment intent and
access to information as may be required by the Company to comply with
applicable securities laws, together with payment in full of the exercise price
for the number of Shares being purchased.
8.3 Payment. Payment for the Shares purchased upon exercise of an
-------
Option may be made (a) in cash or by check; (b) by surrender of shares of Common
Stock of the Company that have been owned by the Optionee for more than six (6)
months (and which have been paid for within the meaning of SEC Rule 144 and, if
such shares were purchased from the Company by use of a promissory note, such
note has been fully paid with respect to such shares) or were obtained by the
Optionee in the open public market, having a Fair Market Value equal to the
exercise price of the Option; (c) by waiver of compensation due or accrued to
the Optionee for services rendered; (d) provided that a public market for the
Company's stock exists, through a "same day sale" commitment from the Optionee
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD DEALER") whereby the Optionee irrevocably elects to exercise
the Option and to sell a portion of the Shares so purchased to pay for the
exercise price and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the exercise price directly to the Company; (e) provided
that a public market for the Company's stock exists, through a "margin"
commitment from the Optionee and an NASD Dealer whereby the Optionee irrevocably
elects to exercise the Option and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from the NASD Dealer in the
amount of the exercise price, and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the exercise price directly to the
Company; or (f) by any combination of the foregoing.
8.4 Withholding Taxes. Prior to issuance of the Shares upon exercise
-----------------
of an Option, the Optionee shall pay or make adequate provision for any federal
or state withholding obligations of the Company, if applicable.
8.5 Limitations on Exercise. Notwithstanding the exercise periods set
-----------------------
forth in the Grant, exercise of an Option shall always be subject to the
following limitations:
(a) An Option shall not be exercisable unless such exercise is in
compliance with the Securities Act and all applicable state securities laws, as
they are in effect on the date of exercise.
(b) The Committee may specify a reasonable minimum number of
Shares that may be purchased upon any exercise of an Option, provided that such
minimum number will not prevent the Optionee from exercising the full number of
Shares as to which the Option is then exercisable.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee, an
Option shall be exercisable only by the Optionee or by the Optionee's guardian
or legal representative, unless otherwise determined by the Committee. No
Option may be sold, pledged, assigned, hypothecated, transferred or disposed of
in any manner other than by will or by the laws of descent and distribution,
unless otherwise determined by the Committee.
10. PRIVILEGES OF STOCK OWNERSHIP. No Optionee shall have any of the
rights of a stockholder with respect to any Shares subject to an Option until
the Option has been validly exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is prior to
the date of exercise, except as provided in this Plan. The Company shall
provide to each Optionee a copy of the annual financial statements of the
Company at such time after the close of each fiscal year of the Company as they
are released by the Company to its stockholders.
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<PAGE>
11. ADJUSTMENT OF OPTION SHARES. In the event that the number of
outstanding shares of Common Stock of the Company is changed by a stock
dividend, stock split, reverse stock split, combination, reclassification or
similar change in the capital structure of the Company without consideration,
the number of Shares available under this Plan and the number of Shares subject
to outstanding Options and the exercise price per share of such outstanding
Options shall be proportionately adjusted, subject to any required action by the
Board or stockholders of the Company and compliance with applicable securities
laws; provided, however, that no fractional shares shall be issued upon exercise
-------- -------
of any Option and any resulting fractions of a Share shall be rounded up to the
nearest whole Share.
12. NO OBLIGATION TO CONTINUE AS DIRECTOR. Nothing in this Plan or any
Option granted under this Plan shall confer on any Optionee any right to
continue as a director of the Company.
13. COMPLIANCE WITH LAWS. The grant of Options and the issuance of Shares
upon exercise of any Options shall be subject to and conditioned upon compliance
with all applicable requirements of law, including without limitation compliance
with the Securities Act, compliance with all other applicable state securities
laws and compliance with the requirements of any stock exchange or national
market system on which the Shares may be listed. The Company shall be under no
obligation to register the Shares with the SEC or to effect compliance with the
registration or qualification requirement of any state securities laws, stock
exchange or national market system.
14. ACCELERATION OF OPTIONS ON CERTAIN CORPORATE TRANSACTIONS. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
----- ----
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Options granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption, conversion or
replacement will be binding on all Optionees), (c) a merger in which the Company
is the surviving corporation but after which the stockholders of the Company
(other than any stockholder which merges (or which owns or controls another
corporation which merges) with the Company in such merger) cease to own their
shares or other equity interests in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, the vesting of all options granted pursuant to this Plan
will accelerate and the options will become exercisable in full prior to the
consummation of such event at such times and on such conditions as the Committee
determines, and if such options are not exercised prior to the consummation of
the corporate transaction, they shall terminate in accordance with the
provisions of this Plan.
15. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate
or amend this Plan or any outstanding option, provided that the Board may not
terminate or amend the terms of any outstanding option without the consent of
the Optionee. In any case, no amendment of this Plan may adversely affect any
then outstanding Options or any unexercised portions thereof without the written
consent of the Optionee.
16. TERM OF PLAN. Options may be granted pursuant to this Plan from time
to time within a period of ten (10) years from the Effective Date.
17. CERTAIN DEFINITIONS. As used in this Plan, the following terms shall
have the following meanings:
17.1 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
17.2 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
-4-
<PAGE>
17.3 "AFFILIATE" means any corporation that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, another corporation, where "control" (including the terms
"controlled by" and "under common control with") means the possession, direct or
indirect, of the power to cause the direction of the management and policies of
the corporation, whether through the ownership of voting securities, by contract
or otherwise.
17.4 "FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
-----------------------
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The Wall
--------
Street Journal;
--------------
(d) in the case of an Option granted on the Effective Date, the price
per share at which shares of the Company's Common Stock are
initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's
Common Stock pursuant to a registration statement filed with the
SEC under the Securities Act; or
(e) if none of the foregoing is applicable, by the Committee in good
faith.
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<PAGE>
EXHIBIT 10.03
ONSALE, INC. 1996 EMPLOYEE STOCK PURCHASE PLAN
As Adopted December 19, 1996
1. ESTABLISHMENT OF PLAN. ONSALE, Inc. (the "COMPANY") proposes to grant
options for purchase of the Company's Common Stock to eligible employees of the
Company and its Subsidiaries (as hereinafter defined) pursuant to this Employee
Stock Purchase Plan (this "PLAN"). For purposes of this Plan, "PARENT
CORPORATION" and "SUBSIDIARY" (collectively, "SUBSIDIARIES") shall have the same
meanings as "parent corporation" and "subsidiary corporation" in Sections 424(e)
and 424(f), respectively, of the Internal Revenue Code of 1986, as amended (the
"CODE"). The Company intends this Plan to qualify as an "employee stock
purchase plan" under Section 423 of the Code (including any amendments to or
replacements of such Section), and this Plan shall be so construed. Any term
not expressly defined in this Plan but defined for purposes of Section 423 of
the Code shall have the same definition herein. A total of 150,000 shares of
the Company's Common Stock is reserved for issuance under this Plan. Such
number shall be subject to adjustments effected in accordance with Section 14 of
this Plan.
2. PURPOSE. The purpose of this Plan is to provide employees of the
Company and Subsidiaries designated by the Board of Directors of the Company
(the "BOARD") as eligible to participate in this Plan with a convenient means of
acquiring an equity interest in the Company through payroll deductions, to
enhance such employees' sense of participation in the affairs of the Company and
Subsidiaries, and to provide an incentive for continued employment.
3. ADMINISTRATION. This Plan shall be administered by the Board or by a
committee of not less than two members of the Board appointed to administer this
Plan (the "COMMITTEE"). As used in this Plan, references to the "Committee"
shall mean either such committee or the Board if no committee has been
established. Subject to the provisions of this Plan and the limitations of
Section 423 of the Code or any successor provision in the Code, all questions of
interpretation or application of this Plan shall be determined by the Board and
its decisions shall be final and binding upon all participants. Members of the
Board shall receive no compensation for their services in connection with the
administration of this Plan, other than standard fees as established from time
to time by the Board for services rendered by Board members serving on Board
committees. All expenses incurred in connection with the administration of this
Plan shall be paid by the Company.
4. ELIGIBILITY. Any employee of the Company or the Subsidiaries is
eligible to participate in an Offering Period (as hereinafter defined) under
this Plan except the following:
(a) employees who are not employed by the Company or Subsidiaries
fifteen (15) days before the beginning of such Offering Period, except that
employees who are employed on the effective date of the registration statement
filed by the Company with the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended (the "SECURITIES ACT") registering the
initial public offering of the Company's Common Stock shall be eligible to
participate in the first Offering Period under the Plan;
(b) employees who are customarily employed for less than twenty (20)
hours per week;
(c) employees who are customarily employed for less than five (5)
months in a calendar year;
(d) employees who, together with any other person whose stock would be
attributed to such employee pursuant to Section 424(d) of the Code, own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Subsidiaries or who, as a result of being granted an option under this Plan
with respect to such Offering Period, would own stock or hold options to
purchase stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or any of its
Subsidiaries; and
(e) individuals who provide services to the Company as independent
contractors whether or not reclassified as common law employees, unless the
Company withholds or is required to withhold U.S. Federal employment taxes for
such individuals pursuant to Section 3402 of the Code.
<PAGE>
5. OFFERING DATES. The offering periods of this Plan (each, an "OFFERING
PERIOD") shall be of twenty-four (24) months duration commencing on February 1
and August 1 of each year and ending on January 31 and July 31 of each year;
provided, however, that notwithstanding the foregoing, the first such Offering
- -----------------
Period shall commence on the first business day on which price quotations for
the Company's Common Stock are available on the Nasdaq National Market (the
"FIRST OFFERING DATE") and shall end on January 31, 1999. Except for the first
Offering Period, each Offering Period shall consist of four (4) six-month
purchase periods (individually, a "PURCHASE PERIOD") during which payroll
deductions of the participants are accumulated under this Plan. The first
Offering Period shall consist of no fewer than three Purchase Periods, any of
which may be greater or less than six months as determined by the Committee.
The first business day of each Offering Period is referred to as the "OFFERING
DATE". The last business day of each Purchase Period is referred to as the
"PURCHASE DATE". The Board shall have the power to change the duration of
Offering Periods or Purchase Periods with respect to offerings without
shareholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period or Purchase Period
to be affected.
6. PARTICIPATION IN THIS PLAN. Eligible employees may become participants
in an Offering Period under this Plan on the first Offering Date after
satisfying the eligibility requirements by delivering a subscription agreement
to the Company's treasury department (the "TREASURY DEPARTMENT") not later than
fifteen (15) days before such Offering Date unless a later time for filing the
subscription agreement authorizing payroll deductions is set by the Board for
all eligible employees with respect to a given Offering Period. An eligible
employee who does not deliver a subscription agreement to the Treasury
Department by such date after becoming eligible to participate in such Offering
Period shall not participate in that Offering Period or any subsequent Offering
Period unless such employee enrolls in this Plan by filing a subscription
agreement with the Treasury Department not later than fifteen (15) days
preceding a subsequent Offering Date. Once an employee becomes a participant in
an Offering Period, such employee will automatically participate in the Offering
Period commencing immediately following the last day of the prior Offering
Period unless the employee withdraws or is deemed to withdraw from this Plan or
terminates further participation in the Offering Period as set forth in Section
11 below. Such participant is not required to file any additional subscription
agreement in order to continue participation in this Plan.
7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by dividing (a) the amount accumulated in such employee's payroll
deduction account during such Purchase Period by (b) the lower of (i) eighty-
five percent (85%) of the fair market value of a share of the Company's Common
Stock on the Offering Date (but in no event less than the par value of a share
of the Company's Common Stock), or (ii) eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Purchase Date (but
in no event less than the par value of a share of the Company's Common Stock),
provided, however, that the number of shares of the Company's Common Stock
- -----------------
subject to any option granted pursuant to this Plan shall not exceed the lesser
of (a) the maximum number of shares set by the Board pursuant to Section 10(c)
below with respect to the applicable Purchase Date, or (b) the maximum number of
shares which may be purchased pursuant to Section 10(b) below with respect to
the applicable Purchase Date. The fair market value of a share of the Company's
Common Stock shall be determined as provided in Section 8 hereof.
8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:
(a) The fair market value on the Offering Date; or
(b) The fair market value on the Purchase Date.
For purposes of this Plan, the term "FAIR MARKET VALUE" means, as of any
date, the value of a share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National Market,
its closing price on the Nasdaq National Market on the date of
determination as reported in The Wall Street Journal;
-----------------------
-2-
<PAGE>
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
-----------------------
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported in The Wall
--------
Street Journal; or
--------------
(d) if none of the foregoing is applicable, by the Board in good
faith, which in the case of the First Offering Date will be the
price per share at which shares of the Company's Common Stock are
initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's
Common Stock pursuant to a registration statement filed with the
SEC under the Securities Act.
9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.
(a) The purchase price of the shares is accumulated by regular payroll
deductions made during each Offering Period. The deductions are made as a
percentage of the participant's compensation in one percent (1%) increments not
less than two percent (2%), nor greater than fifteen percent (15%) or such lower
limit set by the Committee. Compensation shall mean base salary, provided
however, that for purposes of determining a participant's base salary, any
election by such participant to reduce his or her regular cash remuneration
under Sections 125 or 401(k) of the Code shall be treated as if the participant
did not make such election. Payroll deductions shall commence on the first
payday following the Offering Date and shall continue to the end of the Offering
Period unless sooner altered or terminated as provided in this Plan.
(b) A participant may lower (but not increase) the rate of payroll
deductions during an Offering Period by filing with the Treasury Department a
new authorization for payroll deductions, in which case the new rate shall
become effective for the next payroll period commencing more than fifteen (15)
days after the Treasury Department's receipt of the authorization and shall
continue for the remainder of the Offering Period unless changed as described
below. Such change in the rate of payroll deductions may be made at any time
during an Offering Period, but not more than one (1) change may be made
effective during any Offering Period. A participant may increase or decrease
the rate of payroll deductions for any subsequent Offering Period by filing with
the Treasury Department a new authorization for payroll deductions not later
than fifteen (15) days before the beginning of such Offering Period.
(c) All payroll deductions made for a participant are credited to his
or her account under this Plan and are deposited with the general funds of the
Company. No interest accrues on the payroll deductions. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
(d) On each Purchase Date, so long as this Plan remains in effect and
provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest;
provided, however that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a full share
of Common Stock of the Company shall be carried forward, without interest, into
the next Purchase Period or Offering Period, as the case may be. In the event
that this Plan has been oversubscribed, all funds not used to purchase shares on
the Purchase Date shall be returned to the participant, without interest. No
Common Stock shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.
-3-
<PAGE>
(e) As promptly as practicable after the Purchase Date, the Company
shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.
(f) During a participant's lifetime, such participant's option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) No participant shall be entitled to purchase stock under this Plan
at a rate which, when aggregated with his or her rights to purchase stock under
all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan.
(b) No more than two hundred percent (200%) of the number of shares
determined by using eighty-five percent (85%) of the fair market value of a
share of the Company's Common Stock on the Offering Date as the denominator may
be purchased by a participant on any single Purchase Date.
(c) No participant shall be entitled to purchase more than the Maximum
Share Amount (as defined below) on any single Purchase Date. Not less than
thirty (30) days prior to the commencement of any Offering Period, the Committee
may, in its sole discretion, set a maximum number of shares which may be
purchased by any employee at any single Purchase Date (hereinafter the "MAXIMUM
SHARE AMOUNT"). Until otherwise determined by the Committee, the Maximum Share
Amount shall be 1,500 shares. In no event shall the Maximum Share Amount exceed
the amounts permitted under Section 10(b) above. If a new Maximum Share Amount
is set, then all participants must be notified of such Maximum Share Amount not
less than fifteen (15) days prior to the commencement of the next Offering
Period. Once the Maximum Share Amount is set, it shall continue to apply with
respect to all succeeding Purchase Dates and Offering Periods unless revised by
the Committee as set forth above.
(d) If the number of shares to be purchased on a Purchase Date by all
employees participating in this Plan exceeds the number of shares then available
for issuance under this Plan, then the Company will make a pro rata allocation
of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such
event, the Company shall give written notice of such reduction of the number of
shares to be purchased under a participant's option to each participant affected
thereby.
(e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.
11. WITHDRAWAL.
(a) Each participant may withdraw from an Offering Period under this
Plan by signing and delivering to the Treasury Department a written notice to
that effect on a form provided for such purpose. Such withdrawal may be elected
at any time at least fifteen (15) days prior to the end of an Offering Period.
(b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth above for initial participation in
this Plan.
(c) If the purchase price on the first day of any current Offering
Period in which a participant is enrolled is higher than the purchase price on
the first day of any subsequent Offering Period, the Company will automatically
enroll such participant in the subsequent Offering Period. Any funds
accumulated in a participant's account prior to the first day of such subsequent
Offering Period will be applied to the purchase of shares on the Purchase Date
immediately prior
-4-
<PAGE>
to the first day of such subsequent Offering Period. A participant does not need
to file any forms with the Company to automatically be enrolled in the
subsequent Offering Period
12. TERMINATION OF EMPLOYMENT. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee, immediately terminates his or her participation in
this Plan. In such event, the payroll deductions credited to the participant's
account will be returned to him or her or, in the case of his or her death, to
his or her legal representative, without interest. For purposes of this Section
12, an employee will not be deemed to have terminated employment or failed to
remain in the continuous employ of the Company in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided
--------
that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.
13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall promptly deliver to the participant all payroll deductions credited to
such participant's account. No interest shall accrue on the payroll deductions
of a participant in this Plan.
14. CAPITAL CHANGES. Subject to any required action by the shareholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
-----------------
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination shall be final, binding and conclusive. Except
as expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Committee. The Committee may,
in the exercise of its sole discretion in such instances, declare that the
options under this Plan shall terminate as of a date fixed by the Committee and
give each participant the right to exercise his or her option as to all of the
optioned stock, including shares which would not otherwise be exercisable. In
the event of (i) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the options under this Plan are
assumed, converted or replaced by the successor corporation, which assumption
will be binding on all participants), (ii) a merger in which the Company is the
surviving corporation but after which the stockholders of the Company
immediately prior to such merger (other than any stockholder that merges, or
which owns or controls another corporation that merges, with the Company in such
merger) cease to own their shares or other equity interest in the Company, (iii)
the sale of substantially all of the assets of the Company, or (iv) the
acquisition, sale, or transfer of more than 50% of the outstanding shares of the
Company by tender offer or similar transaction, each option under this Plan
shall be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Committee determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock. If the Committee makes an
option exercisable in lieu of assumption or substitution in the event of a
merger, consolidation or sale of assets, the Committee shall notify the
participant that the option shall be fully exercisable for a period of twenty
(20) days from the date of such notice, and the option will terminate upon the
expiration of such period.
The Committee may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event that
the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of
-5-
<PAGE>
shares of its outstanding Common Stock, or in the event of the Company being
consolidated with or merged into any other corporation.
15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.
16. REPORTS. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each participant shall notify the Company if
the participant disposes of any of the shares purchased in any Offering Period
pursuant to this Plan if such disposition occurs within two (2) years from the
Offering Date or within one (1) year from the Purchase Date on which such shares
were purchased (the "NOTICE PERIOD"). Unless such participant is disposing of
any of such shares during the Notice Period, such participant shall keep the
certificates representing such shares in his or her name (and not in the name of
a nominee) during the Notice Period. The Company may, at any time during the
Notice Period, place a legend or legends on any certificate representing shares
acquired pursuant to this Plan requesting the Company's transfer agent to notify
the Company of any transfer of the shares. The obligation of the participant to
provide such notice shall continue notwithstanding the placement of any such
legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of
any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Subsidiary, or restrict the right of the Company or
any Subsidiary to terminate such employee's employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company or the Board, be
reformed to comply with the requirements of Section 423. This Section 19 shall
take precedence over all other provisions in this Plan.
20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. TERM; SHAREHOLDER APPROVAL. After this Plan is adopted by the Board,
this Plan will become effective on the date that is the First Offering Date (as
defined above); provided, however, that if the First Offering Date does not
-------- -------
occur on or before December 31, 1997, this Plan will terminate having never
become effective. This Plan shall be approved by the shareholders of the
Company, in any manner permitted by applicable corporate law, within twelve (12)
months before or after the date this Plan is adopted by the Board. No purchase
of shares pursuant to this Plan shall occur prior to such shareholder approval.
This Plan shall continue until the earlier to occur of (a) termination of this
Plan by the Board (which termination may be effected by the Board at any time),
(b) issuance of all of the shares of Common Stock reserved for issuance under
this Plan, or (c) ten (10) years from the adoption of this Plan by the Board.
-6-
<PAGE>
22. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
this Plan in the event of such participant's death subsequent to the end of an
Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and
in the absence of a beneficiary validly designated under this Plan who is living
at the time of such participant's death, the Company shall deliver such shares
or cash to the executor or administrator of the estate of the participant, or if
no such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such shares or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange or automated quotation system upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.
25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the shareholders of the Company obtained in accordance with
Section 21 hereof within twelve (12) months of the adoption of such amendment
(or earlier if required by Section 21) if such amendment would:
(a) increase the number of shares that may be issued under this Plan;
or
(b) change the designation of the employees (or class of employees)
eligible for participation in this Plan.
-7-
<PAGE>
EXHIBIT 10.04
ONSALE, INC.
INDEMNITY AGREEMENT
This Indemnity Agreement (this "Agreement"), dated as of _____________,
---------
199__, is made by and between ONSALE, Inc., a Delaware corporation (the
"Company"), and _________________, a director and/or officer of the Company (the
-------
"Indemnitee").
----------
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;
B. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
-----
talented and experienced individuals to serve as officers and directors of the
Company, and to encourage such individuals to take the business risks necessary
for the success of the Company, it is necessary for the Company contractually to
indemnify officers and directors and to assume for itself maximum liability for
expenses and damages in connection with claims against such officers and
directors in connection with their service to the Company;
C. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized ("Section 145"), empowers the Company to indemnify by
-----------
agreement its officers, directors, employees and agents, and persons who serve,
at the request of the Company, as directors, officers, employees or agents of
other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive; and
D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. DEFINITIONS.
-----------
1.1 Agent. For the purposes of this Agreement, "agent" of the
----- -----
Company means any person who is or was a director or officer of the Company or a
subsidiary of the Company; or is or was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary of
the Company as a director or officer of another foreign
<PAGE>
or domestic corporation, partnership, joint venture, trust or other enterprise
or an affiliate of the Company; or was a director or officer of a foreign or
domestic corporation which was a predecessor corporation of the Company,
including, without limitation, ONSALE, a California corporation, or was a
director or officer of another enterprise or affiliate of the Company at the
request of, for the convenience of, or to represent the interests of such
predecessor corporation. The term "enterprise" includes any employee benefit
----------
plan of the Company, its subsidiaries, affiliates and predecessor corporations.
1.2 Expenses. For purposes of this Agreement, "expenses" includes
-------- --------
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements and other out-
of-pocket costs) actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses
under this Agreement, Section 145 or otherwise; provided, however, that expenses
-------- -------
shall not include any judgments, fines, ERISA excise taxes or penalties or
amounts paid in settlement of a proceeding.
1.3 Proceeding. For the purposes of this Agreement, "proceeding"
---------- ----------
means any threatened, pending or completed action, suit or other proceeding,
whether civil, criminal, administrative, investigative or any other type
whatsoever.
1.4 Subsidiary. For purposes of this Agreement, "subsidiary"
---------- ----------
means any corporation of which more than 50% of the outstanding voting
securities is owned directly or indirectly by the Company, by the Company and
one or more of its subsidiaries or by one or more of the Company's subsidiaries.
2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or continue
------------------
to serve as an agent of the Company, at the will of the Company (or under
separate agreement, if such agreement exists), in the capacity the Indemnitee
currently serves as an agent of the Company, faithfully and to the best of his
ability, so long as he is duly appointed or elected and qualified in accordance
with the applicable provisions of the charter documents of the Company or any
subsidiary of the Company; provided, however, that the Indemnitee may at any
-------- -------
time and for any reason resign from such position (subject to any contractual
obligation that the Indemnitee may have assumed apart from this Agreement), and
the Company or any subsidiary shall have no obligation under this Agreement to
continue the Indemnitee in any such position.
3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to the
----------------------------------
extent that the Board determines it to be economically reasonable, maintain a
policy of directors' and officers' liability insurance ("D&O Insurance"), on
-------------
such terms and conditions as may be approved by the Board.
4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the Company
-------------------------
shall indemnify the Indemnitee:
4.1 Third Party Actions. If the Indemnitee is a person who was or
-------------------
is a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the
-2-
<PAGE>
Company) by reason of the fact that he is or was an agent of the Company, or by
reason of anything done or not done by him in any such capacity, against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful; and
4.2 Derivative Actions. If the Indemnitee is a person who was or
------------------
is a party or is threatened to be made a party to any proceeding by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he is or was an agent of the Company, or by reason of anything done or not
done by him in any such capacity, against any amounts paid in settlement of any
such proceeding and all expenses actually and reasonably incurred by him in
connection with the investigation, defense, settlement or appeal of such
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Company; except that no
------
indemnification under this subsection shall be made in respect of any claim,
issue or matter as to which such person shall have been finally adjudged to be
liable to the Company by a court of competent jurisdiction due to willful
misconduct of a culpable nature in the performance of his duty to the Company,
unless and only to the extent that the Court of Chancery or the court in which
such proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such amounts which the
Court of Chancery or such other court shall deem proper; and
4.3 Exception for Amounts Covered by Insurance. Notwithstanding
------------------------------------------
the foregoing, the Company shall not be obligated to indemnify the Indemnitee
for expenses or liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) to the extent such have been paid directly to the Indemnitee by D&O
Insurance.
5. PARTIAL INDEMNIFICATION AND CONTRIBUTION.
----------------------------------------
5.1 Partial Indemnification. If the Indemnitee is entitled under
-----------------------
any provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding but is not entitled, however, to indemnification for all
of the total amount thereof, then the Company shall nevertheless indemnify the
Indemnitee for such total amount except as to the portion thereof to which the
Indemnitee is not entitled to indemnification.
5.2 Contribution. If the Indemnitee is not entitled to the
------------
indemnification provided in Section 4 for any reason other than the statutory
limitations set forth in the Delaware General Corporation Law, then in respect
of any threatened, pending or completed proceeding in
-3-
<PAGE>
which the Company is jointly liable with the Indemnitee (or would be if joined
in such proceeding), the Company shall contribute to the amount of expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred and paid or payable by the Indemnitee in such
proportion as is appropriate to reflect (i) the relative benefits received by
the Company on the one hand and the Indemnitee on the other hand from the
transaction from which such proceeding arose and (ii) the relative fault of the
Company on the one hand and of the Indemnitee on the other hand in connection
with the events which resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Indemnitee on the other hand
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
6. MANDATORY ADVANCEMENT OF EXPENSES.
---------------------------------
6.1 Advancement. Subject to Section 9 below, the Company shall
-----------
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity. The Indemnitee hereby undertakes
to promptly repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the General Corporation
Law of Delaware or otherwise. The advances to be made hereunder shall be paid
by the Company to the Indemnitee within thirty (30) days following delivery of a
written request therefor by the Indemnitee to the Company.
6.2 Exception. Notwithstanding the foregoing provisions of this
---------
Section 6, the Company shall not be obligated to advance any expenses to the
Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request to
be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the Indemnitee
acted in bad faith. If such a determination is made, the Indemnitee may have
such decision reviewed by another forum, in the manner set forth in Sections
8.3, 8.4 and 8.5 hereof, with all references therein to "indemnification" being
deemed to refer to "advancement of expenses," and the burden of proof shall be
on the Company to demonstrate clearly and convincingly that, based on the facts
known at the time, the Indemnitee acted in bad faith. The Company may not avail
itself of this Section 6.2 as to a given lawsuit if, at any time after the
occurrence of the activities or omissions that are the primary focus of the
lawsuit, the Company has undergone a change in control. For this purpose, a
change in control shall mean a given person or group of affiliated persons or
groups
-4-
<PAGE>
increasing their beneficial ownership interest in the Company by at least
twenty (20) percentage points without advance Board approval.
7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
-------------------------------------------
7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
7.2 If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7.1 hereof, the Company has D&O
Insurance in effect, the Company shall give prompt notice of the commencement of
such proceeding to the insurers in accordance with the procedures set forth in
the respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such D&O Insurance policies.
7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee (which approval shall not be unreasonably withheld),
upon the delivery to the Indemnitee of written notice of its election to do so.
After delivery of such notice, approval of such counsel by the Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
the Indemnitee under this Agreement for any fees of counsel subsequently
incurred by the Indemnitee with respect to the same proceeding, provided that:
--------
(a) the Indemnitee shall have the right to employ his own counsel in any such
proceeding at the Indemnitee's expense; (b) the Indemnitee shall have the right
to employ his own counsel in connection with any such proceeding, at the expense
of the Company, if such counsel serves in a review, observer, advice and
counseling capacity and does not otherwise materially control or participate in
the defense of such proceeding; and (c) if (i) the employment of counsel by the
Indemnitee has been previously authorized by the Company, (ii) the Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of any such defense or (iii) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, then the fees and expenses of the Indemnitee's counsel shall be at
the expense of the Company.
8. DETERMINATION OF RIGHT TO INDEMNIFICATION.
-----------------------------------------
8.1 To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any proceeding referred to in Section 4.1 or
4.2 of this Agreement or in the defense of any claim, issue or matter described
therein, the Company shall indemnify the Indemnitee against expenses actually
and reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding, or such claim, issue or matter, as the case may be.
-5-
<PAGE>
8.2 In the event that Section 8.1 is inapplicable, or does not
apply to the entire proceeding, the Company shall nonetheless indemnify the
Indemnitee unless the Company shall prove by clear and convincing evidence to a
forum listed in Section 8.3 below that the Indemnitee has not met the applicable
standard of conduct required to entitle the Indemnitee to such indemnification.
8.3 The Indemnitee shall be entitled to select the forum in
which the validity of the Company's claim under Section 8.2 hereof that the
Indemnitee is not entitled to indemnification will be heard from among the
following, except that the Indemnitee can select a forum consisting of the
------
stockholders of the Company only with the approval of the Company:
(a) A quorum of the Board consisting of directors who are
not parties to the proceeding for which indemnification is being sought;
(b) The stockholders of the Company;
(c) Legal counsel mutually agreed upon by the Indemnitee and
the Board, which counsel shall make such determination in a written opinion;
(d) A panel of three arbitrators, one of whom is selected by
the Company, another of whom is selected by the Indemnitee and the last of whom
is selected by the first two arbitrators so selected; or
(e) The Court of Chancery of Delaware or other court having
jurisdiction of subject matter and the parties.
8.4 As soon as practicable, and in no event later than thirty (30)
days after the forum has been selected pursuant to Section 8.3 above, the
Company shall, at its own expense, submit to the selected forum its claim that
the Indemnitee is not entitled to indemnification, and the Company shall act in
the utmost good faith to assure the Indemnitee a complete opportunity to defend
against such claim.
8.5 If the forum selected in accordance with Section 8.3 hereof is
not a court, then after the final decision of such forum is rendered, the
Company or the Indemnitee shall have the right to apply to the Court of Chancery
of Delaware, the court in which the proceeding giving rise to the Indemnitee's
claim for indemnification is or was pending or any other court of competent
jurisdiction, for the purpose of appealing the decision of such forum, provided
--------
that such right is executed within sixty (60) days after the final decision of
such forum is rendered. If the forum selected in accordance with Section 8.3
hereof is a court, then the rights of the Company or the Indemnitee to appeal
any decision of such court shall be governed by the applicable laws and rules
governing appeals of the decision of such court.
8.6 Notwithstanding any other provision in this Agreement to the
contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and
-6-
<PAGE>
against all expenses incurred by the Indemnitee in connection with any other
proceeding between the Company and the Indemnitee involving the interpretation
or enforcement of the rights of the Indemnitee under this Agreement unless a
court of competent jurisdiction finds that each of the material claims and/or
defenses of the Indemnitee in any such proceeding was frivolous or not made in
good faith.
9. EXCEPTIONS. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
9.1 Claims Initiated by Indemnitee. To indemnify or advance
------------------------------
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, except with
------
respect to proceedings specifically authorized by the Board or brought to
establish or enforce a right to indemnification and/or advancement of expenses
arising under this Agreement, the charter documents of the Company or any
subsidiary or any statute or law or otherwise, but such indemnification or
advancement of expenses may be provided by the Company in specific cases if the
Board finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee
------------------------
hereunder for any amounts paid in settlement of a proceeding unless the Company
consents in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or
9.3 Securities Law Actions. To indemnify the Indemnitee on
----------------------
account of any suit in which judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or
9.4 Unlawful Indemnification. To indemnify the Indemnitee if a
------------------------
final decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful. In this respect, the Company and the
Indemnitee have been advised that the Securities and Exchange Commission takes
the position that indemnification for liabilities arising under the federal
securities laws is against public policy and is, therefore, unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication.
10. NON-EXCLUSIVITY. The provisions for indemnification and advancement
---------------
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's Certificate of Incorporation or Bylaws, the vote of the Company's
stockholders or disinterested directors, other agreements or otherwise, both as
to action in the Indemnitee's official capacity and to action in another
capacity while occupying his position as an agent of the Company, and the
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.
-7-
<PAGE>
11. GENERAL PROVISIONS
------------------
11.1 Interpretation of Agreement. It is understood that the
---------------------------
parties hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification and advancement of expenses to the Indemnitee to the
fullest extent now or hereafter permitted by law, except as expressly limited
herein.
11.2 Severability. If any provision or provisions of this
------------
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, then: (a) the validity, legality and enforceability of the
remaining provisions of this Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision held
to be invalid, illegal or unenforceable that are not themselves invalid, illegal
or unenforceable) shall not in any way be affected or impaired thereby; and (b)
to the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraphs of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable and to give effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver.
11.4 Subrogation. In the event of full payment under this
-----------
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of the Indemnitee, who shall execute all documents
required and shall do all acts that may be necessary or desirable to secure such
rights and to enable the Company effectively to bring suit to enforce such
rights.
11.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall
----------------------
bind, and shall inure to the benefit of, the successors and assigns of the
parties hereto.
11.7 Notice. All notices, requests, demands and other
------
communications under this Agreement shall be in writing and shall be deemed duly
given: (a) if delivered by hand and receipted for by the party addressee; or
(b) if mailed by certified or registered mail, with postage prepaid, on the
third business day after the mailing date. Addresses for notice to either party
are as shown on the signature page of this Agreement or as subsequently modified
by written notice.
-8-
<PAGE>
11.8 Governing Law. This Agreement shall be governed exclusively
-------------
by and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
11.9 Consent to Jurisdiction. The Company and the Indemnitee each
-----------------------
hereby irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement.
11.10 Attorneys' Fees. In the event Indemnitee is required to
---------------
bring any action to enforce rights under this Agreement (including, without
limitation, the expenses of any Proceeding described in Section 3), the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing and
pursuing such action, unless a court of competent jurisdiction finds each of the
material claims of the Indemnitee in any such action was frivolous and not made
in good faith.
[REST OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-9-
<PAGE>
The parties hereto have entered into this Indemnity Agreement effective
as of the date first written above.
COMPANY:
ONSALE, INC.
By:
-------------------------------------------
Address: 1861 Landings Drive
Mountain View, CA 94043
INDEMNITEE:
By:
-------------------------------------------
Name:
-----------------------------------------
Address:
--------------------------------------
--------------------------------------
[SIGNATURE PAGE TO INDEMNITY AGREEMENT BETWEEN ONSALE, INC. AND INDEMNITEE.]
-10-
<PAGE>
EXHIBIT 10.06
LEASE AGREEMENT
between
THE LANDMARK
and
ONSALE, INC.
for
1957 Landings Drive
Mountain View, CA 94043
Dated: May 20, 1996
<PAGE>
LANDMARK BUILDING LEASE
1. PARTIES. This Lease dated, for reference purposes only, May 20, 1996, by
and between LANDMARK INVESTMENTS, LIMITED ("Landlord") and ONSALE, INC.
("Tenant"), who agree as follows:
2. PREMISES. Landlord leases to Tenant, and Tenant leases from landlord the
office space located in Mountain View, California, 94043, described as 1957
Landings Drive, outlined in Exhibit "A" ("Premises"). Premises have an agreed
area of Two Thousand Eight Hundred Eighty Three (2,883) rentable square feet.
3. TERM. The term of this Lease shall be for Three (3) years commencing on
August 1, 1996 and ending on July 31, 1999.
4. RENT AND TENANT IMPROVEMENT COST REIMBURSEMENT.
4.1 Tenant shall pay to Landlord as rent for the Premises, without demand,
deduction, or off-set, the sum of Five Thousand Seven Hundred Sixty Six Dollars
and 00/100 ($5,766.00) on or before the first day of each and every month of the
term of this Lease, the first monthly payment to be made concurrently with the
execution hereof. If the commencement date is not the first day of a month or if
the Lease termination date is not the last day of a month, the rent payable
hereunder shall be prorated, based upon a thirty day month, at the current rate
for the fractional month during which this Lease commences and/or terminates.
Any rent payable for a partial month directly following the commencement date
shall be payable on the first day of the first full calendar month of the term.
Rent shall be paid to Landmark Investments, Limited, at 2093 Landings Drive,
Mountain View, CA 94043.
4.2 In place of an operating expense pass-through, the base rent provided for
in 4.1. above shall increase three percent (3%) per year on the anniversary date
of the commencement of the term of the Lease stated in 3. above.
4.3 Late Charges. Tenant hereby acknowledges that late payment by Tenant to
Landlord of rent or other sums due hereunder will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Landlord by
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or of a sum due from Tenant shall not be received by
Landlord or Landlord's
1
<PAGE>
designees by 12:00 noon on the fifth (5th) day of each month of the term hereof,
then Tenant shall pay to Landlord a late charge equal to five percent (5%) of
such overdue amount. The parties hereby agree that such late charges represent a
fair and reasonable estimate of the cost that Landlord will incur by reason of
the late payment by Tenant. Acceptance of such late charges by the Landlord
shall in no event constitute a waiver of Tenant's default with respect to such
overdue amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
5. SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit with
Landlord $5,766.00 as a security deposit for the performance by Tenant of the
provisions of this Lease. If Tenant is in default, Landlord can use the security
deposit, or any portion of it, to cure the default or to compensate Landlord for
all damage sustained by Landlord resulting from Tenant's default. Tenant shall
immediately on demand pay to Landlord a sum equal to the portion of the security
deposit expended or applied by Landlord as provided in this paragraph so as to
maintain the security deposit in the sum initially deposited with Landlord. If
Tenant is not in default at the expiration or termination of this Lease,
Landlord shall, no later than fourteen (14) days after lease expiration or
termination, return to Tenant (or at Landlord's option, to the last assignee of
Tenant's interest hereunder), the balance of the security deposit. Landlord
shall not be required to keep this security deposit separate from its general
funds, and Tenant shall not be entitled to interest on such deposit.
6. POSSESSION.
6.1. If Landlord, for any reason cannot deliver possession of the Premises to
Tenant at the commencement of the term hereof, this Lease shall not be void or
voidable nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom, nor shall the expiration date of the above term be
extended, but, in that event, all rent shall be abated during the period
between the commencement of said term and the time when Landlord delivers
possession.
6.2. In the event that Landlord shall permit Tenant to occupy the Premises
prior to the commencement date of the term, such occupancy shall be subject to
all of the provisions of this Lease and said early possession shall not advance
the termination date hereinabove provided. Rent shall be prorated and prepaid
for early occupancy at the current rate.
7. USE.
7.1. Use. The Premises shall be used and occupied by Tenant for general
office purposes and for no other purpose without
2
<PAGE>
the prior written consent of the Landlord.
7.2 Uses Prohibited.
a. Tenant shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will increase the existing rate or
affect any fire or other insurance upon the building or any of its contents, or
cause a cancellation of any insurance policy covering said building or any part
thereof or any of its contents, nor shall Tenant sell or permit to be kept used
or sold in or about said Premises any articles or substances, inflammable or
otherwise, which may be prohibited by a standard form policy of fire insurance.
b. Tenant shall not do or permit anything to be done in or about the Premises
which will in any way obstruct or interfere with the rights of other tenants of
the building or injure or annoy them or use or allow the Premises to be used for
any unlawful or objectionable purpose.
c. Tenant shall not use the Premises or permit anything to be done in or about
the Premises which will in any way conflict with any law now in force or which
may hereafter be enacted. Tenant shall at its cost promptly comply with all laws
now in force or which may hereafter be in force and with the requirements of any
board of fire underwriters or other similar body relating to Tenant's
improvements or acts.
8. ALTERATIONS AND ADDITIONS. Tenant shall not make or allow any alterations,
additions or improvements of or to the Premises without Landlord's prior written
consent. Any such alterations, additions or improvements, including, but not
limited to, wallcovering, paneling and built-in cabinet work, but excepting
movable furniture and trade fixtures, shall become a party of the realty, shall
belong to the Landlord and shall be surrendered with the Premises at expiration
or termination of the Lease. If Landlord consents to any such alterations,
additions or improvements by Tenant, they shall be made by Tenant at Tenant's
cost, and any contractor or person selected by Tenant to perform the work shall
first be approved of, in writing, by Landlord. Upon expiration, or sooner
termination of the term hereof, Tenant shall, upon written demand by Landlord
promptly remove any alterations, additions or improvements made by Tenant and
designated by Landlord to be removed. Such removal and repair of any damage to
the premises caused by such removal shall be at Tenant's cost.
9. LIENS. Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Tenant. Landlord may require
Tenant
3
<PAGE>
to provide Landlord, at Tenant's cost, a lien and completion bond in an amount
equal to one and one-half (1-1/2) times the estimated cost of any improvements,
additions, or alterations by Tenant, to insure Landlord against liability for
mechanic's and materialmen's liens and to insure completion for the work.
10. REPAIRS AND MAINTENANCE. By taking possession of the Premises, Tenant
shall be deemed to have accepted the Premises as being in good sanitary order,
condition and repair. Tenant shall at Tenant's cost, keep the premises and every
part thereof in good condition and repair except for damages from causes beyond
the control of Tenant and ordinary wear and tear. Tenant shall upon the
expiration or sooner termination of this Lease surrender the Premises to the
Landlord in good condition, ordinary wear and tear and damage from causes
beyond the reasonable control of the Tenant excepted. Unless specifically
provided in an addendum to this Lease, Landlord shall have no obligation to
alter, remodel, improve, repair, decorate or paint the Premises or any part
thereof and the parties hereto affirm that Landlord has made no
representations to Tenant respecting the condition of the premises or the
building except as specifically herein set forth. Notwithstanding the above
provisions, Landlord shall repair and maintain the structural portions of the
building, including the standard plumbing, air conditioning, heating and
electrical systems furnished by Landlord, unless such maintenance and repairs
are caused in part or in whole by the act, neglect, fault or omission of any
duty by the Tenant, its agents, employees or invitees, in which case Tenant
shall pay to Landlord the reasonable cost of such maintenance and repairs.
Tenant shall give Landlord written notice of any required repairs or
maintenance. Landlord shall not be liable for any failure to repair or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice. Any repairs or maintenance to supplemental cooling
equipment required for Tenant's special needs are the responsibility of
Tenant. Except as specifically herein set forth, there shall be no abatement
of rent and no liability of Landlord by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements to any portion of the building or the Premises or
to fixtures, appurtenances and equipment therein. Tenant waives the right to
make repairs at Landlord's expense under any law, statute or ordinance now or
hereafter in effect.
11. ASSIGNMENTS AND SUBLETTING. Tenant shall not, voluntarily or by operation
of law, assign, transfer, or encumber its interest under this Lease or in the
Premises nor sublease all or any part of the premises or allow any other person
or entity (except Tenant's employees, agents and invitees) to occupy or use all
or any part of the
4
<PAGE>
premises without the prior written consent of Landlord. Landlord's consent shall
not be unreasonably withheld. Any such consent shall not release Tenant from
liability hereunder, and a consent to one assignment, subletting, occupation or
use shall not be deemed a consent to any subsequent assignment, subletting,
occupation or use. Any such purported assignment, subletting, or permission to
occupy or use without such consent from Landlord shall be void and shall, at the
option of Landlord, constitute a default under this Lease. Tenant immediately
and irrevocably assigns to Landlord, as security for Tenant's obligations under
this Lease, all rent from any subletting of all or a part of the Premises as
permitted by this Lease, and Landlord, as assignee and as attorney-in-fact for
Tenant, or a receiver for Tenant appointed on Landlord's application, may
collect such rent and apply it toward Tenant's obligations under this Lease;
except that, until the occurrence of an act of default by Tenant, Tenant shall
have the right to collect such rent.
12. HOLD HARMLESS. Except as to claims based on the sole negligence or willful
misconduct of Landlord, its agents or employees, Tenant shall hold Landlord
harmless from any claims arising from Tenant's use of the premises or from any
activity permitted by Tenant in or about the Premises, and any claims arising
from any breach or default in Tenant's performance of any obligation under the
terms of this Lease. If any action or proceeding is brought by reason of any
such claim in which Landlord is named as a party, Tenant shall defend Landlord
therein at Tenant's expense by counsel reasonably satisfactory to Landlord.
Landlord and its agents shall not be liable for any damage to property entrusted
to employees of the building, nor for loss or damage to any property by theft
or otherwise, nor from any injury to or damage to persons or property
resulting from any cause whatsoever, unless caused by or due to the sole
negligence or willful misconduct of Landlord, its agents, or employees.
Landlord shall not be liable for any latent defect in the Premises or in the
building of which they are a part. Tenant shall give prompt notice to Landlord
in case of fire or accidents in the Premises or in the building or of alleged
defects in the building, fixtures or equipment.
13. INSURANCE.
13.1 Coverage. Tenant shall assume the risk of damage to any fixtures,
goods, inventory, merchandise, equipment, furniture and leasehold improvements,
and Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom relative to such damage. Tenant shall, at all times during the
term of this Lease, and at its own cost, procure and continue in force the
following insurance coverage.
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a. Comprehensive public liability insurance, insuring Landlord and Tenant
against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto.
13.2. Insurance Policies. The limits of said insurance policies shall not,
however, limit the liability of the Tenant hereunder. Tenant may carry said
insurance under a blanket policy, providing, however, said insurance by Tenant
shall name Landlord as an additional insured. If Tenant shall fail to procure
and maintain such insurance, Landlord may, but shall not be required to, procure
and maintain same, but at the expense of Tenant. Insurance required hereunder
shall be in companies that rate B+ or better in "Best's Insurance Guide". Tenant
shall deliver to Landlord prior to occupancy of the premises copies of policies
of insurance required herein or certificates evidencing the existence and
amounts of such insurance with loss payable clauses, satisfactory to Landlord.
No policy shall be cancellable or subject to reduction of coverage except after
fifteen (15) days prior written notice to Landlord. The minimum acceptable
amount of comprehensive liability insurance is $1,000,000 against claims in any
occurrence, and property damage insurance in an amount of not less than $100,000
per occurrence, or combined single limit of $1,000,000 comprehensive liability
and property damage insurance.
13.3. Waiver of Subrogation. As long as their respective insurers so permit,
Landlord and Tenant each hereby waive any and all rights of recovery against the
other for any loss or damage occasioned to such waiving party or its property of
others under its control to the extent that such loss or damage is insured
against under any fire or extended coverage insurance policy which either may
have in force at the time of such loss or damage. Each party shall obtain any
special endorsement, if required by their insurer, to evidence compliance with
the aforementioned waiver.
14. SERVICE AND UTILITIES.
14.1 Landlord's Obligations. Landlord agrees to furnish to the Premises
during reasonable hours of generally recognized business days to be determined
by Landlord, and subject to the Rules and Regulations of the building,
electricity for normal lighting and fractional horsepower office machines, heat
and air conditioning required in Landlord's judgement for the comfortable use
and occupancy of the Premises, janitorial, window washing and elevator service.
Landlord shall also maintain and keep lighted the common stairs, gallerias,
entries and toilet rooms in the building. Landlord shall not be liable for and
Tenant shall not be entitled to any reduction of rental by reason of Landlord's
failure to furnish any of the foregoing when such failure is
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caused by accident, breakage, repairs, strikes, lockouts or other labor
disturbances or labor disputes of any character, or by any other cause, similar
or dissimilar, beyond the reasonable control of Landlord.
14.2 Tenant's Obligation. Tenant shall pay for, prior to delinquency, all
telephone and all other materials and services, not expressly required to be
paid by Landlord, which may be furnished to or used in, on or about the Premises
during the term of this Lease. Tenant will not, without the prior written
consent of Landlord and subject to any conditions which Landlord may impose, use
any apparatus or device in the Premises which will in any way increase the
amount of electricity or water usually furnished for use of the Premises as a
general office space. If Tenant shall require water or electric current in
excess of that usually furnished or supplied for use of the Premises as general
office space, Tenant shall first procure the consent of Landlord. Wherever heat
generating machines or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air condition units in the Premises
and the cost thereof, including the cost of installation, operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord. Landlord shall not be liable for Landlord's failure to furnish any of
the foregoing when such failure is caused by any cause beyond the reasonable
control of Landlord. Landlord shall not be liable under any circumstances for
loss of or injury to property, however occurring, in connection with failure to
furnish any of the foregoing.
15. PROPERTY TAXES. Tenant shall pay before delinquency, all personal property
or similar taxes levied or assessed and which become payable during the term
hereof upon all Tenant's equipment, furniture, fixtures and personal property
located in the Premises. Landlord shall pay all property taxes on the land and
building, except should the California Constitution be changed in a way that
results in a higher or lower tax on the Premises than the annual increases now a
matter of law, any such increase or decrease shall be passed through to tenant
on a prorated basis as an item separate from any CPI adjustments. Tenant shall
pay to Landlord its share of such taxes, if any, within thirty days after
delivery to Tenant by Landlord of a statement in writing setting forth the
amount of such taxes.
16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with the
rules and regulations attached as Exhibit "B" to this Lease, as well as such
rules and regulations that Landlord shall from time to time promulgate. Landlord
reserves the right from time to time to make all reasonable modifications to
those rules which shall be binding to Tenant upon delivery of a copy of them to
Tenant. Landlord shall
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not be responsible to Tenant for the nonperformance of any of said rules by
any other tenant.
17. HOLDING OVER. If Tenant remains in possession without Landlord's
consent, after termination of the Lease, by lapse of time or otherwise, Tenant
shall pay Landlord for each day of such retention one-fifteenth (1/15th) of the
amount of the monthly rental for the last month prior to such termination and
Tenant shall also pay all costs, expenses and damages sustained by Landlord by
reason of such including without limitation, claims made by a succeeding
tenant resulting from Tenant's failure to surrender the Premises.
18. ENTRY BY LANDLORD. Landlord reserves the right to enter the premises
at any time to inspect the Premises, to provide any service for which Landlord
is obligated hereunder, to submit the Premises to prospective purchasers or
tenants, to post notices of nonresponsibility, and to alter, improve, maintain
or repair the Premises or any portion of the building of which the Premises
are a part that Landlord deems necessary or desirable, all without abatement
of rent. Landlord may erect scaffolding and other necessary structures
where reasonably required by the character of the work to be performed, but
shall not block entrance to the Premises and not interfere with Tenant's
business, except as reasonably required for the particular activity by
Landlord shall not be liable in any manner for any inconvenience, disturbance,
loss of business, nuisance, interference with quiet enjoyment, or other damage
arising out of Landlord's entry on the Premises as provided on this paragraph,
except damage, if any, resulting from the negligence or willful misconduct of
Landlord or its authorized representative. Landlord shall retain a key with
which to unlock all doors into, within and about the Premises, excluding
Tenant's vaults, safes and files. In an emergency, Landlord shall have the
right to use any means which Landlord deems reasonably necessary to obtain
entry to the Premises, without liability to Tenant, except for any failure to
exercise due care for Tenant's property. Any such entry to the Premises by
Landlord shall not be construed or deemed to be forcible or unlawful entry
into or a detainer of the Premises or an eviction of Tenant from the Premises
or any portion thereof.
19. RECONSTRUCTION. If the Premises or the building of which the Premises
are a part are damaged by fire or other peril covered by extended coverage
insurance, Landlord agrees to make repairs and restorations to the extent and
in the manner possible at a cost not exceeding the proceeds of the insurance
received by Landlord. If the cost of repair and restoration exceeds the
amount of proceeds received from insurance, Landlord may elect to terminate
this Lease by giving notice to Tenant within twenty (20) days after determining
that the cost will exceed such proceeds. If Landlord proceeds with repair and
restoration, this
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Lease shall remain in full force and effect, except that Tenant shall be
entitled to a proportionate reduction of rent while such repairs are being
made. The rent reduction shall be based upon the extent to which repair and
restoration activity materially interferes with Tenant's business at the
Premises, provided, however, that if the damage was occasioned by the fault or
neglect of Tenant, its agents or employees, there shall not be an abatement of
rent.
20. DEFAULTS; REMEDIES.
20.1 Default. The occurrence of any of the following shall constitute a
default by Tenant.
a. Failure by Tenant to pay the rent or other monies when due, where such
failure continues for three (3) business days after written notice by Landlord
to Tenant.
b. Abandonment of the Premises by Tenant.
c. Failure by Tenant to perform any other provision of this Lease where
such failure to perform is not cured within thirty (30) days after notice has
been given to Tenant; provided, however, that if the nature of the default is
such that the same cannot reasonably be cured within said thirty (30) day
period, Tenant shall not be deemed to be in default if Tenant shall within
such period commence such cure and thereafter diligently prosecute the same to
completion.
d. The making by Tenant of any general assignment or general arrangement
for the benefit of creditors; the filing by or against Tenant of a petition to
have Tenant adjudged a bankrupt or of a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, same is dismissed within sixty (60) days; the
appointment of a trustee or receiver to take possession of substantially all
of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged without thirty (30) days.
20.2 Remedies. In the event of any such default Landlord may:
Maintain this Lease in full force and effect and recover the rent and other
monetary charges as they become due, without terminating Tenant's right to
possession irrespective of whether Tenant shall have abandoned the Premises, In
the event Landlord elects not to terminate the Lease, Landlord shall have the
right to attempt to re-let the Premises at
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such rent and upon such conditions and for such a term, and to do all acts
necessary to maintain or preserve the Premises as Landlord deems reasonable
and necessary without being deemed to have elected to terminate the Lease,
including removal of all persons and property from the Premises. Such property
may be removed and stored in a public warehouse or elsewhere a the cost of and
for the account of Tenant. In the event any such reletting occurs, this Lease
shall terminate automatically upon the new tenant taking possession of the
Premises. Notwithstanding that Landlord fails to elect to terminate the Lease
initially, Landlord at any time during the term of this Lease nay elect to
terminate this Lease by virtue off such previous default of Tenant.
Terminate Tenant's right to possession by any lawful means, in which case this
Lease shall terminate and Tenant shall immediately surrender possession of the
Premises to Landlord. In such event Landlord shall be entitled to recover
from Tenant all damages incurred by landlord by reason of Tenant's default,
including without limitation thereto, the following: (1) the worth at the time
of award of any such termination; plus (2) the worth at the time of award of
the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss
that is proved could have been reasonably avoided; plus (3) the worth at the
time of award of the amount by which unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that is proved
could be reasonably avoided; plus (4) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to perform
his obligations under this Lease or which in the ordinary course of events
would be likely to result therefrom; plus (5) at Landlord's election, such
other amounts in addition to or in lieu of the foregoing as may be permitted
from time to time by applicable law. Upon any such re-entry Landlord shall
have the right to make any reasonable repairs, alterations or modifications to
the Premises, which Landlord in its sole discretion deems reasonable and
necessary. As used in (1) above, the "worth at the time of award" is computed
by allowing interest at the rate of ten percent (10%) per annum from the date
of default. As used in (2) and (3) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the U.S. Federal
Reserve Bank at the time of the award plus one percent (1%).
Remedies of Landlord contained in this Lease shall be construed and held to be
cumulative, and Landlord shall have the right to pursue any one or all of such
remedies or any other remedy or relief which may be provided by law. No
waiver of any default of Tenant hereunder shall be implied from any acceptance
by Landlord of any rent or other payments due hereunder or any omission by
Landlord to take any action
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on account of such default is such default persists or is repeated, and no
express waiver shall affect defaults other than as specified in said waiver.
The consent or approval of Landlord to or of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent or approval to or of any subsequent similar
acts by Tenant.
21. EMINENT DOMAIN. If more than twenty-five percent (25%) of the
Premises is taken or appointed by any public or quasi-public authority under
powers of eminent domain, either party hereto shall have the right at its
option, to terminate this Lease. If less than twenty-five percent (25%) of the
Premises is taken (or neither party elects to terminate as above, provided if
more than twenty-five percent (25%) is taken), the Lease shall continue, but
the rental thereater to be paid shall be equitably reduced. If any part of the
building of which the Premises are a part is so taken or appropriated, whether
or not any part of the Premises is involved, Landlord shall be entitled to the
entire award and compensation for the taking which is paid or made by the
public or quasi-public agency, and Tenant shall have no claim against said
award.
22. STATEMENT TO LENDER. Tenant shall at any time and from time to
time, upon not less than ten (10) days prior written notice from Landlord,
execute, acknowledge, and deliver to Landlord a statement in writing, (a)
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modifications and certifying that this
Lease as so modified, is in full force and effect), and the date to which the
rental and other charges are paid in advance, if any, and (b) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of the
Landlord hereunder, or specifying such defaults if any are claimed. Any such
statement may be relied upon by any prospective purchaser or emcumbrancer of
all or any portion of the real property of which the Premises are a part.
23. PARKING. Tenant shall have the right to use, in common with other
tenants or occupants of the building, parking facilities, provided by Landlord
for tenants of The Landmark, subject to the rules and regulations established
by Landlord. Said parking shall be at no expense to the Tenant unless a tax,
fee or levy is imposed directly or indirectly by a Federal, State or local
agency or jurisdiction for parking. If such a tax, fee or levy is imposed
tenant agrees to pay its portion of said fee as reasonably determined by the
Landlord.
24. AUTHORITY OF PARTIES.
24.1 Corporate Authority. If Tenant is a corporation, each
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individual executing this Lease on behalf of said corporation represents and
warrants that he is duly authorized to execute and deliver this Lease on
behalf of said corporation, in accordance with a duly adopted resolution of
the Board of Directors of said corporation or in accordance with the bylaws of
said corporation, and that this Lease is binding upon said corporation in
accordance with its terms.
24.2 Limited Partnerships. Landlord herein is a limited partnership. It is
understood and agreed that any claims by Tenant on Landlord shall be limited to
the assets of the limited partnership. And furthermore, Tenant expressly waives
any and all rights to proceed against the individual partners or the officers,
directors or shareholders of any corporate partner, except to the extent of
their interest in said limited partnership.
25. GENERAL PROVISIONS.
25.1 Exhibits. Exhibits attached hereto, and addendums initialed by the
parties, are deemed to constitute a part hereof.
25.2 Waiver. The waiver by Landlord of any provision of this Lease shall not
be deemed to be a waiver of any subsequent breach of the same or any other
provisions of this Lease herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any provision of this Lease, other than the failure of the Tenant
to pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of the acceptance of such rent.
25.3 Notices. All notices and demands which may or are required to be given by
either party to the other hereunder shall be in writing. All notices and
demands by the Landlord to the Tenant shall be sufficient if delivered in person
or sent by first class mail, postage prepaid, addressed to the Tenant at the
Premises or to such other place as Tenant may from time to time designate in a
written notice to the Landlord. All written notices and demands by the Tenant
to the Landlord shall be sufficient if delivered in person or sent by first
class mail, postage prepaid, addressed to the Landlord at the office of the
building or to such other person or place as the Landlord may from time to time
designate in a notice to the Tenant. Any such notice is effective at the time
of delivery or 48 hours after mailing.
25.4 Rentable Area. Rentable square footage, as herein used, is the actual
square footage of the office suite plus a load factor for gallerias, restrooms,
hallways and other common areas. The stated rentable area will not be used as a
basis for either party making any claim against the other.
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25.5 Joint and Several Obligations. If there be more than one Tenant, the
obligations hereunder imposed upon tenants shall be joint and several.
25.6 Captions. The captions of the paragraphs of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
25.7 Time. Time is of the essence hereof.
25.8 Successors and Assigns. The provisions of this Lease, subject to the
provisions as to assignment, apply to and bind the successors and assigns of the
parties hereto.
25.9 Recording. Neither Landlord nor Tenant shall record this Lease or a
short form memorandum hereof without the prior written consent of the other
party.
25.10 Scope and Amendments. This Lease is and shall be considered to be the
only agreement between the parties hereto. All negotiations and oral agreements
acceptable to both parties are included herein. No amendment or other
modification of this Lease shall be effective unless in a writing signed by
Landlord and by Tenant.
25.11 Legal Fees. In the event of any action brought by either party against
the other under this Lease, the prevailing party shall be entitled to recover
all costs including the fees of its attorneys as the court may adjudge
reasonable.
25.12 Sale. In the event of any sale of the building, Landlord shall be
released of any liability under this Lease, and the purchaser of the Premises
shall be deemed to have assumed and agreed to carry out all of the obligations
of the Landlord under this Lease.
25.13 Lender Requirements. Upon request of the Landlord, Tenant will, in
writing, subordinate its rights hereunder to the lien of any mortgagee, or deed
of trust to any bank, insurance company or other lending institution, now or
hereafter in force against the land and building of which the Premises are a
part, and to all advances made or hereafter to be made upon the security
thereof. If any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by the
Landlord covering the Premises, the Tenant shall recognize such purchaser as the
Landlord under this Lease.
25.14 Name. Tenant shall not use the name of the development in which the
Premises are situated for any purpose other than as an address of the business
to be conducted by the Tenant in the Premises, unless written
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authorization is obtained from Landlord.
25.15 Severability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof.
25.16 Applicable Law. This Lease shall be governed by the laws of the State of
California.
25.17 Toxics. Landlord and Tenant acknowledge that they have been advised that
numerous federal, state, and/or local laws, ordinances and regulations ("law")
affect the existence and removal, storage, disposal, leakage of contamination by
materials designated as hazardous or toxic ("Toxics"). Many materials, some
utilized in everyday business activities and property maintenance, are
designated as hazardous or toxic. Some of the Laws require that Toxics be
removed or cleaned up without regard to whether the party required to pay for
the "clean up" caused the contamination, owned the property at the time the
contamination occurred or even knew about the contamination. Some items, such
as asbestos or PCB's, which were legal when installed, now are classified as
Toxics, and are subject to removal requirements. Civil lawsuits for damages
resulting from Toxics may be filed by third parties in certain circumstances.
Tenant and Landlord agree to hold the other harmless from any responsibility for
any Toxics which are brought on to the Premises or the project by themselves,
their agents, employees or contractors.
26. ELECTRICAL, COMMUNICATIONS AND ALARM WIRING.
26.1 Tenant shall contact the Landlord prior to installing or relocating any
electrical, telephone, network, LAN, intercom, doorbell, or alarm wiring systems
at the Landmark Office Center.
26.2 All electrical wiring shall be installed by a licensed contractor in
expanded metal tubing in accordance with the most current electrical code, etc.
26.3 All communication cabling shall be installed by a licensed contractor and
shall be plenum rated and shall not be installed as to "lay" on ceiling tile or
t-bar grid systems.
A certificate of compliance shall be provided by contractor to Landlord at time
of completion.
26.4 Landlord shall not be financially responsible for any repair or
replacement of any communication cables, telephone lines, telephone feeders, or
trunk lines beyond the M.P.O. (minimum point of entry) established by Pacific
Bell. If one or more of these lines serve several tenants, the cost of
installation and repair shall be divided among tenants currently being served by
said cable.
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26.5 Not all existing telephone rooms/punchdown boards are permanent. Tenant
and his contractor must verify location of termination points with the Landlord
prior to installation.
26.6 No audible alarm systems will be permitted. Landlord will not assume any
financial responsibility for any alarms attributable to its employees,
contractors, including janitors, guards, or service personnel.
26.7 Any work requiring access to adjoining tenant spaces shall be prearranged
so that Landlord can obtain permission for the intrusion/interruption of the
space. Tenant shall reasonably cooperate in arranging access to contractors for
adjoining tenant when requested by Landlord.
26.8 Upon request of Landlord, Tenant shall remove all communication cable that
Tenant has installed in the Premises upon expiration of this Lease and repair
all damage caused by said removal.
27. AMERICANS WITH DISABILITIES ACT. Landlord believes the Premises complies
with the "Americans With Disabilities Act" (ADA), but no independent
investigation has been made to ensure compliance with the "Americans With
Disabilities Act" (ADA). This Act may require a variety of changes to a
facility, including potential removal of barriers to access by disabled persons
and provision of auxiliary aids and services for hearing, vision or speech
impaired persons, some of which would be the Landlord's responsibility and some
would be the Tenant's responsibility. Landlord urges all parties to obtain
independent legal and technical advice with respect to the physical and
environmental conditions and ADA compliance of the Property. The Parties agree
that it will rely solely on their own investigations and/or that of a licensed
professional specializing in these areas, and not on the investigation,
assurances or opinion of Landlord or Broker, if any.
28. BROKERS. Tenant warrants that it has had no dealing with any real estate
broker or agent in connection with the negotiation of this Lease excepting only
of, and it knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease. Commissions shall be paid to
Broker(s) on the following schedule: 6%, 5%, 4%, 3%, 2%. No commissions shall
be paid on Tenant Improvement Amortizations, CPI Increases or any other rent
adjustment covered in section 4.2 herein.
29. TENANT IMPROVEMENTS. Landlord shall clean the carpets and touch-up paint
throughout the Premises.
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The parties hereto have executed this Lease on the dates specified immediately
adjacent to their respective signatures.
LANDLORD: LANDMARK INVESTMENTS, LIMITED
By: THRUST IV, INC., General Partner
By: /s/ Hugh P. Bikle Date: November 14, 1994
___________________________ ______________________
Hugh P. Bikle, President
TENANT: ONSALE, INC.
By: /s/ Alan Fisher Date: May 30, 1996
___________________________ ______________________
(SIGNATURE)
/s/ Alan S. Fisher CFO Tax ID# 77-0408319
___________________________ ____________________
(PRINT NAME) (TITLE)
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EXHIBIT A
PAGE 1 0F 2
[MAP OF BUILDING DESIGNATIONS]
<PAGE>
EXHIBIT A
PAGE 2 OF 2
[MAP OF 2ND FLOOR BLDG. 1]
<PAGE>
EXHIBIT B
Rules and Regulations
---------------------
1. Keys are issued, in a reasonable number, by Landlord to Tenant at no
charge.
2. Access cards, used to open the electronic lock of the front entry door
of a particular building after normal business hours, are assigned to
individual people pursuant to business hours, are assigned to individual
people pursuant to a list submitted by Tenant to Landlord. A $15.00 deposit
per card is charged upon issuance and refundable upon return. When a card
hoder is no longer entitled to a card (left employment, etc.) Tenant shall
notify Landlord of a new holder, or if the card has been taken or lost.
By so notifying Landlord, a particular card code can be removed from the
authorized list, so that it no longer will activate the lock.
3. No sign or notice shall be displayed by Tenant outside of its office
space without written consent of Landlord which may be unreasonably withheld.
If approval is not given, Landlord shall have the right to remove such sign or
notice without notice to and at expense of the Tenant. All signs on access
doors to the Premises shall be approved by Landlord. The original standard
company sign on the main door to the Premises will be installed at Landlord's
expense. Tenant may, at its expense, install a different sign, after written
design approval by Landlord. Design criteria should be obtained from Landlord
in advance.
Tenant shall not place anything within the Premises which may appear unsightly
from outside of the Premises.
Tenant shall not install any curtains, blinds, shades, or screens on any
windows or doors of the Premises without Landlord's consent which may be
unreasonably withheld.
4. Sidewalks, halls, passages, exits, entrances, elevators, and stairways
shall not be obstructed by any of the tenants, or used by them for any purpose
other than for ingress or egress from their respected offices.
5. Tenant shall not alter any lock or install any new or additional locks
or bolts on any doors or windows without the written consent of Landlord. All
such alterations shall be done by Landlord's agents at Tenant cost.
6. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than for which they were installed.
7. Tenant shall not overload the floor of the office
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complex. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork, or plaster or in any way deface the Premises, except for
hanging of small items such as pictures with nail type of hangers, without
Landlord's approval. If Tenant hangs any other furniture, equipment,
whiteboards etc. Tenant shall be responsible for the removal and repair of all
damages to the Premises.
8. No unusually large or heavy equipment shall be brought into the complex
without prior notice to Landlord and all moving of the same into or out of the
office complex shall be done at such time and such a manner as Landlord shall
designate.
All damage done to the office complex by moving or maintaining any such
equipment shall be repaired at the expense of Tenant.
9. Tenant shall not use the office complex in a manner offensive or
objectionable to the Landlord or other occupants by reason of noise, odors,
and/or vibrations, or interfere in any way with other tenants or those having
business herein, nor shall any animals or birds be brought in or about the
office complex.
10. No lodging, washing clothes, cooking, excluding use of coffee makers and
microwave ovens, shall be done or permitted by any Tenant on the Premises.
11. Tenant shall not use or keep on the Premises any foul or noxious gas,
kerosene, gasoline or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Landlord.
12. Landlord shall direct electricians as to where and how telephone wires are
to be installed. No changing of wires will be allowed without the consent of
the Landlord which may be unreasonably withheld. The location of the
telephones, call boxes and other office equipment affixed to the office complex
shall be subject to the approval of Landlord.
13. No aerial satellite dish or other item shall be erected on the roof or
exterior walls of the complex, or on the grounds, without in each instance, the
written consent of the Landlord which may be unreasonably withheld. Any such
item so installed without such written consent shall be subject to removal
without notice at any time.
14. No loud speakers, televisions, radios or other devices shall be used in a
manner so as to be heard or seen outside of the Premises without prior written
consent of the Landlord.
15. On Saturdays, Sundays, legal holidays, and on other days between the hours
of 5:00 P.M. and 8:00 A.M. The following
<PAGE>
day, access to the office complex, or to the Premises may be refused unless
the person seeking entry is known to the person or employee of the office
complex in charge or is properly identified. The Landlord shall in no case be
liable for damages for any error with regard to the admission to or exclusion
from the office complex of any person.
16. Any person whose presence on the Premises may in the judgment of the
Landlord be prejudicial to the safety, character, reputation and interest of the
office complex or of its tenants may be denied access to the office complex or
may be ejected therefrom.
17. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of the
Landlord.
18. Tenant shall not disturb, solicit, or canvass any occupant of the office
complex and shall cooperate to prevent the same.
19. Landlord shall control and operate the public portions of the office
complex, in such manner as it deems best for the benefit of the tenants
generally.
20. All windows and entrance doors in the office complex shall be left locked
when the Premises are not in use, and all doors opening to public corridors
shall be kept closed except for normal ingress and egress from the office
complex.
21. In case of invasions, mob riot, public excitement, or other emergency, the
Landlord reserves the right to prevent access to the office complex during the
continuance of the same by closing of the doors or otherwise, for the safety of
the tenants and protection of property in the office complex. Landlord will also
direct tenants as necessary in an emergency and will not assume any liability
for damages suffered by tenants as the result of such directions.
<PAGE>
EXHIBIT 10.07
CONSENT TO SUBLEASE
-------------------
Master Lessor hereby acknowledges receipt of a copy of the Sublease between
Rogue Wave Software, Inc., Sublessor and Onsale, Inc., Sublessee, signed by
Robert Holburn, CFO for Rogue Wave Software, Inc. on October 19, 1996. Master
Lessor hereby consents to this Sublease, based solely upon a general
consideration of whether the proposed Sublessee intends to occupy the premises
in a lawful and orderly fashion, consistent with uses appropriate to the overall
project. By this consent, Master Lessor shall not be deemed in any way to have
entered into the Sublease, to have agreed to be bound by any provision of the
Sublease, or to have consented to any further assignment or sublease. Master
Lessor's consent hereunder shall not constitute either (i) a waiver of Master
Lessor's rights under the Master Lease, or (ii) a voluntary surrender of either
the Master Lease or any Sublease. This approval expires October 31, 1997.
LANDMARK INVESTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
BY: THRUST IV, INC., A CALIFORNIA
CORPORATION, ITS GENERAL PARTNER
By: /s/ Hugh P. Bikle
______________________________
Hugh P. Bikle, President
<PAGE>
SUBLEASE AGREEMENT
1. PARTIES: This Sublease Agreement is entered into by and between Rogue Wave
Software, Inc., 2065 Landings Drive, Mountain View, California 94043,
("Sublessor"), and OnSale, Inc. -1953 Landings Drive, Mountain View,
California 94043 ("Sublessee"), as a sublease under the lease dated April 22,
1996, entered into by Landmark Investments, Limited, as Lessor and Rogue Wave
Software, Inc., as Lessee, a copy of the lease is attached and designated
Exhibit A.
- ---------
2. PROVISIONS CONCERNING SUBLEASE.
(a) This sublease is subject to all of the terms and conditions of the
master lease at Exhibit A and Sublessee shall assume and perform the obligations
of Sublessor and lessee in said lease, to the extent said terms and conditions
are applicable to the premises subleased pursuant to this sublease. Sublessee
shall not commit or permit to be committed on the subleased premises any act or
omission which shall violate any term or condition of the lease. In the event of
the termination of Sublessor's interest as lessee under the lease for any
reason, then this sublease shall terminate coincidentally therewith without any
liability of Sublessor to Sublessee.
(b) All of the terms and conditions contained in the master lease at
Exhibit A, are incorporated herein except for paragraphs
l,2,3,4.l,4.2,5,28,29.B,30, 31, 32, as terms and conditions of this sublease
(with each reference therein to lessor and lessee to be deemed to refer to
Sublessor and Sublessee) and along with all of the following paragraphs set
out in this sublease, shall be the complete terms and conditions of this
sublease. With respect to Section 25.3, Notices, of the lease, for notices
between Sublessor and Sublessee, as of the date of execution of this sublease,
the addresses of Sublessor and Sublessee are as specified above.
(c) This sublease is subject to the written consent of lessor.
3. PREMISES. Sublessor leases to Sublessee and Sublessee hires from said
Sublessor the following described premises together with the appurtenances,
located at 1861 Landings Drive in the City of Mountain View, County of Santa
Clara, State of California: Approximately 6,408 rentable square feet as
indicated on Exhibit B attached hereto.
---------
Sublessor warrants that to the best of Sublessor's knowledge, Sublessor is
unaware of any toxic materials which are located in, or about the premises,
parking areas, storage area or other parts of the project. Furthermore,
Sublessor warrants that to the best of Sublessor's knowledge, the interior and
exterior of the premises do not violate any ordinance, rule, code or regulation
of any governmental agency and Sublessor has not received any notice of possible
violation. In all other aspects, the premises are delivered "as is."
4. RENT AND OTHER CHARGES.
(a) Sublessee shall pay to Sublessor without deduction, setoff, prior
notice or demand, as rental, the sum of fourteen thousand seven hundred thirty-
eight dollars and 40/100 ($14,738.40) per month in advance on the 1st day of
each month in lawful money of the United States of America throughout the
balance of the term. Monthly rental for any partial month shall be prorated at
the rate of 1/30th of monthly rental per day. Rent shall be paid to Sublessor at
2065 Landings Drive, Mountain View, California 94043, or at such other place or
places as Sublessor may from time to time direct.
<PAGE>
(b) Receipt of $14,738.40 is hereby acknowledged for rental for the first
month, and the additional amount of $7,369.20 as a security deposit. In the
event Sublessee has performed all of the terms and conditions of this sublease
throughout the term, upon Sublessee vacating the premises, and returning the
premises to their condition upon delivery to Sublessee, normal wear and tear
expected, the amount paid as security deposit shall be returned to Sublessee
after first deducting any sums owed to Sublessor.
5. Term.
(a) The term of this sublease shall commence on the first day of November,
1996 and shall continue for a period of twelve (12) months.
(b) In the event Sublessor is unable to deliver possession of the premises
at the commencement of the term, Sublessor shall not be liable for any damage
caused thereby, nor shall this sublease be void or voidable but Sublessee shall
not be liable for rent until such time as Sublessor offers to deliver possession
of the premises to Sublessee. If Sublessee, with Sublessor's consent, takes
possession prior to the commencement of the term, Sublessee shall do so subject
to all of the covenants and conditions hereof and shall pay rent for the first
month of the term, prorated at a rate of 1/30th thereof per day.
7. BROKERAGE. Sublessee warrants that it has only dealt with Cornish & Carey
Commercial as its own broker and Catalyst Real Estate Group as Sublessor's
broker, concerning the premises. The only commissions to be paid under this
sublease are those paid by Rogue Wave Software, Inc. to Catalyst Real Estate
Group, which will share the commission payment by separate agreement.
ROGUE WAVE SOFTWARE, INC. ONSALE, INC.
("Sublessor") ("Sublessee")
By: /s/ Robert Holburn By: /s/ Samuel Jerould Kaplan
_________________________________ _________________________________
Robert Holburn
Chief Financial Officer Print Name: Samuel Jerould Kaplan
___________________________
Date: 10/19/96 Title: CSO
________________________________ ________________________________
Date: 10/15/96
_________________________________
<PAGE>
CONSENT OF LESSOR
Landmark Investments, Limited hereby consents to the sublease dated August
______, 1996, between Rogue Wave Software, Inc. and OnSale, Inc. being entered
into.
For Landmark Investments, Limited:
___________________________________________
Name:______________________________________
Title:_____________________________________
Date:______________________________________
<PAGE>
LEASE AGREEMENT
between
THE LANDMARK
and
ROGUE WAVE SOFTWARE, INC.
for
1861 Landings Drive
Mountain View, CA 94043
Dated: April 22, 1996
<PAGE>
LANDMARK BUILDING LEASE
1. PARTIES. This Lease dated, for reference purposes only, April 22, 1996,
by and between LANDMARK INVESTMENTS, LIMITED ("Landlord") and ROGUE WAVE
SOFTWARE, INC. ("Tenant"), who agree as follows:
2. PREMISES. Landlord leases to Tenant, and Tenant leases from Landlord the
office space located in Mountain View, California, 94043, described as 1861
Landings Drive, outlined in Exhibit "A" ("Premises"). Premises have an agreed
area of Twelve Thousand Eight Hundred Sixteen (12,816) rentable square feet.
3. TERM. The term of this Lease shall be for Three (3) years commencing on
October 1, 1996 and ending on September 30, 1999.
4. RENT AND TENANT IMPROVEMENT COST REIMBURSEMENT.
4.1. Tenant shall pay to Landlord as rent for the Premises, without demand,
deduction, or off-set, the sum of Twenty Four Thousand Three Hundred Fifty
Dollars and 40/100 ($24,350.40) on or before the first day of each and every
month of the term of this Lease, the first monthly payment to be made
concurrently with the execution hereof. If the commencement date is not the
first day of a month or if the Lease termination date is not the last day of a
month, the rent payable hereunder shall be prorated, based upon a thirty day
month, at the current rate for the fractional month during which this Lease
commences and/or terminates. Any rent payable for a partial month directly
following the commencement date shall be payable on the first day of the first
full calendar month of the term. Rent shall be paid to Landmark Investments,
Limited, at 2093 Landings Drive, Mountain View, CA 94043.
4.2. The base rent provided for in 4.1. above shall increase three percent
(3%) per year on the anniversary date of the commencement of the term of the
Lease stated in 3. above.
4.3. Late Charges. Tenant hereby acknowledges that late payment by Tenant to
Landlord of rent or other sums due hereunder will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Landlord by
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of rent or of a sum due from
1
<PAGE>
Tenant shall not be received by Landlord or Landlord's designees by 12:00 noon
on the fifth (5th) day of each month of the term hereof, then Tenant shall pay
to Landlord a late charge equal to five percent (5%) of such overdue amount.
The parties hereby agree that such late charges represent a fair and
reasonable estimate of the cost that Landlord will incur by reason of the late
payment by Tenant. Acceptance of such late charges by the Landlord shall in no
event constitute a waiver of Tenant's default with respect to such overdue
amount, nor prevent Landlord from exercising any of the other rights and
remedies granted hereunder.
5. SECURITY DEPOSIT. On execution of this Lease, Tenant shall increase its
security deposit with Landlord by $19,850.40 to a total of $24,350.40 for the
performance by Tenant of the provisions of this Lease. If Tenant is in default,
Landlord can use the security deposit, or any portion of it, to cure the default
or to compensate Landlord for all damage sustained by Landlord resulting from
Tenant's default. Tenant shall immediately on demand pay to Landlord a sum
equal to the portion of the security deposit expended or applied by Landlord as
provided in this paragraph so as to maintain the security deposit in the sum
initially deposited with Landlord. If Tenant is not in default at the
expiration or termination of this Lease, Landlord shall, no later than fourteen
(14) days after lease expiration or termination, return to Tenant (or at
Landlord's option, to the last assignee of Tenant's interest hereunder), the
balance of the security deposit. Landlord shall not be required to keep this
security deposit separate from its general funds, and Tenant shall not be
entitled to interest on such deposit.
6. POSSESSION.
6.1. If Landlord, for any reason cannot deliver possession of the Premises to
Tenant at the commencement of the term hereof, this Lease shall not be void or
voidable nor shall Landlord be liable to Tenant for any loss or damage resulting
therefrom, nor shall the expiration date of the above term be extended, but, in
that event, all rent shall be abated during the period between the commencement
of said term and the time when Landlord delivers possession.
6.2. In the event that Landlord shall permit Tenant to occupy the Premises
prior to the commencement date of the term, such occupancy shall be subject to
all of the provisions of this Lease and said early possession shall not advance
the termination date hereinabove provided. Rent shall be prorated and prepaid
for early occupancy at the current rate.
7. USE.
7.1 Use. The Premises shall be used and occupied by Tenant
2
<PAGE>
for general office purposes and for no other purpose without the prior written
consent of the Landlord.
7.2 Uses Prohibited.
a. Tenant shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will increase the existing rate or
affect any fire or other insurance upon the building or any of its contents, or
cause a cancellation of any insurance policy covering said building or any part
thereof or any of its contents, nor shall Tenant sell or permit to be kept used
or sold in or about said Premises any articles or substances, inflammable or
otherwise, which may be prohibited by a standard form policy of fire insurance.
b. Tenant shall not do or permit anything to be done in or about the Premises
which will in any way obstruct or interfere with the rights of other tenants of
the building or injure or annoy them or use or allow the Premises to be used for
any unlawful or objectionable purpose.
c. Tenant shall not use the Premises or permit anything to be done in or about
the Premises which will in any way conflict with any law now in force or which
may hereafter be enacted. Tenant shall at its cost promptly comply with all
laws now in force or which may hereafter be in force and with the requirements
of any board of fire underwriters or other similar body relating to Tenant's
improvements or acts.
8. ALTERATIONS AND ADDITIONS. Tenant shall not make or allow any alterations,
additions or improvements of or to the Premises without Landlord's prior written
consent. Any such alterations, additions or improvements, including, but not
limited to, wallcovering, paneling and built-in cabinet work, but excepting
movable furniture and trade fixtures, shall become a part of the realty, shall
belong to the Landlord and shall be surrendered with the Premises at expiration
or termination of the Lease. If Landlord consents to any such alterations,
additions or improvements by Tenant, they shall be made by Tenant at Tenant's
cost, and any contractor or person selected by Tenant to perform the work shall
first be approved of, in writing, by Landlord. Upon expiration, or sooner
termination of the term hereof, Tenant shall, upon written demand by Landlord
promptly remove any alterations, additions or improvements made by Tenant and
designated by Landlord to be removed. Such removal and repair of any damage to
the premises caused by such removal shall be at Tenant's cost.
9. LIENS. Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or
3
<PAGE>
obligations incurred by Tenant. Landlord may require Tenant to provide
Landlord, at Tenant's cost, a lien and completion bond in an amount equal to
one and one-half (1-1/2) times the estimated cost of any improvements,
additions, or alterations by Tenant, to insure Landlord against liability for
mechanic's and materialmen's liens and to insure completion for the work.
10. REPAIRS AND MAINTENANCE. By taking possession of the Premises, Tenant
shall be deemed to have accepted the Premises as being in good sanitary order,
condition and repair. Tenant shall at Tenant's cost, keep the premises and
every part thereof in good condition and repair except for damages from causes
beyond the control of Tenant and ordinary wear and tear. Tenant shall upon the
expiration or sooner termination of this Lease surrender the Premises to the
Landlord in good condition, ordinary wear and tear and damage from causes beyond
the reasonable control of the Tenant excepted. Unless specifically provided in
an addendum to this Lease, Landlord shall have no obligation to alter, remodel,
improve, repair, decorate or paint the Premises or any part thereof and the
parties hereto affirm that Landlord has made no representations to Tenant
respecting the condition of the premises or the building except as specifically
herein set forth. Notwithstanding the above provisions, Landlord shall repair
and maintain the structural portions of the building, including the standard
plumbing, air conditioning, heating and electrical systems furnished by
Landlord, unless such maintenance and repairs are caused in part or in whole by
the act, neglect, fault or omission of any duty by the Tenant, its agents,
employees or invitees, in which case Tenant shall pay to Landlord the reasonable
cost of such maintenance and repairs. Tenant shall give Landlord written notice
of any required repairs or maintenance. Landlord shall not be liable for any
failure to repair or to perform any maintenance unless such failure shall
persist for an unreasonable time after written notice. Any repairs or
maintenance to supplemental cooling equipment required for Tenant's special
needs are the responsibility of Tenant. Except as specifically herein set
forth, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements to any portion of the
building or the Premises or to fixtures, appurtenances and equipment therein.
Tenant waives the right to make repairs at Landlord's expense under any law,
statute or ordinance now or hereafter in effect.
11. ASSIGNMENTS AND SUBLETTING. Tenant shall not, voluntarily or by operation
of law, assign, transfer, or encumber its interest under this Lease or in the
Premises nor sublease all or any part of the premises or allow any other person
or entity (except Tenant's employees, agents
4
<PAGE>
agents and invitees) to occupy or use all or any part of the premises without
the prior written consent of Landlord. Landlord's consent shall not be
unreasonably withheld. Any such consent shall not release Tenant from
liability hereunder, and a consent to one assignment, subletting, occupation
or use shall not be deemed a consent to any subsequent assignment, subletting,
occupation or use. Any such purported assignment, subletting, or permission to
occupy or use without such consent from Landlord shall be void and shall, at
the option of Landlord, constitute a default under this Lease. Tenant
immediately and irrevocably assigns to Landlord, as security for Tenant's
obligations under this Lease, all rent from any subletting of all or a part of
the Premises as permitted by this Lease, and Landlord, as assignee and as
attorney-in-fact for Tenant, or a receiver for Tenant appointed on Landlord's
application, may collect such rent and apply it toward Tenant's obligations
under this Lease; except that, until the occurrence of an act of default by
Tenant, Tenant shall have the right to collect such rent.
12. HOLD HARMLESS. Except as to claims based on the sole negligence or
willful misconduct of Landlord, its agents or employees, Tenant shall hold
Landlord harmless from any claims arising from Tenant's use of the premises or
from any activity permitted by Tenant in or about the Premises, and any claims
arising from any breach or default in Tenant's performance of any obligation
under the terms of this Lease. If any action or proceeding is brought by reason
of any such claim in which Landlord is named as a party, Tenant shall defend
Landlord therein at Tenant's expense by counsel reasonably satisfactory to
Landlord. Landlord and its agents shall not be liable for any damage to
property entrusted to employees of the building, nor for loss or damage to any
property by theft or otherwise, nor from any injury to or damage to persons or
property resulting from any cause whatsoever, unless caused by or due to the
sole negligence or willful misconduct of Landlord, its agents, or employees.
Landlord shall not be liable for any latent defect in the Premises or in the
building of which they are a part. Tenant shall give prompt notice to Landlord
in case of fire or accidents in the Premises or in the building or of alleged
defects in the building, fixtures or equipment.
13. INSURANCE.
13.1 Coverage. Tenant shall assume the risk of damage to any fixtures, goods,
inventory, merchandise, equipment, furniture and leasehold improvements, and
Landlord shall not be liable for injury to Tenant's business or any loss of
income therefrom relative to such damage. Tenant shall, at all times during the
term of this Lease, and at its own cost, procure and continue in force the
following insurance coverage.
5
<PAGE>
a. Comprehensive public liability insurance, insuring Landlord and Tenant
against any liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto.
13.2. Insurance Policies. The limits of said insurance policies shall not,
however, limit the liability of the Tenant hereunder. Tenant may carry said
insurance under a blanket policy, providing, however, said insurance by Tenant
shall name Landlord as an additional insured. If Tenant shall fail to procure
and maintain said insurance, Landlord may, but shall not be required to, procure
and maintain same, but at the expense of Tenant. Insurance required hereunder
shall be in companies that rate B+ or better in "Best's Insurance Guide".
Tenant shall deliver to Landlord prior to occupancy of the premises copies of
policies of insurance required herein or certificates evidencing the existence
and amounts of such insurance with loss payable clauses, satisfactory to
Landlord. No policy shall be cancellable or subject to reduction of coverage
except after fifteen (15) days prior written notice to Landlord. The minimum
acceptable amount of comprehensive liability insurance is $1,000,000 against
claims in any occurrence, and property damage insurance in an amount of not less
than $100,000 per occurrence, or combined single limit of $1,000,000
comprehensive liability and property damage insurance.
13.3. Waiver of Subrogation. As long as their respective insurers so permit,
Landlord and Tenant each hereby waive any and all rights of recovery against the
other for any loss or damage occasioned to such waiving party or its property of
others under its control to the extent that such loss or damage is insured
against under any fire or extended coverage insurance policy which either may
have in force at the time of such loss or damage. Each party shall obtain any
special endorsement, if required by their insurer, to evidence compliance with
the aforementioned waiver.
14. SERVICE AND UTILITIES.
14.1 Landlord's Obligations. Landlord agrees to furnish to the Premises during
reasonable hours of generally recognized business days to be determined by
Landlord, and subject to the Rules and Regulations of the building, electricity
for normal lighting and fractional horsepower office machines, heat and air
conditioning required in Landlord's judgment for the comfortable use and
occupancy of the Premises, janitorial, window washing and elevator service.
Landlord shall also maintain and keep lighted the common stairs, gallerias,
entries and toilet rooms in the building. Landlord shall not be liable for and
Tenant shall not be entitled to any reduction of rental by reason of Landlord's
6
<PAGE>
failure to furnish any of the foregoing when such failure is caused by accident,
breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character, or by any other cause, similar or dissimilar, beyond
the reasonable control of Landlord.
14.2 Tenant's Obligation. Tenant shall pay for, prior to delinquency, all
telephone and all other materials and services, not expressly required to be
paid by Landlord, which may be furnished to or used in, on or about the Premises
during the term of this Lease. Tenant will not, without the prior written
consent of Landlord and subject to any conditions which Landlord may impose, use
any apparatus or device in the Premises which will in any way increase the
amount of electricity or water usually furnished for use of the Premises as
general office space. If Tenant shall require water or electric current in
excess of that usually furnished or supplied for use of the Premises as general
office space, Tenant shall first procure the consent of Landlord. Wherever heat
generating machines or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning units in the
Premises and the cost thereof, including the cost of installation, operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord. Landlord shall not be liable for Landlord's failure to furnish any of
the foregoing when such failure is caused by any cause beyond the reasonable
control of Landlord. Landlord shall not be liable under any circumstances for
loss of or injury to property, however occurring, in connection with failure to
furnish any of the foregoing.
15. PROPERTY TAXES. Tenant shall pay before delinquency, all personal
property or similar taxes levied or assessed and which become payable during the
term hereof upon all Tenant's equipment, furniture, fixtures and personal
property located in the Premises. Landlord shall pay all property taxes on the
land and building, except should the California Constitution be changed in a way
that results in a higher or lower tax on the Premises than the annual increases
now a matter of law, any such increase or decrease shall be passed through to
tenant on a prorated basis as an item separate from any CPI adjustments. Tenant
shall pay to Landlord its share of such taxes, if any, within thirty days after
delivery to Tenant by Landlord of a statement in writing setting forth the
amount of such taxes.
16. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with
the rules and regulations attached as Exhibit "B" to this Lease, as well as such
rules and regulations that Landlord shall from time to time promulgate.
Landlord reserves the right from time to time to make all reasonable
modifications to those rules which shall be binding to Tenant
7
<PAGE>
upon delivery of a copy of them to Tenant. Landlord shall not be responsible
to Tenant for the nonperformance of any of said rules by any other tenant.
17. HOLDING OVER. If Tenant remains in possession without Landlord's consent,
after termination of the Lease, by lapse of time or otherwise, Tenant shall pay
Landlord for each day of such retention one-fifteenth (1/15th) of the amount of
the monthly rental for the last month prior to such termination and Tenant shall
also pay all costs, expenses and damages sustained by Landlord by reason of such
retention, including, without limitation, claims made by a succeeding tenant
resulting from Tenant's failure to surrender the Premises.
18. ENTRY BY LANDLORD. Landlord reserves the right to enter the premises at
any time to inspect the Premises, to provide any service for which Landlord is
obligated hereunder, to submit the Premises to prospective purchasers or
tenants, to post notices of nonresponsibility, and to alter, improve, maintain
or repair the Premises or any portion of the building of which the Premises are
a part that Landlord deems necessary or desirable, all without abatement of
rent. Landlord may erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, but shall not
block entrance to the Premises and not interfere with Tenant's business, except
as reasonably required for the particular activity by Landlord. Landlord shall
not be liable in any manner for any inconvenience, disturbance, loss of
business, nuisance, interference with quiet enjoyment, or other damage arising
out of Landlord's entry on the Premises as provided in this paragraph, except
damage, if any, resulting from the negligence or willful misconduct of Landlord
or its authorized representative. Landlord shall retain a key with which to
unlock all doors into, within and about the Premises, excluding Tenant's vaults,
safes and files. In an emergency, Landlord shall have the right to use any
means which Landlord deems reasonably necessary to obtain entry to the Premises,
without liability to Tenant, except for any failure to exercise due care for
Tenant's property. Any such entry to the Premises by Landlord shall not be
construed or deemed to be forcible or unlawful entry into or a detainer of the
Premises or an eviction of Tenant from the Premises or any portion thereof.
19. RECONSTRUCTION. If the Premises or the building of which the Premises are
a part are damaged by fire or other peril covered by extended coverage
insurance, Landlord agrees to make repairs and restorations to the extent and in
the manner possible at a cost not exceeding the proceeds of the insurance
received by Landlord. If the cost of repair and restoration exceeds the amount
of proceeds received from insurance, Landlord may elect to terminate this Lease
by giving notice to Tenant within twenty (20) days after determining that the
cost will exceed such proceeds. If
8
<PAGE>
Landlord proceeds with repair and restoration, this Lease shall remain in full
force and effect, except that Tenant shall be entitled to a proportionate
reduction of rent while such repairs are being made. The rent reduction shall
be based upon the extent to which repair and restoration activity materially
interferes with Tenant's business at the Premises, provided, however, that if
the damage was occasioned by the fault or neglect of Tenant, its agents or
employees, there shall not be an abatement of rent.
20. DEFAULT; REMEDIES.
20.1 Default. The occurrence of any of the following shall constitute a
default by Tenant:
a. Failure by Tenant to pay the rent or other monies when due, where such
failure continues for three (3) business days after written notice by Landlord
to Tenant.
b. Abandonment of the Premises by Tenant.
c. Failure by Tenant to perform any other provision of this Lease where such
failure to perform is not cured within thirty (30) days after notice has been
given to Tenant; provided, however, that if the nature of the default is such
that the same cannot reasonably be cured within said thirty (30) day period,
Tenant shall not be deemed to be in default if Tenant shall within such period
commence such cure and thereafter diligently prosecute the same to completion.
d. The making by Tenant of any general assignment or general arrangement for
the benefit of creditors; the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or of a petition for reorganization or arrangement
under any law relating to bankruptcy (unless, in the case of a petition filed
against Tenant, same is dismissed within sixty (60) days; the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where such seizure is not
discharged within thirty (30) days.
20.2 Remedies. In the event of any such default Landlord may:
Maintain this Lease in full force and effect and recover the rent and other
monetary charges as they become due, without terminating Tenant's right to
possession irrespective of whether Tenant shall have abandoned the Premises. In
the event Landlord elects not to terminate the Lease, Landlord
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shall have the right to attempt to re-let the Premises at such rent and upon
such conditions and for such a term, and to do all acts necessary to maintain
or preserve the Premises as Landlord deems reasonable and necessary without
being deemed to have elected to terminate the Lease, including removal of all
persons and property from the Premises. Such property may be removed and
stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant. In the event any such reletting occurs, this Lease shall terminate
automatically upon the new tenant taking possession of the Premises.
Notwithstanding that Landlord fails to elect to terminate the Lease initially,
Landlord at any time during the term of this Lease may elect to terminate this
Lease by virtue of such previous default of Tenant.
Terminate Tenant's right to possession by any lawful means, in which case this
Lease shall terminate and Tenant shall immediately surrender possession of the
Premises to Landlord. In such event Landlord shall be entitled to recover from
Tenant all damages incurred by Landlord by reason of Tenant's default,
including without limitation thereto, the following: (1) the worth at the time
of award of any unpaid rent which would have been earned at the time of such
termination; plus (2) the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time
of award exceeds the amount of such rental loss that is proved could have been
reasonably avoided; plus (3) the worth at the time of award of the amount by
which unpaid rent for the balance of the term after the time of award exceeds
the amount of such rental loss that is proved could be reasonably avoided;
plus (4) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform his obligations
under this Lease or which in the ordinary course of events would be likely to
result therefrom; plus (5) at Landlord's election, such other amounts in
addition to or in lieu of the foregoing as may be permitted from time to time
by applicable law. Upon any such re-entry Landlord shall have the right to
make any reasonable repairs, alterations or modifications to the Premises,
which Landlord in its sole discretion deems reasonable and necessary. As used
in (1) above, the "worth at the time of award" is computed by allowing
interest at the rate of ten percent (l0%) per annum from the date of default.
As used in (2) and (3) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the U.S. Federal Reserve Bank
at the time of award plus one percent (l%).
Remedies of Landlord contained in this Lease shall be construed and held to be
cumulative, and Landlord shall have the right to pursue any one or all of such
remedies or any other remedy or relief which may be provided by law. No waiver
of any default of Tenant hereunder shall be implied from any acceptance by
Landlord of any rent or other payments
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due hereunder or any omission by Landlord to take any action on account of
such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Landlord to or of any act by Tenant requiring Landlord's consent
or approval shall not be deemed to waive or render unnecessary Landlord's
consent or approval to or of any subsequent similar acts by Tenant.
21. EMINENT DOMAIN. If more than twenty-five percent (25%) of the Premises is
taken or appropriated by any public or quasi-public authority under powers of
eminent domain, either party hereto shall have the right at its option, to
terminate this Lease. If less than twenty-five percent (25%) of the Premises is
taken (or neither party elects to terminate as above, provided if more than
twenty-five percent (25%) is taken), the Lease shall continue, but the rental
thereafter to be paid shall be equitably reduced. If any part of the building
of which the Premises are a part is so taken or appropriated, whether or not any
part of the Premises is involved, Landlord shall be entitled to the entire award
and compensation for the taking which is paid or made by the public or quasi-
public agency, and Tenant shall have no claim against said award.
22. STATEMENT TO LENDER. Tenant shall at any time and from time to time, upon
not less than ten (10) days prior written notice from Landlord, execute,
acknowledge, and deliver to Landlord a statement in writing, (a) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modifications and certifying that this Lease as so modified,
is in full force and effect), and the date to which the rental and other charges
are paid in advance, if any, and (b) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on the part of the Landlord hereunder,
or specifying such defaults if any are claimed. Any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion
of the real property of which the Premises are a part.
23. PARKING. Tenant shall have the right to use, in common with other tenants
or occupants of the building, parking facilities, provided by Landlord for
tenants of The Landmark, subject to the rules and regulations established by
Landlord. Said parking shall be at no expense to the Tenant unless a tax, fee or
levy is imposed directly or indirectly by a Federal, State or local agency or
jurisdiction for parking. If such a tax, fee or levy is imposed tenant agrees to
pay its portion of said fee as reasonably determined by the Landlord.
24. AUTHORITY OF PARTIES.
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24.1 Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation, in accordance with a duly adopted resolution of the Board of
Directors of said corporation or in accordance with the bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
24.2 Limited Partnerships. Landlord herein is a limited partnership. It is
understood and agreed that any claims by Tenant on Landlord shall be limited to
the assets of the limited partnership. And furthermore, Tenant expressly waives
any and all rights to proceed against the individual partners or the officers,
directors or shareholders of any corporate partner, except to the extent of
their interest in said limited partnership.
25. GENERAL PROVISIONS.
25.1 Exhibits. Exhibits attached hereto, and addendums initialed by the
parties, are deemed to constitute a part hereof.
25.2 Waiver. The waiver by Landlord of any provision of this Lease shall not
be deemed to be a waiver of any subsequent breach of the same or any other
provisions of this Lease herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any provision of this Lease, other than the failure of the Tenant
to pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of the acceptance of such rent.
25.3 Notices. All notices and demands which may or are required to be given by
either party to the other hereunder shall be in writing. All notices and
demands by the Landlord to the Tenant shall be sufficient if delivered in person
or sent by first class mail, postage prepaid, addressed to the Tenant at the
Premises or to such other place as Tenant may from time to time designate in a
written notice to the Landlord. All written notices and demands by the Tenant
to the Landlord shall be sufficient if delivered in person or sent by first
class mail, postage prepaid, addressed to the Landlord at the office of the
building or to such other person or place as the Landlord may from time to time
designate in a notice to the Tenant. Any such notice is effective at the time
of delivery or 48 hours after mailing.
25.4 Rentable Area. Rentable square footage, as herein used, is the actual
square footage of the office suite plus a load factor for gallerias, restrooms,
hallways and other common areas. The stated rentable area will not be used as a
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basis for either party making any claim against the other.
25.5 Joint and Several Obligations. If there be more than one Tenant, the
obligations hereunder imposed upon tenants shall be joint and several.
25.6 Captions. The captions of the paragraphs of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
25.7 Time. Time is of the essence hereof.
25.8 Successors and Assigns. The provisions of this Lease, subject to the
provisions as to assignment, apply to and bind the successors and assigns of the
parties hereto.
25.9 Recording. Neither Landlord nor Tenant shall record this Lease or a
short form memorandum hereof without the prior written consent of the other
party.
25.10 Scope and Amendments. This Lease is and shall be considered to be the
only agreement between the parties hereto. All negotiations and oral agreements
acceptable to both parties are included herein. No amendment or other
modification of this Lease shall be effective unless in a writing signed by
Landlord and by Tenant.
25.11 Legal Fees. In the event of any action brought by either party against
the other under this Lease, the prevailing party shall be entitled to recover
all costs including the fees of its attorneys as the court may adjudge
reasonable.
25.12 Sale. In the event of any sale of the building, Landlord shall be
released of any liability under this Lease, and the purchaser of the Premises
shall be deemed to have assumed and agreed to carry out all of the obligations
of the Landlord under this Lease.
25.13 Lender Requirements. Upon request of the Landlord, Tenant will, in
writing, subordinate its rights hereunder to the lien of any mortgagee, or deed
of trust to any bank, insurance company or other lending institution, now or
hereafter in force against the land and building of which the Premises are a
part, and to all advances made or hereafter to be made upon the security
thereof. If any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by the
Landlord covering the Premises, the Tenant shall recognize such purchaser as the
Landlord under this Lease.
25.14 Name. Tenant shall not use the name of the development in which the
Premises are situated for any purpose other than as an address of the business
to be
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conducted by the Tenant in the Premises, unless written authorization is
obtained from Landlord.
25.15 Severability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof.
25.16 Applicable Law. This Lease shall be governed by the laws of the State
of California.
25.17 Toxics. Landlord and Tenant acknowledge that they have been advised
that numerous federal, state, and/or local laws, ordinances and regulations
("law") affect the existence and removal, storage, disposal, leakage of
contamination by materials designated as hazardous or toxic ("Toxics"). Many
materials, some utilized in everyday business activities and property
maintenance, are designated as hazardous or toxic. Some of the Laws require that
Toxics be removed or cleaned up without regard to whether the party required to
pay for the "clean up" caused the contamination, owned the property at the time
the contamination occurred or even knew about the contamination. Some items,
such as asbestos or PCB's, which were legal when installed, now are classified
as Toxics, and are subject to removal requirements. Civil lawsuits for damages
resulting from Toxics may be filed by third parties in certain circumstances.
Tenant and Landlord agree to hold the other harmless from any responsibility for
any Toxics which are brought on to the Premises or the project by themselves,
their agents, employees or contractors.
26. ELECTRICAL, COMMUNICATIONS AND ALARM WIRING.
26.1 Tenant shall contact the Landlord prior to installing or relocating any
electrical, telephone, network, LAN, intercom, doorbell, or alarm wiring systems
at the Landmark Office Center.
26.2 All electrical wiring shall be installed by a licensed contractor in
expanded metal tubing in accordance with the most current electrical code, etc.
26.3 All communication cabling shall be installed by a licensed contractor and
shall be plenum rated and shall not be installed as to "lay" on ceiling tile or
t-bar grid systems.
A certificate of compliance shall be provided by contractor to Landlord at time
of completion.
26.4 Landlord shall not be financially responsible for any repair or
replacement of any communication cables, telephone lines, telephone feeders, or
trunk lines beyond the M.P.O. (minimum point of entry) established by Pacific
Bell. If one or more of these lines serve several tenants, the cost of
installation and repair shall be divided among tenants currently being served by
said cable.
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26.5 Not all existing telephone rooms/punchdown boards are permanent. Tenant
and his contractor must verify location of termination points with the Landlord
prior to installation.
26.6 No audible alarm systems will be permitted. Landlord will not assume any
financial responsibility for any alarms attributable to its employees,
contractors, including janitors, guards, or service personnel.
26.7 Any work requiring access to adjoining tenant spaces shall be prearranged
so that Landlord can obtain permission for the intrusion/interruption of the
space. Tenant shall reasonably cooperate in arranging access to contractors for
adjoining tenant when requested by Landlord.
26.8 Upon request of Landlord, Tenant shall remove all communication cable
that Tenant has installed in the Premises upon expiration of this Lease and
repair all damage caused by said removal.
27. AMERICANS WITH DISABILITIES ACT. Landlord believes the Premises complies
with the "Americans With Disabilities Act" (ADA), but no independent
investigation has been made to ensure compliance with the "Americans With
Disabilities Act" (ADA). This Act may require a variety of changes to a
facility, including potential removal of barriers to access by disabled persons
and provision of auxiliary aids and services for hearing, vision or speech
impaired persons, some of which would be the Landlord's responsibility and some
would be the Tenant's responsibility. Landlord urges all parties to obtain
independent legal and technical advice with respect to the physical and
environmental conditions and ADA compliance of the Property. The Parties agree
that it will rely solely on their own investigations and/or that of a licensed
professional specializing in these areas, and not on the investigation,
assurances or opinion of Landlord or Broker, if any.
28. BROKERS. Tenant warrants that it has had no dealing with any real estate
broker or agent in connection with the negotiation of this Lease excepting only
Mark Moser of Catalyst Real Estate Group, and it knows of no other real estate
broker or agent who is entitled to a commission in connection with this Lease.
Commissions shall be paid to Broker(s) on the following schedule: 6%, 5%, 4%,
3%, 2%. No commissions shall be paid on Tenant Improvement Amortizations, CPI
Increases or any other rent adjustment covered in section 4.2 herein.
29. TENANT IMPROVEMENTS.
a. Landlord shall, at its expense replace the carpet and paint the walls.
No rent will be charged to
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Tenant for the Premises during this time (approximately five days).
b. Landlord is also willing to construct 15 private offices on the 2nd
floor at Tenant's sole cost which may be paid in one lump sum or
amortized over the 36 months at an 8 1/2 % per annum interest rate.
Tenant shall be responsible for the rent on 1861 Landings Drive during
the construction of these improvements and Tenant may pay this in one
lump sum or amortized over the 36 months at an 8 1/2 % per annum
interest rate.
30. HOLD OVER IN SUITES 2065 & 2073. Tenant shall remain in possession of
their existing Premises and at their existing rate until the Tenant Improvements
requested above are complete.
31. OPTION TO EXTEND TERM. Provided Tenant is not in default hereunder at the
expiration of the term herein provided for and has fully and faithfully
performed all of Tenant's obligations under the Lease during said term, then
Tenant shall have the option to extend the term for one additional three year
term, commencing immediately upon expiration of the initial term. Tenant shall
give Landlord written notice of exercise of the option at least 180 days before
the expiration of the initial term. Lease payments for said extension period
shall be at rate to be negotiated between Tenant and Landlord at the time the
lease extension notice is given. If a lease modification extending the term and
including a new lease rate is not agreed to in writing within 30 days of the
extension notice being given, this option to extend shall become void.
32. BUILDING SIGNAGE. Landlord shall provide Tenant a sign consistent with
the other signs on the project for full building users. Landlord shall also at
Tenant's sole cost place a standard Tenant identification sign on the corner of
Charleston Road and the entry driveway.
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The parties hereto have executed this Lease on the dates specified immediately
adjacent to their respective signatures.
LANDLORD: INVESTMENTS, LIMITED
By: THRUST IV, INC., General Partner
By: /s/ Hugh R. Bikle Date: 19 June 96
______________________________ _____________________
Hugh R. Bickle President
TENANT: ROGUE WAVE SOFTWARE, INC.
By: /s/ Robert Holburn Date: June 10, 1996
______________________________ _____________________
(SIGNATURE)
Robert Holburn
______________________________ Tax ID# 93-1064214
(PRINT NAME) (TITLE) __________
17
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[MAP OF BUILDING DESIGNATIONS]
<PAGE>
EXHIBIT A
PAGE 2 OF 3
[SITE PLAN OF SUITE 1861]
<PAGE>
EXHIBIT B
Rules and Regulations
---------------------
1. Keys are issued, in a reasonable number, by Landlord to Tenant at no
charge.
2. Access cards, used to open the electronic lock of the front entry door of a
particular building after normal business hours, are assigned to individual
people pursuant to a list submitted by Tenant to Landlord. A $15.00 deposit per
card is charged upon issuance and refundable upon return. When a card holder is
no longer entitled to a card (left employment, etc.) Tenant shall notify
Landlord of a new holder, or if the card has been taken or lost. By so
notifying Landlord, a particular card code can be removed from the authorized
list, so that it no longer will activate the lock.
3. No sign or notice shall be displayed by Tenant outside of its office space
without written consent of Landlord which may be unreasonably withheld. If
approval is not given, Landlord shall have the right to remove such sign or
notice without notice to and at expense of the Tenant. All signs on access
doors to the Premises shall be approved by Landlord. The original standard
company sign on the main door to the Premises will be installed at Landlord's
expense. Tenant may, at its expense, install a different sign, after written
design approval by Landlord. Design criteria should be obtained from Landlord
in advance.
Tenant shall not place anything within the Premises which may appear unsightly
from outside of the Premises.
Tenant shall not install any curtains, blinds , shades, or screens on any
windows or doors of the Premises without Landlord's consent which may be
unreasonably withheld.
4. Sidewalks, halls, passages, exits, entrances, elevators, and stairways shall
not be obstructed by any of the tenants, or used by them for any purpose other
than for ingress or egress from their respected offices.
5. Tenant shall not alter any lock or install any new or additional locks or
bolts on any doors or windows without the written consent of Landlord. All such
alterations shall be done by Landlord's agents at Tenant's cost.
6. The toilet rooms, urinals, wash bowls and other apparatus shall not be used
for any purpose other than for which they were installed.
7. Tenant shall not overload the floor of the office
<PAGE>
complex. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork, or plaster or in any way deface the Premises, except for
hanging of small items such as pictures with nail type of hangers, without
Landlord's approval. If Tenant hangs any other furniture, equipment,
whiteboards etc. Tenant shall be responsible for the removal and repair of all
damages to the Premises.
8. No unusually large or heavy equipment shall be brought into the complex
without prior notice to Landlord and all moving of the same into or out of the
office complex shall be done at such time and such a manner as Landlord shall
designate.
All damage done to the office complex by moving or maintaining any such
equipment shall be repaired at the expense of Tenant.
9. Tenant shall not use the office complex in a manner offensive or
objectionable to the Landlord or other occupants by reason of noise, odors,
and/or vibrations, or interfere in any way with other tenants or those having
business herein, nor shall any animals or birds be brought in or about the
office complex.
10. No lodging, washing clothes, cooking, excluding use of coffee makers and
microwave ovens, shall be done or permitted by any Tenant on the Premises.
11. Tenant shall not use or keep on the Premises any foul or noxious gas,
kerosene, gasoline or inflammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied by Landlord.
12. Landlord shall direct electricians as to where and how telephone wires are
to be installed. No changing of wires will be allowed without the consent of
the Landlord which may be unreasonably withheld. The location of the
telephones, call boxes and other office equipment affixed to the office complex
shall be subject to the approval of Landlord.
13. No aerial satellite dish or other item shall be erected on the roof or
exterior walls of the complex, or on the grounds, without in each instance, the
written consent of the Landlord which may be unreasonably withheld. Any such
item so installed without such written consent shall be subject to removal
without notice at any time.
14. No loud speakers, televisions, radios or other devices shall be used in a
manner so as to be heard or seen outside of the Premises without prior written
consent of the Landlord.
15. On Saturdays, Sundays, legal holidays, and on other days between the hours
of 5:00 P.M. and 8:00 A.M. the following
<PAGE>
day, access to the office complex, or to the Premises may be refused unless
the person seeking entry is known to the person or employee of the office
complex in charge or is properly identified. The Landlord shall in no case be
liable for damages for any error with regard to the admission to or exclusion
from the office complex of any person.
16. Any person whose presence on the Premises may in the judgment of the
Landlord be prejudicial to the safety, character, reputation and interest of the
office complex or of its tenants may be denied access to the office complex or
may be ejected therefrom.
17. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent of the
Landlord.
18. Tenant shall not disturb, solicit, or canvass any occupant of the office
complex and shall cooperate to prevent the same.
19. Landlord shall control and operate the public portions of the office
complex, in such manner as it deems best for the benefit of the tenants
generally.
20. All windows and entrance doors in the office complex shall be left locked
when the Premises are not in use, and all doors opening to public corridors
shall be kept closed except for normal ingress and egress from the office
complex.
21. In case of invasions, mob riot, public excitement, or other emergency, the
Landlord reserves the right to prevent access to the office complex during the
continuance of the same by closing of the doors or otherwise, for the safety of
the tenants and protection of property in the office complex. Landlord will also
direct tenants as necessary in an emergency and will not assume any liability
for damages suffered by tenants as the result of such directions.
<PAGE>
EXHIBIT 10.08
Alan Fisher November 17, 1996
President
Software Partner's
1951 Landings Dr.
Mountain View, CA 94043
Dear Alan,
Pursuant to our earlier conversation, it is agreed that ONSALE will pay rent to
Software Partners for the office space located at 2013 Landings Drive at the
same rental rate paid by Software Partners under its lease for the space from
The Landmark. While we are not subleasing this space directly from the
landlord, we will continue to rent the space from Software Partners for the
foreseeable future.
I appreciate the ease with which we are able to do business between the two
Companies.
Sincerely,
Agreed: /s/ Alan Fisher
-------------------------------
Alan Fisher
/s/ John Sauerland
John Sauerland Date: NOV 18, 1996
---------------------------------
Chief Financial Officer
<PAGE>
EXHIBIT 10.10
SERVICE AGREEMENT
This agreement entered into this 4th day of December, 1996, ("Agreement Date")
by and between ONSALE, a California Corporation, with an office at 1861 Landings
Drive, Mountain View, CA 94043 ("ONSALE") and the Gage Marketing Group with an
office at 101 Union Street, Plymouth, MI 48179 ("Gage").
WHEREAS, ONSALE desires the services of a fulfillment house; and
WHEREAS, Gage desires to provide the services of a fulfillment house to ONSALE.
NOW, THEREFORE, in consideration of the following terms and conditions, ONSALE
and Gage agree as follows:
1. SCOPE OF WORK
Gage shall provide to ONSALE the Services set forth in Exhibit A hereto
(hereinafter "Services") and shall distribute the ONSALE products set forth in
Exhibit B ("Merchandise").
2. PRICES, PAYMENTS, TAXES AND AUDITS
ONSALE shall pay Gage the on-going service fees and expense reimbursements set
forth in Exhibit C ("Pricing") hereto. Gage shall supply ONSALE upon request
with documentation to support such charges. ONSALE shall not pay for any
expenses it has not approved in advance. Such payments shall be made by ONSALE
no more than thirty (30) days following invoice by Gage.
The prices set forth in Exhibit C are exclusive of any amount for Federal, State
and/or Local excise, sales, use property, retailers' occupation or similar
taxes. If any such excluded tax is determined to be applicable to the
transactions made under this Agreement the amount of such tax shall be itemized
on Gage's monthly invoice for the Services invoices thereon.
ONSALE reserves the right to audit Gage's records relating to this agreement
upon ten (10) days notice to Gage. Such audit shall be during normal business
hours and shall be conducted observing Gage's reasonable facility rules.
3. ONSALE PROPERTY
A. Description
- ---------------
Gage acknowledges that ONSALE shall retain all rights and title to property
supplied by ONSALE including that listed on Exhibit B hereto, as Exhibit B may,
from time to time, be updated or amended, which ONSALE shall deliver to Gage for
safekeeping and distribution as instructed by ONSALE (hereinafter "ONSALE
Property").
Gage may from time to time, purchase or manufacture to ONSALE's order and
specifications, materials for distribution as instructed by ONSALE. All rights
and title to such materials shall pass to ONSALE immediately upon Gage's receipt
of ONSALE's payment for same and such will become ONSALE property.
[**] Confidential Treatment Requested
--------------------------------
<PAGE>
C) Upon termination or expiration of the agreement, Gage shall promptly fill all
accepted but unshipped orders for Product unless otherwise requested by ONSALE.
D) Either party's acceptance of any order from the other after the termination
or expiration of this agreement shall not be construed as a renewal or extension
of this agreement, nor as a waiver of termination or expiration of this
agreement.
E) The terms, provisions, representations and warranties contained in this
agreement that by their sense and context are intended to survive the
performance thereof by either or both parties shall so survive the completion of
performance and termination or expiration of this agreement, including without
limitation the making of any and all payments due under this agreement and the
confidentiality provisions.
6. INSURANCE
Gage shall obtain and continue at its own cost and expense at all times and in
full force and effect throughout the term of the agreement sufficient insurance
to cover all of ONSALE's property in its possession and Gage's obligations
thereunder.
7. SECURITY OF ONSALE PROPERTY
A) Gage shall store all ONSALE Property in secure buildings under its control
and be responsible for its safekeeping. ONSALE reserves the right to inspect and
inventory ONSALE Property in Gage's possession upon reasonable notice to Gage.
Such inspections shall be during normal business hours and shall be conducted
observing Gage's reasonable facility rules.
B) From time to time, ONSALE may place into Gage's control certain documentation
prior to its introduction into commerce ("Pre-release Products"). ONSALE shall
identify Pre-release Products as such to Gage and Gage shall store and handle
Pre-release Property with a high level of security so as to prevent releases
prior to notification from ONSALE.
C) All other Products shall be handled at a high level of security, at not time
shall any Products be handled with less than the same care and security as it
handles its own property of similar value.
D) Gage shall limit the physical adjustment transactions of the inventory system
to only the necessary Gage employees.
E) All ONSALE inventory located in its possession or control at Gage will be
included in the Gage inventory system.
8. INDEMNITY AND LIMITATION OF LIABILITY
Gage shall indemnify and hold ONSALE, its directors, officers, agents and
employees harmless against all claims arising out of the acts or omission of
Gage, its employees performance of any services for ONSALE or from Merchandise.
Products and Services sold hereunder including reasonable attorney's fees and
shall indemnify
<PAGE>
ONSALE for the replacement costs of any ONSALE Property lost, stolen or damaged
while in its possession or control.
9. CONFIDENTIAL INFORMATION
During and for two (2) years after the termination or expiration of this
agreement Gage shall maintain in strict confidence all information disclosed to
it by ONSALE or other, including, but not limited to, all price and marketing
information, customers lists, technical information and data, and other
information of any nature relating to all ONSALE products and services or the
sale or distribution thereof. All information disclosed by ONSALE thereunder and
information Gage obtains in connection with this agreement shall be used solely
in furtherance of the interest of ONSALE.
10. TRAINING
Gage shall provide training as required. ONSALE shall have a right to reject any
training materials, in its sole discretion, deemed inappropriate.
11. TRADEMARKS
Gage may not use any ONSALE trademark, trade name or service mark (collectively,
"Mark) in any manner, including without limitation, for publicity purposes,
without ONSALE's express written permission. Nothing herein, nor in any written
permission shall grant to Gage any right to or interest in any ONSALE Mark. Gage
hereby acknowledges ONSALE's ownership of all rights, titles and interests in
its trademarks, trade names and service marks.
12. CREATIVE SERVICES
ONSALE reserves the sole and exclusive right of approval of any printed
materials bearing it name or Mark(s), including without limitation, brochures,
promotional merchandise and like products created for ONSALE by Gage. Gage will
no distribute any such products without ONSALE's express written approval.
13. INDEPENDENT CONTRACTORS
This agreement does not create an agency, joint venture or partnership between
Gage and ONSALE. Neither party shall impose or create any obligation of
responsibility, express or implied, or make any promises, representations or
warranties on behalf of the other party, other than as expressly provided
herein. Nothing in the agreement shall be construed so as to make Gage, its
employees or agents, entitled to participate in any of ONSALE's employees or
agents, entitled to participate in any of ONSALE's employee benefit programs.
ONSALE shall not be liable to pay wages, withhold any taxes, provide any
insurance, or otherwise be obligated as an employer. ONSALE shall not be
responsible to any of the various governmental agencies for Worker's
Compensation insurance or any other type of employee insurance, withholding
taxes, or social security taxes for Gage, employees or other agent of Gage.
<PAGE>
14. WARRANTIES
Gage warrants that it shall maintain all records relating to this agreement in
accordance with generally accepted accounting principles; that it will secure
all ONSALE Property with appropriate access control and use the same protective
measures as it would use for its own property of similar value: that all
statements, invoices and inventories sent to ONSALE are true a accurate as of
the date of issue; and that it will perform the duties and responsibilities set
forth in the agreement in a timely and business like manner.
15. GENERAL
A. Assignment
- -------------
Neither party may assign any of its rights or responsibilities under this
agreement without the express written permission of the other party.
B. Amendments
- -------------
No amendements to or modification of this Agreement shall be binding unless in
writing and signed by a duly authorized representative of both parties.
C. Severability
- ---------------
If for any reason a court of competent jurisdiction finds any provision of this
agreement, or portion thereof, to be unenforceable, that provision of the
agreement shall be enforced to the maximum extent permissible so as to effect
the intent of the parties, and the remainder of this agreement shall continue in
full force and effect.
IN WITNESS WHEREOF, the Parties have executed this Agreement through their duly
authorized signatories as of the date set forth above,
Accepted:
GAGE MARKETING GROUP ONSALE
By:___________________________________ By:/s/ John Sauerland
---------------------------
Terry Niles John Sauerland
President, Marketing Services Division Chief Financial Officer
<PAGE>
14. WARRANTIES
Gage warrants that it shall maintain all records relating to this agreement in
accordance with generally accepted accounting principles; that it will secure
all ONSALE Property with appropriate access control and use the same protective
measures as it would use for its own property of similar value: that all
statements, invoices and inventories sent to ONSALE are true a accurate as of
the date of issue; and that it will perform the duties and responsibilities set
forth in the agreement in a timely and business like manner.
15. GENERAL
A. Assignment
- -------------
Neither party may assign any of its rights or responsibilities under this
agreement without the express written permission of the other party.
B. Amendments
- -------------
No amendements to or modification of this Agreement shall be binding unless in
writing and signed by a duly authorized representative of both parties.
C. Severability
- ---------------
If for any reason a court of competent jurisdiction finds any provision of this
agreement, or portion thereof, to be unenforceable, that provision of the
agreement shall be enforced to the maximum extent permissible so as to effect
the intent of the parties, and the remainder of this agreement shall continue in
full force and effect.
IN WITNESS WHEREOF, the Parties have executed this Agreement through their duly
authorized signatories as of the date set forth above,
Accepted:
GAGE MARKETING GROUP ONSALE
By:/s/ Terry Niles By:___________________________
-----------------------------------
Terry Niles John Sauerland
President, Marketing Services Division Chief Financial Officer
<PAGE>
EXHIBIT A
---------
SERVICES
- --------
For description of services, referenced the attached proposals dated
November 22, 1996.
<PAGE>
[LOGO OF GAGE APPEARS HERE]
November 22, 1996
Mr. John Saverland
ONSALE
1861 Landings Drive
Mountain View, CA 94043
Dear John:
On behalf of the Gage Marketing Group, I am pleased to present the following for
your consideration.
OVERVIEW
- --------
ONSALE markets computer equipment via the Internet acting as on on-line auction
house.
Products are currently shipped through one of the following channels of
distribution:
<TABLE>
<CAPTION>
FULFILMENT CENTER LOCATION AVERAGE WEEKLY ORDER VOLUME
----------------- -------- ---------------------------
<S> <C> <C>
Federal Express San Francisco & Memphis 1,000 - 1,500
ONSALE Mountainview 1,000 - 1,500
Manufacturer Various Locations 2,000 - 3,000
----- -----
4,000 - 6,000
</TABLE>
Fewer than ten shipments are returned per week. However, this may increase when
cash-on-delivery terms are offered. All products are prepackaged and all instock
items are shipped within twenty-four hours from receipt of order.
PROPOSED SERVICE
- ----------------
Gage's Marketing Support Services division provides fulfilment and distribution
services. The following centers are available to support ONSALE's distribution
requirements
<TABLE>
<CAPTION>
GAGE FULFILMENT CENTERS CAPACITY ANNUAL ORDERS PROCESSED
----------------------- -------- -----------------------
<S> <C> <C>
Detroit 625,000 Square Feet 750,000
Kankakee (Chicago) 140,000 Square Feet 2,500,000
Minneapolis 480,000 Square Feet 3,000,000
------------------- ---------
1,245,000 Square Feet 6,250,000
</TABLE>
Initially, we propose to process ONSALE's orders through the fulfilment center
in Detroit where secure storage is immediately available. The Kankakee and
Minneapolis facilities provide ONSALE with additional resources for future
utilization.
The attached diagram outlines the process Gage proposes to fulfill orders for
ONSALE products.
[LETTERHEAD OF GAGE MARKETING GROUP APPEARS HERE]
<PAGE>
IMPLEMENTATION PLAN
- -------------------
A comprehensive implementation plan will be developed upon acceptance of this
proposal. The plan will include:
. Personalize Gage's Customer Quality Operating System (CQOS) to support
ONSALE's requirements. CQOS defines a customers expectations, establishes
procedures and outlines measurable. All elements are documented and updated
continuously.
. Establish system & communication linkages.
. Prepare facility.
. Identify and prepare Account Team.
. PHASE 1 Transfer Federal Express fulfillment responsibilities to Gage.
(Operational 1/1/97)
. PHASE 2 Transfer ONSALE's fulfillment responsibilities to Gage.
(Operational 2/1/97)
. PHASE 3 Transfer manufacturers fulfillment responsibilities to Gage.
(Operational 3/1/97)
<PAGE>
PROJECTED 1997 BUDGET
- ---------------------
IMPLEMENTATION FEE $[**]
RECURRING FEES
PHASE 1 (Federal Express 1/1/97 - 12/31/97)
. 1,000 - 1,500 Orders Per Week x $[**] Per Order x 52 Weeks $[**] - $[**]
. 1,250 - 1,875 Items Ordered Per Week x [**] Per
Item x 52 Weeks [**] - [**]
PHASE 2 (ONSALE 2/1/97 - 12/31/97)
. 1,000 - 1,500 Orders Per Week x $[**] Per Order x 48 Weeks [**] - [**]
. 1,250 - 1,875 Items Ordered Per Week x [**] Per [**] - [**]
Item x 48 Weeks
PHASE 3 (Manufactures 3/1/97 - 12/31/97)
. 2,000 - 3,000 Orders Per Week x $[**] Per Order x 44 Weeks [**] - [**]
. 2,500 - 3,750 Items Ordered Per Week x [**] Per [**] - [**]
Item x 44 Weeks
TOTAL PROJECTED 1997 BUDGET $[**] - $[**]
. 188,000 - 282,000 Orders Processed
. 235,000 - 352,000 Items Processed
(Average handling charge Per Order/Item processed $[**])
Assumptions
. Instock orders are processed within 24 hours from receipt of order.
. Backorders are processed on a FIFO basis.
. 25% of all orders require two items.
. Inventory turns 20-30 times per year.
. 10,000 Square Feet of continuous secure storage required.
. 100 - 400 Unique Items (sku) in inventory.
. All items are prepackaged.
John, I want to thank ONSALE for giving Gage the opportunity to review its
fulfillment requirements and submit this proposal. I believe we understand the
requirements and I am confident that we can support those requirements. Gage has
well over forty years of fulfillment experience. We have the personnel, systems
and facilities available to begin working with ONSALE immediately. I would
welcome the opportunity to personally present this proposal and of course, you
and your ONSALE associates are welcome to visit Gage's facilities. Please feel
free to call me with any questions. I look forward to hearing from you.
Sincerely,
/s/ Timothy Anthony
Timothy Anthony
313.414.2620
cc: C. Lucas
T. Niles
J. Rewey
[**] Confidential Treatment Requested
--------------------------------
<PAGE>
EXHIBIT B
---------
Merchandise
- -----------
Merchandise categories consist of:
= Desktop PCs
= Printers
= Memory & CPUs
= Servers
= Notebooks
= Networking
= Plotters and Scanners
= Apple/Sun Products
= Drives & Controllers
= Monitors
= CD-ROMs & Multimedia
= Video and Photography
= Hi Fi Audio & Home Theater
= Portable Audio & Car Stereo
= Phones, Faxes and Home Office
= Consumer Electronics
= Computer Accessories
= Mice & Keyboards
= Printer Accessories/Toner
= Modems/Sound Cards
= Software
= Motherboards
= Video Cards
Reference the attached copy of "ONSALE" - Auctions of Computers and
Electronics."
<PAGE>
ONSALE - Auctions of Computers and Electronics Page 2
- --------------------------------------------------------------------------------
---------------- --------------------------
CATEGORIES HOT DEALS
---------------- --------------------------
> Desktop PCs > Packard Bell Pentium 75 w/8 MB RAM, 1 GB HD
----------- -------------------------------------------
> Printers & 4X CD-ROM from $100!
-------- ----------------------
> Memory & CPUs > Packard Bell 486 DX/2 66 MHz 8 MB RAM, 540
------------- -------------------------------------------
> Servers MB HDD from $100
------- ----------------
> Notebooks > JVC GR-DVI Ultra Small Digital "CyberCam"
--------- -----------------------------------------
> Networking Camcorder from $999!
---------- --------------------
> Plotters and Scanners > NEW!!! CYRIX 6X86-p166+System 16MB/2GB HD
--------------------- ------------------------------------------
> Apple/Sun Products from $250!
------------------ ----------
> Drives & Controllers > Pentium 166 MHZ Power Plus System 32 MB/3.2
-------------------- -------------------------------------------
> Monitors GB HD/8X CD/28.8 V.34 from $450!
-------- --------------------------------
> CD-ROMs & Multimedia > 100 MHZ Pentium System 16MB/1.2GB HD from
-------------------- -----------------------------------------
> Video and Photography $200!
--------------------- -----
> Hi Fi Audio & Home Theatre > NEC Versa 4000D with P75, 8MB, 540 MB HD
-------------------------- ----------------------------------------
> Portable Audio & Car Stereo w/2x CD Rom Notebook from $499!
--------------------------- -------------------------------
> Phones, Faxes and Home Office > NEC Versa 586/100, 8M, 540HD, 10.4"
----------------------------- -----------------------------------
> Consumer Electronics Display from $499!
-------------------- ------------------
> Computer Accessories > Internal Controllers for the OMS PS Series
-------------------- ------------------------------------------
> MICE & Keyboards Printers from $100!
---------------- -------------------
> Printer Accessories/Toner > Sanyo SEX-P50 Plain Paper Inkjet Fax
------------------------- ------------------------------------
> Modems/Sound Cards Machine from $199!
------------------ ------------------
> Software > Lexmark Winwriter 600 Laser Printer from
-------- $100!
> Motherboards -----
------------ > HP Laserjet III Printer from $399!
> Video Cards ----------------------------------
----------- > QMS ColorScript 210 Network Color Printer
-----------------------------------------
from $499!
----------
> DEC colorwriter 520ic - Color Inkjet
------------------------------------
Printer from $145!
------------------
> AST Vision 7L 17" Monitor from $200!
------------------------------------
> 21" NCR, 28 DPL, 1600 X 1280 Res, Extended
------------------------------------------
SVGA Monitor from $500!
-----------------------
> Dell 17" 1728 SVGA, 28 Dot Pinch Monitor
----------------------------------------
from $25!
---------
> Hewlett Packard IBM: Compaq and DEC
-----------------------------------
Servers, Servers and more Servers!!
-----------------------------------
> Mag DX17I 17-inch, 26 Dot Pitch Trinitron
-----------------------------------------
Color Monitor from $25!
-----------------------
> Hewlett Packard Networking Extravaganza!!
-----------------------------------------
> Simms, Simms, Simms & Intel Pentium
-----------------------------------
Processors!
-----------
> Dell 15" 1528 SVGA, 28 Dot Pinch Monitor
----------------------------------------
from $25!
---------
> 8x32 32MB 72 pin SIMM 70ns from $25!
------------------------------------
> 8MB 72 PIN SIMM 70NS (2X32) (Non-EDO)
-------------------------------------
from $10!
---------
> NEW!!! Artec ViewStation A6000C
----------------------------------
Color Flatbed Scanner for PC from $20!
--------------------------------------
> New 12X IDE CD-ROM from $149!
-----------------------------
> 486 MOTHERBOARD SX25-DX4/133MHZ PCI from
----------------------------------------
$64!
----
---------------------------------------------
GREAT GIFT IDEAS
> Citizen 2.2" Handheld LCD Color TV from
---------------------------------------
$49!
----
> Manguavox Remote AM/FM Portable CD BoomBox
------------------------------------------
w/7 Disk Changer from $89!
---------------------------
> Sanyo SJ3020 Electric Citrus Juicer from
----------------------------------------
$19!
----
> Sharp 128 KB Personal Electronic Organizer
------------------------------------------
from $29!
---------
> Sanyo SK3G "Toasty" Toaster/Snack Maker
----------------------------------------
from $19!
---------
> JVC HRS-5100 Super VHS HI-FI VCR w/DSS
--------------------------------------
Satellite Connector from $2001!
-------------------------------
> JVC MX-77 Compact Component System w/
-------------------------------------------
Compulink & Labyrinth Port System from $249!
--------------------------------------------
> Sony D-830K Discman w/ Car Kit and
----------------------------------
Electronic Shock Protection from $49!
-------------------------------------
> Canon PC-6 RE Personal/Office Copier from
-----------------------------------------
$379!
-----
________________________________________________________________________________
<PAGE>
EXHIBIT C
---------
Pricing
- -------
IMPLEMENTATION FEE [**]
ORDER PROCESSING $[**] PER ORDER
Includes: Receiving, Warehousing & Inventory Control. Includes Two Items
Fulfillment, Account Management and Quality Assurance. $[**] Per Additional
Item
OPTIONAL
- --------
Coordinate Returns (If Requested) $[**] Per Item Returned
Material Handling (If Requested) $[**] Per Hour
-Inventory Physical
-Scrapping
-Special Material handling
ADMINISTRATION (If Requested) $[**] Per Hour
RUSH SHIPMENTS (If Requested) $[**] Per Hour
FAXING (If Requested) $[**] Per Page
Transportation & Telecommunications charges invoiced at cost plus [**]%.
Reference attached copies of rate information.
[**] Confidential Treatment Requested
--------------------------------
<PAGE>
UPS GROUND SERVICE
1 to 70 pounds
. All rates are effective February 3, 1996.
. Any fraction of a pound over the weight shown takes the next highest rate.
. Refer to the Additional Information page in the back of the book.
COMMERCIAL DELIVERIES
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ------------------------------------------------------------
ZONES ZONES
------------------------------------------------------- -------------------------------------------------------
2 3 4 5 6 7 8 2 3 4 5 6 7 8
------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $2.52 $2.70 $2.94 $3.03 $3.10 $3.19 $3.24 36 $6.28 $7.73 $8.98 $10.95 $13.81 $18.72 $19.79
2 2.57 2.76 3.20 3.32 3.51 3.62 3.83 37 6.38 7.90 9.18 11.22 14.15 17.14 20.30
3 2.65 2.91 3.40 3.55 3.82 3.96 4.28 38 6.47 8.07 9.39 11.48 14.49 17.57 20.80
4 2.76 3.04 3.56 3.74 4.05 4.23 4.63 39 6.56 8.22 9.59 11.74 14.84 17.99 21.31
5 2.90 3.19 3.65 3.86 4.22 4.44 4.87 40 6.66 8.37 9.79 12.00 15.17 18.42 21.82
- ------------------------------------------------------------ ------------------------------------------------------------
6 3.03 3.28 3.72 3.94 4.35 4.61 5.09 41 6.75 8.52 10.01 12.26 15.50 18.84 22.33
7 3.14 3.35 3.77 4.01 4.51 4.82 5.35 42 6.86 8.67 10.22 12.53 15.85 19.27 22.85
8 3.26 3.42 3.83 4.07 4.65 5.08 5.68 43 6.96 8.84 10.43 12.79 16.19 19.69 23.36
9 3.38 3.50 3.90 4.16 4.83 5.37 6.08 44 7.06 9.00 10.64 13.05 16.54 20.13 23.87
10 3.50 3.61 3.99 4.29 5.02 5.74 6.55 45 7.17 9.18 10.85 13.31 16.89 20.55 24.38
- ------------------------------------------------------------ ------------------------------------------------------------
11 3.61 3.72 4.06 4.47 5.28 6.11 7.03 46 7.26 9.33 11.06 13.58 17.21 20.97 24.88
12 3.70 3.84 4.19 4.68 5.56 6.51 7.51 47 7.36 9.48 11.27 13.83 17.53 21.36 25.36
13 3.78 3.97 4.31 4.94 5.88 6.93 8.02 48 7.43 9.60 11.47 14.09 17.82 21.74 25.84
14 3.86 4.12 4.46 5.19 6.22 7.35 8.53 48 7.50 9.71 11.67 14.32 18.10 22.11 26.28
15 3.94 4.28 4.65 5.46 6.56 7.79 9.05 50 7.55 9.80 11.82 14.53 18.37 22.43 26.70
- ------------------------------------------------------------ ------------------------------------------------------------
16 4.02 4.46 4.84 5.73 6.93 8.24 9.57 51 7.63 9.91 11.98 14.70 18.62 22.74 27.06
17 4.11 4.64 5.06 5.99 7.29 8.69 10.09 52 7.68 9.99 12.08 14.82 18.82 22.97 27.34
18 4.20 4.80 5.25 6.25 7.65 9.13 10.50 53 7.74 10.06 12.17 14.91 18.96 23.15 27.55
19 4.30 4.96 5.45 6.49 7.99 9.54 11.10 54 7.78 10.10 12.22 14.99 19.05 23.27 27.88
20 4.43 5.11 5.64 6.74 8.34 9.94 11.59 55 7.83 10.15 12.29 15.06 19.14 23.39 27.83
- ------------------------------------------------------------ ------------------------------------------------------------
21 4.56 5.28 5.83 6.98 8.67 10.35 12.09 56 7.89 10.21 12.35 15.13 19.22 23.50 27.95
22 4.69 5.44 6.03 7.24 9.00 10.75 12.58 57 7.94 10.26 12.40 15.21 19.30 23.61 28.07
23 4.83 5.60 6.22 7.49 9.33 11.16 13.08 58 8.01 10.33 12.45 16.28 19.39 23.71 28.20
24 4.97 5.76 6.42 7.74 9.67 11.57 13.57 59 8.07 10.39 12.51 15.35 19.48 23.82 28.32
25 5.10 5.92 6.63 8.00 10.01 11.99 14.08 60 8.13 10.45 12.56 15.43 19.56 23.92 28.46
- ------------------------------------------------------------ ------------------------------------------------------------
26 5.22 6.10 6.82 8.25 10.34 12.40 14.58 61 8.19 10.51 12.63 15.51 19.65 24.03 28.59
27 5.35 6.26 7.03 8.51 10.67 12.83 15.08 62 8.25 10.56 12.68 15.58 19.73 24.14 28.73
28 5.46 6.43 7.23 8.78 11.01 13.24 15.59 63 8.30 10.62 12.74 15.66 19.83 24.24 28.86
29 5.56 6.58 7.45 9.03 11.36 13.67 16.10 64 8.36 10.67 12.79 15.73 19.92 24.35 29.01
30 5.66 6.73 7.67 9.31 11.72 14.09 16.63 65 8.41 10.73 12.84 15.81 20.01 24.46 29.15
- ------------------------------------------------------------ ------------------------------------------------------------
31 5.76 6.88 7.89 9.60 12.09 14.52 17.16 66 8.46 10.78 12.90 15.87 20.10 24.59 29.28
32 5.87 7.03 8.12 9.88 12.45 14.96 17.69 67 8.52 10.85 12.96 15.94 20.19 24.71 29.42
33 5.97 7.20 8.34 10.15 12.80 15.40 18.23 68 8.57 10.91 13.01 15.99 20.28 24.83 29.54
34 6.08 7.38 8.55 10.43 13.14 15.85 18.75 69 8.66 11.01 13.12 16.21 20.57 25.08 29.74
35 6.19 7.54 8.77 10.69 13.47 16.28 19.28 70 8.71 11.06 13.17 16.26 20.65 25.35 29.99
- ------------------------------------------------------------ ------------------------------------------------------------
</TABLE>
<PAGE>
PACKAGES WEIGHING OVER 70 POUNDS REQUIRE A UPS
OVER 70 POUNDS STICKER.
UPS GROUND SERVICE
71 to pounds
Commercial Deliveries
WEIGHT IN POUNDS
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------ ---------------------------------------------------------------
ZONES ZONES
------------------------------------------------------------- -----------------------------------------------------------
2 3 4 5 6 7 8 2 3 4 5 6 7 8
------------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
71 $13.42 $15.09 $16.88 $18.89 $22.47 $26.47 $30.54 111 $35.56 $37.72 $39.61 $40.74 $43.17 $44.99 $47.23
72 17.09 18.62 20.04 21.11 24.39 27.86 31.24 112 35.87 38.05 39.95 41.09 43.53 45.36 47.62
73 19.90 21.41 23.09 23.75 26.51 29.33 32.13 113 36.18 38.38 40.30 41.44 43.90 45.73 48.00
74 21.96 23.55 25.12 25.99 28.38 30.70 32.98 114 36.50 38.70 40.64 41.79 44.26 46.10 48.39
75 23.48 25.11 26.44 27.23 29.50 31.41 33.58 115 36.80 39.03 40.98 42.14 44.62 46.47 48.77
- ------------------------------------------------------------------ -----------------------------------------------------------
76 24.08 25.67 27.17 28.16 30.29 31.90 34.00 116 37.11 39.35 41.33 42.49 44.98 46.84 49.15
77 24.55 26.16 27.68 28.50 30.62 32.07 34.20 117 37.42 39.68 41.67 42.84 45.34 47.22 49.54
78 25.00 26.64 28.16 28.99 31.04 32.45 34.45 118 37.73 40.01 42.00 43.19 45.71 47.59 49.92
79 25.45 27.11 28.62 28.39 31.44 32.88 34.71 119 38.04 40.33 42.34 43.54 46.07 47.96 50.31
80 25.85 27.54 29.04 29.81 31.84 33.29 35.03 120 38.35 40.65 42.69 43.89 48.43 48.33 50.70
- ------------------------------------------------------------------ -----------------------------------------------------------------
81 26.22 27.92 29.44 30.20 32.24 33.68 35.41 121 38.66 40.98 43.03 44.24 46.81 48.71 51.08
82 26.56 28.28 29.81 30.58 32.63 34.08 35.82 122 38.97 41.31 43.37 44.59 47.17 49.08 51.47
83 26.87 28.61 30.15 30.94 33.00 34.46 36.23 123 39.28 41.63 43.71 44.93 47.54 49.46 51.88
84 27.19 28.93 30.49 31.29 33.36 34.85 36.63 124 39.59 41.96 44.05 45.28 47.90 49.83 52.24
85 27.50 29.26 30.83 31.64 33.72 35.23 37.03 125 39.90 42.28 44.39 45.62 48.26 50.20 52.63
- ------------------------------------------------------------------ -----------------------------------------------------------------
86 27.81 29.59 31.18 31.99 34.10 35.61 37.43 126 40.21 42.60 44.73 45.98 48.62 60.67 53.01
87 28.12 29.91 31.52 32.34 34.47 36.00 37.82 127 40.53 42.93 45.08 46.33 48.98 50.94 53.40
88 28.42 30.23 31.86 32.69 34.83 36.38 38.22 128 40.84 43.26 45.42 46.88 49.35 51.32 53.78
89 28.73 30.56 32.19 33.04 35.20 36.76 38.61 129 41.15 43.58 45.76 47.03 49.71 51.69 54.16
90 29.05 30.88 32.53 33.38 35.56 37.14 39.01 130 41.45 43.91 46.10 47.38 50.07 52.06 54.55
- ------------------------------------------------------------------ -----------------------------------------------------------------
91 29.36 31.21 32.88 33.73 35.93 37.52 39.41 131 41.76 44.24 46.43 47.73 50.44 52.43 54.94
92 29.67 31.54 33.22 34.07 36.29 37.89 39.80 132 42.07 44.56 46.78 48.08 50.81 52.81 55.35
93 29.98 31.86 33.54 34.43 36.68 38.27 40.21 133 42.39 44.89 47.11 48.43 51.17 53.18 55.70
94 30.28 32.19 33.88 34.78 37.02 38.63 40.61 134 42.70 45.21 47.45 48.78 51.53 53.55 58.09
95 30.59 32.52 34.22 35.13 37.37 39.00 41.01 135 43.01 45.54 47.80 49.14 51.90 53.92 56.48
- ------------------------------------------------------------------ -----------------------------------------------------------------
96 30.91 32.84 34.50 35.48 37.71 39.37 41.41 136 43.31 45.87 48.14 49.49 52.28 54.30 56.86
97 31.22 33.17 34.82 35.83 38.05 39.75 41.80 137 43.62 46.19 48.48 49.84 52.62 54.67 57.25
98 31.53 33.49 35.19 36.18 38.40 40.13 42.20 138 43.93 46.51 48.82 50.19 52.98 55.05 57.54
99 31.84 33.81 35.53 36.53 38.77 40.50 42.59 139 44.25 46.84 49.15 50.54 53.34 55.42 58.02
100 32.15 34.14 35.86 36.88 39.15 40.88 42.99 140 44.56 47.17 49.49 50.89 53.72 55.80 58.40
- ------------------------------------------------------------------ -----------------------------------------------------------------
101 32.45 34.47 36.20 37.23 39.52 41.25 43.37 141 44.87 47.49 49.83 51.24 54.08 56.17 58.79
102 32.76 34.79 36.55 37.58 39.89 41.62 43.76 142 45.18 47.82 50.17 51.59 54.45 56.54 59.17
103 33.08 35.12 36.89 37.93 40.25 41.99 44.14 143 45.48 48.14 50.50 51.94 54.81 56.92 59.56
104 33.39 35.45 37.23 38.23 40.62 42.37 44.53 144 45.79 48.47 50.84 52.29 55.17 57.28 59.95
105 33.70 35.77 37.58 38.63 40.88 42.74 44.91 145 46.11 48.80 51.18 52.63 55.54 57.65 60.32
- ------------------------------------------------------------------ -----------------------------------------------------------------
106 34.01 36.10 37.92 38.98 41.34 43.12 45.31 146 46.42 49.12 51.52 52.98 55.89 58.00 60.70
107 34.32 36.42 38.25 39.34 41.71 43.49 45.69 147 46.73 49.44 51.85 53.31 56.25 58.36 61.06
108 34.63 36.75 38.59 39.69 42.07 43.87 46.08 148 47.03 49.77 52.19 53.65 56.60 58.72 61.41
109 34.94 37.08 38.94 40.04 42.43 44.24 46.46 149 47.33 50.06 52.53 53.98 56.96 59.08 61.76
110 35.24 37.40 39.28 40.39 42.79 44.61 46.85 150 47.81 50.37 52.85 54.31 57.31 59.44 62.11
- ------------------------------------------------------------------ -----------------------------------------------------------------
</TABLE>
<PAGE>
UPS GROUND SERVICE
1 to 70 pounds
. All rates are effective February 3, 1996.
. Any fraction of a pound over the weights shown takes the next higher rate.
. Refer to the Additional Information page in the back of the book.
RESIDENTIAL DELIVERIES
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ------------------------------------------------------------
ZONES ZONES
------------------------------------------------------- -------------------------------------------------------
2 3 4 5 6 7 8 2 3 4 5 6 7 8
------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $3.25 $3.44 $3.68 $3.76 $3.83 $3.93 $3.97 36 $6.99 $8.43 $9.69 $11.70 $14.59 $17.52 $20.63
2 3.31 3.50 3.93 4.05 4.25 4.36 4.57 37 7.08 8.61 9.90 11.97 14.93 17.95 21.14
3 3.39 3.65 4.13 4.29 4.56 4.70 5.03 38 7.18 8.77 10.10 12.23 15.27 18.39 21.65
4 3.50 3.78 4.29 4.48 4.79 4.98 5.37 39 7.27 8.92 10.30 12.49 15.62 18.80 22.16
5 3.64 3.92 4.39 4.60 4.96 5.18 5.62 40 7.37 9.08 10.52 12.76 15.96 19.24 22.67
- ------------------------------------------------------------ ------------------------------------------------------------
6 3.76 4.00 4.44 4.67 5.09 5.36 5.84 41 7.46 9.23 10.73 13.02 16.30 19.67 23.19
7 3.88 4.07 4.50 4.74 5.25 5.57 6.10 42 7.57 9.39 10.94 13.29 16.64 20.10 23.71
8 3.99 4.14 4.55 4.80 5.39 5.82 6.42 43 7.67 9.55 11.15 13.55 17.00 20.53 24.22
9 4.12 4.22 4.63 4.90 5.57 6.13 6.84 44 7.77 9.73 11.38 13.82 17.35 20.96 24.75
10 4.24 4.33 4.71 5.02 5.76 6.49 7.31 45 7.88 9.89 11.57 14.08 17.69 21.40 25.26
- ------------------------------------------------------------ ------------------------------------------------------------
11 4.38 4.44 4.81 5.21 6.02 6.86 7.79 46 7.98 10.05 11.79 14.35 18.03 21.81 25.77
12 4.45 4.55 4.91 5.42 6.31 7.26 8.29 47 8.07 10.19 12.00 14.62 18.34 22.22 26.26
13 4.53 4.69 5.04 5.67 6.63 7.68 8.79 48 8.14 10.32 12.20 14.87 18.63 22.60 26.73
14 4.60 4.85 5.19 5.94 6.97 8.11 9.30 49 8.22 10.42 12.40 15.12 18.94 22.98 27.21
15 4.68 5.01 5.37 6.21 7.32 8.56 9.82 50 8.28 10.53 12.58 15.33 19.22 23.33 27.64
- ------------------------------------------------------------ ------------------------------------------------------------
16 4.77 5.19 5.58 6.48 7.69 9.01 10.36 51 8.36 10.65 12.74 15.56 19.53 23.71 28.10
17 4.85 5.37 5.80 6.76 8.06 9.47 10.88 52 8.43 10.75 12.87 15.71 19.76 23.98 28.42
18 4.95 5.53 5.99 7.01 8.43 9.92 11.40 53 8.49 10.83 12.96 15.83 19.95 24.21 28.68
19 5.05 5.68 6.19 7.26 8.77 10.33 11.90 54 8.53 10.87 13.02 15.89 20.02 24.32 28.80
20 5.16 5.84 6.37 7.49 9.12 10.74 12.39 55 8.58 10.92 13.08 15.97 20.11 24.43 28.94
- ------------------------------------------------------------ ------------------------------------------------------------
21 5.27 5.97 6.54 7.72 9.42 11.11 12.87 56 8.64 10.97 13.14 16.04 20.20 24.54 29.07
22 5.39 6.13 6.72 7.96 9.75 11.51 13.35 57 8.70 11.04 13.19 16.12 20.29 24.65 29.20
23 5.52 6.28 6.91 8.19 10.07 11.90 13.84 58 8.76 11.10 13.25 16.19 20.37 24.77 29.33
24 5.66 6.45 7.12 8.46 10.42 12.33 14.35 59 8.82 11.18 13.30 16.27 20.46 24.87 29.46
25 5.80 6.81 7.32 8.71 10.75 12.75 14.86 60 8.89 11.22 13.36 16.34 20.54 24.99 29.59
- ------------------------------------------------------------ ------------------------------------------------------------
26 5.92 6.79 7.52 8.98 11.09 13.16 15.36 61 8.94 11.28 13.42 16.42 20.63 25.09 29.72
27 6.05 6.95 7.72 9.24 11.42 13.59 15.87 62 8.99 11.33 13.47 16.50 20.71 25.20 29.86
28 6.16 7.12 7.94 9.50 11.77 14.01 16.38 63 9.06 11.39 13.53 16.57 20.81 25.30 30.00
29 6.28 7.27 8.15 9.77 12.12 14.44 16.91 64 9.11 11.44 13.59 16.65 20.90 25.41 30.14
30 6.38 7.43 8.38 10.05 12.48 14.86 17.43 65 9.17 11.51 13.64 16.73 21.00 25.52 30.29
- ------------------------------------------------------------ ------------------------------------------------------------
31 6.46 7.58 8.60 10.33 12.86 15.30 17.97 66 9.22 11.57 13.70 16.79 21.09 25.66 30.42
32 6.58 7.73 8.82 10.62 13.22 15.74 18.50 67 9.27 11.63 13.75 16.88 21.18 25.76 30.56
33 6.69 7.89 9.04 10.89 13.58 16.20 19.04 68 9.33 11.69 13.80 16.92 21.28 25.89 30.69
34 6.79 8.08 9.26 11.17 13.91 16.64 19.58 69 9.40 11.78 13.90 17.03 21.43 26.09 30.85
35 6.90 8.24 9.49 11.44 14.25 17.09 20.10 70 9.46 11.83 13.96 17.07 21.51 26.25 31.03
- ------------------------------------------------------------ ------------------------------------------------------------
</TABLE>
<PAGE>
Packages weighting over 70 pounds require a UPS
over 70 pounds sticker.
UPS GROUND SERVICE
71 to 150 pounds
RESIDENTIAL DELIVERIES
WEIGHT IN POUNDS
UPS GROUND SERVICE
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ------------------------------------------------------------
ZONES ZONES
------------------------------------------------------- -------------------------------------------------------
2 3 4 5 6 7 8 2 3 4 5 6 7 8
------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
71 $14.10 $15.82 $17.82 $19.57 $23.39 $27.48 $31.57 111 $36.56 $38.67 $40.58 $41.83 $44.27 $46.11 $48.40
72 17.91 18.88 20.52 22.00 25.30 25.30 32.24 112 36.88 39.017 40.92 42.18 44.65 46.49 48.77
73 20.73 22.22 23.73 24.64 27.42 30.26 33.10 113 37.19 39.32 41.27 42.53 45.01 46.87 48.18
74 22.81 24.50 25.87 26.90 29.32 31.68 33.96 114 37.51 39.57 41.61 42.89 45.38 47.24 49.55
75 24.31 25.87 27.24 28.17 30.46 32.38 34.59 115 37.82 39.98 41.96 43.24 45.74 47.62 49.95
- ------------------------------------------------------------ -------------------------------------------------------------
76 24.97 26.58 28.13 29.10 31.25 32.89 35.01 116 38.13 40.32 42.30 43.59 46.11 47.99 50.34
77 25.44 27.03 28.58 29.46 31.59 33.06 35.21 117 38.44 40.66 42.65 43.95 46.48 48.37 50.73
78 25.30 27.51 29.06 29.96 32.03 33.45 35.48 118 38.75 40.97 42.99 44.30 46.84 48.75 51.12
79 26.34 27.96 29.49 30.37 32.44 38.88 35.72 119 39.07 41.30 43.33 44.65 47.22 49.12 51.51
80 26.75 28.40 29.91 30.79 32.85 34.30 36.06 120 39.38 41.62 43.67 45.01 47.59 49.51 51.90
- ------------------------------------------------------------ -------------------------------------------------------------
81 27.13 28.79 30.32 31.18 33.24 34.70 36.44 121 39.70 41.96 44.02 45.36 47.96 49.89 52.29
82 27.48 29.15 30.69 31.56 33.63 35.10 36.87 122 40.00 42.29 44.36 45.71 48.33 50.26 52.68
83 27.79 29.49 31.04 31.92 34.00 35.48 37.27 123 40.32 42.62 44.71 46.07 48.69 50.64 53.07
84 28.11 29.82 31.39 32.27 34.38 35.87 37.68 124 40.63 42.94 45.05 46.42 49.06 51.01 53.46
85 28.42 30.15 31.73 32.63 34.75 36.25 38.08 125 40.95 43.27 45.40 46.77 49.42 51.39 53.85
- ------------------------------------------------------------ -------------------------------------------------------------
86 28.74 30.48 32.07 32.98 35.12 36.65 38.48 126 41.26 43.59 45.74 47.13 49.79 51.76 54.24
87 29.05 30.80 32.42 33.33 35.49 37.03 38.88 127 41.58 43.92 46.08 47.48 50.16 52.15 54.63
88 29.36 31.13 32.76 33.69 35.86 37.42 39.28 128 42.89 44.24 46.43 47.83 50.52 52.52 55.02
89 29.67 31.45 33.10 34.04 36.23 37.80 39.69 129 42.20 44.58 46.77 48.19 50.90 52.90 55.41
90 29.98 31.79 33.45 34.39 36.60 38.19 40.09 130 42.51 44.91 47.11 48.54 51.27 53.27 55.79
- ------------------------------------------------------------ -------------------------------------------------------------
91 30.30 32.11 33.79 34.75 36.97 38.57 40.49 131 42.82 45.24 47.46 48.89 51.64 53.65 56.18
92 30.62 32.44 34.14 35.10 37.34 38.96 40.89 132 43.14 45.57 47.80 49.25 52.00 54.02 56.56
93 30.83 32.78 34.48 35.45 37.71 39.33 41.29 133 43.45 45.90 48.14 49.60 52.37 54.41 56.96
94 31.23 33.10 34.81 35.81 38.07 39.70 41.69 134 43.77 46.22 48.48 49.96 52.73 54.78 57.35
95 31.55 33.43 35.14 36.16 38.43 40.07 42.10 135 44.08 46.55 48.82 50.31 53.10 55.16 57.74
- ------------------------------------------------------------ -------------------------------------------------------------
96 31.85 33.76 35.45 36.51 38.76 40.45 42.50 136 44.39 46.87 49.17 50.67 53.47 55.53 58.13
97 32.18 34.08 35.78 36.87 39.12 40.84 42.91 137 44.70 47.21 49.52 51.03 53.83 55.91 58.52
98 32.49 34.41 36.10 37.22 39.47 41.22 43.31 138 45.02 47.54 49.86 51.38 54.21 56.28 58.91
99 32.81 34.73 36.46 37.57 39.85 41.60 43.71 139 45.33 47.87 50.20 51.73 54.57 56.67 59.29
100 33.12 35.07 36.80 37.93 40.22 41.97 44.10 140 45.65 48.19 50.54 52.09 54.95 57.05 59.69
- ------------------------------------------------------------ -------------------------------------------------------------
101 33.43 35.40 37.15 33.28 40.59 42.35 44.50 141 45.96 48.52 50.88 52.44 55.32 57.42 60.07
102 33.74 35.72 37.49 38.63 40.97 42.72 44.89 142 46.27 48.84 51.22 52.79 55.68 57.80 60.47
103 34.05 36.06 37.83 38.88 41.33 43.10 45.28 143 48.58 49.18 51.56 53.15 56.05 58.17 60.85
104 34.37 36.37 38.18 39.34 41.70 43.47 45.57 144 46.89 49.50 51.90 53.50 56.41 58.55 61.24
105 34.69 36.72 38.52 39.70 42.06 43.86 46.06 145 47.21 49.83 52.24 53.85 56.78 58.92 61.63
- ------------------------------------------------------------ -------------------------------------------------------------
106 35.00 37.03 38.87 40.05 42.44 44.24 46.44 146 47.52 50.15 52.58 54.20 57.15 59.28 62.00
107 35.31 37.37 39.21 40.41 42.80 44.61 46.84 147 47.84 50.48 52.92 54.53 57.51 59.64 62.36
108 35.63 37.70 39.55 40.77 43.17 44.99 47.21 148 48.14 50.81 53.25 54.87 57.86 60.00 62.73
109 35.93 38.02 39.89 41.12 43.53 45.36 47.62 149 48.45 51.12 53.59 55.20 58.22 60.36 63.08
110 36.25 38.35 40.24 41.47 43.90 45.74 47.99 150 48.73 51.44 53.82 55.54 58.57 60.73 63.44
- ------------------------------------------------------------ -------------------------------------------------------------
</TABLE>
<PAGE>
Packages weighing over 70 pounds require a UPS
Over 70 Pounds sticker
UPS NEXT DAY AIR
36 to 70 pounds
UPS PACKAGES
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
ZONES
---------------------------------------------------------------------------------
102 103 104 105 106 107 108 *124 125 *126
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36 $40.75 $44.75 $72.75 $76.75 $78.00 $79.50 $81.00 $78.25 $78.50 $84.25
37 41.50 45.50 74.25 78.50 79.50 81.00 82.75 80.00 80.00 86.25
38 42.25 46.25 75.75 80.25 81.25 82.75 84.50 82.00 82.00 88.00
39 43.00 47.00 77.25 82.00 83.00 84.50 86.25 83.75 83.75 89.75
40 43.75 48.00 78.75 83.75 84.75 86.25 88.00 85.50 85.50 91.50
- --------------------------------------------------------------------------------------
41 44.50 49.00 80.25 85.25 86.25 88.00 89.75 87.00 87.00 93.00
42 45.25 50.00 81.75 86.75 88.00 89.75 91.50 88.25 88.25 94.25
43 46.00 51.00 83.25 88.25 89.50 91.25 93.00 89.50 89.50 95.50
44 47.00 52.00 84.75 89.75 91.25 93.00 94.75 90.50 90.50 96.50
45 48.00 53.00 86.25 91.00 92.75 94.50 96.25 91.75 91.75 97.75
- --------------------------------------------------------------------------------------
46 48.75 54.00 87.75 92.25 94.25 96.00 97.75 92.25 92.25 98.25
47 49.50 55.00 89.25 93.50 95.75 97.50 99.50 93.00 93.00 98.75
48 50.25 56.00 90.75 94.75 97.25 99.25 101.00 93.75 93.75 99.75
49 51.00 57.00 92.25 96.00 98.75 100.75 102.50 95.00 95.00 101.00
50 51.75 58.25 93.75 97.25 100.50 102.25 104.25 96.25 96.25 102.25
- --------------------------------------------------------------------------------------
51 52.75 59.50 95.25 98.75 102.25 104.25 106.25 97.25 97.25 103.25
52 53.75 60.75 96.75 100.25 104.00 106.00 108.00 98.75 98.50 104.25
53 54.75 62.00 98.25 101.75 105.75 108.00 110.00 100.00 99.25 105.25
54 55.75 63.25 99.75 103.25 107.25 109.75 112.00 101.00 100.00 106.25
55 56.75 64.50 101.25 104.75 109.00 111.75 113.75 103.00 102.00 108.00
- --------------------------------------------------------------------------------------
56 57.50 65.75 102.75 106.25 110.50 113.75 115.75 104.75 104.50 110.00
57 58.50 67.00 104.25 107.75 112.00 115.50 117.75 107.00 107.00 112.50
58 59.50 68.25 105.75 109.25 113.75 117.50 119.75 109.50 109.75 114.75
59 60.50 69.50 107.25 110.75 115.25 119.50 121.75 111.25 111.75 117.00
60 61.50 71.00 109.00 112.25 116.75 121.25 123.50 113.25 113.75 119.00
- --------------------------------------------------------------------------------------
61 62.75 72.50 110.75 114.50 119.00 123.50 126.25 115.75 116.25 121.50
62 64.00 74.00 112.50 116.50 121.50 125.50 128.75 117.75 118.25 123.50
63 65.25 75.50 114.25 118.50 123.00 127.75 131.25 119.75 120.25 125.75
64 66.50 77.00 116.00 120.50 125.25 130.00 133.50 121.75 122.50 127.75
65 67.75 78.50 117.75 122.50 127.25 132.25 135.75 123.50 124.25 129.50
- --------------------------------------------------------------------------------------
68 69.25 80.00 119.50 124.50 129.50 134.25 138.00 125.00 125.50 130.75
67 70.50 81.50 121.25 126.50 131.50 136.50 140.25 126.75 127.25 132.75
68 71.75 83.00 123.00 128.50 133.50 138.75 142.50 128.75 129.25 134.75
69 73.00 84.50 124.75 130.50 135.75 141.00 144.75 130.25 130.75 136.25
70 74.50 86.00 126.75 132.50 137.75 143.00 147.00 132.25 133.00 138.25
- --------------------------------------------------------------------------------------
</TABLE>
See your UPS Zone Chart for Alaska zone designations. See your UPS Air Service
Guide for Alaska and Hawaii time-in-transit information
<PAGE>
Packages weighing over 70 pounds require a
ups over 70 Pounds sticker.
UPS NEXT DAY AIR
71 to 110 pounds
UPS PACKAGES
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
ZONES
---------------------------------------------------------------------------------------
102 103 104 105 106 107 108 *124 125 *126
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
71 $75.75 $87.50 $128.75 $134.50 $140.00 $145.25 $149.25 $135.00 $135.50 $140.50
72 77.00 89.00 130.75 136.50 142.00 147.50 151.50 137.00 136.25 143.25
73 78.25 90.50 132.75 138.50 144.00 149.50 153.75 139.75 137.50 145.00
74 79.75 92.00 134.75 140.75 146.25 151.75 156.00 141.00 138.75 146.50
75 81.00 93.50 136.75 142.75 148.25 154.00 158.25 142.00 140.00 148.25
- -------------------------------------------------------------------------------------------
76 82.25 95.00 139.00 144.75 150.50 156.25 160.50 144.75 143.00 150.25
77 83.75 96.50 141.25 146.75 152.50 158.25 162.75 147.00 146.00 152.25
78 85.00 98.00 143.50 148.75 154.50 160.50 165.00 149.75 149.00 155.00
79 86.50 99.50 145.75 150.75 156.75 162.75 167.25 152.50 152.00 157.75
80 87.75 101.25 148.25 152.75 158.75 164.75 169.50 155.00 155.00 160.50
- -------------------------------------------------------------------------------------------
81 89.25 103.00 150.50 154.75 161.00 167.00 171.75 157.50 158.00 163.00
82 90.50 104.75 152.75 156.75 163.00 169.25 174.00 160.50 161.25 165.75
83 92.25 106.50 154.75 158.75 165.00 171.50 176.00 162.50 163.75 167.75
84 93.25 108.25 158.75 160.00 167.25 173.50 178.25 164.50 168.50 169.75
85 94.50 110.00 158.75 162.75 169.25 175.75 180.50 166.50 169.00 172.00
- -------------------------------------------------------------------------------------------
86 95.75 111.75 160.75 165.00 171.50 176.00 182.75 168.75 171.50 174.25
87 97.00 113.50 162.75 167.00 173.50 180.00 185.00 170.75 174.00 175.25
88 98.25 115.25 164.75 169.00 175.50 182.25 187.25 172.75 176.75 178.25
89 99.50 117.00 166.50 171.00 177.75 184.50 189.50 174.75 179.25 -180.25
90 100.50 118.75 168.50 173.00 179.75 185.75 191.75 177.00 181.75 182.50
- -------------------------------------------------------------------------------------------
91 101.75 120.50 170.50 175.00 182.00 188.75 194.00 179.00 184.25 184.50
92 103.00 122.25 172.00 177.00 184.50 191.00 196.25 181.00 188.75 186.75
93 104.25 123.25 174.50 179.00 186.00 193.25 198.50 183.00 189.25 189.00
94 105.50 124.75 176.50 181.00 188.25 195.50 200.75 185.25 191.75 191.00
95 106.75 126.25 178.50 183.00 190.25 197.50 203.00 187.25 194.25 192.75
- -------------------------------------------------------------------------------------------
96 108.00 127.75 180.25 185.00 192.50 199.75 205.25 189.25 196.75 194.75
97 109.00 129.00 182.25 187.00 194.50 202.00 207.50 191.25 199.60 196.75
98 110.00 130.50 184.00 189.00 196.50 204.00 209.75 193.50 202.25 198.75
99 111.50 132.00 185.75 191.25 198.75 206.25 212.00 195.75 204.75 201.00
100 112.75 133.50 187.25 192.00 199.50 207.00 212.75 196.50 206.25 202.00
- -------------------------------------------------------------------------------------------
101 114.00 134.75 189.00 193.75 201.50 209.25 215.00 198.50 209.00 204.00
102 115.25 136.25 190.75 195.75 203.50 211.25 217.00 201.00 211.50 206.25
103 116.25 137.75 192.50 197.75 205.50 213.25 219.25 203.25 214.00 208.50
104 117.50 139.00 194.50 199.50 207.50 215.50 221.25 205.50 216.50 211.00
105 118.75 140.50 196.25 201.50 209.50 217.50 223.50 207.50 219.00 213.00
- -------------------------------------------------------------------------------------------
106 120.00 142.00 198.25 203.50 211.50 219.50 225.50 209.75 221.75 215.50
107 121.25 143.50 200.00 205.25 213.50 221.50 227.75 212.00 224.25 217.75
108 122.50 144.75 202.00 207.25 215.50 223.75 229.75 214.25 226.50 219.75
109 123.50 146.25 203.75 209.25 217.50 225.75 232.00 215.00 228.75 221.50
110 124.75 147.75 205.75 211.00 219.50 227.75 234.00 217.50 229.75 223.00
- -------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
UPS 2ND DAY AIR
1 to 35 pounds
. All rates are effective February 3, 1996.
. Any fraction of a pound over the weight shown takes the next higher rate.
. Refer to the Additional Information page in the back of the book.
UPS LETTERS AND PACKAGES
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
ZONES
------------------------------------------------------------------------
202 203 204 205 206 207 208 *224 225 *226
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Letter $ 5.50 $ 5.75 $ 6.00 $ 6.25 $ 6.50 $ 6.75 $ 7.00 $10.00 $ 9.75 $14.00
1 6.00 6.25 6.50 6.75 7.25 7.75 8.00 11.25 10.75 22.50
2 6.25 6.75 7.25 7.50 8.25 8.50 9.00 12.50 12.25 24.00
3 6.75 7.25 8.00 8.50 9.25 9.75 10.00 14.00 14.25 25.50
4 7.25 7.75 8.75 9.50 10.50 11.00 11.50 15.25 15.75 26.75
5 7.75 8.50 9.50 10.50 12.00 12.50 13.00 16.50 17.00 27.75
- --------------------------------------------------------------------------------
6 8.50 9.25 10.50 11.50 13.50 14.25 14.75 18.50 18.75 28.75
7 9.00 10.00 11.50 12.75 15.00 15.75 16.50 20.00 20.00 30.00
8 9.50 10.75 12.25 14.00 16.50 17.50 18.25 21.50 21.25 31.50
9 10.00 11.25 13.25 15.25 17.75 18.75 19.50 23.25 22.75 32.50
10 10.50 12.00 14.00 16.25 19.00 20.00 20.75 25.00 24.00 34.00
- --------------------------------------------------------------------------------
11 11.00 12.50 15.00 17.25 20.25 21.25 22.00 26.75 25.75 35.00
12 11.50 13.25 15.75 18.25 21.50 22.50 23.25 28.00 27.50 36.25
13 12.25 13.75 16.50 19.25 22.75 23.50 24.50 29.25 29.00 37.00
14 12.75 14.50 17.50 20.25 24.00 24.75 25.75 30.50 30.50 38.50
15 13.25 15.00 18.25 21.25 25.25 26.00 27.00 32.25 32.00 40.75
- --------------------------------------------------------------------------------
16 13.75 15.75 19.00 22.25 26.50 27.25 28.25 33.50 33.50 42.25
17 14.25 16.25 20.00 23.25 27.75 28.75 29.50 34.75 34.75 43.25
18 14.75 17.00 20.75 24.00 29.00 30.00 31.00 36.25 36.25 45.00
19 15.25 17.50 21.50 25.00 30.25 31.75 32.75 37.50 37.25 46.00
20 15.75 18.25 22.25 26.00 31.50 33.25 34.50 39.25 38.50 47.25
- --------------------------------------------------------------------------------
21 16.25 18.75 23.00 27.00 32.75 34.75 36.25 41.00 40.00 49.00
22 16.75 19.50 23.75 27.75 34.00 36.50 38.00 42.50 41.00 50.25
23 17.25 20.00 24.50 28.75 35.25 38.00 39.50 44.25 42.00 51.50
24 17.75 20.50 25.25 29.75 36.50 39.50 41.00 46.00 43.00 53.00
25 18.25 21.25 26.00 30.75 37.75 40.75 42.50 47.25 44.25 54.25
- --------------------------------------------------------------------------------
26 18.75 21.75 26.75 31.50 39.00 42.00 44.00 48.75 45.25 55.50
27 19.50 22.50 27.50 32.50 40.25 43.50 45.50 50.00 46.25 56.50
28 20.00 23.00 28.25 33.50 41.50 44.75 47.00 51.25 47.25 57.50
29 20.50 23.75 29.00 34.25 42.75 46.25 48.50 52.50 48.25 58.50
30 21.00 24.25 29.75 35.25 44.00 47.50 50.00 54.25 49.50 59.75
- --------------------------------------------------------------------------------
31 21.50 24.75 30.75 36.25 45.25 49.00 51.50 55.25 50.25 60.50
32 22.00 25.50 31.50 37.00 46.50 50.25 52.75 56.25 51.00 61.25
33 22.50 26.00 32.25 38.00 47.75 51.50 54.00 57.50 51.75 61.75
34 23.00 26.75 33.00 38.75 49.00 53.00 55.50 58.50 52.50 62.25
35 23.50 27.25 33.75 39.75 50.25 54.25 56.75 59.50 53.50 62.75
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
UPS 2ND DAY AIR Packages weighing over 70 pounds require a UPS Over 70 Pounds
36 to 70 pounds sticker.
UPS PACKAGES
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
ZONES
--------------------------------------------------------------------------------
202 203 204 205 206 207 208 *224 225 *226
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
36 $24.00 $28.00 $34.50 $40.50 $51.50 $55.50 $ 58.00 $60.50 $54.50 $ 83.75
37 24.50 28.50 35.25 41.50 52.75 57.00 59.25 61.50 55.50 64.75
38 25.00 29.25 36.00 42.25 54.00 58.25 60.75 62.50 56.50 66.25
39 25.75 29.75 36.75 43.25 55.00 59.50 62.25 63.50 57.50 68.00
40 26.25 30.50 37.50 44.00 56.25 60.75 63.50 64.50 58.50 69.75
- --------------------------------------------------------------------------------------
41 26.75 31.25 38.25 45.00 57.50 62.25 65.00 65.50 59.75 71.00
42 27.25 31.75 39.00 45.75 58.75 63.50 66.25 66.50 60.75 72.00
43 28.00 32.50 39.75 46.75 59.75 64.75 67.50 67.50 61.75 73.00
44 28.50 33.00 40.50 47.50 61.00 66.00 68.75 68.50 62.75 74.25
45 29.00 33.75 41.25 48.50 62.25 67.25 70.00 69.50 63.75 75.25
- --------------------------------------------------------------------------------------
46 29.50 34.25 42.00 49.25 63.25 68.50 71.25 70.50 64.75 76.25
47 30.00 35.00 42.75 50.25 64.50 69.75 72.50 71.50 65.75 77.00
48 30.75 35.50 43.50 51.00 65.75 71.25 73.75 72.50 66.75 77.50
49 31.25 36.25 44.25 52.00 67.00 72.50 75.00 73.50 67.75 78.00
50 31.75 36.75 45.00 52.75 68.00 73.75 76.25 74.75 69.00 78.75
- --------------------------------------------------------------------------------------
51 32.25 37.50 45.75 53.75 69.25 75.00 77.50 76.00 70.25 79.50
52 32.75 38.00 46.50 54.50 70.50 76.25 78.75 77.00 71.50 80.50
53 33.25 38.75 47.25 55.50 71.50 77.50 80.00 78.00 72.75 81.50
54 33.75 39.25 48.00 56.25 72.75 78.75 81.25 79.00 74.00 82.50
55 34.25 40.00 48.75 57.25 73.75 80.00 82.50 80.25 75.25 83.75
- --------------------------------------------------------------------------------------
56 34.75 40.50 49.50 58.00 75.00 81.25 83.75 81.25 76.25 85.25
57 35.25 41.25 50.25 59.00 76.25 82.50 85.00 82.25 77.25 86.75
58 35.75 41.75 51.00 59.75 77.25 83.75 86.25 83.50 78.50 88.25
59 36.25 42.25 51.75 60.75 78.50 85.00 87.50 84.75 79.75 89.75
60 36.75 43.00 52.50 61.75 79.75 86.25 89.00 86.00 81.00 91.25
- --------------------------------------------------------------------------------------
61 37.50 43.50 53.25 62.50 80.75 87.50 90.25 87.25 82.25 93.50
62 38.00 44.25 54.00 63.50 82.00 89.00 91.75 88.50 83.50 94.75
63 38.50 44.75 54.75 64.50 83.25 90.25 93.00 89.75 84.75 96.50
64 39.00 45.50 55.50 65.50 84.50 91.50 94.50 91.00 85.75 98.00
65 39.50 46.25 56.25 66.50 85.75 93.00 95.75 92.00 87.00 99.50
- --------------------------------------------------------------------------------------
66 40.25 46.75 57.25 67.25 86.75 94.25 97.25 93.25 88.25 101.25
67 40.75 47.50 58.00 68.25 88.00 95.50 98.50 94.00 89.50 101.75
68 41.25 48.00 58.75 69.25 89.25 97.00 100.00 95.00 90.75 102.50
69 41.75 48.75 59.75 70.25 90.50 98.25 101.25 96.00 91.75 103.50
70 42.25 49.50 60.50 71.25 91.75 99.50 102.75 97.00 92.75 104.50
- --------------------------------------------------------------------------------------
</TABLE>
*See your UPS Zone Chart for Alaska zone designations. See your UPS Air Service
Guide for Alaska time-in-transit information.
<PAGE>
UPS 2ND DAY AIR Packages weighing over 70 pounds require a UPS Over 70 Pounds
71 to 110 pounds sticker.
UPS PACKAGES
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
ZONES
-------------------------------------------------------------------------------------
202 203 204 205 206 207 208 *224 225 *226
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
71 $43.00 $50.00 $61.25 $ 72.25 $ 92.75 $101.00 $104.00 $ 98.25 $ 93.75 $105.25
72 43.50 50.75 62.25 73.50 94.00 102.25 105.50 98.75 94.50 105.75
73 44.00 51.50 63.00 74.50 95.25 103.50 106.75 99.25 95.25 106.25
74 44.50 52.00 63.75 75.50 96.50 105.00 108.25 100.25 96.00 106.75
75 45.25 52.75 64.75 76.50 97.50 106.25 109.50 101.25 96.75 107.25
- ------------------------------------------------------------------------------------------
76 45.75 53.25 65.50 77.50 98.75 107.50 111.00 102.25 97.25 107.75
77 46.25 54.00 66.25 78.50 100.00 108.75 112.25 102.75 97.75 108.25
78 46.75 54.75 67.25 79.50 101.00 110.25 113.75 103.25 98.25 108.75
79 47.50 55.25 68.00 80.50 102.25 111.50 115.00 103.75 98.75 109.25
80 48.00 56.00 69.00 81.50 103.50 112.75 116.50 104.25 99.50 109.75
- ------------------------------------------------------------------------------------------
81 48.50 56.50 69.75 82.50 104.75 114.25 117.75 104.75 100.50 110.25
82 49.00 57.25 70.50 83.50 106.00 115.50 119.25 105.25 101.25 110.75
83 49.50 58.00 71.50 84.50 107.00 116.75 120.50 105.75 102.00 111.25
84 50.25 58.50 72.25 85.50 108.25 118.25 122.00 106.25 103.25 111.75
85 50.75 59.25 73.00 86.50 109.50 119.50 123.25 106.75 104.75 112.25
- ------------------------------------------------------------------------------------------
86 51.25 59.75 74.00 87.50 110.75 120.75 124.75 107.25 106.25 112.75
87 51.75 60.50 74.75 88.50 112.00 122.00 126.00 107.75 107.75 113.25
88 52.50 61.25 75.50 89.50 113.25 123.50 127.50 108.25 109.25 113.75
89 53.00 61.75 76.25 90.50 114.25 124.75 128.75 108.75 110.75 114.25
90 53.50 62.50 77.25 91.50 115.50 126.00 130.25 109.25 112.25 114.75
- ------------------------------------------------------------------------------------------
91 54.00 63.25 78.00 92.50 116.75 127.50 131.50 109.75 113.75 115.25
92 54.75 63.75 78.75 93.50 118.00 128.75 133.00 110.25 115.25 115.75
93 55.25 64.50 79.50 94.50 119.25 130.00 134.25 110.75 116.75 116.25
94 55.75 65.00 80.50 95.50 120.50 131.25 135.75 111.50 118.25 117.25
95 56.25 65.75 81.25 96.50 121.75 132.50 137.00 112.50 119.75 118.25
- ------------------------------------------------------------------------------------------
96 56.75 66.25 82.00 97.25 123.00 133.75 138.25 113.50 121.25 119.25
97 57.50 67.00 82.75 98.25 124.00 135.00 139.50 114.50 122.75 120.25
98 58.00 67.50 83.50 99.00 125.00 136.25 140.75 115.50 124.25 121.25
99 58.50 68.00 84.25 100.00 126.25 137.50 142.00 116.75 125.75 122.25
100 59.00 68.75 85.00 100.75 127.50 138.75 143.25 117.25 127.00 123.25
- ------------------------------------------------------------------------------------------
101 59.50 69.25 85.75 101.50 128.75 140.00 144.50 117.75 128.25 124.00
102 60.00 70.00 86.50 102.50 130.00 141.25 145.75 118.75 129.50 125.00
103 60.50 70.50 87.25 103.50 131.25 142.50 147.00 119.75 130.75 126.00
104 61.00 71.25 88.00 104.50 132.50 143.75 148.25 121.00 132.00 127.00
105 61.50 71.75 88.75 105.50 133.75 145.00 149.75 122.00 133.25 128.00
- ------------------------------------------------------------------------------------------
106 62.00 72.50 89.50 106.50 135.00 146.50 151.25 123.00 134.50 129.00
107 62.75 73.25 90.25 107.50 136.25 148.00 152.75 124.00 135.75 130.00
108 63.25 74.00 91.25 108.50 137.50 149.25 154.00 125.25 137.00 131.00
109 63.75 74.50 92.00 109.50 138.75 150.75 155.50 126.25 138.25 132.00
110 64.50 75.25 92.75 110.50 140.00 152.00 157.00 127.50 139.50 133.25
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Packages weighing over 70 pounds require a UPS
Over 70 Pounds sticker.
UPS 2ND DAY AIR
111 to 150 pounds
UPS PACKAGES
WEIGHT IN POUNDS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
ZONES
-------------------------------------------------------------------------------------
202 203 204 205 206 207 208 *224 225 *226
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
111 $65.00 $76.00 $83.75 $111.50 $141.25 $153.50 $158.25 $128.50 $140.75 $134.25
112 65.50 76.50 94.50 112.50 142.50 154.75 159.75 129.50 142.00 135.50
113 66.25 77.25 95.50 113.50 143.75 156.25 161.25 130.50 143.25 136.50
114 66.75 78.00 96.25 114.50 145.00 157.50 162.75 131.50 144.25 137.50
115 67.25 78.75 97.00 115.50 146.25 159.00 164.00 132.75 145.25 138.50
- -----------------------------------------------------------------------------------------
116 68.00 79.25 98.00 116.50 147.50 160.25 165.50 134.00 146.25 139.75
117 68.50 80.00 98.75 117.50 148.75 161.75 167.00 135.00 147.25 140.75
118 69.00 80.75 99.75 118.50 150.00 163.00 168.25 136.00 148.50 141.75
119 69.75 81.50 100.50 119.50 151.25 164.50 169.75 137.00 149.75 143.00
120 70.25 82.00 101.25 120.50 152.50 165.75 171.25 138.00 151.25 144.00
- -----------------------------------------------------------------------------------------
121 70.75 82.75 102.25 121.50 153.75 167.25 172.75 139.00 152.50 145.00
122 71.50 83.50 103.00 122.50 155.00 168.50 174.00 140.25 153.75 146.25
123 72.00 84.00 104.00 123.50 156.25 170.00 175.50 141.25 155.00 147.25
124 72.50 84.75 104.75 124.50 157.50 171.25 177.00 142.50 156.00 148.25
125 73.25 85.50 106.50 125.50 158.75 172.75 178.25 143.50 157.25 149.25
- -----------------------------------------------------------------------------------------
126 73.75 86.25 106.50 126.50 160.00 174.25 179.75 144.50 158.50 150.50
127 74.25 86.75 107.25 127.50 161.25 175.50 181.25 145.50 160.00 151.50
128 75.00 87.50 108.25 128.50 162.50 177.00 182.75 146.75 161.25 152.75
129 75.50 88.25 109.00 129.50 163.75 178.25 184.00 147.75 162.50 153.75
130 76.00 89.00 109.75 130.50 165.00 179.75 185.50 148.75 163.75 154.75
- -----------------------------------------------------------------------------------------
131 76.75 89.50 110.75 131.50 166.25 181.00 187.00 149.75 165.00 155.75
132 77.25 90.25 111.50 132.50 167.50 182.50 188.25 151.00 166.25 156.75
133 77.75 91.00 112.25 133.50 168.75 183.75 189.75 152.00 167.25 158.00
134 78.50 91.75 113.25 134.50 170.00 185.25 191.00 153.25 168.75 159.25
135 79.00 92.25 114.00 135.50 171.25 186.50 192.50 154.25 170.00 160.25
- -----------------------------------------------------------------------------------------
136 79.50 93.00 115.00 136.50 172.50 188.00 194.00 155.25 171.25 161.25
137 80.25 93.75 115.75 137.50 173.75 189.25 195.50 156.25 172.50 162.25
138 80.75 94.25 116.50 138.50 175.00 190.75 197.00 157.25 173.75 163.25
139 81.25 95.00 117.50 139.50 176.25 192.00 198.25 158.25 175.00 164.25
140 82.00 95.75 118.25 140.50 177.50 193.50 199.75 159.75 176.50 165.75
- -----------------------------------------------------------------------------------------
141 82.50 96.50 119.25 141.50 178.75 194.75 201.25 160.75 177.75 167.00
142 83.00 97.00 120.00 142.50 180.00 196.25 202.50 161.75 178.75 168.25
143 83.75 97.75 120.75 143.50 181.25 197.50 204.00 162.75 180.00 169.25
144 84.25 98.50 121.75 144.50 182.50 199.00 205.50 163.75 181.25 170.25
145 84.75 99.25 122.50 145.50 183.75 200.25 207.00 164.75 182.50 171.25
- -----------------------------------------------------------------------------------------
146 85.00 99.75 123.50 146.50 185.00 201.75 208.25 165.75 183.75 172.25
147 86.00 100.50 124.25 147.50 186.25 203.25 209.75 167.00 185.25 173.25
148 86.75 101.25 125.00 148.50 187.50 204.50 211.25 168.25 186.50 174.25
149 87.25 102.00 126.00 149.50 188.75 206.00 212.50 169.25 187.75 175.25
150 87.75 102.50 126.75 150.50 190.00 207.25 214.00 170.25 189.00 176.25
- -----------------------------------------------------------------------------------------
</TABLE>
See your UPS Zone Chart for Alaska some designations. See your UPS Air Service
Guide for Alaska time-in-transit information.
<PAGE>
Effective February 4, 1995
- --------------------------------------------------------------------------------
UPS HUNDREDWEIGHT SERVICE' MULTI-TIER RATE CHART
- --------------------------------------------------------------------------------
UPS Hundredweight Service with Weight Break Pricing offers a significant savings
opportunity for your ground. 3 Day Select. 2nd Day Air, and Next Day Air
shipments of 500 pounds or more.
- --------------------------------------------------------------------------------
GROUND SERVICE WITHIN THE 48 CONTIGUOUS STATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATES PER HUNDREDWEIGHT (CWT) ZONES
Tiers' Classes Shipment Billed Weight 2 3 4 5 6 7 8
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01 50 $ 9.35 $12.15 $15.60 $17.20 $20.15 $22.30 $24.95
500 pounds or more $ 7.70 $ 9.95 $13.20 $14.80 $17.40 $19.45 $21.70
- ------------------------------------------------------------------------------------------------
02 55.60 $ 9.75 $12.60 $16.00 $18.35 $21.35 $23.80 $26.50
500 pounds or more $ 8.40 $10.80 $13.65 $15.90 $18.65 $20.75 $23.10
- ------------------------------------------------------------------------------------------------
03 65 $10.50 $13.35 $16.60 $19.20 $22.75 $25.15 $28.10
500 pounds or more $ 9.00 $11.60 $14.45 $17.55 $20.70 $22.90 $25.55
- ------------------------------------------------------------------------------------------------
04 70 $10.65 $14.25 $17.60 $20.90 $24.30 $26.70 $29.75
500 pounds or more $ 9.50 $13.05 $15.95 $19.00 $22.10 $24.30 $27.10
- ------------------------------------------------------------------------------------------------
05 77.5 $10.85 $14.35 $18.05 $22.10 $25.60 $28.50 $31.40
500 pounds or more $10.35 $13.55 $16.90 $21.05 $24.40 $27.00 $29.80
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
UPS 3 DAY SELECT WITHIN THE 48 CONTIGUOUS STATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATES PER HUNDREDWEIGHT (CWT) ZONES
Tiers' Classes Shipment Billed Weight 32 33 34 35 36 37 38
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01 50 $18.95 $19.90 $21.50 $22.50 $28.95 $47.95 $51.75
500 pounds or more $15.15 $15.90 $17.00 $18.90 $24.30 $40.25 $43.45
- ------------------------------------------------------------------------------------------------
02 55.60 $20.80 $21.95 $24.25 $24.75 $33.95 $51.50 $53.50
500 pounds or more $17.45 $18.20 $20.60 $21.30 $29.20 $44.25 $46.00
- ------------------------------------------------------------------------------------------------
03 65 $21.35 $22.95 $25.75 $26.25 $38.65 $57.50 $62.05
500 pounds or more $18.15 $19.50 $21.90 $23.60 $34.80 $51.75 $55.85
- ------------------------------------------------------------------------------------------------
04 70 $24.75 $26.55 $28.75 $29.25 $41.55 $63.25 $66.95
500 pounds or more $22.00 $23.60 $25.60 $26.30 $37.40 $56.95 $60.25
- ------------------------------------------------------------------------------------------------
05 77.5 $25.95 $27.75 $31.75 $32.95 $44.75 $66.85 $72.95
500 pounds or more $24.15 $25.50 $29.20 $31.00 $42.00 $62.15 $67.85
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
AIR SERVICE WITHIN THE 48 CONTIGUOUS STATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UPS 2ND DAY AIR UPS NEXT DAY AIR
RATES PER POUND ZONE ZONE
Tiers' Classes Shipment Billed Weight 12 22
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01 50 $0.75 $1.10
500 pounds or more $0.73 $1.05
- ------------------------------------------------------------------------------------------------
02 55.60 $0.80 $1.20
500 pounds or more $0.78 $1.15
- ------------------------------------------------------------------------------------------------
03 65 $0.85 $1.30
500 pounds or more $0.83 $1.25
- ------------------------------------------------------------------------------------------------
04 70 $0.90 $1.40
500 pounds or more $0.?? $1.35
- ------------------------------------------------------------------------------------------------
05 77.5 $0.95 $1.50
500 pounds or more $0.93 $????
- ------------------------------------------------------------------------------------------------
</TABLE>
* Please refer to your Hundredweight Service Contact Carrier Agreement for your
applicable rate list
<PAGE>
Effective February 4, 1995
- --------------------------------------------------------------------------------
UPS HUNDREDWEIGHT SERVICE' MULTI-TIER RATE CHART
- --------------------------------------------------------------------------------
UPS Hundredweight Service with Weight Break Pricing offers a significant savings
opportunity for your ground. 3 Day Select. 2nd Day Air, and Next Day Air
shipments of 500 pounds or more.
- --------------------------------------------------------------------------------
GROUND SERVICE WITHIN THE 48 CONTIGUOUS STATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATES PER HUNDREDWEIGHT (CWT) ZONES
Tiers' Classes Shipment Billed Weight 2 3 4 5 6 7 8
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01 50 $ 9.35 $12.15 $15.60 $17.20 $20.15 $22.30 $24.95
500 pounds or more $ 7.70 $ 9.95 $13.20 $14.80 $17.40 $19.45 $21.70
- ------------------------------------------------------------------------------------------------
02 55.60 $ 9.75 $12.60 $16.00 $18.35 $21.35 $23.80 $26.50
500 pounds or more $ 8.40 $10.80 $13.65 $15.90 $18.65 $20.75 $23.10
- ------------------------------------------------------------------------------------------------
03 65 $10.50 $13.35 $16.60 $19.20 $22.75 $25.15 $28.10
500 pounds or more $ 9.00 $11.60 $14.45 $17.55 $20.70 $22.90 $25.55
- ------------------------------------------------------------------------------------------------
04 70 $10.65 $14.25 $17.60 $20.90 $24.30 $26.70 $29.75
500 pounds or more $ 9.50 $13.05 $15.95 $19.00 $22.10 $24.30 $27.10
- ------------------------------------------------------------------------------------------------
05 77.5 $10.85 $14.35 $18.05 $22.10 $25.60 $28.50 $31.40
500 pounds or more $10.35 $13.55 $16.90 $21.05 $24.40 $27.00 $29.80
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
UPS 3 DAY SELECT WITHIN THE 48 CONTIGUOUS STATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATES PER HUNDREDWEIGHT (CWT) ZONES
Tiers' Classes Shipment Billed Weight 32 33 34 35 36 37 38
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
01 50 $18.95 $19.90 $21.50 $22.50 $28.95 $47.95 $51.75
500 pounds or more $15.15 $15.90 $17.00 $18.90 $24.30 $40.25 $43.45
- ------------------------------------------------------------------------------------------------
02 55.60 $20.80 $21.95 $24.25 $24.75 $33.95 $51.50 $53.50
500 pounds or more $17.45 $18.20 $20.60 $21.30 $29.20 $44.25 $46.00
- ------------------------------------------------------------------------------------------------
03 65 $21.35 $22.95 $25.75 $26.25 $38.65 $57.50 $62.05
500 pounds or more $18.15 $19.50 $21.90 $23.60 $34.80 $51.75 $55.85
- ------------------------------------------------------------------------------------------------
04 70 $24.75 $26.55 $28.75 $29.25 $41.55 $63.25 $66.95
500 pounds or more $22.00 $23.60 $25.60 $26.30 $37.40 $56.95 $60.25
- ------------------------------------------------------------------------------------------------
05 77.5 $25.95 $27.75 $31.75 $32.95 $44.75 $66.85 $72.95
500 pounds or more $24.15 $25.50 $29.20 $31.00 $42.00 $62.15 $67.85
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
AIR SERVICE WITHIN THE 48 CONTIGUOUS STATES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UPS 2ND DAY AIR UPS NEXT DAY AIR
RATES PER POUND ZONE ZONE
Tiers' Classes Shipment Billed Weight 12 22
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
01 50 $0.75 $1.10
500 pounds or more $0.73 $1.05
- ------------------------------------------------------------------------------------------------
02 55.60 $0.80 $1.20
500 pounds or more $0.78 $1.15
- ------------------------------------------------------------------------------------------------
03 65 $0.85 $1.30
500 pounds or more $0.83 $1.25
- ------------------------------------------------------------------------------------------------
04 70 $0.90 $1.40
500 pounds or more $0.?? $1.35
- ------------------------------------------------------------------------------------------------
05 77.5 $0.95 $1.50
500 pounds or more $0.93 $????
- ------------------------------------------------------------------------------------------------
</TABLE>
* Please refer to your Hundredweight Service Contact Carrier Agreement for your
applicable rate list
<PAGE>
Exhibit 10.11
HEWLETT-PACKARD AND ONSALE AGREEMENT
This agreement is entered into July 31, 1996 between Hewlett-Packard and ONSALE.
Hewlett-Packard and ONSALE desire to perform a test of ONSALE's internet auction
service to determine its suitability as a distribution channel for
Hewlett-Packard products.
Hewlett-Packard responsibilities:
- ---------------------------------
. Select and reserve an inventory of items for this purpose.
. Provide to ONSALE the quantity available, detailed description, color
picture and warranty information for each item selected.
. Provide to ONSALE information about Hewlett-Packard, including logo, to
create an online description of Hewlett-Packard.
. Review and approve all item and corporate descriptions as provided by
ONSALE.
. Ship inventory at [**] within 3 days of ONSALE's request to:
ONSALE
c/o Federal Express Logistics Services
400 Forbes Blvd. #3
South San Francisco, CA 94080
. Provide a minimum 90-day parts and labor warranty on all items sold.
ONSALE responsibilities:
- ------------------------
. Create merchandise web pages for auction of each item provided by
Hewlett-Packard.
. Create an online description of Hewlett-Packard, for posting in
conjunction with Hewlett-Packard items.
. Provide copies of the above to Hewlett-Packard for approval prior to
public posting.
. Manage the online auction; select winning bidders.
[**] Confidential Treatment Requested
--------------------------------
<PAGE>
. Charge winning bidders' credit cards, collect funds, ship goods via Federal
Express 2-day air.
. Remit to Hewlett-Packard the actual closing prices less a [**] fee for
service no later than [**] days from the time of receipt of
Hewlett-Packard product.
Notes:
- ------
ONSALE will add a shipping charge to the posted items and will collect and
retain this amount from the winning bidders.
ONSALE will collect sales tax to winning bidders within California.
Accepted for Hewlett-Packard by: Accepted for ONSALE by:
/s/ Diana Bell 7/31/96 /s/ Jerry Kaplan 7/26/96
- ---------------------- ---------------------------
(date) (date)
[**] Confidential Treatment Requested
--------------------------------
<PAGE>
EXHIBIT 10.12
FIRST USA MERCHANT SERVICES, INC.
CREDIT CARD PROCESSING SERVICES AGREEMENT
SCHEDULE A
MERCHANT NAME: ONSALE, Inc.
MERCHANT AGREEMENT CONTRACT NUMBER: 700963
The average value of MERCHANT's CREDIT CARD transactions will be $200.00.
MERCHANT will process approximately 10,000 CREDIT CARD transactions annually.
PROCESSING FEES
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Per CREDIT CARD SALES DRAFT and CREDIT $.25
Monthly Minimum** $150.00
BANK CARD Discount Rate
(includes CARD FEEs and Authorizations) 2.00%
Voice Authorization No Charge
ACH (Automated Clearing House) Funds Transfer No Charge
Weekly Statements No Charge
24 Hour Processing Support No Charge
Per MCI and VISA CHARGEBACK Processed/Represented $5.00
Collection, Pre-Arbitration & Compliance $10.00
Postage, Supplies, Equipment & Other Services Charged as used
Supplemental Products Listing Available
**If total monthly fees are greater than the Monthly Minimum specified above, no
Minimum will apply. If total monthly fees are less than the Monthly Minimum
specified above the difference shall be charged on the last calendar day of
the month.
If on any business day, MERCHANT's NET PROCEEDS are negative, any such amounts
shall be collected from MERCHANT's designated bank account via ACH.
Set Up Fees:
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Computer to Computer Direct Access (CPU) Set up $250.00
Negative Balance
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MERCHANT shall be charged a fee against NET PROCEEDS after the number of
Negative Balances for a calendar month has exceeded two (2) based on the
following schedule.
Negative Balance Amount Fee Per Occurrence
----------------------- ------------------
$0 - $300.00 $ 25.00
$301.00 - $700.00 $ 50.00
$701.00 - $1,000.00 $ 75.00
$1,001.00 - $5,000.00 $100.00
$5,001.00 - $10,000.00 $200.00
$10,001.00 + $300.00
If a Negative Balance results when any fees are assessed, section 7 shall
apply.
<PAGE>
FIRST USA MERCHANT SERVICES, INC.
CREDIT CARD PROCESSING SERVICES AGREEMENT
SCHEDULE A (continued)
MERCHANT NAME: ONSALE, Inc. AGREEMENT NUMBER: 700963
RESERVE ACCOUNT
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We shall withhold from BANK CARD SALES DRAFTs, a percent (Prepayment Percentage)
and/or a Prepayment, as indicated below, that shall be credited to a RESERVE
ACCOUNT, against which CHARGEBACKs are assessed. We shall credit a compensating
dividend to the RESERVE ACCOUNT and provide to MERCHANT a periodic accounting
which, relates by month: i) the amount of BANK CARD SALES DRAFTs, submitted, ii)
the Prepayments made (including compensating dividends), iii) the amounts of
CHARGEBACKs which relate to and reverse the specific SALES DRAFTs submitted and
iv) the resulting RESERVE ACCOUNT balance. On a monthly basis, and no later than
fifteen (15) days following the sixth _______ calendar month in arrears, we
shall rebate to MERCHANT any remaining balance in the RESERVE ACCOUNT that
exists for the sixth month prior to a current reporting period, subject to all
other terms and conditions herein.
If any periodic accounting shows that a RESERVE ACCOUNT balance associated with
any given month, becomes or is projected to become negative, we shall replenish
the RESERVE ACCOUNT by suspending any rebates due MERCHANT and/or withholding
from NET PROCEEDS the amounts necessary to eliminate such negative position.
Upon notice from us, MERCHANT shall repay any remaining amounts due within one
(1) business day by wire transfer. We may increase the Prepayment Percentage as
it appears to be necessary to avoid negative positions.
Prepayment Percentage 3%
Activity Parameters
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Maximum Average Ticket of $200.00
Daily Weekly
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Total BANK CARD SALES DRAFTs $5,700.00 $40,000.00
Total BANK CARD CREDITs $200.00 $1,400.00
In any case wherein MERCHANT exceeds the above parameters, FIRST USA shall
make every reasonable attempt to contact the MERCHANT and advise MERCHANT of
such occurrence, and FIRST USA may exercise its rights under paragraph 21.
Failure to contact MERCHANT or exercise any rights of FIRST USA, in no way
waives any rights or remedies of FIRST USA under this AGREEMENT at any time.
Your signature on two copies of this Addendum that you return to us indicates
your understanding and acceptance of its terms and incorporation by reference in
the FIRST USA MERCHANT SERVICES, INC. CREDIT CARD PROCESSING SERVICES AGREEMENT.
Agreed and Accepted by: Agreed and Accepted by:
/s/ ALAN FISHER
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Date June 16, 1996 Date
ONSALE, INC. FIRST USA MERCHANT SERVICES, INC.
- ------------------------------------ ------------------------------------
MERCHANT LEGAL NAME (Print or Type)
1953 Landings Drive 4 Northeastern Boulevard
Mountain View, CA 94043 Salem, NH 03079-1952
- ------------------------------------ ------------------------------------
Address (Print or Type)
/s/ ALAN FISHER
- ------------------------------------ ------------------------------------
By (authorized signature) By (authorized signature)
ALAN S. FISHER, CFO Kathleen M. Keller, Group Manager
- ------------------------------------ ------------------------------------
By, Name, Title (Print or Type) By, Title (Print or Type)
<PAGE>
FIRST USA MERCHANT SERVICES, INC.
CREDIT CARD PROCESSING SERVICES AGREEMENT
GUARANTY ADDENDUM
MERCHANT NAME: ONSALE, Inc. AGREEMENT NUMBER: 700963
To induce First USA Merchant Services, Inc. (hereinafter referred to as FIRST
USA) to enter into the annexed Credit Card Processing Service Agreement
(hereinafter the AGREEMENT) in conjunction with card companies and clearing
banks as their terms are defined in the AGREEMENT, and for good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
undersigned (____________________ if more than one) unconditionally guarantees,
in accordance with the terms hereof and without any prior written notice, the
prompt payment of any liability or indebtedness to FIRST USA when due.
The undersigned further agrees to indemnify and save FIRST USA harmless against
all costs and expenses, including reasonable attorney's fees, incurred in the
collection of any of the above obligations.
The undersigned hereby waives notice of the acceptance of this Guaranty and of
any future advances and extensions or renewals made in reliance hereon, and also
waives notice of presentment, demand, dishonor, and protest of any note or other
obligations to FIRST USA and any other notices of any description in connection
with this Guaranty.
The liability of the undersigned is absolute and unconditional and shall not be
reduced or terminated by the granting of any indulgence to, or compromise or
settlement with any person(s) who may be liable for the obligations to FIRST
USA, nor by any release, exchange, substitution, or impairment of collateral for
such obligations. FIRST USA shall have no duty to collect or protect any
collateral or income therefrom, nor to preserve any rights against other
parties, and may immediately proceed under ________________ default without
first resorting to any other guaranty, collateral, or other source of payment.
This instrument shall operate as a continuing guaranty and will remain in full
force and effect until withdrawn by a written notice delivered to, and accepted
by FIRST USA, but such withdrawal shall in no way release or diminish the
undersigned's liability incurred under this instrument on account of the balance
due on obligations and liabilities to FIRST USA at the time of such withdrawal
or which are contingent or not then due.
This instrument is intended to take effect as a sealed instrument and shall
become effective immediately upon signing by the undersigned. This instrument
and all rights and remedies of the parties shall be determined as to their
validity, construction, effect and enforcement, and in all other respects of the
same or different nature, by the laws of the State of Texas.
This Guaranty is given for the benefit of ONSALE, Inc.
GUARANTOR: GUARANTOR:
Software Partners, Inc. S. Jerrold Kaplan
- ------------------------------------ ------------------------------------
Individual (type or print) Individual (type or print)
1953 Landings Drive, 910 S. Santainez,
Mountain View, CA 94043 Hillsborough, CA 94010
- ------------------------------------ ------------------------------------
Address Address
/s/ ALAN FISHER /s/ S. JERROLD KAPLAN
- ------------------------------------ ------------------------------------
By (signature) By (signature)
June 16, 1996 June 16, 1996
- ------------------------------------ ------------------------------------
Date Date
2.00%
<PAGE>
FIRST USA MERCHANT SERVICES, INC.
---------------------------------
CREDIT CARD PROCESSING SERVICES AGREEMENT
In consideration of the mutual promises herein made and the mutual benefits to
be derived from this AGREEMENT, the undersigned direct marketer or merchant
(hereinafter referred to as the MERCHANT, "you" or "your") and FIRST USA
MERCHANT SERVICES, INC., a Nevada corporation, having its principal office at
1601 Elm Street, Dallas, Texas 75201 (hereinafter referred to as FIRST USA,
"we", "our" or "us") mutually agree to the following terms and conditions:
1. INTRODUCTION: We facilitate the funds transfer between the various CARD
ORGANIZATIONs and you for Telephone. Mail and Store CARD SALEs you make to
your CARDHOLDER customers. In a manner similar to the way personal checks are
cleared, your CREDIT CARD funds are cleared according to the various CARD
ORGANIZATIONs rules and regulations and federal, state and local law. It is
the purpose of this AGREEMENT to establish the legal relationship and
contractual duties required of the parties in this AGREEMENT in order to
comply with such rules, regulations and law.
2. DEFINITIONS:
. AGREEMENT refers to this Credit Card Processing Services Agreement and
any schedule attached hereto.
. APPLICATION is your statement of the characteristics of your account that
you have prepared and submitted to us to induce us to enter into this
AGREEMENT with you and that has induced us to process your CREDIT CARD
transactions under the terms and conditions of this AGREEMENT.
. BANK ACCOUNT is your account in your bank to which we will transfer your
NET PROCEEDS.
. BANK CARD is either a MasterCard or VISA CREDIT CARD or such other credit
card as we may hereafter designate in our sole and exclusive discretion.
. CARD FEE is the interchange of assessments charged by a CARD ORGANIZATION
or the discount charge to the company. This fee will increase or decrease
as a result of any changes in the fees or assessments set by the various
CARD ORGANIZATIONs.
. CARDHOLDER is the person to whom the CREDIT CARD is issued and who is
entitled to use the CREDIT CARD.
. CARD ISSUER is the bank that issues BANK CARDs or the T&E CARD company
that issues T&E CARDs.
. CARD ORGANIZATION is a T&E CARD company or a BANK CARD interchange
system.
. CARD SALE is a CREDIT CARD sale made by you to a valid CARDHOLDER as of
the SALE DATE. Each order you receive is a single CARD SALE unless the
goods or services ordered cannot be delivered or completed at one time,
in which case each partial deposit, delivery or completion is a letter
CARD SALE.
. CHARGEBACK is a charge against a SALES DRAFT you previously presented.
. CREDITs are submitted by you to us to offset specific SALES DRAFTs
previously presented to you.
. CREDIT CARD is both the plastic card or other evidence of the charge
account issued by a CARD ORGANIZATION to the CARDHOLDER and the charge
account number designated on the card, either of which you accept from
your customers as payment for their purchases from you.
. CREDIT NET AMOUNT is the amount of the CREDITs less the CARD FEE.
. LICENSED PROGRAMS are our proprietary computer programs that we provide
for your use pursuant to the requirements of this AGREEMENT, including
without limitation, for the purpose of transmitting and receiving
telecommunicated date to us.
. MERCHANDISE RETURN POLICY is that policy established by you for the
issuance of CREDITs to offset specific SALES DRAFTs.
. MERCHANT is the party to this AGREEMENT contracting with FIRST USA whose
correct legal name, legal identity, legal and business address or
addresses and all trade names and styles are set forth in the APPLICATION
and Schedule "A" hereto annexed.
. NET PROCEEDS is the net debit or credit amount. It is (1) the SALES DRAFT
NET AMOUNT (2) Less the CREDIT NET AMOUNT (3) Less the CHARGEBACK AMOUNT
(4) Less the PROCESSING FEES (5) Less the amounts to be credited to the
RESERVE ACCOUNT.
. NON-QUALIFICATION SURCHARGE is an amount added to your CARD FEES that is
the difference between the BANK CARD base interchange rate and the
QUALIFYING RATES for those SALES DRAFTs which do not qualify for the
QUALIFYING RATES.
. PROCESSING FEES are the fees we charge you for our services as specified
in Schedule "A" as may be amended from time to time.
. QUALIFYING RATES are the reduced CARD FEES charged by CARD ORGANIZATIONs
for certain transactions which qualify under the rules of the CARD
ORGANIZATIONs.
. RESERVE ACCOUNT is an account that we may establish on our records for
our accounting requirements and benefit pledged by you to secure payment
to us of any and all amounts which may be due from you to us and for the
benefit of your CARDHOLDER customers. Any and all funds credited to the
RESERVE ACCOUNT may be comingled with our general funds, and will be
subject to disbursement only by us. You have no interest in the reserve
amount until your receipt thereof. The reserve amount shall secure our
PROCESSING FEES and any other sums as may be due to us. CHARGEBACKs and
CREDIT NET AMOUNTs and the claims of CARDHOLDERs arising from CARD SALEs,
and you hereby grant to us a security interest in all funds in our
possession at any time.
. RETRIEVAL REQUEST is a request for information on behalf of a CARDHOLDER
or CARD ISSUER relating to a claim or complaint concerning a CARD SALE
you have made.
. SALE DATE is the effective date of the CARD SALE at which time you have
performed all principal obligations to the CARDHOLDER in connection with
a transaction such as shipment or delivery of goods or services.
. SALES DRAFT is a transaction representing a CARD SALE which you submit to
us for authorization and payment.
. SALES DRAFT NET AMOUNT is the SALES DRAFT amount less the CARD FEE.
. T&E CARD is a Travel and Entertainment CREDIT CARD issued by American
Express, Carte Blanche, Diner's Club, JCB, or such other T&E CARD as we
may hereafter designate in our sole and exclusive discretion.
3. THE RELATIONSHIP: To induce us to perform that which is required of us
pursuant to this AGREEMENT and to secure your prompt, punctual and faithful
performance and all and each of your obligations pursuant to this AGREEMENT,
you hereby assign and pledge to us each SALES DRAFT now or hereafter
presented to us and the proceeds thereof including, without limitation, any
and all sums held by us in the RESERVE ACCOUNT. In consideration thereof,
pursuant to the terms and conditions of this AGREEMENT, we agree to
facilitate the funds transfer between the various CARD ORGANIZATIONS and you
for Telephone, Mail and Store CARD SALES you make to your CARDHOLDER
customers in accordance with the terms and conditions of this AGREEMENT.
4. SALES DRAFT: Each CARD SALE shall be evidenced by a single SALES DRAFT
furnished in format and in a manner acceptable to us and completed with the
SALE DATE, the amount and a brief description of goods and services sold or
of the deposit tendered is sufficient detail to identify the transaction.
5. PRESENTMENT: You agree that, except as otherwise agreed in writing, all SALES
DRAFTs and CREDITs arising from CARD SALEs made by you will be presented to
us for processing in accordance with the terms of this AGREEMENT. You shall
present SALES DRAFTs to us within three (3) business days of the SALE DATE,
and you shall present CREDITs to us within three (3) business days of the
date you receive return merchandise, cancellation of service, or a price
adjustment notice from the CARDHOLDER. Such SALES DRAFTs and CREDITs shall be
presented in a format and in a manner acceptable to us and in compliance with
the rules of the CARD ORGANIZATIONS.
We shall make an electronic authorization request, but only if you have not
otherwise provided an authorization, for every BANK CARD transaction and for
those T&E CARD transactions which exceed the floor limit set for you by the
relevant T&E CARD company. We reserve the right not to accept any SALES DRAFT
presented by you if we are unable to obtain an authorization, if it is
illegible, if we reasonably determine that it is or will become uncollectable
from the CARDHOLDER to which the SALES DRAFT would otherwise be charged, or
if we determine that the SALES DRAFT was prepared in violation of any
provision of this AGREEMENT.
Subject to CHARGEBACK and other rights, your presentation to us of your SALES
DRAFTs shall be final, and you hereby authorize us to convey all SALES DRAFTs
and CREDITs to the appropriate CARD ORGANIZATION.
6. QUALIFICATION FOR QUALIFYING RATES: We shall process all SALES DRAFTs in a
manner so that each transaction will have the potential to qualify for the
CARD ORGANIZATIONS' QUALIFYING RATES. For those SALES DRAFTs which cannot
qualify, the base interchange rate will apply and your PROCESSING FEES will
include a NON-QUALIFICATION SURCHARGE for those transactions. In the event
that we determine that an excessive amount of SALES DRAFTs do not qualify, we
may review your internal procedures relating to acceptance of CREDIT CARDS,
and we may notify you of new procedures you should adopt. For purposes of
this AGREEMENT, an excessive number of SALES DRAFTs which do not qualify for
QUALIFYING RATES is 2 per 100 SALES DRAFTs.
7. PAYMENTS FOR SALES DRAFTS: For BANK CARD transactions, we will initiate
transfer of the NET PROCEEDS to your BANK ACCOUNT not later than three (3)
business days following our receipt of your qualified SALES DRAFTs and
CREDITs. In accordance with the Uniform Commercial Code, you agree that the
transfer of NET PROCEEDS to your BANK ACCOUNT shall continue provisional
credit only for your SALES DRAFTs so long as any CARDHOLDER has a dispute or
challenge with respect to the SALES DRAFT for any reason.
<PAGE>
To the extent the NET PROCEEDS for any day are negative, we may pursue one
or more of the following options: (i) debit your BANK ACCOUNT for the amount
of the negative balance; (ii) delay presentation of your CREDITs until you
make a payment to us of a sufficient amount to cover the negative balance;
(iii) request (either orally or in writing) payment for such amounts; (iv)
collect the negative balance from any of your accounts at your BANK or at
any other financial institution without notice to you. You agree to resolve
any negative balance within one (1) business day of our advice to you of a
negative balance.
For T&E CARD transactions, we will electronically forward the SALES DRAFT,
including the required authorization code, to the appropriate T&E CARD
company. Except to the extent we provide settlement services for JCB or
Diner's Club/Carte Blanche transactions, your receipt of the proceeds due
you will be governed by whatever agreement you have with that T&E CARD
company, and we do not bear any responsibility for their performance.
8. ACCOUNTING: Within three (3) business days following the close of a business
day on which activity is submitted to us, we will supply a detailed
statement describing the elements of your NET PROCEEDs and your T&E CARD
transactions for that business day. We will not be responsible for any error
which you do not bring to our attention within thirty (30) days from date of
such statement.
9. CARD ORGANIZATION RULES AND REGULATIONS AND FEDERAL, STATE AND LOCAL LAW: In
signing this AGREEMENT you agree to comply with all rules and regulations of
the CARD ORGANIZATIONs. You also agree to comply with all provisions of
federal, state and local law affecting CREDIT CARED transactions. Any
failure by you to comply with a CARD ORGANIZATION's rules and regulations or
federal, state or local law applicable to any aspect of any CREDIT CARD
transaction will be a breach of this AGREEMENT which will authorize us to
terminate the AGREEMENT immediately and without prior notice to you.
10. YOUR WARRANTIES: You warrant and represent the following and reaffirm such
warranties and representations each time you present a SALES DRAFT:
(a) You shall abide by the conditions of this AGREEMENT for all SALES
DRAFTs and CREDITs presented to us.
(b) All statements made on your APPLICATION for this AGREEMENT are true as
of the date of your execution of this AGREEMENT. You have no reason to
suspect any fact or circumstance not specified therein which, if known
to us, might prevent us from executing this AGREEMENT.
(c) You will promptly advise us of any materially adverse changes in that
information provided in your APPLICATION and of a material, adverse
change in your financial condition.
(d) You do not do business under a trade name or style not previously
disclosed to us and that there has been no change in the nature of your
business or the product lines that you sell not previously disclosed to
us.
(e) All SALES DRAFTs and CREDITs you present to us are genuine and arise
out of a bona fide Telephone, Mail or Store CARD SALES of merchandise
or service by you and do not involve the use of a CREDIT CARD for any
other purpose of the remaining or existing obligations of the
CARDHOLDER.
(f) You have title to all SALES DRAFTs you present to us, there are no lens
or other encumbrances on them, and you have the authority to present
the SALES DRAFTs to us for submission to the CARD ORGANIZATIONs.
(g) No SALES DRAFT is subject to any dispute, set-off or counterclaim.
(h) SALES DRAFTs presented to us under this AGREEMENT have not and will not
be presented for payment anywhere else.
(i) Each SALES DRAFT delivered to us represents a valid obligation for the
amounts set forth therein.
(j) All statements on each SALES DRAFT are true, and you have no knowledge
or facts which would impair the validity or collectibility of the
amount of the SALES DRAFT.
(k) You have performed all of your principal obligations with respect to
each SALES DRAFT including shipment of the order to the CARDHOLDER in
connection with the transaction to which the SALES DRAFT pertains.
(l) Each SALES DRAFT is drawn on a purchaser who actually is the CARDHOLDEr
and to whom you have actually sold the goods or services and delivered
them according to the CARDHOLDER's instructions.
(m) Goods described in each SALES DRAFT are your sole property and are free
from all liens and encumbrances.
(n) You make no CARD SALEs when only a part of the consideration due is
paid through use of a CREDIT CARD except pursuant to a policy
previously submitted in writing to us.
(o) You prepare one and only one SALES DRAFT per CARD SALE.
(p) The CARD SALES you make pursuant to this AGREEMENT do not violate your
charter or by-laws or any applicable federal, state or local laws or
regulations.
(q) You do not require a minimum transaction amount below which you refuse
to honor otherwise valid CREDIT CARDs.
(r) You do not increase the price or impose any other fee upon any customer
who uses a CREDIT CARD for payment of any transaction.
(s) You do not sell, purchase, provide, or exchange CREDIT CARD account
number information in any form whatsoever other than to us or pursuant
to an official government request.
(t) You have made no representations or warranties for the issuance of
CREDIT except as it states in your MERCHANDISE RETURN POLICY which has
been previously submitted to us in writing.
11. LIABILITY FOR BREACH OF WARRANTIES: If any of your representations or
warranties in your APPLICATION, herein or any paper or documents submitted
to us should be untrue, this AGREEMENT may be terminated by us, in our sole
discretion, immediately and without prior notice.
12. ADVERTISING: You will inform the public in all your advertising material of
the CREDIT CARDs that you honor.
13. MERCHANDISE RETURN POLICY: You shall maintain a fair policy with regard to
the exchange, return and adjustment of merchandise purchased by CREDIT CARD
transactions. Such policy shall be applied equally to all customers and
shall be posted in your establishment or otherwise disclosed to customers.
Such policy may include a refusal to accept items sold at a special rate or
discount for return, except that CARD SALEs involving non-returnable
merchandise shall include a notation to that effect on the SALES DRAFT.
The terms and conditions of your MERCHANDISE RETURN POLICY shall be
submitted to us in writing prior to the effective date of this AGREEMENT and
any change in the terms and conditions of your policy shall be submitted in
writing to us not less than thirty (30) days prior to such change. We may
refuse to process any CARD SALE made in accordance with a MERCHANDISE RETURN
POLICY not acceptable to us.
14. REFUNDS AND CARDHOLDER PAYMENTS: Unless required by law, you will not give
cash refunds to any CARDHOLDER in connection with a CARD SALE. If you allow
a price adjustment, return of merchandise or cancellation of services in
connection with a CARD SALE, you will instead prepare and delivery to us a
CREDIT within three (3) business days of the date you receive return
merchandise, cancellation of service, or a price adjustment notice from the
CARDHOLDER, which you will complete in a format and in a manner acceptable
to us. The amount of the CREDIT may not exceed the amount shown as the total
on the original SALES DRAFT except by the exact amount required to
reimburse the CARDHOLDER for postage that the CARDHOLDER paid to return
merchandise in accordance with a policy that you apply consistently to all
of your customers.
You will not accept cash or any other payment or consideration from a
customer in return for preparing a CREDIT to be deposited to the customer's
CREDIT CARD account.
15. FIRST USA POLICIES, PROCEDURES, FORMS AND FORMATS: You agree to comply with
our policies, procedures, forms requirements and data processing formats for
timely and secure processing of CREDIT CARD transactions under this
AGREEMENT. We may notify you of a change in our policies, procedures, forms
or formats from time to time, and you agree to comply with any such change.
16. RETRIEVAL REQUESTS: We will send you any RETRIEVAL REQUEST that we cannot
satisfy with the information we have on file concerning a CARD SALE. If you
notify us in writing of the resolution of your investigation of such a
RETRIEVAL REQUEST within three (3) business days after you receive it, we
will take the appropriate steps required to reduce the probability of the
CARD ISSUER issuing an unjustified CHARGEBACK. You acknowledge that your
failure to comply with a RETRIEVAL REQUEST in accordance with the respective
CARD ORGANIZATION rules may result in a non-reversible CHARGEBACK of the
subject transaction.
17. CHARGEBACKS: We shall recreate or retrieve all sales information needed to
process CHARGEBACKs with respect to SALES DRAFTs presented to us. You will
keep the original order information from which the SALES DRAFTs are derived
and will furnish the same to us upon request. We will keep the SALES DRAFT
information itself for you.
Except as provided in Section 25 with respect to our obligation to indemnify
you for certain claims, you shall have full responsibility for any such
CHARGEBACK. In no event shall the fact that authorization was obtained by
you deemed to be our representation that a particular CREDIT CARD
transaction is in fact a valid, authorized or undisputed transaction entered
into by the CARDHOLDER or an authorized user of the CREDIT CARD. You may
receive a CHARGBACK from the CARDHOLDER or CARD ISSUER for numerous reasons
under the CARD ORGANIZATION rules: however, the following is a list of some
of the most common reasons for CHARGEBACKS:
(a) For return or non-delivery of goods or services.
(b) Where authorization was required and not obtained.
(c) Where the CARD SALE date is after the CREDIT CARD's expiration date.
(d) Where you have received notice that the CREDIT CARD is not honored.
(e) Where the SALES DRAFT is executed or accepted fraudulently, or where you
knew or should have known the transaction was fraudulent.
(f) If we do not receive your response to a RETRIEVAL REQUEST within three
(3) business day period.
(g) Where the purchaser disputes sales of goods or services, or execution of
SALES DRAFT or claims that the sale price is subject to any set-off,
defense or counterclaim.
(h) Where a CARDHOLDER refuses to make payment for a SALES DRAFT because in
the CARDHOLDER's good faith opinion, a claim or complaint has not been
resolved, or have been resolved by you but in an unsatisfactory manner.
(i) Where the sale or extension of credit is in violation of any law.
(j) Where you have breached any of the terms or conditions of this AGREEMENT
including, but not limited to, a breach of any warranty or
representation, specified in Section 10.
(k) Where the CREDIT CARD was not presented, the CARDHOLDER denies making
the purchase, and the merchandise was sent to an address other than that
of a CARDHOLDER.
<PAGE>
(l) Where the sale or extension of credit was subject to a MERCHANDISE
RETURN POLICY not submitted to us as required by the terms of this
AGREEMENT or had been rejected by us.
You are not allowed to re-submit for processing any CARD SALE that
previously has been charged back to you.
In the event we determine that an excessive amount of CHARGEBACKs are being
received by you, we may review your internal procedures relating to
acceptance of CREDIT CARDS and we may notify you of new procedures you
should adopt and/or notify you of a new rate at which we will charge you to
process your CHARGEBACKs or this AGREEMENT may be terminated by us, in our
sole discretion, immediately and without prior notice. For purposes of this
AGREEMENT an excessive number of CHARGEBACKs is one (1) CHARGEBACK per 100
SALES DRAFTs or the total amount of CHARGEBACKs is greater than or equal to
one percent (1%) of the total SALES DRAFT NET AMOUNTs on a rolling thirty
(30) day basis.
18. RECORDS RETENTION: YOU ARE REQUIRED TO STORE ORIGINAL DOCUMENTATION OF EACH
TRANSACTION FOR AT LEAST SIX (6) MONTHS FROM THE DATE OF THE RESPECTIVE
TRANSACTION, AND MUST RETAIN COPIES OF ALL SUCH DATA FOR AT LEAST THREE (3)
YEARS FROM THE DATE OF THE RESPECTIVE TRANSACTION. You are not allowed to
charge any fee for the creation or storage of these copies. We may require
you to deliver original SALES DATA to us rather than storing it.
19. CLAIMS OF CARDHOLDER CUSTOMERS: You acknowledge and agree to be estopped
from denying that to the extent that we have paid or may be called upon to
pay a CHARGEBACK or CREDIT for or on the account of a CARDHOLDER customer
and reimbursement of such payment is not made by you as provided in this
AGREEMENT, then and in that event for the purpose of obtaining reimbursement
of such sums paid or anticipated to be paid, we shall have all of the rights
and remedies of such CARDHOLDER customers under applicable federal, state or
local law. We shall be authorized to assert any and all such claims in our
own name for and on behalf of any such CARDHOLDER customer individually or
all such CARDHOLDER customers as a class.
20. GRANT OF SECURITY INTEREST: To secure your obligations to your customers and
to us to abide by the conditions of this AGREEMENT, to ship the ordered
merchandise to the CARDHOLDER, and to pay CHARGEBACKs, you grant a
continuing security interest in, and assign to us, all of the new owned or
hereafter acquired (and all products and proceeds thereof) accounts,
inventory, general intangibles, cards, chattel paper, fixtures, instruments,
documents of title, documents, securities, books, records, papers, and
information relating to the same and/or to your business, trade secrets,
computer programs, customer lists, tax refunds, and liens, guaranties,
rights, remedies, and privileges pertaining to any of the foregoing and
hereby authorize us to sign financing statements on your behalf to evidence
the security interest granted herein.
21. RESERVE ACCOUNT: In the event of the occurrence or threat of a material,
adverse change in financial condition or of another event as the result of
which we, in our sole discretion, deem ourselves insecure or have reasonable
grounds to believe that we may be liable to third parties for credit
extended to you or that you may be liable to your customers for any reason
whatsoever, we shall have the right (a) to immediately place payments due
you in the RESERVE ACCOUNT and/or stop processing transactions for you until
such time as the extent of your obligation to us, our liability to third
parties and your liability to your customers is known and we no longer deem
ourselves insecure and (b) to demand from you an amount that our experience
dictates to assure payment of such liability. Your failure to pay such
amount shall allow us to terminate this AGREEMENT immediately and without
notice.
22. INFORMATION ABOUT MERCHANT'S BUSINESS: You agree to furnish us within five
(5) days' whatever financial statements and information concerning MERCHANT
or your parent, subsidiary and affiliated entities as we may from time to
time request. Without prior notice (but during your normal business hours),
FIRST USA's duly authorized representatives may visit your business
premises, and may examine your books and records that pertain to your sales
and/or leases made by honoring CARDs, including without limitation your
books and records concerning all SALES DATA presented to us for credit. You
and your principals, officers, partners or proprietors, as the case may be,
agree to provide us at least thirty (30) days' prior written notice of your
or their intent to change in any way the basic nature of your business,
including, without limitation, any change in the manner in which you accept
CARDs and any change in your product line. If we, in our sole discretion,
determine such a change in the nature of your business material to our
relationship with you, we may refuse to process CARD SALEs made pursuant to
such change and we may terminate this AGREEMENT. You will also give us
prompt notice of any potential material adverse change to your business. You
agree to provide us with prompt written notice if MERCHANT or any of your
parent, subsidiary or affiliated entities is the subject of any voluntary or
involuntary bankruptcy or insolvency petition or proceeding.
23. CONFIDENTIALITY: In performing the services described in this AGREEMENT, we
may have access to and receive disclosure of certain information about you
which you designate to be proprietary including, but not limited to,
information about your customers such as lists, sales, etc. We agree that
such information is to be used solely in connection with our obligations
pursuant to this AGREEMENT, and that we shall receive such information in
confidence and not disclose such information to any third party. We shall,
however, be permitted to advertise the fact that you are using our
processing services. We shall use our best efforts to ensure compliance with
the terms of this Section 23 by our employees and shall restrict the number
of our employees with access to this information. Furthermore, all employees
of FIRST USA and its affiliates are required to sign a confidentiality
statement as a condition of employment.
In performing the services described in this AGREEMENT, you may receive
access to and disclosure of certain confidential information about us which
we designate to be confidential or proprietary. You agree that such
information is to be used solely in connection with your obligations
pursuant to this AGREEMENT, and that you shall receive such information in
confidence and not disclose such information to any third party. You shall
use your best efforts to ensure compliance with the terms of this Section 23
by your employees and shall restrict the number of your employees with
access to this information.
In addition, you will exercise reasonable care to prevent disclosure of
CARDHOLDER information, including, but not limited to, storing all media
containing CREDIT CARD numbers in an area limited to selected personnel.
Prior to discarding material containing CARDHOLDER information, you will
destroy it in a manner rendering the data unreadable. If at any time you
determine that the CARDHOLDER information has been compromised, you must
notify us immediately and assist us in notifying the proper parties as we
deem necessary.
24. LICENSED PROGRAMS: All programs which we provide to you now and in the
future are proprietary to us and licensed to you on a non-exclusive basis
governed by, and only for the term of, this AGREEMENT. You acknowledge that
the license granted herein is limited exclusively to your use and that you
do not have the right to sub-license any of the LICENSED PROGRAMs in either
their original or modified form. The original and any copies of LICENSED
PROGRAMs, in whole or in part, which are made by you, shall be our property.
You may modify any LICENSED PROGRAM in machine readable form for your own
use and merge it into other program material to form an updated work,
provided that, upon termination of this AGREEMENT, the LICENSED PROGRAM will
be completely removed from the updated work and treated as if permission to
modify had never been granted.
FIRST USA GRANTS NO WARRANTIES, EITHER EXPRESS OR IMPLIED, ON ANY LICENSED
PROGRAM OR ANY SERVICE PROVIDED UNDER THIS AGREEMENT, INCLUDING ALL IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO
EVENT WILL FIRST USA BE LIABLE FOR CONSEQUENTIALLY OR INCIDENTAL DAMAGES
EVEN IF FIRST USA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
25. INDEMNITY: We agree to indemnify you from any liability, loss or expense
arising out of any claim or complaint by CARDHOLDER related to the
maintenance of the CARDHOLDER's account by us or any failure by us to
properly maintain the CARDHOLDER's account. This indemnification does not
apply to any claim or complaint relating to merchandise or service sold by
you or your failure to resolve a payment dispute. We agree to indemnify you
from any loss due to our mismanagement of funds transferred to you in your
behalf.
You agree to indemnify us from any liability, loss or expense arising out of
any claim, complaint, offset or CHARGEBACK made by a CARDHOLDER with respect
to any SALES DRAFT for merchandise or services which are the subject of any
CARD SALE made by you. Also, you agree to indemnify us or any loss caused by
your violation of a CARD ORGANIZATION's rules or regulations or federal,
state or local laws.
26. EVENTS OF DEFAULT: Upon the occurrence of any one or more of the following
events of default, we may terminate this AGREEMENT without notice or demand,
in addition to which we may exercise our rights and remedies upon default,
as set forth hereinafter. The occurrence of any such event of default shall
also constitute, without notice or demand, a default under all other
agreements, if any, between us and instruments and papers given to us by
you.
(a) Your failure to pay when due any amount then owing by you to us;
(b) Your failure to promptly, punctually, and faithfully perform or
discharge any of your obligations to us;
(c) The determination by us that any representation or warranty now or
hereafter made by you to us, whether herein or in any other document,
instrument, agreement or paper was not true or accurate when given;
(d) The occurrence of any event of default under any agreement between you
and us or instrument or paper now or hereafter given to us by you,
notwithstanding that we may not have exercised our rights upon default
under any such other agreement, instrument, or paper;
(e) Any act by, against, or relating to you, or your property or assets,
which act constitutes the application for, counsel to, or sufferance of
the appointment of a receiver, trustee, or other person pursuant to
court action or otherwise, over all or any part of your property; the
granting of any trust mortgage or execution of an assignment for the
benefit of your creditors, or the occurrence of any voluntary or
involuntary liquidation or extension of debt agreement for you; the
admission by you or your inability to pay your debts as they mature
adjudication of insolvency relation to you; the entry of an order for
relief or similar order with respect to you in any proceeding pursuant
to any federal statute dealing with bankruptcy (hereinafter generally
the "Bankruptcy Code"; the filing of any complaint, application, or
person against you initiating any matter in which you are or may be
granted any relief from its debts pursuant to the Bankruptcy Code or
pursuant to any other insolvency statute or procedures; the calling or
sufferance of a meeting of your creditors; the meeting by you with a
formal or information creditors' committee; the offering by or entering
into by you of any composition, extension or other arrangement seeking
relief or extension of your debts; or the initiation of any other
judicial or non-judicial proceeding or agreement by, against, or
including you which seeks or intends to accomplish a reorganization or
arrangement with creditors;
(f) The entry of any judgment against you which seeks or intends to
accomplish a reorganization or arrangement with creditors;
(g) The service of any process upon us seeking to attach or garnish by mesne
or trustee process any of your funds in our possession;
(h) Your death, termination of existence, dissolution, winding up, or
liquidation;
(i) The occurrence of any event or circumstance with respect to you and/or
the SALES DRAFTs such that we deem ourselves insecure;
(k) Your business failure; or a material, adverse change in your financial
condition;
(l) The existence of your liabilities in excess of the fair market value of
your assets (excluding intangible assets);
(m) The occurrence of any of the foregoing events of default with respect to
any guarantor to us of this AGREEMENT, as if such guarantor were "you"
described therein.
<PAGE>
27. RIGHTS AND REMEDIES UPON DEFAULT: Upon the occurrence of any event of
default, and at any time thereafter, we shall have all of the rights and
remedies as provided in the AGREEMENT and of a secured party upon default
under the Uniform Commercial Code, in addition to which we may sell or
otherwise dispose of the SALES DRAFTs and other collateral and apply the
proceeds thereof for application towards (but not necessarily in complete
satisfaction of) the obligations due to us or for which we may be liable to
third parties, including without limitation CARDHOLDER customers. You shall
remain liable to us for any deficiency remaining following such application.
The proceeds shall be applied toward your obligations to us in such order
and manner as we determine in our sole discretion, any statute, certain or
vague, to the contrary notwithstanding.
28. FEES. You agree to pay us for the services set forth in Schedule A in
accordance with the pricing schedule set forth therein. You acknowledge that
such pricing is based on your representation as to your volume of credit
card transactions, method of processing, type of business, and interchange
qualification criteria as represented in your APPLICATION. To the extent
your actual volumes, method, type and criteria differ from this information,
we may modify the pricing set froth on Schedule A.
In addition to the above, from time to time, we may change our fees, charges
and discounts resulting from increases in CARD FEES or the charges of any
third party vendor by giving you notice of the change. Any price change that
is caused by changes in the CARD FEES will be applicable to you as of the
effective date established by the CARD ORGANIZATION. As to any price change
not cause by CARD ORGANIZATION increases, we will provide you with at least
thirty (30) days' notice of the effective date of this price change. Your
presentation of any SALES DRAFT to us after the effective date will
constitute your acceptance of the new prices.
If you terminate this AGREEMENT prior to the expiration of the original or
any renewal term, you agree that the future harm to us would be difficult to
calculate. Accordingly, in the event of your early termination of the
AGREEMENT, in order to compensate us for our loss and not as a penalty, you
agree to pay to us as liquidated damages an amount calculated by multiplying
the average monthly PROCESSING FEES from the prior six (6) months by the
number or months remaining in the contract term. Such amount will be funded,
to the extent possible, according to the same methods for collecting amounts
due under Section 7 hereof.
29. TERMINATION: This AGREEMENT shall remain in effect for two (2) years and
shall automatically be extended for successive one (1) year terms until
terminated by either party upon ninety (90) days' written notice; provided
that we may terminate without such notice to the extent otherwise set forth
herein or if a CARD ORGANIZATION notifies us that it is unwilling to
continue accepting your SALES DRAFTs. All references to termination in this
AGREEMENT are governed by the provision of this Section 29.
Termination shall not affect either party's respective rights and
obligations under this AGREEMENT as to CREDIT CARD transactions entered into
before termination, nor shall it affect either party's rights and
obligations under Sections 7, 11, 17,21, 23, 25, 27 and 29, all of which
shall constitute without limit as to time.
Upon termination, you shall return all materials or supplies issued by us as
part of this AGREEMENT and we will discontinue the maintenance of your
information and will return any relevant data to you except that we will
continue to maintain that information which is required by the regulations
of the respective CARD ORGANIZATIONs and which would be impossible for you
or your agent to maintain.
Upon termination by either party for any reason, you shall fund a RESERVE
ACCOUNT to cover yet unbilled processing costs plus an amount equal to the
actual CHARGEBACK experience determined as a percentage of the prior six (6)
months multiplied by the gross deposits of the prior four (4) months or
reasonably anticipated future CHARGEBACKs, at our discretion. Such RESERVE
ACCOUNT will be funded, to the extent possible, with NET PROCEEDS otherwise
payable to you under Section 7 hereof. To the extent such NET PROCEEDS are
insufficient, you will fund the RESERVE ACCOUNT directly within one (1)
business day of the request according to the same methods for funding a
negative balance under Section 7 of this AGREEMENT. We will refund to you
any remaining monies in your RESERVE ACCOUNT no later than 365 days after
termination or such longer time within which any customer is entitled to a
CHARGEBACK pursuant to the rules and regulations of the CARD ORGANIZATIONS
or federal, state or local law applicable thereto.
30. GENERAL:
PARAGRAPH HEADINGS: The paragraph headings of this AGREEMENT are for
convenience only and shall not be deemed to define, limit or describe the
scope or intent of this AGREEMENT.
EFFECTIVE DATE: This AGREEMENT shall become effective when accepted by an
authorized signatory of FIRST USA.
CREDIT CHECK: Your authorized signature on this AGREEMENT authorizes us to
initiate any credit check deemed necessary of MERCHANT and proposed
Guarantors.
SUCCESSORS AND ASSIGNS: This AGREEMENT binds you and us and our respective
heirs, representatives, successors and assigns.
ASSIGNMENT: You may not assign or transfer your rights or delegate your
responsibilities under this AGREEMENT without our prior written consent.
SEVERABILITY: Should any provision of this AGREEMENT be determined to be
invalid or unenforceable under any law, rule or regulation, such
determinations shall not affect the validity or enforceability of any other
provision of this AGREEMENT.
WAIVERS: No term or condition of this AGREEMENT may be waived unless a
written waiver is signed by both parties.
ENTIRE AGREEMENT: No amendments to this AGREEMENT may be made except in
writing signed by both parties.
NOTICES: All notices must be given in writing and either hand delivered or
mailed first class, postage prepaid to the addresses set forth below or to
such other address as either party may from time to time specify to the
other party in writing. If said notice is to First USA, in addition to the
address below, a copy of the notice shall also be sent to First USA Merchant
Services, Inc., Attn: General Counsel, 1601 Elm Street, Suite 4700, Dallas,
Texas 75201.
GOVERNING LAW: This AGREEMENT will be governed by and construed in
accordance with the laws of the State of Texas. Any action, proceeding,
litigation or arbitration relating to or arising from this Agreement shall
be brought in Dallas County, Dallas, Texas.
ATTORNEY'S FEES: In any action by FIRST USA to enforce an obligation under
this AGREEMENT, MERCHANT shall be liable and pay all costs, expenses and
reasonable attorney's fees.
Your signature on two copies of this AGREEMENT that you return to us indicates
your understanding and acceptance of its terms and conditions. We will then
indicate our acceptance of the AGREEMENT by returning one fully executed copy to
you, and two signed copies of Schedule A or other Addenda that are incorporated
herein.
<TABLE>
<S> <C>
Agreed and Accepted by: Agreed and Accepted by:
June 16, 1996
- ------------------------------------ ----------------------------------------------
Date Date
ONSALE, INC. FIRST USA MERCHANT SERVICES, INC.
- ------------------------------------ ----------------------------------------------
MERCHANT LEGAL NAME (Print or Type)
1953 LANDINGS DR 4 Northeastern Boulevard, Salem, NH 03079-1952
- ------------------------------------ ----------------------------------------------
Address (Print or Type)
MT. VIEW CA 94043
- ------------------------------------
City, State, Zip (Print or Type)
/s/ Alan S. Fisher CFO
- ------------------------------------ ------------------------------------
By (authorized signature) By (authorized signature)
ALAN S. FISHER CFO Kathleen M. Keller, Group Manager
- ------------------------------------ ------------------------------------
By, Name, Title (Print or Type) By, Name, Title (Print or Type)
</TABLE>
REVISION 12/95
********************************************************************************
* To Be Completed By First USA Merchant Services, Inc. upon acceptance *
* and return to Merchant *
* *
* Your Merchant Agreement Contract Number is: 700963 *
* -------------- *
* *
* Your Merchant Processing Identification Number Will Be Provided At *
* Time of Processing Set Up *
********************************************************************************
<PAGE>
EXHIBIT 10.13
WELLS FARGO MERCHANT CARD SERVICES APPLICATION
- --------------------------------------------------------------------------------
PROCESSING OPTIONS (CHECK ALL THAT APPLY)
- --------------------------------------------------------------------------------
[X] Electronic processing [ ] Electronic processing with ATM/debit cards
[ ] Purchase equipment [ ] Lease equipment
[ ] Please contact me with [ ] Tip/Restaurant electronic processing
pricing for PC Internet [ ] Please reprogram my equipment.
Lodging, Purchasing Card [ ] I plan on accepting credit cards at more
or other products. than two trade shows, craft fairs or
[ ] Paper processing seminars this year.
- --------------------------------------------------------------------------------
BUSINESS PROFILE*
- --------------------------------------------------------------------------------
Company DBA (Doing Business As) name
- --------------------------------------------------------------------------------
Legal name OnSale Inc.
- --------------------------------------------------------------------------------
Street address 1953 Landings Drive
- --------------------------------------------------------------------------------
Mailing address Mountain View, CA 94043
- --------------------------------------------------------------------------------
Business contact Alan S. Fisher
- --------------------------------------------------------------------------------
Business phone number (415)428-0600 x201
If you need to dial an extra number to reach an outside line, what is it?
- --------------------------------------------------------------------------------
Best time to call Day
- --------------------------------------------------------------------------------
Federal Tax ID Number 77-0408319
- --------------------------------------------------------------------------------
This business operates from [ ] Office in home [ ] Retail store front
[ ] Warehouse [X] Office suite
- --------------------------------------------------------------------------------
This business is [ ] Sole proprietorship [ ] Nonprofit organization
[ ] Partnership [X] Corporation
- --------------------------------------------------------------------------------
Year established 1995 Current owner(s) since 1995
- --------------------------------------------------------------------------------
Describe your product/service Internet Auction--computers
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OWNERSHIP Please list the three owners with the largest share of ownership.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of Address Social Security
Owner's Name Ownership Number
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jerry Kaplan 50 910 W. Santa Inez, Hillsborough, CA ###-##-####
Software Partnership 50 1953 Landings Dr., Mt. View, CA 94043 94-3074544
</TABLE>
- --------------------------------------------------------------------------------
TRADE REFERENCES Please list two references. If renting or leasing office space,
you must include landlord information
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Company Name Contact Name (optional) City State/ZIP
<S> <C> <C> <C>
Logitech See attached credit info
Pentax See attached credit info
</TABLE>
- --------------------------------------------------------------------------------
*If we need additional information or any supporting material, we will contact
-----------------------------------------------------------------------------
you.
---
- --------------------------------------------------------------------------------
PAYMENT PROCESSING PROFILE
- --------------------------------------------------------------------------------
Number of outlets ONE Please attach contact name, address and phone
number of each location you'd like to set up
for payment processing.
- --------------------------------------------------------------------------------
Monthly Visa(R)/MasterCard(R) volume $200K
Estimated average Visa/MasterCard ticket amount $400
- --------------------------------------------------------------------------------
If established, please list the account number of the Wells Fargo business
checking account you will use for payment processing 0124-055229
--------------
*--will switch upon approval
- --------------------------------------------------------------------------------
MAIL/TELEPHONE/FAX/INTERNET SALES Please complete if any of your business is
done through mail, telephone, fax or Internet orders.
- --------------------------------------------------------------------------------
Percentage of monthly Visa and/or MasterCard sales generated through mail,
telephone, fax or Internet orders 100%
---------
- --------------------------------------------------------------------------------
Visa/MasterCard sales are deposited [X] At date of order
[ ] At date of delivery
- --------------------------------------------------------------------------------
How do you advertise these sales? [ ] Catalog [X] Internet [ ] Other
[ ] Direct mail--letter/brochure
[ ] Newspapers/magazines
- --------------------------------------------------------------------------------
CURRENT CREDIT CARD PROCESSING
- --------------------------------------------------------------------------------
Have you used another credit card processor? YES Name NOVA
Number of years ONE
- --------------------------------------------------------------------------------
Reason for changing processor NOVA COULD NOT ACCOMMODATE OUR GROWTH RATE
- --------------------------------------------------------------------------------
AGREEMENT AND PERSONAL GUARANTEE
- --------------------------------------------------------------------------------
The signer(s) certifies that he/she is authorized to execute this Application
for the business named above, and that all information and documents submitted
are true, correct, and complete. The signer(s) authorizes Wells Fargo Bank, N.A.
and/or CES, collectively hereafter referred to as "Bank," to obtain consumer
and/or business reports, including inquiries to the Internal Revenue Service or
the Franchise Tax Board, in their name(s) as individual(s) at any time. The
signer(s) further agrees to notify the Bank promptly of any material change in
the ownership or products and services of this business. This agreement is made
between Bank and the business identified above and the business' personnel for
the processing and collection of Visa/MasterCard and/or ATM/debit card
transactions.
Upon notification of final approval, the business and its personnel agree to
abide by the terms and conditions of the Merchant Card Services Agreement,
including all schedules, amendments, applications, attachments, operating guides
and associated reference materials. By signing below the signer(s) agrees
in his/her individual capacity jointly and severally unconditionally to
guarantee and promise to pay upon demand to Bank all indebtedness of the
business named above at any time owing under such company's Merchant Card
Services Agreement. If this Agreement is terminated within the first year, you
will be subject to a $300 cancellation fee.
THE THREE OWNERS WITH THE LARGEST SHARE OF OWNERSHIP MUST SIGN.
X /s/ ALAN FISHER Mar 6, 1996
- ------------------------------------------------ ------------------------
Signer Date
X /s/ SAMUEL JERROLD KAPLAN Mar 7, 1996
- ------------------------------------------------ ------------------------
Signer Date
X /s/ RAZI MOHIUDDIN 3/25/96
- ------------------------------------------------ -----------------------
Signer Date
- ----------------------------------------
For Bank Use Only (please print)
/s/ ANN MARQUES
- ----------------------------------------
Bank Sales Representative
0230-011 (510)889-2212
- ------------------------- -------------
<PAGE>
WELLS FARGO BANK SECURITY AGREEMENT
RIGHTS TO PAYMENT
================================================================================
1. GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned
ONSALE Inc. or any of them ("Debtor"), hereby grants and transfers to WELLS
- -----------
FARGO BANK, NATIONAL ASSOCIATION ("Bank") a security interest in the following
accounts, deposit accounts, accounts receivables, chattel paper, instruments,
documents and general intangibles or other rights to payment (collectively
called "Collateral"):
Certificate No. 1124-057324-00, in the name of ONSALE Inc. in the amount
of $80,000.00, pledged to Merchant Card Services until reviewed and
released by Risk Management (minimum one year).
and all renewals thereof, including all securities, guaranties, warranties,
indemnity agreements, insurance policies and other agreements pertaining to the
same or the property described therein, together with whatever is receivable or
received when any of the Collateral or proceeds thereof are sold, collected,
exchanged or otherwise disposed of, whether such disposition is voluntary or
involuntary, including without limitation, (a) all accounts, contract rights,
chattel paper, instruments, general intangibles and rights to payment of every
kind now or at any time hereafter arising from any such sale, lease, collection,
exchange or other disposition of any of the foregoing, (b) all rights to
payment, including returned premiums, with respect to any insurance relating to
any of the foregoing, (c) and all rights to payment with respect to any cause of
action affecting or relating to any of the foregoing (hereinafter called
"Proceeds").
2. OBLIGATIONS SECURED. The obligations secured hereby are the payment and
performance of: (a) all present and future Indebtedness of Debtor to Bank; (b)
all obligations of Debtor and rights of Bank under this Agreement; and (c) all
present and future obligations of Debtor to Bank of other kinds. the word
"indebtedness" is used herein in its most comprehensive sense and includes any
and all advances, debts, obligations and liabilities of Debtor, or any of them,
heretofore, now or hereafter made, incurred or created, whether voluntary or
involuntary and however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether Debtor may
be liable individually or jointly, or whether recovery upon such Indebtedness
may be or hereafter becomes unenforceable.
3. TERMINATION. This Agreement will terminate upon the performance of all
obligations of Debtor to Bank, including without limitation, the payment of all
Indebtedness of Debtor to Bank existing or committed by Bank at the time Bank
receives written notice from Debtor of the termination of this Agreement.
4. OBLIGATIONS OF BANK. Bank has no obligation to make any loans
hereunder. Any money received by Bank in respect of the Collateral may be
deposited, at Bank's option, into a non-interest bearing account over which
Debtor shall have no control, and the same shall, for all purposes, be deemed
Collateral hereunder.
5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Bank
that: (a) Debtor is the owner and has possession or control of the Collateral
and Proceeds; (b) Debtor has the right to grant a security interest in the
Collateral and Proceeds; (c) all Collateral and Proceeds are genuine, free from
liens, adverse claims, setoffs, default, prepayment, defenses and conditions
precedent of any kind or character, except as heretofore disclosed to Bank in
writing; (d) all statements contained herein and, where applicable, in the
Collateral are true and complete; (e) no financing statement covering any of the
Collateral or Proceeds, and naming any secured party other than Bank, is on file
in any public office; (f) all persons appearing to be obligated on Collateral
and Proceeds have authority and capacity to contract and are bound as they
appear to be; (g) all property subject to chattel paper has been properly
registered and filed in compliance with law and to perfect the interest of
Debtor in such property; and (h) all Collateral and Proceeds comply with
applicable laws concerning form, content and manner of preparation and
execution, including where applicable Federal Reserve Regulation Z and any State
consumer credit laws.
<PAGE>
6. COVENANTS OF DEBTOR.
(a) Debtor Agrees in General: (i) to pay indebtedness secured hereby
when due; (ii) to indemnify Bank against all losses, claims, demands,
liabilities and expenses of every kind caused by property subject hereto; (iii)
to pay all costs and expenses, including reasonable attorney's fees, incurred by
Bank in the perfection, preservation, realization, enforcement and exercise of
its rights, powers and remedies hereunder; (iv) to permit Bank to exercise its
powers; (v) to execute and deliver such documents as Bank deems necessary to
create, perfect and continue the security interests contemplated hereby; and
(vi) not to change its chief place of business or the places where Debtor keeps
its books and records concerning the Collateral and Proceeds without first
giving Bank written notice of the address to which Debtor is moving same.
(b) Debtor Agrees with Regard to the Collateral and Proceeds: (i) where
applicable, to insure the Collateral with Bank as loss payee, in form and
amounts, under agreements, against risks and liabilities, and with insurance
companies satisfactory to Bank; (ii) not to permit any lien on the Collateral or
Proceeds, except in favor of Bank; (iii) not to withdraw any funds from any
deposit account pledged to Bank hereunder without Bank's prior written consent;
(iv) not to sell hypothecate or otherwise dispose of any of the Collateral or
Proceeds, or any interest therein, without Bank's prior written consent; (v) to
keep, in accordance with generally accepted accounting principles, complete and
accurate records regarding all Collateral and Proceeds, and to permit Bank to
inspect the same and make copies thereof at any reasonable time; (vi) if
requested by Bank, to receive and use reasonable diligence to collect Proceeds,
in trust and as the property of Bank, and to immediately endorse as appropriate
and deliver such Proceeds to Bank daily in the exact form in which they are
received together with a collection report in form satisfactory to Bank; (vii)
not to commingle Collateral or Proceeds, or collections thereunder, with other
property; (viii) in the event Bank elects to receive payments of Collateral and
Proceeds hereunder, to pay all expenses incurred by Bank in connection
therewith, including expenses of accounting, correspondence, collection efforts,
reporting to account or contract debtors, filing, recording, record keeping and
expenses incidental thereto; and (ix) to provide any service and do any other
acts which may be necessary to keep all Collateral and Proceeds free and clear
of all defenses, rights of offset and counterclaims.
7. POWERS OF BANK. Debtor appoints Bank its true attorney in fact to perform
any of the following powers, which are coupled with an interest, are irrevocable
until termination of this Agreement and may be exercised from time to time by
Bank's officers and employees, or any of them, whether or not Debtor is in
default: (a) to perform any obligation of Debtor thereunder in Debtor's name or
otherwise; (b) to give notice of Bank's rights in the Collateral and Proceeds,
to enforce the same and make extension agreements with respect thereto; (c) to
release persons liable on Collateral or Proceeds and to give receipts and
acquittances and compromise disputes in connection therewith; (d) to release
security; (e) to resort to security in any order;(f) to prepare, execute, file,
record or deliver notes, assignments, schedules, designation statements,
financing statements, continuation statements, termination statements,
statements of assignment, applications for registration or like papers to
perfect, preserve or release Bank's interest in the Collateral and Proceeds; (g)
to receive, open and read mail addressed to Debtor; (h) to take cash,
instruments for the payment of money and other property to which Bank is
entitled; (i) to verify facts concerning the Collateral and Proceeds by inquiry
of obligors thereon, or otherwise, in its own name or a fictitious name; (j) to
endorse, collect, deliver and receive payment under instruments for the payment
of money constituting or relating to Proceeds; (k) to prepare, adjust, execute,
deliver and receive payment under insurance claims, and to collect and receive
payment of and endorse any instrument in payment of loss or returned premiums or
any other insurance refund or return, and to apply such amounts received by
Bank, at Bank's sole option, toward repayment of the indebtedness; (l) to
exercise all rights, power and remedies which Debtor would have, but for this
Agreement, with respect to all Collateral and Proceeds subject hereto; and (m)
to do all acts and things and execute all documents in the name of Debtor or
otherwise, deemed by Bank as necessary, proper and convenient in connection with
the preservation, perfection or enforcement of its rights hereunder.
8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor
agrees to pay, prior to delinquency, all insurance premiums, taxes, charges,
liens and assessments against the Collateral and Proceeds, and upon the failure
of Debtor to do so, Bank at its option may pay nay of them and shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same. Any such payments made by Bank shall be obligations of
Debtor to Bank, due and payable immediately upon demand, together with interest
at a rate determined in accordance with the provisions of Section 12 herein, and
shall be secured by the Collateral and Proceeds, subject to all terms and
conditions of this Agreement.
9. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "Event of Default" under this agreement: (a) any default in the
payment or performance of any obligation, or any defined event of default, under
(i) any contract or instrument evidencing any indebtedness, or (ii) any other
agreement between any Debtor and Bank, including without limitation any loan
agreement, relating to or executed in connection with any indebtedness; (b) any
representation
<PAGE>
or warranty made by any Debtor herein shall prove to be incorrect in any
material respect when made; (c) any Debtor shall fail to observe or perform any
obligation or agreement contained herein; (d) any attachment or like levy on any
property of any Debtor; and (e) Bank, in good faith, believes any or all of the
Collateral and/or Proceeds to be in danger of misuse, dissipation, commingling,
loss, theft, damage or destruction, or otherwise in jeopardy or unsatisfactory
in character or value.
10. REMEDIES. Upon the occurrence of any Event of Default, Bank shall have
the right to declare immediately due and payable all or any Indebtedness secured
hereby and to terminate any commitments to make loans or otherwise extend credit
to Debtor. Bank shall have all other rights, powers, privileges and remedies
granted to a secured party upon default under the California Uniform Commercial
Code or otherwise provided by law, including without limitation, the right to
contact all persons obligated to Debtor on any Collateral or Proceeds and to
instruct such persons to deliver all Collateral and/or Proceeds directly to
Bank. All rights, powers, privileges and remedies of Bank shall be cumulative.
No delay, failure or discontinuance of Bank in exercising any right, power,
privilege or remedy hereunder shall affect or operate as a waiver of such right,
power, privilege or remedy; nor shall any single or partial exercise of any such
right, power, privilege or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the exercise of any other right, power, privilege
or remedy. Any waiver, permit, consent or approval of any kind by Bank of any
default hereunder, or any such waiver of any provisions or conditions hereof,
must be in writing and shall be effective only to the extent set forth in
writing. It is agreed that public or private sales, for cash or on credit, to a
wholesaler or retailer or investor, or user of property of the types subject to
this Agreement, or public auction, are all commercially reasonable since
differences in the sales prices generally realized in the different kinds of
sales are ordinarily offset by the differences in the costs and credit risks of
such sales. While an Event of Default exists: (a) Debtor will deliver to Bank
from time to time, as requested by Bank, current lists of all Collateral and
Proceeds; (b) Debtor will not dispose of any of the Collateral or Proceeds
except on terms approved by Bank; (c) Bank may, at any time and at Bank's sole
option, liquidate any time deposits pledged to Bank hereunder and apply the
Proceeds thereof to payment of the Indebtedness, whether or not said time
deposits have matured and notwithstanding the fact that such liquidation may
give rise to penalties for early withdrawal of funds; and (d) at Bank's request,
Debtor will assemble and deliver all Collateral or Proceeds, and books and
records pertaining thereto, to Bank at a reasonably convenient place designated
by Bank.
11. DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or any
part of the Indebtedness, Bank may transfer all or any part of the Collateral or
Proceeds and shall be fully discharged thereafter from all liability and
responsibility with respect to any of the foregoing so transferred, and the
transferee shall be vested with all rights and powers of Bank hereunder with
respect to any of the foregoing so transferred; but with respect to any
Collateral or Proceeds not so transferred, Bank shall retain all rights, powers,
privileges and remedies herein given. Any proceeds of any disposition of the
Collateral or Proceeds, or any part thereof, may be applied by Bank to the
payment of expenses incurred by Bank in connection with the foregoing, including
reasonable attorneys' fees, and the balance of such proceeds may be applied by
Bank toward the payment of the Indebtedness in such order of application as Bank
may from time to time elect.
12. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of Bank's in-house counsel), incurred by Bank in
exercising any right, power, privilege or remedy conferred by this Agreement or
in the enforcement thereof, including any of the foregoing incurred in
connection with any bankruptcy proceeding relating to Debtor or the valuation of
the Collateral and/or Proceeds, including without limitation, the seeking of
relief from or modification of the automatic stay or the negotiation and
drafting of a cash collateral order. All of the foregoing shall be paid by
Debtor with interest at a rate per annum equal to the greater of ten percent
(10%) or the Prime Rate in effect from time to time. The "Prime Rate" is a base
rate that Bank from time to time establishes and which serves as the basis upon
which effective rates of interest are calculated for those loans making
reference thereto.
13. STATUE OF LIMITATIONS. Until all Indebtedness shall have been paid in
full, the power of sale and all other rights, powers, privileges and remedies
granted to Bank hereunder shall continue to exist and may be exercised by Bank
at any time and from time to time irrespective of the fact that the
Indebtedness or any part thereof may have become barred by any statute of
limitations, or that the personal liability of Debtor may have ceased, unless
such liability shall have ceased due to the payment in full of all Indebtedness
secured hereunder.
14. MISCELLANEOUS. The obligations of Debtor are joint and several;
presentment, protest, notice of protest, notice of dishonor and notice of
nonpayment are waived with respect to any Proceeds to which Bank is entitled
hereunder; any right to direct the application of payments of security for
Indebtedness of Debtor hereunder, or indebtedness of customers of Debtor,and any
right to require proceedings against others or to require exhaustion of security
are waived; and consent to extensions, forbearances or alterations of the terms
of Indebtedness, the release or substitution of security, and the
<PAGE>
release of guarantors is given with respect to Proceeds subject to this
Agreement; provided however, that in each instance, Bank believes in good faith
that the action in question is commercially reasonable in that it does not
unreasonably increase the risk of nonpayment of the Indebtedness to which the
action applies. Until all Indebtedness shall have been paid in full, no Debtor
shall have any right of subrogation or contribution, and each Debtor hereby
waives any benefit of or any right to participate in any of the Collateral or
Proceeds or any other security now or hereafter held by Bank.
15. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this
Agreement as a Debtor hereby expressly agrees that recourse may be had against
his or her separate property for all his or her Indebtedness to Bank secured by
the Collateral and Proceeds under this Agreement.
16. NOTICES. All notices, requests and demands required under this Agreement
must be in writing, addressed to Bank at the address specified in any other loan
documents entered into between Debtor and Bank and to Debtor at the address of
its chief executive office (or residence, if applicable) specified below, or to
such other address as any party may designate by written notice to each other
party, and shall be deemed to have been given or made as follows: (a) if
personally delivered, upon delivery; (b) if sent by mail, upon the earlier of
the date of receipt or three (3) days after deposit in the U.S. mail, first
class and postage prepaid; and (c) if sent by telecopy, upon receipt.
17. GOVERNING LAW; SUCCESSORS, ASSIGNS. This Agreement shall be governed by
and construed in accordance with the laws of the State of California, and shall
be binding upon and inure to the benefit of the heirs,executors, administrators,
legal representatives, successors and assigns of the parties.
18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
held to be prohibited by or invalid under applicable law, such provision shall
be ineffective only to the extent of such prohibition or invalidity,without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
Debtor warrants that its chief executive office is located at the following
address: 1953 Landings Dr., Mountain View, CA 94043
------------------------------------------
IN WITNESS WHEREOF, this Agreement has been duly executed as of
March 25, 1996
--------------
ONSALE Inc.
---------------------------------------
DEBTOR
BY: /s/ Samuel Jerrold Kaplan
------------------------------------
SIGNATURE AND TITLE
BY: /s/ Alan Fisher
------------------------------------
SIGNATURE AND TITLE
<PAGE>
COLLATERAL DEPOSIT RECEIPT
, CALIFORNIA 19
--------------- -------------- ---
RECEIVED THE FOLLOWING LISTED SECURITIES FROM ONSALE INC.
----------------------------------
AS COLLATERAL ( ) FOR SAFEKEEPING ( ) (ADDRESS)
------------------------
<TABLE>
<CAPTION>
====================================================================================================================================
SECURITIES DEPOSITED SECURITIES WITHDRAWN
====================================================================================================================================
Coupons Attd. No. of Shares CKD. out of Consid. Delivery Qty Received Items Listed
Serial Nos. Beg. with or Sec. Cab. Veri- Date With- Opposite Signature
Stocks or Bonds Description No. Due Par Val. Bonds By And fied drawn Below
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
WELLS FARGO BANK
SPECIAL PURPOSE Acct.
CERTIFICATE OF DEPOSIT No. 1124057324-000
Office Warm Springs Date 3/25/96 Amount $*80,000.00**
------------------------ --------- ------------
Payable to Merchant Card Services until reviewed & released by Risk Management
-------------------------------------------------------------------
Received from ONSALE Inc.
----------------------------------------------------------------
Renewal term 12 months Maturity date 3/25/97 Interest rate 4.5%
---------- -------- ------
Annual percentage yield 4.57%
------
Interest will be computed on a 360 day year basis. Interest will be paid
at maturity and [ ] credited to account number
- ------------------- -----------------------
or [ ] paid by check.
This certificate is non-transferable. Presentation of the original certificate,
signed by the payee, is required to withdraw funds. If the deposit is withdrawn
before maturity, there may be an early withdrawal fee. At maturity, this deposit
will automatically renew. The terms of the certificate, including the interest
rate and annual percentage yield, are subject to change on the maturity date.
Please refer to the Disclosure Statement for additional information about your
account.
Bank Representative's Signature
-------------------------------
DEPOSITOR COPY - Not valid to
close account
Member FDIC
<PAGE>
EXHIBIT 10.14
FOUNDER'S RESTRICTED STOCK PURCHASE AGREEMENT
---------------------------------------------
This Agreement is made and entered into as of July 21, 1994 (the "Effective
---------
Date") between InterMall, Inc. (the "Company"), a California corporation, and S.
- ---- -------
JERROLD KAPLAN ("Purchaser").
---------
1. PURCHASE OF SHARES. On the Effective Date and subject to the terms
------------------
and conditions of this Agreement, Purchaser hereby purchases from the Company,
and Company hereby sells to Purchaser, an aggregate of 2,000,000 shares of the
Company's common stock (the "Shares") at an aggregate purchase price of
------
$10,000.00 (the "Purchase Price") or $0.005 per Share (the "Purchase Price Per
-------------- ------------------
Share"). As used in this Agreement, the term "Shares" refers to the Shares
- -----
purchased under this Agreement and includes all securities received (a) in
replacement of the Shares, (b) as a result of stock dividends or stock splits in
respect of the Shares, and (c) in replacement of the Shares in a
recapitalization, merger, reorganization or the like.
2. PAYMENT OF PURCHASE PRICE; CLOSING.
----------------------------------
(a) DELIVERIES BY PURCHASER. Purchaser hereby delivers to the Company
-----------------------
the full Purchase Price in the form of Purchaser's assignment to the Company of
Purchaser's entire right, title and interest in and to a business plan developed
by Purchaser (which business plan is attached hereto as Exhibit 1) (the
---------
"Business Plan"). Purchaser also hereby delivers to the Company: (i) two (2)
- --------------
copies of a blank Stock Power and Assignment Separate from Stock Certificate in
the form of Exhibit 2 attached hereto (the "Stock Powers"), both executed by the
--------- ------------
Purchaser and Purchaser's spouse, and (ii) a Consent of Spouse in the form of
Exhibit 3 attached hereto (the "Spouse Consent") duly executed by Purchaser's
- --------- --------------
spouse.
(b) TRANSFER BY PURCHASER. In consideration of the issuance by the
---------------------
Company of the Shares to Purchaser, Purchaser hereby forever sells, assigns,
transfers, releases and conveys to the Company, and its successors and assigns,
Purchaser's entire right, title and interest in and to all copyrights, moral
rights and rights of authorship in the Business Plan and all physical
embodiments and copies thereof. Purchaser further agrees, promptly upon request
of the Company, or any of its successors or assigns, to execute and deliver,
without further compensation of any kind, any power of attorney, assignment,
application for copyright, patent or other intellectual property right
protection, or any other papers which may be necessary or desirable to fully
secure to the Company, its successors and assigns, all right, title and interest
in and to the Business Plan and all physical embodiments and copies thereof, and
to cooperate and assist in the prosecution of any opposition proceedings
involving said rights and any adjudication of the same. Further, Purchaser
agrees never to assert any claims, rights or moral rights in or to the Business
Plan or any physical embodiments or copies thereof.
(c) DELIVERIES BY THE COMPANY. Upon its receipt of the entire
-------------------------
Purchase Price and all the documents to be executed and delivered by Purchaser
to the Company under Section
<PAGE>
2(a), the Company will issue a duly executed stock certificate evidencing the
Shares registered in Purchaser's name in accordance with Section 19, with such
certificate to be placed in escrow as provided in Section 8 until expiration or
termination of both the Company's Repurchase Option and Right of First Refusal
described in Sections 5 and 6.
-2-
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
-------------------------------------------
warrants to the Company that:
(a) PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is purchasing
---------------------------------------
the Shares for Purchaser's own account for investment purposes only and not with
a view to, or for sale in connection with, a distribution of the Shares within
the meaning of the Securities Act of 1933, as amended (the "1933 Act").
--------
Purchaser has no present intention of selling or otherwise disposing of all or
any portion of the Shares and no one other than Purchaser has any beneficial
ownership of any of the Shares.
(b) ACCESS TO INFORMATION. Purchaser has had access to all
---------------------
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
(c) UNDERSTANDING OF RISKS. Purchaser is a founder of the Company and
----------------------
is fully aware of: (i) the highly speculative nature of the investment in the
Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of the
Shares and the restrictions on transferability of the Shares (e.g., that
----
Purchaser may not be able to sell or dispose of the Shares or use them as
collateral for loans); (iv) the qualifications and backgrounds of the management
of the Company; and (v) the tax consequences of investment in the Shares.
(d) PURCHASER'S QUALIFICATIONS. Purchaser has a preexisting personal
--------------------------
or business relationship with the Company and/or certain of its officers and/or
directors of a nature and duration sufficient to make Purchaser aware of the
character, business acumen and general business and financial circumstances of
the Company and/or such officers and directors. By reason of Purchaser's
business or financial experience, Purchaser is capable of evaluating the merits
and risks of this investment, has the ability to protect Purchaser's own
interests in this transaction and is financially capable of bearing a total loss
of this investment.
(e) NO GENERAL SOLICITATION. At no time was Purchaser presented with
-----------------------
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
(f) COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and
-------------------------------
acknowledges that, in reliance upon the representations and warranties made by
Purchaser herein, the Shares are not being registered with the Securities and
Exchange Commission ("SEC") under the 1933 Act or being qualified under the
---
California Corporate Securities Law of 1968, as amended (the "Law"), but instead
---
are being issued under an exemption or exemptions from the registration and
qualification requirements of the 1933 Act and the Law which impose certain
restrictions on Purchaser's ability to transfer the Shares.
(g) RESTRICTIONS ON TRANSFER. Purchaser understands that Purchaser
------------------------
may not transfer any Shares unless such Shares are registered under the 1933 Act
or qualified under the
-3-
<PAGE>
Law or unless, in the opinion of counsel to the Company, exemptions from such
registration and qualification requirements are available. Purchaser understands
that only the Company may file a registration statement with the SEC or the
California Commissioner of Corporations and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been advised
that exemptions from registration and qualification may not be available or may
not permit Purchaser to transfer all or any of the Shares in the amounts or at
the times proposed by Purchaser.
-4-
<PAGE>
(h) RULE 144. In addition, Purchaser has been advised that SEC Rule
--------
144 promulgated under the 1933 Act, which permits certain limited sales of
unregistered securities, is not presently available with respect to the Shares
and, in any event, requires that the Shares be held for a minimum of two years,
and in certain cases three years, after they have been purchased and paid for
------------
(within the meaning of Rule 144), before they may be resold under Rule 144.
(i) RULE 701. The Shares will become freely tradeable by non-
--------
affiliates under SEC Rule 701 promulgated under the 1933 Act, subject to limited
conditions regarding the method of sale, 90 days after the first sale of common
stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the SEC, subject to the lengthier market
standoff agreement contained in this Agreement or any other agreement entered
into by Purchaser. Affiliates must comply with the provisions (other than the
holding period requirements) of Rule 144.
4. COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
------------------------------------------
SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION,
IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. COMPANY'S REPURCHASE OPTION. The Company has the option to repurchase
---------------------------
all or a portion of the Vested Shares (as defined below) on the terms and
conditions set forth in this Section (the "Repurchase Option") if Purchaser
-----------------
ceases to be employed by the Company (as defined herein) for any reason, or no
reason, including without limitation Purchaser's death, disability, voluntary
resignation or termination by the Company with or without cause.
(a) DEFINITION OF "EMPLOYED BY THE COMPANY"; "TERMINATION DATE". For
----------------------------------------------------------
purposes of this Agreement, Purchaser will be considered to be "employed by the
---------------
Company" if the Board of Directors of the Company determines that Purchaser is
- -------
rendering substantial services as an officer, employee, consultant or
independent contractor to the Company or to any parent, subsidiary or affiliate
of the Company. In case of any dispute as to whether Purchaser is employed by
the Company, the Board of Directors of the Company will have discretion to
determine whether Purchaser has ceased to be employed by the Company or any
parent, subsidiary or affiliate of the Company and the effective date on which
Purchaser's employment terminated (the "Termination Date").
----------------
(b) UNVESTED AND VESTED SHARES. Shares that are not Vested Shares (as
--------------------------
defined in this Section) are "Unvested Shares". On the Effective Date all of
---------------
the Shares will be Unvested Shares. For so long (and only for so long) as
Purchaser remains continuously employed by the Company at all times after the
Effective Date, one forty-eighth (1/48) of the
-5-
<PAGE>
Shares (rounded to the nearest whole share) will become Vested Shares upon the
expiration of each full month elapsed after the Effective Date. No Shares will
become Vested Shares after the Termination Date.
(c) ADJUSTMENTS. The number of Shares that are Vested Shares or
-----------
Unvested Shares will be proportionally adjusted to reflect any stock dividend,
stock split, reverse stock split or recapitalization of the common stock of the
Company occurring after the Effective Date.
-6-
<PAGE>
(d) EXERCISE OF REPURCHASE OPTION AT ORIGINAL PRICE. At any time
-----------------------------------------------
within thirty (30) days after the Termination Date, the Company may elect to
repurchase any or all of the Unvested Shares by giving Purchaser written notice
of exercise of the Repurchase Option. The Company and/or its assignee(s) will
then have the option to repurchase from Purchaser (or from Purchaser's personal
representative as the case may be) any or all of the Unvested Shares at the
Purchaser's original Purchase Price Per Share (as adjusted to reflect any stock
dividend, stock split, reverse stock split or recapitalization of the common
stock of the Company occurring after the Effective Date).
(e) PAYMENT OF REPURCHASE PRICE. The repurchase price payable to
---------------------------
purchase Unvested Shares upon exercise of the Repurchase Option will be payable,
at the option of the Company or its assignee(s), by check or by cancellation of
all or a portion of any outstanding indebtedness of Purchaser to the Company (or
to such assignee) or by any combination thereof. The repurchase price will be
paid without interest within thirty (30) days after the Termination Date.
(f) RIGHT OF TERMINATION UNAFFECTED. Nothing in this Agreement will
-------------------------------
be construed to limit or otherwise affect in any manner whatsoever the right or
power of the Company (or any parent, subsidiary or affiliate of the Company) to
terminate Purchaser's employment at any time for any reason or no reason, with
or without cause.
(g) TERMINATION UPON CERTAIN CORPORATE TRANSACTIONS. In the event of
-----------------------------------------------
(i) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transactions in which there is no substantial change in the shareholders
of the Company), (ii) a dissolution or liquidation of the Company, or (iii) the
sale of substantially all of the assets of the Company, the Company's Repurchase
Option shall immediately terminate.
(h) VESTING UPON INVOLUNTARY TERMINATION. In the event that the
------------------------------------
Company terminates the employment of Purchaser without cause (as defined below)
and without Purchaser's consent, then on the Termination Date one quarter (1/4)
of the remaining Unvested Shares (rounded to the nearest whole share) shall
immediately become Vested Shares hereunder. For the purposes of this Section 5,
"cause" shall mean (i) Purchaser's intentional misconduct which could reasonably
be expected to have a material adverse effect on the business and affairs of the
Company, (ii) Purchaser's neglect of his duties or failure to act which could
reasonably be expected to have a material adverse effect on the business and
affairs of the Company, (iii) Purchaser's commission of an act constituting
common law fraud, or a felony or criminal act, against the Company or any
subsidiary or affiliate thereof or (iv) Purchaser's material breach of any of
the agreements contained herein.
6. RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or otherwise
----------------------
transferred by Purchaser without the Company's prior written consent. Before
any Vested Shares held by Purchaser or any transferee of such Shares (either
being sometimes referred to herein as the "Holder") may be sold or otherwise
------
transferred (including without limitation a transfer by gift
-7-
<PAGE>
or operation of law), the Company and/or its assignee(s) will have a right of
first refusal to purchase the Shares to be sold or transferred (the "Offered
Shares") on the terms and conditions set forth in this Section (the "Right of
First Refusal").
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares will
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer the Offered Shares;
(ii) the name of each proposed purchaser or other transferee ("Proposed
--------
Transferee"); (iii) the number of Offered Shares to be transferred to each
- ----------
Proposed Transferee; (iv) the bona fide cash price or other consideration for
which the Holder proposes to transfer the Offered Shares (the "Offered Price");
-------------
and (v) that the Holder will offer to sell the Offered Shares to the Company
and/or its assignee(s) at the Offered Price as provided in this Section.
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
----------------------------------
(30) days after the date of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all (but not less than
all) of the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees named in the Notice, at the purchase price determined in
accordance with subsection (c) below.
(c) PURCHASE PRICE. The purchase price for the Offered Shares
--------------
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the value of the non-cash
consideration as determined in good faith by the Company's Board of Directors
will conclusively be deemed to be the cash equivalent value of such non-cash
consideration.
(d) PAYMENT. Payment of the purchase price for Offered Shares will be
-------
payable, at the option of the Company and/or its assignee(s) (as applicable), by
check or by cancellation of all or a portion of any outstanding indebtedness of
the Holder to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The purchase
price will be paid without interest within thirty (30) days after the Company's
receipt of the Notice, or, at the option of the Company and/or its assignee(s),
in the manner and at the time(s) set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise transfer such Offered Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or
--------
other transfer is consummated within 120 days after the date of the Notice, and
provided further, that: (i) any such sale or other transfer is effected in
- -------- -------
compliance with all applicable securities laws; and (ii) the Proposed Transferee
agrees in writing that the provisions of this Section will continue to apply to
the Offered Shares in the hands of such Proposed Transferee. If the Offered
Shares described in the Notice are not transferred to the Proposed Transferee
within such 120 day period, then a new Notice must be given to the Company, and
the Company will again be offered the Right of First Refusal before any Shares
held by the Holder may be sold or otherwise transferred.
-8-
<PAGE>
(f) EXEMPT TRANSFERS. Notwithstanding anything to the contrary in
----------------
this Section, the following transfers of Shares will be exempt from the Right of
First Refusal: (i) the transfer of any or all of the Shares during Purchaser's
lifetime by gift or on Purchaser's death by will or intestacy to Purchaser's
"immediate family" (as defined below) or to a trust for the benefit of Purchaser
or Purchaser's immediate family, provided that each transferee or other
recipient agrees in a writing satisfactory to the Company that the provisions of
this Section will continue to apply to the transferred Shares in the hands of
such transferee or other recipient; (ii) any transfer of Shares made pursuant to
a statutory merger or statutory consolidation of the Company with or into
another corporation or corporations (except that the Right of First Refusal will
continue to apply thereafter to such Shares, in which case the surviving
corporation of such merger or consolidation shall succeed to the rights or the
Company under this Section unless the agreement of merger or consolidation
expressly otherwise provides); or (iii) any transfer of Shares pursuant to the
winding up and dissolution of the Company. As used herein, the term "immediate
---------
family" will mean Purchaser's spouse, lineal descendant or antecedent, father,
- ------
mother, brother or sister, adopted child or grandchild, or the spouse of any
child, adopted child, grandchild or adopted grandchild of Purchaser.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First Refusal
-------------------------------------
will terminate as to all Shares on the effective date of the first sale of
common stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the SEC under the 1933 Act (other
than a registration statement relating solely to the issuance of common stock
pursuant to a business combination or an employee incentive or benefit plan).
(h) ENCUMBRANCES ON VESTED SHARES. Purchaser may grant a lien or
-----------------------------
security interest in, or pledge, hypothecate or encumber Vested Shares only if
each party to whom such lien or security interest is granted, or to whom such
pledge, hypothecation or other encumbrance is made, agrees in a writing
satisfactory to the Company that: (i) such lien, security interest, pledge,
hypothecation or encumbrance will not apply to such Vested Shares after they are
acquired by the Company and/or its assignees) under this Section; and (ii) the
provisions of this Section will continue to apply to such Vested Shares in the
hands of such party and any transferee of such party. Purchaser may not grant a
lien or security interest in, or pledge, hypothecate or encumber, any Unvested
Shares.
7. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
---------------------
Agreement, Purchaser will have all of the rights of a shareholder of the Company
with respect to the Shares from and after the date that Purchaser delivers
payment of the Purchase Price until such time as Purchaser disposes of the
Shares or the Company and/or its assignee(s) exercise(s) the Repurchase Option
or Right of First Refusal. Upon an exercise of the Repurchase Option or the
Right of First Refusal, Purchaser will have no further rights as a holder of the
Shares so purchased upon such exercise, except the right to receive payment for
the Shares so purchased in accordance with the provisions of this Agreement, and
Purchaser will promptly surrender the stock certificate(s) evidencing the Shares
so purchased to the Company for transfer or cancellation.
-9-
<PAGE>
8. ESCROW. As security for Purchaser's faithful performance of this
------
Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company ("Escrow Holder"), who is hereby appointed to
-------------
hold such certificate(s) and Stock Powers in escrow and to take all such actions
and to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Purchaser and the Company agree
that Escrow Holder will not be liable to any party to this Agreement (or to any
other party) for any actions or omissions unless Escrow Holder is grossly
negligent or intentionally fraudulent in carrying out the duties of Escrow
Holder under this Section. Escrow Holder may rely upon any letter, notice or
other document executed by any signature purported to be genuine and may rely on
the advice of counsel and obey any order of any court with respect to the
transactions contemplated by this Agreement. The Shares will be released from
escrow upon termination of the Repurchase Option.
9. TAX CONSEQUENCES. Purchaser hereby acknowledges that Purchaser has
----------------
been informed that, unless an election is filed by the Purchaser with the
Internal Revenue Service (and, if necessary, the proper state taxing
authorities), within 30 days of the purchase of the Shares, electing pursuant to
--------------
Section 83(b) of the Internal Revenue Code (and similar state tax provisions, if
applicable) to be taxed currently on any difference between the Purchase Price
of the Shares and their fair market value on the date of purchase, there will be
a recognition of taxable income to the Purchaser, measured by the excess, if
any, of the fair market value of the Vested Shares, at the time they cease to be
Unvested Shares, over the purchase price for such Shares. Purchaser represents
that Purchaser has consulted any tax consultant(s) Purchaser deems advisable in
connection with Purchaser's purchase of the Shares and the filing of the
election under Section 83(b) and similar tax provisions. A form of Election
under Section 83(b) is attached hereto as Exhibit 4 for reference. PURCHASER
---------
HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING SUCH ELECTION AND PAYING ANY TAXES
RESULTING FROM SUCH ELECTION OR FOR FAILING TO FILE THE ELECTION AND PAYING
TAXES RESULTING FROM THE LAPSE OF THE REPURCHASE RESTRICTIONS ON THE UNVESTED
SHARES.
10. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
--------------------------------------------
(a) LEGENDS. Purchaser understands and agrees that the Company will
-------
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or federal securities laws, the Company's Articles of Incorporation or
Bylaws, any other agreement between Purchaser and the Company or any agreement
between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY
-10-
<PAGE>
NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE, TRANSFER, AND RIGHT OF REPURCHASE
AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A FOUNDER'S RESTRICTED STOCK PURCHASE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF
THE ISSUER. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS AND THE
RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.
(b) STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, in order to
--------------------------
ensure compliance with the restrictions imposed by this Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company will not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares, or to accord the right to vote or pay dividends, to any
purchaser or other transferee to whom such Shares have been so transferred.
11. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
-------------------------
registration of the Company's securities under the 1933 Act that, upon the
request of the Company or the underwriters managing any registered public
offering of the Company's securities, Purchaser will not sell or otherwise
dispose of any Shares without the prior written consent of the Company or such
managing underwriters, as the case may be, for a period of time (not to exceed
180 days) after the effective date of such registration requested by such
managing underwriters and subject to all restrictions as the Company or the
managing underwriters may specify for employee-shareholders generally.
-11-
<PAGE>
12. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
------------------------------------
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and federal laws and regulations and with
all applicable requirements of any stock exchange or automated quotation system
on which the Company's common stock may be listed or quoted at the time of such
issuance or transfer.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
----------------------
under this Agreement, including its rights to repurchase Shares under the
Repurchase Option and the Right of First Refusal. This Agreement will be binding
upon and inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement will be
binding upon Purchaser and Purchaser's heirs, executors, administrators,
successors and assigns.
14. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by and
---------------------------
construed in accordance with the internal laws of the State of California,
excluding that body of laws pertaining to conflict of laws. If any provision of
this Agreement is determined by a court of law to be illegal or unenforceable,
then such provision will be enforced to the maximum extent possible and the
other provisions will remain fully effective and enforceable.
15. NOTICES. Any notice required or permitted hereunder will be given in
-------
writing and will be deemed effectively given upon personal delivery, three (3)
days after deposit in the United States mail by certified or registered mail
(return receipt requested), one (1) business day after its deposit with any
return receipt express courier (prepaid), or one (1) business day after
transmission by telecopier, addressed to the other party at its address (or
facsimile number, in the case of transmission by telecopier) as shown below its
signature to this Agreement, or to such other address as such party may
designate in writing from time to time to the other party.
16. FURTHER INSTRUMENTS. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
17. HEADINGS. The captions and headings of this Agreement are included
--------
for ease of reference only and will be disregarded in interpreting or construing
this Agreement. All references herein to Sections will refer to Sections of
this Agreement.
18. ENTIRE AGREEMENT. This Agreement, together with all its Exhibits,
----------------
constitutes the entire agreement and understanding of the parties with respect
to the subject matter of this Agreement, and supersedes all prior understandings
and agreements, whether oral or written, between the parties hereto with respect
to the specific subject matter hereof.
19. TITLE TO SHARES. The exact spelling of the name(s) under which
---------------
Purchaser will take title to the Shares is:
S. JERROLD KAPLAN
-----------------
-12-
<PAGE>
Purchaser desires to take title to the Shares as follows:
[_] Individual, as separate property
[X] Husband and wife, as community property
[_] Joint Tenants
[_] Alone or with spouse as trustee(s) of the
following trust (including date):
----------------------------------------------------------------------
----------------------------------------------------------------------
[_] Other; please specify:
-----------------------------------------------
----------------------------------------------------------------------
Purchaser's social security number is: ###-##-####
-----------
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by its duly authorized representative and Purchaser has executed this
Agreement in duplicate, as of the Effective Date.
COMPANY PURCHASER
By:/s/ Alan Fisher By:/s/ S. Jerrold Kaplan
------------------------------ ------------------------------
Name: ALAN S. FISHER Name: S. JERROLD KAPLAN
------------------------------ ------------------------------
Title: VICE PRESIDENT Title:
------------------------------ ------------------------------
Address: Address: 910 W. SANTA INEZ AVE.
------------------------- -------------------------
HILLSBOROUGH, CA 94010
------------------------------
Fax: (___) Fax: (415) 340-9687
------------------------------ ------------------------------
LIST OF EXHIBITS
----------------
Exhibit 1: Business Plan
Exhibit 2: Stock Power and Assignment Separate from Stock Certificate
Exhibit 3: Spousal Consent
Exhibit 4: Election Under Section 83(b) of the Internal Revenue Code
-13-
<PAGE>
EXHIBIT 1
---------
BUSINESS PLAN
<PAGE>
EXHIBIT 2
---------
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Restricted Stock
Purchase Agreement dated as of July 21, 1994 (the "Agreement"), the undersigned
---------
hereby sells, assigns and transfers unto ______________ , ______ shares of the
common stock InterMall, Inc., a California corporation (the "Company"), standing
-------
in the undersigned's name on the books of the Company represented by Certificate
No(s). delivered herewith, and does hereby irrevocably constitute and appoint
the Secretary of the Company as the undersigned's attorney-in-fact, with full
power of substitution, to transfer said stock on the books of the Company. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS
THERETO.
Dated: _________ , 199__
PURCHASER
/s/ S. Jerrold Kaplan
-----------------------------------------
(Signature)
S. JERROLD KAPLAN
-----------------------------------------
(Please Print Name)
/s/ Layne Gray Kaplan
-----------------------------------------
(Spouse's Signature, if any)
Layne Gray Kaplan
-----------------------------------------
(Please Print Spouse's Name)
INSTRUCTION: Please do not fill in any blanks other than the signature line.
- ----------- ---
The purpose of this Stock Power and Assignment is to enable the Company and/or
its assignee(s) to acquire the shares upon exercise of its "Repurchase Option"
and/or its "Right of First Refusal" as set forth in the Agreement without
requiring additional signatures on the part of the Purchaser or the Purchaser's
Spouse.
<PAGE>
EXHIBIT 3
---------
CONSENT OF SPOUSE
-----------------
I, the undersigned, am the spouse of S. JERROLD KAPLAN ("Purchaser"). I
---------
have read and hereby consent to and approve all the terms and conditions of:
the Founder's Restricted Stock Purchase Agreement (the "Agreement") dated July
---------
21, 1994 between Purchaser and InterMall, Inc., a California corporation (the
"Company"), pursuant to which Purchaser has purchased 2,000,000 shares of the
- --------
Company's common stock (the "Shares").
------
In consideration of the Company granting my spouse the right to purchase
the Shares under the Agreement, I hereby agree to be irrevocably bound by all
the terms and conditions of the Agreement (including but not limited to the
Company's Repurchase Option, and the Right of First Refusal agreements contained
therein) and further agree that any community property interest I may have in
the Shares will be similarly bound by the Agreement.
I hereby appoint Purchaser as my attorney-in-fact, to act in my name, place
and stead with respect to any amendment of the Agreement and with respect to the
making and filing of an election under Internal Revenue Code Section 83(b) in
connection with the purchase of the Shares.
Dated: _________ , 19___
/s/ Layne Gray Kaplan
-----------------------------------------
Signature of Spouse [Sign Here]
/s/ Layne Gray Kaplan
-----------------------------------------
Name of Spouse [Please Print]
<PAGE>
EXHIBIT 4
---------
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
1. TAXPAYER'S NAME: S. JERROLD KAPLAN
-----------------
TAXPAYER'S ADDRESS: 910 W. SANTA INEZ AVE.
----------------------
HILLSBOROUGH, CA 94010
----------------------
SOCIAL SECURITY NUMBER: ###-##-####
-----------
2. The property with respect to which the election is made is described as
follows: 2,000,000 shares of Common Stock of InterMall, Inc., a California
corporation (the "Company"), which is Taxpayer's employer or the corporation
-------
for whom the Taxpayer performs services.
3. The date on which the shares were transferred was July 21, 1994 and this
election is made for calendar year 1994 .
4. The shares are subject to the following restrictions: The Company may
repurchase all or a portion of the shares at the Taxpayer's original
purchase price under certain conditions at the time of Taxpayer's
termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $0.005 per
share at the time of transfer.
6. The amount paid for such shares was $0.005 per share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
---
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
--------------
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED
WITHOUT THE CONSENT OF THE IRS.
Dated: ________, 199__
-----------------------------------------
Taxpayer's Signature
<PAGE>
EXHIBIT 10.15
FOUNDER'S RESTRICTED STOCK PURCHASE AGREEMENT
---------------------------------------------
This Agreement is made and entered into as of July 21, 1994 (the "Effective
---------
Date") between InterMall, Inc. (the "Company"), a California corporation, and
- ---- -------
SOFTWARE PARTNERS, INC., a Delaware corporation ("Purchaser").
---------
1. PURCHASE OF SHARES. On the Effective Date and subject to the terms
------------------
and conditions of this Agreement, Purchaser hereby purchases from the Company,
and Company hereby sells to Purchaser, an aggregate of 2,000,000 shares of the
Company's common stock (the "Shares") at an aggregate purchase price of
------
$10,000.00 (the "Purchase Price") or $0.005 per Share (the "Purchase Price Per
-------------- ------------------
Share"). As used in this Agreement, the term "Shares" refers to the Shares
- -----
purchased under this Agreement and includes all securities received (a) in
replacement of the Shares, (b) as a result of stock dividends or stock splits in
respect of the Shares, and (c) in replacement of the Shares in a
recapitalization, merger, reorganization or the like.
2. PAYMENT OF PURCHASE PRICE; CLOSING.
----------------------------------
(a) DELIVERIES BY PURCHASER. Purchaser hereby delivers to the Company
-----------------------
the full Purchase Price by Purchaser's assignment to the Company of certain
technology and related rights owned by Purchaser (the "Assigned Technology") by
-------------------
delivery to the Company of an Assignment Agreement in the form of Exhibit 1,
---------
duly executed by Purchaser. Purchaser also hereby delivers to the Company two
(2) copies of a blank Stock Power and Assignment Separate from Stock Certificate
in the form of Exhibit 2 attached hereto (the "Stock Powers"), both executed by
--------- ------------
the Purchaser.
(b) DELIVERIES BY THE COMPANY. Upon its receipt of the entire
-------------------------
Purchase Price and all the documents to be executed and delivered by Purchaser
to the Company under Section 2(a), the Company will issue a duly executed stock
certificate evidencing the Shares registered in Purchaser's name, with such
certificate to be placed in escrow as provided in Section 8 until expiration or
termination of both the Company's Repurchase Option and Right of First Refusal
described in Sections 5 and 6.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
-------------------------------------------
warrants to the Company that:
(a) PURCHASE FOR OWN ACCOUNT FOR INVESTMENT. Purchaser is purchasing
---------------------------------------
the Shares for Purchaser's own account for investment purposes only, not as a
nominee or agent and not with a view to, or for sale in connection with, a
distribution of the Shares within the meaning of the Securities Act of 1933, as
amended (the "1933 Act"). Purchaser has no present intention of selling or
--------
otherwise disposing of all or any portion of the Shares and no one other than
Purchaser has any beneficial ownership of any of the Shares. Purchaser also
represents that Purchaser was not formed for the specific purpose of acquiring
the Shares.
<PAGE>
(b) ACCESS TO INFORMATION. Purchaser has had access to all
---------------------
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
(c) UNDERSTANDING OF RISKS. Purchaser is a founder of the Company and
----------------------
is fully aware of: (i) the highly speculative nature of the investment in the
Shares; (ii) the financial hazards involved; (iii) the lack of liquidity of the
Shares and the restrictions on transferability of the Shares (e.g., that
----
Purchaser may not be able to sell or dispose of the Shares or use them as
collateral for loans); (iv) the qualifications and backgrounds of the management
of the Company; and (v) the tax consequences of investment in the Shares.
(d) PURCHASER'S QUALIFICATIONS. Purchaser has a preexisting personal
--------------------------
or business relationship with the Company and/or certain of its officers and/or
directors of a nature and duration sufficient to make Purchaser aware of the
character, business acumen and general business and financial circumstances of
the Company and/or such officers and directors. By reason of Purchaser's
business or financial experience, Purchaser is capable of evaluating the merits
and risks of this investment, has the ability to protect Purchaser's own
interests in this transaction and is financially capable of bearing a total loss
of this investment.
(e) NO GENERAL SOLICITATION. At no time was Purchaser presented with
-----------------------
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
(f) COMPLIANCE WITH SECURITIES LAWS. Purchaser understands and
-------------------------------
acknowledges that, in reliance upon the representations and warranties made by
Purchaser herein, the Shares are not being registered with the Securities and
Exchange Commission ("SEC") under the 1933 Act or being qualified under the
---
California Corporate Securities Law of 1968, as amended (the "Law"), but instead
---
are being issued under an exemption or exemptions from the registration and
qualification requirements of the 1933 Act and the Law which impose certain
restrictions on Purchaser's ability to transfer the Shares.
(g) RESTRICTIONS ON TRANSFER. Purchaser understands that Purchaser
------------------------
may not transfer any Shares unless such Shares are registered under the 1933 Act
or qualified under the Law or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are available.
Purchaser understands that only the Company may file a registration statement
with the SEC or the California Commissioner of Corporations and that the Company
is under no obligation to do so with respect to the Shares. Purchaser has also
been advised that exemptions from registration and qualification may not be
available or may not permit Purchaser to transfer all or any of the Shares in
the amounts or at the times proposed by Purchaser.
(h) RULE 144. In addition, Purchaser has been advised that SEC Rule
--------
144 promulgated under the 1933 Act, which permits certain limited sales of
unregistered securities, is
-2-
<PAGE>
not presently available with respect to the Shares and, in any event, requires
that the Shares be held for a minimum of two years, and in certain cases three
years, after they have been purchased and paid for (within the meaning of Rule
------------
144), before they may be resold under Rule 144.
4. COMPLIANCE WITH CALIFORNIA SECURITIES LAWS. THE SALE OF THE
------------------------------------------
SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION,
IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION
BEING AVAILABLE.
5. COMPANY'S REPURCHASE OPTION. The Company has the option to repurchase
---------------------------
all or a portion of the Vested Shares (as defined below) on the terms and
conditions set forth in this Section (the "Repurchase Option") if Alan S.
-----------------
Fisher, a principal shareholder of Purchaser ("Fisher"), ceases to be employed
------
by the Company (as defined herein) for any reason, or no reason, including
without limitation Fisher's death, disability, voluntary resignation or
termination by the Company with or without cause.
(A) DEFINITION OF "EMPLOYED BY THE COMPANY"; "TERMINATION DATE". For
----------------------------------------------------------
purposes of this Agreement, Fisher will be considered to be "employed by the
---------------
Company" if the Board of Directors of the Company determines that Fisher is
- -------
rendering substantial services as an officer, employee, consultant or
independent contractor to the Company or to any parent, subsidiary or affiliate
of the Company. In case of any dispute as to whether Fisher is employed by the
Company, the Board of Directors of the Company will have discretion to determine
whether Fisher has ceased to be employed by the Company or any parent,
subsidiary or affiliate of the Company and the effective date on which Fisher's
employment terminated (the "Termination Date").
----------------
(b) UNVESTED AND VESTED SHARES. Shares that are not Vested Shares (as
--------------------------
defined in this Section) are "Unvested Shares". On the Effective Date all of
---------------
the Shares will be Unvested Shares. For so long (and only for so long) as
Fisher remains continuously employed by the Company at all times after the
Effective Date, one forty-eighth (1/48) of the Shares (rounded to the nearest
whole share) will become Vested Shares upon the expiration of each full month
elapsed after the Effective Date. No Shares will become Vested Shares after the
Termination Date.
(c) ADJUSTMENTS. The number of Shares that are Vested Shares or
-----------
Unvested Shares will be proportionally adjusted to reflect any stock dividend,
stock split, reverse stock split or recapitalization of the common stock of the
Company occurring after the Effective Date.
(d) EXERCISE OF REPURCHASE OPTION AT ORIGINAL PRICE. At any time
-----------------------------------------------
within thirty (30) days after the Termination Date, the Company may elect to
repurchase any or all of
-3-
<PAGE>
the Unvested Shares by giving Purchaser written notice of exercise of the
Repurchase Option. The Company and/or its assignee(s) will then have the option
to repurchase from Purchaser (or from Purchaser's personal representative as the
case may be) any or all of the Unvested Shares at the Purchaser's original
Purchase Price Per Share (as adjusted to reflect any stock dividend, stock
split, reverse stock split or recapitalization of the common stock of the
Company occurring after the Effective Date).
(e) PAYMENT OF REPURCHASE PRICE. The repurchase price payable to
---------------------------
purchase Unvested Shares upon exercise of the Repurchase Option will be payable,
at the option of the Company or its assignee(s), by check or by cancellation of
all or a portion of any outstanding indebtedness of Purchaser to the Company (or
to such assignee) or by any combination thereof. The repurchase price will be
paid without interest within thirty (30) days after the Termination Date.
(f) RIGHT OF TERMINATION UNAFFECTED. Nothing in this Agreement will
-------------------------------
be construed to limit or otherwise affect in any manner whatsoever the right or
power of the Company (or any parent, subsidiary or affiliate of the Company) to
terminate Fisher's employment at any time for any reason or no reason, with or
without cause.
(g) TERMINATION UPON CERTAIN CORPORATE TRANSACTIONS. In the event of
-----------------------------------------------
(i) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transactions in which there is no substantial change in the shareholders
of the Company), (ii) a dissolution or liquidation of the Company, or (iii) the
sale of substantially all of the assets of the Company, the Company's Repurchase
Option shall immediately terminate.
(h) VESTING UPON INVOLUNTARY TERMINATION. In the event that the
------------------------------------
Company terminates the employment of Fisher without cause (as defined below) and
without Fisher's consent, then on the Termination Date one quarter (1/4) of the
remaining Unvested Shares (rounded to the nearest whole share) shall immediately
become Vested Shares hereunder. For the purposes of this Section 5, "cause"
shall mean (i) Fisher's intentional misconduct which could reasonably be
expected to have a material adverse effect on the business and affairs of the
Company, (ii) Fisher's neglect of his duties or failure to act which could
reasonably be expected to have a material adverse effect on the business and
affairs of the Company, (iii) Fisher's commission of an act constituting common
law fraud, or a felony or criminal act, against the Company or any subsidiary or
affiliate thereof or (iv) Fisher's material breach of any of the agreements
contained herein.
6. RIGHT OF FIRST REFUSAL. Unvested Shares may not be sold or otherwise
----------------------
transferred by Purchaser without the Company's prior written consent. Before
any Vested Shares held by Purchaser or any transferee of such Shares (either
being sometimes referred to herein as the "Holder") may be sold or otherwise
------
transferred (including without limitation a transfer by gift or operation of
law), the Company and/or its assignee(s) will have a right of first refusal to
-4-
<PAGE>
purchase the Shares to be sold or transferred (the "Offered Shares") on the
--------------
terms and conditions set forth in this Section (the "Right of First Refusal").
----------------------
(a) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares will
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer the Offered Shares;
(ii) the name of each proposed purchaser or other transferee ("Proposed
--------
Transferee"); (iii) the number of Offered Shares to be transferred to each
- ----------
Proposed Transferee; (iv) the bona fide cash price or other consideration for
which the Holder proposes to transfer the Offered Shares (the "Offered Price");
-------------
and (v) that the Holder will offer to sell the Offered Shares to the Company
and/or its assignee(s) at the Offered Price as provided in this Section.
(b) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within thirty
----------------------------------
(30) days after the date of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all (but not less than
all) of the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees named in the Notice, at the purchase price determined in
accordance with subsection (c) below.
(c) PURCHASE PRICE. The purchase price for the Offered Shares
--------------
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the value of the non-cash
consideration as determined in good faith by the Company's Board of Directors
will conclusively be deemed to be the cash equivalent value of such non-cash
consideration.
(d) PAYMENT. Payment of the purchase price for Offered Shares will be
-------
payable, at the option of the Company and/or its assignee(s) (as applicable), by
check or by cancellation of all or a portion of any outstanding indebtedness of
the Holder to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The purchase
price will be paid without interest within thirty (30) days after the Company's
receipt of the Notice, or, at the option of the Company and/or its assignee(s),
in the manner and at the time(s) set forth in the Notice.
(e) HOLDER'S RIGHT TO TRANSFER. If all of the Offered Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise transfer such Offered Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or
--------
other transfer is consummated within 120 days after the date of the Notice, and
provided further, that: (i) any such sale or other transfer is effected in
- -------- -------
compliance with all applicable securities laws; and (ii) the Proposed Transferee
agrees in writing that the provisions of this Section will continue to apply to
the Offered Shares in the hands of such Proposed Transferee. If the Offered
Shares described in the Notice are not transferred to the Proposed Transferee
within such 120 day period, then a new Notice must be given to the Company, and
the Company will again be offered the Right of First Refusal before any Shares
held by the Holder may be sold or otherwise transferred.
-5-
<PAGE>
(f) EXEMPT TRANSFERS. Notwithstanding anything to the contrary in
----------------
this Section, the following transfers of Shares will be exempt from the Right of
First Refusal: (i) the transfer of any or all of the Shares to Purchaser's then-
current shareholders (each a "Purchaser Shareholder"); (ii) the transfer of any
---------------------
or all of the Shares by a Purchaser Shareholder during his or her lifetime by
gift or on his or her death by will or intestacy to such Purchaser Shareholder's
"immediate family" (as defined below) or to a trust for the benefit of such
Purchaser Shareholder or such Purchaser Shareholder's immediate family, provided
that each transferee or other recipient agrees in a writing satisfactory to the
Company that the provisions of this Section will continue to apply to the
transferred Shares in the hands of such transferee or other recipient; (ii) any
transfer of Shares made pursuant to a statutory merger or statutory
consolidation of the Company with or into another corporation or corporations
(except that the Right of First Refusal will continue to apply thereafter to
such Shares, in which case the surviving corporation of such merger or
consolidation shall succeed to the rights or the Company under this Section
unless the agreement of merger or consolidation expressly otherwise provides);
or (iii) any transfer of Shares pursuant to the winding up and dissolution of
the Company. As used herein, the term "immediate family" will mean a Purchaser
----------------
Shareholder's spouse, lineal descendant or antecedent, father, mother, brother
or sister, adopted child or grandchild, or the spouse of any child, adopted
child, grandchild or adopted grandchild of such Purchaser Shareholder.
(g) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First Refusal
-------------------------------------
will terminate as to all Shares on the effective date of the first sale of
common stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the SEC under the 1933 Act (other
than a registration statement relating solely to the issuance of common stock
pursuant to a business combination or an employee incentive or benefit plan).
(h) ENCUMBRANCES ON VESTED SHARES. Purchaser may grant a lien or
-----------------------------
security interest in, or pledge, hypothecate or encumber Vested Shares only if
each party to whom such lien or security interest is granted, or to whom such
pledge, hypothecation or other encumbrance is made, agrees in a writing
satisfactory to the Company that: (i) such lien, security interest, pledge,
hypothecation or encumbrance will not apply to such Vested Shares after they are
acquired by the Company and/or its assignees) under this Section; and (ii) the
provisions of this Section will continue to apply to such Vested Shares in the
hands of such party and any transferee of such party. Purchaser may not grant a
lien or security interest in, or pledge, hypothecate or encumber, any Unvested
Shares.
7. RIGHTS AS SHAREHOLDER. Subject to the terms and conditions of this
---------------------
Agreement, Purchaser will have all of the rights of a shareholder of the Company
with respect to the Shares from and after the date that Purchaser delivers
payment of the Purchase Price until such time as Purchaser disposes of the
Shares or the Company and/or its assignee(s) exercise(s) the Repurchase Option
or Right of First Refusal. Upon an exercise of the Repurchase Option or the
Right of First Refusal, Purchaser will have no further rights as a holder of the
Shares so purchased upon such exercise, except the right to receive payment for
the Shares so purchased in accordance with the provisions of this Agreement, and
Purchaser will promptly surrender the stock certificate(s) evidencing the Shares
so purchased to the Company for transfer or cancellation.
-6-
<PAGE>
8. ESCROW. As security for Purchaser's faithful performance of this
------
Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser (with the date and number of Shares
left blank), to the Secretary of the Company or other designee of the Company
("Escrow Holder"), who is hereby appointed to hold such certificate(s) and Stock
- ---------------
Powers in escrow and to take all such actions and to effectuate all such
transfers and/or releases of such Shares as are in accordance with the terms of
this Agreement. Purchaser and the Company agree that Escrow Holder will not be
liable to any party to this Agreement (or to any other party) for any actions or
omissions unless Escrow Holder is grossly negligent or intentionally fraudulent
in carrying out the duties of Escrow Holder under this Section. Escrow Holder
may rely upon any letter, notice or other document executed by any signature
purported to be genuine and may rely on the advice of counsel and obey any order
of any court with respect to the transactions contemplated by this Agreement.
The Shares will be released from escrow upon termination of the Repurchase
Option.
9. TAX CONSEQUENCES. Purchaser hereby acknowledges that Purchaser has
----------------
been informed that, unless an election is filed by the Purchaser with the
Internal Revenue Service (and, if necessary, the proper state taxing
authorities), within 30 days of the purchase of the Shares, electing pursuant to
--------------
Section 83(b) of the Internal Revenue Code (and similar state tax provisions, if
applicable) to be taxed currently on any difference between the Purchase Price
of the Shares and their fair market value on the date of purchase, there will be
a recognition of taxable income to the Purchaser, measured by the excess, if
any, of the fair market value of the Vested Shares, at the time they cease to be
Unvested Shares, over the purchase price for such Shares. Purchaser represents
that Purchaser has consulted any tax consultant(s) Purchaser deems advisable in
connection with Purchaser's purchase of the Shares and the filing of the
election under Section 83(b) and similar tax provisions. A form of Election
under Section 83(b) is attached hereto as Exhibit 3 for reference. PURCHASER
---------
HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING SUCH ELECTION AND PAYING ANY TAXES
RESULTING FROM SUCH ELECTION OR FOR FAILING TO FILE THE ELECTION AND PAYING
TAXES RESULTING FROM THE LAPSE OF THE REPURCHASE RESTRICTIONS ON THE UNVESTED
SHARES.
10. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
--------------------------------------------
(a) LEGENDS. Purchaser understands and agrees that the Company will
-------
place the legends set forth below or similar legends on any stock certificate(s)
evidencing the Shares, together with any other legends that may be required by
state or federal securities laws, the Company's Articles of Incorporation or
Bylaws, any other agreement between Purchaser and the Company or any agreement
between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO
-7-
<PAGE>
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE, TRANSFER, AND RIGHT OF REPURCHASE
AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A FOUNDER'S RESTRICTED STOCK PURCHASE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF
THE ISSUER. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS AND THE
RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.
(b) STOP-TRANSFER INSTRUCTIONS. Purchaser agrees that, in order to
--------------------------
ensure compliance with the restrictions imposed by this Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company will not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares, or to accord the right to vote or pay dividends, to any
purchaser or other transferee to whom such Shares have been so transferred.
11. MARKET STANDOFF AGREEMENT. Purchaser agrees in connection with any
-------------------------
registration of the Company's securities under the 1933 Act that, upon the
request of the Company or the underwriters managing any registered public
offering of the Company's securities, Purchaser will not sell or otherwise
dispose of any Shares without the prior written consent of the Company or such
managing underwriters, as the case may be, for a period of time (not to exceed
180 days) after the effective date of such registration requested by such
managing underwriters and subject to all restrictions as the Company or the
managing underwriters may specify for employee-shareholders generally.
-8-
<PAGE>
12. COMPLIANCE WITH LAWS AND REGULATIONS. The issuance and transfer of
------------------------------------
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and federal laws and regulations and with
all applicable requirements of any stock exchange or automated quotation system
on which the Company's common stock may be listed or quoted at the time of such
issuance or transfer.
13. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
----------------------
under this Agreement, including its rights to repurchase Shares under the
Repurchase Option and the Right of First Refusal. This Agreement will be binding
upon and inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement will be
binding upon Purchaser and Purchaser's administrators, successors and assigns.
14. GOVERNING LAW; SEVERABILITY. This Agreement will be governed by and
---------------------------
construed in accordance with the internal laws of the State of California,
excluding that body of laws pertaining to conflict of laws. If any provision of
this Agreement is determined by a court of law to be illegal or unenforceable,
then such provision will be enforced to the maximum extent possible and the
other provisions will remain fully effective and enforceable.
15. NOTICES. Any notice required or permitted hereunder will be given in
-------
writing and will be deemed effectively given upon personal delivery, three (3)
days after deposit in the United States mail by certified or registered mail
(return receipt requested), one (1) business day after its deposit with any
return receipt express courier (prepaid), or one (1) business day after
transmission by telecopier, addressed to the other party at its address (or
facsimile number, in the case of transmission by telecopier) as shown below its
signature to this Agreement, or to such other address as such party may
designate in writing from time to time to the other party.
16. FURTHER INSTRUMENTS. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
17. HEADINGS. The captions and headings of this Agreement are included
--------
for ease of reference only and will be disregarded in interpreting or construing
this Agreement. All references herein to Sections will refer to Sections of
this Agreement.
18. ENTIRE AGREEMENT. This Agreement, together with all its Exhibits,
----------------
constitutes the entire agreement and understanding of the parties with respect
to the subject matter of this Agreement, and supersedes all prior understandings
and agreements, whether oral or written, between the parties hereto with respect
to the specific subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by its duly authorized representative and Purchaser has executed this
Agreement in duplicate, as of the Effective Date.
-9-
<PAGE>
COMPANY PURCHASER
By: /s/ S. Jerrold Kaplan By: /s/ Alan Fisher
------------------------------- --------------------------------
Name: S. JERROLD KAPLAN Name: ALAN S. FISHER
------------------------------ ------------------------------
Title: PRESIDENT Title: PRESIDENT
----------------------------- -----------------------------
Address: Address: 2013 LANDINGS DRIVE
--------------------------- ---------------------------
MOUNTAIN VIEW, CA 94043
--------------------------- ---------------------------
Fax: (___) Fax: (415) 428-0163
--------------------------- ---------------------------
LIST OF EXHIBITS
----------------
Exhibit 1: Assignment Agreement
Exhibit 2: Stock Power and Assignment Separate From Certificate
Exhibit 3: Election Under Section 83(b) of the Internal Revenue Code
-10-
<PAGE>
EXHIBIT 2
---------
STOCK POWER AND ASSIGNMENT
SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Founder's Restricted Stock
Purchase Agreement dated as of July 21, 1994 (the "Agreement"), the undersigned
---------
hereby sells, assigns and transfers unto ________ , ______ shares of the
common stock InterMall, Inc., a California corporation (the "Company"), standing
-------
in the undersigned's name on the books of the Company represented by Certificate
No(s).____ delivered herewith, and does hereby irrevocably constitute and
appoint the Secretary of the Company as the undersigned's attorney-in-fact, with
full power of substitution, to transfer said stock on the books of the Company.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS
THERETO.
Dated: ________ , 199__
SOFTWARE PARTNERS, INC.
By: /s/ Alan S.Fisher
-----------------
Name: ALAN S. FISHER
-----------------
Title: PRESIDENT
-----------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
- ----------- ---
The purpose of this Stock Power and Assignment is to enable the Company and/or
its assignee(s) to acquire the shares upon exercise of its "Repurchase Option"
and/or its "Right of First Refusal" as set forth in the Agreement without
requiring additional signatures on the part of the Purchaser.
<PAGE>
EXHIBIT 3
---------
ELECTION UNDER SECTION 83(b) OF THE
INTERNAL REVENUE CODE
1. TAXPAYER'S NAME: ALAN S. FISHER
--------------
TAXPAYER'S ADDRESS: 2013 LANDINGS DRIVE
-------------------
MOUNTAIN VIEW, CA 94043
-----------------------
SOCIAL SECURITY NUMBER:
-----------------------
2. The property with respect to which the election is made is described as
follows: 2,000,000 shares of Common Stock of InterMall, Inc., a California
corporation (the "Company"), which is Taxpayer's employer or the corporation
-------
for whom the Taxpayer performs services.
3. The date on which the shares were transferred was July 21, 1994 and this
election is made for calendar year 1994 .
4. The shares are subject to the following restrictions: The Company may
repurchase all or a portion of the shares at the Taxpayer's original
purchase price under certain conditions at the time of Taxpayer's
termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $0.005 per
share at the time of transfer.
6. The amount paid for such shares was $0.005 per share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
---
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
--------------
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED
WITHOUT THE CONSENT OF THE IRS.
Dated: August 16, 1994
/s/ Alan Fisher
-------------------------------------
Taxpayer's Signature
<PAGE>
EXHIBIT 10.16
[EXHIBIT 1]
ASSIGNMENT AGREEMENT
--------------------
This Assignment Agreement (this "Agreement") is made and entered into
---------
effective as July 21, 1994 by and between InterMall, Inc., a California
corporation (the "Company"), and Software Partners, Inc., a California
-------
corporation ("Assignor").
--------
RECITALS
A. Assignor is the author and owner of the Technology (as defined below),
and Assignor desires to assign and transfer to the Company all of Assignor's
right, title and interest in and to the Technology and other related rights in
exchange for the Company's issuance to Assignor of 2,000,000 shares of the
Company's Common Stock (the "Shares").
------
B. The parties are entering into this Agreement pursuant to that certain
Founder's Restricted Stock Purchase Agreement by and between the Company and
Assignor dated of even date herewith (the "Stock Purchase Agreement").
------------------------
NOW THEREFORE, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. As used herein, the following terms will have the
-------------------
meanings set forth below:
1.1 Technology. The term "Technology" means that certain software
---------- ----------
application program designed to run with the Microsoft Windows operating system
on personal computers which application program provides a user interface for
customer access to an on-line retail merchandise shopping network, as more fully
described in Schedule A attached hereto, and all technology, trade secrets and
----------
know-how related thereto.
1.2 Derivative. The term "Derivative" means: (a) any derivative
---------- ----------
work of the Technology (as defined in Section 101 of the U.S. Copyright Act);
(b) all improvements, modifications, alterations, adaptations, enhancements and
new versions of the Technology ("Technology Derivatives"); and (c) all
----------------------
technology, inventions, products or other items that, directly or indirectly,
incorporate, or are derived from, any part of the Technology or any Technology
Derivative.
1.3 Intellectual Property Rights. The term "Intellectual Property
---------------------------- ---------------------
Rights" means, collectively, all worldwide patents, patent applications,
- ------
patent rights, copyrights, copyright registrations, moral rights, trade names,
trademarks, service marks and registrations and applications therefor, trade
secrets, know-how, mask work rights, rights in trade dress and packaging,
goodwill and all other intellectual property rights and proprietary rights
relating in any way to the Technology, any Derivative or any Embodiment, whether
arising under the laws of the United States of America or the laws of any other
state, country or jurisdiction.
<PAGE>
1.4 Embodiment. The term "Embodiment" means all documentation,
---------- ----------
drafts, papers, designs, schematics, diagrams, models, prototypes, source and
object code (in any form or format and for all hardware platforms), computer-
stored data, diskettes, manuscripts and other items describing all or any part
of the Technology, any Derivative, any Intellectual Property Rights or any
information related thereto or in which all of any part of the Technology, any
Derivative, any Intellectual Property Right or such information is set forth,
embodied, recorded or stored.
1.5 Assigned Assets. The term "Assigned Assets" refers to the
--------------- ---------------
Technology, all Derivatives, all Intellectual Property Rights and all
Embodiments, collectively.
2. ASSIGNMENT. In consideration of the issuance by the Company to
----------
Assignor of the Shares pursuant to the Stock Purchase Agreement, receipt of
which is hereby acknowledged, Assignor hereby forever sells, assigns, transfers,
releases and conveys to the Company, and its successors and assigns, Assignor's
entire right, title and interest in and to each and all of the Assigned Assets.
3. DELIVERY. Assignor agrees to promptly deliver all Embodiments of all
--------
Assigned Assets to the Company at such time and location as designated by the
Company after the date of execution hereof.
4. ASSIGNOR WARRANTIES. Assignor represents and warrants to the Company
-------------------
that Assignor is the sole owner, inventor and/or author of, and that Assignor
owns, and can grant exclusive right, title and interest in and to, each of the
Assigned Assets and that none of the Assigned Assets are subject to any dispute,
claim, prior license or other agreement, assignment, lien or rights of any third
party, or any other rights that might interfere with the Company's use, or
exercise of ownership of, any Assigned Assets. Assignor further represents and
warrants to the Company that the Assigned Assets are free of any claim of any
prior employer of any employee of Assignor or any school, university or other
institution attended by such employee of Assignor, and that Assignor is not
aware of any claims by any third party to any rights of any kind in or to any of
the Assigned Assets.
5. FURTHER ASSURANCES. Assignor further agrees, promptly upon request of
------------------
the Company, or any of its successors or assigns, to execute and deliver,
without further compensation of any kind, any power of attorney, assignment,
application for copyright, patent or other intellectual property right
protection, or any other papers which may be necessary or desirable to fully
secure to the Company, its successors and assigns, all right, title and interest
in and to each of the Assigned Assets, and to cooperate and assist in the
prosecution of any opposition proceedings involving said rights and any
adjudication of the same. Further, Assignor agrees never to assert any claims,
rights or moral rights in or to any of the Assigned Assets.
6. INDEMNITY. Assignor will indemnify and hold the Company harmless from
---------
and against any loss, damages or expense (including without limitation
reasonable attorneys' fees) incurred by the Company in connection with, and will
defend or settle at Licensor's own expense, any claim, suit or other proceeding
in which a third party asserts any claim to any right, title, license or other
interest in or to any Assigned Asset, any claim that any Assigned Asset
infringes
-2-
<PAGE>
any copyright or incorporates any misappropriated trade secret or other non-
patent intellectual property right of such third party, or that, if true, would
be inconsistent with any representation made by Assignor in Section 4 above.
Assignor's liability to the Company under this Section 6 shall be limited to the
value of the Shares at such time as the Company asserts its right to
indemnification hereunder.
7. COUNTERPARTS; GOVERNING LAW. This Agreement may be executed in any
---------------------------
number of counterparts, each of which will constitute an original, and all of
which will together constitute this one Agreement. This Agreement will be
governed exclusively by the internal laws of the State of California.
-3-
<PAGE>
8. ENTIRE AGREEMENT. This Agreement and the Stock Purchase Agreement
----------------
constitute the entire understanding and agreement between Assignor and the
Company regarding the subject matter of such agreements, and supersede any and
all other agreements or understandings of the parties regarding such subject
matter.
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of the date and year first above written.
INTERMALL, INC. SOFTWARE PARTNERS, INC.
By: /s/ S. Jerrold Kaplan By: /s/ Alan Fisher
--------------------- ---------------
Name: S. JERROLD KAPLAN Name: ALAN S. FISHER
----------------- --------------
Title: PRESIDENT Title: PRESIDENT
--------- ---------
-4-
<PAGE>
SCHEDULE A
----------
DESCRIPTION OF TECHNOLOGY
<PAGE>
EXHIBIT 11.01
ONSALE, INC.
CALCULATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(JULY 1994) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
-------------- -------------
<S> <C> <C>
Weighted average common shares outstanding........ 12,144 12,144
Weighted average common equivalent shares from
Convertible Preferred Stock and warrants,
calculated using the "if converted" method....... 1,704 1,704
Weighted average common equivalent shares from
stock options calculated using the treasury stock
method (1)....................................... 1,373 1,373
------ ------
Shares used to compute net income (loss) per
share............................................ 15,221 15,221
====== ======
Net income (loss)................................. $ (440) $ 221
====== ======
Net income (loss) per share....................... $(0.03) $ 0.01
====== ======
</TABLE>
- --------
(1) Pursuant to a Securities and Exchange Commission Staff Accounting
Bulletin, stock options issued subsequent to September 1995 have been
included in the computation as if they were outstanding for all periods
presented.
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated December 20, 1996
relating to the financial statements of ONSALE, Inc., which appears in such
Prospectus. We also consent to the application of such report to the Financial
Statement Schedule for the period from inception (July 1994) to December 31,
1995 and for the nine months ended September 30, 1996 listed under Item 16(b)
of this Registration Statement when such schedule is read in conjunction with
the financial statements referred to in our report. The audits referred to in
such report also included this schedule. We also consent to the references to
us under the headings "Experts" and "Selected Financial Data" in such
Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Financial Data."
PRICE WATERHOUSE LLP
San Jose, California
December 20, 1996
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<PAGE>
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<S> <C> <C>
<PERIOD-TYPE> OTHER 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-30-1996
<PERIOD-START> JUL-01-1994 JAN-01-1996
<PERIOD-END> DEC-31-1995 SEP-30-1996
<CASH> 20,000 3,216,000
<SECURITIES> 0 0
<RECEIVABLES> 22,000 351,000
<ALLOWANCES> 16,000 39,000
<INVENTORY> 1,000 274,000
<CURRENT-ASSETS> 43,000 4,002,000
<PP&E> 40,000 313,000
<DEPRECIATION> (10,000) (36,000)
<TOTAL-ASSETS> 73,000 4,291,000
<CURRENT-LIABILITIES> 492,000 2,119,000
<BONDS> 0 0
0 0
0 1,000
<COMMON> 12,000 12,000
<OTHER-SE> (407,000) 2,159,000
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<TOTAL-REVENUES> 140,000 5,963,000
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<INTEREST-EXPENSE> 0 3,000
<INCOME-PRETAX> (440,000) 246,000
<INCOME-TAX> 0 (25,000)
<INCOME-CONTINUING> (440,000) 221,000
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