SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 20, 1999
UBARTER.COM INC.
(Exact name of registrant as specified in its charter)
NEVADA 0-24005 91-1739746
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
21400 International Blvd. #207, Seattle, WA 98198
(Address of principal executive offices) (Zip Code)
Registrant=s telephone number, including area code: (206) 870-9290
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Item 5. Other Events.
On December 20, 1999, Ubarter.com Inc. ("Ubarter") entered into a
letter of intent (the "Letter") with ShopNow.com Inc. ("ShopNow") pursuant to
which ShopNow would acquire Ubarter and would provide Ubarter a $2.0 million
short-term bridge loan. The following summary of certain terms and conditions of
the transactions is qualified by reference to the documents relating to these
transactions which are filed as exhibits to this Form 8-K.
The Letter provides that ShopNow will acquire all of the Company's
equity for $45 million (subject to reduction for certain liabilities of Ubarter
as of the closing date) payable in shares of ShopNow's common stock valued at
the lower of (i) $20 per share or (ii) the average daily closing sales price of
ShopNow's common stock as reported on the Nasdaq National Market on each of the
ten trading days immediately prior to the execution of the definitive
acquisition agreement. On December 20, 1999, the closing sales price of
ShopNow's common stock was $18.75 per share.
The transaction is subject to completion of due diligence, execution of
definitive agreements and receipt of all necessary consents and approvals,
including approval of the board of directors and shareholders of Ubarter.
Ubarter has agreed to pay a termination fee to ShopNow under certain
circumstances if the acquisition contemplated by the Letter is not consummated.
The transaction is expected to be completed sometime in the first half of 2000.
As a part of execution of the Letter, Steven White, the Company's Chief
Executive Officer, and New Horizons LLC have agreed to vote their shares in
favor of approval of the acquisition contemplated by the Letter and upon
execution of definitive agreements relating to the acquisition, to enter into a
voting agreement to vote in favor of approval of the transactions contemplated
by the Letter. In addition, prior to April 30, 2000, Mr. White has given ShopNow
an option (the "Call Option") to purchase all of his shares of Ubarter at a
price of $6.00 per share. Mr. White currently holds approximately 22% of
Ubarter's outstanding shares of common stock and New Horizons currently holds
approximately 19% of Ubarter's outstanding shares of common stock (assuming
exercise of warrants to purchase 400,000 shares of Ubarter's common stock).
As a part of the execution of the Letter, ShopNow provided Ubarter a
$2.0 million short-term bridge loan in the form of a Convertible Promissory Note
due upon demand at any time after June 22, 2000 (the "Note"). If the acquisition
of Ubarter is not completed, the then unpaid principal balance of the
Convertible Note will convert into shares of common stock upon the conversion
prices as set forth in the Note. Under certain circumstances, in the event of
conversion of the Note into shares of Ubarter common stock, Ubarter will issue
ShopNow a warrant to purchase shares of Ubarter common stock (the "Warrant").
Ubarter will use the proceeds of the bridge loan to continue to fund further
development of its e-commerce site for barter and for working capital purposes.
A copy of the Letter, the Call Option, the Note and the Warrant are
filed as exhibits to this Form 8-K.
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Item 7. Financial Statements and Exhibits.
(c) Exhibits.
2 Letter of Intent dated December 20, 1999,between
Ubarter.com Inc., ShopNow.com Inc., Steven White and
New Horizons LLC.
4.2 Call Option between Steven White and ShopNow.com Inc.
4.3 Convertible Promissory Note dated December 22, 1999
4.4 Stock Purchase Warrant dated December 22, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 31, 1999 UBARTER.COM INC.
By /s/ Steven M. White
Name: Steven M. White
President and Chief Executive Officer
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EXHIBIT INDEX
Exhibit Number Exhibit Description
2 Letter of Intent dated December 20, 1999,between
Ubarter.com Inc., ShopNow.com Inc., Steven White and
New Horizons LLC.
4.1 Call Option between Steven White and ShopNow.com Inc.
4.2 Convertible Promissory Note dated December 22, 1999
4.3 Stock Purchase Warrant dated December 22, 1999
Letter of Intent
December 20, 1999
Ubarter.com Inc.
21400 International Blvd., Suite 207
Seattle, WA 98198
Attn: Steven M. White
Re: Proposal to Acquire Ubarter.com Inc.
Dear Steven:
The purpose of this letter (this "Letter") is to set forth certain
nonbinding understandings and certain binding agreements among ShopNow.com Inc.,
a Washington corporation ("Prospective Buyer"), Ubarter.com Inc., a Nevada
corporation (the "Company"), and shareholders of the Company who are signatories
to this Letter (the "Key Shareholders"), as of the date shown above (the
"Effective Date"), with respect to the possible acquisition of the Company by
the Prospective Buyer on the terms set forth below.
PART ONE--NONBINDING PROVISIONS
The following numbered paragraphs of this Letter (collectively, the
"Nonbinding Provisions") reflect our mutual understanding of the matters
described in them, but each party acknowledges that the Nonbinding Provisions
are not intended to create or constitute any legally binding obligation among
Prospective Buyer, the Company and the Key Shareholders, and none of Prospective
Buyer, the Company or the Key Shareholders shall have any liability to the other
parties with respect to the Nonbinding Provisions unless and to the extent that
they are embodied in a fully integrated definitive agreement (the "Definitive
Agreement"), and other related documents, which are prepared, authorized,
executed and delivered by and among all parties. If the Definitive Agreement is
not prepared, authorized, executed or delivered for any reason, no party to this
Letter shall have any liability to any other party to this Letter based upon,
arising from, or relating to the Nonbinding Provisions.
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1. Basic Transaction
a. Prospective Buyer would acquire the equity of the Company as of the
closing of the proposed transaction. The parties intend that the closing of the
proposed transaction (the "Closing") would occur three business days after the
later to occur of (i) the date the Form S-4 (as defined below) is declared
effective by the Securities and Exchange Commission (the "Commission") and (ii)
the date the shareholders of the Company approve the proposed transaction.
b. The structure and form of the transaction will be mutually agreeable
to the parties, provided that the parties currently intend that the transaction
will qualify for treatment as a tax-free transaction under the Internal Revenue
Code of 1986, as amended.
2. Proposed Purchase Price; Registration of Securities; Assumption of Debt
Based on the information known to Prospective Buyer on the date hereof,
the total consideration for the Company would be $45 million, subject to
adjustment as provided below (the "Purchase Price"). The Purchase Price less the
total amount of the Closing Liabilities (as defined below) would be paid to the
holders of equity securities of the Company (the "Shareholders") at the Closing
through the issuance by Prospective Buyer of shares of Prospective Buyer's
Common Stock valued at the Per Share Stock Price.
For purposes of this Letter, (a) "Per Share Stock Price" shall mean the
lower of (i) $20 or (ii) the average daily closing sales price of Prospective
Buyer's Common Stock as reported on the Nasdaq National Market ("Nasdaq") on
each of the ten trading days immediately prior to the execution of the
Definitive Agreement (the "Ten Day Average Price") and (b) "Closing Liabilities"
shall mean all liabilities, debts or obligations, contingent or otherwise,
existing as of the Closing, the value of which would not exceed the Purchase
Price, including without limitation, all outstanding indebtedness to (1) Astra
Ventures LLC, (2) certain employees of the Company based on change of control
provisions in such employees' respective employment agreements, (3) Alpine
Capital for approximately $1 million, (4) the Company's COO for approximately
$250,000 as an earn-out under an agreement between the Company and such officer,
(5) Momentous Inc. Pension and Trust for approximately $100,000 and (6) various
lessors, lenders and vendors for approximately $100,000 (in the aggregate)
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created in connection with the execution of miscellaneous leases and other
agreements; provided, however, that "Closing Liabilities" shall not include, in
each case existing at the Closing, (x) any outstanding indebtedness and accrued
interest under the Bridge Financing (as defined below), (y) any payables or
accrued expenses incurred in the ordinary course of business (provided such
payables and accrued expenses do not exceed in the aggregate $225,000) and (z)
any trade dollar liabilities (noncash/barter). All Closing Liabilities payable
at the Closing, including, but not limited to, (A) $1.35 million to Astra
Ventures LLC, which amount is payable 50% in cash and 50% through the issuance
of shares of Prospective Buyer's Common Stock and (B) $750,000 payable to
certain employees based on change of control provisions in such employees'
respective employment agreements, will be paid by Prospective Buyer at Closing.
The number of shares of Prospective Buyer's Common Stock issued to the
Shareholders in the proposed transaction would be appropriately decreased to
reflect the intrinsic value of any warrants or options assumed by Prospective
Buyer or for which replacement options or warrants with equivalent economic
benefits are issued by Prospective Buyer. At the Closing, Prospective Buyer
would grant warrants to purchase 20,000 shares of Prospective Buyer's Common
Stock in exchange for the cancellation of that certain promissory note issued by
the Company for the benefit of Momentus Inc. Pension and Trust. Such warrants
would have a one year term and an exercise price equal to the closing sales
price of Prospective Buyer's Common Stock as reported on Nasdaq on the trading
day immediately preceding the date of the issuance of such warrants.
In addition, options to purchase 600,000 shares of Prospective Buyer's
Common Stock would be available under Prospective Buyer's stock option plan, or
other arrangement, for the following distribution: (i) 250,000 to Liad Meidar
("Meidar") and (ii) the remaining 350,000 to those employees of the Company who
are offered employment and agree to be employed by Prospective Buyer or its
subsidiaries or affiliates after the Closing (collectively, the "Retained
Employees") in amounts mutually acceptable to the Company and Prospective Buyer.
Such options would have an exercise price equal to the lower of (i) $18 or (ii)
90% of the Ten Day Average Price. One-third of such options would vest on the
one-year anniversary of the Closing, with the remaining balance of the options
vesting on a quarterly basis over the remaining two-year period.
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The shares of Prospective Buyer's Common Stock issued at the Closing
will be registered under a Registration Statement on Form S-4 (the "Form S-4"),
which the Company and Prospective Buyer intend to file with the Commission by
February 15, 2000. Shares issued upon exercise of options described above that
are granted under Prospective Buyer's stock option plans to Retained Employees
will be included in one of Prospective Buyer's Form S-8 currently on file with
the Commission.
A mutually agreeable treatment of the options and warrants to purchase
shares of the Company's equity securities outstanding immediately prior to the
Closing (i.e., assumption or substitution of substantially equivalent options
for Prospective Buyer's Common Stock) would be determined after Prospective
Buyer has completed its due diligence review of the Company. Such treatment will
be reflected in the Definitive Agreement.
Subject to any preference of the holders of preferred stock of the
Company, the number of shares comprising the Purchase Price, and each component
thereof, would be divided among the Shareholders pro rata in accordance with
their respective ownership of the equity securities of the Company.
3. Due Diligence
Immediately upon execution of this Letter, Prospective Buyer will
commence its due diligence investigation of the prospects, business, assets,
contracts, rights, liabilities and obligations of the Company, including
financial, marketing, employee, legal, regulatory and environmental matters.
4. Proposed Form of Agreement
Prospective Buyer and the Company intend promptly to begin negotiating
to reach a written Definitive Agreement, containing comprehensive
representations, warranties, indemnities, conditions and agreements by the
Company, including, without limitation, representations by the Company regarding
the ownership of the Company's principal assets, including its intellectual
property, and the continuity of any key licensed technologies for a reasonable
period of time. The Definitive Agreement will not include any indemnification
provisions. The execution of the Definitive Agreement by Prospective Buyer and
the Company and their respective obligations to close the transaction shall be
subject to approval by the respective boards of directors of Prospective Buyer
and the Company.
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5. Conditions to Proposed Transaction
The parties do not intend to be bound to the Nonbinding Provisions or
any provisions covering the same subject matter until the execution and delivery
of the Definitive Agreement, which, if successfully negotiated, would provide
that the proposed transaction would be subject to customary terms and
conditions, including, but not limited to, the following:
a. receipt of all necessary consents and approvals of governmental
bodies, lenders, lessors and other third parties, including compliance by the
parties with the Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act"),
if necessary;
b. absence of any material adverse change in the Company's business,
financial condition, prospects, assets or operations since the end of the last
month preceding the date of the Definitive Agreement;
c. absence of pending or threatened litigation regarding the
Definitive Agreement or the transactions to be contemplated thereby;
d. delivery of customary legal opinions, closing certificates and
other documentation;
e. approval of the shareholders of the Company and Prospective Buyer, if
necessary;
f. the compliance of the transaction contemplated herein with any
applicable tax-free reorganization or other tax restriction, which compliance
shall be mutually satisfactory to the parties hereto;and
g. the declaration by the Commission that the Form S-4 containing a
proxy statement/prospectus for the proposed transaction has become effective
under the Securities Act of 1933, as amended.
6. Proposed Noncompetition Agreement
At the Closing, each Retained Employee would enter into Prospective
Buyer's standard noncompetition agreement, containing confidentiality and other
customary provisions, and an agreement that such employee would not compete with
Prospective Buyer or its subsidiaries or affiliates for one year after such
employee's cessation of
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employment, for any reason, with Prospective Buyer or its subsidiaries or
affiliates (the "Noncompetition Agreement").
7. Other Agreements
As one of the Company's condition to the Closing, Prospective Buyer
would enter into a two-year employment agreement, containing customary terms and
provisions, with Meidar pursuant to which Meidar would, following the Closing,
be employed as Prospective Buyer's Senior Vice President in charge of
Prospective Buyer's division containing the Company post-transaction. Such
agreement would (i) contain a provision that the options granted to Meidar in
accordance with the provisions of third paragraph of Paragraph 2 above would
automatically and fully vest upon Meidar's termination for "good reason" or
without "cause" (each as defined in such employment agreement) and (ii) be fully
negotiated by the date of the execution of the Definitive Agreement and would
appear as an exhibit to the Definitive Agreement.
At the Closing, Steven White ("White") would not be considered a
Retained Employee and would enter into a two-year consulting agreement,
containing customary terms and provisions, with Prospective Buyer pursuant to
which White would, following the Closing, provide consulting services to
Prospective Buyer on an as-needed basis (the "Consulting Agreement"). Such
agreement would be fully negotiated by the date of the execution of the
Definitive Agreement and would appear as an exhibit to the Definitive Agreement.
As a condition to Closing, White would also enter into a Noncompetition
Agreement.
8. Lock-Up Arrangements for Certain Shareholders
At the Closing, White and Meidar would enter into a lock-up agreement
with Prospective Buyer pursuant to which each such Shareholder would agree not
to offer, pledge, sell or otherwise transfer or dispose of, directly or
indirectly, (a) any of the shares of Prospective Buyer's Common Stock received
by such Shareholder in this transaction (the "Merger Shares") during the six
month period following the Closing and (b) more than 50% of the Merger Shares
during the six month period following the period set forth in clause (a) above.
Each lock-up agreement would terminate on the one year anniversary of the
Closing date. All Merger Shares would be available for sale by such Shareholders
after the one year anniversary of the Closing. Notwithstanding the foregoing, at
the Closing, Prospective Buyer would agree to permit White to sell up to
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that number of Merger Shares equal to $1 million (priced at the fair market
value thereof) at any time after the Closing.
At the Closing, New Horizons LLC ("New Horizons") would enter into a
lock-up agreement with Prospective Buyer pursuant to which such Shareholder
would agree not to offer, pledge, sell or otherwise transfer or dispose of,
directly or indirectly, more than 10% of New Horizons's Merger Shares in any one
month for the six month period following the Closing. Such lock-up agreement
would terminate six months following the Closing date.
PART TWO--BINDING PROVISIONS
Upon execution by the Company and the Key Shareholders of this Letter
or counterparts thereof, the following lettered paragraphs of this Letter
(collectively, the "Binding Provisions") will constitute the legally binding and
enforceable agreement of Prospective Buyer, the Company and the Key Shareholders
(in consideration of the significant costs to be borne by Prospective Buyer and
the Company in pursuing this proposed transaction and further, in consideration
of their mutual undertakings as to the matters described herein).
A. Nonbinding Provisions Not Enforceable
The Nonbinding Provisions do not create or constitute any legally
binding obligations among Prospective Buyer, the Company and the Key
Shareholders, and none of Prospective Buyer, the Company or the Key Shareholders
shall have any liability to the other parties with respect to the Nonbinding
Provisions unless and to the extent that they are embodied in the Definitive
Agreement, if one is successfully negotiated, executed and delivered by and
among all parties. If the Definitive Agreement is not prepared, authorized,
executed or delivered for any reason, no party to this Letter shall have any
liability to any other party to this Letter based upon, arising from, or
relating to the Nonbinding Provisions.
B. Definitive Agreement; Term of This Letter
Prospective Buyer and its counsel shall be responsible for preparing
the initial draft of the Definitive Agreement. Subject to the final sentence of
Paragraph C of the Binding Provisions, Prospective Buyer and the Company shall
negotiate in good faith to
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arrive at a mutually acceptable Definitive Agreement for approval, execution and
delivery on the earliest reasonably practicable date.
The term of this Letter shall begin on the Effective Date and shall
expire upon the earliest of (i) 11:59 p.m., Seattle time, on the date that is 30
days after the Effective Date (i.e., on January 19, 2000), (ii) the execution of
the Definitive Agreement or (iii) such later or earlier date and time as the
Company and Prospective Buyer may agree in writing.
C. Access
The Company shall provide to Prospective Buyer complete access to the
Company's facilities, books and records and shall cause the directors,
employees, accountants, attorneys and other agents and representatives
(collectively, "Representatives") of the Company to cooperate fully with
Prospective Buyer and Prospective Buyer's Representatives in connection with
Prospective Buyer's due diligence investigation of the Company and the Company's
assets, contracts, liabilities, operations, records and other aspects of its
business (as described in Paragraph 3 of the Nonbinding Provisions). Prospective
Buyer shall be under no obligation to continue with its due diligence
investigation or negotiations regarding the Definitive Agreement or to
consummate the transactions contemplated by this Letter if, at any time, the
results of its due diligence investigation are not satisfactory to Prospective
Buyer for any reason in its sole discretion.
D. Exclusive Dealing
During the term of this Letter, the Company shall not, directly or
indirectly, through any Representative or otherwise, solicit, negotiate with or
in any manner encourage, discuss or accept any proposal of any other person
relating to the acquisition of the Company, shares of its capital stock
purchased from the Company, or its assets or business, in whole or in part,
whether through direct purchase, merger, consolidation or other business
combination (other than sales of inventory in the ordinary course of the
Company's business) and whether through disposing, licensing or transferring the
rights to any of the Company's assets to a third party (collectively, an
"Alternative Transaction"); provided, however, that upon receipt of an
unsolicited proposal to effect an Alternative Transaction, the Company may
disclose (i) the existence of this Letter, (ii) the terms of the right of first
refusal set forth in the next paragraph and (iii) the terms of the break-up
provisions set forth in Paragraph E of this Part Two. The Company will
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immediately notify Prospective Buyer regarding any contact between the Company
or its Representatives and any other person regarding any proposed Alternative
Transaction or any related inquiry.
In the event that the Company receives a proposal for an Alternative
Transaction (a "Proposal"), the Company will immediately give written notice to
Prospective Buyer setting forth the identity of the proposed party and the price
and terms of the Proposal. Prospective Buyer shall have the right, exercisable
within the five business days following receipt of such notice, to effect the
Alternative Transaction on the same economic terms as those set forth in the
Proposal.
Notwithstanding anything to the contrary contained herein, if
Prospective Buyer terminates the Binding Provisions pursuant to Paragraphs J(iv)
or J(v) of this Part Two, the exclusive dealing provisions of this Paragraph D
shall be terminated and the Company shall, immediately upon such termination, be
permitted to pursue an Alternative Transaction.
E. Break-up Provisions
In the event that (a) the Company breaches Paragraph D of this Part
Two, (b) the Binding Provisions are terminated by Prospective Buyer pursuant to
Paragraph J(ii) of this Part Two or (c) the Binding Provisions are terminated by
the Company pursuant to Paragraph J(iii) and, within 12 months after such breach
or termination, the Company closes an Alternative Transaction, then, immediately
upon such closing, the Company shall pay to Prospective Buyer 20% of the total
consideration (including the assumption of any liabilities of the Company), cash
and noncash (as, when and in such proportion as such consideration is received
by the Shareholders) paid to the Company or its shareholders in the Alternative
Transaction in excess of $45 million.
The Definitive Agreement shall include similar break-up provisions.
Notwithstanding the foregoing, if Prospective Buyer terminates the Binding
Provisions pursuant to Paragraph J(ii) below, the break-up provisions in this
Paragraph E shall only apply if (i) Prospective Buyer was negotiating the
Definitive Agreement in good faith, (ii) the economics and structure of the
transaction in the Definitive Agreement are substantially the same as those
contemplated in this Letter and (iii) Prospective Buyer has signed the
Definitive Agreement in a form mutually agreed to be signed, in good faith, by
Prospective Buyer and the Company.
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F. Conduct of Business
Until the Definitive Agreement has been executed and delivered by all
the parties or the Binding Provisions have been terminated pursuant to Paragraph
J of this Part Two, the Company shall conduct its business only in the ordinary
course, and may not engage in any extraordinary transactions without Prospective
Buyer's prior consent, including, without limitation:
(i) not disposing, licensing or transferring rights to any assets
of the Company, except in the ordinary course of business;
(ii) not materially increasing the annual level of compensation
of any employee, and not increasing at all the annual level of
compensation of any person whose compensation from the Company in the
last preceding fiscal year exceeded $100,000, and not granting any
unusual or extraordinary bonuses, benefits or other forms of direct or
indirect compensation to any employee, officer, director or
consultant, except in amounts in keeping with past practices by
formulas or otherwise;
(iii) not increasing, terminating, amending or otherwise
modifying any plan for the benefit of employees;
(iv) not issuing any equity securities or options, warrants,
rights or convertible securities, other than for customary grants of
options to new hires;
(v) not paying any dividends, redeeming any securities, or
otherwise causing assets of the Company to be distributed to any of
its shareholders except by way of compensation to employees who are
also shareholders within the limitations set forth in clause (ii)
above;
(vi) not terminating any employees of the Company that
Prospective Buyer has indicated that it desires to retain subsequent
to the Closing; and
(vii) not borrowing any funds, under existing credit lines or
otherwise, except as reasonably necessary for the ordinary operation
of the Company's business in a manner, and in amounts, in keeping with
historical practices.
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G. Disclosure
Except as and to the extent required by law, without the prior written
consent of the other party, neither Prospective Buyer nor the Company shall, and
each shall direct its shareholders or Representatives not to, directly or
indirectly, make any public comment, statement or communication with respect to,
or otherwise disclose or permit the disclosure of the existence of discussions
regarding, a possible transaction among the parties or any of the terms,
conditions or other aspects of the transaction proposed in this Letter;
provided, however, that upon receipt of an unsolicited proposal to effect an
Alternative Transaction, the Company may disclose (i) the existence of this
Letter, (ii) the terms of the right of first refusal set forth in the next
paragraph and (iii) the terms of the break-up provisions set forth in Paragraph
E of this Part Two. If a party is required by law to make any such disclosure,
it must first provide to the other party the content of the proposed disclosure,
the reasons that such disclosure is required by law, and the time and place that
the disclosure will be made.
H. Costs
If the Closing does not occur for any reason, each party shall pay its
own costs and expenses (including any broker's or finder's fees) incurred in
connection with the proposed transaction, including expenses of its
Representatives. If the Closing occurs, Prospective Buyer shall pay all such
reasonable costs and expenses of all parties (other than any broker's or
finder's fees and the costs and expenses of the Key Shareholder's
Representatives in excess of $10,000 in the aggregate, which excess amounts
shall remain the sole responsibility of the Key Shareholders). The Prospective
Buyer and the Company will each pay one-half of the HSR Act filing fee, if
applicable.
I. Consents
Prospective Buyer and the Company shall cooperate with each other and
proceed, as promptly as is reasonably practicable, to prepare and file the
notifications required by the HSR Act, if any, to seek to obtain all necessary
consents and approvals from lenders, landlords and other third parties, to
prepare and file the Form S-4, and to endeavor to comply with all other legal or
contractual requirements for or preconditions to the execution and consummation
of the Definitive Agreement.
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J. Termination
The Binding Provisions may be terminated:
(i) by mutual written consent of Prospective Buyer and the
Company;
(ii) upon written notice by (a) the Company to Prospective Buyer
or (b) Prospective Buyer to the Company, if the Definitive Agreement
containing substantially the same terms as those set forth in the
Nonbinding Provisions has not been executed, in the case of clause (a)
above, by Prospective Buyer, or, in the case of clause (b) above, by
the Company, prior to the expiration of the term of this Letter;
(iii) upon prompt written notice by (a) the Company to
Prospective Buyer or (b) Prospective Buyer to the Company, if such
notifying party has decided, prior to the expiration of the term of
this Letter, not to pursue the transaction contemplated hereby on
substantially the same terms as those set forth in the Nonbinding
Provisions;
(iv) by Prospective Buyer, without any penalty to Prospective
Buyer or the Company, in the event that Prospective Buyer's due
diligence (a) uncovers facts concerning the Company's business,
technology or financial condition that are different than those
represented to Prospective Buyer by the Company prior to the execution
of this Letter or (b) discloses any material concerns to Prospective
Buyer regarding the Company;
(v) by Prospective Buyer, without any penalty to Prospective
Buyer or the Company, in the event that Prospective Buyer's board of
directors does not approve the execution of this Letter, the
Definitive Agreement and/or the transactions contemplated hereby;
provided, however, that the termination of the Binding Provisions shall not
affect the liability of a party for breach of any of the Binding Provisions
prior to the termination. Upon termination of the Binding Provisions, the
parties shall have no further obligations hereunder, except as stated in
Paragraphs A, E, G, H, K, L, M and N of these Binding Provisions, which shall
survive any such termination.
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K. Entire Agreement; Amendment
The Binding Provisions and that certain Non-Disclosure Agreement, dated
as of December 17, 1999, between the Company and Prospective Buyer, constitute
the entire agreement among the parties, and supersede all prior oral or written
agreements, understandings, representations and warranties, and courses of
conduct and dealing among the parties on the subject matter hereof. Except as
otherwise provided herein, the Binding Provisions may be amended or modified
only by a writing executed by all of the parties.
L. Governing Law; Jurisdiction; Venue
This Letter shall be governed by and construed under the laws of the
state of Washington without regard to principles of conflict of laws. The
parties irrevocably consent to the jurisdiction and venue of the state and
federal courts located in King County, Washington in connection with any action
M. Voting Agreements
Upon execution of this Letter by the Key Shareholders, the Key
Shareholders hereby agree to vote in favor of the adoption and approval of the
Definitive Agreement and all transactions relating thereto or contemplated
thereby at every meeting of the shareholders of the Company at which such
matters are considered and at every adjournment thereof and in connection with
every proposal to take action by written consent with respect thereto. Upon
execution of the Definitive Agreement, the Key Shareholders shall execute voting
agreements/proxies to vote as set forth in the previous sentence and to appoint
Prospective Buyer as their attorney and proxy with respect to such matters.
Notwithstanding anything to the contrary contained herein, the term of the
voting provisions set forth in this Paragraph M shall commence on the date
hereof and terminate upon the earlier to occur of (i) the date of the Closing,
or (ii) the date on which the Definitive Agreement is terminated in accordance
with its terms. Upon such termination, no party shall have any further
obligations or liabilities under this Paragraph M; provided, however, such
termination shall not relieve any party from liability for any breach of the
voting provisions set forth in this Paragraph M prior to such termination.
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N. Bridge Financing
Within three business days of the execution of this Letter, Prospective
Buyer will provide a short-term bridge loan to the Company in the amount of $2.0
million (the "Bridge Financing"), which loan would be evidenced by a convertible
promissory note containing customary terms, conditions and negative covenants
(the "Convertible Note").
Both parties agree to use their respective best efforts to close the
transaction contemplated in this Letter as soon as practicable after the date
hereof. If (i) the Binding Provisions are terminated by Prospective Buyer
pursuant to Paragraph J(ii) of this Part Two, (ii) the Binding Provisions are
terminated by the Company pursuant to Paragraphs J(iii), (iii) the Company
accepts a proposal to effect an Alternative Transaction or (iii) the transaction
contemplated in this Letter is not consummated on or before the date designated
for the Closing for any reason other than the Company's closing conditions not
being satisfied on or prior to such date due to any omission or affirmative act
of Prospective Buyer, an event of default shall occur under the Convertible Note
and (a) the outstanding principal and unpaid interest shall automatically
convert into shares of common stock of the Company based on a total
pre-investment valuation (on a fully-diluted basis) of the Company equal to $15
million (i.e., a $2.15 per share conversion price) and (b) Prospective Buyer
shall be entitled to 125% warrant coverage, which warrants would have an
exercise price equal to the per share conversion price of such note. If the
transaction contemplated in this Letter is not consummated on or before the date
designated for the Closing because (i) the Binding Provisions are terminated
pursuant to Paragraph J(i) of this Part Two, (ii) the Binding Provisions are
terminated by the Company pursuant to Paragraph J(ii) of this Part Two, (iii)
the Binding Provisions are terminated by Prospective Buyer pursuant to
Paragraphs J(iii), J(iv) or J(v), or (iv) the Company's closing conditions were
not satisfied on or prior to the date designated for the Closing due to any
omission or affirmative act of Prospective Buyer, an event of default shall
occur under the Convertible Note and (a) the outstanding principal and unpaid
interest shall automatically convert into shares of common stock of the Company
based on a total pre-investment valuation (on a fully-diluted basis) of the
Company equal to $25 million (i.e., a $3.58 per share conversion price) and (b)
Prospective Buyer shall be entitled to 50% warrant coverage, which warrants
would have an exercise price equal to the per share conversion price of such
note.
* * * *
<PAGE>
Please sign and date this Letter in the space provided below to
confirmyour understanding of the terms of the Nonbinding Provisions and to
confirm the mutual binding agreements set forth in the Binding Provisions and
return a signed copy to the undersigned.
Very truly yours,
SHOPNOW.COM INC.
By: /s/ Dwayne Walker
Name: Dwayne Walker
Title: CEO
Acknowledged and agreed as to the Nonbinding and Binding Provisions this 20th
day of December 1999:
UBARTER.COM INC.
By: /s/ Steven White
Name: Steven White
Title: CEO
KEY SHAREHOLDERS
/s/ Steven M. White
Steven M. White
NEW HORIZONS LP
By: /s/ Joe MacDonald
Name: Joe MacDonald
Title: General Partner
New Horizons LP
CALL OPTION
THIS IS TO CERTIFY that, for $1,000 and other value received and
subject to these terms and conditions, ShopNow.com Inc. ("Holder"), is entitled
to exercise this Call Option to purchase 1,337,896 fully paid and nonassessable
shares (the "Shares") of the Common Stock (the "Common Stock") of Ubarter.com
Inc., a Nevada corporation (the "Company"), from Steven White (the
"Shareholder") at a price per share of $6.00.
This Call Option may be exercised by the Holder, at any time after the
date of issuance, but not later than April 30, 2000, in whole or in part, by
delivering to the Shareholder (a) this Call Option, (b) a certified or cashier's
check payable to the Shareholder in the amount of the Exercise Price multiplied
by the number of shares for which this Call Option is being exercised (the
"Purchase Price"), and (c) the Notice of Exercise attached as Exhibit A duly
completed and executed by the Holder. Upon exercise, the Holder shall be
entitled to receive from the Company a stock certificate in proper form
representing the number of shares of Common Stock so purchased. Notwithstanding
the foregoing, this Call Option shall immediately terminate if (i) Holder
terminates the binding provisions of that certain Letter of Intent, dated
December 20, 1999, among Holder, the Company, the Shareholder and New Horizons
LLC (the "LOI"), pursuant to Paragraph J(iii), J(iv) or J(v) thereof or (ii) the
Company and Holder terminate the binding provisions of the LOI pursuant to
Paragraph J(i) thereof.
Within 10 days after the payment of the Purchase Price following the
exercise of this Call Option (in whole or in part), the Shareholder shall (a)
cause the Company, at Holder's expense, to issue in the name of and deliver to
the Holder a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which the Holder shall be entitled upon
such exercise, and (b) grant a new Call Option of like tenor to purchase up to
that number of shares of Common Stock, if any, as to which this Call Option has
not been exercised if this Call Option has not expired. The Holder shall for all
purposes be deemed to have become the holder of record of such shares of Common
Stock on the date this Call Option was exercised, irrespective of the date of
delivery of the certificate or certificates representing the Common Stock;
provided that, if the date such exercise is made is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of record of such shares of Common Stock at the close of
business on the next succeeding date on which the stock transfer books are open.
The Shareholder hereby represents and warrants to the Holder that (i)
the Shareholder owns beneficially and of record the Shares, free and clear of
any liens, mortgages, pledges, deeds of trust, security interests, charges,
encumbrances or other adverse claims of interest of any kind; (ii) the
Shareholder has the
<PAGE>
necessary power and capacity (as the case may be) and authority to execute this
Call Option, to make the representations, warranties and covenants herein and to
perform the obligations hereunder; (iii) this Call Option is duly executed and
is a legal, valid and binding obligation of the Shareholder, enforceable in
accordance with its terms; and (iv) the execution, delivery and performance of
this Call Option by the Shareholder will not (a) constitute a violation (with or
without the giving of notice or lapse of time or both) of any provision of any
law applicable to the Shareholder, (b) require any consent, approval or
authorization of, or notice to, any person, corporation, partnership, domestic
or foreign governmental authority or other organization or entity or (c) result
in a default under, an acceleration or termination of, or the creation in any
party of the right to accelerate, terminate, modify or cancel, any material
agreement, lease, note or other restriction, encumbrance, obligation or
liability to which the Shareholder is a party or by which the Shareholder is
bound or (d) result in the creation or imposition of any lien on any of the
Shares held by the Shareholder.
This Call Option shall be governed by and construed under the laws of
the state of Washington without regard to principles of conflict of laws. The
parties irrevocably consent to the jurisdiction and venue of the state and
federal courts located in King County, Washington in connection with any action
relating to this Call Option.
[The remainder of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the Shareholder and the Holder have caused this
Call Option to be duly executed by its duly authorized officers, effective as of
the date written above.
SHAREHOLDER: /s/ Steven White
Steven White
HOLDER: ShopNow.com Inc.
By: /s/ Alan Koslow
Name: Alan Koslow
Title: CEO and General Counsel
<PAGE>
Exhibit A
NOTICE OF EXERCISE
To: Steven White
The undersigned hereby irrevocably elects to purchase ___________
shares of shares of the Common Stock (the "Common Stock") Ubarter.com Inc., a
Nevada corporation (the "Company"), issuable upon the exercise of the attached
Call Option and requests that Steven White cause the Company to issue
certificates for such shares in the name of and delivered to the address of the
undersigned, at the address stated below and, if said number of shares shall not
be all the shares that may be purchased pursuant to the attached Call Option,
that a new Call Option evidencing the right to purchase the balance of such
shares be executed in the name of, and delivered to, the undersigned at the
address stated below.
Payment enclosed in the amount of $___________.
Dated: ________________
Name of Holder of Call Option: ShopNow.com Inc.
Address: 411 First Avenue S, Suite 200N
Seattle, WA 98104
By:___________________________________________________________
Name: ________________________________________________________
Title: _______________________________________________________
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
CONVERTIBLE PROMISSORY NOTE
$2,000,000.00 December 22, 1999
Seattle, Washington
For value received, Ubarter.com, Inc., a Nevada corporation (the
"Company"), promises to pay to ShopNow.com Inc., a Washington corporation (the
"Holder"), the principal sum of Two Million Dollars ($2,000,000.00). Interest
shall accrue from the date of this Note on the unpaid principal amount at a rate
equal to eight and one-half percent (8.5%) per annum, simple interest. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. This
Note is subject to the following terms and conditions.
1. Maturity. Subject to Section 2, principal and all accrued and unpaid interest
under this Note shall be due and payable upon demand by the Holder at any time
after June 22, 2000 (the "Maturity Date"). Notwithstanding the foregoing, the
entire unpaid principal sum of this Note, together with all accrued and unpaid
interest thereon, shall become immediately due and payable in the event of any
Event of Default (as defined below).
2. Conversion.
(a) Termination of LOI. The entire principal amount of and accrued and unpaid
interest on this Note shall automatically be converted into fully paid and
nonassessable shares of the Company's common stock ("Common Stock") upon the
earlier to occur of (1) the termination of the binding provisions (the "Binding
Provisions") of that certain Letter of Intent, dated December 20, 1999, among
Holder, the Company, Steven M. White and New Horizons LP (the "LOI"), by Holder
pursuant to Paragraph J(ii) of the LOI, (2) the termination of the Binding
Provisions by the Company pursuant to Paragraphs J(iii) of the LOI, (3) the
acceptance by the Company of a proposal to effect an Alternative Transaction (as
defined in the LOI), (4) the failure of the transaction contemplated in the LOI
to be consummated on or before the date designated for the Closing (as defined
in the LOI) for any reason other than the Company's closing conditions not being
satisfied on or prior to such date due to any omission or affirmative act of
Holder, (5) the termination of the Binding Provisions by the Company and Holder
pursuant to Paragraph J(i) of the LOI, (6) the termination of the Binding
Provisions by the Company pursuant to Paragraph J(ii) of the LOI, (7)
termination of the Binding Provisions by Holder pursuant to Paragraphs J(iii),
J(iv) or J(v) of the LOI, or (8) the failure of the Company's closing conditions
to the transaction proposed in the LOI to be satisfied on or prior to the date
designated for the Closing due to any omission or affirmative act of Holder. (b)
<PAGE>
(b) Number of Shares Issued upon Termination by the Company. Upon the
conversion of this Note due to the occurrence of an event represented by clauses
(1), (2),(3) or (4) of Section 2(a) above, the number of shares of Common Stock
to be issued upon such conversion shall be equal to the quotient obtained by
dividing (x) the entire principal amount of this Note plus accrued and unpaid
interest by (y) $2.15 (the "Company Termination Conversion Price"), rounded to
the nearest whole share.
(c) Number of Shares Issued upon Termination by Holder. Upon the
conversion of this Note due to the occurrence of an event represented by clauses
(5), (6), (7) or (8) of Section 2(a) above, the number of shares of Common Stock
to be issued upon such conversion shall be equal to the quotient obtained by
dividing (x) the entire principal amount of this Note plus accrued and unpaid
interest by (y) $3.58 (the "Holder Termination Conversion Price"), rounded to
the nearest whole share.
(d) Warrant Coverage.
(i) In the event of a conversion of this Note pursuant to clauses (1), (2),
(3) or (4) of Section 2(a) above, the Company shall issue to Holder a warrant to
purchase a number of shares of Common Stock equal to the quotient of (A) 125%
times the entire principal amount of this Note plus accrued and unpaid interest
divided by (B) the Company Termination Conversion Price. Such warrant shall have
a term of 7 years and an exercise price equal to the Company Termination
Conversion Price, rounded to the nearest whole share. The form of warrant is
attached as Appendix A hereto.
(ii) In the event of a conversion of this Note pursuant to clauses (5),
(6), (7) or (8) of Section 2(a) above, the Company shall issue to Holder a
warrant to purchase a number of shares of Common Stock equal to the quotient of
(i) 50% times the entire principal amount of this Note plus accrued and unpaid
interest divided by (ii) the Holder Termination Conversion Price. Such warrants
shall have a term of 7 years and an exercise price equal to the Holder
Termination Conversion Price, rounded to the nearest whole share. The form of
warrant is attached as Appendix A hereto.
(e) Mechanics and Effect of Conversion. No fractional shares of the
Company's capital stock will be issued upon conversion of this Note. In
lieu of any fractional share to which the Holder would otherwise be entitled,
the Company will pay to the Holder in cash the amount of the unconverted
principal and interest balance of this Note that would otherwise be
converted into such fractional share. Upon conversion of this Note pursuant
to this Section 2, the Holder shall surrender this Note, duly endorsed, at the
principal offices of the Company or any transfer agent of the Company. At its
expense, the Company will, as soon as practicable thereafter, issue and
deliver to such Holder, at such principal office, a certificate or certificates
for the number of fully paid and nonassessable shares of Common Stock to which
such Holder is entitled upon such conversion, together with any other securities
and property to which the Holder is entitled upon such conversion under the
terms of this Note, including a check payable to the Holder for any cash amounts
payable as described herein. Upon conversion of this Note, the Company will
be forever released from all of its obligations and liabilities under this
Note with regard to that portion of the principal amount and accrued interest
being converted
<PAGE>
including without limitation the obligation to pay such portion of the principal
amount and accrued interest.
3. Payment. All payments shall be made in lawful money of the United States of
America at such place as the Holder hereof may from time to time designate in
writing to the Company. Payment shall be credited first to the accrued interest
then due and payable and the remainder applied to principal. Prepayment of this
Note may not be made prior to the Maturity Date, unless agreed to in writing by
the Holder.
4. Transfer; Successors and Assigns. The terms and conditions of this Note shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Notwithstanding the foregoing, (i) the Holder may not
assign, pledge, or otherwise transfer this Note without the prior written
consent of the Company, except for transfers to affiliates and (ii) the Company
may not assign, pledge, or otherwise transfer this Note without the prior
written consent of the Holder. Subject to the preceding sentence, this Note may
be transferred only upon surrender of the original Note for registration of
transfer, duly endorsed, or accompanied by a duly executed written instrument of
transfer in form satisfactory to the Holder. Thereupon, a new note for the same
principal amount and interest will be issued to, and registered in the name of,
the transferee. Interest and principal are payable only to the registered holder
of this Note.
5. Governing Law. This Note and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed
and interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.
6. Notices. Any notice required or permitted by this Note shall be in writing
and shall be deemed sufficient upon delivery, when delivered personally or by a
nationally-recognized delivery service (such as Federal Express or UPS), or
forty-eight (48) hours after being deposited in the U.S. mail, as certified or
registered mail, with postage prepaid, addressed to the party to be notified at
such party's address as set forth below or as subsequently modified by written
notice.
7. Amendments and Waivers. Any term of this Note may be amended or waived only
with the written consent of the Company and the Holder. Any amendment or waiver
effected in accordance with this Section 7 shall be binding upon the Company,
the Holder and each transferee of the Note.
8. Shareholders, Officers and Directors Not Liable. In no event shall any
shareholder, officer or director of the Company be liable for any amounts due or
payable pursuant to this Note.
9. Notice and Presentment. The Company hereby waives demand, notice,
presentment, protest and notice of dishonor.
10. Severability. If one or more provisions of this Note are held to be
unenforceable under applicable law, such provision shall be excluded from this
Note, and the balance of this 11.
<PAGE>
Note shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.
12. Attorneys' Fees. The Company and all endorsers of this Note agree to pay the
Holder's reasonable expenses and costs in collecting and enforcing this Note,
including reasonable attorneys' fees.
13. Holder as Owner. The Company may deem and treat the holder of record of this
Note as the absolute owner for all purposes regardless of any notice to the
contrary.
14. Events of Default. If any of the events specified in this Section 13 shall
occur (an "Event of Default"), the Holder may, so long as such condition exists,
declare the outstanding principal and accrued but unpaid interest immediately
due and payable by notice in writing to the Company:
(a) The institution of proceedings by the Company to be adjudicated as
bankrupt or insolvent, the filing of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or any other
applicable federal or state law, the appointment of a receiver, liquidator or
trustee, an assignment for the benefit of creditors, or the taking of corporate
action by the Company in furtherance of any such action;
(b) If, within 60 days after the commencement of an action against the
Company (and service of process on the Company) seeking any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such action shall not have been
resolved in favor of the Company or all orders or proceedings thereunder
affecting the operations or the business of the Company stayed, or if the stay
of any such order or proceeding shall thereafter be set aside, or if, within 60
days after the appointment without the consent or acquiescence of the Company of
any trustee, receiver or liquidator of the Company, such appointment shall not
have been vacated;
(c) Failure to pay the principal of and interest on this Note when due;
(d) The adoption of any plan of liquidation, dissolution or winding up of
the Company, or the involuntary occurrence thereof; or
(e) Material breach by the Company of any provision of this Note (other
than the payment obligations described in clause (c) above), where such breach
is not cured within ten (10) days after the Company receives written notice of
the same from the Holder.
14. Covenants of the Company. For so long as any principal remains outstanding
under the Note, the Company shall not, without first obtaining the consent of
Holder:
(a) issue equity securities or options, warrants, rights or convertible
securities; other than for customary grants of options to new hires not to
exceed in the aggregate 50,000
<PAGE>
(b) amend the Company's Articles of Incorporation or Bylaws in any manner
adverse to Holder;
(c) lease, sell, license or otherwise transfer all or substantially all of
its assets;
(d) create or assume any indebtedness for borrowed money that is pari passu
or senior in right of payment to the obligations under the Note;
(e) pay any dividends or other distributions on the capital stock of the
Company, or repurchase or redeem any Common Stock, other than pursuant to
vesting or repurchase provisions under equity incentive programs maintained by
the Company;
(f) grant any unusual or extraordinary bonuses, benefits or other forms of
direct or indirect compensation to any employee, officer, director or consultant
if the direct or indirect result of such action would be likely to result in (i)
the insolvency or bankruptcy of the Company or (ii) an Event of Default;
(g) directly or indirectly make any payments on existing indebtedness other
than regularly scheduled installments of principal and interest nor make any
payment on any existing indebtedness which would violate the terms of such
indebtedness or any agreement related thereto; or
(h) cause the net loss on the Company's income statement to increase by
more than $500,000 in any individual month.
15. Company Representations and Warranties. The Company represents and warrants
that:
(a) It is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of Nevada. The Company has all requisite
corporate power and authority to carry on its business as presently conducted,
and to carry out the transactions contemplated in this Note. The Company is duly
qualified to transact business and is in good standing as a foreign corporation
in each jurisdiction in which the failure to be so qualified would have a
material adverse effect on the Company's financial condition, business,
operations or property.
(b) The execution, delivery and performance by the Company of this Note has
been duly authorized by all requisite action of the Company and its directors
and shareholders. This Note has been duly executed and delivered by the Company,
and this Note constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
(c) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state,
local or provincial governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Note, except for filings pursuant to the federal securities laws and to
applicable state Blue Sky laws.
<PAGE>
(d) The Company is not in default (i) under its Articles of Incorporation
or its Bylaws; (ii) under any material contract, agreement or instrument to
which the Company is a party or by which it or any of its property is bound or
affected, including without limitation any material indenture, mortgage, lease,
license or purchase or sales order, other than any default arising from the
failure to the Company to register the shares of the Company's common stock in
accordance with section 1.9 of that certain Share Purchase Agreement dated
February 28, 1999, among the registrant, Barter Business Exchange Inc. and Bob
Bagga; or (iii) with respect to any order, writ, injunction or decree of any
court or of any federal, state, municipal or other domestic or foreign
governmental department, commission, board, bureau, agency or instrumentality.
To the knowledge of the Company, there presently exists no material default by
any party other than the Company to any of the foregoing, and no condition,
event or act which constitutes, or which after notice, lapse of time or both
would constitute, a material default by the Company or any other party under any
of the foregoing.
[Signature page follows]
<PAGE>
COMPANY:
Ubarter.com, Inc.
By: /s/ Steven White
Name: Steven White
(print)
Title: CEO
Address: 21400 International Blvd, #207
Seattle, WA 98198
(206) 872-9290
AGREED AND ACCEPTED:
ShopNow.com Inc.
By: ______________________________________
Name:_____________________________________
(print)
Title:____________________________________
Address: 411 First Avenue S., Suite 200N
Seattle, WA 98104
[Signature Page to Convertible Subordinated Promissory Note]
SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
UBARTER.COM, INC.
STOCK PURCHASE WARRANT
Date: _______________________
This certifies that ShopNow.com Inc. or its assigns (the "Holder"), for
value received, is entitled to purchase from Ubarter.com, Inc., a Nevada
corporation (the "Company"), a number of fully paid and nonassessable shares of
the Company's common stock (the "Common Stock") equal to the Warrant Amount (as
defined below) divided by the Stock Purchase Price (as defined below) (such
number of shares, the "Warrant Shares"). For purposes of the foregoing, the
following definitions apply:
(A) The "Warrant Amount" shall be [one hundred twenty five
percent (125%)][fifty percent (50%)] of the outstanding principal
balance of and any accrued but unpaid interest under that certain
Convertible Promissory Note, dated as of December 22, 1999, issued to
Holder by the Company (the "Note").
(C) The "Stock Purchase Price" shall be [$2.15][$3.58].
(D) The "Fully Diluted Number" shall mean at any given time
the total number of shares of Common Stock outstanding on a fully
diluted basis, which calculation assumes (x) the exercise of all then
outstanding rights, warrants or options, vested or unvested, to acquire
the Company's common stock, regardless of restrictions on exercise or
conversion and (y) the conversion of all then outstanding securities
(including, without limitation, any preferred stock) and notes
convertible at any time into the Company's common stock (other than the
Note).
This Warrant may be exercised at any time or from time to time up to
and including the earliest to occur of (i) 5:00 p.m. Pacific time on [seven
years from issuance] or (ii) the consummation of a firm commitment underwritten
public offering pursuant to a registration statement under the Securities Act of
1933, as amended (the "Expiration Date"), upon surrender to the Company at its
principal office (or at such other location as the Company may advise Holder in
writing) of this Warrant properly endorsed with the Form of Subscription
attached hereto duly filled in and signed and upon payment in cash or by check
of the aggregate Stock Purchase Price for the number of Warrant Shares for which
this Warrant is being exercised determined in accordance with the provisions
hereof. The Stock Purchase Price and the number of Warrant Shares are subject to
adjustment as provided in Section 4 below.
<PAGE>
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares. This Warrant
is exercisable at the option of the Holder of record hereof, at any time or from
time to time, up to the Expiration Date for all and any part of the Warrant
Shares (but not for a fraction of a share). The Company agrees that the Warrant
Shares purchased under this Warrant shall be and are deemed to be issued to the
Holder hereof as the record owner of such shares as of the close of business on
the date on which this Warrant shall have been surrendered and payment made for
such shares. Certificates for the Warrant Shares so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of less than all the
Warrant Shares, the Company shall cancel this Warrant and execute and deliver a
new Warrant or Warrants of like tenor for the balance of the Warrant Shares
purchasable under the Warrant surrendered upon such purchase to the Holder
hereof within a reasonable time, not exceeding fifteen (15) days after the date
of such surrender. Each stock certificate so delivered shall be in such
denominations as may be requested by the Holder hereof and shall be registered
in the name of such Holder or such other name as shall be designated by such
Holder.
2. Conversion of Warrant.
2.1 Right to Convert. In addition to, and without limiting,
the other rights of the Holder hereunder, the Holder shall have the right (the
"Conversion Right") to convert this Warrant or any part hereof into Warrant
Shares at any time and from time to time during the term hereof. Upon exercise
of the Conversion Right, the Company shall deliver to the Holder, without
payment by the Holder of any Stock Purchase Price or any cash or other
consideration, that number of Warrant Shares computed using the following
formula:
x = y (a-b)
a
Where: x = the number of Warrant Shares to be issued to the
Holder
y = the number of Warrant Shares purchasable pursuant to
this Warrant
a = the Fair Market Value of one Warrant Share as of the
Conversion Date
b = the Stock Purchase Price
2.2 Method of Exercise. The Conversion Right may be exercised
by the Holder by the surrender of this Warrant to the Company, together with a
written notice specifying that the Holder intends to exercise the Conversion
Right and indicating the number of Warrant Shares to be acquired upon exercise
of the Conversion Right. Such conversion shall be effective upon the Company's
receipt of this Warrant, together with the conversion notice, or on such later
date as is specified in the conversion notice (the "Conversion Date") and, at
the Holder's election, may be made contingent upon the closing of the Company's
initial public offering of any securities pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"); provided
that the foregoing shall not create any obligation on the
<PAGE>
part of the Company to undertake any public offering of securities. Certificates
for the Warrant Shares so acquired shall be delivered to the Holder within a
reasonable time, not exceeding fifteen (15) days after the Conversion Date. If
applicable, the Company shall, upon surrender of this Warrant for cancellation,
deliver a new Warrant evidencing the rights of the Holder to purchase the
balance of the Warrant Shares which Holder is entitled to purchase hereunder.
2.3 Fair Market Value. "Fair Market Value" of a share of
Warrant Shares as of a particular date means: (i) if traded on an exchange or
quoted on The Nasdaq National Market, then the prior trading day's closing
price, (ii) if conversion is effective as of the closing of the Company's
initial public offering of any securities pursuant to a registration statement
under the Securities Act, the "price to public" specified for such shares in the
final prospectus for such public offering, (iii) if actively traded
over-the-counter, then the average of the most-recently reported bid and ask
prices and (iv) otherwise, the price as determined in good faith by the Board of
Directors of the Company.
3. Reservation of Shares. The Company covenants and agrees that the
Company will use its best efforts to cause a sufficient number of shares of
authorized but unissued Common Stock to be authorized when and as required to
provide for the exercise or conversion of the rights represented by this
Warrant. The Company will further take all such action as may be necessary to
assure that such shares of Common Stock may be issued as provided herein without
violation of any applicable securities law or regulation.
4. Adjustment of Stock Purchase Price and Number of Shares. The Stock
Purchase Price and the number of shares purchasable upon the exercise or
conversion of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events described in this Section 4. Upon each
adjustment of the Stock Purchase Price, the Holder of this Warrant shall
thereafter be entitled to purchase, at the Stock Purchase Price resulting from
such adjustment, the number of shares obtained by multiplying the Stock Purchase
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company
shall at any time subdivide any of its outstanding shares of the same class and
series as the Warrant Shares into a greater number of shares, the Stock Purchase
Price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case any outstanding shares of the same class and
series as the Warrant Shares shall be combined into a smaller number of shares,
the Stock Purchase Price in effect immediately prior to such combination shall
be proportionately increased.
4.2 Dividends, Reclassification. If at any time or from time
to time any holders of securities of the same class and series as the Warrant
Shares shall have received or become entitled to receive, without payment
thereof,
(A) any shares of the Company's Preferred
Stock, Common Stock or any shares of stock or other securities which are
at any time directly or indirectly convertible into or exchangeable for
Common Stock (collectively, "Company Stock"), or any rights or options to
<PAGE>
subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution;
(B) any cash paid or payable otherwise than as a
regular periodic cash dividend at a rate which is substantially consistent with
past practice (or, in the case of an initial dividend, at a rate which is
substantially consistent with industry practice); or
(C) any shares of the Company's Preferred Stock,
Common Stock or other or additional stock or other securities or property
(including cash) by way of spinoff, split-up, reclassification, combination of
shares or similar corporate rearrangement; (other than shares of the same class
and series as the Warrant Shares issued as a stock split, adjustments in respect
of which shall be covered by the terms of Section 4.1 above),
then and in each such case, the Holder hereof shall,
upon the exercise or conversion of this Warrant, be entitled to receive, in
addition to the number of shares of such capital stock receivable thereupon, and
without payment of any additional consideration thereof, the amount of stock and
other securities and property (including cash in the cases referred to in
clauses (B) and (C) above) which such Holder would hold on the date of such
exercise or conversion had he or it been the Holder of record of such capital
stock as of the date on which holders of such capital stock received or became
entitled to receive such shares and/or all other additional stock and other
securities and property.
4.3 Conversion or Redemption. Should all of the Company's
capital stock of the same class and series as the Warrant Shares be, or if
outstanding would be, at any time prior to the expiration of this Warrant or any
portion thereof, redeemed or converted into shares of Company Stock, then this
Warrant shall immediately become exercisable or convertible for that number of
shares of Common Stock equal to the number of shares of the Common Stock that
would have been received if this Warrant had been exercised in full and the
capital stock received thereupon had been simultaneously converted immediately
prior to such event, and the Stock Purchase Price shall be immediately adjusted
to equal the quotient obtained by dividing (x) the aggregate Stock Purchase
Price of the maximum number of shares of capital stock for which this Warrant
was exercisable or convertible immediately prior to such conversion or
redemption, by (y) the number of shares of Common Stock for which this Warrant
is exercisable or convertible immediately after such conversion or redemption.
4.4 Antidilution. In case the Company shall at any time prior
to the expiration of this Warrant, issue any shares of Common Stock (other than
(i) shares issued as a stock dividend or stock split as provided in Section 4.2
or (ii) options to purchase equity securities of the Company pursuant to the
Company's stock incentive plans) for a consideration per share that is less than
the Stock Purchase Price, then on the date of such issue the Stock Purchase
Price shall be reduced to a price (calculated to the nearest cent) equal to the
quotient of (a) the sum of (i) the per share consideration received by the
Company in such issue plus (ii) the product of the Fully Diluted Number
immediately prior to the issuance times the Stock Purchase Price divided by (b)
the Fully Diluted Number immediately after the issuance.
In the case of the issuance of options to purchase or rights
to subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to subscribe for
such convertible or exchangeable securities, other
<PAGE>
than options to purchase equity securities of the Company pursuant to the
Company's stock incentive plans, the following provisions shall apply:
(i) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such options or
rights were issued for a consideration equal to the consideration received by
the Company upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the Common Stock covered
thereby, but no further adjustment to the Stock Purchase Price shall be made for
the actual issuance of Common Stock upon the exercise of such options or rights
in accordance with their terms;
(ii) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued for a
consideration equal to the consideration received by the Company for any such
securities and related options or rights, plus the additional consideration, if
any, to be received by the Company upon the conversion or exchange of such
securities or the exercise of any related options or rights, but no further
adjustment to the Stock Purchase Price shall be made for the actual issuance of
Common Stock upon the conversion or exchange of such securities in accordance
with their terms;
(iii) if such options, rights or convertible or exchangeable
securities by their terms provide, with the passage of time or otherwise, for
any increase in the consideration payable to the Company, or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Stock Purchase Price computed upon the original issue
thereof, and any subsequent adjustments based thereon, shall, upon such increase
or decrease becoming effective, be recomputed to reflect such increase or
decrease with respect to such options, rights and securities not already
exercised, converted or exchanged prior to such increase or decrease becoming
effective, but no further adjustment to the Stock Purchase Price shall be made
for the actual issuance of Common Stock upon the exercise of any such options or
rights or the conversion or exchange of such securities in accordance with their
terms;
(iv) upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the expiration of any
options or rights related to such convertible or exchangeable securities, the
Stock Purchase Price shall promptly be readjusted to such Stock Purchase Price
as would have been obtained had the adjustment which was made upon the issuance
of such options, rights or securities or options or rights related to such
securities been made upon the basis of the issuance of only the number of shares
of Common Stock actually issued upon the exercise of such options or rights,
upon the conversion or exchange of such securities or upon the exercise of the
options or rights related to such securities.
4.5 Calculation of Consideration. In the case of an issue of
additional shares of Common Stock for cash, the consideration received by the
Company shall be deemed to be the net cash proceeds received for such shares. In
the case of an issue of additional shares of Common Stock for noncash
consideration, the Company's Board of Directors shall determine the
<PAGE>
value of such consideration and such determination, unless shown by the Holder
to have been made other than in good faith, shall be conclusive.
4.6 Other Notices. If at any time:
(A) the Company shall declare any cash dividend
upon its shares of the same class and series as the Warrant Shares;
(B) the Company shall declare any dividend upon
its shares of the same class and series as the Warrant Shares payable in stock
or make any special dividend or other distribution to the holders of its shares
of the same class and series as the Warrant Shares;
(C) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or any merger in which
shareholders of the Company prior to such merger hold less than 50% of the
voting power of the capital stock of the surviving corporation after such
merger, or the sale of all or substantially all of the Company's assets, or a
transaction, whether effected in a single transaction or a series of related
transactions, in which 50% or more of the voting power of the capital stock of
the Company is transferred (an "Acquisition");
(D) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(E) the Company shall take or propose to take any
other action, notice of which is actually provided to or is required to be
provided, pursuant to any written agreement, to holders of its shares of the
same class and series as the Warrant Shares,
then, in any one or more of said cases, the Company shall give, by
first class mail, postage prepaid, addressed to the Holder of this Warrant at
the address of such Holder as shown of the books of the Company, (i) at least 20
days prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividends or distribution rights or
for determining rights to vote in respect of any such reorganization,
reclassification, Acquisition, dissolution, liquidation or winding-up, and (ii)
in the case of any such reorganization, reclassification, Acquisition,
dissolution, liquidation or winding-up, at least 20 days prior written notice of
the date when the same shall take place. Any notice given in accordance with the
foregoing clause (i) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of shares of
the same class and series as the Warrant Shares shall be entitled thereto. Any
notice given in accordance with the foregoing clause (ii) shall also specify the
date on which the holders of shares of the same class and series as the Warrant
Shares shall be entitled to exchange their stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, Acquisition, dissolution, liquidation or winding-up, as the case
may be.
5. Issue Tax. The issuance of certificates for shares of the Warrant
Shares shall be made without charge to the Holder of the Warrant for any issue
tax in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being transferred.
<PAGE>
6. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder in
respect of meetings of shareholders for the election of directors of the Company
or any other matters or any rights whatsoever as a shareholder of the Company.
No dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised or
converted.
7. Unregistered Security. Each holder of this Warrant acknowledges that
this Warrant and the Warrant Shares have not been registered under the
Securities Act, and agrees not to sell, pledge, distribute, offer for sale,
transfer or otherwise dispose of this Warrant, any Warrant Shares issued upon
its exercise in the absence of (i) an effective registration statement under the
Securities Act as to this Warrant or such Warrant Shares and registration or
qualification of this Warrant or such Warrant Shares under any applicable
federal or state securities law then in effect, or (ii) an opinion of counsel,
satisfactory to the Company, that such registration and qualification are not
required. Each certificate or other instrument for Warrant Shares issued upon
the exercise of this Warrant shall bear a legend substantially to the foregoing
effect.
8. Transferability. Subject to the provisions of Section 7 hereof, this
Warrant and all rights hereunder are not transferable, in whole or in part,
except for transfers to affiliates upon surrender of the Warrant with a properly
executed assignment (in the form attached hereto) at the principal office of the
Company.
9. Modification and Waiver. This Warrant and any provision hereof may
be amended, waived or modified upon written consent of the Company and the
Holder.
10. Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder hereof or the Company shall be
delivered or shall be sent by certified or registered mail, postage prepaid, to
each such Holder at its address as shown on the books of the Company or to the
Company at its principal executive offices.
11. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Warrant are inserted for convenience only and do
not constitute a part of this Warrant.
12. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Washington, without giving effect to the conflict of laws
principles thereof.
13. Lost Warrants or Stock Certificates. The Company represents and
warrants to the Holder hereof that upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
any Warrant or stock certificate and, in the case of any such loss, theft or
destruction, upon receipt of an indemnity reasonably satisfactory to the
Company, or in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
<PAGE>
14. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
[Signature Page Follows.]
<PAGE>
IN WITNESS WHEREOF, the Company and the Holder have caused this Warrant
to be duly executed by its duly authorized officers, effective as of the date
written above.
COMPANY: Ubarter.com, Inc.
By: /s/ Steven White
Name: Steven White
Title: CEO
HOLDER: ShopNow.com Inc.
By: _______________________________________
Name: ____________________________________
Title: ___________________________________
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To:_______________________________
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _____________ ____________________________ (_____________)
shares of ____________ Stock of Ubarter.com, Inc. and herewith makes payment of
____________________ Dollars ($__________) thereof, and requests that the
certificates for such shares by issued in the name of, and delivered to
________________________________, whose address is
.
The undersigned represents that it is acquiring such ________________
Stock for its own account for investment and not with a view to or for sale in
connection with any distribution thereof (subject, however, to any requirement
of law that the disposition thereof shall at all times by within its control).
DATED: ___________________
__________________________________________________
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
__________________________________________________
__________________________________________________
(Address)
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the Holder of the within Warrant,
hereby sells, assigns and transfers all of the rights of the undersigned under
the within Warrant, with respect to the number of shares of ________________
Stock covered thereby set forth herein below, unto:
<TABLE>
<S> <C> <C>
Name of Assignee Address No. of Shares
</TABLE>
DATED: ___________________
__________________________________________________
(Signature must conform in all respects to name of
Holder as specified on the face of the Warrant)
