<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
----------------
Shopping.com
(Name of Subject Company)
Compaq Interests, Inc.
Compaq Computer Corporation
(Bidders)
----------------
Common Stock, no par value
(Title of Class of Securities)
----------------
82509Q-10-6
(CUSIP Number of Class of Securities)
----------------
Thomas C. Siekman
Senior Vice President, General Counsel and Secretary
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
(281) 370-0670
(Name, Address and Telephone Number of Person authorized to Receive Notices
and Communications on Behalf of Bidder)
Copy to:
Kenton J. King, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
(650) 470-4500
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CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
Transaction Valuation* Amount of Filing Fee
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<S> <C>
$286,830,764.00 $57,366.15
</TABLE>
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* For purposes of calculating fee only. This amount assumes (i) the purchase
of 8,140,793 outstanding shares of common stock of Shopping.com, and (ii)
6,955,563 shares of common stock of Shopping.com which may be issued upon
exercise of outstanding warrants and options, in each case, at $19.00 in
cash per share. The amount of the filing fee calculated in accordance with
Regulation 240.0-11 of the Securities Exchange Act of 1934, as amended,
equals 1/50 of one percentum of the value of shares to be purchased.
[_]Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
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<PAGE>
SCHEDULE 14D-1
CUSIP No.
82509Q-10-6
1.Names of Reporting Persons
I.R.S. Identification Nos. of Above Persons
Compaq Interests, Inc.
Compaq Computer Corporation
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2.Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
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3.SEC Use Only
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4.Source of Funds
WC
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5.Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e)
or 2(f)
[_]
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6.Citizenship or Place of Organization
Compaq Interests Inc.: Delaware
Compaq Computer Corporation: Delaware
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7.Aggregate Amount Beneficially Owned by Each Reporting Person
13,995,120
(see the Offer to Purchase)
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8.Check if the Aggregate Amount in Row (7) Excludes Certain Shares [_]
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9.Percent of Class Represented by Amount in Row (7)
56.0%
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10.Type of Reporting Person
CO
2
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Compaq Interests, Inc., a Delaware corporation (the "Purchaser"),
and an indirect, wholly owned subsidiary of Compaq Computer Corporation, a
Delaware corporation ("Parent"), to purchase all of the outstanding shares
(the "Shares") of common stock, no par value (the "Common Stock") of
Shopping.com, a California corporation (the "Company"), at $19.00 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated January 15, 1999 (the "Offer to
Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the
related Letter of Transmittal, a copy of which is attached hereto as Exhibit
(a)(2) (which together constitute the "Offer").
Item 1. Security and Subject Company.
(a) The name of the subject company is Shopping.com, a California
corporation, and the address of its principal executive offices is 2101 East
Coast Highway, Garden Level, Corona Del Mar, California 92625.
(b) The class of securities to which this Statement relates is the Common
Stock. The Company has represented that as of January 11, 1999, there were (1)
8,140,793 shares of Common Stock issued and outstanding, (2) outstanding
options to purchase an aggregate of 2,743,325 shares of Common Stock, and
(3) outstanding warrants to purchase an aggregate of 4,212,238 shares of
Common Stock. Purchaser is seeking to purchase all of the outstanding Shares
at a purchase price of $19.00 per Share, net to the seller in cash.
(c) The information set forth in "Section 6--Price Range of the Shares;
Dividends on the Shares" of the Offer to Purchase is incorporated herein by
reference.
Item 2. Identity and Background.
(a)-(d), (g) This Statement is being filed by Parent and the Purchaser. The
information set forth in the "INTRODUCTION" and "Section 9--Certain
Information Concerning Parent and the Purchaser" of the Offer to Purchase is
incorporated herein by reference. The name, business address, present
principal occupation or employment, the material occupations, positions,
offices or employments for the past five years and citizenship of each
director and executive officer of Parent and the Purchaser and the name,
principal business and address of any corporation or other organization in
which such occupations, positions, offices and employments are or were carried
on are set forth in Schedule I of the Offer to Purchase and incorporated
herein by reference.
(e)-(f) During the last five years neither Parent or the Purchaser nor, to
the best knowledge of Parent and the Purchaser, any of the persons listed in
Schedule I of the Offer to Purchase have been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
(a)(1) Other than the transactions described in Item 3(b) below, neither
Parent or the Purchaser nor, to the best knowledge of Parent and the
Purchaser, any of the persons listed in Schedule I of the Offer to Purchase,
has entered into any transaction with the Company, or any of the Company's
affiliates which are corporations, since the commencement of the Company's
third full fiscal year preceding the date of this Statement, the aggregate
amount of which was equal to or greater than one percent of the consolidated
revenues of the Company for (i) the fiscal year in which such transaction
occurred, or (ii) the portion of the current fiscal year which has occurred if
the transaction occurred in such year.
(a)(2) Other than the transactions described in Item 3(b) below, neither
Parent or the Purchaser, nor, to the best knowledge of Parent and the
Purchaser, any of the persons listed in Schedule I of the Offer to Purchase,
has
3
<PAGE>
entered into any transaction since the commencement of the Company's third
full fiscal year preceding the date of this Statement, with the executive
officers, directors or affiliates of the Company which are not corporations,
in which the aggregate amount involved in such transaction or in a series of
similar transactions, including all periodic installments in the case of any
lease or other agreement providing for periodic payments or installments,
exceeded $40,000.
(b) The information set forth in the "INTRODUCTION," "Section 9--Certain
Information Concerning Parent and the Purchaser," "Section 11--Background of
the Offer; Purpose of the Offer and the Merger; The Merger Agreement and
Certain Other Agreements" and "Section 12--Plans for the Company; Other
Matters" of the Offer to Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a) The information set forth in "Section 10--Source and Amount of Funds" of
the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
(a)-(e) The information set forth in the "INTRODUCTION," "Section 11--
Background of the Offer; Purpose of the Offer and the Merger; The Merger
Agreement and Certain Other Agreements" and "Section 12--Plans for the
Company; Other Matters" of the Offer to Purchase is incorporated herein by
reference.
(f)-(g) The information set forth in "Section 7--Effect of the Offer on the
Market for the Shares; Stock Listing; Exchange Act Registration; Margin
Regulations" of the Offer to Purchase is incorporated herein by reference.
Item 6. Interest in Securities of the Subject Company.
(a)-(b) The information set forth in "Section 9--Certain Information
Concerning Parent and the Purchaser" and "Section 11--Background of the Offer;
Purpose of the Offer and the Merger; The Merger Agreement and Certain Other
Agreements" of the Offer to Purchase is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect
to the Subject Company's Securities.
The information set forth in the "INTRODUCTION," "Section 10--Source and
Amount of Funds," "Section 11--Background of the Offer; Purpose of the Offer
and the Merger; The Merger Agreement and Certain Other Agreements," "Section
12--Plans for the Company; Other Matters" and "Section 16--Fees and Expenses"
of the Offer to Purchase is incorporated herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in "Section 16--Fees and Expenses" of the Offer to
Purchase is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
The information set forth in "Section 9--Certain Information Concerning
Parent and the Purchaser" of the Offer to Purchase is incorporated herein by
reference.
4
<PAGE>
Item 10. Additional Information.
(a) Except as disclosed in Items 3 and 7 above, there are no present or
proposed material contracts, arrangements, understandings or relationships
between Parent or the Purchaser, or to the best knowledge of Parent and the
Purchaser, any of the persons listed in Schedule I of the Offer to Purchase,
and the Company, or any of its executive officers, directors, controlling
persons or subsidiaries.
(b)-(c) The information set forth in the "INTRODUCTION," "Section 14--
Conditions of the Offer" and "Section 15--Certain Legal Matters" of the Offer
to Purchase is incorporated herein by reference.
(d) The information set forth in "Section 7--Effect of the Offer on the
Market for Shares; Stock Listing; Exchange Act Registration; Margin
Regulations" of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letters of
Transmittal, to the extent not otherwise incorporated herein by reference, is
incorporated herein by reference.
Item 11. Materials to be Filed as Exhibits.
<TABLE>
<C> <S>
(a)(1) Offer to Purchase, dated January 15, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies and
Nominees to their Clients.
(a)(4) Letter to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release issued by Parent, dated January 11, 1999.
(a)(8) Form of Summary Advertisement, dated January 15, 1999.
(a)(9) Fairness Opinion of Trautman Kramer & Company, dated January 11, 1999.
(c)(1) Agreement and Plan of Merger, dated January 11, 1999, by and between
Parent and the Company.
(c)(2) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Robert McNulty.
(c)(3) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Cyber Depot.
(c)(4) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Kipling Isle.
(c)(5) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Paul Hill.
(c)(6) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Ed Bradley.
(c)(7) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Mark Winkler.
(c)(8) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Kristine Webster.
(c)(9) Shareholder Agreement, dated January 11, 1999, by and between Parent
and John Markley.
(c)(10) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Frank Denny.
(c)(11) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Pat Demicco.
(c)(12) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Randy Read.
(c)(13) Stock Option Agreement, dated January 11, 1999, by and between Parent
and the Company.
(d) None
(e) Not applicable.
(f) None.
</TABLE>
5
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Date: January 15, 1999
Compaq Interests, inc.
By: /s/ Earl L. Mason
----------------------------------
Name: Earl L. Mason
Title: President
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
Date: January 15, 1999
Compaq Computer Corporation
By: /s/ Earl L. Mason
----------------------------------
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
(a)(1) Offer to Purchase, dated January 15, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies and
Nominees to their Clients.
(a)(4) Letter to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release issued by Parent, dated January 11, 1999.
(a)(8) Form of Summary Advertisement, dated January 15, 1999.
(a)(9) Fairness Opinion of Trautman Kramer & Company dated January 11, 1999.
(c)(1) Agreement and Plan of Merger, dated January 11, 1999, by and between
Parent and the Company.
(c)(2) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Robert McNulty.
(c)(3) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Cyber Depot.
(c)(4) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Kipling Isle.
(c)(5) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Paul Hill.
(c)(6) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Ed Bradley.
(c)(7) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Mark Winkler.
(c)(8) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Kristine Webster.
(c)(9) Shareholder Agreement, dated January 11, 1999, by and between Parent
and John Markley.
(c)(10) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Frank Denny.
(c)(11) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Pat Demicco.
(c)(12) Shareholder Agreement, dated January 11, 1999, by and between Parent
and Randy Read.
(c)(13) Stock Option Agreement, dated January 11, 1999, by and between Parent
and the Company.
(d) None
(e) Not applicable.
(f) None.
</TABLE>
8
<PAGE>
EXHIBIT (a)(1)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Shopping.com
by
Compaq Interests, Inc.
an indirect
wholly owned subsidiary of
Compaq Computer Corporation
at
$19.00 Net Per Share
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 12, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
JANUARY 11, 1999, BY AND BETWEEN COMPAQ COMPUTER CORPORATION AND SHOPPING.COM.
THE BOARD OF DIRECTORS OF SHOPPING.COM HAS UNANIMOUSLY DETERMINED THAT EACH OF
THE MERGER AGREEMENT, THE OFFER, THE MERGER AND THE OPTION AGREEMENT IS FAIR
TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, AND
RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER
OF SHARES WHICH, WHEN ADDED TO THE SHARES THEN OWNED BY THE PURCHASER,
REPRESENTS AT LEAST NINETY PERCENT (90%) OF THE SHARES OUTSTANDING ON THE DATE
OF PURCHASE (THE "MINIMUM CONDITION"), THE EXPIRATION OR TERMINATION OF ANY
APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS
ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER, AND THE OTHER
CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14.
IN THE EVENT THAT THE MINIMUM CONDITION IS NOT SATISFIED ON THE INITIAL
EXPIRATION DATE, THE PURCHASER MAY ELECT TO EXTEND THE OFFER AND MAY WAIVE THE
MINIMUM CONDITION AND AMEND THE OFFER TO REDUCE THE NUMBER OF SHARES SUBJECT
TO THE OFFER TO SUCH NUMBER OF SHARES THAT, WHEN ADDED TO THE SHARES THEN
OWNED BY THE PURCHASER, WILL EQUAL 49.9999% OF THE SHARES THEN OUTSTANDING
(THE "REVISED MINIMUM NUMBER") AND, IF A GREATER NUMBER OF SHARES IS TENDERED
INTO THE OFFER AND NOT WITHDRAWN, PURCHASE, ON A PRO RATA BASIS, THE REVISED
MINIMUM NUMBER OF SHARES (THE "REVISED MINIMUM NUMBER PRORATION") (IT BEING
UNDERSTOOD THAT THE PURCHASER MAY, BUT SHALL NOT IN ANY EVENT BE REQUIRED TO
ACCEPT FOR PAYMENT, OR PAY FOR, ANY SHARES IF LESS THAN THE REVISED MINIMUM
NUMBER OF SHARES ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN AT THE
APPLICABLE EXPIRATION DATE OF THE OFFER).
--------------
IMPORTANT
Any shareholder who desires to tender all or any portion of such
shareholder's Shares (as defined herein) should either (i) complete and sign
the Letter of Transmittal (or facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver it and any other
required documents to the Depositary and either deliver the certificates for
such Shares to the Depositary or tender such Shares pursuant to the procedures
for book-entry transfer set forth in Section 3 or (ii) request such
shareholder's broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such shareholder. Any shareholder whose Shares
are registered in the name of a broker, dealer, commercial bank, trust company
or other nominee must contact such person to tender their Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective locations and telephone
numbers set forth on the back cover of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase, the Letter of Transmittal and the
Notice of Guaranteed Delivery may be directed to the Information Agent, or the
Dealer Manager, or to brokers, dealers, commercial banks or trust companies. A
shareholder also may contact brokers, dealers, commercial banks or trust
companies for assistance concerning the Offer.
--------------
The Dealer Manager for the Offer is:
GREENHILL & CO., LLC
--------------
January 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION............................................................. 1
THE OFFER................................................................ 3
1. Terms of Offer....................................................... 3
2. Acceptance for Payment and Payment................................... 5
3. Procedure for Tendering Shares....................................... 6
4. Withdrawal Rights.................................................... 8
5. Certain Federal Income Tax Consequences.............................. 9
6. Price Range of the Shares; Dividends on the Shares................... 9
7. Effect of the Offer on the Market for the Shares; Stock Listing;
Exchange Act Registration; Margin Regulations....................... 10
8. Certain Information Concerning the Company........................... 10
9. Certain Information Concerning Parent and the Purchaser.............. 13
10. Source and Amount of Funds........................................... 15
11. Background of the Offer; Purpose of the Offer and the Merger; The
Merger Agreement and Certain Other Agreements....................... 15
12. Plans for the Company; Other Matters................................. 28
13. Dividends and Distributions.......................................... 30
14. Conditions of the Offer.............................................. 30
15. Certain Legal Matters................................................ 32
16. Fees and Expenses.................................................... 34
17. Miscellaneous........................................................ 35
</TABLE>
Schedule I--Directors and Executive Officers of Compaq Interests, Inc. and
Compaq Computer Corporation.
<PAGE>
To the Holders of Common Stock of Shopping.com:
INTRODUCTION
Compaq Interests, Inc., a Delaware corporation (the "Purchaser") and an
indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware
corporation ("Parent"), hereby offers to purchase all issued and outstanding
shares of common stock ("Common Stock"), no par value (the "Shares"), of
Shopping.com, a California corporation (the "Company"), at a price of $19.00
per Share, or any higher price paid in the Offer, net to the seller in cash,
upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer"). Tendering shareholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses incurred in connection with the Offer
of Greenhill & Co., LLC, which is acting as the Dealer Manager (the "Dealer
Manager"), Corporate Investor Communications, Inc., which is acting as the
Information Agent (the "Information Agent"), and U.S. Stock Transfer
Corporation, which is acting as the Depositary (the "Depositary").
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer, that number
of shares of Common Stock which represents, when added to the Shares then
owned by the Purchaser, at least ninety percent (90%) of the Shares
outstanding on the date of purchase (the "Minimum Condition"). See Section 14.
The Company has informed the Purchaser that, as of January 11, 1999, there
were (i) 8,140,793 shares of Common Stock issued and outstanding, (ii)
outstanding options to purchase an aggregate of 2,743,325 shares of Common
Stock under the Company's stock plans, and (iii) 4,212,238 Shares reserved for
issuance pursuant to outstanding warrants of the Company. The Merger Agreement
(as defined below) provides, among other things, that the Company will not,
without the prior written consent of Parent, issue any additional Shares
(except on the exercise of outstanding options and other rights and
securities). Based on the foregoing, the Purchaser believes that the Minimum
Condition will be satisfied if 7,326,714 shares of Common Stock are validly
tendered and not withdrawn prior to the expiration of the Offer.
As a condition and inducement to Parent's entering into the Merger Agreement
and incurring the liabilities therein, certain shareholders of the Company
(each, a "Shareholder"), who together share voting power and dispositive power
with respect to an aggregate of 1,405,475 Shares outstanding and options and
warrants exercisable for 2,705,001 shares, concurrently with the execution and
delivery of the Merger Agreement entered into Shareholder Agreements (the
"Shareholder Agreements"), dated January 11, 1999, with Parent. Pursuant to
the Shareholder Agreements, the Shareholders have agreed, among other things,
to tender the Shares held by them in the Offer, and to grant Parent a proxy
with respect to the voting of such Shares in favor of the Merger with respect
to such Shares upon the terms and subject to the conditions set forth therein.
The Shareholders have also agreed, if requested by Parent, to exercise options
and warrants held by them and to tender the Shares received upon such exercise
in the Offer. See Section 11.
As a condition and further inducement to Parent to enter into the Merger
Agreement and incurring the liabilities therein, concurrently with the
execution and delivery of the Merger Agreement, the Purchaser and the Company
entered into a Stock Option Agreement, dated January 11, 1999 (the "Option
Agreement"), pursuant to which, among other things, the Company has granted
the Purchaser an option to purchase certain newly issued shares of Common
Stock, subject to certain conditions. See Section 11.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
January 11, 1999 (the "Merger Agreement"), by and between Parent and the
Company pursuant to which, as soon as practicable after the completion of the
Offer and satisfaction or waiver, if permissible, of all conditions to the
Merger (as defined below), the Purchaser will be merged with and into the
Company and the separate corporate existence of the Purchaser will thereupon
cease. The merger, as effected pursuant to the immediately preceding sentence,
is referred to herein as the "Merger," and the Company as the surviving
corporation of the Merger is sometimes herein referred to as the "Surviving
Corporation." At the effective time of the Merger (the "Effective Time"), each
share of Common Stock then outstanding (other than Shares held by Parent, the
Purchaser or any other
1
<PAGE>
wholly owned subsidiary of Parent and Shares held by shareholders who properly
perfect their dissenters' rights under California law) will be canceled and
retired and converted into the right to receive $19.00 per Share, net to the
seller in cash or any higher price per share of Common Stock paid in the Offer
(such price, being referred to herein as the "Offer Price"), in cash payable
to the holder thereof without interest (the "Merger Consideration"). The
Merger Agreement is more fully described in Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE MERGER AGREEMENT, THE OFFER, THE MERGER AND THE OPTION AGREEMENT IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND
RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER
THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER.
Trautman Kramer & Company, the Company's financial advisor ("Trautman
Kramer"), has delivered to the Company's Board of Directors its written
opinion (the "Fairness Opinion"), dated January 11, 1999, to the effect that,
as of such date, the consideration to be received by the holders of shares of
Common Stock (other than Parent, the Purchaser and any affiliate thereof)
pursuant to the Offer and under the terms of the Merger Agreement, is fair
from a financial point of view, to such holders. Such opinion is set forth in
full as an exhibit to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9") that is being mailed to shareholders of
the Company.
The Merger Agreement provides that the initial scheduled expiration date of
the Offer shall be twenty (20) business days after the date the Offer is
commenced (the "Initial Expiration Date"). If as of the Initial Expiration
Date all conditions to the Offer shall not have been satisfied or waived, the
Merger Agreement provides that the Purchaser may, and may continue to extend
the expiration date of the Offer from time to time. In addition, in the event
the Minimum Condition is not satisfied on the Initial Expiration Date pursuant
to the Offer, the Purchaser may waive the Minimum Condition and amend the
Offer to reduce the number of Shares subject to the Offer to such number of
Shares that, when added to the Shares then owned by the Purchaser, will equal
49.9999% of the Shares then outstanding (the "Revised Minimum Number"), and,
if a greater number of shares is tendered into the Offer and not withdrawn,
purchase, on a pro rata basis, the Revised Minimum Number of Shares (the
"Revised Minimum Number Proration") (it being understood that the Purchaser
may, but shall not in any event be required to accept for payment, or pay for,
any Shares if less than the Revised Minimum Number of Shares are tendered
pursuant to the Offer and not withdrawn at the applicable expiration date of
the Offer). In addition, the Merger Agreement provides that the Purchaser
shall, on the terms and subject to the prior satisfaction or waiver of the
conditions of the Offer, accept for payment and purchase, as soon as permitted
under the terms of the Offer, all Shares validly tendered and not withdrawn
prior to the expiration of the Offer. The Offer will not remain open following
the time Shares are accepted for payment.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of shareholders of the Company of
the Merger Agreement, if required by applicable law in order to consummate the
Merger. See Section 11. Under the California General Corporation Law (the
"GCL"), if the Purchaser acquires, pursuant to the Offer, the Option Agreement
or otherwise, at least 90% of the Shares then outstanding, the Purchaser will
be able to approve the Merger Agreement and the transactions contemplated
thereby, including the Merger, without a vote of the shareholders. In such
event, Parent and the Company have agreed in the Merger Agreement to take,
subject to the satisfaction of the conditions set forth in the Merger
Agreement, all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the acceptance and payment for Shares
by the Purchaser pursuant to the Offer without a meeting of the shareholders,
in accordance with Section 1110 of the GCL. If, however, the Purchaser does
not acquire at least 90% of the then outstanding Shares on the date of
purchase, pursuant to the Offer, the Option Agreement or otherwise and the
Purchaser instead waives the Minimum Condition and amends the Offer to reduce
the number of Shares subject to the Offer to the Revised Minimum Number of
Shares, the Purchaser would own upon consummation of the Offer 49.9999% of the
Shares then outstanding, and would thereafter solicit the approval of the
Merger and the Merger Agreement by a vote of the shareholders of the Company.
Under such circumstances, a significantly longer period of time will be
required to effect the Merger. See Sections 11 and 12.
2
<PAGE>
Under the GCL, the Merger may not be accomplished for cash paid to the
shareholders if the Purchaser or Parent owns, directly or indirectly, more
than 50% but less than 90% of the then outstanding Shares unless either all
the shareholders consent or the Commissioner of Corporations of the State of
California approves, after a hearing, the terms and conditions of the Merger
and the fairness thereof. Accordingly, concurrently with the execution of the
Merger Agreement, and as an inducement to Parent to enter into the Merger
Agreement, the Company entered into the Option Agreement with Parent. Pursuant
to the Option Agreement, the Company granted to the Purchaser an irrevocable
option (the "Stock Option") to purchase up to the number of Shares (the
"Option Shares") that, when added to the number of Shares owned by the
Purchaser and its affiliates immediately following consummation of the Offer,
would constitute 90% of the Shares then outstanding at a cash purchase price
per Option Share equal to the Offer Price (the "Option Price") subject to the
terms and conditions set forth in the Option Agreement, including, without
limitation, that the number of Shares to be issued under the Stock Option
shall not exceed the number of authorized Shares available for issuance. If
the Stock Option is exercised by the Purchaser (resulting in the Purchaser
owning 90% or more of the outstanding Shares), the Purchaser will be able to
effect a short-form Merger under the GCL, subject to the terms and conditions
of the Merger Agreement. The Purchaser is required to effect a short-form
Merger as soon as practicable if it is able to do so under the GCL.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
THE OFFER
1. Terms of the Offer. Upon the terms and subject to the conditions of the
Offer, and subject to reduction in the number of Shares subject to the Offer
to a number equal to the Revised Minimum Number (the "Revised Minimum Number
Proration"), the Purchaser will accept for payment and pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of this Offer to Purchase. The term "Expiration
Date" shall mean 12:00 Midnight, New York City time, on Friday, February 12,
1999, unless and until the Purchaser, in accordance with the terms of the
Merger Agreement, shall have extended the period of time for which the Offer
is open, in which event the term "Expiration Date" shall mean the latest time
and date at which the Offer, as so extended by the Purchaser, shall expire.
The Offer is conditioned upon, among other things, the satisfaction of the
Minimum Condition, and the expiration or termination of all waiting periods
imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder (the "HSR Act"). See Section 14. If
such conditions are not satisfied prior to the Expiration Date, the Purchaser
reserves the right (but shall not be obligated) to (i) decline to purchase any
of the Shares tendered and terminate the Offer, subject to the terms of the
Merger Agreement, (ii) waive any of the conditions to the Offer, to the extent
permitted by applicable law and the provisions of the Merger Agreement, and,
subject to complying with applicable rules and regulations of the Securities
and Exchange Commission (the "Commission"), purchase all Shares validly
tendered, (iii) subject to the terms of the Merger Agreement, extend the Offer
and, subject to the right of shareholders to withdraw Shares until the
Expiration Date, retain the Shares which will have been tendered during the
period or periods for which the Offer is open or extended or (iv) amend the
Offer.
Subject to the terms of the Merger Agreement, the Purchaser may from time to
time, (i) extend the period of time during which the Offer is open and thereby
delay acceptance for payment of, and the payment for, any Shares, by giving
oral or written notice of such extension to the Depositary and (ii) amend the
Offer by giving oral or written notice of such amendment to the Depositary.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, the announcement in
the case of an extension to be issued no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date
in accordance with the public announcement requirements of Rule 14d-4(c)
3
<PAGE>
under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Without limiting the obligation of the Purchaser under such Rule or the manner
in which the Purchaser may choose to make any public announcement, the
Purchaser currently intends to make announcements by issuing a press release
to the Dow Jones News Service. Under no circumstances will interest be paid on
the Offer Price to be paid by the Purchaser for the Shares, regardless of any
extension of the Offer or any delay in making such payment.
The Merger Agreement provides that, except as described below, the Purchaser
will not, without the prior written consent of the Company, (i) decrease the
Offer Price or change the form of consideration payable in the Offer, (ii)
decrease the number of Shares sought (except as set forth below), (iii) impose
additional conditions to the Offer other than those described in Section 14,
(iv) amend any condition of the Offer described in Section 14, (v) extend the
Initial Expiration Date, provided, however, that if on the Initial Expiration
Date of the Offer, all conditions to the Offer shall not have been satisfied
or waived, the Purchaser may elect to extend the Expiration Date from time to
time until a date not later than May 15, 1999, or (vi) amend any other term of
the Offer in any manner adverse to the holders of Shares without the written
consent of the Company. Notwithstanding the foregoing, in the event that less
than 90% of the Shares then outstanding are tendered pursuant to the Offer on
the Initial Expiration Date pursuant to the Offer, the Purchaser may elect to
extend the Offer and may waive the Minimum Condition and amend the Offer to
reduce the number of Shares subject to the Offer to such number of Shares
equal to the Revised Minimum Number, and, if a greater number of shares are
tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the
Revised Minimum Number of Shares (it being understood that the Purchaser may,
but shall not in any event be required to accept for payment, or pay for, any
Shares if less than the Revised Minimum Number of Shares are tendered pursuant
to the Offer and not withdrawn at the applicable expiration date of the
Offer).
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering shareholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of the Purchaser to delay the payment for Shares which the Purchaser has
accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of the Offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend
the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. In a
public release, the Commission has stated that in its view an offer must
remain open for a minimum period of time following a material change in the
terms of the Offer and that waiver of a material condition, such as the
Minimum Condition, is a material change in the terms of the Offer. The release
states that an offer should remain open for a minimum of five business days
from the date a material change is first published, sent or given to security
holders and that, if material changes are made with respect to information not
materially less significant than the offer price and the number of shares
being sought, a minimum of ten business days may be required to allow adequate
dissemination and investor response. The requirement to extend the Offer will
not apply to the extent that the number of business days remaining between the
occurrence of the change and the then-scheduled Expiration Date equals or
exceeds the minimum extension period that would be required because of such
amendment. As used in this Offer to Purchase, "business day" has the meaning
set forth in Rule 14d-1 under the Exchange Act.
4
<PAGE>
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed by the Purchaser to record holders of Shares and
will be furnished by the Purchaser to brokers, dealers, banks and similar
persons whose names, or the names of whose nominees, appear on the shareholder
lists or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
2. Acceptance for Payment and Payment. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), and subject to the
Revised Minimum Number Proration, the Purchaser will accept for payment and
will pay, promptly after the Expiration Date, for all Shares validly tendered
prior to the Expiration Date and not properly withdrawn in accordance with
Section 4. All determinations concerning the satisfaction of such terms and
conditions will be within the Purchaser's discretion, which determinations
will be final and binding. See Sections 1 and 14. The Purchaser expressly
reserves the right, in its sole discretion, to delay acceptance for payment of
or payment for Shares in order to comply in whole or in part with any
applicable law, including, without limitation, the HSR Act. Any such delays
will be effected in compliance with Rule 14e-l(c) under the Exchange Act
(relating to a bidder's obligation to pay the consideration offered or return
the securities deposited by or on behalf of holders of securities promptly
after the termination or withdrawal of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
for such Shares (or a timely Book-Entry Confirmation (as defined below) with
respect thereto), (ii) a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message (as defined
below), and (iii) any other documents required by the Letter of Transmittal.
The per share consideration paid to any holder of Common Stock pursuant to the
Offer will be the highest per Share consideration paid to any other holder of
such shares pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to the Purchaser and
not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares.
Payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for tendering shareholders for the purpose of receiving payment from the
Purchaser and transmitting payment to tendering shareholders. Under no
circumstances will interest be paid on the purchase price to be paid by the
Purchaser for the Shares, regardless of any extension of the Offer or any
delay in making such payment.
If the Purchaser is delayed in its acceptance for payment of, or payment
for, Shares or is unable to accept for payment or pay for Shares pursuant to
the Offer for any reason, then, without prejudice to the Purchaser's rights
under the Offer (including such rights as are set forth in Sections 1 and 14)
(but subject to compliance with Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to exercise, and duly exercise, withdrawal rights as
described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, certificates for any such Shares will be returned, without expense to
the tendering shareholder (or, in the case of Shares delivered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility (as defined below) pursuant to the procedures set forth in
Section 3, such Shares will be credited to an account maintained at the Book-
Entry Transfer Facility), as promptly as practicable after the expiration or
termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or in part,
to Parent or to any affiliate of Parent, the right to purchase Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve
the Purchaser of its obligations under the Offer and will in no way prejudice
the rights of tendering shareholders to receive payment for Shares validly
tendered and accepted for payment pursuant to the Offer.
5
<PAGE>
3. Procedure for Tendering Shares.
Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message (as defined below), and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either certificates for tendered Shares must be received
by the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below) received by the Depositary), in
each case, prior to the Expiration Date or (ii) the tendering shareholder must
comply with the guaranteed delivery procedures set forth below.
The Depositary will establish an account with respect to the Shares at The
Depositary Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase.
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Shares by causing the Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
in accordance with the Book-Entry Transfer Facility's procedure for such
transfer. However, although delivery of Shares may be effected through book-
entry transfer into the Depositary's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents must, in any case, be transmitted
to, and received by, the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering shareholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." Delivery of documents to
the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer
Facility's procedures does not constitute delivery to the Depositary.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
The method of delivery of Shares, the Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer
Facility, is at the election and risk of the tendering shareholder. Shares
will be deemed delivered only when actually received by the Depositary
(including, in the case of a book-entry transfer, by Book-Entry Confirmation).
If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant
in the Book Entry Transfer Facility's systems whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal or (ii) if such Shares are tendered for the account
of a financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agent's Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (each, an
"Eligible Institution" and, collectively, "Eligible Institutions"). In all
other cases, all signatures on Letters of Transmittal must be guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the certificates for Shares are registered in the name of a person other
than the signer of the Letter of Transmittal, or if payment is to be made, or
certificates
6
<PAGE>
for Shares not tendered or not accepted for payment are to be returned, to a
person other than the registered holder of the certificates surrendered, then
the tendered certificates for such Shares must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name or names
of the registered holders or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed as aforesaid. See
Instruction 5 to the Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer cannot be completed on a
timely basis or time will not permit all required documents to reach the
Depositary prior to the Expiration Date, such shareholder's tender may be
effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect to)
such Shares, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the New York Stock Exchange (the "NYSE")
is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (iii) any other documents required by the Letter of Transmittal.
Accordingly, tendering shareholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. Under no circumstances will
interest be paid on the purchase price to be paid by the Purchaser for the
Shares, regardless of any extension of the Offer or any delay in making such
payment.
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering shareholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing the Letter of Transmittal as set forth above, the
tendering shareholder will irrevocably appoint designees of the Purchaser, and
each of them, as such shareholder's attorneys-in-fact and proxies in the
manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of such shareholder's rights with respect to
the Shares tendered by such shareholder and accepted for payment by the
Purchaser and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, the Purchaser accepts for
payment Shares tendered by such shareholder as provided herein. Upon such
appointment, all prior powers of attorney, proxies and consents given by such
shareholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given by such shareholder (and, if
given, will not be deemed effective). The designees of the Purchaser will
thereby be empowered to exercise all voting and other rights with respect to
such Shares and other securities or rights,
7
<PAGE>
including, without limitation, in respect of any annual, special or adjourned
meeting of the Company's shareholders, actions by written consent in lieu of
any such meeting or otherwise, as they in their sole discretion deem proper.
The Purchaser reserves the right to require that, in order for Shares to be
deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares, the Purchaser must be able to exercise full voting,
consent and other rights with respect to such Shares and other related
securities or rights, including voting at any meeting of shareholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser, in its sole discretion, which
determination will be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders of any Shares determined by it not to be in
proper form or the acceptance for payment of, or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right, in its sole discretion, subject to the provisions of the
Merger Agreement, to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any Shares of any particular shareholder,
whether or not similar defects or irregularities are waived in the case of
other shareholders. No tender of Shares will be deemed to have been validly
made until all defects or irregularities relating thereto have been cured or
waived. None of the Purchaser, Parent, the Depositary, the Information Agent,
the Company or any other person will be under any duty to give notification of
any defects or irregularities in tenders or incur any liability for failure to
give any such notification. Subject to the terms of the Merger Agreement, the
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
Backup Withholding. Under the "backup withholding" provisions of federal
income tax law, unless a tendering registered holder, or his assignee (in
either case, the "Payee"), satisfies the conditions described in Instruction 9
of the Letter of Transmittal or is otherwise exempt, the cash payable as a
result of the Offer may be subject to backup withholding tax at a rate 31% of
the gross proceeds. To prevent backup withholding, each Payee should complete
and sign the Substitute Form W-9 provided in the Letter of Transmittal. See
Instruction 9 of the Letter of Transmittal.
4. Withdrawal Rights. Except as otherwise provided in this Section 4,
tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn pursuant to the procedures set forth below at any time prior to
the Expiration Date and, unless theretofore accepted for payment and paid for
by the Purchaser pursuant to the Offer, may also be withdrawn at any time
after March 15, 1999.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant
to the procedures for book-entry transfer as set forth in Section 3, any
notice of withdrawal must also specify the name and number of the account at
the appropriate Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 3 any time prior to the
Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Parent, the Depositary, the Information Agent, or any other person
will be under any duty to give notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give any
such notification.
8
<PAGE>
5. Certain Federal Income Tax Consequences. The receipt of cash for Shares
pursuant to the Offer (or the Merger) will be a taxable transaction for U.S.
federal income tax law purposes and may also be a taxable transaction under
applicable state, local or foreign tax laws. The tax consequences of such
receipt pursuant to the Offer (or the Merger) may vary depending upon, among
other things, the particular circumstances of the shareholder. In general, a
shareholder who receives cash for Shares pursuant to the Offer (or the Merger)
will recognize gain or loss for U.S. federal income tax purposes equal to the
difference between the amount of cash received in exchange for the Shares sold
and such shareholder's adjusted tax basis in such Shares.
Provided that the Shares constitute capital assets in the hands of the
shareholder, such gain or loss will be capital gain or loss and will be long-
term capital gain or loss if the holding period for such Shares exceeds one
year. Gain or loss will be calculated separately for each block of Shares
(i.e., Shares acquired at the same time and price) sold pursuant to the Offer
(or the Merger). The deduction of capital losses is subject to certain
limitations.
A shareholder that tenders Shares may be subject to backup withholding at a
rate of 31% unless such shareholder provides a correct TIN and certifies that
such shareholder is not subject to backup withholding, or unless an exemption
applies. See "Backup Withholding" under Section 3 herein, and Instruction 9
and "Important Tax Information" in the Letter of Transmittal.
The U.S. federal income tax discussion set forth above is included for
general information only and is based upon present law. Shareholders are urged
to consult their tax advisors with respect to the specific tax consequences of
the Offer (or the Merger) to them, including the application and effect of the
alternative minimum tax, and state, local and foreign tax laws. In addition,
the discussion set forth above may not apply to particular categories of
shareholders, including, for example, individuals who are not citizens or
residents of the United States, foreign corporations, life insurance
companies, tax-exempt organizations, financial institutions, and holders who
acquired Shares pursuant to the exercise of employee stock options or
otherwise as compensation.
6. Price Range of the Shares; Dividends on the Shares. The shares of Common
Stock are traded in the over-the-counter market under the symbol "IBUY". The
following table sets forth, for each of the calendar quarters indicated, the
high and low reported sales price per share of Common Stock based on published
financial sources. The Company did not declare or pay any cash dividends
during any of the periods indicated in the table below. In addition, under the
terms of the Merger Agreement, the Company is not permitted to declare or pay
dividends with respect to the shares without the prior written consent of
Parent.
<TABLE>
<CAPTION>
Common Stock
------------------
High Low
-------- ---------
<S> <C> <C>
1997
Fourth Quarter (from inception on November 26, 1997)... $11 7/64 $ 8 1/2
1998
First Quarter.......................................... $39 $10 55/64
Second Quarter......................................... 34 1/2 10
Third Quarter.......................................... 25 1/2 0 61/64
Fourth Quarter......................................... 15 1/16 1 1/4
1999
First Quarter (through January 12, 1999)............... $20 $11 1/32
</TABLE>
On January 8, 1999, the last full trading day prior to the public
announcement of the execution of the Merger Agreement by the Company and
Parent, the last reported sales price of the Shares in over-the-counter market
was $13 3/16 per share of Common Stock. On January 14, 1999, the last full
trading day prior to the commencement of the Offer, the last reported sales
price of the Shares in over-the-counter market was $18 9/16 per share of
Common Stock. Shareholders are urged to obtain a current market quotation for
the Shares.
9
<PAGE>
7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange
Act Registration; Margin Regulations.
Market for the Shares. The purchase of Shares by the Purchaser pursuant to
the Offer will reduce the number of Shares that might otherwise trade publicly
and will reduce the number of holders of Shares, which could adversely affect
the liquidity and market value of the remaining Shares held by the public.
Stock Listing. The Common Stock is traded in over-the-counter market. The
extent of the public market for the Shares and the availability of quotations
depends upon such factors as the number of shareholders and/or the aggregate
market value of the Shares at any time, the interest in maintaining a market
in the Shares on the part of securities firms, the possible termination of
registration under the Exchange Act as described below, and other factors. The
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on
the market price for, or marketability of, the Shares or whether it would
cause future market prices to be greater or lesser than the Offer Price. The
Company has represented that, as of January 11, 1999, 8,140,793 Shares were
issued and outstanding.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the
Exchange Act, assuming there are no other securities of the Company subject to
registration, would substantially reduce the information required to be
furnished by the Company to its shareholders and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement pursuant to Section 14(a) in connection with shareholders' meetings
and the related requirement of furnishing an annual report to shareholders and
the requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Company. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144
or Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), may be impaired or eliminated.
The Purchaser may seek to cause the Company to apply for termination of
registration of the Shares under the Exchange Act as soon after the completion
of the Offer as the requirements for such termination are met. If the Exchange
Act registration of the Shares is not terminated prior to the Merger, then the
registration of the Shares under the Exchange Act will be terminated following
the consummation of the Merger.
Margin Regulations. Since the Shares are currently traded in the over-the-
counter market, they are not "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board").
8. Certain Information Concerning the Company.
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or
based upon publicly available documents and records on file with the
Commission and other public sources. Neither Parent nor the Purchaser assumes
responsibility for the accuracy or completeness of the information concerning
the Company contained in such documents and records or for any failure by the
Company to disclose events which may have occurred or may affect the
significance or accuracy of any such information but which are unknown to
Parent or the Purchaser.
The Company is an Internet-based electronic retailer. The Company is a
California corporation with its principal executive offices at 2101 East Coast
Highway, Garden Level, Corona Del Mar, California 92625. The telephone number
of the Company at such offices is (949) 640-4393.
10
<PAGE>
Selected Financial Information. Set forth below is certain selected
consolidated financial information with respect to the Company, excerpted or
derived from the Company's Annual Report on Form 10-KSB for the fiscal year
ended January 31, 1998, filed with the Commission pursuant to the Exchange
Act.
More comprehensive financial information is included in such report and in
other documents filed by the Company with the Commission. The following
summary is qualified in its entirety by reference to such report and other
documents and all of the financial information (including any related notes)
contained therein. Such report and other documents may be inspected and copies
may be obtained from the Commission in the manner set forth below.
SHOPPING.COM
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 31
----------------------
1998 1997
----------- ---------
<S> <C> <C>
Operating Data:
Net sales........................................... $ 850,724 $ --
Operating income (loss)............................. $(4,970,869) $(201,697)
Net earnings (loss)................................. $(5,522,029) $(201,697)
Net earnings (loss) per share....................... $ (3.05) $ (0.16)
Balance Sheet Data (at end of period):(1)
Total assets........................................ $ 8,444,732 $ --
Total liabilities................................... $ 1,864,496 --
Shareholders' equity................................ $ 6,580,236 --
</TABLE>
- - --------
(1) The Company completed its initial public offering on November 25, 1997,
and therefore balance sheet data as of January 31, 1997 has been omitted
from this table.
Approximately 1,405,475 of the outstanding Shares, in the aggregate, and
options and warrants exercisable for 2,730,001 Shares are held by the
Shareholders, who have agreed, among other things, to tender, or cause to be
tendered, all Shares owned by them pursuant to the Offer. The Shareholders
also have granted to Parent a proxy to vote the Shares owned by them in favor
of the Merger (which proxy will terminate in the event that the Purchaser
waives the Minimum Condition and accepts for payment the Revised Number of
Shares). See Section 11.
Certain Company Projections. To the knowledge of Parent and the Purchaser,
the Company does not as a matter of course, make public forecasts as to its
future financial performance. However, in connection with the discussions
concerning the Offer and the Merger, the Company furnished Parent with
financial projections contained in the Company's 1998 and 1999 operating
budgets prepared by management for management's 1998 and 1999 operating plan.
The financial projections contained therein are based on numerous assumptions
concerning revenue growth in all product and customer areas, and increases in
sales and marketing and general administrative expenses.
The Company's projections for fiscal year ended January 31, 1999 anticipated
net sales of approximately $16.9 million and $179.5 million for fiscal year
ended January 31, 2000.
The Company's 1998 and 1999 operating budgets and the financial projections
contained therein were prepared for the limited purpose of managing the
operating plan of the Company for fiscal years 1998 and 1999. They do not
reflect recent developments that have occurred since they were prepared, such
as the Offer and the Merger. This reference to the projections is provided
solely because such projections have been provided to the Purchaser and none
of the Purchaser, Parent, the Company or any of their respective affiliates or
representatives believes that such projections should be relied upon.
11
<PAGE>
THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROJECTIONS OR FORECASTS. THESE FORWARD-LOOKING STATEMENTS (AS THAT
TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE PROJECTIONS. THE COMPANY HAS ADVISED THE PURCHASER
AND PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON WHICH THE PROJECTIONS
PROVIDED TO PARENT WERE BASED IN PART) ARE, IN GENERAL, PREPARED SOLELY FOR
INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT DECISIONS, AND ARE
SUBJECTIVE IN MANY RESPECTS AND THUS SUSCEPTIBLE TO INTERPRETATIONS AND
PERIODIC REVISION BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENTS. THE
PROJECTIONS ALSO REFLECT NUMEROUS ASSUMPTIONS (NOT ALL OF WHICH WERE PROVIDED
TO PARENT), ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY
PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND
OTHER MATTERS, INCLUDING EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS
FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE
BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY
PARENT OR THE PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE
ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL
RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE
PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS
AN INDICATION THAT ANY OF PARENT, THE PURCHASER, THE COMPANY OR THEIR
RESPECTIVE AFFILIATES OR REPRESENTATIVES CONSIDERED OR CONSIDER THE
PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS
SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT, THE PURCHASER, THE COMPANY
OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE, OR MAKES
ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE
PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE
PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO
REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF
THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. IT IS
EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS,
AND ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information
as of particular dates concerning the Company's directors and officers, their
remuneration, options granted to them, the principal holders of the Company's
securities and any material interests of such persons in transactions with the
Company is required to be disclosed in proxy statements distributed to the
Company's shareholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a
website at http://www.sec.gov that contains reports, proxy statements and
other information relating to the Company that have been filed via the EDGAR
System. Such material should also be available for inspection at the offices
of the NASDAQ National Market, located at 20 Broad Street, New York, New York
10005.
12
<PAGE>
9. Certain Information Concerning Parent and the Purchaser.
Parent. Parent, a Delaware corporation, is a worldwide information
technology company and is the largest global supplier of personal computers.
The Purchaser is a Delaware entity newly formed at the direction of Parent for
the purpose of effecting the Offer and the Merger. Parent owns, indirectly,
all of the outstanding capital stock of the Purchaser. It is not anticipated
that, prior to the consummation of the Offer, the Purchaser will have any
significant assets or liabilities or will engage in any activities other than
those incident to the Offer and the Merger. The offices of Parent and
Purchaser are located at 20555 State Highway 249, Houston, Texas 77070.
For certain information concerning the executive officers and directors, as
the case may be, of the Purchaser and Parent, see Schedule I.
Pursuant to the Option Agreement and the Shareholder Agreements, Parent and
the Purchaser may be deemed to beneficially own 14,014,120 shares of Common
Stock constituting approximately 56.1% of the total number of shares of Common
Stock after giving effect to the exercise of all outstanding options and
warrants (including the Option pursuant to the Option Agreement). See Section
11. Each of the Purchaser and Parent disclaims beneficial ownership of such
shares. Except as set forth in this Offer to Purchase, none of the Purchaser,
Parent, or, to the best knowledge of the Purchaser or Parent, any of the
persons listed on Schedule I, or any associate or majority-owned subsidiary of
any of the foregoing, beneficially owns or has a right to acquire any Shares,
and none of the Purchaser, Parent, or, to the best knowledge of the Purchaser
or Parent, any of the persons or entities referred to above, nor any of the
respective executive officers, directors or subsidiaries of any of the
foregoing, has effected any transaction in Shares during the past 60 days.
Except as set forth in this Offer to Purchase, none of the Purchaser,
Parent, or, to the best knowledge of the Purchaser and Parent, any of the
persons listed on Schedule I, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, none of
the Purchaser, Parent, or any of their respective affiliates, or, to the best
knowledge of the Purchaser and Parent, any of the persons listed on Schedule
I, has had, since January 1, 1994, any business relationships or transactions
with the Company or any of its executive officers, directors or affiliates
that would require reporting under the rules of the Commission. Except as set
forth in this Offer to Purchase, since January 1, 1994, there have been no
contacts, negotiations or transactions between the Purchaser or Parent, any of
their respective affiliates or, to the best knowledge of the Purchaser or
Parent, any of the persons listed on Schedule I, and the Company or its
affiliates concerning a merger, consolidation or acquisition, tender offer or
other acquisition of securities, election of directors or a sale or other
transfer of a material amount of assets.
Set forth below is certain selected historical financial information with
respect to Parent excerpted or derived from financial information contained in
Parent's Annual Reports on Form 10-K for the years ended December 31, 1997,
1996, 1995, 1994 and 1993, respectively, and Parent's Quarterly Reports on
Form 10-Q for the three months ended March 31, 1998, June 30, 1998 and
September 30, 1998. More comprehensive financial information is included in
such reports and other documents filed by Parent with the Commission, and the
following summary is qualified in its entirety by reference to such reports
and such other documents and all the financial information (including any
related notes) contained therein. Such reports and other documents should be
available for inspection and copies thereof should be obtainable in the manner
set forth below.
13
<PAGE>
COMPAQ COMPUTER CORPORATION
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(in millions, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30, Year ended December 31,
------------------ --------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Consolidated
Statement of Income
data:
Revenue................. $ 20,310 $ 17,261 $24,584 $20,009 $16,675 $12,605 $8,873
Income (loss) before
provision for income
taxes(1)(2)(3)(4)...... (3,594) 1,805 2,758 1,883 1,326 1,353 161
Net income
(loss)(1)(2)(3)(4)..... (3,501) 1,188 1,855 1,318 893 988 19
Earnings (loss) per
common share:
Basic................. $ (2.21) $ 0.79 $ 1.23 $ 0.90 $ 0.62 $ 0.70 $ 0.01
Diluted............... $ (2.21) $ 0.76 $ 1.19 $ 0.87 $ 0.60 $ 0.68 $ 0.01
Shares used in computing
earnings (loss) per
common share:
Basic................. 1,585 1,502 1,505 1,472 1,442 1,405 1,348
Diluted............... 1,585 1,557 1,564 1,516 1,492 1,463 1,388
Cash dividends declared
per common share(5).... $ 0.045 $ 0.015
<CAPTION>
September 30, December 31,
------------------ --------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Historical Consolidated
Balance Sheet data:
Current assets.......... $ 14,770 $ 11,906 $12,017 $10,089 $ 7,462 $ 6,037 $4,142
Total assets............ 21,647 14,343 14,631 12,331 9,637 7,862 5,752
Current liabilities..... 10,356 5,516 5,202 4,741 3,356 2,739 2,098
Non-current
liabilities............ 852 300 300 300
Stockholders' equity.... 10,439 8,568 9,429 7,290 5,757 4,644 3,468
</TABLE>
- - --------
(1) Includes charges in 1998 in connection with the acquisition of Digital
Equipment Corporation and the closing of certain Compaq facilities. These
charges include $3.2 billion for the write-off of purchased in-process
technology and $393 million for restructuring charges related to Compaq
employee separations and elimination of certain Compaq facilities.
(2) Includes a $208 million and a $241 million non-recurring, non-tax
deductible charge for purchased in-process technology in connection with
acquisitions in 1997 and 1995, respectively.
(3) Includes Tandem Computers Incorporated restructuring charge of $258
million in 1993.
(4) Includes a Tandem Computers Incorporated loss from discontinued operations
of $222 million in 1993.
(5) Compaq Computer Corporation announced an increase in its quarterly cash
dividends from $0.015 to $0.02 per common share payable on January 20,
1999, to shareholders of record on December 31, 1998.
Parent is subject to the informational requirements of the Exchange Act and
in accordance therewith files periodic reports and other information with the
Commission relating to its business, financial condition and other matters.
Such reports and other information are available for inspection and copying at
the offices of the Commission in the same manner as set forth with respect to
the Company in Section 8.
14
<PAGE>
10. Source and Amount of Funds.
The total amount of funds required by the Purchaser to purchase all
outstanding Shares and Shares issuable upon the exercise of all outstanding
options and warrants to purchase Shares, pursuant to the Offer and to pay fees
and expenses related to the Offer and the Merger is estimated to be
approximately $250 million. The Purchaser plans to obtain all funds needed for
the Offer and the Merger through a capital contribution that will be made by
Parent to the Purchaser. For such capital contribution, Parent plans to use
funds it has available in its cash accounts. The Purchaser has not conditioned
the Offer on obtaining financing.
11. Background of the Offer; Purpose of the Offer and the Merger; The Merger
Agreement and Certain Other Agreements.
The following description was prepared by the Purchaser and the Company.
Information about the Company was provided by the Company, and neither the
Purchaser nor Parent takes any responsibility for the accuracy or completeness
of any information regarding meetings or discussions in which Parent or its
representatives did not participate.
Background of the Offer.
On December 14, 1998, Mr. Harold F. Enright, a Vice President of one of
Parent's subsidiaries, contacted Mr. Robert McNulty, former president and
chief executive officer of the Company, to inquire as to the Company's
interest in discussing a potential alliance. At the meeting of representatives
of Parent and the Company held on December 14, 1998, Mr. McNulty and other
representatives of the Company apprised representatives of Parent of the
Company's business and recent historical performance, including matters
relating to the Company's technology, merchant relationships, competitive
position in the industry and prospects. Mr. Enright indicated that Parent was
reviewing a number of other potential opportunities, but that Parent would
consider engaging in further discussions regarding a potential alliance with
the Company.
Concurrently with the foregoing preliminary discussions with the Company,
Parent determined to retain a financial adviser to assist Parent's management
and board of directors in the analysis of potential strategic opportunities in
the electronic commerce industry. Representatives of Parent contacted
representatives of Greenhill & Co., LLC ("Greenhill"), which was formally
retained as of December 22, 1998. Over the course of the next several days,
Greenhill held discussions with Parent to review the opportunities available
to Parent.
On December 20, 1998, following various internal management meetings and
discussions with Greenhill, Parent determined to pursue further discussions
with the Company. Mr. Ward communicated Parent's decision to further pursue
discussions with the Company, and he held a meeting at the Company's offices
in Corona Del Mar to further understand the Company's business. On December
21, 1998, following the return of representatives of Parent to their offices
in Houston and internal management meetings held on that day, Parent
determined to proceed with further due diligence review of the Company. Mr.
Ward telephoned Mr. Denny to communicate Parent's intention and to further
explore whether there was a basis for a business combination of the two
companies. During that telephone conversation, Mr. Denny encouraged
representatives of Parent to visit again with Company management at the
Company's headquarters in Corona Del Mar to conduct further diligence.
Over the course of December 22 and 23, 1998, Parent conducted its diligence
review of the Company along with representatives of Greenhill, representatives
of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to Parent and other
advisors. During this review, Parent's representatives held discussions with
members of the Company's senior management relating to the Company's
management and technology, and financial and legal matters. At the conclusion
of these meetings, Mr. Ward indicated to Mr. Denny that Parent would contact
the Company following the Christmas and New Year's holidays to inform the
Company whether Parent would consider proceeding with further discussions
regarding a possible acquisition.
On January 4, 1999, following internal senior management meetings,
management of Parent determined to continue its discussions with the Company.
On January 6, the board of directors of Parent held a special meeting
15
<PAGE>
to review, with the advice and assistance of representatives of Greenhill and
other advisors, the proposed acquisition of the Company. Following discussion
of the business, technology, management and prospects of the Company, the
board of directors of Parent authorized its management to pursue a transaction
with the Company within specified parameters. Following the meeting of the
board of directors of Parent, Mr. Ward telephoned Mr. Denny to inform him of
the board's decision and to pursue further discussions.
At meetings held on January 9, 1999 and attended by Mr. Ward,
representatives of Greenhill and representatives of the Company, the parties
discussed general business terms of a possible transaction, including a
proposed transaction structure. Mr. Denny informed representatives of Parent
that, after having apprised the Company's board of directors of the
preliminary discussions with Parent, he had been given authority to proceed
with discussion of transaction terms with Parent.
Following price discussions between the parties, Mr. Ward informed Mr. Denny
that Parent was willing to move forward to negotiate a transaction only if
definitive agreements between the parties could be executed prior to the open
of the business day on Monday, January 11, 1999, and that Parent was willing
to proceed with a per share price based on an enterprise value of the Company
that Parent determined to be approximately $220 million. Mr. Denny conveyed
Parent's proposal to the Company's board of directors, which after
deliberation during the evening on January 9, 1999, determined to proceed with
the transaction on those terms. Mr. Denny then communicated the board's
decision to Mr. Ward.
Over the course of the day and evening of January 10, 1999 and prior to the
opening of business on January 11, 1999, representatives of the parties
exchanged drafts of the definitive agreements, discussed and negotiated the
terms of the Merger Agreement, the Shareholder Agreements and the Option
Agreement.
In the early morning on January 11, 1999, the Company's board of directors
held a special meeting to consider the terms of the Merger Agreement, the
Offer, the Merger, the Option Agreement and the transactions contemplated
thereby. At that meeting, the Company's board of directors reviewed the terms
of the Merger Agreement, the Offer, the Merger, the Option Agreement, and the
transactions contemplated thereby with the Company's management, its counsel
and the Company's financial advisor, Trautman Kramer & Company ("Trautman
Kramer"). At the conclusion of their presentation, representatives of Trautman
Kramer delivered their oral opinion (which was subsequently confirmed in
writing) to the Company's board of directors that, as of such date, the
consideration to be received by the shareholders of the Company pursuant to
the Offer and the Merger is fair to such shareholders, from a financial point
of view.
Immediately following the conclusion of the Company's board of directors
meeting, the parties executed the Merger Agreement, the Shareholder Agreements
and the Option Agreement. Parent and the Company issued a press release
announcing the transactions shortly before the opening of the New York Stock
Exchange on January 11, 1999.
Purpose of the Offer and the Merger.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
Parent to acquire control of, and the entire equity interest in, the Company.
The Offer is being made pursuant to the Merger Agreement and is intended to
increase the likelihood that the Merger will be effected. The purpose of the
Merger is to acquire all outstanding Shares not purchased pursuant to the
Offer. The transaction is structured as a merger in order to ensure the
acquisition by Parent of all the outstanding Shares.
If the Merger is consummated, Parent's common equity interest in the Company
would increase to 100% and Parent would be entitled to all benefits resulting
from that interest. These benefits include complete management with regard to
the future conduct of the Company's business and any increase in its value.
Similarly, Parent will also bear the risk of any losses incurred in the
operation of the Company and any decrease in the value of the Company.
16
<PAGE>
Shareholders of the Company who sell their Shares in the Offer will cease to
have any equity interest in the Company and to participate in its earnings and
any future growth. If the Merger is consummated, the shareholders will no
longer have an equity interest in the Company and instead will have only the
right to receive cash consideration pursuant to the Merger Agreement or to
exercise statutory appraisal rights under the GCL, if available. See Section
12. Similarly, the shareholders of the Company will not bear the risk of any
decrease in the value of the Company after selling their Shares in the Offer
or the subsequent Merger.
The primary benefits of the Offer and the Merger to the shareholders of the
Company are that such shareholders are being afforded an opportunity to sell
all of their Shares for cash at a price which represents a premium of
approximately 44.1% over the closing market price of the Common Stock on the
last full trading day prior to the public announcement that the Company and
Parent executed the Merger Agreement, and a more substantial premium over
recent historical trading prices.
Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
The summary is qualified in its entirety by reference to the Merger Agreement
which is incorporated herein by reference and a copy of which has been filed
with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement
may be examined and copies may be obtained at the places and in the manner set
forth in Section 8 of this Offer to Purchase. Capitalized terms used in this
Offer to Purchase and not otherwise defined shall have the meanings ascribed
to such terms in the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, the Purchaser will purchase all Shares
validly tendered pursuant to the Offer. The Merger Agreement provides that,
without the written consent of the Company, the Purchaser will not (i)
decrease the Offer Price, (ii) decrease the number of Shares sought in the
Offer (except as set forth below), (iii) impose additional conditions to the
Offer, (iv) amend any condition to the Offer described in Section 14, (v)
extend the Initial Expiration Date, provided, that if on the Initial
Expiration Date of the Offer, all conditions to the Offer shall not have been
satisfied or waived, the Purchaser, in its sole discretion, may elect to
extend the Expiration Date from time to time, or (vi) amend any other term of
the Offer in any manner adverse to any holders of Shares without the written
consent of the Company.
In the event the Minimum Condition is not satisfied on any scheduled
Expiration Date, the Purchaser may either (i) extend the Offer or (ii) amend
the Offer to provide that, in the event (X) the Minimum Condition is not
satisfied at the next scheduled Expiration Date (without giving pro forma
effect to the potential issuance of any Shares issuable upon exercise of the
Option Agreement) and (Y) the number of Shares tendered pursuant to the Offer
and not withdrawn as of such next scheduled Expiration Date is more than 50%
of the then outstanding Shares, the Purchaser shall waive the Minimum
Condition and amend the Offer to reduce the number of Shares subject to the
Offer to a number of Shares that when added to the Shares then owned by the
Purchaser will equal the Revised Minimum Number and, if a greater number of
Shares is tendered into the Offer and not withdrawn, purchase, on a pro rata
basis, the Revised Minimum Number of Shares (it being understood that the
Purchaser may, but shall not in any event be required to, accept for payment,
or pay for any Shares if less than the Revised Minimum Number of Shares are
tendered pursuant to the Offer and not withdrawn at the applicable Expiration
Date). In the event that the Purchaser purchases a number of Shares equal to
the Revised Minimum Number, without the prior written consent of the Purchaser
prior to the termination of the Merger Agreement, the Company shall take no
action whatsoever to increase the number of Shares owned by the Purchaser in
excess of the Revised Minimum Number.
The Purchaser shall, on the terms and subject to the prior satisfaction or
waiver of the conditions to the Offer, accept for payment and pay for Shares
tendered as soon as legally permitted to do so under applicable law.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, at the Effective
Time the Purchaser shall be merged with and into the Company
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and, as a result of the Merger, the separate corporate existence of the
Purchaser shall cease and the Company shall continue as the surviving
corporation (sometimes referred to as the "Surviving Corporation").
The respective obligations of Parent and the Purchaser, on the one hand, and
the Company, on the other hand, to effect the Merger are subject to the
satisfaction on or prior to the Closing Date (as defined in the Merger
Agreement) of each of the following conditions: (i) the Purchaser shall have
purchased or caused to be purchased, the Shares pursuant to the Offer, unless
such failure to purchase is a result of a breach of the Purchaser's
obligations under the Merger Agreement, (ii) the Merger Agreement shall have
been approved and adopted by the requisite vote of the holders of Shares, to
the extent required by the Company's Articles of Incorporation and the GCL, in
order to consummate the Merger; (iii) no statute, rule, regulation or order
shall have been enacted or promulgated by any United States governmental
authority which prohibits the consummation of the Merger, and there shall be
no order or injunction of a court of competent jurisdiction in effect
preventing the consummation of the Merger and (iv) the applicable waiting
period under the HSR Act shall have expired or been terminated.
At the Effective Time of the Merger (i) each issued and outstanding Share
(other than Shares that are owned by owned by Parent, the Purchaser or any
Shares which are held by shareholders properly exercising dissenters' rights
under the GCL) will be converted into the right to receive the Offer Price
paid pursuant to the Offer and (ii) each issued and outstanding share of any
class or series of common stock, par value $.01 per share, of the Purchaser
will be converted into one share of common stock of the Surviving Corporation.
The Company's Board of Directors. The Merger Agreement provides that
promptly upon the purchase of and payment for any Shares by the Purchaser
pursuant to the Offer, Parent shall be entitled to designate such number of
directors, rounded up to the next whole number, on the Company's Board of
Directors as will give Parent representation on the Board of Directors equal
to at least that number of directors which equals the product of the total
number of directors on the Company's Board of Directors (after giving effect
to the directors designated by Parent) multiplied by the percentage that the
aggregate number of Shares beneficially owned by the Purchaser or any of its
affiliates bears to the number of Shares outstanding. The Company shall
promptly secure the resignations of such number of its incumbent directors as
is necessary to enable Parent's designees to be elected to the Company's Board
of Directors, provided that (i) in the event that Parent's designees are
appointed or elected to the Company's Board of Directors, until the Effective
Time the Company's Board of Directors will have at least two directors who are
directors as of the date of the execution of the Merger Agreement and neither
of whom is an officer of the Company nor a designee, shareholder, affiliate or
associate (within the meaning of federal securities laws) of Parent (one or
more of such directors, the "Independent Directors") and (ii) if no
Independent Directors remain, the other directors will designate two persons
to fill one of the vacancies who shall not be a shareholder, affiliate or
associate of Parent or the Purchaser, such person so designated being deemed
an Independent Director. The Company's obligation to appoint Parent's
designees to the Company's Board of Directors is subject to compliance with
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Following the election of Parent's designees to the Company's Board of
Directors and prior to the Effective Time, the affirmative vote of a majority
of the Independent Directors shall be required to (i) amend or terminate the
Merger Agreement on behalf of the Company, (ii) exercise or waive any of the
Company's rights, benefits or remedies under the Merger Agreement or (iii)
take any other action by the Company's Board of Directors under or in
connection with the Merger Agreement which would materially and adversely
affect the rights of the Company's shareholders other than Parent or the
Purchaser, under the Merger Agreement; provided, further, that if there will
be no such directors, such actions may be effected by the unanimous vote of
the entire Board of Directors of the Company.
Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will,
if required by applicable law or the Company's Articles of Incorporation, in
order to consummate the Merger, duly call, give notice of, convene and hold a
special meeting of its shareholders as promptly as practicable following the
acceptance for payment and purchase of Shares by the Purchaser pursuant to the
Offer for the purpose of considering and taking
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action upon the approval of the Merger and the adoption of the Merger
Agreement. The Merger Agreement provides that the Company will, if required by
applicable law in order to consummate the Merger, prepare and file with the
Commission a preliminary proxy or information statement relating to the Merger
and the Merger Agreement and use its best efforts (i) to obtain and furnish
the information required to be included by the Commission in the Proxy
Statement (as hereinafter defined) and, after consultation with Parent, to
respond promptly to any comments made by the Commission with respect to the
preliminary Proxy Statement and cause a definitive Proxy Statement to be
mailed to its shareholders, provided that no amendment or supplement to the
Proxy Statement will be made by the Company without consultation with Parent
and its counsel and (ii) to obtain the necessary approvals of the Merger and
the Merger Agreement by its shareholders. Subject to the terms of the Merger
Agreement, the Company has agreed to include in the Proxy Statement the
recommendation of the Company's Board of Directors that shareholders of the
Company vote in favor of the approval of the Merger and the adoption of the
Merger Agreement.
The Merger Agreement provides that in the event that Parent or the Purchaser
acquires at least 90% of outstanding shares of Common Stock, pursuant to the
Offer or otherwise, Parent, the Purchaser and the Company will, at the request
of Parent and subject to the terms of the Merger Agreement, take all necessary
and appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of shareholders of the
Company, in accordance with Section 1110 of the GCL.
Options. Pursuant to the Merger Agreement, at the Effective Time, each
Company Option (as defined below), whether vested or unvested, shall be
assumed by Parent and shall be converted into an option to acquire that number
of shares of Parent Common Stock (as defined below) equal to (i) the number of
Shares subject to the Company Option immediately prior to the Effective Time,
multiplied by (ii) the Exchange Ratio (as defined below), rounded down to the
nearest whole share, at a price per Parent Common Share equal to (A) the
exercise price of the Company Option immediately prior to the Effective Time,
divided by (B) the Exchange Ratio, rounded up to the nearest whole cent. Other
than as described in the immediately preceding sentence, the Company Options
shall be subject to the same terms and conditions as applicable immediately
prior to the Effective Time. Parent shall take all action necessary for the
Parent Common Shares to rank pari passu in all respects with all other Parent
Common Shares then in issue and to be listed and issuable upon exercise of the
Company Options to be freely tradeable on the New York Stock Exchange. The
Company is required to take all necessary actions to provide that as of the
Effective Time no holder of Company Options under the Stock Plans will have
any right to receive shares of common stock of the Surviving Corporation upon
exercise of any such Company Option.
"Company Options" means those certain options to purchase Shares which have
been granted by the Company under the Company's Stock Option Plan of 1997, as
amended and the options identified in Schedule 2.4 to the Merger Agreement,
and in each case, which are outstanding at the Effective Time.
"Exchange Ratio" means the quotient of (x) the Offer Price multiplied by the
average per share closing price of the Parent Common Stock as reported on the
New York Stock Exchange on each of the ten trading days immediately preceding
the Effective Time.
Interim Operations; Covenants. Pursuant to the Merger Agreement, the Company
has agreed that prior to the Effective Time, except as (i) expressly
contemplated by the Merger Agreement, (ii) as set forth in Section 5.1 of the
Disclosure Schedule, or (iii) as agreed in writing by Parent, after the date
of the Merger Agreement, the business of the Company will be conducted in the
ordinary course and consistent with past practice, and the Company will use
its best efforts to preserve its business organization intact, keep available
the services of its current officers and employees and maintain its existing
relations with franchisees, customers, suppliers, creditors, business partners
and others having business dealings with it, to the end that the goodwill and
ongoing business of each of them shall be unimpaired at the Effective Time. In
addition, the Company has agreed that it will not: (i) amend its articles of
incorporation or by-laws or similar organizational documents; (ii) issue,
sell, transfer, pledge, dispose of or encumber any shares of any class or
series of (A) its capital stock or (B) indebtedness having general voting
rights and debt convertible into securities having such rights (such
indebtedness, "Voting
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Debt"), or (C) securities convertible into or exchangeable for, or options,
warrants, calls, commitments or rights of any kind to acquire, any shares of
any class or series of its capital stock or any Voting Debt, other than Shares
reserved for issuance on the date of the Merger Agreement pursuant to the
exercise of Company Options outstanding on the date of the Merger Agreement;
(iii) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to any shares of any class or series of
its capital stock; (iv) split, combine or reclassify any shares of any class
or series of its stock; (v) redeem, purchase or otherwise acquire directly or
indirectly any shares of any class or series of its capital stock, or any
instrument or security which consists of or includes a right to acquire such
shares; (vi) incur or modify any indebtedness or other liability, other than
in the ordinary and usual course of business and consistent with past
practice; (vii) modify, amend or terminate any of its material contracts or
waive, release or assign any material rights or claims, except in the ordinary
course of business and consistent with past practice; (viii) incur or assume
any long-term debt, or except in the ordinary course of business, incur or
assume any short-term indebtedness in amounts not consistent with past
practice; (ix) modify the terms of any indebtedness or other liability; (x)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person,
except as described in the Disclosure Schedule as being in the ordinary course
of business and consistent with past practice; (xi) make any loans, advances
or capital contributions to, or investments in, any other; (xii) enter into
any material commitment or transaction (including, but not limited to, any
capital expenditure or purchase, sale or lease of assets or real estate);
(xiii) transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any assets other than in the ordinary and usual course of business
and consistent with past practice; (xiv) except as otherwise specifically
provided in the Merger Agreement or in the Schedule 14D-9, make any change in
the compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than normal recurring
increases in wages to employees who are not officers or directors or
Affiliates in the ordinary course of business consistent with past practice)
or to Persons providing management services, or enter into or amend any
employment, severance, consulting, termination or other agreement or employee
benefit plan or make any loans to any of its officers, directors, employees,
Affiliates, agents or consultants or make any change in its existing borrowing
or lending arrangements for or on behalf of any of such Persons pursuant to an
employee benefit plan or otherwise; (xv) except as otherwise specifically
contemplated by the Merger Agreement or by the Schedule 14D-9 or as
specifically set forth in the Disclosure Schedule, pay or make any accrual or
arrangement for payment of any pension, retirement allowance or other employee
benefit pursuant to any existing plan, agreement or arrangement to any
officer, director, employee or Affiliate or pay or agree to pay or make any
accrual or arrangement for payment to any officers, directors, employees or
Affiliates of the Company of any amount relating to unused vacation days,
except payments and accruals made in the ordinary course of business
consistent with past practice; (xvi) adopt or pay, grant, issue, accelerate or
accrue salary or other payments or benefits pursuant to any pension, profit-
sharing, bonus, extra compensation, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group insurance, severance
pay, retirement or other employee benefit plan, agreement or arrangement, or
any employment or consulting agreement with or for the benefit of any
director, officer, employee, agent or consultant, whether past or present; or
amend in any material respect any such existing plan, agreement or arrangement
in a manner inconsistent with the foregoing; (xvii) permit any insurance
policy naming it as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Parent; (xviii) enter into any contract or
transaction relating to the purchase of assets other than in the ordinary
course of business consistent with prior practices; (xix) pay, repurchase,
discharge or satisfy any of its claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice, of claims, liabilities or obligations reflected
or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company; (xx) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company (other
than the Merger); (xxi) change any of the accounting methods used by it unless
required by GAAP or make any material election relating to Taxes, change any
material election relating to Taxes already made, adopt any material
accounting method relating to Taxes, change any material accounting method
relating to Taxes unless required by GAAP, enter into any closing agreement
relating to Taxes, settle any claim or assessment relating to Taxes or consent
to any claim or assessment relating to Taxes or any waiver of the statute of
limitations for any such claim or
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assessment; (xxii) take, or agree to commit to take, any action that would or
is reasonably likely to result in any of the conditions to the Offer set forth
in Annex A of the Merger Agreement or any of the conditions to the Merger set
forth in Article VI of the Merger Agreement not being satisfied, or would make
any representation or warranty of the Company contained in the Merger
Agreement inaccurate in any respect at, or as of any time prior to, the
Effective Time, or that would materially impair the ability of the Company,
Parent, Purchaser or the holders of Shares to consummate the Offer or the
Merger in accordance with the terms of the Merger Agreement or materially
delay such consummation; and (xxiii) enter into an agreement, contract,
commitment or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the foregoing.
Access; Confidentiality. Pursuant to the Merger Agreement, the Company has
agreed to afford to the officers, employees, accountants, counsel, financing
sources and other representatives of Parent, full access during the period
prior to the time the persons designated by the Purchaser have been elected
to, and shall constitute a majority of, the Company Board of Directors
pursuant to the terms of the Merger Agreement (the "Appointment Date"), to all
its properties, books, contracts, commitments and records, and, during such
period, the Company has agreed to furnish promptly to the Parent (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of the federal
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Access includes the
right to conduct such environmental studies as Parent, in its discretion,
deems appropriate. After the Appointment Date, the Company has agreed to
provide Parent and such persons as Parent shall designate with all such
information, at any time as Parent shall request. Until the Appointment Date,
unless otherwise required by law or in order to comply with disclosure
requirements applicable to the Offer Documents or the Proxy Statement, Parent
has agreed to hold any such information which is nonpublic in confidence in
accordance with the provisions of a confidentiality agreement.
Reasonable Best Efforts. Prior to the Closing, upon the terms and subject to
the conditions of the Merger Agreement, Parent, Purchaser and the Company have
agreed to use their respective reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable (subject to any applicable laws) to consummate and make
effective the Merger and the other Transactions as promptly as practicable
including, but not limited to (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate the Merger and
the other Transactions and the taking of such actions as are necessary to
obtain any requisite approvals, consents, orders, exemptions or waivers by any
third party or Governmental Entity, and (ii) the satisfaction of the other
parties' conditions to Closing. In addition, each party to the Merger
Agreement has agreed not to take any action after the date of the Merger
Agreement that would reasonably be expected to materially delay the obtaining
of, or result in not obtaining, any permission, approval or consent from any
Governmental Entity necessary to be obtained prior to Closing. Notwithstanding
the foregoing, or any other covenant contained in the Merger Agreement, in
connection with the receipt of any necessary approvals under the HSR Act, the
Company has agreed that it will not be entitled to divest or hold separate or
otherwise take or commit to take any action that limits Parent's or
Purchaser's freedom of action with respect of, or their ability to retain, the
Company or any material portions thereof or any of the businesses, product
lines, properties or assets of the Company, without Parent's prior written
consent.
Prior to the Closing, each party has agreed to promptly consult with the
other parties to the Merger Agreement with respect to, provide any necessary
information with respect to, and provide the other parties (or their
respective counsel) with copies of, all filings made by such party with any
Governmental Entity or any other information supplied by such party to a
Governmental Entity in connection with the Merger Agreement, the Merger and
the other Transactions. Each party to the Merger Agreement has agreed to
promptly inform the other parties of any communication from any Governmental
Entity regarding any of the Transactions. If any party to the Merger Agreement
or Affiliate thereof receives a request for additional information or
documentary material from any such Governmental Entity with respect to any of
the Transactions, then such party has agreed to endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after
consultation with the other parties, an appropriate response in compliance
with such request. To the extent that transfers,
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amendments or modifications of permits (including environmental permits) are
required as a result of the execution of the Merger Agreement or consummation
of any of the Transactions, the Company has agreed to use its best efforts to
effect such transfers, amendments or modifications.
Pursuant to the Merger Agreement, the Company and Parent have agreed to file
as soon as practicable notifications under the HSR Act and respond as promptly
as practicable to any inquiries received from the Federal Trade Commission and
the Antitrust Division of the Department of Justice for additional information
or documentation and respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection with antitrust matters. Concurrently with the filing of
notifications under the HSR Act or as soon thereafter as practicable, each of
the Company and Parent has agreed to request early termination of the HSR Act
waiting period.
Notwithstanding the foregoing, nothing in the Merger Agreement is to be
deemed to require Parent or Purchaser to commence any litigation against any
entity in order to facilitate the consummation of any of the Transactions or
to defend against any litigation brought by any third party or Governmental
Entity seeking to prevent the consummation of any of the Transactions.
No Solicitation of Competing Transaction. Pursuant to the Merger Agreement,
the Company and its Affiliates have agreed not to (and the Company will cause
the officers, directors, employees, representatives and agents of the Company,
and each Affiliate of the Company, including, but not limited to, investment
bankers, attorneys and accountants, not to), directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with, or provide any information to, any Person or group (other than Parent,
any of its Affiliates or representatives) concerning any Acquisition Proposal
(as defined below), except that nothing contained in any provision of the
Merger Agreement shall prohibit the Company or the Company's Board from (i)
taking and disclosing to the Company's shareholders a position with respect to
a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act, or (ii) making such disclosure to the
Company's shareholders as, in the good faith judgment of the Board, after
receiving advice from outside counsel, is required under applicable law,
provided that the Company may not, except as provided for under the Merger
Agreement, withdraw or modify, or propose to withdraw or modify, its position
with respect to the Offer or the Merger or approve or recommend, or propose to
approve or recommend any Acquisition Proposal, or enter into any agreement
with respect to any Acquisition Proposal. After the date of the Merger
Agreement, the Company will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing.
An "Acquisition Proposal" means any proposal or offer to acquire all or a
substantial part of the business or properties of the Company or any capital
stock of the Company, whether by merger, tender offer, exchange offer, sale of
assets or similar transactions involving the Company, division or operating or
principal business unit of the Company.
Notwithstanding the foregoing, prior to the time of acceptance of Shares for
payment pursuant to the Offer, the Company may furnish information concerning
its business, properties or assets to any corporation, partnership, person or
other entity or group pursuant to appropriate confidentiality agreements, and
may negotiate and participate in discussions and negotiations with such entity
or group concerning an Acquisition Proposal if: (i) such entity or group has
on an unsolicited basis submitted a bona fide written proposal to the Company
Board of Directors relating to any such transaction which the Board determines
in good faith, represents a superior transaction to the Offer and the Merger
and which is not subject to the receipt of any necessary financing; and (ii)
in the opinion of the Company Board of Directors such action is required to
discharge the Board's fiduciary duties to the Company's shareholders under
applicable law, determined only after receipt of (A) a written opinion from
the Company's investment banking firm that the Acquisition Proposal is
superior, from a financial point of view, to the Offer and the Merger, and (B)
a written opinion from independent legal counsel to the Company that the
failure to provide such information or access or to engage in such discussions
or negotiations would cause the Board of Directors to violate its fiduciary
duties to the Company's shareholders under applicable law (an Acquisition
Proposal meeting the foregoing criteria, a "Superior Proposal") .
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Pursuant to the Merger Agreement, the Company has agreed to immediately
notify Parent of the existence of any proposal, discussion, negotiation or
inquiry received by the Company, and the Company has agreed to immediately
communicate to Parent the terms of any proposal, discussion, negotiation or
inquiry which it may receive (and will immediately provide to Parent copies of
any written materials received by the Company in connection with such
proposal, discussion, negotiation or inquiry) and the identity of the party
making such proposal or inquiry or engaging in such discussion or negotiation.
The Company has further agreed to promptly provide to Parent any non-public
information concerning the Company provided to any other party which was not
previously provided to Parent.
Except as set forth in the following sentence, the Company Board of
Directors and any committee thereof have agreed not to (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Purchaser,
the approval or recommendation by such Board of Directors or any such
committee of the Offer, the Merger Agreement or the Merger, (ii) approve or
recommend or propose to approve or recommend, any Acquisition Proposal or
(iii) enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, prior to the time of acceptance for payment of
Shares pursuant to the Offer, the Company Board of Directors may withdraw or
modify its approval or recommendation of the Offer, the Merger Agreement or
the Merger, approve or recommend a Superior Proposal, or enter into an
agreement with respect to a Superior Proposal, in each case at any time after
the fifth business day following Parent's receipt of written notice from the
Company advising Parent that the Board of Directors has received a Superior
Proposal which it intends to accept, specifying the material terms and
conditions of such Superior Proposal, and identifying the person making such
Superior Proposal, but only if the Company has caused its financial and legal
advisors to negotiate with Parent to make such adjustments in the terms and
conditions of the Merger Agreement as would enable the Company to proceed with
the transactions contemplated therein on such adjusted terms.
Publicity. The parties to the Merger Agreement have agreed that the initial
press release with respect to the execution of the Merger Agreement shall be a
joint press release acceptable to Parent and the Company. Thereafter, until
the Appointment Date, or the date the Transactions are terminated or abandoned
pursuant to Article VII of the Merger Agreement, the Company and Parent have
agreed to, and will cause and each of their respective Affiliates to, issue or
cause the publication of any press release or other announcement with respect
to the Merger, the Merger Agreement or the other Transactions without prior
consultation with the other party, except as may be required by law or by any
listing agreement with a national securities exchange or trading market.
Notification of Certain Matters. Pursuant to the Merger Agreement, the
Company has agreed to give prompt notice to Parent of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty contained in the Merger Agreement to be
untrue or inaccurate in any material respect at or prior to the Effective
Time, and (ii) any material failure of the Company to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under the Merger Agreement; provided, however, that the delivery of any notice
pursuant to the Merger Agreement will not limit or otherwise affect the
remedies available under the Merger Agreement to the party receiving such
notice.
Directors' and Officers' Insurance and Indemnification. Pursuant to the
Merger Agreement, for six years after the Effective Time, the Surviving
Corporation (or any successor to the Surviving Corporation) has agreed to
indemnify, defend and hold harmless each present and former officer and
director of the Company as of the date of the Merger Agreement and each person
who became any of the foregoing prior to the Effective Time (each such person
an "Indemnified Party") against all losses, claims, damages, liabilities,
costs, fees and expenses, including reasonable fees and disbursements of
counsel and judgments, fines, losses, claims, liabilities and amounts paid in
settlement (provided that any such settlement is effected with the written
consent of the Parent or the Surviving Corporation) arising out of actions or
omissions occurring at or prior to the Effective Time to the full extent
required under applicable California law, the terms of the Company's
certificate of incorporation or the by-laws, as in effect at the date of the
Merger Agreement; provided that, in the event any
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claim or claims are asserted or made within such six-year period, all rights
to indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims.
Parent or the Surviving Corporation have agreed to maintain the Company's
existing officers' and directors' liability insurance for a period of not less
than three years after the Effective Time; provided, however, that the Parent
may substitute therefor policies of substantially equivalent coverage and
amounts containing terms no less favorable to such former directors or
officers; provided, further, that in no event is the Company required to pay
aggregate premiums for insurance under the Merger Agreement in excess of 150%
of the aggregate premiums paid by the Company in 1998 on an annualized basis
for such purpose; and provided, further, that if the Parent or the Surviving
Corporation is unable to obtain the amount of insurance required by the Merger
Agreement for such aggregate premium, Parent or the Surviving Corporation
shall obtain as much insurance as can be obtained for an annual premium not in
excess of 150% of the aggregate premiums paid by the Company in 1998 on an
annualized basis for such purpose.
State Takeover Laws. The Company has agreed, upon the request of the
Purchaser, to take all commercially reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the
transactions contemplated by the Merger Agreement and the Option Agreement,
including the Offer and the Merger, and the Shareholder Agreements, of any
state takeover law.
Purchaser Compliance. Parent has agreed to cause Purchaser to comply with
all of its obligations under or related to the Merger Agreement.
Cooperation. If Parent and Purchaser have not consummated the Offer within
26 business days following the date of the Merger Agreement, Parent has agreed
to cooperate with the Company to obtain financing for the Company's working
capital requirements.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and the
Purchaser with respect to, among other things, its organization and
qualification; capitalization; authority and corporate action relative to the
Transactions; consents and approvals; public filings and financial statements;
books and records; liabilities; accounts receivable; inventory; conduct of
business; litigation, employee benefit plans; tax matters and government
benefits; property title; plant and equipment; leases; environmental matters;
bank accounts; intellectual property; employment matters; legal compliance;
products liability; contractual matters; customers and suppliers; orders,
commitments and returns; insurance matters; labor matters; consents;
information contained in the Schedule 14D-9; information contained in the
Proxy Statement; opinion of financial advisor; absence of questionable
payments; personnel matters; insider interests; brokers or finders and full
disclosure.
Termination; Fees. The Transactions may be terminated or abandoned at any
time prior to the Effective Time, whether before or after shareholder approval
thereof:
a. Subject to the terms and provisions of the Merger Agreement, by the
mutual written consent of Parent and the Company; or
b. By either of the Company or Parent if (i) the Offer shall have expired
without any Shares being purchased pursuant thereto, or (ii) Purchaser has
not accepted for payment any Shares pursuant to the Offer by May 15, 1999;
provided, however, that the right to terminate the Merger Agreement
pursuant to the terms thereof shall not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of Purchaser to purchase the Shares
pursuant to the Offer on or prior to such date; or (iii) if any
Governmental Entity shall have issued an order, decree or ruling or taken
any other action (which order, decree, ruling or other action the parties
hereto shall use their reasonable efforts to lift), which permanently
restrains, enjoins or otherwise prohibits the acceptance for payment of, or
payment for, Shares pursuant to the Offer or the Merger and such order,
decree, ruling or other action shall have become final and non-appealable;
or
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c. By the Company (i) if Parent, Purchaser or any of their Affiliates
shall have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer;
provided, that the Company may not terminate the Merger Agreement pursuant
to its terms if the Company is at such time in material breach of its
obligations under the Merger Agreement; (ii) in connection with entering
into a definitive agreement as permitted by the provisions of the Merger
Agreement, provided the Company has complied with all provisions thereof,
including the notice provisions contained therein, and that the Company
makes simultaneous payment to Parent of funds as required by the provisions
of the Merger Agreement; or (iii) if Parent or Purchaser has breached in
any material respect any of its respective representations, warranties,
covenants or other agreements contained in the Merger Agreement, which
breach cannot be or has not been cured within 30 days after the giving of
written notice by the Company to Parent or Purchaser, as applicable; or
d. By Parent (i) if, due to an occurrence, not involving a breach by
Parent or Purchaser of their obligations under the Merger Agreement, which
makes it impossible to satisfy any of the conditions set forth in Annex A
thereto, Parent, Purchaser, or any of their Affiliates shall have failed to
commence the Offer on or prior to the fifth business day following the date
of the initial public announcement of the Offer; (ii) if, prior to the
purchase of Shares by Purchaser pursuant to the Offer, the Company Board of
Directors has (A) withdrawn, modified or changed in a manner adverse to
Parent or Purchaser its approval or recommendation of the Offer, the Merger
Agreement or the Merger, (B) recommended an Acquisition Proposal, (C)
executed an agreement in principle or definitive agreement relating to an
Acquisition Proposal or similar business combination with a person or
entity other than Parent, Purchaser or their Affiliates, or (D) exercised
its rights pursuant to Merger Agreement with respect to an Acquisition
Proposal, and, directly or through its representatives, continued
discussions with any third party concerning an Acquisition Proposal for
more than ten business days after the date of receipt of such Acquisition
Proposal; (iii) if prior to the purchase of Shares pursuant to the Offer,
the Company shall have breached any representation, warranty, covenant or
other agreement contained in the Merger Agreement which (A) would give rise
to the failure of a condition set forth in paragraph (f) or (g) of Annex A
thereto, and (B) cannot be or has not been cured within 30 days after the
giving of written notice to the Company; or (iv) if the Disclosure Schedule
of the Company which is to be delivered to Parent pursuant to the Merger
Agreement following the Execution Date reveals matters or information that
are material and adverse to the Company and the Company shall not have
disclosed such matters or information to Parent on or prior to the date of
the Merger Agreement.
In the event of the termination or abandonment of the Transactions by any
party to the Merger Agreement pursuant to the terms of the Merger Agreement,
written notice of such termination or abandonment must be given to the other
party or parties specifying the provision of the Merger Agreement pursuant to
which such termination or abandonment of the Transactions is made, and there
will be no liability on the part of the Parent or the Company except (A) for
fraud or for breach of the Merger Agreement prior to such termination or
abandonment of the Transactions and (B) as specified under the Merger
Agreement.
Except as specifically provided to the contrary in the Merger Agreement, all
costs and expenses incurred in connection with the Merger Agreement and the
consummation of the Transactions shall be paid by the party incurring such
expenses; provided; that if any legal action is instituted to enforce or
interpret the terms of the Merger Agreement, the prevailing party in such
action shall be entitled, in addition to any other relief to which the party
is entitled, to reimbursement of its actual attorneys fees.
If (i) the Company enters into an agreement which accepts or implements a
Superior Proposal; (ii) either the Company or Parent terminates or abandons
the Transactions pursuant to Section 7.1(b)(i) of the Merger Agreement and
prior thereto there shall have been publicly announced another Acquisition
Proposal; (iii) the Company has terminated or abandoned the Transactions
pursuant to Section 7.1(c)(ii) of the Merger Agreement; or (iv) Parent has
terminated or abandoned the Transactions pursuant to Section 7.1(d)(ii) or
(iv) of the Merger Agreement, then the Company shall pay to Parent an amount
equal to the Termination Fee of $9,000,000 plus
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an amount equal to Parent's actual and reasonably documented out-of-pocket
fees and expenses incurred by Parent and Purchaser in connection with the
Offer, the Merger, the Merger Agreement and the consummation of the
Transactions. The Termination Fee and Parent's good faith estimate of its
expenses shall be paid in same day funds concurrently with the execution of an
agreement referred to in section (i) above or any termination or abandonment
referred to in subsections (ii), (iii) or (iv) above, whichever shall first
occur, together with delivery of a written acknowledgment by the Company of
its obligation to reimburse Parent for its actual expenses in excess of such
estimated expense payment.
Shareholder Agreements
The following is a summary of certain provisions of the Shareholder
Agreements, dated January 11, 1999 between Parent and the shareholders
identified in such Shareholder Agreements. The following summary of the
Shareholder Agreements does not purport to be complete and is qualified by
reference to the text of the Shareholder Agreements, copies of which are filed
as Exhibits (c)(2) through (c)(12) hereto and incorporated herein by
reference.
As a condition and inducement to Parent and the Purchaser to enter into the
Merger Agreement and incurring the liabilities therein, certain shareholders
of the Company (each a "Shareholder") who have voting power and dispositive
power with respect to an aggregate of 1,405,475 Shares outstanding and options
and warrants exercisable for 2,705,001 Shares as of January 11, 1999
concurrently with the execution and delivery of the Merger Agreement have
entered into the Shareholder Agreements. The Shareholders are Robert McNulty,
Paul Hill, Ed Bradley, Mark Winkler, Kristine Webster, John Markley, Frank
Denny, Pat Demicco, Randy Read, Cyber Depot, a corporation wholly owned by Mr.
McNulty, and Kipling Isle, a corporation wholly owned by Paul Hill. Pursuant
to the Shareholder Agreements, each of the Shareholders has agreed to validly
tender, in accordance with the terms of the Offer promptly, all Shares subject
to the Shareholder Agreements. Each Shareholder agreed not to withdraw his
Shares so tendered unless the Offer is terminated or expired. Each of the
Shareholders has granted Parent an irrevocable proxy with respect to the
voting of such Shares in favor of the Merger, which proxy will terminate in
the event that the Purchaser waives the Minimum Condition and accepts for
payment the Revised Number of Shares.
Each of the Shareholders has agreed that, prior to the termination of the
Shareholder Agreements pursuant to their terms, he or she will not (i)
transfer, or consent to the transfer, of any or all of the Shares or any
interest therein; (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of the Shares or any
interest therein; (iii) grant any proxy, power-of-attorney or other
authorization in or with respect to the Shares; (iv) deposit the Shares into a
voting trust or enter into a voting agreement or arrangement with respect to
the Shares or (v) take any other action that would in any way restrict, limit
or interfere with the performance of the Shareholder's obligations under the
Shareholder Agreements or the Merger Agreement.
The Shareholder Agreements, and all rights and obligations of the parties
thereto, shall terminate immediately upon the earlier of (i) six months
following the termination of the Merger Agreement in accordance with its terms
or (ii) the Effective Time.
In addition, the Shareholder Agreement with each of Robert McNulty, Mark
Winkler, Frank Denny and Pat Demicco provides for certain non-competition and
non-disclosure restrictions. Pursuant to these provisions, each such
shareholder is prohibited, for a period of eighteen months following the
Effective Time, from: (a) engaging in any business or activity competitive in
any material manner with the business of retail sales on or through the
Internet (the "Business"); (b) meaningfully assisting any business or activity
competitive in any material manner with the Business; (c) taking any action
with respect to the Business to solicit or divert any business (or potential
business) or clients or customers (or potential clients or potential
customers) away from Parent or any Affiliate; (d) inducing customers,
potential customers, clients, potential clients, suppliers, agents or other
persons under contract or otherwise associated or doing business with respect
to the Business with Parent or any Affiliate to terminate, reduce or alter any
such association or business with respect to the Business with or from Parent
or
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any Affiliate; and (e) knowingly inducing any person in the employment of
Parent or any Affiliate in the Business to (i) terminate such employment, (ii)
with respect to the Business, interfere with the customers, suppliers, or
clients of Parent or any Affiliate in any manner or the business of Parent or
any Affiliate in any manner. In addition, each such shareholder agreed not to
disclose to any person, or use or otherwise exploit for his or her own benefit
or for the benefit of any person, other than Parent and/or its Affiliates, any
confidential information or trade secrets (other than any of the foregoing
which becomes public information without any breach of the Shareholder
Agreement by such shareholder).
Option Agreement
The following is a summary of certain provisions of the Option Agreement,
dated January 11, 1999 between Parent and the Company. The following summary
of the Option Agreement does not purport to be complete and is qualified by
reference to the text of the Option Agreement, a copy of which is filed as
Exhibit (c)(13) hereto and incorporated herein by reference. Capitalized terms
used in the following summary but not otherwise defined shall have the
meanings described to them in the Option Agreement.
Pursuant to the Option Agreement, the Company granted to the Purchaser the
Stock Option to purchase the Option Shares at the Option Price, subject to the
terms and conditions set forth in the Option Agreement; provided, however,
that the Stock Option will not be exercisable if the number of shares subject
thereto exceeds the number of authorized shares available for issuance.
The Option Agreement provides that, subject to the conditions therein and
any additional requirements of law, the Stock Option may be exercised by the
Purchaser, in whole but not in part, at any one time after the occurrence of a
Top-up Exercise Event (as defined below) and prior to the Termination Date (as
defined below). For the purpose of the Option Agreement, a "Top-up Exercise
Event" would occur upon the Purchaser's acceptance for payment pursuant to the
Offer of shares of Common Stock constituting more than 50% but less than 90%
of the shares of Common Stock then outstanding, and the Termination Date would
occur upon the first to occur of any of the following: (i) the Effective Time;
(ii) the date which is ten (10) business days after the occurrence of a Top-up
Exercise Event; (iii) the termination of the Merger Agreement and (iv) the
date on which the Purchaser waives the Minimum Condition and accepts for
payment the Revised Minimum Number of Shares.
Pursuant to the Option Agreement, the Company granted to Parent an
irrevocable option (the "Topping Fee Option") to purchase, at the Offer Price,
a number of shares of Common Stock (the "Topping Fee Option Shares") equal to
the number of authorized shares of Common Stock available for issuance (as
adjusted to reflect certain changes in the Company's capitalization occurring
after the date of the Option Agreement). The Topping Fee Option expires on the
earliest to occur of: (i) the Effective Time, and (ii) six (6) months after
any termination of the Merger Agreement pursuant to Article VII thereof (the
"Topping Fee Termination Date"); provided, however, that the Topping Fee
Option shall not expire if the Parent has given notice that it wishes to
exercise all or any part of the Topping Fee Option prior to the Topping Fee
Termination Date.
The Option Agreement provides that, subject to the conditions therein and
any additional requirements of law, the Topping Fee Option may be exercised by
the Parent (or its designee), in whole or in part, if on or after the date of
the Option Agreement: (a) any corporation, partnership, individual or other
entity or "person" (other than Parent or any of its affiliates (a "Third
Party"), shall have: (i) commenced a bona fide tender offer or exchange offer
for any shares of Common Stock of the Company, the consummation of which would
result in "beneficial ownership" (as defined under the Exchange Act) by such
Third Party (together with all such Third Party's affiliates and "associates"
(as such term is defined in the Exchange Act)) of 15% or more of the then
outstanding voting equity of the Company (either on a primary or a fully
diluted basis); (ii) acquired beneficial ownership of shares of Common Stock
of the Company which, when aggregated with any shares of Company Stock already
owned by such Third Party, its affiliates and associates, would result in the
aggregate beneficial ownership by such Third Party its affiliates and
associates of 15% or more of the then outstanding voting equity of the Company
(either on a primary or a fully diluted basis), provided, however, that "Third
Party" for purposes of this clause (ii) shall not include any corporation,
partnership, person or other entity or group which beneficially
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owns more than 15% of the outstanding voting equity of the Company (either on
a primary or a fully diluted basis) as of the date of the Option Agreement and
that does not, after the date thereof, increase such ownership percentage by
more than an additional 1% of the outstanding voting equity of the Company
(either on a primary or a fully diluted basis); (iii) solicited "proxies" in a
"solicitation" subject to the proxy rules under the Exchange Act or executed
any written consent with respect to, or become a "participant" in, any
"solicitation" (as such terms are defined in Regulation 14A under the Exchange
Act), in each case with respect to the Common Stock of the Company; or (b) any
of the events described in Section 7.1(d)(ii) or (d)(iii) of the Merger
Agreement that would allow Parent to terminate the Merger Agreement has
occurred (but without the necessity of Parent having terminated the Merger
Agreement).
The Option Agreement provides that the obligation of the Company to deliver
Option Shares or Topping Fee Option Shares upon the exercise of the Stock
Option or the Topping Fee Option, as the case may be, is subject to the
following conditions: (i) all waiting periods, if any, under the HSR Act
applicable to the issuance of the Option Shares shall have expired or have
been terminated and (ii) there shall be no preliminary or permanent injunction
or other final, non-appealable judgment by a court of competent jurisdiction
preventing or prohibiting the exercise of the Stock Option or the delivery of
the Option Shares in respect of such exercise.
12. Plans for the Company; Other Matters.
Plans for the Company. In light of Parent's electronic commerce strategies
as they may develop in the future, Parent intends to conduct a detailed review
of the Company and its assets, corporate structure, dividend policy,
capitalization, operations, properties, policies, management and personnel and
will consider, subject to the terms of the Merger Agreement, what, if any,
changes would be desirable in light of the circumstances which exist upon
completion of the Offer. Such changes could include changes in the Company's
business, corporate structure, certificate of incorporation, by-laws,
capitalization, Board of Directors, management or dividend policy, although,
except as disclosed in this Offer to Purchase, Parent has no current plans
with respect to any of such matters. The Merger Agreement provides that,
promptly upon the purchase of and payment for any Shares by the Purchaser
pursuant to the Offer, and from time to time thereafter as Shares are acquired
by the Purchaser, Parent has the right to designate such number of directors,
rounded up to the next whole number, on the Company's Board of Directors as is
equal to the product of the total number of directors on the Company's Board
of Directors (giving effect to the directors designated by Parent) multiplied
by the percentage that the number of Shares beneficially owned by the
Purchaser or any affiliate of the Purchaser bears to the total number of
Shares then outstanding. See Section 11. The Merger Agreement provides that
the directors of the Purchaser and the officers of the Company at the
Effective Time of the Merger will, from and after the Effective Time, be the
initial directors and officers, respectively, of the Surviving Corporation.
Except as disclosed in this Offer to Purchase, neither Parent nor the
Purchaser has any present plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, relocation of operations, or sale or transfer of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's corporate structure, business or composition of its management
or personnel.
Other Matters
Shareholder Approval. Under the GCL, the approval of the Board of Directors
of the Company and the affirmative vote of the holders of a majority of the
outstanding Shares are required to adopt and approve the Merger Agreement and
the transactions contemplated thereby. The Company has represented in the
Merger Agreement that the execution and delivery of the Merger Agreement by
the Company and the consummation by the Company of the transactions
contemplated by the Merger Agreement, the Shareholder Agreements and the
Option Agreement have been duly authorized by all necessary corporate action
on the part of the Company, subject to the approval of the Merger by the
Company's shareholders in accordance with the GCL. In addition, the Company
has represented that the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is the only vote of the holders of any
class or series of the Company's capital stock which is necessary to approve
the Merger Agreement and the transactions contemplated thereby, including the
Merger.
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Therefore, unless the Merger is consummated pursuant to the short-form merger
provisions under the GCL described below (in which case no further corporate
action by the shareholders of the Company will be required to complete the
Merger), the only remaining required corporate action of the Company will be
the approval of the Merger Agreement and the transactions contemplated thereby
by the affirmative vote of the holders of a majority of the shares of Common
Stock. The Merger Agreement provides that Parent will vote, or cause to be
voted, all of the Shares then owned by Parent, the Purchaser or any of
Parent's other subsidiaries and affiliates in favor of the approval of the
Merger and the adoption of the Merger Agreement. In the event that the Minimum
Condition is satisfied, the Purchaser will have sufficient voting power to
cause the approval of the Merger Agreement and the transactions contemplated
thereby without the affirmative vote of any other shareholders of the Company.
Short-Form Merger. Section 1110 of the GCL provides that, if the parent
corporation owns at least 90% of the outstanding shares of each class of the
subsidiary corporation, the merger into the subsidiary corporation of the
parent corporation may be effected by a resolution or plan of Merger adopted
and approved by the board of directors of the parent corporation and the
appropriate filings with the California Secretary of State, without any action
or vote on the part of the shareholders of the subsidiary corporation (a
"short-form merger"). Under the GCL, if the Purchaser acquires, pursuant to
the Offer, the Stock Option or otherwise, at least 90% of the outstanding
Shares, the Purchaser will be able to effect the Merger without a vote of the
shareholders of the Company. In such event, Parent, the Purchaser and the
Company have agreed in the Merger Agreement to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of the Company's
shareholders. Under the GCL, the Merger may not be accomplished for cash paid
to the Company's shareholders if the Purchaser owns, directly or indirectly,
more than 50% but less than 90% of the then outstanding Shares unless either
all the shareholders consent or the Commissioner of Corporations of the State
of California, approves, after a hearing, the terms and conditions of the
Merger and the fairness thereof. If such shareholder consent or Commissioner
of Corporations approval is not obtained, the GCL requires that the
consideration received in the Merger consist only of non-redeemable common
stock of Parent. The purpose of the Offer is to obtain 90% or more of the
Shares and to enable Parent and the Purchaser to acquire all of the equity of
the Company.
In the event that less than 90% of the Shares then outstanding are tendered
pursuant to the Offer on the Initial Expiration Date, the Purchaser is
required to extend the Offer and may waive the Minimum Condition and amend the
Offer to reduce the number of Shares subject to the Offer to the Revised
Minimum Number and, if a greater number of Shares is tendered into the Offer
and not withdrawn, purchase on a pro rata basis, the Revised Minimum Number of
Shares (it being understood that the Purchaser may, but shall not in any event
be required to accept for payment, or pay for, any Shares if less than the
Revised Minimum Number of Shares are tendered pursuant to the Offer and not
withdrawn at the applicable expiration date of the Offer). The Purchaser would
thus own upon consummation of the Offer 49.9999% of the Shares then
outstanding and would thereafter solicit the approval of the Merger and the
Merger Agreement by a vote of the shareholders of the Company. The Purchaser
is required to effect a short-form merger as soon as practicable if permitted
to do so under the GCL.
Dissenters' Rights. Holders of the Shares do not have dissenters' rights as
a result of the Offer. However, if the Merger is consummated, holders of the
Shares at the Effective Time, by complying with the provisions of Chapter 13
of the GCL, may have certain rights to dissent and to require the Company to
purchase their Shares for cash at "fair market value." In general, holders of
Shares will be entitled to exercise dissenters' rights under the GCL only if
the holders of five percent or more of the outstanding Shares properly file
demands for payment or if the Shares held by such holders are subject to any
restriction on transfer imposed by the Company or any law or regulation
("Restricted Shares"). Accordingly, if any holder of Restricted Shares and, if
the holders of five percent or more of the Shares properly file demands for
payment, all other such holders who fully comply with all other applicable
provisions of Chapter 13 of the GCL will be entitled to require the Company to
purchase their Shares for cash at their fair market value if the Merger is
consummated. In addition, if immediately prior to the Effective Time, the
Shares are not listed on a national securities exchange or on the list of OTC
margin stocks
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issued by the Federal Reserve Board, holders of Shares may likewise exercise
their dissenters' rights as to any or all of their Shares entitled to such
rights. If the statutory procedures under the GCL relating to dissenters'
rights were complied with, such rights could lead to a judicial determination
of the fair market value of the Shares. The "fair market value" would be
determined as of the day before the first announcement of the terms of the
Merger, excluding any appreciation or depreciation in consequence of the
Merger. The value so determined could be more or less than the Merger
Consideration.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE
PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO
THE APPLICABLE PROVISIONS OF THE GCL.
The foregoing description of the GCL, including the descriptions of Chapter
13, is not necessarily complete and is qualified in its entirety by reference
to the GCL.
Rule 13e-3. The Merger would have to comply with any applicable Federal law
operative at the time. Rule 13e-3 under the Exchange Act is applicable to
certain "going private" transactions; however, the Purchaser believes that
Rule 13e-3 will not be applicable to the Merger because it is anticipated that
the Merger will be effected within one year following the consummation of the
Offer. If Rule 13e-3 were applicable to the Merger, it would require, among
other things, that certain financial information concerning the Company, and
certain information relating to the fairness of the proposed transaction and
the consideration offered to minority shareholders in such a transaction, be
filed with the Commission and disclosed to minority shareholders prior to
consummation of the transaction.
13. Dividends and Distributions.
The Merger Agreement provides that the Company shall not: (i) declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock; (ii) issue, sell, pledge, dispose
of or encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class of the Company,
other than Shares reserved for issuance on the date of the Merger Agreement
pursuant to the exercise of Company Options (as defined in the Merger
Agreement); or (iii) redeem, purchase or otherwise acquire any shares of any
class or series of its capital stock.
14. Conditions of the Offer.
Notwithstanding any other provisions of the Offer, the Purchaser is not
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-l(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and may delay
the acceptance for payment of or, subject to the restriction referred to
above, the payment for, any tendered Shares unless the Minimum Condition has
been satisfied; provided, however, that the Minimum Condition must be waived
by the Purchaser and the Revised Minimum Number substituted therefor as
contemplated, and to the extent required, by Section 1.1(d) of the Merger
Agreement. Furthermore, notwithstanding any other provisions of the Offer, the
Purchaser is not required to accept for payment or pay for any tendered Shares
if, at the scheduled expiration date, (i) any applicable waiting period under
the HSR Act has not expired or terminated prior to termination of the Offer,
or (ii) any of the following events shall have occurred and be continuing:
a. there shall be threatened or pending any suit, action or proceeding by
any Governmental Entity (as defined in the Merger Agreement) (i) seeking to
prohibit or impose any material limitations on Parent's or Purchaser's
ownership or operation (or that of any of their respective subsidiaries or
affiliates) of all or a material portion of their or the Company's
businesses or assets, or to compel Parent or Purchaser or their respective
subsidiaries and affiliates to dispose of or hold separate any material
portion of the business or
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assets of the Company or Parent and their respective subsidiaries, in each
case taken as a whole, (ii) challenging the acquisition by Parent or
Purchaser of any Shares under the Offer or pursuant to the Stock Option
Agreement or the Shareholder Agreements, seeking to restrain or prohibit
the making or consummation of the Offer or the Merger or the performance of
any of the other transactions contemplated by the Merger Agreement, the
Stock Option Agreement or the Shareholder Agreements, or seeking to obtain
from the Company, Parent or Purchaser any damages that are material in
relation to the Company taken as a whole, (iii) seeking to impose material
limitations on the ability of Purchaser, or rendering Purchaser unable, to
accept for payment, pay for or purchase some or all of the Shares pursuant
to the Offer and the Merger, (iv) seeking to impose material limitations on
the ability of Purchaser or Parent effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to vote
the Shares purchased by it on all matters properly presented to the
Company's shareholders, or (v) which otherwise is reasonably likely to have
a material adverse affect on the financial condition, businesses,
operations, properties (including intangible properties), results of
operations, assets or prospects of the Company, or on the ability of the
Company to consummate the Offer or the Merger, or to perform any of their
obligations under the Merger Agreement or the Stock Option Agreement; or
b. there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated, or deemed applicable to
the Offer or the Merger or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger
of applicable waiting periods under the HSR Act, that is likely to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (v) of paragraph a. above; or
c. there shall have occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the New York Stock Exchange, in the
Nasdaq National Market System, for a period in excess of three hours
(excluding suspensions or limitations resulting solely from physical damage
or interference with such exchanges not related to market conditions), (ii)
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) any
limitation (whether or not mandatory) by any United States governmental
authority on the extension of credit by banks or other financial
institutions, (v) any decline in either the Dow Jones Industrial Average or
the Standard & Poor's Index of 500 Industrial Companies by an amount in
excess of 15% measured from the close of business on the date of the Merger
Agreement, (vi) a change in general financial bank or capital market
conditions which materially or adversely affects the ability of financial
institutions in the United States to extend credit or syndicate loans, or
(vii) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof; or
d. there shall have occurred any material adverse change (or any
development that, insofar as reasonably can be foreseen, is reasonably
likely to result in any material adverse change) in the consolidated
financial condition, businesses, operations, properties (including
intangible properties), results of operations, assets or prospects of the
Company, or in the ability of the Company to consummate the Offer or the
Merger, or to perform any of their obligations under the Merger Agreement
or the Stock Option Agreement; or
e. the Company Board of Directors or any committee thereof (i) shall have
withdrawn, modified or changed in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger Agreement or the
Merger, (ii) shall have recommended the approval or acceptance of an
Acquisition Proposal from, or similar business combination with, a person
or entity other than Parent, Purchaser or their affiliates, (iii) shall
have executed an agreement in principle or definitive agreement relating to
an Acquisition Proposal (as defined in the Merger Agreement) from, or
similar business combination with, a person or entity other than Parent,
Purchaser or their affiliates, or (iv) shall have exercised its rights
pursuant to Section 5.5 of the Merger Agreement with respect to an
Acquisition Proposal, and, directly or through its representatives,
continued discussions with any third party concerning an Acquisition
Proposal for more than ten business days after the date of receipt of such
Acquisition Proposal; or
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f. any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as of the date of the Merger Agreement and as of the scheduled
expiration of the Offer; or
g. the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement; or
h. all consents necessary to the consummation of the Tender Offer or the
Merger including, without limitation, consents from parties to loans,
contracts, leases or other agreements, and consents from governmental
agencies, whether federal, state or local, shall not have been obtained,
other than consents the failure to obtain which would not have a material
adverse effect on the Company; or
i. the Merger Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and the
Purchaser, may be asserted by Parent or the Purchaser regardless of the
circumstances giving rise to such condition and may be waived by Parent or the
Purchaser in whole or in part at any time and from time to time in the sole
discretion of Parent or the Purchaser, subject in each case to the terms of
the Merger Agreement. The failure by Parent or the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition to the foregoing conditions, Parent may terminate the Merger
Agreement and the Offer in the event that the Disclosure Schedule of the
Company which is to be delivered to Parent pursuant to the Merger Agreement
following the Execution Date reveals matters or information that are material
and adverse to the Company and the Company shall not have disclosed such
matters or information to Parent on or prior to the Execution Date.
15. Certain Legal Matters.
Except as described in this Section 15, based on information provided by the
Company, none of the Company, Purchaser or Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company
that might be adversely affected by the Purchaser's acquisition of Shares as
contemplated herein or of any approval or other action by a domestic or
foreign governmental, administrative or regulatory agency or authority that
would be required for the acquisition and ownership of the Shares by the
Purchaser as contemplated herein. Should any such approval or other action be
required, the Purchaser and Parent presently contemplate that such approval or
other action will be sought, except as described below under "State Takeover
Laws." While, except as otherwise described in this Offer to Purchase, the
Purchaser does not presently intend to delay the acceptance for payment of or
payment for Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial
conditions or that failure to obtain any such approval or other action might
not result in consequences adverse to the Company's business or that certain
parts of the Company's business might not have to be disposed of or other
substantial conditions complied with in the event that such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, the Purchaser could decline to accept
for payment or pay for any Shares tendered. See Section 14 for certain
conditions to the Offer, including conditions with respect to governmental
actions.
Section 1203 of the GCL. The Company is incorporated under the laws of the
State of California. Section 1203 of the GCL provides that if a tender offer
is made to some or all of a corporation's shareholders by an "interested
party," an affirmative opinion in writing as to the fairness of the
consideration to the shareholders of that corporation shall be delivered to
the shareholders at the time that the tender offer is first made in writing to
the shareholders. However, if the tender offer is commenced by publication and
tender offer materials are subsequently mailed or otherwise distributed to the
shareholders, the opinion may be omitted in that publication
32
<PAGE>
if the opinion is included in the materials distributed to the shareholders.
For purposes of Section 1203, the term "interested party" includes, among
other things, a person who is a party to the transaction and (A) directly or
indirectly controls the corporation that is the subject of the tender offer or
proposal, (B) is, or is directly or indirectly controlled by, an officer or
director of the subject corporation, or (C) is an entity in which a material
financial interest is held by any director or executive officer of the subject
corporation. While none of the Company, Parent or Purchaser believes that the
Offer constitutes a transaction which falls within the provisions of Section
1203, an independent financial advisor, Trautman Kramer, has been retained by
the Company, to provide a fairness opinion with respect to the Offer.
State Takeover Laws. The Company's principal executive offices are located
in, and the Company is incorporated under the laws of, the State of
California, which currently has no takeover statute that would apply to the
Offer or the Merger. However, there can be no assurances that California will
not, prior to the completion of the Offer, adopt such a statute. Under the
GCL, the Merger may not be accomplished for cash paid to the shareholders of
the Company if the Purchaser or Parent owns directly or indirectly more than
50% but less than 90% of the then outstanding Shares unless either all of the
shareholders of the Company consent or the Commissioner of Corporations of the
State of California approves, after a hearing, the terms and conditions of the
Merger and the fairness thereof. The purpose of the Offer is to obtain 90% or
more of the Shares (on a fully diluted basis) and to enable Parent and the
Purchaser to acquire control of the Company.
In the event that less than 90% of the Shares then outstanding on a fully
diluted basis are tendered pursuant to the Offer on the Initial Expiration
Date, the Purchaser is required to extend the Offer and may waive the Minimum
Condition and amend the Offer to reduce the number of Shares subject to the
Offer to the Revised Minimum Number and, if a greater number of Shares is
tendered into the Offer and not withdrawn, purchase on a pro rata basis, the
Revised Minimum Number of Shares (it being understood that the Purchaser may,
but shall not in any event be required to accept for payment, or pay for, any
Shares if less than the Revised Minimum Number of Shares are tendered pursuant
to the Offer and not withdrawn at the applicable expiration date of the
Offer). In the event that the Purchaser acquires the Revised Minimum Number of
Shares, it would have the ability to ensure approval of the Merger by the
shareholders of the Company with the approval of a de minimis number of
remaining outstanding Shares.
A number of states have adopted laws and regulations applicable to attempts
to acquire securities of corporations which are incorporated, or have
substantial assets, shareholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult. However, in 1987,
in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining shareholders.
The state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of shareholders in the state and
were incorporated there.
The Company may conduct business in a number of states throughout the United
States, some of which have enacted takeover laws. The Purchaser does not know
whether any of these laws will, by their terms, apply to the Offer or the
Merger and has not complied with any such laws. Should any Person seek to
apply any state takeover law, the Purchaser will take such action as then
appears desirable, which may include challenging the validity or applicability
of any such statute in appropriate court proceedings. In the event it is
asserted that one or more state takeover laws are applicable to the Offer or
the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, the Purchaser might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Purchaser might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer and the Merger. In such case,
the Purchaser may not be obligated to accept for payment, or pay for, any
Share tendered pursuant to the Offer. See Section 14.
33
<PAGE>
Antitrust. Under the HSR Act, and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied.
A Notification and Report Form with respect to the Offer is expected to be
filed under the HSR Act on or about Wednesday, January 20, 1999, and if filed
on such date, the waiting period with respect to the Offer under the HSR Act
will expire at 11:59 p.m., New York City time, on Thursday, February 4, 1999.
Before such time, however, either the FTC or the Antitrust Division may extend
the waiting period by requesting additional information or material from the
Purchaser. If such request is made, the waiting period will expire at 11:59
p.m., New York City time, on the tenth calendar day after the Purchaser has
substantially complied with such request. Thereafter, the waiting period may
be extended only by court order or with the Purchaser's consent.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of
Shares pursuant to the Offer and the Merger. At any time before or after the
Purchaser's acquisition of Shares, the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable
in the public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by the Purchaser or divestiture of substantial assets of Parent or its
subsidiaries. Private parties, as well as state governments, may also bring
legal action under the antitrust laws under certain circumstances. Based upon
an examination of publicly available information relating to the businesses in
which Parent and the Company are engaged, Parent and the Purchaser believe
that the acquisition of Shares by the Purchaser will not violate the antitrust
laws. Nevertheless, there can be no assurance that a challenge to the Offer or
other acquisition of Shares by the Purchaser on antitrust grounds will not be
made or, if such a challenge is made, of the result. See Section 14 for
certain conditions to the Offer, including conditions with respect to
litigation and certain governmental actions.
16. Fees and Expenses.
Except as set forth below, neither Parent nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Greenhill & Co., LLC is acting as the Dealer Manager in connection with the
Offer and is acting as financial advisor to Parent in connection with its
effort to acquire the Company. In connection with the Offer, Parent has agreed
to pay Greenhill & Co., LLC for its services a transaction fee paid by Parent
upon completion of the Offer in the amount of approximately $1.9 million.
Parent has also agreed, whether or not the Offer is consummated, to pay
Greenhill & Co., LLC (in its capacity as Dealer Manager and financial advisor)
for its reasonable out-of-pocket expenses, including the reasonable fees and
expenses of its legal counsel, incurred in connection with its engagement, and
to indemnify Greenhill & Co., LLC against certain liabilities and expenses in
connection with their engagement. Greenhill & Co., LLC renders various
investment banking and other advisory services to Parent and its affiliates
and is expected to continue to render such services, for which it has received
and will continue to receive customary compensation from Parent and its
affiliates.
The Purchaser has retained Corporate Investor Communications, Inc. to act as
the Information Agent and U.S. Stock Transfer Company to act as the Depositary
in connection with the Offer. Such firms each will receive reasonable and
customary compensation for their services. The Purchaser has also agreed to
reimburse each such firm for certain reasonable out-of-pocket expenses and to
indemnify each such firm against certain liabilities in connection with their
services, including certain liabilities under federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or other person (other than the Information Agent and the Dealer Manager) for
making solicitations or recommendations in connection with the Offer. Brokers,
dealers, banks and trust companies will be reimbursed by the Purchaser for
customary mailing and handling expenses incurred by them in forwarding
material to their customers.
34
<PAGE>
17. Miscellaneous.
The Offer is being made to all holders of Shares other than the Company. The
Purchaser is not aware of any jurisdiction in which the making of the Offer or
the tender of Shares in connection therewith would not be in compliance with
the laws of such jurisdiction. If the Purchaser becomes aware of any
jurisdiction in which the making of the Offer would not be in compliance with
applicable law, the Purchaser will make a good faith effort to comply with any
such law. If, after such good faith effort, the Purchaser cannot comply with
any such law, the Offer will not be made to (nor will tenders be accepted from
or on behalf of) the holders of Shares residing in such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of Parent or the Purchaser not contained herein or in
the Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained from
the offices of the Commission and the New York Stock Exchange in the manner
set forth in Section 9 of this Offer to Purchase (except that they will not be
available at the regional offices of the Commission).
Compaq Interests, Inc.
January 15, 1999
35
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND THE PURCHASER
1.Directors and Executive Officers of Parent. The names, present principal
occupation or employment, and material occupations, positions, offices or
employments during the last five years of each director and executive officer
of Compaq Computer Corporation ("Parent") are set forth below. Unless
otherwise noted, the officers and directors have held the positions indicated
below with Parent. The business address of each person listed below is 20555
State Highway 249, Houston, Texas 77070, and each person is a citizen of the
United States.
<TABLE>
<CAPTION>
Present Principal Occupation or
Employment Position with the Parent
Directors and Executive Officers and Five-Year Employment History
-------------------------------- -----------------------------------
<C> <S>
Lawrence T. Babbio, Jr.............. Director since 1995. Mr. Babbio, age 54,
has served as President and Chief
Operating Officer of Bell Atlantic
Corporation since December 1998. In
August 1997, he was elected President and
Chief Operating Officer, Network Group,
and Chairman of Global Wireless Group of
Bell Atlantic. In 1995, he was elected
Vice Chairman of Bell Atlantic. In 1994,
he was elected Executive Vice President
and Chief Operating Officer of Bell
Atlantic. Mr. Babbio is also a director
of Grupo Iusacell, S.A. de C.V.
Andreas Barth....................... Mr. Barth, age 54, was elected Senior
Vice President, Europe, Middle East and
Africa, in December 1991. He joined
Parent in February 1988 as Managing
Director of Compaq Computer GmbH,
Parent's German subsidiary, was appointed
Vice President, Central Europe, in
December 1990, and Vice President,
Europe, in January 1991.
Michael D. Capellas................. Mr. Capellas, age 44, was elected Senior
Vice President, Information Management
and Chief Information Officer in August
1998. Mr. Capellas was previously Senior
Vice President and General Manager of
Oracle's global energy sector. In
addition, he spent 18 years with
Schlumberger Limited in a variety of
management positions, including serving
as head of worldwide information
services.
Judith L. Craven.................... Director since 1998. Dr. Craven, age 53,
served as president of the United Way of
the Texas Gulf Coast from 1992 to October
1998. Prior to heading the United Way of
the Texas Gulf Coast, Dr. Craven was vice
president for multicultural affairs at
the University of Texas Health Science
Center at Houston; dean of the School of
Allied Health Sciences at the University
of Texas Health Science Center at
Houston; director of public health for
the City of Houston; chief of Family
Health Service of the City of Houston;
and chief of anesthesia at Riverside
General Hospital. Dr. Craven serves on
the boards of directors at A.H. Belo
Corporation, Luby's Cafeterias, Inc., and
SYSCO Corporation.
</TABLE>
I-1
<PAGE>
<TABLE>
<C> <S>
Frank P. Doyle...................... Director since 1998. Mr. Doyle, age 67,
retired in December 1995 as an Executive
Vice President of General Electric
Company ("GE"). Mr. Doyle had been an
Executive Vice President of GE and a
member of its corporate executive office
since July 1992. He is a director of the
Paine Webber Group Inc., Roadway Express,
Inc., and Educational Testing Service.
Mr. Doyle served as a director of Digital
Equipment Corporation from 1995 until he
joined the Parent Board of Directors.
Robert Ted Enloe, III............... Director since 1986. Mr. Enloe, age 60,
has served as managing partner of
Balquita Partners, Ltd., a real estate
and securities investment firm, since
1996. From 1975 to 1986, he served as
President, and, from 1992 to 1996, as
Chief Executive Officer, of Liberte
Investors. He was President of L&N
Housing Corp. from 1981 to 1992 and a
director of that entity, now known as LNH
REIT, Inc., from 1981 to 1996. Mr. Enloe
is also a director of Liberte Investors,
Inc., Leggett & Platt, Inc., and Sixx
Holdings, Incorporated.
Hans W. Gutsch...................... Mr. Gutsch, age 55, was elected Senior
Vice President, Human Resources and
Environment in November 1994. Mr. Gutsch
joined Parent in 1988 as Director, Human
Resources, Europe and was appointed Vice
President, Human Resources, Europe in
June 1992, and Vice President, Human
Resources and Environment, Europe, Middle
East and Africa in January 1993.
Michael D. Heil..................... Mr. Heil, age 51, was elected Senior Vice
President, Worldwide Sales and Marketing,
in June 1998. From September 1995 to June
1998, he served as Senior Vice President,
Consumer Products Group. Prior to his
arrival at Parent, he was President and
General Manager of Los Angeles Cellular
Telephone Company since May 1989.
George H. Heilmeier................. Director since 1994. Dr. Heilmeier, age
62, is Chairman Emeritus of Bell
Communications Research, Inc. (Bellcore).
He served as Chairman and Chief Executive
Officer of Bellcore from 1991 to 1997. He
was Senior Vice President and Chief
Technical Officer of Texas Instruments,
Inc. from 1983 to 1991. He is a member of
the Defense Science Board, the
President's National Security
Telecommunications Advisory Committee and
the National Academy of Engineering. Dr.
Heilmeier is also a director of TRW,
Inc., MITRE Corporation, Automatic Data
Processing, Inc. and Teletech Holdings.
Peter N. Larson..................... Director since 1993. Mr. Larson, age 59,
has served as Chairman and Chief
Executive of Brunswick Corporation since
April 1995. Before joining Brunswick, he
was an executive officer of Johnson &
Johnson where he served as Worldwide
Chairman of the Consumer and Personal
Care Group, and was a member of the
Executive Committee and the Board of
Directors. In addition to being a
director of Brunswick, Mr. Larson is also
a director of CIGNA Corp. and Coty, Inc.
</TABLE>
I-2
<PAGE>
<TABLE>
<C> <S>
Kenneth L. Lay...................... Director since 1987. Mr. Lay, age 56, has
served as Chairman of the Board and Chief
Executive Officer of Enron Corp., a
diversified energy company, since
February 1986. In addition to Enron
Corp., he is a director of Eli Lilly &
Company, Trust Company of the West, Enron
Oil and Gas Company, and EOTT Energy
Corp.
Earl L. Mason....................... Mr. Mason, age 51, was elected Senior
Vice President and Chief Financial
Officer in June 1996. Prior to his
arrival at Parent, he was Senior Vice
President of Inland Steel Industries,
Inc. ("ISI") since January 1995. From
January 1994 to May 1996, he served as
Chief Financial Officer and President of
Inland International, Inc. He also served
as Vice President of ISI from January
1994 to January 1995, and Vice President,
Finance and Principal Financial Officer
of ISI from June 1991 to January 1994.
Thomas J. Perkins................... Director since 1997. Mr. Perkins, age 67,
served as Chairman of the Board of
Directors of Tandem Computers
Incorporated from 1974 until 1997. He has
been a General Partner of Kleiner Perkins
Caufield & Byers, a private investment
partnership, since 1972, and has served
as either a general or limited partner of
numerous funds formed by Kleiner Perkins
Caufield & Byers. He is also a director
of News Corporation and TriStrata
Security.
Enrico Pesatori..................... Mr. Pesatori, age 58, was elected Senior
Vice President, Corporate Marketing in
June 1998. He joined Parent in August
1997 when Tandem Computers Incorporated
was acquired by Parent. At the time of
that acquisition, Mr. Pesatori served as
President of Tandem. Mr. Pesatori served
as vice president and general manager of
Digital Equipment Corporation's Computer
Systems Division from 1993 to 1996.
Gregory E. Petsch................... Mr. Petsch, age 48, was elected Senior
Vice President, Manufacturing and
Quality, in July 1993. He joined Parent
in September 1983 as Director of
Manufacturing Control and was named Vice
President, CPU Manufacturing in May 1989
and Vice President, Manufacturing in
November 1991.
Eckhard Pfeiffer.................... Director since 1991. Mr. Pfeiffer, age
57, was appointed President and Chief
Executive Officer and elected a director
of Compaq in October 1991. He joined
Parent in September 1983 as Vice
President, Europe and was elected Senior
Vice President, International Operations
in January 1986, President, Europe and
International Division in May 1989, and
Executive Vice President and Chief
Operating Officer in January 1991. He is
also a director of Bell Atlantic
Corporation and General Motors
Corporation.
John J. Rando....................... Mr. Rando, age 46, was elected Senior
Vice President and General Manager,
Service in June 1998 at the time of
Compaq's acquisition of Digital Equipment
Corporation. Prior to this, he served as
Senior Vice President and General
Manager, Digital Worldwide Services from
1996 to 1998, and as Vice President,
Digital Multivendor Customer Services
from 1993 to 1996.
</TABLE>
I-3
<PAGE>
<TABLE>
<C> <S>
Kenneth Roman....................... Director since 1991. Mr. Roman, age 68,
served as Chairman and Chief Executive
Officer of The Ogilvy Group (and from
1985 to 1989 as Chairman of Ogilvy &
Mather Worldwide). He was Executive Vice
President of American Express from 1989
to 1991. Mr. Roman is a director of
Brunswick Corporation, Coty Inc., Nelson
Communications, and PennCorp Financial
Group, Inc.
John T. Rose........................ Mr. Rose, age 53, was elected Senior Vice
President, Enterprise Computing Group, in
July 1996. He joined Parent as Senior
Vice President, Desktop PC Division, in
July 1993. Prior to his arrival at
Parent, he was Vice President of Digital
Equipment Corporation's Personal
Computing Systems Business, which he
established in 1985.
Benjamin M. Rosen................... Director since 1982. Mr. Rosen, age 65,
was appointed Chairman of the Board of
Directors of Parent in 1983. Mr. Rosen is
a director of Capstone Turbine Corp., a
privately held technology company. He is
also Vice Chairman of the Board of
Trustees of the California Institute of
Technology.
Lucille S. Salhany.................. Director since 1996. Ms. Salhany, age 52,
serves as President and Chief Executive
Officer of J.H. Media Limited. She served
as President and Chief Executive Officer
of United Paramount Network from
September 1994 until September 1997. From
January 1993 to July 1994, she served as
Chairman of FOX Broadcasting Company and
also was a member of the Board of
Directors of Fox Inc. Ms. Salhany is a
director of American Media, Avid
Technology, and Boston Restaurant
Associates.
Rodney W. Schrock................... Mr. Schrock, age 39, was elected Senior
Vice President, Consumer Products Group,
in June 1998, and was Vice President,
Consumer Products Group from January
1998. He joined Parent in 1987 as
Director of Compaq Systems Product
Marketing and served as Director of
Desktop business and Technology from 1993
until 1995. In 1995, he was named Vice
President of the Presario PC Division.
Thomas C. Siekman................... Mr. Siekman, age 56, was elected Senior
Vice President, General Counsel &
Secretary in June 1998 at the time of
Compaq's acquisition of Digital Equipment
Corporation. He was elected Vice
President and General Counsel of Digital
in 1993.
Edward M. Straw..................... Mr. Straw, age 59, was elected Senior
Vice President, Supply Chain Management
in December 1998. Mr. Straw joined Parent
from Ryder Integrated Logistics, Inc.
where he served as President since June
1997. Prior to Ryder, Mr. Straw spent
35 years in the U.S. Navy, where he rose
to the rank of Vice Admiral (three-star)
and served four years as Director of the
Defense Logistics Agency, the lead
Department of Defense agency for the U.S.
military's worldwide logistics support.
</TABLE>
I-4
<PAGE>
<TABLE>
<C> <S>
William D. Strecker................. Mr. Strecker, age 54, was elected Senior
Vice President, Technology and Corporate
Development, in June 1998, at the time of
Parent's acquisition of Digital Equipment
Corporation. He had been an executive
officer of Digital since 1985, most
recently serving as Vice President,
Corporate Strategy and Technology and
Chief Technical Officer.
Michael J. Winkler.................. Mr. Winkler, age 53, was elected Senior
Vice President, PC Products Group in
November 1996. He joined Parent in
November 1995 as Senior Vice President,
Portable PC Division. Prior to his
arrival at Parent, he was a Vice
President and General Manager of the
Computer Systems Division of Toshiba
America Information Systems since October
1991.
</TABLE>
2.Directors and Executive Officers of the Purchaser. The names, present
principal occupation or employment, and material occupations, positions,
offices or employments during the last five years of each director and
executive officer of Compaq Interests, Inc. (the "Purchaser") are set forth
below. Unless otherwise noted, the officers and directors have held the
positions indicated below with the Purchaser. The business address of each
person listed below is 20555 State Highway 249, Houston, Texas 77070, and,
each person is a citizen of the United States.
<TABLE>
<CAPTION>
Present Principal Occupation or
Employment Position with the Parent
Directors and Executive Officers and Five-Year Employment History
-------------------------------- -----------------------------------
<C> <S>
Linda S. Auwers..................... Secretary. Ms. Auwers, age 51, was
appointed Vice President and Associate
General Counsel of Parent in October
1997. She joined Parent in May 1988 as a
corporate attorney and was appointed Vice
President and Assistant General Counsel
of Parent in May 1995.
Earl L. Mason....................... Director and President. See biographical
information for Mr. Mason set forth in
Section 1 above.
Ben K. Wells........................ Vice President and Treasurer. Mr. Wells,
age 45, was elected Vice President &
Corporate Controller of Parent in
September 1997. Prior to this, he served
as Assistant Treasurer of Parent from
August 1993 until September 1997. He has
served in various treasury functions for
Parent since 1987.
</TABLE>
I-5
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
shareholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at one of the addresses set forth
below:
The Depositary for the Offer is:
U.S. Stock Transfer Corporation
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
1745 Gardena Avenue (For Eligible Institutions Only)
Glendale, California 91204 (818) 502-0674
Attention: Mark Cano
Confirm Receipt of Facsimile by
Telephone:
(818) 502-1404
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the
Guidelines for Certification of Taxpayer Identification on Substitute Form W-9
may be directed to the Information Agent at the locations and telephone
numbers set forth below. Shareholders may also contact Greenhill & Co., LLC,
Dealer Manager for the Offer, or their broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
Banks and Brokers call (800) 346-7885
All others call Toll Free (888) 421-4808
The Dealer Manager for the Offer is:
GREENHILL & CO., LLC
31 West 52nd Street, 16th Floor
New York, New York 10019
(212) 408-0660 (Call Collect)
or
Call Toll Free (888) 504-7336
<PAGE>
EXHIBIT (a)(2)
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
Shopping.com
Pursuant to the Offer to Purchase
Dated January 15, 1999
by
Compaq Interests, Inc.
an indirect
wholly owned subsidiary of
Compaq Computer Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 12, 1999 (THE "INITIAL EXPIRATION DATE"), UNLESS
THE OFFER IS EXTENDED.
The Depositary for the Offer is:
U.S. Stock Transfer Corporation
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
(For Eligible Institutions Only)
1745 Gardena Avenue (818) 502-0674
Glendale, California 91204
Attention: Mark Cano Confirm Receipt of Facsimile
by Telephone:
(818) 502-1404
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED
THEREFORE AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED
BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DESCRIPTION OF COMMON SHARES TENDERED
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of
Registered Holder(s)
(Please fill in, if blank,
exactly as name(s) appear(s) Share Certificate(s) and Shares Tendered
on Share Certificate(s)) (Attach additional list, if necessary)
- - --------------------------------------------------------------------------------
Total Number of
Shares Evidenced Number
Share Certificate by Share of Shares
Number(s)* Certificate(s)* Tendered**
-------------------------------------------------
<S> <C> <C> <C>
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
-------------------------------------------------
Total Shares:
- - --------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Shareholders delivering Shares by Book-Entry
Transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be used either if certificates are to be
forwarded herewith or if delivery of Shares (as defined below) is to be made
by book-entry transfer to an account maintained by the Depositary at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3 of the Offer to Purchase (as defined below).
Delivery of documents to the Book-Entry Transfer Facility does not constitute
delivery to the Depository. Shareholders who deliver Shares by book-entry
transfer are referred to herein as "Book-Entry Shareholders" and other
Shareholders are referred to herein as "Certificate Shareholders."
Shareholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase) must tender their Shares according to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
See Instruction 2.
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: ______________________________________________
DTC Account Number: _________________________________________________________
Transaction Code Number: ____________________________________________________
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): ____________________________________________
Window Ticket No. (if any): _________________________________________________
Date of Execution of Notice of Guaranteed Delivery: _________________________
Name of Institution which Guaranteed Delivery: ______________________________
DTC Account Number (if delivered by Book-Entry Transfer): ___________________
Transaction Code Number: ____________________________________________________
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
[_] CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE
IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF
TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY
WITH REPLACEMENT INSTRUCTIONS.
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Compaq Interests, Inc., a Delaware
corporation (the "Offeror") and an indirect, wholly owned subsidiary of Compaq
Computer Corporation, a Delaware corporation ("Parent"), the above-described
shares of Common Stock, no par value (the "Shares"), pursuant to the Offeror's
offer to purchase all outstanding Shares at a price of $19.00 per Share, net
to the seller in cash, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated January 15, 1999 (the "Offer to Purchase"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which, together with the Offer to Purchase and any amendments or supplements
hereto or thereto, constitute the "Offer"). The undersigned understands that
the Offeror reserves the right to transfer or assign, in whole or in part from
time to time, to any affiliate of Parent the right to purchase Shares tendered
pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers
to, or upon the order of the Offeror, all right, title and interest in and to
all the Shares that are being tendered hereby (and any and all other Shares or
other securities issued or issuable in respect thereof (collectively,
"Distributions")) and irrevocably constitutes and appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (a) deliver certificates for such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by a Book-Entry Transfer Facility, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
the Offeror, upon receipt by the Depositary, as the undersigned's agent, of
the purchase price (adjusted, if appropriate, as provided in the Offer to
Purchase), (b) present such Shares and all Distributions for cancellation and
transfer on the Company's books, and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares and all
Distributions, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
and all Distributions and that, when the same are accepted for payment by the
Offeror, the Offeror will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, claims, charges and
encumbrances, and the same will not be subject to any adverse claims. The
undersigned will, upon request, execute any signature guarantees or additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the tendered Shares and all
Distributions. In addition, the undersigned shall promptly remit and transfer
to the Depositary for the account of the Offeror any such Distributions issued
to the undersigned, in respect of the tendered Shares, accompanied by
documentation of transfer, and pending such remittance or appropriate
assurance thereof, the Offeror shall be entitled to all rights and privileges
as owner of any such Distributions and, subject to the terms of the Merger
Agreement, may withhold the entire purchase price or deduct from the purchase
price the amount or value thereof, as determined by the Offeror, in its sole
discretion.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby irrevocably appoints Eckhard Pfeiffer, Earl L. Mason
or Thomas C. Siekman and each of them, and any other designees of the Offeror,
the attorneys and proxies of the undersigned, each with full power of
substitution, to vote at any annual, special or adjourned meeting of the
Company's Shareholders or otherwise act (including pursuant to written
consent) in such manner as each such attorney and proxy or his or her
substitute shall in his or her sole discretion deem proper with respect to,
and to otherwise act with respect to, all the Shares tendered hereby which
have been accepted for payment by the Offeror prior to the time any such vote
or action is taken (and any and all Distributions issued or issuable in
respect thereof) and with respect to which the undersigned is entitled to
vote. This appointment is effective when, and only to the extent that, the
Offeror accepts for payment such Shares as provided in the Offer to Purchase.
This power of attorney and proxy is coupled with an interest in the tendered
Shares, is irrevocable and is granted in consideration of the acceptance for
payment of such Shares in accordance with the terms of the Offer. Such
acceptance for payment shall revoke all prior powers of attorney and proxies
given by the undersigned at any time with respect to such Shares and no
subsequent
<PAGE>
powers of attorney or proxies may be given by the undersigned (and, if given,
will not be deemed effective). The Offeror reserves the right to require that,
in order for Shares to be deemed validly tendered, immediately upon the
Offeror's acceptance for payment of such Shares, the Offeror must be able to
exercise full voting and other rights with respect to such Shares, including
voting at any Shareholders meeting then scheduled.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase to
Offeror and in the instructions hereto will constitute a binding agreement
between the undersigned and the Offeror upon the terms and subject to the
conditions of the Offer. The undersigned recognizes that under certain
circumstances set forth in the Offer to Purchase, the Offeror may not be
required to accept for payment any of the tendered Shares. The Offeror's
acceptance for payment of Shares pursuant to the Offer will constitute a
binding agreement between the undersigned and the Offeror upon the terms and
subject to the conditions of the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price of any Shares purchased, and/or
return any certificates for Shares not tendered or accepted for payment, in
the name(s) of the registered holder(s) appearing under "Description of Shares
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased, and/or any certificates for Shares not tendered or accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the Special Delivery Instructions and the Special Payment
Instructions are completed, please issue the check for the purchase price of
any Shares purchased, and/or return any certificates for Shares not tendered
or accepted for payment in the name(s) of, and mail said check and/or any
certificates to, the person or persons so indicated. In the case of a book-
entry delivery of Shares, please credit the account maintained at the Book-
Entry Transfer Facility with any Shares not accepted for payment. The
undersigned recognizes that the Offeror has no obligation pursuant to the
Special Payment Instructions to transfer any Shares from the name of the
registered holder(s) thereof if the Offeror does not accept for payment any of
the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS (See SPECIAL DELIVERY INSTRUCTIONS
Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7)
To be completed ONLY if the To be completed ONLY if the
check for the purchase price of check for the purchase of Shares
Shares or Share Certificates evi- purchased or Share Certificates
dencing Shares not tendered or evidencing Shares not tendered or
not purchased is to be issued in not purchased is to be mailed to
the name of someone other than someone other than the under-
the undersigned. signed, or to the undersigned at
an address other than that shown
under "Description of Shares Ten-
dered."
Issue check and/or certificate(s)
to:
Name _____________________________ Mail check and/or certificate(s)
(Please Print) to:
Address __________________________ Name _____________________________
(Please Print)
__________________________________
(Include Zip Code) Address __________________________
__________________________________ __________________________________
(Tax Identification or Social (Include Zip Code)
Security Number)
(See Substitute Form W-9 on __________________________________
Reverse Side)
<PAGE>
IMPORTANT
SHAREHOLDER(S): SIGN HERE
(Please Complete Substitute Form W-9 on Reverse)
_________________________________________
_________________________________________
Signature(s) of Holder(s)
Dated: _____________________________________________________________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificates or on a security position listing or by a person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please
provide the following information. See Instruction 5.)
Name(s): ___________________________________________________________________
____________________________________________________________________________
Please Print
Capacity: __________________________________________________________________
Please Provide Full Title
Address: ___________________________________________________________________
Include Zip Code
Telephone No.: _____________________________________________________________
Include Area Code
Taxpayer Identification or
Social Security Number: ____________________________________________________
See Substitute Form W-9 on Reverse Side
GUARANTEE OF SIGNATURE(S)
(If Required--See Instructions 1 and 5)
SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL
INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE PROVIDED BELOW.
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most commercial banks, savings and loan associations
and brokerage houses) that is a participant in the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program (each an "Eligible
Institution," and collectively, "Eligible Institutions"). No signature
guarantee is required on this Letter of Transmittal (i) if this Letter of
Transmittal is signed by the registered holder(s) (which term, for purposes of
this document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares) of
Shares tendered herewith, unless such holder(s) has completed either the box
entitled "Special Delivery Instructions" or the box entitled "Special Payment
Instructions" in this Letter of Transmittal, or (ii) if such Shares are
tendered for the account of an Eligible Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed by Shareholders
either if Share Certificates are to be forwarded herewith or if a tender of
Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. For Shares to be
validly tendered pursuant to the Offer, either (i) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees, or in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and any other required
documents, must be received by the Depositary at one of the Depositary's
addresses set forth herein prior to the Expiration Date (as defined in the
Offer to Purchase) and either certificates for tendered Shares must be
received by the Depositary at one of such addresses or such Shares must be
delivered pursuant to the procedures for book-entry transfer (and a Book Entry
Confirmation received by the Depositary), in each case, prior to the
Expiration Date, or (ii) the tendering Shareholder must comply with the
guaranteed delivery procedure set forth below.
Shareholders whose Share Certificates are not immediately available or who
cannot complete the procedures for book-entry transfer on a timely basis or
time will not permit all required documents to reach the Depositary prior to
the Expiration Date, may tender their Shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant
to such procedures, (i) such tender must be made by or through an Eligible
Institution, (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror (or facsimile
thereof), must be received by the Depositary prior to the Expiration Date, and
(iii) the certificates for (or a Book-Entry Confirmation with respect to) such
Shares, together with this properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in Section 3 of the Offer to Purchase. A "trading day" is any day on
which the National Association of Securities Dealers Automated Quotation
System, Inc. is open for business. The Notice of Guaranteed Delivery may be
delivered by hand to the Depositary or transmitted by telegram, facsimile
transmission or mail to the Depositary and must include a guarantee by an
Eligible Institution in the form set forth in such Notice of Guaranteed
Delivery.
The method of delivery of Share Certificates, this Letter of Transmittal and
all other required documents, including delivery through a Book-Entry Transfer
Facility, is at the election and risk of the tendering Shareholder. Share
Certificates will be deemed delivered only when actually received by the
Depositary (including, in the case of a book-entry transfer, by Book-Entry
Confirmation). If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering Shareholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers and/or the
number of Shares evidenced by such Share Certificates and the number of Shares
tendered should be listed on a separate schedule attached hereto.
<PAGE>
4. Partial Tenders. If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered, fill in
the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered." In such case, new Share Certificate(s) for the remainder of
the Shares that were evidenced by the Share Certificate(s) delivered to the
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the
expiration or termination of the Offer. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the Share Certificate(s) evidencing such shares without any
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
such Shares.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Offeror of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and tendered hereby, no endorsements of Share Certificates or
separate stock powers are required unless payment or Share Certificates
evidencing Shares not tendered or not accepted for payment are to be issued in
the name of a person other than the registered holder(s), in which case the
Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) or stock powers must be guaranteed by
an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the shares tendered hereby, the certificates
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case, signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificates. Signatures on such
Share Certificate(s) or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6, the
Offeror will pay, or cause to be paid, any stock transfer taxes with respect
to the transfer and sale of Shares to it or its assignee pursuant to the
Offer. If, however, payment of the purchase price of any Shares is to be made
to, or if Share Certificates evidencing Shares not tendered or accepted for
payment are to be issued in the name of, a person other than the registered
holder(s), or if tendered Shares Certificates are registered in the name of a
person other than the person(s) signing this Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder(s) or
such person or otherwise payable on the account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased,
unless evidence satisfactory to the Offeror of the payment of such taxes, or
exemption therefrom, is submitted. Except as provided in this Instruction 6,
it will not be necessary for transfer tax stamps to be affixed to the Share
Certificates evidencing the Shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check is to be issued in
the name of and/or Shares Certificates not accepted for payment are to be
returned to a person other than the signer of this Letter of Transmittal or if
a check is to be sent and/or such Share Certificates are to be returned to a
person other than the signer of this Letter of Transmittal or to an address
other than that shown in the box entitled "Description of Shares Tendered" on
the reverse hereof, the appropriate boxes on the reverse side of this Letter
of Transmittal should be completed. Any Shareholder tendering Shares by book-
entry transfer will have any Shares not accepted for payment returned by
crediting the account maintained by such Shareholder at a Book-Entry Transfer
Facility from which such transfer was made.
<PAGE>
8. Waiver of Conditions. Except as otherwise provided in the Offer to
Purchase, the Offeror reserves the absolute right, in its sole discretion, to
waive any of the conditions of the Offer or any defect or irregularity in the
tender of any Shares of any particular Shareholder, whether or not similar
defects or irregularities are waived in the case of other Shareholders.
9. Substitute Form W-9. The tendering Shareholder (or other payee) is
required, unless an exemption applies, to provide the Depositary with a
correct Taxpayer Identification Number ("TIN"), generally the Shareholder's
social security or federal employer identification number, and with certain
other information, on Substitute Form W-9, which is provided under "Important
Tax Information" below, and to certify under penalties of perjury, that such
number is correct and that the Shareholder (or other payee) is not subject to
backup withholding. If a tendering Shareholder is subject to backup
withholding, he or she must cross out item (2) of the Certification Box on
Substitute Form W-9 before signing such Form. Failure to furnish the correct
TIN on the Substitute Form W-9 may subject the tendering Shareholder (or other
payee) to a $50 penalty imposed by the Internal Revenue Service and payments
of cash to the tendering Shareholder (or other payee) pursuant to the Offer
may be subject to backup withholding of 31%. If the tendering Shareholder has
not been issued a TIN and has applied for a number or intends to apply for a
number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number. If
"Applied For" is written in Part I and the Depositary is not provided with a
TIN by the time of payment, the Depositary will withhold 31% of all such
payments for surrendered Shares thereafter until a TIN is provided to the
Depositary.
10. Lost or Destroyed Certificates. If any Share Certificate(s) has (have)
been lost or destroyed, the Shareholder should check the appropriate box on
the reverse side of the Letter of Transmittal. The Company's stock transfer
agent will then instruct such Shareholder as to the procedure to be followed
in order to replace the Share Certificate(s). The Shareholder will have to
post a surety bond of approximately 2% of the current market value of the
stock. This Letter of Transmittal and related documents cannot be processed
until procedures for replacing lost or destroyed Share Certificates have been
followed.
11. Requests for Assistance or Additional Copies. Questions and requests for
assistance or additional copies of the Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at the locations and telephone numbers set
forth below.
IMPORTANT: This Letter of Transmittal (or a facsimile copy thereof),
together with any required signature guarantees, or in the case of a book-
entry transfer, an Agent's Message, and Share Certificates, or a Book-Entry
Confirmation, for Shares and all other required documents must be received by
the Depositary, or the Notice of Guaranteed Delivery (or a facsimile copy
thereof) must be received by the Depositary, on or prior to the Expiration
Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Shareholder surrendering Shares must, unless
an exemption applies, provide the Depositary (as payor) with his correct TIN
on Substitute Form W-9 included in this Letter of Transmittal. If the
Shareholder is an individual, his TIN is such Shareholder's social security
number. If the correct TIN is not provided, the Shareholder may be subject to
a $50 penalty imposed by the Internal Revenue Service and payments of cash to
the tendering Shareholder (or other payee) pursuant to the Offer may be
subject to backup withholding of 31% of all payments of the purchase price.
Certain Shareholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding. In
order for an exempt foreign Shareholder to avoid backup withholding, such
person should complete, sign and submit a Form W-8, Certificate of Foreign
Status, signed under penalties of perjury, attesting to his or her exempt
status. A Form W-8 can be obtained from the Depositary. Exempt Shareholders,
other than foreign Shareholders, should furnish their TIN, write "Exempt" on
the face of the Substitute Form W-9 and sign, date and return the Substitute
Form W-9 to the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payment made to payee. Backup withholding is not an additional tax.
Rather, the federal income tax liability of persons subject to backup
withholding will be
<PAGE>
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the Internal Revenue
Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a Shareholder
with respect to Shares purchased pursuant to the Offer, the Shareholder is
required to notify the Depositary of his correct TIN (or the TIN of any other
payee) by completing the Substitute Form W-9 included in this Letter of
Transmittal certifying (1) that the TIN provided on the Substitute Form W-9 is
correct (or that such Shareholder is awaiting a TIN), and that (2) the
Shareholder is not subject to backup withholding because (i) the Shareholder
has not been notified by the Internal Revenue Service that the Shareholder is
subject to backup withholding as a result of a failure to report all interest
and dividends or (ii) the Internal Revenue Service has notified the
Shareholder that the Shareholder is no longer subject to backup withholding.
What Number to Give the Depositary
The Shareholder is required to give the Depositary the TIN, generally the
social security number or employer identification number, of the record holder
of the Shares tendered hereby. If the Shares are in more than one name or are
not in the name of the actual owner, consult the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional guidance on which number to report. If the tendering Shareholder
has not been issued a TIN and has applied for a number or intends to apply for
a number in the near future, he or she should write "Applied For" in the space
provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign
and date the Certificate of Awaiting Taxpayer Identification Number, which
appears in a separate box below the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN by the time of
payment, the Depositary will withhold 31% of all payments of the purchase
price until a TIN is provided to the Depositary.
<PAGE>
PAYOR'S NAME: U.S. STOCK TRANSFER CORPORATION, AS DEPOSITARY
- - -------------------------------------------------------------------------------
SUBSTITUTE PART I--Taxpayer Social security number
Identification Number--For
Form W-9 all accounts, enter your
TIN in the box at right. OR ___________________
(For most individuals, this
Department of the is your social security
Treasury number. If you do not have Employer identification
a TIN, see Obtaining a number (If awaiting TIN
Internal Revenue Number in the enclosed write "Applied For")
Service Guidelines.) Certify by
signing and dating below.
Note: If the account is in
more than one name, see the
chart in the enclosed
Guidelines to determine
which number to give the
payer.
Payer's Request for
Taxpayer --------------------------------------------------------
Identification Number
(TIN) PART II--For Payees Exempt from backup Withholding,
see the enclosed Guidelines and complete as
instructed therein.
- - -------------------------------------------------------------------------------
Certification--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Num-
ber (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because (a) I am exempt
from backup withholding, (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a
result of failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
Certification Instructions--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are not longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- - -------------------------------------------------------------------------------
SIGNATURE _____________________________________ DATE _________________, 1999
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under the penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
Signature ____________________________ Date _________________________________
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer materials may be
directed to the Dealer Manager or the Information Agent at the locations and
telephone numbers set forth below:
The Information Agent for the Offer is:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072
Banks and Brokers call (800) 346-7885
All others call Toll Free (888) 421-4808
The Dealer Manager for the Offer is:
GREENHILL & CO., LLC
31 West 52nd Street, 16th Floor
New York, New York 10019
(212) 408-0660 (Call Collect)
or
Call Toll Free (888) 504-7336
<PAGE>
EXHIBIT (a)(3)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Shopping.com
at
$19.00 Net Per Share
by
Compaq Interests, Inc.
an indirect
wholly owned subsidiary of
Compaq Computer Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, FEBRUARY 12, 1999 (THE "INITIAL EXPIRATION DATE"),
UNLESS THE OFFER IS EXTENDED.
January 15, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Compaq Interests, Inc., a Delaware corporation
(the "Offeror") an indirect, wholly owned subsidiary of Compaq Computer
Corporation, a Delaware corporation ("Parent"), to act as Dealer Manager in
connection with the Offeror's offer to purchase all outstanding shares (the
"Shares") of common stock, no par value (the "Common Stock") of Shopping.com,
a California corporation (the "Company"), at a price of $19.00 per Share, net
to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offeror's Offer to Purchase, dated January 15,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
as amended or supplemented from time to time, together constitute the "Offer")
enclosed herewith. The Offer is being made in connection with the Agreement
and Plan of Merger, dated as of January 11, 1999, by and between Parent and
the Company. Please furnish copies of the enclosed materials to those of your
clients for whose accounts you hold Shares registered in your name or in the
name of your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee we are enclosing
copies of the following documents:
1. Offer to Purchase;
2. Letter of Transmittal to tender Shares for your use and for the
information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary by the Expiration
Date (as defined in the Offer to Purchase) or if the procedure for book-
entry transfer cannot be completed on a timely basis;
4. A letter to Shareholders of the Company from Frank W. Denny, Chairman
of the Board of the Company, together with a Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange
Commission by the Company;
<PAGE>
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
7. Return envelope addressed to U.S. Stock Transfer Corporation (the
"Depositary").
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 12, 1999, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility (as defined in the Offer to Purchase), (ii) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry delivery, and (iii) and any
other documents required by the Letter of Transmittal.
If holders of Shares wish to tender Shares, but cannot deliver such holders'
certificates or other required documents, or cannot comply with the procedure
for book-entry transfer, prior to the expiration of the Offer, a tender may be
effected by following the guaranteed delivery procedure described in Section 3
of the Offer to Purchase.
Neither the Offeror nor the Parent will pay any fees or commissions to any
broker, dealer or other person (other than Greenhill & Co., LLC (the "Dealer
Manager")) and Corporate Investor Communications, Inc. (the "Information
Agent") for soliciting tenders of Shares pursuant to the Offer. However, upon
request, the Offeror will reimburse you for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Offeror will pay or cause to be paid any stock transfer taxes
payable with respect to the transfer of Shares to it, except as otherwise
provided in the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
the Information Agent or to the Dealer Manager, at the respective addresses
and telephone numbers set forth on the back cover page of the Offer to
Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent at the address and telephone number set forth on the back
cover page of the Offer to Purchase.
Very truly yours,
GREENHILL & CO., LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR
ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF THE PARENT, THE
PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT (a)(4)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Shopping.com
at
$19.00 Net Per Share
by
Compaq Interests, Inc.
an indirect
wholly owned subsidiary of
Compaq Computer Corporation
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 12, 1999 (THE "INITIAL EXPIRATION DATE"), UNLESS
THE OFFER IS EXTENDED.
January 15, 1999
To Our Clients:
Enclosed for your consideration are an Offer to Purchase, dated January 15,
1999 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as
amended or supplemented from time to time, together constitute the "Offer")
relating to the offer by Compaq Interests, Inc., a Delaware corporation (the
"Offeror") and an indirect, wholly owned subsidiary of Compaq Computer
Corporation, a Delaware corporation ("Parent"), to purchase all outstanding
shares (the "Shares") of common stock, no par value (the "Common Stock"), of
Shopping.com, a California corporation (the "Company"), at a price of $19.00
per Share, net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in the Offer. The Offer is being made in
connection with the Agreement and Plan of Merger, dated as of January 11,
1999, by and between Parent and the Company (the "Merger Agreement"). Also
enclosed is the Letter to Shareholders of the Company from Frank W. Denny,
Chairman of the Board of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company.
We are (or our nominee is) the holder of record of Shares held by us for
your account. A tender of such Shares can be made only by us as the holder of
record and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Shares held by us for your account.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Shares held by us (or our nominee) for
your account, upon the terms and subject to the condition set forth in the
Offer.
Your attention is invited to the following:
1. The tender price is $19.00 per Share of Common Stock, net to the
seller in cash, without interest.
2. The Offer is being made for all outstanding Shares, although under
certain circumstances described in the Offer to Purchase the Offer may be
amended such that the Offer will be for 49.9999% of the outstanding Shares.
3. The Board of Directors of the Company has unanimously determined that
each of the Merger Agreement, the Offer and the Merger is fair to and in
the best interests of the shareholders of the Company and recommends that
the shareholders of the Company accept the Offer and tender their Shares to
the Purchaser pursuant to the Offer.
1
<PAGE>
4. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Friday, February 12, 1999, unless the Offer is extended.
5. Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in the Letter of Transmittal,
stock transfer taxes with respect to the purchase of Shares by the Offeror
pursuant to the Offer. However, U.S. Federal income tax backup withholding
at a rate of 31% may be required, unless an exemption is provided or unless
the required taxpayer identification information is provided. See
Instruction 9 of the Letter of Transmittal.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form contained in this letter. An envelope in which to return your
instructions to us is enclosed. If you authorize the tender of your Shares,
all such Shares will be tendered unless otherwise specified in your
instructions. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto, and is being made to
all holders of Shares. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Offeror by
Greenhill & Co., LLC or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
2
<PAGE>
Instructions with Respect to the Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Shopping.com
by
Compaq Interests, Inc.
an indirect
wholly owned subsidiary of
Compaq Computer Corporation
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated January 15, 1999, and the related Letter of Transmittal
(which, as amended or supplemented from time to time, together constitute the
"Offer") in connection with the offer by Compaq Interests, Inc., a Delaware
corporation and an indirect, wholly owned subsidiary of Compaq Computer
Corporation, a Delaware corporation, to purchase all outstanding shares (the
"Shares") of common stock, no par value (the "Common Stock"), of Shopping.com,
a California corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Dated: ______, 1999 SIGN HERE
_____________________________________
Number of Shares to be Tendered: _____________________________________
Signature(s) of Holder(s)
___ shares of Common Stock*
Name(s) of Holder(s)
_____________________________________
_____________________________________
Please Type or Print
_____________________________________
Address
_____________________________________
Zip Code
_____________________________________
Area Code and Telephone Number
_____________________________________
Taxpayer Identification or Social
Security Number
- - --------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
EXHIBIT (a)(5)
NOTICE OF GUARANTEED DELIVERY
for the
Tender of Shares of Common Stock
of
Shopping.com
Pursuant to the Offer to Purchase
Dated January 15, 1999
to
Compaq Interests, Inc.
an indirect
wholly owned subsidiary of
Compaq Computer Corporation
(Not to be Used for Signature Guarantees)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if certificates evidencing
shares (the "Shares") of common stock, no par value (the "Common Stock") of
Shopping.com, a California corporation (the "Company"), are not immediately
available or time will not permit all required documents to reach U.S. Stock
Transfer Corporation, as Depositary (the "Depositary"), prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined
below)) or the procedure for delivery by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or transmitted by telegram, facsimile transmission or mail
to the Depositary. See Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
U.S. Stock Transfer Corporation
By Mail, Hand or Overnight Delivery: By Facsimile Transmission:
(For Eligible Institutions Only)
1745 Gardena Avenue (818) 502-0674
Glendale, California 91204
Attention: Mark Cano Confirm Receipt of Facsimile
by Telephone:
(818) 502-1404
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above, and transmission of instructions via facsimile transmission
other than as set forth above, will not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Shares may not be tendered pursuant to the Guaranteed Delivery Procedures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Compaq Interests, Inc., a Delaware
corporation and an indirect, wholly owned subsidiary of Compaq Computer
Corporation, a Delaware corporation, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated January 15, 1999 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, as amended
or supplemented from time to time, together constitute the "Offer"), receipt
of each of which is hereby acknowledged, the number of Shares specified below
pursuant to the guaranteed delivery procedure described in Section 3 of the
Offer to Purchase.
PLEASE CHECK RELEVANT BOX BELOW
Series and Certificate Nos. of Shares (if available):
Common Stock, no par value Name(s) of Record Holder(s)
Certificate Nos. __________________ ___________________________________
Number of Shares Tendered _________ ___________________________________
Please Type or Print
___________________________________
Address(es): ______________________
___________________________________
Zip Code
Area Code and Tel. No.: ___________
Signature(s): _____________________
Dated: ____________________________
DTC Account No.: ______________________
2
<PAGE>
GUARANTEE
(Not to be used for the signature guarantee)
The undersigned, an Eligible Institution (as defined in the Offer to
Purchase), hereby guarantees delivery to the Depositary, at one of its
addresses set forth above, certificates ("Share Certificates") evidencing
the Shares tendered hereby, in proper form for transfer, or confirmation
of book-entry transfer of such Shares into the Depositary's account at The
Depositary Trust Company, in each case with delivery of a Letter of
Transmittal (or facsimile thereof) properly completed and duly executed,
or an Agent's Message (as defined in the Offer to Purchase) in the case of
a book-entry delivery, and any other required documents, all within three
days on which the National Association of Securities Dealers Automated
Quotation System, Inc. is open for business after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
Share Certificates to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
___________________________________ ___________________________________
Name of Firm Authorized Signature
___________________________________ Title: ____________________________
Address
Name: _____________________________
___________________________________ Please Type or Print
Zip Code
Dated: _____________________ , 1999
___________________________________
Area Code and Telephone No.
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
EXHIBIT (a)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens,
e.g., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen, e.g., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- - ---------------------------------------------
Give the
SOCIAL SECURITY
For this type of account: number of--
- - ---------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor(1)
6. Account in the name of The ward, minor,
guardian or committee or incompetent
for a designated ward, person(3)
minor, or incompetent
person
7.a. A revocable savings The grantor-
trust account (in trustee(1)
which grantor is also
trustee)
b. Any "trust" account The actual
that is not a legal owner(1)
or valid trust under
State law
8. Sole proprietorship The owner(4)
account
- - ---------------------------------------------
<CAPTION>
Give the EMPLOYER
IDENTIFICATION
For this type of account: number of--
- - ---------------------------------------------
<S> <C>
9. A valid trust, estate, The legal entity
or pension trust (do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Religious, charitable, The partnership
or educational
organization account
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
- - ---------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner. If the owner does not have an employer
identification number, furnish the owner's social security number.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL
BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
resident individuals), Form SS-4, Application for an Employer Identification
Number (for businesses and all other entities), Form W-7 for an International
Taxpayer Identification Number (for alien individuals required to file U.S.
tax returns), at an office of the Social Security Administration or the
Internal Revenue Service.
To complete Substitute Form W-9, if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification
number in Part I, sign and date the Form, and give it to the requester.
Generally, you will then have 60 days to obtain a taxpayer identification
number and furnish it to the requester. If the requester does not receive your
taxpayer identification number within 60 days, backup withholding, if
applicable, will begin and will continue until you furnish your taxpayer
identification number to the requester.
Payees Exempt from Backup Withholding Penalties
Payees specifically exempted from backup withholding on ALL payments include
the following:*
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government or a political subdivision, agency or instrumentality
thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the United
States or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
- - -------
* Unless otherwise noted herein, all references below to section numbers or to
regulations are references to the Internal Revenue Code and the regulation
promulgated thereunder.
Privacy Act Notices.--Section 6109 requires most recipients of dividends,
interest or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to
file tax returns. Payers must generally withhold 31% of taxable interest,
dividends, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if (i) this interest is $600 or more, (ii)
the interest is paid in the course of the payer's trade or business and
(iii) you have not provided your correct taxpayer identification number to
the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) Civil Penalty for False Statements With Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.--If you falsify
certifications or affirmations, you are subject to criminal penalties
including fines and/or imprisonment.
(4) Failure to Report Certain Dividend and Interest Payments.--If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of any underpayment attributable to
the failure.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (a)(7)
Compaq Reaches Agreement
to Acquire Shopping.com
Strategic Move for AltaVista to
Become a Leading Internet Transaction Site
HOUSTON, January 11, 1999 - In a move designed to leverage the tremendous user
traffic generated by its AltaVista Internet guide and its Internet PCs, Compaq
Computer Corporation (NYSE: CPQ) today announced it has reached a definitive
---------
agreement to acquire Shopping.com (OTC: IBUY), a leading online retailer which
offers Internet shoppers a vast array of top brand-name consumer products. The
increased traffic from AltaVista and Compaq Internet PCs will enable
Shopping.com to grow faster and more efficiently than stand alone e-commerce
companies. In turn, the increased knowledge gained from users' online
purchasing interests will allow AltaVista to better organize content and
information for its users.
A wholly owned subsidiary of Compaq will promptly commence a tender offer to
acquire all of the outstanding shares of Shopping.com for $19 per share in cash,
representing an aggregate approximate purchase price of $220 million. The Board
of Directors and management of Shopping.com have unanimously approved the
acquisition and will recommend shareholder acceptance.
"The Internet is fast becoming a transaction medium in addition to a content
medium. Today, AltaVista becomes the first site to fully combine these two
capabilities into one synergistic user experience," said Rod Schrock, Compaq
Senior Vice President and Group General Manager, Consumer Products. "Our intent
is to make AltaVista the leading guide for both information and e-commerce on
the Internet."
During the recent holiday season, AltaVista drove several million visits to the
AltaVista Holiday shopping experience and its e-commerce partners. With the
addition of Shopping.com capabilities, AltaVista can now directly complete
e-commerce transactions and offer customers a seamless information and shopping
experience.
Compaq entered into a stockholder agreement with certain significant
shareholders who, in the aggregate, are the holders of approximately 27 percent
of the fully diluted shares of common stock of Shopping.com. The stockholder
agreement provides for, among other things, the commitment of each of these
shareholders to tender their respective shares into the tender offer.
The closing of the transaction is subject to the satisfaction of various
conditions including, but not limited to, Compaq receiving at least 90 percent
of the issued and outstanding shares of common stock of Shopping.com and
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act.
<PAGE>
AltaVista Leads the Industry
AltaVista is the most powerful and useful guide to the Internet and is a
forerunner in Web search technology. AltaVista continues to set new standards
such as indexing the entire Internet as well as providing the AV Family Filter
and AV Photo Finder search capabilities.
Over the last several months, AltaVista has made extensive enhancements to make
navigating the Internet relevant, fast and effective for Web users of all
proficiency levels. The impact of these improvements has been noted by both
customers and the press:
. AltaVista was named one of "The Best Sites of '98" by ZDNet/Yahoo! Internet
Life.
. AltaVista is a nominee for the 1999 Webby Awards given by the International
Academy of Digital Arts & Sciences (IADAS).
. AltaVista received the highest marks in the Internet search industry for
Cyber Dialogue, a leading authority in one-to-one marketing and online
market research.
. AltaVista has grown to become the ninth largest individual domain on the
Internet, up from the eleventh position, as ranked by the firm Relevant
Knowledge.
For more information, visit AltaVista's flagship site located at
http://www.altavista.com or http://www.av.com.
-----------------------------------------
Shopping.com Unique Attributes
Shopping.com has a state-of-the-art transaction capability that can best
complement AltaVista's customer traffic potential while delivering a superior
customer buying experience. Committed to offering one-stop shopping for
products and services, Shopping.com:
. Features 63 Warehouse Power Stores to Internet shoppers, providing a
comprehensive selection of over two million name brand products backed by
more than 1,000 merchandising partners
. Offers the Maximizer frequent shopper program, where customers earn
reward dollars on all purchases and services
The simple "Shopping.com" name is easily recognizable and will aid in the
development of the most powerful e-commerce brand in the industry.
Shopping.com is available at http://www.shopping.com.
Company Background
Founded in 1982, Compaq Computer Corporation is a Fortune Global 100 company.
Compaq is the second largest computer company in the world and the largest
global supplier of personal computers. Compaq develops and markets hardware,
software, solutions, and services, including industry-leading enterprise
computing solutions, fault-tolerant business-critical
<PAGE>
solutions, networking and communication products, commercial desktop and
portable products and consumer PCs. The company is an industry leader in
environmentally friendly programs and business practices.
Compaq products are sold and supported in more than 100 countries through a
network of authorized Compaq marketing partners. Customer support and
information about Compaq and its products are available at
http://www.compaq.com.
<PAGE>
EXHIBIT a(8)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase, dated January 15, 1999 (the "Offer to
Purchase"), and the related Letter of Transmittal and is being made to all
holders of Shares. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction or any administrative or judicial action
pursuant thereto. In any jurisdictions where securities, blue sky or other
laws require the Offer to be made by a licensed broker or dealer, the Offer
shall be deemed to be made on behalf of the Purchaser (as defined below) by
Greenhill & Co., LLC (the "Dealer Manager") or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Shopping.com
at
$19.00 Net Per Share
by
Compaq Interests, Inc.
an indirect, wholly owned subsidiary of
Compaq Computer Corporation
Compaq Interests, Inc., a Delaware corporation (the "Purchaser") and an
indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware
corporation ("Compaq"), is offering to purchase all of the issued and
outstanding shares (the "Shares") of common stock, no par value (the "Common
Stock"), of Shopping.com, a California corporation (the "Company"), for $19.00
per Share or any higher price paid in the Offer, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer"). Tendering shareholders will not be obligated to pay brokerage
fees or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
The Purchaser is offering to acquire all Shares as a first step in acquiring
the entire equity interest in the Company. Following consummation of the
Offer, the Purchaser intends to effect the merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, FEBRUARY 12, 1999 (THE "INITIAL EXPIRATION DATE"),
UNLESS THE OFFER IS EXTENDED.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
January 11, 1999 (the "Merger Agreement"), by and between Compaq and the
Company pursuant to which, as soon as practicable after the completion of the
Offer and satisfaction or waiver, if permissible, of all conditions to the
Merger (as defined below), the Purchaser will be merged with and into the
Company and the separate corporate existence of the Purchaser will thereupon
cease. The merger, as effected pursuant to the immediately preceding sentence,
is referred to herein as the "Merger," and the Company as the surviving
corporation of the Merger is sometimes herein referred to as the "Surviving
Corporation." At the effective time of the Merger (the "Effective Time"), each
share of Common Stock then outstanding (other than Shares held by Compaq or
the Purchaser and Shares
<PAGE>
held by shareholders of the Company who perfect their dissenters' rights under
California law) will be canceled and retired and converted into the right to
receive the Offer Price, in cash payable to the holder thereof without
interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH
OF THE MERGER AGREEMENT, THE OFFER, THE MERGER, AND THE OPTION AGREEMENT (AS
DEFINED BELOW) IS FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE
COMPANY AND RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER
AND TENDER THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER
OF SHARES OF COMMON STOCK WHICH, WHEN ADDED TO THE SHARES THEN OWNED BY THE
PURCHASER, REPRESENTS AT LEAST 90% OF THE SHARES OUTSTANDING ON THE DATE OF
PURCHASE (THE "MINIMUM CONDITION"). The Purchaser will not be required to
accept for payment or pay for any tendered Shares until the expiration of all
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended. The Offer is also subject to other terms and
conditions described in Section 14 of the Offer to Purchase.
In the event that the Minimum Condition is not satisfied on the Initial
Expiration Date pursuant to the Offer, the Purchaser may elect to extend the
Offer and may waive, and in certain circumstances thereafter is required to
waive, the Minimum Condition and amend the Offer to reduce the number of
Shares subject to the Offer to such number of Shares that, when added to the
Shares, then owned by the Purchaser, will equal 49.9999% of the Shares then
outstanding (the "Revised Minimum Number") and, if a greater number of Shares
is tendered into the Offer and not withdrawn, purchase, on a pro rata basis,
the Revised Minimum Number of Shares (it being understood that the Purchaser
may, but shall not in any event be required to accept for payment, or pay for,
any Shares if less than the Revised Minimum Number of Shares is tendered
pursuant to the Offer and not withdrawn at the applicable expiration date of
the Offer). Concurrently with the execution and delivery of the Merger
Agreement, Compaq and the Company entered into a Stock Option Agreement, dated
January 11, 1999 (the "Option Agreement"), pursuant to which, upon the terms
set forth therein, the Company granted to the Purchaser an irrevocable option
(the "Stock Option") to purchase up to the number of Shares (the "Option
Shares") that, when added to the number of shares owned by the Purchaser and
its affiliates immediately following consummation of the Offer, would
constitute 90% of the Shares then outstanding at a purchase price per Option
Share equal to the Offer Price, subject to the terms and conditions set forth
in the Option Agreement, including, without limitation, that the number of
Shares to be issued under the Stock Option shall not exceed the number of
authorized Shares available for issuance.
As a condition and inducement to Compaq's entering into the Merger Agreement
and incurring the liabilities therein, certain shareholders of the Company
(the "Shareholders"), who have voting power and dispositive power with respect
to an aggregate of 1,386,475 Shares outstanding and options and warrants
exercisable for 2,730,001 Shares, concurrently with the execution and delivery
of the Merger Agreement, entered into Shareholder Agreements, dated January
11, 1999 (the "Shareholder Agreements"), with Compaq. Pursuant to the
Shareholder Agreements, the Shareholders have agreed, among other things, to
tender the Shares held by them in the Offer, and to grant Compaq a proxy with
respect to the voting of such Shares in favor of the Merger (which proxy will
terminate in the event that the Purchaser waives the Minimum Condition and
accepts for payment the Revised Minimum Number of Shares).
For the purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as of and when the Purchaser gives oral or written notice to
U.S. Stock Transfer Corporation (the "Depositary") of the Purchaser's
acceptance for
2
<PAGE>
payment of such Shares. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering shareholders for the purposes of receiving payment
from the Purchaser and transmitting payment to tendering shareholders. In all
cases, payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for such
Shares (or a timely Book-Entry Confirmation (as defined in the Offer to
Purchase) with respect thereto), (ii) a Letter of Transmittal (or facsimile
thereof), property completed and duly executed, with any required signature
guarantees, or, in the case of book-entry transfer, an Agent's Message (as
defined in the Offer to Purchase), and (iii) any other documents required by
the Letter of Transmittal. The per share consideration paid to any holder of a
Share pursuant to the Offer will be the highest per share consideration paid
to any other holder of Shares pursuant to the Offer. Under no circumstances
will interest be paid on the purchase price to be paid by the Purchaser for
the tendered Shares, regardless of any extension of the Offer or any delay in
making such payment. Except as otherwise provided in the Offer to Purchase,
tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn pursuant to the procedures set forth below at any time prior to
the Expiration Date (as defined in the Offer to Purchase) and, unless
theretofore accepted for payment and paid for by the Purchaser pursuant to the
Offer, may also be withdrawn at any time after March 15, 1999, as described in
Section 4 of the Offer to Purchase.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase and
must specify the name of the person having tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates for Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such certificates, the serial numbers shown on such certificates must be
submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution (as defined in Section 3 of the Offer to Purchase), the
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been delivered pursuant to the procedures for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at
the appropriate Book-Entry Transfer Facility (as defined in the Offer to
Purchase) to be credited with the withdrawn Shares and otherwise comply with
such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of
Shares may not be rescinded, and any Shares properly withdrawn will thereafter
be deemed not validly tendered for purposes of the Offer. However, withdrawn
Shares may be tendered again by following one of the procedures described in
Section 3 of the Offer to Purchase any time prior to the Expiration Date.
The term "Expiration Date" shall mean 12:00 midnight, New York City time, on
Friday, February 12, 1999, unless and until the Purchaser, in accordance with
the terms of the Offer, shall have extended the period of time during which
the Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Offer, as so extended by the Purchaser,
shall expire.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, which determination will be final and binding. None of the
Purchaser, Compaq, the Depositary, Corporate Investor Communications, Inc.
(the "Information Agent"), the Dealer Manager or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Subject to the terms of the Merger Agreement, the Purchaser expressly
reserves the right, in its sole discretion, at any time or from time to time,
to extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares, by giving oral or
written notice of such extension to the Depositary and by making a public
announcement of such extension by no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled expiration date.
During any such extension, all Shares previously tendered and not withdrawn
will remain subject to the Offer, subject to the right of a tendering
shareholder to withdraw such shareholder's Shares.
3
<PAGE>
The information required to be disclosed by paragraph (e)(1)(vii) of Rule
14d-6 under the Securities Exchange Act of 1934, as amended, is contained in
the Offer to Purchase and is incorporated herein by reference.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listing for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal
and other relevant documents will be mailed by the Purchaser to record holders
of Shares, and will be furnished by the Purchaser to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the shareholder lists, or, if applicable,
who are listed as participants in a clearing agency's security position
listing, for subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the Letter of Transmittal contain important
information and should be read in their entirety before any decision is made
with respect to the Offer.
Questions and requests for assistance or additional copies of the Offer to
Purchase, Letter of Transmittal and other tender offer documents may be
directed to the Information Agent or the Dealer Manager, at the respective
addresses and telephone numbers set forth below, and copies will be furnished
at the Purchaser's expense. The Purchaser will not pay any fees or commissions
to any broker or dealer or other person (other than the Information Agent,
Depositary and Dealer Manager) for soliciting tenders of Shares pursuant to
the Offer.
The Information Agent for the Offer is:
Corporate Investor Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
Banks and Brokers call (800) 346-7885
All others call Toll Free (888) 421-4808
The Dealer Manager for the Offer is:
GREENHILL & CO., LLC
31 West 52nd Street, 16th Floor
New York, New York 10019
(212) 408-0660 (Call Collect)
or
Call Toll Free (888) 504-7336
January 15, 1999
4
<PAGE>
EXHIBIT (A)(9)
TRAUTMAN KRAMER & COMPANY
INCORPORATED
500 FIFTH AVENUE
NEW YORK, NEW YORK 10110
212-575-5500 . 800-895-4800 . FAX . 212-575-6589
WWW.TKCO.COM
January 11, 1999
To The Board of Directors
Shopping.com
2101 East Coast Highway
Corona del Mar, CA 92625
We understand that all of the issued and outstanding common shares of
Shopping.com, Inc. ("IBUY," "Cowboy Corporation" or the "Company") are to be
acquired by Compaq Computer, Inc. ("CPQ," "Silver Acquisition Corporation" or
"Compaq") for the consideration of not less than $19.00 per share in a all-
cash transaction. Compaq will indirectly assume all liabilities, both existing
and contingent and existing indebtedness at the close of the transaction, and
the Company will become a wholly-owned subsidiary of Compaq.
You have requested our written opinion (the "Opinion") as to the matters set
forth below. This Opinion values the Company on a "take-out value" basis,
giving effect to the Company's history, operating plan, infrastructure,
existing financial condition and value ascribed to the domain name. For
purposes of this Opinion "take-out value" shall be defined as the amount at
which the Company would change hands between a willing buyer and a willing
seller, each having reasonable knowledge of the relevant facts, neither being
under any compulsion to act, in an arm's length transaction under present
conditions for the sale of comparable business enterprises, as such conditions
can be reasonably evaluated by Trautman Kramer & Company, Incorporated
("TKCO"). We have used the same valuation methodologies in determining take-
out value for purposes of rendering this Opinion. The term "existing and
contingent liabilities" shall mean the stated amount of all existing and
contingent liabilities identified to us and valued by responsible officers of
the Company, upon whom we have relied without independent verification; no
other contingent liabilities will be considered. No representation is made
herein, or directly or indirectly by the Opinion, as to any legal matter or as
to sufficiency of said definitions for any purpose other than setting forth
the scope of TKCO's Opinion hereunder.
Notwithstanding the use of the defined terms "take-out value," we have not
been engaged to identify prospective purchasers or to ascertain the actual
prices at which and terms which the Company can currently be sold, and we know
of no such efforts by others.
Because the sale of any business enterprise involves numerous assumptions
and uncertainties, not all of which can be quantified or ascertained prior to
engaging in an actual selling effort, we express no opinion as to whether the
Company would actually be sold for the amount we believe to be its fair value
and present fair saleable value.
Pursuant to the terms of an engagement letter dated January 11, 1999 by and
between the Company and TKCO, the Company has agreed to compensate TKCO a
$250,000 fee for rendering its opinion assuming a successful close to the
transaction. In the event that the transaction does not occur, the fee will be
reduced to $50,000. In addition, TKCO has acted as the Company's investment
banker on prior occasions and received fees for those services.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. Reviewed the Company's audited financial statements for the fiscal years
ended January 31, 1997 and 1998;
2. Reviewed certain Company interim financial information and interim
projections for the 9 months ended October 30, 1998, which the Company's
management has identified as the most current information available;
1
<PAGE>
3. Reviewed the Company's most-recent Business Plan for its Internet
retailing business and on-line auction site;
4. Held discussions with management of the Company to discuss the condition,
future prospects, and projected operations and performance of the Company;
5. Reviewed the Company's financial projections dated July, 1998 for the
fiscal years ended January 31, 1999 through 2002;
6. Reviewed the historical market prices and trading volume for the Company's
publicly traded securities;
7. Reviewed other publicly available financial data for the Company and
certain companies that we deem comparable to the Company, and other
economic and financial matters related to the Company's business
operation;
8. Conducted such other studies, analyses and investigations as we have
deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably
prepared and reflect the best currently available estimates of the future
financial results and condition of the Company, and that there has been no
material adverse change in the assets, financial condition, business or
prospects of the Company since the date of the most recent interim financial
statement made available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility to it or for it. We have not made any physical inspection or
independent appraisal of any of the properties or assets of the Company. Our
opinion is necessarily based on business, economic, market and other
conditions as they exist and can be evaluated by us at the date of this
letter.
Our analysis was performed at the request and solely for the benefit of the
Board of Directors, and not to offer or provide advice to any other party. Our
conclusion in connection therewith does not constitute a recommendation that
any stockholder of IBUY vote to approve, ratify, disapprove or abstain from
voting in connection with any action considered by the stockholders. Based
upon and subject to the foregoing, it is our opinion that as of the date
hereof, the Merger consideration to be received by common stockholders of IBUY
in the transaction is fair, from a financial point of view, to the common
stockholders of IBUY.
Based on the foregoing, and in reliance thereon, it is our opinion as of the
date of this letter that, assuming the Transaction is consummated as proposed,
immediately after and giving effect to the Transaction:
(a) the take-out value of the Company's operating business and its tangible
and intangible assets approximates the value of the consideration now
being offered by Compaq in the proposed transaction.
This Opinion is furnished solely for your benefit and may not be relied upon
by any other person without our express, prior written consent. This Opinion
is delivered to each recipient subject to the conditions, scope of engagement,
limitations and understandings set forth in this Opinion and our engagement
letter dated January 11, 1999, and subject to the understanding that the
obligations of TKCO in the Transaction are solely corporate obligations, and
no officer, director, employee, agent, shareholder or controlling person of
TKCO shall be subjected to any personal liability whatsoever to any person,
nor will any such claim be asserted by or on behalf of you or your affiliates.
TRAUTMAN KRAMER & COMPANY, INCORPORATED
/s/ Gregory O. Trautman
- - ---------------------------------------
Gregory O. Trautman, CFA
President
2
<PAGE>
EXHIBIT (C)(1)
AGREEMENT AND PLAN OF MERGER
by and between
COMPAQ COMPUTER CORPORATION
and
SHOPPING.COM
dated as of
January 11, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
THE OFFER AND MERGER
<S> <C> <C>
Section 1.1 The Offer....................................................... Page 2
---------
Section 1.2 Company Actions................................................. Page 4
---------------
Section 1.3 Directors....................................................... Page 5
---------
Section 1.4 The Merger...................................................... Page 7
----------
Section 1.5 Effective Time.................................................. Page 7
--------------
Section 1.6 Closing......................................................... Page 8
-------
Section 1.7 Directors and Officers of the Surviving Corporation............. Page 8
---------------------------------------------------
Section 1.8 Subsequent Actions.............................................. Page 8
------------------
Section 1.9 Shareholders' Meeting........................................... Page 8
---------------------
Section 1.10 Merger Without Meeting of Shareholders.......................... Page 9
--------------------------------------
</TABLE>
ARTICLE II
CONVERSION OF SECURITIES
<TABLE>
<CAPTION>
<S> <C> <C>
Section 2.1 Conversion of Capital Stock..................................... Page 10
---------------------------
Section 2.2 Exchange of Certificates........................................ Page 10
------------------------
Section 2.3 Dissenting Shares............................................... Page 12
-----------------
Section 2.4 Company Stock Option Plans...................................... Page 13
--------------------------
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.1 Organization; Qualification.................................... Page 14
---------------------------
Section 3.2 Capitalization................................................. Page 14
--------------
Section 3.3 Authorization; Validity of Agreement;
-------------------------------------
Company Action................................................. Page 15
--------------
Section 3.4 Board Approvals Regarding Transactions......................... Page 16
--------------------------------------
Section 3.5 Vote Required.................................................. Page 16
-------------
Section 3.6 Consents and Approvals; No Violations.......................... Page 16
-------------------------------------
Section 3.7 SEC Reports and Financial Statements........................... Page 17
------------------------------------
Section 3.8 Books and Records.............................................. Page 17
-----------------
Section 3.9 No Undisclosed Liabilities..................................... Page 17
--------------------------
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.10 Accounts Receivable............................................ Page 18
-------------------
Section 3.11 Inventory...................................................... Page 18
---------
Section 3.12 Interim Operations............................................. Page 18
------------------
Section 3.14 Litigation..................................................... Page 20
----------
Section 3.15 Employee Benefit Plans......................................... Page 21
----------------------
Section 3.16 Tax Matters; Government Benefits............................... Page 23
--------------------------------
Section 3.17 Title to Properties; Encumbrances.............................. Page 25
---------------------------------
Section 3.18 Plant and Equipment............................................ Page 25
-------------------
Section 3.19 Leases......................................................... Page 26
------
Section 3.20 Environmental Laws............................................ Page 26
------------------
Section 3.21 Bank Accounts................................................. Page 26
-------------
Section 3.22 Intellectual Property......................................... Page 27
---------------------
Section 3.23 Employment Matters............................................ Page 29
------------------
Section 3.24 Compliance with Laws.......................................... Page 29
--------------------
Section 3.25 Products Liability............................................ Page 29
------------------
Section 3.26 Contracts and Commitments..................................... Page 29
-------------------------
Section 3.27 Customers and Suppliers....................................... Page 31
-----------------------
Section 3.28 Orders, Commitments and Returns............................... Page 31
-------------------------------
Section 3.29 Insurance..................................................... Page 31
---------
Section 3.30 Labor Difficulties............................................ Page 32
------------------
Section 3.31 Consents...................................................... Page 32
--------
Section 3.32 Information in Schedule 14D-9................................. Page 32
-----------------------------
Section 3.33 Information in Proxy Statement................................ Page 32
------------------------------
Section 3.34 Opinion of Financial Advisor.................................. Page 33
----------------------------
Section 3.35 Absence of Questionable Payments.............................. Page 33
--------------------------------
Section 3.36 Personnel..................................................... Page 33
---------
Section 3.37 Insider Interests............................................. Page 33
-----------------
Section 3.38 Brokers or Finders............................................ Page 34
------------------
Section 3.39 Full Disclosure............................................... Page 34
---------------
</TABLE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND PURCHASER
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.1 Organization.................................................... Page 34
------------
Section 4.2 Authorization; Validity of Agreement;
-------------------------------------
Necessary Action................................................ Page 34
----------------
Section 4.3 Consents and Approvals; No Violations........................... Page 35
-------------------------------------
Section 4.4 Information in Offer Documents.................................. Page 35
------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.5 Information in Proxy Statement................................. Page 36
------------------------------
Section 4.6 Share Ownership................................................ Page 36
---------------
Section 4.7 Purchaser's Operations......................................... Page 36
----------------------
Section 4.8 Brokers or Finders............................................. Page 36
------------------
</TABLE>
ARTICLE V
COVENANTS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 5.1 Interim Operations of the Company.............................. Page 36
---------------------------------
Section 5.2 Access; Confidentiality........................................ Page 39
-----------------------
Section 5.3 Reasonable Best Efforts........................................ Page 40
-----------------------
Section 5.4 Employee Benefits.............................................. Page 41
-----------------
Section 5.5 No Solicitation of Competing Transaction....................... Page 42
----------------------------------------
Section 5.6 Publicity...................................................... Page 44
---------
Section 5.7 Notification of Certain Matters................................ Page 44
-------------------------------
Section 5.8 Directors' and Officers' Insurance and Indemnification......... Page 44
------------------------------------------------------
Section 5.9 State Takeover Laws............................................ Page 45
-------------------
Section 5.10 Purchaser Compliance........................................... Page 45
--------------------
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VI
CONDITIONS
<S> <C> <C>
Section 6.1 Conditions to Each Party's Obligation to
----------------------------------------
Effect the Merger.............................................. Page 45
-----------------
Section 6.2 Conditions to Parent's and Purchaser's Obligations
--------------------------------------------------
to Effect the Merger........................................... Page 46
--------------------
</TABLE>
ARTICLE VII
TERMINATION
<TABLE>
<CAPTION>
<S> <C> <C>
Section 7.1 Termination..................................................... Page 46
-----------
Section 7.2 Effect of Termination........................................... Page 48
---------------------
</TABLE>
ARTICLE VIII
DEFINITIONS AND INTERPRETATION
<TABLE>
<CAPTION>
<S> <C> <C>
Section 8.1 Definitions..................................................... Page 49
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Section 8.2 Interpretation.................................................. Page 58
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ARTICLE IX
MISCELLANEOUS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 9.1 Fees and Expenses.............................................. Page 59
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Section 9.2 Amendment and Modification..................................... Page 60
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Section 9.3 Non-Survival of Representations and Warranties................. Page 60
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Section 9.4 Notices........................................................ Page 60
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Section 9.5 Counterparts................................................... Page 61
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Section 9.6 Entire Agreement; No Third Party Beneficiaries................. Page 62
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Section 9.7 Severability................................................... Page 62
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Section 9.8 Governing Law.................................................. Page 62
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Section 9.9 Enforcement.................................................... Page 62
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Section 9.10 Time of Essence................................................ Page 62
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Section 9.11 Extension; Waiver.............................................. Page 62
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Section 9.12 Assignment..................................................... Page 63
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</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of January 11, 1999, by and
among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Shopping.com, a California corporation (the "Company"). Certain capitalized
-------
terms used in this Agreement have the meanings ascribed to them in Article VIII,
Section 8.1 hereof.
WHEREAS, the Board of Directors of each of Parent and the Company has
approved, and deems it advisable and in the best interests of its respective
shareholders to consummate, the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth herein;
WHEREAS, Parent intends promptly after the execution of this Agreement
to form Purchaser in the state of Delaware;
WHEREAS, in furtherance thereof, it is proposed that Purchaser make a
cash tender offer to acquire all of the issued and outstanding shares of common
stock, no par value, of the Company for $19.00 per share, net to the seller in
cash; and
WHEREAS, also in furtherance of such acquisition, the Board of
Directors of each of Parent and the Company have approved this Agreement and the
Merger following the Offer in accordance with the CGCL and upon the terms and
subject to the conditions set forth herein; and
WHEREAS, the Company Board of Directors has determined that the
consideration to be paid for each Share in the Offer and the Merger is fair to
the holders of such Shares and has resolved to recommend that the holders of
such Shares accept the Offer and approve this Agreement and each of the
Transactions upon the terms and subject to the conditions set forth herein; and
WHEREAS, the Company and Parent desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and Merger; and
WHEREAS, as a condition and inducement to Parent's entering into this
Agreement and incurring the obligations set forth herein, each of the Major
Sharehold-
Page 1
<PAGE>
ers, concurrently herewith, is entering into a Shareholder Agreement
dated as of the date hereof, with Parent, substantially in the form of Exhibit A
hereto, pursuant to which each of the Major Shareholders is agreeing, among
other things, to tender the Shares held by each of them in the Offer and to
grant Parent a proxy with respect to the voting of such Shares, all upon the
terms and subject to the conditions set forth in the Shareholder Agreements; and
WHEREAS, as a condition and inducement to Parent's entering into this
Agreement and incurring the obligations set forth herein, the Company,
concurrently herewith, is entering into a Stock Option Agreement, dated as of
the date hereof, with Parent, substantially in the form of Exhibit B hereto,
pursuant to which the Company is granting to Purchaser an option to purchase
Shares, all upon the terms and subject to the conditions set forth in the Stock
Option Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein,
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer.
---------
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 7.1 and none of the events set forth in Annex A shall
have occurred and be existing, as promptly as practicable (but in no event later
than five business days after the public announcement of the execution of this
Agreement), Purchaser shall commence (within the meaning of Rule 14d-2
promulgated under the Exchange Act) a cash tender offer to acquire all Shares at
the Offer Price. Subject to Section 1.1(d) and the satisfaction of the Minimum
Condition and the other conditions set forth in Annex A hereto, Purchaser shall
use reasonable efforts to consummate the Offer in accordance with its terms and
to accept for payment and pay for Shares tendered pursuant to the Offer as soon
as Purchaser is legally permitted to do so under applicable law. The Offer shall
be made by means of the Offer to Purchase and shall be subject to the Minimum
Condition and the other conditions set forth in Annex A hereto, and shall
reflect, as appropriate, the other terms set forth in this Agreement. Subject to
Section 1.1(d), Purchaser shall not
Page 2
<PAGE>
amend or waive the Minimum Condition, decrease the Offer Price or decrease the
number of Shares sought, or amend any other condition of the Offer in any manner
adverse to the holders of the Shares without the written consent of the Company.
If on the initial scheduled expiration date of the Offer, which shall be no
earlier than twenty business days after the date the Offer is commenced, all
conditions to the Offer will not have been satisfied or waived, Purchaser may,
from time to time, in its sole discretion, extend the expiration date. In
addition, Purchaser may increase the amount it offers to pay per Share in the
Offer, and the Offer may be extended to the extent required by law in connection
with such increase, in each case, without the consent of the Company.
(b) As soon as practicable on the date the Offer is commenced, Parent
and Purchaser shall file with the SEC a tender offer statement on Schedule 14D-1
with respect to the Offer. The Schedule 14D-1 will include, as exhibits, the
Offer to Purchase and a 1 form of letter of transmittal and summary
advertisement.
(c) Parent and Purchaser will take all steps necessary to cause the
Offer Documents to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and Purchaser, on the one hand, and the Company, on
the other hand, will promptly correct any information provided by it for use in
the Offer Documents if and to the extent that it shall have become false or
misleading in any material respect, and Purchaser will take all steps necessary
to cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of the Shares, in each case as and to the extent
required by applicable federal securities laws. The Company and its counsel
shall be given the opportunity to review the initial Schedule 14D-1 before it is
filed with the SEC. Parent and Purchaser will provide the Company and its
counsel in writing with any comments or other communications, whether written
or oral, Parent, Purchaser or their counsel may receive from time to time from
the SEC or its staff with respect to the Offer Documents, promptly after the
receipt of such comments or other communications.
(d) In the event the Minimum Condition is not satisfied on any
scheduled expiration date of the Offer, Purchaser may either (i) extend the
Offer pursuant to Section 1.1(a), or (ii) amend the Offer to provide that, in
the event (A) the Minimum Condition is not satisfied at the next scheduled
expiration date of the Offer (without giving pro forma effect to the potential
issuance of any Shares issuable upon exercise of the Stock Option Agreement),
and (B) the number of
Page 3
<PAGE>
Shares tendered pursuant to the Offer and not withdrawn as of such next
scheduled expiration date is more than 50% of the then outstanding Shares,
Purchaser shall waive the Minimum Condition and amend the Offer to reduce the
number of Shares subject to the Offer to a number of Shares that when added to
the Shares then owned by Purchaser will equal the Revised Minimum Number, and,
if a greater number of Shares is tendered into the Offer and not withdrawn,
purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being
understood that Purchaser may, but shall not in any event be required to accept
for payment, and pay for, any Shares if less than the Revised Minimum Number of
Shares are tendered pursuant to the Offer and not withdrawn at the applicable
expiration date). Notwithstanding any other provision of this Agreement, in the
event that Purchaser purchases a number of Shares equal to the Revised Minimum
Number, without the prior written consent of the Purchaser prior to the
termination of this Agreement, the Company shall take no action whatsoever to
increase the number of Shares owned by the Purchaser in excess of the Revised
Minimum Number.
Section 1.2 Company Actions.
---------------
(a) As soon as practicable on the date the Offer is commenced, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9, which shall, subject to the provisions of Section 5.5(b),
contain the recommendation referred to in clause (iii) of Section 3.5 hereof. At
the time the Offer Documents are first mailed to the shareholders of the
Company, the Company shall mail or cause to be mailed to the shareholders of the
Company such Schedule 14D-9 together with such Offer Documents. The Company
further agrees to take all steps necessary to cause the Schedule 14D-9 to be
disseminated to holders of the Shares, as and to the extent required by
applicable federal securities laws. Each of the Company, on the one hand, and
Parent and Purchaser, on the other hand, agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false and misleading in any material respect and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given the opportunity to
review the Schedule 14D-9 before it is filed with the SEC. In addition, the
Company agrees to provide Parent, Purchaser and their counsel with any comments,
whether written or oral, that the Company or its counsel may receive from time
to time from the SEC or its staff with respect to the Schedule 14D-9 promptly
after the receipt of such comments or other communications.
Page 4
<PAGE>
(b) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to Purchaser mailing labels, security position listings
and any available listing, or computer file containing the names and addresses
of all recordholders of the Shares as of a recent date, and shall furnish
Purchaser with such additional information (including, but not limited to, lists
of holders of the Shares, updated daily, and their addresses, mailing labels and
lists of security positions) and assistance as Purchaser or its agents may
reasonably request in communicating the Offer to the record and beneficial
holders of the Shares. Except for such steps as are necessary to disseminate
the Offer Documents, Parent and Purchaser shall hold in confidence the
information contained in any of such labels and lists and the additional
information referred to in the preceding sentence, will use such information
only in connection with the Offer, and, if this Agreement is terminated, will
upon request of the Company deliver or cause to be delivered to the Company all
copies of such information then in its possession or the possession of its
agents or representatives.
Section 1.3 Directors.
---------
(a) Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, of the Company as is equal to the product
of the total number of directors on such Board of Directors (giving effect to
the directors designated by Parent pursuant to this sentence) multiplied by the
Board Fraction. The Directors so designated by Parent shall take office
immediately after (i) the purchase of and payment for any Shares by Parent or
any of its Subsidiaries as a result of which Parent owns beneficially at least
that number of shares which satisfies the Minimum Condition or the Revised
Minimum Number, as applicable, and (ii) compliance with Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, whichever shall occur later.
In furtherance thereof, the Company shall, upon request of the Parent, promptly
either increase the size of its Board of Directors or secure the resignations of
such number of its incumbent directors, or both, as is necessary to enable such
designees of Parent to be so elected or appointed to the Company Board of
Directors, and the Company shall take all actions available to the Company to
cause such designees of Parent to be so elected or appointed at such time. At
such time, the Company shall, if requested by Parent, also take all action
necessary to cause persons designated by Parent to constitute the same Board
Fraction of (i) each committee of the Company Board of Directors and (ii) each
committee (or similar body) of each such board.
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<PAGE>
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder in order
to fulfill its obligations under Section 1.3(a), including mailing to
shareholders, concurrently with mailing to shareholders the Schedule 14D-9, the
information required by such Section 14(f) and Rule 14f-1 as is necessary to
enable Parent's designees to be elected or appointed to the Company Board of
Directors immediately after the purchase of and payment for any Shares by Parent
or any of its Subsidiaries as a result of which Parent own beneficially at least
a majority of then outstanding Shares. Parent or Purchaser will supply the
Company all information with respect to either of them and their nominees,
officers, directors and Affiliates required to be disclosed by such Section
14(f) and Rule 14f-1. The provisions of this Section 1.3 are in addition to and
shall not limit any rights which Purchaser, Parent or any of their Affiliates
may have as a holder or beneficial owner of Shares as a matter of law with
respect to the election of directors or otherwise.
(c) In the event that Parent's designees are elected or appointed to
the Company Board of Directors, until the Effective Time, the Company Board of
Directors shall have at least two directors who are Independent Directors,
provided that, in such event, if the number of Independent Directors shall be
reduced below two for any reason whatsoever, any remaining Independent Directors
(or Independent Director, if there be only one remaining) shall be entitled to
designate persons to fill such vacancies who shall be deemed to be Independent
Directors for purposes of this Agreement or, if no Independent Director then
remains, the other directors shall designate two persons to fill such vacancies
who shall not be shareholders, Affiliates or Associates of Parent or
Purchaser, and such persons shall be deemed to be Independent Directors for
purposes of this Agreement. Notwithstanding anything in this Agreement to the
contrary, in the event that Parent's designees constitute a majority of the
directors on the Company Board of Directors, the affirmative vote of a majority
of the Independent Directors shall be required after the acceptance for payment
of Shares pursuant to the Offer and prior to the Effective Time, to (a) amend or
terminate this Agreement by the Company, (b) exercise or waive any of the
Company's rights, benefits or remedies hereunder if such exercise or waiver
materially and adversely affects holders of Shares other than Parent or
Purchaser, or (c) take any other action under or in connection with this
Agreement if such action materially and adversely affects holders of Shares
other than Parent or Purchaser; provided, that if there shall be no such
--------
directors, such actions may be effected by unanimous vote of the entire Company
Board of Directors.
Page 6
<PAGE>
Section 1.4 The Merger.
----------
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time, the Company and Purchaser shall consummate a merger pursuant to
which (a) Purchaser shall be merged with and into the Company and the separate
corporate existence of Purchaser shall thereupon cease, (b) the Company shall be
the successor or surviving corporation in the Merger and shall continue to be
governed by the laws of the State of California, and (c) the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger, except as set forth in this
Section 1.4.
(b) As of the Effective Time of the Merger, the articles of
incorporation of the Surviving Corporation shall be as set forth in Exhibit D-1
to this Agreement, and such articles of incorporation shall be the articles of
incorporation of Surviving Corporation until thereafter amended as provided by
law and such articles of incorporation of the Surviving Corporation. As of the
Effective Time of the Merger, the by-laws of the Surviving Corporation shall as
set forth in Exhibit D-2 to this Agreement, and such by-laws shall be the by-
laws of the Surviving Corporation until thereafter amended as provided by law
and such by-laws of the Surviving Corporation.
Section 1.5 Effective Time. Upon the terms and subject to the
--------------
conditions set forth in Article VI of this Agreement and the California Merger
Agreement, the form of which is attached hereto as Exhibit C, the parties hereto
shall file the California Merger Agreement with the Secretary of State of the
State of California, whereupon Purchaser shall be merged with and into the
Company in accordance with the applicable provisions of this Agreement and the
CGCL. Concurrently with the filing of the California Merger Agreement with
the Secretary of State of the State of California and upon the terms and subject
to the conditions set forth in this Agreement, the parties hereto shall file a
Certificate of Merger with the Secretary of State of Delaware in accordance with
the relevant provisions of the DGCL. The parties hereto shall make all other
filings, recordings or publications required by the CGCL and the DGCL in
connection with the Merger. The Merger shall become effective at the time
specified in the California Merger Agreement or the Certificate of Merger, as
the case may be, which specified time shall be the same in each of the
California Merger Agreement and the Certificate of Merger.
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Section 1.6 Closing. The closing of the Merger shall take place at
-------
10:00 a.m. on a date to be agreed upon by the parties, and if such date is not
agreed upon by the parties, the Closing shall occur on the business day after
satisfaction or waiver of all of the conditions set forth in Article VI, at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 525 University Avenue,
Suite 220, Palo Alto, California 94301.
Section 1.7 Directors and Officers of the Surviving Corporation.
---------------------------------------------------
The directors and officers of the Company at the Effective Time shall, from and
after the Effective Time, be the directors and officers of the Surviving
Corporation until their successors shall have been duly elected or appointed or
qualified or until their earlier death, resignation or removal in accordance
with the articles of incorporation and the by-laws of the Surviving Corporation.
If, at the Effective Time, a vacancy shall exist on the Company Board of
Directors or in any office of the Surviving Corporation, such vacancy may
thereafter be filled in the manner provided by law.
Section 1.8 Subsequent Actions. If at any time after the Effective
------------------
Time the Surviving Corporation will consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Purchaser acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of either the Company or Purchaser, all such deeds, bills of
sale, instruments of conveyance, assignments and assurances and to take and do,
in the name and on behalf of each of such corporations or otherwise, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
Section 1.9 Shareholders' Meeting.
---------------------
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through its Board of Directors, shall, in accordance with
applicable law:
Page 8
<PAGE>
(i) duly call, give notice of, convene and hold a Special Meeting of
its shareholders as promptly as practicable following the acceptance for
payment and purchase of Shares by Purchaser pursuant to the Offer for the
purpose of considering and taking action upon the approval of the Merger and the
adoption of this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and use its best
efforts to obtain and furnish the information required to be included by the SEC
in the Proxy Statement (as hereinafter defined) and, after consultation with
Parent, to respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive proxy or
information statement, including any amendment or supplement thereto to be
mailed to its shareholders, provided that no amendment or supplement to such
Proxy or information statement will be made by the Company without consultation
with Parent and its counsel;
(iii) include in the Proxy Statement the recommendation of
the Board of Directors that shareholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement;
(iv) use its best efforts to solicit from holders of Shares
proxies in favor of the Merger and shall take all other action necessary or, in
the reasonable opinion of Parent, advisable to secure any vote or consent of
shareholders required under California law to effect the Merger.
(b) Parent will provide the Company with the information concerning
Parent and Purchaser required to be included in the Proxy Statement. Parent
shall vote, or cause to be voted, all of the Shares then owned by it, Purchaser
or any of its other Subsidiaries or Affiliates controlled by Parent in favor of
the approval of the Merger and the approval and adoption of this Agreement.
Section 1.10 Merger Without Meeting of Shareholders.
--------------------------------------
Notwithstanding Section 1.9, in the event that Parent, Purchaser and any other
Subsidiaries of Parent shall acquire in the aggregate a number of the
outstanding shares of each class of capital stock of the Company, pursuant to
the Offer or otherwise, sufficient to enable Purchaser or the Company to cause
the Merger to become effective without a meeting of shareholders of the Company,
the parties hereto shall, at the request of Parent and subject to Article VI,
take all necessary and appropriate action to cause
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the Merger to become effective as soon as practicable after such acquisition,
without a meeting of shareholders of the Company, in accordance with Section
1110 of the CGCL.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time,
---------------------------
by virtue of the Merger and without any further action on the part of the
holders of any Shares or holders of Purchaser Common Stock:
(a) Purchaser Common Stock. Each issued and outstanding share of
----------------------
Purchaser Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Parent-Owned Stock. All Shares that are owned by
----------------------------------
Parent, Purchaser or any other wholly-owned Subsidiary of Parent shall be
cancelled and retired and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(c) Conversion of Shares. Each issued and outstanding Share (other
--------------------
than Shares to be cancelled in accordance with Section 2.1(b) and other than any
Dissenting Shares) shall be converted into the right to receive the Offer Price,
payable to the holder thereof, without interest, upon surrender of the
certificate formerly representing such Share in the manner provided in Section
2.2. From and after the Effective Time, all such converted Shares shall no
longer be outstanding and shall be deemed to be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such Shares
shall cease to have any rights with respect to such shares except the right to
receive the Merger Consideration therefor, without interest, upon the surrender
of such certificate in accordance with Section 2.2.
Section 2.2 Exchange of Certificates.
------------------------
(a) Paying Agent. Parent shall designate a bank or trust company to
------------
act as agent for the holders of the Shares in connection with the Merger to
receive in trust the funds to which holders of the Shares shall become entitled
Page 10
<PAGE>
pursuant to Section 2.1(c). At the Effective Time, Parent or Purchaser shall
deposit, or cause to be deposited, with the Exchange Agent for the benefit of
holders of Shares the aggregate consideration to which such holders shall be
entitled at the Effective Time pursuant to Section 2.1(c). Such funds shall be
invested as directed by Parent or the Surviving Corporation pending payment
thereof by the Paying Agent to holders of the Shares. Earnings from such
investments shall be the sole and exclusive property of Purchaser and the
Surviving Corporation, and no part of such earnings shall accrue to the benefit
of holders of Shares.
(b) Exchange Procedures. As soon as reasonably practicable after the
-------------------
Effective Time, Parent shall cause the Paying Agent to mail to each holder of
record of a Certificate or Certificates, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Paying
Agent and shall be in such form and have such other provisions not inconsistent
with this Agreement as Parent may specify) and (ii) instructions for use in
effecting the surrender of Certificates in exchange for payment of the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Paying
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, the holder of such Certificate
shall be entitled to receive in exchange therefor the Merger Consideration for
each Share formerly represented by such Certificate, and the Certificate so
surrendered shall forthwith be cancelled. If payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the person requesting such payment shall
have paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration in cash as contemplated by this Section 2.2.
(c) Transfer Books; No Further Ownership Rights in the Shares. At the
---------------------------------------------------------
Effective Time, the stock transfer books of the Company shall be closed, and
thereafter there shall be no further registration of transfers of the Shares on
the records of the Company. From and after the Effective Time, the holders of
Certificates evidencing ownership of the Shares outstanding immediately prior to
the
Page 11
<PAGE>
Effective Time shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable law.
(d) Termination of Fund; No Liability. At any time following six
---------------------------------
months after the Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including any earnings
received with respect thereto) which had been made available to the Paying Agent
and which have not been disbursed to holders of Certificates, and thereafter
such holders shall be entitled to look only to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) and only as
general creditors thereof with respect to the Merger Consideration payable upon
due surrender of their Certificates, without any interest thereon.
Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying
Agent shall be liable to any holder of a Certificate for Merger Consideration
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
Section 2.3 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the contrary,
Dissenting Shares shall not be converted into or represent a right to receive
cash pursuant to Section 2.1, but the holder thereof shall be entitled to only
such rights as are granted by the CGCL.
(b) Notwithstanding the provisions of Section 2.3(a), if any holder of
Shares who demands appraisal of his Shares under the CGCL effectively withdraws
or loses (through failure to perfect or otherwise) his right to appraisal, then
as of the Effective Time or the occurrence of such event, whichever later
occurs, such holder's Shares shall automatically be converted into and represent
only the right to receive the Merger Consideration as provided in Section
2.1(c), without interest, upon surrender of the certificate or certificates
representing such Shares pursuant to Section 2.2.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands, and any other instruments served on the Company pursuant to the
CGCL received by the Company, and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
CGCL. Except with the prior written consent of Parent, the Company shall not
voluntarily
Page 12
<PAGE>
make any payment with respect to any demands for appraisal, settle
or offer to settle any such demands.
Section 2.4 Company Stock Option Plans.
--------------------------
(a) At the Effective Time, each Company Option, whether vested or
unvested, shall be assumed by Parent (and Parent shall take all action necessary
under applicable law, to cause such result or equivalent result without
disadvantage to the Company Option holders) and shall thereupon constitute an
option to acquire that number of shares of Parent Common Stock equal to (i) the
number of Shares subject to the Company Option immediately prior to the
Effective Time, multiplied by (ii) the Exchange Ratio, rounded down to the
nearest whole share, at a price per share of Parent Common Stock equal to (x)
the exercise price of the Company Option immediately prior to the Effective
Time, divided by (y) the Exchange Ratio, rounded up to the nearest whole cent.
Other than as described in the immediately preceding sentence, the Company
Options shall be subject to the same terms and conditions as applicable
immediately prior to the Effective Time. As soon as reasonably practicable
following the Effective Time, Parent shall deliver to each holder of a Company
Option an appropriate notice setting forth the terms of such assumption. With
respect to any Company Option that is an incentive stock option (within the
meaning of Section 422 of the Code) immediately prior to the Effective Time,
such assumption shall, to the extent reasonably practicable, conform to the
requirements of Section 424(a) of the Code. Parent shall take all action
necessary for the shares of Parent Common Stock to rank pari passu in all
---- -----
respects with all other shares of Parent Common Stock then in issue and to be
listed and issuable upon exercise of the Company Options so that such Company
Options shall be freely tradeable on the New York Stock Exchange.
(b) Except as may be otherwise agreed to by Parent or Purchaser and
the Company or as otherwise contemplated or required to effectuate this Section
2.4, the Plans shall terminate as of the Effective Time and the provisions in
any other plan, program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of the Company shall be
deleted as of the Effective Time.
(c) The Company shall take all necessary actions to provide that as of
the Effective Time no holder of Company Options under the Plans will have any
right to receive shares of common stock of the Surviving Corporation upon
exercise of any such Company Option.
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(d) Notwithstanding anything in this Agreement to the contrary, a vote
of a majority of the Independent Directors shall be required to amend this
Section 2.4 in any manner adverse to the holders of Company Options described
herein.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule prepared and signed by
the Company and to be delivered to Parent no later than 5:00 p.m., Pacific
Standard Time on January 14, 1999, the Company represents and warrants to Parent
and Purchaser that all of the statements contained in this Article III are true
and correct as of the date of this Agreement (or, if made as of a specified
date, as of such date), and will be true and correct as of the Closing Date as
though made on the Closing Date. Each exception set forth in the Disclosure
Schedule and each other response to this Agreement set forth in the Disclosure
Schedule is identified by reference to, or has been grouped under a heading
referring to, a specific individual section of this Agreement and, except as
otherwise specifically stated with respect to such exception, relates only to
such section. The disclosures in each section of the Disclosure Schedule relate
only to the representations and warranties set forth in the Section of this
Agreement to which such section of the Disclosure Schedule expressly relates and
not to any other representation and warranty contained in this Agreement, except
to the extent that one section of the Disclosure Schedule specifically refers to
another section thereof. In the event of any inconsistency between statements
in the body of this Agreement and statements in the Disclosure Schedule
(excluding exceptions expressly set forth in the Disclosure Schedule with
respect to a specifically identified representation or warranty), the statements
in the body of this Agreement shall control.
Section 3.1 Organization; Qualification. The Company (i) is a
---------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California; (ii) has full corporate power and authority to carry
on its business as it is now being conducted and to own the properties and
assets it now owns; and (iii) is duly qualified or licensed to do business as a
foreign corporation in good standing in every jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification.
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Section 3.2 Capitalization. (a) The authorized capital stock of the
--------------
Company consists of 25,000,000 Shares. As of the date hereof, (i) 8,140,793
Shares are issued and outstanding, (ii) no shares of Company Preferred Stock are
issued and outstanding, (iii) pursuant to California law, no Shares are issued
and held in the treasury of the Company, (iv) 2,743,325 Shares are reserved for
issuance pursuant to outstanding Company Options, and (v) 4,212,238 Shares are
reserved for issuance pursuant to outstanding warrants of the Company. All the
outstanding shares of the Company's capital stock are, and all Shares which may
be issued pursuant to the exercise of outstanding Company Options will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable. There is no Voting Debt of the Company
issued and outstanding. Except as set forth above and except for the
Transactions, as of the date hereof, (i) there are no shares of capital stock of
the Company authorized, issued or outstanding; (ii) there are no existing
options, warrants, calls, pre-emptive rights, subscriptions or other rights,
agreements, arrangements or commitments of any character, relating to the issued
or unissued capital stock of the Company, obligating the Company to issue,
transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interest in, the Company or
securities convertible into or exchangeable for such shares or equity interests,
or obligating the Company to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or commitment
and (iii) there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any Shares, or the capital stock of the
Company or Affiliate of the Company or to provide funds to make any investment
(in the form of a loan, capital contribution or otherwise) in any other entity.
(b) There are no voting trusts or other agreements or understandings
to which the Company is a party with respect to the voting of the capital stock
of the Company.
(c) Following the Effective Time, no holder of Company Options will
have any right to receive shares of common stock of the Surviving Corporation
upon exercise of Company Options.
(d) No Indebtedness of the Company contains any restriction upon (i)
the prepayment of any Indebtedness of the Company, (ii) the incurrence of
Indebtedness by the Company, or (iii) the ability of the Company to grant any
lien on the properties or assets of the Company.
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Section 3.3 Authorization; Validity of Agreement; Company Action.
----------------------------------------------------
The Company has full corporate power and authority to execute and deliver this
Agreement and the Stock Option Agreement, and to consummate the Transactions.
The execution, delivery and performance by the Company of this Agreement and the
consummation by it of the Transactions, have been duly authorized by the Company
Board of Directors and, except for obtaining the approval of its shareholders as
contemplated by Section 1.9, no other corporate action on the part of the
Company is necessary to authorize the execution and delivery by the Company of
this Agreement or the Stock Option Agreement or the consummation by it of the
Transactions. This Agreement and the Stock Option Agreement have been duly
executed and delivered by the Company and, assuming due and valid authorization,
execution and delivery thereof by Parent, this Agreement and the Stock Option
Agreement are valid and binding obligations of the Company enforceable against
the Company in accordance with their terms.
Section 3.4 Board Approvals Regarding Transactions. The Company
--------------------------------------
Board of Directors, at a meeting duly called and held or by unanimous written
consent, has (i) unanimously determined that each of the Agreement, the Stock
Option Agreement, the Offer and the Merger are fair to and in the best interests
of the shareholders of the Company, (ii) approved the 1 Transactions, and (iii)
resolved to recommend that the shareholders of the Company accept the Offer,
tender their Shares to Purchaser pursuant to the Offer and approve and adopt
this Agreement and the Merger, and none of the aforesaid actions by the Company
Board of Directors has been amended, rescinded or modified. To the knowledge of
the Company, no state takeover statute is applicable to the Merger or the other
Transactions.
Section 3.5 Vote Required. The affirmative vote of the holders of
-------------
a bare majority of the outstanding Shares is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve the Merger.
No vote of any class or series of the Company's capital stock is necessary to
approve any of the Transactions other than the Merger.
Section 3.6 Consents and Approvals; No Violations. Except for the
-------------------------------------
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act,
state securities or blue sky laws, and the CGCL, none of the execution, delivery
or performance of this Agreement by the Company, the consummation by the Company
of the Transactions or compliance by the Company with any of the provisions
hereof will (i) conflict with or result in any breach of any provision of the
articles of incorporation, the by-laws or
Page 16
<PAGE>
similar organizational documents of the Company, (ii) require any filing with,
or permit, authorization, consent or approval of, any Governmental Entity, (iii)
result in a violation or breach of, or constitute (with or without due notice or
the passage of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any Company Agreement, or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of their properties or assets, excluding from the foregoing clauses (ii),
(iii) and (iv) such violations, breaches or defaults which would not,
individually or in the aggregate, have a material adverse effect on the Company.
There are no third party consents or approvals required to be obtained under the
Company Agreements prior to the consummation of the Transactions.
Section 3.7 SEC Reports and Financial Statements. The Company has
------------------------------------
filed with the SEC, and has heretofore made available to Parent, true and
complete copies of, the Company SEC Documents. As of their respective dates or,
if amended, as of the date of the last such amendment filed prior to the date
hereof, the Company SEC Documents, including, without limitation, any financial
statements or schedules included therein (a) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading and (b)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. The Financial Statements have
been prepared from, and are in accordance with, the books and records of the
Company, comply in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto,
have been prepared in accordance with GAAP applied on a consistent basis during
the period involved (except as may be stated in the notes thereto) and fairly
present the consolidated financial position and the results of operations and
cash flows (and changes in financial position, if any) of the Company as of the
times and for the periods referred to therein.
Section 3.8 Books and Records. The books of account, minute books,
-----------------
stock record books and other records of the Company are complete and correct in
all material respects and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Exchange Act,
including the requirements relating to a system of internal accounting controls.
The minute books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the shareholders, the Company
Board of Directors and committees of the Company Board of Directors, and no
meeting of any of such shareholders, the
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Company Board of Directors or such committees has been held for which minutes
have not been prepared and are not contained in such minute books.
Section 3.9 No Undisclosed Liabilities. Except (a) as disclosed in
--------------------------
the Financial Statements, and (b) for liabilities and obligations (i) incurred
in the ordinary course of business and consistent with past practice since the
Balance Sheet Date pursuant to the terms of this Agreement, the Company has no
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, that have, or would be reasonably likely to have, a material adverse
effect on the Company. The reserves reflected in the Financial Statements are
adequate, appropriate and reasonable and have been calculated in a consistent
manner.
Section 3.10 Accounts Receivable. All accounts receivable of the
-------------------
Company, whether reflected in the Balance Sheet or otherwise, represent sales
actually made in the ordinary course of business, and are current and
collectible net of any reserves shown on the Balance Sheet. Subject to such
reserve, each of the accounts receivable either has been collected in full or
will be collected in full, without any set-off, within 120 days after the day on
which it became due and payable.
Section 3.11 Inventory. All of the inventories of the Company,
---------
whether reflected in the Balance Sheet or otherwise, consist of a quality and
quantity usable and salable in the ordinary and usual course of business, except
for items of obsolete materials and materials of below-standard quality, all of
which have been written off or written down on the Balance Sheet to fair market
value or for which adequate reserves have been provided therein. All
inventories not written off have been priced at the lower of average cost or
market. The quantities of each type of inventory (whether raw materials, work-
in-process, or finished goods) are not excessive, but are reasonable and
warranted in the present circumstances of the Company. All work in process and
finished goods inventory is free of any defect or other deficiency.
Section 3.12 Interim Operations. Since the date of the Balance
------------------
Sheet, the business of the Company has been conducted only in the ordinary and
usual course consistent with past practice. Since the date of the Balance
Sheet, there have not been any material adverse changes in the financial
condition, assets or results of operations of the Company. Since the date of
the Balance Sheet, such assets have not been affected in any way as a result of
flood, fire, explosion or other casualty (whether or not covered by insurance).
The Company is not aware of any circumstances which may cause it to suffer any
material adverse change in its business, operations or prospects.
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Section 3.13 Absence of Certain Changes. Except as disclosed in
--------------------------
the Company SEC Documents filed prior to the date hereof, since the date of the
Balance Sheet, the Company has not:
(a) suffered any material adverse change in its working capital,
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business, operations or prospects;
(b) incurred any liabilities or obligations (absolute, accrued,
contingent or otherwise) except non-material items incurred in the ordinary
course of business and consistent with past practice, none of which exceeds
$100,000 (counting obligations or liabilities arising from one transaction or a
series of similar transactions, and all periodic installments or payments under
any lease or other agreement providing for periodic installments or payments, as
a single obligation or liability), or increased, or experienced any change in
any assumptions underlying or methods of calculating, any bad debt, contingency
or other reserves;
(c) paid, discharged or satisfied any claim, liability or obligation
(whether absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities and obligations reflected or reserved against in
the Balance Sheet or incurred in the ordinary course of business and consistent
with past practice since the date of the Balance Sheet;
(d) permitted or allowed any of its property or assets (real, personal
or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, except for
liens for current taxes not yet due;
(e) written down the value of any inventory (including write-downs by
reason of shrinkage or mark-down) or written off as uncollectible any notes or
accounts receivable, except for immaterial write-downs and write-offs in the
ordinary course of business and consistent with past practice;
(f) cancelled any debts or waived any claims or rights of
substantial value;
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(g) sold, transferred, or otherwise disposed of any of its properties
or assets (real, personal or mixed, tangible or intangible), except in the
ordinary course of business and consistent with past practice;
(h) disposed of or permitted to lapse any rights to the use of any
Intellectual Property, or disposed of or disclosed (except as necessary in the
conduct of its business) to any person other than representatives of Parent any
trade secret, formula, process, know-how or other Intellectual Property not
theretofore a matter of public knowledge;
(i) granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension,
profitsharing or other plan or commitment) or any increase in the compensation
payable or to become payable to any officer or employee, and no such increase is
customary on a periodic basis or required by agreement or understanding;
(j) made any single capital expenditure or commitment in excess of
$10,000 for additions to property, plant, equipment or intangible capital assets
or made aggregate capital expenditures and commitments in excess of $50,000 (on
a consolidated basis) for additions to property, plant, equipment or intangible
capital assets;
(k) declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of capital stock or other
securities of the Company;
(l) made any change in any method of accounting or accounting
practice;
(m) paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any of its
officers or directors or any Affiliate or Associate of any of its officers or
directors except for directors' fees, and compensation to officers at rates not
exceeding the rates of compensation paid during the year ended January 31, 1998;
or
(n) agreed, whether in writing or otherwise, to take any action
described in this section.
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Section 3.14 Litigation. There is no action, suit, inquiry,
----------
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending or threatened against
or involving the Company or which questions or challenges the validity of this
Agreement or any action taken or to be taken by the Company pursuant to this
Agreement or in connection with the Transactions; nor is there any valid basis
for any such action, proceeding or investigation. The Company is not in default
under or in violation of, nor is there any valid basis for any claim of default
under or violation of, any contract, commitment or restriction to which it is a
party or by which it is bound. The Company is not subject to any judgment, order
or decree which may have an adverse effect on its business practices or on its
ability to acquire any property or conduct its business in any area.
Section 3.15 Employee Benefit Plans.
----------------------
(a) The Disclosure Schedule contains a true and complete list of
each deferred compensation and each incentive compensation, stock purchase,
stock option and other equity compensation plan, program, agreement or
arrangement; each severance or termination pay, medical, surgical,
hospitalization, life insurance and other "welfare" plan, fund or program
(within the meaning of Section 3(1) of ERISA); each profit-sharing, stock bonus
or other "pension" plan, fund or program (within the meaning of Section 3(2) of
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained or contributed to or required to be contributed to
by the Company or by any ERISA Affiliate, or to which the Company or an ERISA
Affiliate is party, whether written or oral, for the benefit of any employee or
former employee of the Company. Neither the Company nor any ERISA Affiliate has
any commitment or formal plan, whether legally binding or not, to create any
additional employee benefit plan or modify or change any existing Plan that
would affect any employee or former employee of the Company.
(b) With respect to each of the Plans, the Company has
heretofore delivered to Parent true and complete copies of each of the following
documents, as applicable: (i) a copy of the Plan documents (including all
amendments thereto) for each written Plan or a written description of any Plan
that is not otherwise in writing; (ii) a copy of the annual report or Internal
Revenue Service Form 5500 Series, if required under ERISA, with respect to each
Plan for the last three Plan years ending prior to the date of this Agreement
for which such a report was filed; (iii) a copy of the actuarial report, if
required under ERISA, with respect to each Plan for the last three Plan years
ending prior to the date of this Agreement; (iv) a copy of the most
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recent Summary Plan Description ("SPD"), together with all Summaries of Material
---
Modification issued with respect to such SPD, if required under ERISA, with
respect to each Plan, and all other material employee communications relating to
each Plan; (v) if the Plan is funded through a trust or any other funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof, if any; (vi)
all contracts relating to the Plans with respect to which the Company, and of
its Subsidiaries or any ERISA Affiliate may have any liability, including
insurance contracts, investment management agreements, subscription and
participation agreements and record keeping agreements; and (vii) the most
recent determination letter received from the IRS with respect to each Plan that
is intended to be qualified under Section 401(a) of the Code.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than liability for
premiums due the PBGC (which premiums have been paid when due). Insofar as the
representation made in this Section 3.16(c) applies to Sections 4064, 4069 or
4204 of Title IV of ERISA, it is made with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which the
Company or any ERISA Affiliate made, or was required to make, contributions
during the five year period ending on the last day of the most recent plan year
ended prior to the Closing Date.
(d) The PBGC has not instituted proceedings to terminate any
Title IV Plan and no condition exists that presents a material risk that such
proceedings will be instituted.
(e) With respect to each Title IV Plan, the present value of
accrued benefits under such plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such plan's
actuary with respect to such plan did not exceed, as of its latest valuation
date, then current value of the assets of such plan allocable to such accrued
benefits.
(f) No Title IV Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each Title IV Plan ended prior to the Closing
Date. All contributions required to be made with respect to any Plan on or prior
to the Closing Date have been timely made.
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(g) No Title IV Plan is a "multi-employer pension plan," as
defined in Section 3(37) of ERISA, nor is any Title IV Plan a plan described in
Section 4063(a) of ERISA. Neither the Company nor any ERISA Affiliate has made
or suffered a "complete withdrawal" or a "partial withdrawal," as such terms are
respectively defined in Sections 4203 and 4205 of ERISA (or any liability
resulting therefrom has been satisfied in full).
(h) Neither the Company, any Plan, any trust created thereunder,
nor any trustee or administrator thereof has engaged in a transaction in
connection with which the Company, any Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Plan or any such trust
could be subject to either a civil penalty assessed pursuant to Section 409 or
502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code.
(i) Each Plan has been operated and administered in all material
respects in accordance with its terms and applicable law, including but not
limited to ERISA and the Code.
(j) Each Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified, and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code. Each Plan intended to
satisfy the requirements of Section 501(c)(9) has satisfied such requirements.
(k) No Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former employees
of the Company for periods extending beyond their retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his beneficiary).
(l) No amounts payable under the Plans will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.
(m) The consummation of the Transactions will not, either alone
or in combination with another event, (i) entitle any current or former employee
or officer of the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer.
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(n) There are no pending, threatened or anticipated claims by or
on behalf of any Plan, by any employee or beneficiary covered under any such
Plan, or otherwise involving any such Plan (other than routine claims for
benefits).
Section 3.16 Tax Matters; Government Benefits.
--------------------------------
(a) The Company has duly and timely filed all Tax Returns that
are required to be filed by it, and has duly paid in full or made adequate
provision for the payment of all Taxes relating to all periods or portions
thereof ending through the date hereof. All such Tax Returns are correct and
complete in all material respects. Since the Balance Sheet Date, the Company has
not incurred liability for any Taxes other than in the ordinary course of
business. The Company has not received notice of any claim made by an authority
in a jurisdiction where the Company does not file a Tax Return, that the Company
is or may be subject to taxation by that jurisdiction.
(b) The Company has not waived any statute of limitations in any
jurisdiction in respect of Taxes or Tax Returns or agreed to any extension of
time with respect to a Tax assessment or deficiency. The Company has not
requested or been granted any extension of time within which to file any Tax
Returns that have not since been filed. There are no Tax liens upon any of the
assets of the Company except for liens for Taxes not yet due for which adequate
reserves have been established.
(c) No federal, state, local or foreign audits, examinations or
other administrative proceedings have been commenced, are pending or are
threatened with regard to any Taxes or Tax Returns of the Company. There is no
dispute or claim concerning any Tax liability of the Company either claimed or
raised by any taxing authority that has not been settled and fully paid.
(d) The Company is not a party to any agreement, plan, contract
or arrangement that could result, separately or in the aggregate, in a payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code.
(e) The Company has not filed a consent pursuant to Section
341(f) of the Code (or any predecessor provision) concerning collapsible
corporations, or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a "subsection (f) asset" (as such term is defined in Section
341(f)(4) of the Code) owned by the Company. The Company has not agreed to make,
or is required to make, any adjustment under Section 481(a) of the Code (or
comparable provision under other laws) by reason of a change in accounting
method or otherwise.
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(f) No taxing authority is asserting or threatening to assert a
claim against the Company under or as a result of Section 482 of the Code or any
similar provision of state, local or foreign law.
(g) The Company is not a party to any material tax sharing, tax
indemnity or other similar agreement or arrangement with any entity.
(h) The Company has not been a member of any affiliated group
within the meaning of Section 1504(a) of the Code, or any similar affiliated or
consolidated group for tax purposes under state, local or foreign law, or has
any liability for Taxes of any person (other than the Company) under Treasury
Regulation Section 1.1502-6 or any similar provision of state, local or foreign
law as a transferee or successor, by contract or otherwise.
(i) The Company has complied in all respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes and
have, within the time prescribed by law, withheld and paid over to the proper
governmental authorities all amounts required to be withheld and paid over under
all applicable laws.
Section 3.17 Title to Properties; Encumbrances. The Company has
---------------------------------
good, valid and marketable title to all the properties and assets which it
purports to own (real, personal and mixed, tangible and intangible), including,
without limitation, all the properties and assets reflected in the Balance
Sheet, and all the properties and assets purchased by the Company since the date
of the Balance Sheet, which subsequently acquired properties and assets (other
than inventory) are listed in the Disclosure Schedule. All properties and assets
reflected in the Balance Sheet have a fair market or realizable value at least
equal to the value thereof as reflected therein, and all such properties and
assets are free and clear of all mortgages, title defects or objections, liens,
claims, charges, security interests or other encumbrances of any nature
whatsoever including, without limitation, leases, chattel mortgages, conditional
sales contracts, collateral security arrangements and other title or interest
retention arrangements, and are not, in the case of real property, subject to
any rights of way, building use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever except, with respect to all
such properties and assets, (a) liens shown on the Balance Sheet as securing
specified liabilities or obligations and liens incurred in connection with the
purchase of property and/or assets, if such purchase was effected after the date
of the Balance Sheet, with respect to which no default exists; (b) minor
imperfections of title, if any, none of which are substantial in amount,
materially detract from the value
Page 25
<PAGE>
or impair the use of the property subject thereto, or impair the operations of
the Company and which have arisen only in the ordinary course of business and
consistent with past practice since the date of the Balance Sheet; and (c) liens
for current taxes not yet due. The rights, properties and other assets presently
owned, leased or licensed by the Company and described elsewhere in this
Agreement include all rights, properties and other assets necessary to permit
the Company to conduct its business in all material respects in the same manner
as its business has been conducted prior to the date hereof.
Section 3.18 Plant and Equipment. The plants, structures and
-------------------
equipment of the Company are structurally sound with no known defects and are in
good operating condition and repair and are adequate for the uses to which they
are being put. None of such plants, structures or equipment are in need of
maintenance or repairs except for ordinary, routine maintenance and repairs
which are not material in nature or cost. The Company has not received
notification that it is in violation of any applicable building, zoning, anti-
pollution, health or other law, ordinance or regulation in respect of its plants
or structures or their operations.
Section 3.19 Leases. The Disclosure Schedule contains an accurate and
------
complete description of the terms of all leases pursuant to which the Company
leases real or personal property. All such leases are valid, binding and
enforceable in accordance with their terms, and are in full force and effect;
there are no existing defaults by the Company thereunder; and no event of
default has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
thereunder. Executed counterpart copies of all consents referred to in the
preceding sentence will be delivered to Parent at the Closing.
Section 3.20 Environmental Laws. Except as disclosed in the Company
------------------
SEC Documents (a) the Company is in compliance in all material respects with all
Environmental Laws, including, but not limited to, compliance with any permits
or other governmental authorizations or the terms and conditions thereof; (b)
the Company has not received any communication or notice, whether from a
governmental authority or otherwise, alleging any violation of or noncompliance
with any Environmental Laws by the Company for which it is responsible, and
there is no pending or, to the Company's knowledge, threatened Environmental
Claim, except where such Environmental Claim would not have a material adverse
effect on the Company; and (c) to the Company's knowledge, there are no past or
present facts or circumstances that could form the basis of any Environmental
Claim against the Company or against any person or entity whose liability for
any Environmental Claim the Company has retained or assumed either contractually
or by operation of law, except where such Environmental Claim, if made,
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<PAGE>
would not have a material adverse effect on the Company. All permits and other
governmental authorizations currently held or required to be held by the Company
pursuant to any Environmental Laws are identified in the Disclosure Schedule.
The Company has provided to Parent all assessments, reports, data, results of
investigations or audits, and other information that is in the possession of or
reasonably available to the Company regarding environmental matters pertaining
to or the environmental condition of the business of the Company, or the
compliance (or noncompliance) by the Company with any Environmental Laws.
Section 3.21 Bank Accounts. The Disclosure Schedule sets forth the
-------------
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company maintains safe deposit
boxes or accounts of any nature, and the names of all persons authorized to draw
thereon, make withdrawals therefrom or have access thereto. At the Closing, the
Company will deliver to Parent copies of all records, including all signature or
authorization cards, pertaining to such bank accounts.
Section 3.22 Intellectual Property.
---------------------
(a) As used herein, the term "Intellectual Property" means all
trademarks, service marks, trade names, Internet domain names, designs, logos,
slogans and general intangibles of like nature, together with goodwill,
registrations and applications relating to the foregoing; registered and
unregistered patents, copyrights (including registrations and applications for
any of the foregoing); computer programs, including any and all software
implementations of algorithms, models and methodologies whether in source code
or object code form, databases and compilations, including any and all data and
collections of data, all documentation, including user manuals and training
materials, related to any of the foregoing and the content and information
contained on any Web site (collectively, "Software"); confidential information,
technology, know-how, inventions, processes, formulae, algorithms, models and
methodologies (such confidential items, collectively "Trade Secrets") held for
use or used in the business of the Company as conducted as of the Closing Date
or as presently contemplated to be conducted and any licenses to use any of the
foregoing.
(b) Section 3.22(b) of the Disclosure Schedule sets forth, for
all Intellectual Property owned by the Company, a complete and accurate list, of
all U.S. and foreign: (i) patents and patent applications; (ii) trademark and
service mark registrations (including Internet domain name registrations),
trademark and service mark
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applications and material unregistered trademarks and service marks; and (iii)
copyright registrations, copyright applications and material unregistered
copyrights.
(c) Section 3.22(c) of the Disclosure Schedule lists all
contracts for material Software which is licensed, leased or otherwise used by
the Company and all Software which is owned by the Company ("Proprietary
Software"), and identifies which Software is owned, licensed, leased, or
otherwise used, as the case may be.
(d) Section 3.22(d) of the Disclosure Schedule sets forth a
complete and accurate list of all agreements granting or obtaining any right to
use or practice any rights under any Intellectual Property, to which the Company
is a party or otherwise bound, as licensee or licensor thereunder, including,
without limitation, license agreements, settlement agreements and covenants not
to sue (collectively, the "License Agreements").
(e) Except as would not have a material adverse effect on the
Company:
(i) the Company owns or has the right to use all
Intellectual Property, free and clear of all liens or other encumbrances;
(ii) any Intellectual Property owned or used by the
Company has been duly maintained, is valid and subsisting, in full force and
effect and has not been cancelled, expired or abandoned;
(iii) the Company has not received written notice from any
third party regarding any actual or potential infringement by the Company of any
intellectual property of such third party, and the Company has no knowledge of
any basis for such a claim against the Company;
(iv) the Company has not received written notice from any
third party regarding any assertion or claim challenging the validity of any
Intellectual Property owned or used by the Company and the Company has no
knowledge of any basis for such a claim;
(v) the Company has not licensed or sublicensed its
rights in any Intellectual Property, or received or been granted any such
rights, other than pursuant to the License Agreements;
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(vi) no third party is misappropriating, infringing,
diluting or violating any Intellectual Property owned by the Company;
(vii) the License Agreements are valid and binding
obligations of the Company, enforceable in accordance with their terms, and
there exists no event or condition which will result in a violation or breach
of, or constitute a default by the Company or, to the knowledge of the Company,
the other party thereto, under any such License Agreement;
(viii) the Company takes reasonable measures to protect the
confidentiality of Trade Secrets (as defined hereinafter) including requiring
third parties having access thereto to execute written nondisclosure agreements.
No Trade Secret of the Company has been disclosed or authorized to be disclosed
to any third party other than pursuant to a written nondisclosure agreement that
adequately protects the Company's proprietary interests in and to such Trade
Secrets;
(ix) the consummation of the transactions contemplated
hereby will not result in the loss or impairment of the Company rights to own or
use any of the Intellectual Property, nor will such consummation require the
consent of any third party in respect of any Intellectual Property; and
(x) all Proprietary Software set forth in Section 3.22(c)
of the Disclosure Schedule, was either developed (a) by employees of the Company
within the scope of their employment; or (b) by independent contractors who have
assigned all of their rights to the Company pursuant to written agreement.
(f) Except as set forth in Section 3.23(f) of the Disclosure
Schedule, neither the Company:
(i) has granted to any third party any exclusive rights
of any kind (including, without limitation, exclusivity with regard to
categories of advertisers on any World Wide Web site, territorial exclusivity or
exclusivity with respect to particular versions, implementations or translations
of any of the Intellectual Property), nor has the Company granted any third
party any right to market any of the Intellectual Property under any private
label or "OEM" arrangements;
(ii) has any outstanding sales or advertising contract,
commitment or proposal (including, without limitation, insertion orders,
slotting agreements or other agreements under which the Company has allowed
third parties to
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advertise on or otherwise be included in a World Wide Web site) that the Company
currently expects to result in any loss to the Company upon completion or
performance thereof;
(iii) has any oral contracts or arrangements for the sale
of advertising or any other product or service; or
(iv) employs any employee, contractor or consultant who is
in violation of any term of any written employment contract, patent disclosure
agreement or any other written contract or agreement relating to the
relationship of any such employee, consultant or contractor with the Company or,
to the Company's knowledge, any other party because of the nature of the
business conducted by the Company.
(g) All Software and systems used by the Company are Year 2000
Compliant. As used herein, "Year 2000 Compliant" and "Year 2000 Compliance" mean
for all dates and times, including, without limitation dates and times after
December 31, 1999 and in the multi-century scenario, when used on a stand-alone
system or in combination with other software or systems: (i) the application
system functions and receives and processes dates and times correctly without
abnormal results; (ii) all date related calculations are correct (including,
without limitation, age calculations, duration calculations and scheduling
calculations); (iii) all manipulations and comparisons of date-related data
produce correct results for all valid date values within the scope of the
application; (iv) there is no century ambiguity; (v) all reports and displays
are sorted correctly; and (vi) leap years are accounted for and correctly
identified (including, without limitation, that 2000 is recognized as a leap
year). The Company has obtained written representations or assurances from each
entity that (x) provides data of any type that includes date information or
which is otherwise derived from, dependent on or related to date information
("Date Data") to the Company, (y) processes in any way Date Data for the Company
or (z) otherwise provides any material product or service to the Company that is
dependent on Year 2000 Compliance, that all of such entity's Date Data and
related software and systems that are used for, or on behalf of, the Company are
Year 2000 Compliant.
Section 3.23 Employment Matters. To the Company's knowledge, no key
------------------
employee or group of employees has any plans to terminate their employment with
the Company as a result of the Transactions or otherwise. The Company has not
experienced any strikes, collective labor grievances, other collective
bargaining disputes or Claims of unfair labor practices in the last five years.
To the Company's knowledge,
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there is no organizational effort presently being made or threatened by or on
behalf of any labor union with respect to employees of the Company.
Section 3.24 Compliance with Laws. The Company is in compliance with,
--------------------
and have not violated any applicable law, rule or regulation of any United
States federal, state, local, or foreign government or agency thereof which
materially affects the business, properties or assets of the Company, and no
notice, charge, claim, action or assertion has been received by the Company or
has been filed, commenced or, to the Company's knowledge, threatened against the
Company alleging any such violation, except for any matter otherwise covered by
this sentence which does not have, individually or in the aggregate, a material
adverse effect on the Company. All licenses, permits and approvals required
under such laws, rules and regulations are in full force and effect except where
the failure to be in full force and effect would not have a material adverse
effect on the Company.
Section 3.25 Products Liability. As of the date of this Agreement,
------------------
there is no claim, action, suit or proceeding pending before any Governmental
Entity in which a Product is alleged to have a Defect; nor, to the knowledge of
the Company, as of the date of this Agreement, is any such claim, action, suit
or proceeding threatened or is there any valid basis for any such claim, action,
suit or inquiry, proceeding.
Section 3.26 Contracts and Commitments.
-------------------------
(a) The Company has no agreements, contracts, commitments or
restrictions which are material to its business, operations or prospects or
which require the making of any charitable contribution;
(b) No purchase contracts or commitments of the Company continue
for a period of more than 12 months or are in excess of the normal, ordinary and
usual requirements of business or at any excessive price;
(c) There are no outstanding sales contracts, commitments or
proposals of the Company which continue for a period of more than 12 months or
will result in any loss to the Company upon completion or performance thereof,
after allowance for direct distribution expenses, nor are there any outstanding
contracts, bids or sales or service proposals quoting prices which will not
result in a normal profit;
(d) The Company has no outstanding contracts with officers,
employees, agents, consultants, advisors, salesmen, sales representatives,
distributors
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<PAGE>
or dealers that are not cancellable by it on notice of not longer than 30 days
and without liability, penalty or premium, or any agreement or arrangement
providing for the payment of any bonus or commission based on sales or earnings;
(e) The Company has no employment agreements, or any other
agreements that contain any severance or termination pay liabilities or
obligations;
(f) The Company has no collective bargaining or union contracts
or agreements;
(g) The Company is not in default, nor is there any basis for
any valid claim of default, under any contract made or obligation owed by it;
(h) The Company has no employee to whom it is paying
compensation at the annual rate of more than $75,000 for services rendered;
(i) The Company is not restricted by agreement from carrying on
its business anywhere in the world;
(j) The Company is not under any liability or obligation with
respect to the return of inventory or merchandise in the possession of
wholesalers, distributors, retailers or other customers;
(k) The Company has no debt obligations for borrowed money,
including guarantees of or agreements to acquire any such debt obligation of
others;
(l) The Company has no outstanding loans to any person; and
(m) The Company has no powers of attorney outstanding or any
obligations or liabilities (whether absolute, accrued, contingent or otherwise),
as guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in
respect of the obligation of any person, corporation, partnership, joint
venture, association, organization or other entity.
Section 3.27 Customers and Suppliers. There has not been any material
-----------------------
adverse change in the business relationship of the Company with any customer who
accounted for more than 5% of the Company's sales (on a consolidated basis)
during the period February 1, 1998 to October 31, 1998 or any supplier from whom
the Company
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purchased more than 5% of the goods or services (on a consolidated basis) which
it purchased during the same period.
Section 3.28 Orders, Commitments and Returns. As of the date of this
-------------------------------
Agreement, the aggregate of all accepted and unfulfilled orders for the sale of
merchandise entered into by the Company does not exceed $200,000. As of the date
of this Agreement, there are no claims against the Company to return in excess
of an aggregate of $25,000 of merchandise by reason of alleged overshipments,
defective merchandise or otherwise, or of merchandise in the hands of customers
under an understanding that such merchandise would be returnable.
Section 3.29 Insurance. The Disclosure Schedule contains an accurate
---------
and complete description of all material policies of fire, liability, workmen's
compensation and other forms of insurance owned or held by the Company. All such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the date of the Closing have been paid,
and no notice of cancellation or termination has been received with respect to
any such policy. Such policies are sufficient for compliance with all
requirements of law and of all agreements to which the Company is a party; are
valid, outstanding and enforceable policies; provide adequate insurance coverage
for the assets and operations of the Company, will remain in full force and
effect through the respective dates set forth in the Disclosure Schedule without
the payment of additional premiums; and will not in any way be affected by, or
terminate or lapse by reason of, the Transactions. The Disclosure Schedule
identifies all risks which the Company, its Board of Directors or officers have
designated as being self insured. The Company has not been refused any insurance
with respect to its assets or operations, nor has its coverage been limited, by
any insurance carrier to which it has applied for any such insurance or with
which it has carried insurance during the last two years.
Section 3.30 Labor Difficulties. (a) The Company is in compliance
------------------
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, and are not engaged in any
unfair labor practice; (b) there is no unfair labor practice complaint against
the Company pending before the National Labor Relations Board; (c) there is no
labor strike, dispute, slowdown or stoppage actually pending or threatened
against or affecting the Company; (d) no representation question exists
respecting the employees of the Company; (e) no grievance nor any arbitration
proceeding arising out of or under collective bargaining agreements is pending
and no claim therefor exists; (f) no collective bargaining agreement which is
binding on the Company restricts it from relocating or closing any
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<PAGE>
of their operations; and (g) the Company has not experienced any work stoppage
or other labor difficulty since January 31, 1997.
Section 3.31 Consents. Except as set forth in Section 3.6 hereof, no
--------
consent of any person is necessary to the consummation of the Transactions,
including, without limitation, consents from parties to loans, contracts, leases
or other agreements, and consents from governmental agencies, whether federal,
state or local.
Section 3.32 Information in Schedule 14D-9. The information supplied
-----------------------------
by the Company expressly for inclusion in the Offer Documents and the Schedule
14D-9 will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The Schedule 14D-9 will comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the SEC and on the date first published or sent or given to the
Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to statements made therein
based on information furnished by Parent or Purchaser for inclusion in the
Schedule 14D-9.
Section 3.33 Information in Proxy Statement. The Proxy Statement, if
------------------------------
any, will not, at the date mailed to Company shareholders and at the time of the
Special Meeting to be held in connection with the Merger, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Company with respect to statements made
therein based on information furnished by Parent or Purchaser for inclusion in
the Proxy Statement. The Proxy Statement will comply in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder.
Section 3.34 Opinion of Financial Advisor. The Company has received
----------------------------
the opinion of Trautman Kramer & Company dated the date hereof, to the effect
that, as of such date, the consideration to be received in the Offer and the
Merger by the Company's shareholders is fair to the Company's shareholders from
a financial point of view, and the copy of such opinion included in the
Disclosure Schedule is manually signed, accurate and complete. The Company has
been authorized by Trautman Kramer
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& Company to permit the inclusion of such opinion in its entirety in the Offer
Documents and the Schedule 14D-9 and the Proxy Statement, so long as such
inclusion is in form and substance reasonably satisfactory to Trautman Kramer &
Company and its counsel.
Section 3.35 Absence of Questionable Payments. Neither the Company
--------------------------------
nor any director, officer, agent, employee or other person acting on behalf of
the Company, has used any corporate or other funds for unlawful contributions,
payments, gifts, or entertainment, or made any unlawful expenditures relating to
political activity to government officials or others or established or
maintained any unlawful or unrecorded funds in violation of Section 30A of the
Securities Exchange Act. Neither the Company nor any current director, officer,
agent, employee or other person acting on behalf of the Company, has accepted or
received any unlawful contributions, payments, gifts, or expenditures. The
Company is in compliance with the provisions of Section 13(b) of the Securities
Exchange Act.
Section 3.36 Personnel. The Disclosure Schedule sets forth a true and
---------
complete list of: the names and current salaries of all directors and elected
and appointed officers of each of the Company, the number of shares of the
Company Stock owned beneficially or of record, or both, by each such person and
the family relationships, if any, among such persons; the wage rates for non-
salaried and non-executive salaried employees of the Company by classification,
and all labor union contracts; and all group insurance programs in effect for
employees of each of the Company. The Company is not in default with respect to
any of its obligations referred to in the preceding sentence.
Section 3.37 Insider Interests. No officer or director of the Company
-----------------
has any material interest in any property, real or personal, tangible or
intangible, including without limitation, inventions, patents, trademarks or
trade names, used in or pertaining to the business of the Company.
Section 3.38 Brokers or Finders. No agent, broker, investment banker,
------------------
financial advisor or other firm or person is or will be entitled to any brokers'
or finder's fee or any other commission or similar fee in connection with any of
the Transactions except for Trautman Kramer & Company. True and correct copies
of all agreements between the Company and Trautman Kramer & Company, including,
without limitation, any fee arrangements are included in the Disclosure
Schedule.
Section 3.39 Full Disclosure. The Company has not failed to disclose
---------------
to Parent any facts material to the business, results of operations, assets,
liabilities,
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<PAGE>
financial condition or prospects of the Company. No representation or warranty
by the Company in this Agreement and no statement contained in any document
(including, without limitation, financial statements and the Disclosure
Schedule), certificate, or other writing furnished or to be furnished by the
Company to Parent or any of its representatives pursuant to the provisions
hereof or in connection with the Transactions, contains or will contain any
untrue statement of material fact or omits or will omit to state any material
fact necessary, in light of the circumstances under which it was made, in order
to make the statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company that:
Section 4.1 Organization. Parent is a corporation duly organized,
------------
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority,
and governmental approvals would not have, individually or in the aggregate, a
material adverse effect on Parent and its Subsidiaries, taken as a whole.
Section 4.2 Authorization; Validity of Agreement; Necessary Action.
------------------------------------------------------
Parent has full corporate power and authority to execute and deliver this
Agreement and to consummate the Transactions. The execution, delivery and
performance by Parent of this Agreement and the Stock Option Agreement and the
consummation of the Merger and the Transactions have been duly authorized by the
Board of Directors of Parent, and no other corporate action on the part of
Parent is necessary to authorize the execution and delivery by Parent of this
Agreement or the Stock Option Agreement, or the consummation of the
Transactions. Each of this Agreement and the Stock Option Agreement has been
duly executed and delivered by Parent, and assuming due and valid authorization,
execution and delivery hereof by the Company, is a valid and binding obligation
of Parent, enforceable against Parent in accordance with its terms.
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Section 4.3 Consents and Approvals; No Violations. Except for the
-------------------------------------
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the HSR Act,
state securities or blue sky laws, the New York Stock Exchange, and the CGCL,
none of the execution, delivery or performance of this Agreement by Parent, the
consummation by Parent of the Transactions or compliance by Parent with any of
the provisions hereof will (i) conflict with or result in any breach of any
provision of the respective articles of incorporation or by-laws or other
similar organizational documents of Parent, (ii) require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent, or any of its Subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound, or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent, any of its Subsidiaries or any of their
properties or assets, excluding from the foregoing clauses (ii), (iii) and (iv)
such violations, breaches or defaults which would not, individually or in the
aggregate, have a material adverse effect on Parent and its Subsidiaries, taken
as a whole.
Section 4.4 Information in Offer Documents. The Offer Documents will
------------------------------
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published or sent or given to the Company's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements made therein,
in the light of the circumstances under which they were made, not misleading,
except that no representation is made by Parent with respect to information
furnished by the Company expressly for inclusion in the Offer Documents.
Section 4.5 Information in Proxy Statement. None of the information
------------------------------
furnished by Parent expressly for inclusion in the Proxy Statement will, at the
date mailed to shareholders, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading.
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Section 4.6 Share Ownership. None of Parent, or any of its
---------------
respective Affiliates or Associates beneficially owns any Shares.
Section 4.7 Purchaser's Operations. Purchaser shall be formed solely
----------------------
for the purpose of engaging in the Transactions and shall not engage in any
business activities or conducted any operations other than in connection with
the Transactions.
Section 4.8 Brokers or Finders. Neither Parent nor any of its
------------------
Subsidiaries or its Affiliates has entered into any agreement or arrangement
entitling any agent, broker, investment banker, financial advisor or other firm
or person to any brokers' or finders' fee or any other commission or similar fee
in connection with any of the Transactions, except Greenhill & Co., LLC whose
fees and expenses will be paid by Parent in accordance with Parent's agreement
with such firm.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants
---------------------------------
and agrees that prior to the Effective Time, except (i) as expressly
contemplated by this Agreement, (ii) as set forth in Section 5.1 of the
Disclosure Schedule, or (iii) as agreed in writing by Parent, after the date
hereof:
(a) the business of the Company shall be conducted only in the
usual, regular and ordinary course and substantially in the same manner as
heretofore conducted, and each of the Company shall use its best efforts to
preserve its business organization intact, keep available the services of its
current officers and employees and maintain its existing relations with
franchisees, customers, suppliers, creditors, business partners and others
having business dealings with it, to the end that the goodwill and ongoing
business of each of them shall be unimpaired at the Effective Time;
(b) the Company shall not: (i) amend its articles of
incorporation or by-laws or similar organizational documents, (ii) issue, sell,
transfer, pledge, dispose of or encumber any shares of any class or series of
its capital stock or Voting Debt, or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to acquire,
any shares of any class or series of its capital stock or any Voting Debt, other
than Shares reserved for issuance on the date hereof pursuant to the exercise of
Company Options outstanding on the date hereof, (iii)
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declare, set aside or pay any dividend or other distribution payable in cash,
stock or property with respect to any shares of any class or series of its
capital stock; (iv) split, combine or reclassify any shares of any class or
series of its stock; or (v) redeem, purchase or otherwise acquire directly or
indirectly any shares of any class or series of its capital stock, or any
instrument or security which consists of or includes a right to acquire such
shares;
(c) the Company shall not: (i) incur or modify any indebtedness
or other liability, other than in the ordinary and usual course of business and
consistent with past practice; or (ii) modify, amend or terminate any of its
material contracts or waive, release or assign any material rights or claims,
except in the ordinary course of business and consistent with past practice;
(d) the Company shall not: (i) incur or assume any long-term
debt, or except in the ordinary course of business, incur or assume any short-
term indebtedness in amounts not consistent with past practice; (ii) modify the
terms of any indebtedness or other liability; (iii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except as described in the
Disclosure Schedule as being in the ordinary course of business and consistent
with past practice; (iv) make any loans, advances or capital contributions to,
or investments in, any other; or (v) enter into any material commitment or
transaction (including, but not limited to, any capital expenditure or purchase,
sale or lease of assets or real estate);
(e) the Company shall not transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any assets other than in the ordinary
and usual course of business and consistent with past practice; or
(f) except as otherwise specifically provided in this Agreement
or in the Schedule 14D-9, make any change in the compensation payable or to
become payable to any of its officers, directors, employees, agents or
consultants (other than normal recurring increases in wages to employees who are
not officers or directors or Affiliates in the ordinary course of business
consistent with past practice) or to Persons providing management services, or
enter into or amend any employment, severance, consulting, termination or other
agreement or employee benefit plan or make any loans to any of its officers,
directors, employees, Affiliates, agents or consultants or make any change in
its existing borrowing or lending arrangements for or on behalf of any of such
Persons pursuant to an employee benefit plan or otherwise;
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<PAGE>
(g) except as otherwise specifically contemplated by this
Agreement or by the Schedule 14D-9 or as specifically set forth in the
Disclosure Schedule, pay or make any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any existing
plan, agreement or arrangement to any officer, director, employee or Affiliate
or pay or agree to pay or make any accrual or arrangement for payment to any
officers, directors, employees or Affiliates of the Company of any amount
relating to unused vacation days, except payments and accruals made in the
ordinary course of business consistent with past practice; adopt or pay, grant,
issue, accelerate or accrue salary or other payments or benefits pursuant to any
pension, profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan, agreement
or arrangement, or any employment or consulting agreement with or for the
benefit of any director, officer, employee, agent or consultant, whether past or
present; or amend in any material respect any such existing plan, agreement or
arrangement in a manner inconsistent with the foregoing;
(h) the Company shall not permit any insurance policy naming it
as a beneficiary or a loss payable payee to be cancelled or terminated without
notice to Parent;
(i) the Company shall not enter into any contract or transaction
relating to the purchase of assets other than in the ordinary course of business
consistent with prior practices;
(j) the Company shall not pay, repurchase, discharge or satisfy
any of its claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice, of claims, liabilities or obligations reflected or reserved against
in, or contemplated by, the consolidated financial statements (or the notes
thereto) of the Company;
(k) the Company will not adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company (other than the Merger);
(l) the Company will not (i) change any of the accounting
methods used by it unless required by GAAP or (ii) make any material election
relating to Taxes, change any material election relating to Taxes already made,
adopt any
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material accounting method relating to Taxes, change any material accounting
method relating to Taxes unless required by GAAP, enter into any closing
agreement relating to Taxes, settle any claim or assessment relating to Taxes or
consent to any claim or assessment relating to Taxes or any waiver of the
statute of limitations for any such claim or assessment;
(m) the Company will not take, or agree to commit to take, any
action that would or is reasonably likely to result in any of the conditions to
the Offer set forth in Annex A or any of the conditions to the Merger set forth
in Article VI not being satisfied, or would make any representation or warranty
of the Company contained herein inaccurate in any respect at, or as of any time
prior to, the Effective Time, or that would materially impair the ability of the
Company, Parent, Purchaser or the holders of Shares to consummate the Offer or
the Merger in accordance with the terms hereof or materially delay such
consummation; and
(n) the Company will not enter into an agreement, contract,
commitment or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the foregoing.
Section 5.2 Access; Confidentiality. The Company shall (and shall
-----------------------
cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of Parent,
full access during the period prior to the Appointment Date, to all its
properties, books, contracts, commitments and records and, during such period,
the Company shall (and shall cause each of its Subsidiaries to) furnish promptly
to the Parent (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal securities laws and (b) all other information concerning
its business, properties and personnel as Parent may reasonably request. Access
shall include the right to conduct such environmental studies as Parent, in its
discretion, shall deem appropriate. After the Appointment Date, the Company
shall provide Parent and such persons as Parent shall designate with all such
information, at any time as Parent shall request. Until the Appointment Date,
unless otherwise required by law or in order to comply with disclosure
requirements applicable to the Offer Documents or the Proxy Statement, Parent
will hold any such information which is nonpublic in confidence in accordance
with the provisions of the Confidentiality Agreement.
Section 5.3 Reasonable Best Efforts.
-----------------------
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(a) Prior to the Closing, upon the terms and subject to the
conditions of this Agreement, Parent, Purchaser and the Company agree to use
their respective reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable (subject to any applicable laws) to consummate and make effective the
Merger and the other Transactions as promptly as practicable including, but not
limited to (i) the preparation and filing of all forms, registrations and
notices required to be filed to consummate the Merger and the other Transactions
and the taking of such actions as are necessary to obtain any requisite
approvals, consents, orders, exemptions or waivers by any third party or
Governmental Entity, and (ii) the satisfaction of the other parties' conditions
to Closing. In addition, no party hereto shall take any action after the date
hereof that would reasonably be expected to materially delay the obtaining of,
or result in not obtaining, any permission, approval or consent from any
Governmental Entity necessary to be obtained prior to Closing. Notwithstanding
the foregoing, or any other covenant herein contained, in connection with the
receipt of any necessary approvals under the HSR Act, the Company shall not be
entitled to divest or hold separate or otherwise take or commit to take any
action that limits Parent's or Purchaser's freedom of action with respect of, or
their ability to retain, the Company or any material portions thereof or any of
the businesses, product lines, properties or assets of the Company, without
Parent's prior written consent.
(b) Prior to the Closing, each party shall promptly consult with
the other parties hereto with respect to, provide any necessary information with
respect to, and provide the other parties (or their respective counsel) with
copies of, all filings made by such party with any Governmental Entity or any
other information supplied by such party to a Governmental Entity in connection
with this Agreement, the Merger and the other Transactions. Each party hereto
shall promptly inform the other of any communication from any Governmental
Entity regarding any of the Transactions. If any party hereto or Affiliate
thereof receives a request for additional information or documentary material
from any such Governmental Entity with respect to any of the Transactions, then
such party shall endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other parties, an
appropriate response in compliance with such request. To the extent that
transfers, amendments or modifications of permits (including environmental
permits) are required as a result of the execution of this Agreement or
consummation of any of the Transactions, the Company shall use its best efforts
to effect such transfers, amendments or modifications.
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(c) The Company and Parent shall file as soon as practicable
notifications under the HSR Act and respond as promptly as practicable to any
inquiries received from the Federal Trade Commission and the Antitrust Division
of the Department of Justice for additional information or documentation and
respond as promptly as practicable to all inquiries and requests received from
any State Attorney General or other Governmental Entity in connection with
antitrust matters. Concurrently with the filing of notifications under the HSR
Act or as soon thereafter as practicable, the Company and Parent shall each
request early termination of the HSR Act waiting period.
(d) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require Parent or Purchaser to commence any litigation against any
entity in order to facilitate the consummation of any of the Transactions or to
defend against any litigation brought by any third party or Governmental Entity
seeking to prevent the consummation of any of the Transactions.
Section 5.4 [Intentionally Omitted.]
Section 5.5 No Solicitation of Competing Transaction. (a) Neither
----------------------------------------
the Company nor any Affiliate of the Company shall (and the Company shall cause
the officers, directors, employees, representatives and agents of the Company,
and each Affiliate of the Company, including, but not limited to, investment
bankers, attorneys and accountants, not to), directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or provide
any information to, any Person or group (other than Parent, any of its
Affiliates or representatives) concerning any Acquisition Proposal, except that
nothing contained in this Section 5.5 or any other provision hereof shall
prohibit the Company or the Company's Board from (i) taking and disclosing to
the Company's shareholders a position with respect to a tender or exchange offer
by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the
Exchange Act, or (ii) making such disclosure to the Company's shareholders as,
in the good faith judgment of the Board, after receiving advice from outside
counsel, is required under applicable law, provided that the Company may not,
except as permitted by Section 5.5(b), withdraw or modify, or propose to
withdraw or modify, its position with respect to the Offer or the Merger or
approve or recommend, or propose to approve or recommend any Acquisition
Proposal, or enter into any agreement with respect to any Acquisition Proposal.
Upon execution of this Agreement, the Company will immediately cease any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Notwithstanding the
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foregoing, prior to the time of acceptance of Shares for payment pursuant to the
Offer, the Company may furnish information concerning its business, properties
or assets to any corporation, partnership, person or other entity or group
pursuant to appropriate confidentiality agreements, and may negotiate and
participate in discussions and negotiations with such entity or group concerning
an Acquisition Proposal if:
(x) such entity or group has on an unsolicited basis submitted a
bona fide written proposal to the Company Board of Directors relating to
any such transaction which the Board determines in good faith, represents a
superior transaction to the Offer and the Merger and which is not subject
to the receipt of any necessary financing; and
(y) in the opinion of the Company Board of Directors such action
is required to discharge the Board's fiduciary duties to the Company's
shareholders under applicable law, determined only after receipt of:
(i) a written opinion from the Company's investment banking firm
that the Acquisition Proposal is superior, from a financial point of view, to
the Offer and the Merger, and
(ii) a written opinion from independent legal counsel to the
Company that the failure to provide such information or access or to engage in
such discussions or negotiations would cause the Board of Directors to violate
its fiduciary duties to the Company's shareholders under applicable law.
The Company will immediately notify Parent of the existence of any proposal,
discussion, negotiation or inquiry received by the Company, and the Company will
immediately communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry which it may receive (and will immediately provide to
Parent copies of any written materials received by the Company in connection
with such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry or engaging in such discussion or
negotiation. The Company will promptly provide to Parent any non-public
information concerning the Company provided to any other party which was not
previously provided to Parent.
(b) Except as set forth below in this subsection (b), neither the
Company Board of Directors nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by such Board of Directors or any such
committee of
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the Offer, this Agreement or the Merger, (ii) approve or recommend or propose to
approve or recommend, any Acquisition Proposal or (iii) enter into any agreement
with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior
to the time of acceptance for payment of Shares pursuant to the Offer, the
Company Board of Directors may withdraw or modify its approval or recommendation
of the Offer, this Agreement or the Merger, approve or recommend a Superior
Proposal, or enter into an agreement with respect to a Superior Proposal, in
each case at any time after the fifth business day following Parent's receipt of
written notice from the Company advising Parent that the Board of Directors has
received a Superior Proposal which it intends to accept, specifying the material
terms and conditions of such Superior Proposal, identifying the person making
such Superior Proposal, but only if the Company shall have caused its financial
and legal advisors to negotiate with Parent to make such adjustments in the
terms and conditions of this Agreement as would enable the Company to proceed
with the transactions contemplated herein on such adjusted terms.
Section 5.6 Publicity. The initial press release with respect to the
---------
execution of this Agreement shall be a joint press release acceptable to Parent
and the Company. Thereafter, until the Appointment Date, or the date the
Transactions are terminated or abandoned pursuant to Article VII, neither the
Company, Parent nor any of their respective Affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other Transactions without prior consultation
with the other party, except as may be required by law or by any listing
agreement with a national securities exchange or trading market.
Section 5.7 Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Parent, of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Effective Time, and (ii) any material failure of the
Company, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.8 shall not limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
Section 5.8 Directors' and Officers' Insurance and Indemnification.
------------------------------------------------------
(a) For six years after the Effective Time, the Surviving Corporation (or any
successor to the Surviving Corporation) shall indemnify, defend and hold
harmless each Indemnified Party against all losses, claims, damages,
liabilities, costs, fees and expenses, including reasonable fees and
disbursements of counsel and judgments, fines,
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losses, claims, liabilities and amounts paid in settlement (provided that any
such settlement is effected with the written consent of the Parent or the
Surviving Corporation) arising out of actions or omissions occurring at or prior
to the Effective Time to the full extent required under applicable California
law, the terms of the Company's certificate of incorporation or the by-laws, as
in effect at the date hereof; provided that, in the event any claim or claims
are asserted or made within such six-year period, all rights to indemnification
in respect of any such claim or claims shall continue until disposition of any
and all such claims.
(b) Parent or the Surviving Corporation shall maintain the Company's
existing officers' and directors' liability insurance for a period of not less
than three years after the Effective Time; provided, however, that the Parent
-------- -------
may substitute therefor policies of substantially equivalent coverage and
amounts containing terms no less favorable to such former directors or officers;
provided, further, that in no event shall the Company be required to pay
aggregate premiums for insurance under this Section 5.9(b) in excess of 150% of
the aggregate premiums paid by the Company in 1998 on an annualized basis for
such purpose; and provided, further, that if the Parent or the Surviving
-------- -------
Corporation is unable to obtain the amount of insurance required by this Section
5.9(b) for such aggregate premium, Parent or the Surviving Corporation shall
obtain as much insurance as can be obtained for an annual premium not in excess
of 150% of the aggregate premiums paid by the Company in 1998 on an annualized
basis for such purpose.
Section 5.9 State Takeover Laws. The Company shall, upon the request
-------------------
of the Purchaser, take all commercially reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the transactions
contemplated by this Agreement and the Option Agreement, including the Offer and
the Merger, and the Shareholder Agreements, of any state takeover law.
Section 5.10 Purchaser Compliance. Parent shall cause Purchaser to
--------------------
comply with all of its obligations under or related to this Agreement.
Section 5.11 Cooperation. If Parent and Purchaser shall not have
-----------
consummated the Offer within 26 business days following the date hereof, Parent
shall cooperate with the Company to obtain financing for the Company's working
capital requirements.
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ARTICLE VI
CONDITIONS
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
-----------------------------------------------------------
The respective obligation of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of each of the following
conditions, any and all of which may be waived in whole or in part by the
Company, Parent or Purchaser, as the case may be, to the extent permitted by
applicable law:
(a) Shareholder Approval. The Merger and this Agreement shall have
--------------------
been approved and adopted by the requisite vote of the holders of the Shares, to
the extent required by the CGCL and the articles of incorporation of the
Company;
(b) Statutes; Court Orders. No statute, rule or regulation shall have
----------------------
been enacted or promulgated by any governmental authority which prohibits the
consummation of the Merger; and there shall be no order or injunction of a court
of competent jurisdiction in effect precluding consummation of the Merger;
(c) Purchase of Shares in Offer. Parent, Purchaser or their
---------------------------
Affiliates shall have purchased Shares pursuant to the Offer, except that this
condition shall not apply if Parent, Purchaser or their Affiliates shall have
failed to purchase Shares pursuant to the Offer in breach of their obligations
under this Agreement; and
(d) HSR Approval. The applicable waiting period under the HSR Act
------------
shall have expired or been terminated.
Section 6.2 Conditions to Parent's and Purchaser's Obligations to
-----------------------------------------------------
Effect the Merger. The obligations of Parent and Purchaser to consummate the
- - -----------------
Merger shall be subject to the satisfaction on or prior to the Closing Date of
each of the following conditions, any and all of which may be waived in whole or
in part by the Parent and Purchaser, to the extent permitted by applicable law.
(a) Compliance with Obligations. All actions contemplated by
---------------------------
Section 2.4 shall have been taken;
(b) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in Article III shall be true in all material
respects on the date of this Agreement and as of the Effective Time; and
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(c) Covenants. The Company shall have complied in all material
---------
respects with its obligations under the terms of this Agreement.
ARTICLE VII
TERMINATION
Section 7.1 Termination. The Transactions may be terminated or
-----------
abandoned at any time prior to the Effective Time, whether before or after
shareholder approval thereof:
(a) Subject to Section 1.3(c), by the mutual written consent of
Parent and the Company;
(b) By either of the Company or Parent:
(i) if (x) the Offer shall have expired without any Shares being
purchased pursuant thereto, or (y) Purchaser shall not have accepted for payment
any Shares pursuant to the Offer by May 15, 1999; provided, however, that the
-------- -------
right to terminate this Agreement under this Section 7.1(b)(i) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of Purchaser to
purchase the Shares pursuant to the Offer on or prior to such date; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their reasonable efforts to lift), which
permanently restrains, enjoins or otherwise prohibits the acceptance for payment
of, or payment for, Shares pursuant to the Offer or the Merger and such order,
decree, ruling or other action shall have become final and non-appealable.
(c) By the Company:
(i) if Parent, Purchaser or any of their Affiliates shall have
failed to commence the Offer on or prior to five business days following the
date of the initial public announcement of the Offer; provided, that the Company
may not terminate this Agreement pursuant to this Section 7.1(c)(i) if the
Company is at such time in material breach of its obligations under this
Agreement;
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(ii) in connection with entering into a definitive agreement
as permitted by Section 5.5(b), provided the Company has complied with all
provisions thereof, including the notice provisions therein, and that the
Company makes simultaneous payment to Parent of funds as required by Section
9.1(b);
(iii) if Parent or Purchaser shall have breached in any
material respect any of their respective representations, warranties, covenants
or other agreements contained in this Agreement, which breach cannot be or has
not been cured within 30 days after the giving of written notice by the Company
to Parent or Purchaser, as applicable.
(d) By Parent:
(i) if, due to an occurrence, not involving a breach by Parent or
Purchaser of their obligations hereunder, which makes it impossible to satisfy
any of the conditions set forth in Annex A hereto, Parent, Purchaser, or any of
their Affiliates shall have failed to commence the Offer on or prior to the
fifth business day following the date of the initial public announcement of the
Offer;
(ii) if, prior to the purchase of Shares by Purchaser pursuant to the
Offer, the Company Board of Directors shall have (A) withdrawn, modified or
changed in a manner adverse to Parent or Purchaser its approval or
recommendation of the Offer, this Agreement or the Merger, (B) recommended an
Acquisition Proposal, (C) executed an agreement in principle or definitive
agreement relating to an Acquisition Proposal or similar business combination
with a person or entity other than Parent, Purchaser or their Affiliates, or (D)
exercised its rights pursuant to Section 5.5 with respect to an Acquisition
Proposal, and, directly or through its representatives, continued discussions
with any third party concerning an Acquisition Proposal for more than ten
business days after the date of receipt of such Acquisition Proposal;
(iii) if prior to the purchase of Shares pursuant to the Offer, the
Company shall have breached any representation, warranty, covenant or other
agreement contained in this Agreement which (x) would give rise to the failure
of a condition set forth in paragraph (f) or (g) of Annex A hereto, and (y)
cannot be or has not been cured within 30 days after the giving of written
notice to the Company; or
(iv) if the Disclosure Schedule as delivered to Parent pursuant to
Article III hereof shall reveal matters or information that are material and
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adverse to the Company and the Company shall not have disclosed such matters or
information to Parent on or prior to the date hereof.
Section 7.2 Effect of Termination. In the event of the termination or
---------------------
abandonment of the Transactions by any party hereto pursuant to the terms of
this Agreement, written notice thereof shall forthwith be given to the other
party or parties specifying the provision hereof pursuant to which such
termination or abandonment of the Transactions is made, and there shall be no
liability on the part of the Parent or the Company except (A) for fraud or for
breach of this Agreement prior to such termination or abandonment of the
Transactions and (B) as set forth in Sections 5.2 and 9.1.
ARTICLE VIII
DEFINITIONS AND INTERPRETATION
Section 8.1 Definitions. For all purposes of this Agreement, except
-----------
as otherwise expressly provided or unless the context clearly requires
otherwise:
"Acquisition Proposal" shall mean any proposal or offer to acquire all or a
substantial part of the business or properties of the Company or any capital
stock of the Company, whether by merger, tender offer, exchange offer, sale of
assets or similar transactions involving the Company, division or operating or
principal business unit of the Company.
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act.
"Agreement" or "this Agreement" shall mean this Agreement and Plan of
Merger, together with the Exhibits and Appendices hereto and the Disclosure
Schedule.
"Appointment Date" shall mean the time the persons designated by Purchaser
have been elected to, and shall constitute a majority of, the Company Board of
Directors pursuant to Section 1.3.
"Associate" shall have the meaning set forth in Rule 12b-2 of the Exchange
Act.
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"Balance Sheet" shall mean the most recent audited balance sheet of the
Company and its consolidated subsidiaries included in the Financial Statements.
"Balance Sheet Date" shall mean the date of the Balance Sheet.
"Board Fraction" shall mean a fraction, the numerator of which shall be the
number of Shares which Parent beneficially own at the time of calculation of the
Board Fraction, and the denominator of which shall be the total number of Shares
then outstanding.
"California Merger Agreement" shall mean the Agreement of Merger by and
among the Company, Purchaser and Parent, together with the related officers'
certificates required by section 1103 of the CGCL.
"Cash Amount" shall mean an amount of cash calculated in accordance with
Section 2.4(a).
"Certificate" shall mean a certificate which immediately prior to the
Effective Time represented Shares which were converted pursuant to Section 2.1
into the right to receive the Merger Consideration.
"CGCL" shall mean the California General Corporation Law.
"Certificate of Merger" shall mean the Certificate of Merger referred to in
Section 1.5 to be filed with the Secretary of State of the State of Delaware.
"Closing" shall mean the closing referred to in Section 1.6.
"Closing Date" shall mean the date on which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning set forth in the preamble hereto.
"Company Agreement" shall mean any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which the
Company is a party or by which it or any of its properties or assets may be
bound.
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"Company Board of Directors" shall mean the board of directors of the
Company.
"Company Option" shall mean an option to purchase Shares which has been
granted by the Company under the Company's Stock Option Plan of 1997, as amended
and each option identified in Schedule 2.4, and in each case, which is
outstanding at the Effective Time.
"Company SEC Documents" shall mean each form, report, schedule, statement
and other documents required to be filed by the Company since November 25, 1997
under the Exchange Act or the Securities Act, including any amendment to such
document, whether or not such amendment is required to be so filed.
"Company's knowledge" or "best knowledge of the Company" shall mean the
knowledge that the directors and officers of the Company and the employees of
the Company having responsibility for the particular subject matter at issue
have or would possess after reasonable investigation and inquiry.
"Confidentiality Agreement" shall mean a letter agreement dated on or about
December 28, 1998 between the Company and Parent.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Defect" shall mean a defect or impurity of any kind, whether in design,
manufacture, processing, or otherwise, including, without limitation, any
dangerous propensity associated with any reasonably foreseeable use of a
Product, or the failure to warn of the existence of any defect, impurity, or
dangerous propensity.
"DGCL" shall mean the Delaware General Corporation Law.
"Disclosure Schedule" shall mean the disclosure schedule prepared and
signed by the Company and delivered to Purchaser no later than the time and date
set forth in Article III.
"Dissenting Shares" shall mean any Shares outstanding immediately prior to
the Effective Time and held by a holder who has not voted in favor of the Merger
or consented thereto in writing, and who has demanded appraisal for such shares
in accordance with Section 1300 of the CGCL, if such Section 1300 provides for
appraisal rights for such Shares in the Merger.
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"Effective Time" shall mean the date and time at which the California
Merger Agreement and the Certificate of Merger referred to in Section 1.5 are
duly filed with the Secretary of State of the State of California and the
Secretary of State of the State of Delaware, respectively, or such other date
and time as are specified in the California Merger Agreement and the Certificate
of Merger as the date and time the Merger becomes effective.
"Environmental Claim" shall mean any claim, action, investigation or
notice by any person or entity alleging potential liability for investigatory,
cleanup or governmental response costs, or natural resources or property
damages, or personal injuries, attorney's fees or penalties relating to (i) the
presence, or release into the environment, of any Materials of Environmental
Concern at any location owned or operated by the Company, now or in the past, or
(ii) any violation, or alleged violation, of any Environmental Law.
"Environmental Law" shall mean each federal, state, local and foreign law
and regulation relating to pollution, protection or preservation of human health
or the environment including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata, and natural resources, and
including, without limitation, each law and regulation relating to emissions,
discharges, releases or threatened releases of Materials of Environmental
Concern, or otherwise relating to the generation, storage, containment (whether
above ground or underground), disposal, transport or handling of Materials of
Environmental Concern, or the preservation of the environment or mitigation of
adverse effects thereon and each law and regulation with regard to record
keeping, notification, disclosure and reporting requirements respecting
Materials of Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any trade or business, whether or not
incorporated, that together with the Company would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall mean the quotient of (x) the Offer Price and (y) the
average per share closing price of the Parent Common Stock as reported on the
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New York Stock Exchange on each of the ten trading days immediately preceding
the Effective Time.
"Financial Statements" shall mean the financial statements of the Company
included in the Company SEC Documents.
"GAAP" shall mean United States generally accepted accounting principles.
"Governmental Entity" shall mean a court, arbitral tribunal, administrative
agency or commission or other governmental or other regulatory authority or
agency.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indebtedness" shall mean (i) all indebtedness for borrowed money or for
the deferred purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business and payable in
accordance with customary practices), (ii) any other indebtedness that is
evidenced by a note, bond, debenture or similar instrument, (iii) all
obligations under financing leases, (iv) all obligations in respect of
acceptances issued or created, (v) all liabilities secured by any lien on any
property and (vi) all guarantee obligations.
"Indemnified Party" shall mean each present and former officer and director
of the Company , and each person who become any of the foregoing prior to the
Effective Time.
"Independent Directors" shall mean directors of the Company who are
directors on the date hereof.
"Major Shareholder" shall mean each of the shareholders identified in Annex
I attached hereto.
"Materials of Environmental Concern" shall mean pollutants, contaminants,
toxic or hazardous substances, materials and wastes, petroleum and petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
radon and lead or lead-based paints and materials.
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"Merger" shall mean the merger of Purchaser into the Company referred to in
Section 1.4.
"Merger Consideration" shall mean an amount of cash equal to the Offer
Price, which amount shall not include interest, regardless of when paid.
"Minimum Condition" shall mean the condition that, pursuant to the Offer,
there shall have been validly tendered and not withdrawn prior to the expiration
of the Offer, not less than that number of Shares which, together with the
Shares owned by Parent and Purchaser on the date hereof, constitutes at least
90% of the Shares issued and outstanding.
"Offer" shall mean the cash tender offer to be made by Purchaser pursuant
to Section 1.1 to acquire all of the issued and outstanding shares of common
stock, no par value, of the Company at the Offer Price.
"Offer Documents" shall mean the Offer to Purchase and a form of letter of
transmittal and summary advertisement filed as exhibits to the Schedule 14D-1,
together with any amendments and supplements thereto.
"Offer Price" shall mean $19.00 per Share net to the seller in cash, or
such increased amount, if any, as Purchaser may offer to pay as contemplated by
Section 1.1(a).
"Offer to Purchase" shall mean the offer to purchase included in the
Schedule 14D-1 filed with the SEC pursuant to Section 1.1(b).
"Parent" shall have the meaning set forth in the preamble hereto.
"Parent Common Stock" shall mean shares of common stock of Parent.
"Paying Agent" shall mean the bank or trust company designated by Parent to
act as agent for the holders of the Shares pursuant to Section 2.2(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Person" shall mean a natural person, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity or organization.
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<PAGE>
"Plan" shall mean a plan, program, agreement, arrangement or program
required to be included in the Disclosure Schedule pursuant to Section 3.15(a).
"Product" shall mean any product designed, manufactured, shipped, sold,
marketed, distributed and/or otherwise introduced into the stream of commerce by
or on behalf of the Company, including, without limitation, any product sold in
the United States by the Company as the distributor, agent, or pursuant to any
other contractual relationship with a non-U.S. manufacturer.
"Proxy Statement" shall mean the proxy statement to be filed by the Company
with the SEC pursuant to Section 1.9(a)(ii), together with all amendments and
supplements thereto and including the exhibits thereto.
"Purchaser" shall mean an indirect, wholly-owned subsidiary of Parent to be
formed as soon as practicable after the date hereof.
"Purchaser Common Stock" shall mean common stock, par value $0.01 per
share, of Purchaser.
"Revised Minimum Number" shall mean that number of Shares that when added
to the Shares then owned by the Purchaser would equal 49.9999% of the Shares
then outstanding.
"Schedule 14D-l" shall mean the Schedule 14D-1 filed by Purchaser with the
SEC pursuant to Section 1.1(b), together with all amendments and supplements
thereto and including the exhibits thereto.
"Schedule 14D-9" shall mean the Solicitation/Recommendation Statement on
Schedule 14D-9 filed by the Company with the SEC pursuant to Section 1.2(a),
together with all amendments and supplements thereto and including the exhibits
thereto.
"SEC" shall mean the United States Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean shares of common stock, no par value, issued by the
Company.
Page 56
<PAGE>
"Shareholder Agreement" shall mean each agreement, dated as of the date
hereof, among the Major Shareholders and Parent, pursuant to which each Major
Shareholder has agreed, among other things, to tender the Shares held by such
Major Shareholder in the Offer and to grant Parent a proxy with respect to the
voting of such Shares upon the terms and subject to the conditions set forth
therein.
"Special Meeting" shall mean the special meeting of shareholders of the
Company referred to in Section 1.9(a)(i).
"Stock Option Agreement" shall mean a Stock Option Agreement, dated as of
the date hereof, among the Company and Parent pursuant to which the Company has
granted to Purchaser an option to purchase Shares.
"Subsidiary" shall mean, with respect to any party, any corporation or
other organization, whether incorporated or unincorporated, of which (a) at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries or (b) such party or any other Subsidiary of such party is a
general partner (excluding any such partnership where such party or any
Subsidiary of such party does not have a majority of the voting interest in such
partnership).
"Superior Proposal" shall mean an Acquisition Proposal which satisfies
both subsection (x) and subsection (y) of Section 5.5(a).
"Surviving Corporation" shall mean the successor or surviving corporation
in the Merger.
"Tax" or "Taxes" shall mean all taxes, charges, fees, duties, levies,
penalties or other assessments imposed by any federal, state, local or foreign
governmental authority, including, but not limited to, income, gross receipts,
excise, property, sales, gain, use, license, custom duty, unemployment, capital
stock, transfer, franchise, payroll, withholding, social security, minimum
estimated, and other taxes, and shall include interest, penalties or additions
attributable thereto; and
"Tax Return" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Page 57
<PAGE>
"Termination Fee" shall mean the sum of $9,000,000.
"Title IV Plan" shall mean a Plan that is subject to Section 302 or Title
IV of ERISA or Section 412 of the Code.
"Transactions" shall mean the transactions provided for or contemplated by
this Agreement, the Stock Option Agreement and the Shareholder Agreement,
including but not limited to the Offer and the Merger.
"Voting Debt" shall mean indebtedness having general voting rights and debt
convertible into securities having such rights.
Section 8.2 Interpretation.
--------------
(a) When a reference is made in this Agreement to a section or
article, such reference shall be to a section or article of this Agreement
unless otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or "including" are used
in this Agreement they shall be deemed to be followed by the words "without
limitation."
(c) The words "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles,
sections, paragraphs, exhibits and schedules of this Agreement unless otherwise
specified.
(d) The plural of any defined term shall have a meaning correlative
to such defined term, and words denoting any gender shall include all genders.
Where a word or phrase is defined herein, each of its other grammatical forms
shall have a corresponding meaning.
(e) A reference to any party to this Agreement or any other agreement
or document shall include such party's successors and permitted assigns.
(f) A reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative
Page 58
<PAGE>
provision substituted therefor and all regulations and statutory instruments
issued thereunder or pursuant thereto.
(g) As used in this Agreement, any reference to any event, change or
effect being material or having a material adverse effect on or with respect to
any entity (or group of entities taken as a whole) means such event, change or
effect is materially adverse to (i) the consolidated financial condition,
businesses, operations, properties (including intangible properties), results of
operations, assets or prospects of such entity as a whole (or, if used with
respect thereto, of such group of entities taken as a whole), or (ii) the
ability of such entity (or group) to consummate the Offer or the Merger, or to
perform its obligations under this Agreement or the Stock Option Agreement.
(h) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Fees and Expenses. (a) Except as specifically provided to
-----------------
the contrary in this Agreement, including Section 9.1(b), all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such expenses; provided; that
--------
if any legal action is instituted to enforce or interpret the terms of this
Agreement, the prevailing party in such action shall be entitled, in addition to
any other relief to which the party is entitled, to reimbursement of its actual
attorneys fees.
(b) If:
(i) the Company shall enter into an agreement which accepts or
implements a Superior Proposal;
Page 59
<PAGE>
(ii) either the Company or Parent terminates or abandons the
Transactions pursuant to Section 7.1(b)(i) and prior thereto there shall have
been publicly announced another Acquisition Proposal;
(iii) the Company shall terminate or abandon the Transactions
pursuant to Section 7.1(c)(ii); or
(iv) Parent shall terminate or abandon the Transactions pursuant
to Section 7.1(d)(ii) or (iii);
then the Company shall pay to Parent an amount equal to the Termination Fee plus
an amount equal to Parent's actual and reasonably documented out-of-pocket fees
and expenses incurred by Parent and Purchaser in connection with the Offer, the
Merger, this Agreement and the consummation of the Transactions. The Termination
Fee and Parent's good faith estimate of its expenses shall be paid in same day
funds concurrently with the execution of an agreement referred to in subsection
(i) above or any termination or abandonment referred to in subsections (ii),
(iii) or (iv) above, whichever shall first occur, together with delivery of a
written acknowledgment by the Company of its obligation to reimburse Parent for
its actual expenses in excess of such estimated expense payment.
Section 9.2 Amendment and Modification. Subject to applicable law and
--------------------------
Section 1.3, this Agreement may be amended, modified and supplemented in any
and all respects, whether before or after any vote of the shareholders of the
Company contemplated hereby, by written agreement of the parties hereto, by
action taken by their respective Boards of Directors (which in the case of the
Company shall include approvals as contemplated in Section 1.3(c)), at any time
prior to the Closing Date with respect to any of the terms contained herein;
provided, however, that after the approval of this Agreement by the shareholders
- - -------- -------
of the Company, no such amendment, modification or supplement shall reduce the
amount or change the form of the Merger Consideration.
Section 9.3 Non-Survival of Representations and Warranties. None of
----------------------------------------------
the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time. The foregoing sentence shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
Section 9.4 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if delivered personally,
telecopied (which
Page 60
<PAGE>
is confirmed) or sent by an overnight courier service, such as
Federal Express, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Attention: General Counsel
Telephone No.: (281) 370-0670
Telecopy No.: (281) 927-8835
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Attention: Kenton J. King, Esq.
Telephone: 650-470-4500
Telecopy: 650-470-4570
(b) if to the Company, to:
Shopping.com
2101 East Coast Highway
Garden Level
Corona Del Mar, California 92625
Telephone No.: (949) 640-4393
Telecopy No.: (949) 640-4374
with a copy to:
Mark V. Asdourian, Esq.
5 Park Plaza, Suite 1480
Irvine, California 92614
Telephone: (949) 862-0040
Telecopy: (949) 862-0039
Page 61
<PAGE>
Section 9.5 Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 9.6 Entire Agreement; No Third Party Beneficiaries. This
----------------------------------------------
Agreement, the Stock Option Agreement, the Shareholder Agreements, and the
Confidentiality Agreement (including the documents and the instruments referred
to herein and therein): (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof and thereof, and (b) except as
provided in Sections 2.4 and 5.9 are not intended to confer upon any person
other than the parties hereto and thereto any rights or remedies hereunder.
Section 9.7 Severability. Any term or provision of this Agreement
------------
that is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction or other authority declares that any term or
provision hereof is invalid, void or unenforceable, the parties agree that the
court making such determination shall have the power to reduce the scope,
duration, area or applicability of the term or provision, to delete specific
words or phrases, or to replace any invalid, void or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision.
Section 9.8 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California without giving
effect to the principles of conflicts of law thereof.
Section 9.9 Enforcement. The parties agree that irreparable damage
-----------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement.
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<PAGE>
Section 9.10 Time of Essence. Each of the parties hereto hereby
---------------
agrees that, with regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
Section 9.11 Extension; Waiver. At any time prior to the Effective
-----------------
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement, or (c)
subject to the proviso of Section 9.2, waive compliance by the other parties
with any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
Section 9.12 Assignment. Neither this Agreement not any of the
----------
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written content of the other parties, except that Purchaser may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to Parent or to any direct or indirect wholly or majority owned Subsidiary or
Affiliate of Parent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
Page 63
<PAGE>
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
___________________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
SHOPPING.COM
By: /s/ Frank W. Denny
___________________________________
Name: Frank W. Denny
Title: President and Chief Executive Officer
Page 64
<PAGE>
Annex A
Certain Conditions of the Offer. Notwithstanding any other provisions of
-------------------------------
the Offer, and in addition to (and not in limitation of) Purchaser's rights to
extend and amend the Offer at any time in its sole discretion (subject to the
provisions of the Agreement), Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's
obligation to pay for or return tendered Shares promptly after termination or
withdrawal of the Offer), pay for, and may delay the acceptance for payment of
or, subject to the restriction referred to above, the payment for, any tendered
Shares, and may terminate or amend the Offer as to any Shares not then paid for,
if (i) the Minimum Condition has not been satisfied, (ii) any applicable waiting
period under the HSR Act has not expired or terminated, or (iii) at any time on
or after the date of the Agreement and before the time of payment for any such
Shares, any of the following events shall occur or shall be determined by
Purchaser to have occurred:
(a) there shall be threatened or pending any suit, action or
proceeding by any Governmental Entity (i) seeking to prohibit or impose any
material limitations on Parent's or Purchaser's ownership or operation (or that
of any of their respective Subsidiaries or Affiliates) of all or a material
portion of their or the Company's businesses or assets, or to compel Parent or
Purchaser or their respective Subsidiaries and Affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or Parent
and their respective Subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Parent or Purchaser of any Shares under the Offer
or pursuant to the Stock Option Agreement or the Shareholders Agreement, seeking
to restrain or prohibit the making or consummation of the Offer or the Merger or
the performance of any of the other transactions contemplated by this Agreement,
the Stock Option Agreement or the Shareholder Agreements, or seeking to obtain
from the Company, Parent or Purchaser any damages that are material in relation
to the Company taken as a whole, (iii) seeking to impose material limitations on
the ability of Purchaser, or rendering Purchaser unable, to accept for payment,
pay for or purchase some or all of the Shares pursuant to the Offer and the
Merger, (iv) seeking to impose material limitations on the ability of Purchaser
or Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's shareholders, or (v) which
otherwise is reasonably likely to have a material adverse affect on the
financial condition, businesses, operations, properties (including intangible
properties), results of operations, assets or prospects of the Company, or on
the ability of the
A-1
<PAGE>
Company to consummate the Offer or the Merger, or to perform any of their
obligations under this Agreement or the Stock Option Agreement; or
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by any Governmental
Entity, other than the application to the Offer or the Merger of applicable
waiting periods under the HSR Act, that is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in clauses (i) through (v)
of paragraph (a) above; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange, in
the Nasdaq National Market System, for a period in excess of three hours
(excluding suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States (whether or not mandatory), (iii) a commencement of a
war, armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) any limitation (whether or not
mandatory) by any United States governmental authority on the extension of
credit by banks or other financial institutions, (v) any decline in either the
Dow Jones Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies by an amount in excess of 15% measured from the close of business on
the date of this Agreement, (vi) a change in general financial bank or capital
market conditions which materially or adversely affects the ability of financial
institutions in the United States to extend credit or syndicate loans, or (vii)
in the case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof; or
(d) there shall have occurred any material adverse change (or any
development that, insofar as reasonably can be foreseen, is reasonably likely to
result in any material adverse change) in the consolidated financial condition,
businesses, operations, properties (including intangible properties), results of
operations, assets or prospects of the Company, or in the ability of the Company
to consummate the Offer or the Merger, or to perform any of their obligations
under this Agreement or the Stock Option Agreement; or
(e) the Company Board of Directors or any committee thereof (i) shall
have withdrawn, modified or changed in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, this Agreement or the Merger,
A-2
<PAGE>
(ii) shall have recommended the approval or acceptance of an Acquisition
Proposal from, or similar business combination with, a person or entity other
than Parent, Purchaser or their Affiliates, (iii) shall have executed an
agreement in principle or definitive agreement relating to an Acquisition
Proposal from, or similar business combination with, a person or entity other
than Parent, Purchaser or their Affiliates, or (iv) shall have exercised its
rights pursuant to Section 5.5 of this Agreement with respect to an Acquisition
Proposal, and, directly or through its representatives, continued discussions
with any third party concerning an Acquisition Proposal for more than ten
business days after the date of receipt of such Acquisition Proposal; or
(f) any of the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each case as
of the date of this Agreement and as of the scheduled expiration of the Offer;
or
(g) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under this Agreement; or
(h) all consents necessary to the consummation of the Tender Offer or
the Merger including, without limitation, consents from parties to loans,
contracts, leases or other agreements, and consents from governmental agencies,
whether federal, state or local, shall not have been obtained, other than
consents the failure to obtain which would not have a material adverse effect on
the Company;
(i) this Agreement shall have been terminated in accordance
with its terms;
which in the sole judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances (including any action or inaction by Parent or
Purchaser) giving rise to such condition makes it inadvisable to proceed with
the Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and
Purchaser, may be waived by Parent or Purchaser, in whole or in part, at any
time and from time to time in the sole discretion of Parent or Purchaser. The
failure by Parent or Purchaser at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any
A-3
<PAGE>
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
A-4
<PAGE>
Annex I
Robert J. McNulty
Cyber Depot
Kipling Isle
Paul Hill
Ed Bradley
Mark Winkler
Kristine Webster
John Markley
Frank Denny
Pat Demicco
Randy Read
I-1
<PAGE>
EXHIBIT (c)(2)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Robert J. McNulty (in his individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Company is engaged in the business of retail sales on or
through the Internet (the "Business");
WHEREAS, the Shareholder is an officer of the Company and has
knowledge of trade secrets, customer information and other confidential and
proprietary information of the Company and, in order to protect the goodwill,
trade secrets and other confidential and proprietary information of the
Business, Parent has requested the Shareholder to enter into this Agreement;
WHEREAS, as an officer of the Company with a significant equity
interest therein, the Shareholder has a material economic interest in the
consummation of the Offer and the Merger and, in order to induce Parent to enter
into the Merger Agreement, Shareholder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
execution and delivery by Parent of the Merger Agreement and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing the
Shares owned by such Shareholder are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
2
<PAGE>
(b) This Agreement has been duly authorized, executed and delivered
by Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind
to which Parent is a party or bound. The consummation by Parent of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Parent, except for any necessary
filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time of the
Merger. Parent will cooperate with the Shareholder and the Company to permit
the cashless exercise of Options held by the Shareholder.
4
<PAGE>
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the Company)
relating to any Acquisition Proposal. The foregoing shall not apply to the
extent it is inconsistent with any of Shareholder's duties as a director and/or
officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the Merger Agreement in accordance with its terms, or (b) the
Effective Time (as defined in the Merger Agreement); provided, however, that
-------- -------
Sections 8 and 10 shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be entitled,
in addition to any other relief to which the party is entitled, to reimbursement
of its actual attorneys fees.
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any
5
<PAGE>
press release or otherwise make any public statement with respect to this
Agreement or the transactions contemplated hereby without the prior consent of
the other party, which consent shall not be unreasonably withheld or delayed;
provided, however, that such disclosure can be made without obtaining such
- - -------- -------
prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Non-Competition and Non-Disclosure.
----------------------------------
(a) Definitions. As used in this Section 13, terms defined in
------------
the preamble and recitals of this Agreement shall have the meanings set forth
therein and the following terms shall have the meanings set forth below.
(i) "Affiliate" shall mean, with respect to any person
---------
or entity, the subsidiaries of such person or entity and any other person or
entity which directly or indirectly controls, is controlled by or is under
common control with such person or entity;
(ii) "Business" shall have the meaning set forth in the
--------
Recitals;
(iii) "Confidential Information" shall mean all
------------------------
information respecting the business and activities of Parent and/or any
Affiliate, including, without limitation, the clients, customers, suppliers,
employees, consultants, computer or other files, projects, products, computer
disks or other media, computer hardware or computer software programs, marketing
plans, financial information, methodologies, know-how, processes, practices,
approaches, projections, forecasts, formats, systems, data gathering methods
and/or strategies of Parent and/or any Affiliate thereof. Notwithstanding the
immediately preceding sentence, Confidential Information shall not include (x)
any information that is, or becomes, a part of the public domain or generally
available to the public (unless such availability occurs as a result of any
breach by the Shareholder of any portion of this Agreement or any other
obligation the Shareholder owes to Parent and/or any Affiliate thereof) or (y)
any business knowledge and experience of the type usually acquired by persons
engaged in positions similar to the Shareholder's position as an officer of the
Company, to the extent such knowledge and experience is not specific to Parent
or any of its Affiliates and not proprietary to Parent or any of its Affiliates;
(iv) "Effective Date" shall mean the date of the
--------------
consummation of the Merger;
6
<PAGE>
(v) "potential business" shall mean any current or
------------------
reasonably foreseeable material commercial activity or any current or reasonably
foreseeable material commercial opportunities associated in any way with the
Business;
(vi) "potential client" or "potential customer" shall
---------------- ------------------
mean a person or entity that Parent, the Company or any of their Affiliates (i)
as of the date hereof, is, or in the reasonably foreseeable future can
reasonably be expected to be, soliciting (or has targeted for solicitation, or
can reasonably be expected to be so targeting in the reasonably foreseeable
future), and/or (ii) at any time or from time to time, within the 12-month
period prior to the date hereof, has been soliciting, in the case of each of
clause (i) or (ii) for or in respect of the Business;
(viii) "Restricted Area" shall mean each county in the
---------------
continental United States where the Business is conducted;
(ix) "Term" shall mean the period commencing on the
----
Effective Date and ending on the date that is eighteen months following the
Effective Time; and
(x) "Trade Secrets" shall mean the whole or any portion
-------------
or phase of any scientific or technical information, design, process, procedure,
computer program, formula or improvement of Parent, the Company or any of their
Affiliates that is valuable and not generally known to the competitors of
Parent, the Company or any of their Affiliates, whether or not in written or
tangible form. Notwithstanding the immediately preceding sentence, Trade Secrets
shall not include (x) any information that is, or becomes, a part of the public
domain or generally available to the public (unless such availability occurs as
a result of any breach by Shareholder of this Agreement or any Affiliate
thereof) or (y) any business knowledge and experience of the type usually
acquired by persons engaged in positions similar to Shareholder's position as an
officer of the Company, to the extent such knowledge and experience is not
specific to Parent or any of its Affiliates and not proprietary to Parent or any
of its Affiliates.
(b) No Competitive Business. As an inducement for Parent to
------------------------
enter into the Merger Agreement, to agree to the Offer and to consummate the
transactions contemplated by the Merger Agreement, Shareholder agrees that,
during the Term (the "Specified Period"), at any time or for any reason,
Shareholder shall not, anywhere in the Restricted Area, directly or indirectly
(a) engage, without the prior express written consent of Parent, in any business
or activity, whether as an employee, consultant, partner, principal, agent,
representative, stockholder (except as a holder of less than 5% of the combined
voting power of the outstanding stock of a publicly held company) or in any
other individual,
7
<PAGE>
corporate or representative capacity, or render any services or provide any
advice to any business, activity, person or entity, if Shareholder knows or
reasonably should know that such business, activity, service, person or entity,
directly or indirectly, is similar to, or competes or is competitive in any
material manner with, the Business as it is currently defined (the business of
retail sales on or through the Internet), or (b) meaningfully assist, help or
otherwise support, without the prior express written consent of Parent, any
person, business, corporation, partnership or other entity or activity, whether
as an employee, consultant, partner, principal, agent, representative,
stockholder (except as a holder of less than 5% of the combined voting power of
the outstanding stock of a publicly held company) or in any other individual,
corporate or representative capacity, to create, commence or otherwise initiate,
or to develop, enhance or otherwise further, any business or activity if
Shareholder knows or reasonably should know that such business or activity, is
similar to, or directly or indirectly competes or is competitive with, the
Business.
(c) No Interference with the Business. As an inducement for
---------------------------------
Parent to enter into the Merger Agreement, to agree to the Offer and to
consummate the transactions contemplated by the Merger Agreement, Shareholder
agrees that for the Specified Period, at any time or for any reason, Shareholder
shall not directly or indirectly (a) with respect to the Business, take any
action to solicit or divert any business (or potential business) or clients or
customers (or potential clients or potential customers) away from Parent or any
Affiliate, (b) induce customers, potential customers, clients, potential
clients, suppliers, agents or other persons under contract or otherwise
associated or doing business with respect to the Business with Parent or any
Affiliate to terminate, reduce or alter any such association or business with
respect to the Business with or from Parent or any Affiliate, and/or (c)
knowingly induce any person in the employment of Parent or any Affiliate in the
Business to (i) terminate such employment, (ii) with respect to the Business,
interfere with the customers, suppliers, or clients of Parent or any Affiliate
in any manner or the business of Parent or any Affiliate in any manner.
(d) No Disclosure of Proprietary Information. Shareholder
----------------------------------------
hereby agrees that he or she will not directly or indirectly disclose to any
person, or use or otherwise exploit for his own benefit or for the benefit of
any person, other than Parent and/or its Affiliates, any Confidential
Information or Trade Secrets other than any of the foregoing which becomes
public information without any breach of this Agreement by Shareholder.
(e) Shareholder represents and warrants that the provisions of
this Section 13 are reasonable and are necessary to protect the legitimate
business interests of Parent and the Company. Shareholder represents and
warrants that Shareholder has no right, title, interest or claim in, to or under
any Trade Secrets, Confidential Information or other property (other than the
Shares) that is the subject of the Merger Agreement. In consider-
8
<PAGE>
ation for the mutual promises contained herein, Shareholder agrees and covenants
that he or she will not request or otherwise pursue a determination that the
provisions of this Section 13 are unenforceable as written.
SECTION 14. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(c) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Robert J. McNulty
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
9
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving effect to
the principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restric-
10
<PAGE>
tions of this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in
the event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in any
action for specific performance, the defense of adequacy of a remedy at law, and
(ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing
and signed by such party .
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ Robert J. McNulty
_______________________________
Robert J. McNulty
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
Common Stock 1,022,474
Options 200,000
Warrants 317,500
<PAGE>
Exhibit (c)(3)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Cyber Depot (the "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, and in order to induce Parent to enter into the Merger
Agreement, the Shareholder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the execution
and delivery by Parent of the Merger Agreement and the mutual representations,
warranties, covenants and agreements set forth herein and therein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the
shares of Common Stock (as may be adjusted from time to time pursuant to Section
6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
<PAGE>
(b) Such Shareholder has the legal capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by
such Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor
the consummation by such Shareholder of the transactions contemplated hereby
will violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing
the Shares owned by such Shareholder are now and at all times during the term
hereof will be held by such Shareholder, or by a nominee or custodian for the
benefit of such Shareholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(d) This Agreement has been duly authorized, executed and
delivered by Parent and constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) the
2
<PAGE>
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor
the consummation by Parent of the transactions contemplated hereby will result
in a violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent is a party or bound. The consummation by Parent of the transactions
contemplated hereby will not violate, or require any consent, approval, or
notice under, any provision of any judgment, order, decree, statute, law, rule
or regulation applicable to Parent, except for any necessary filing under the
HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or under standing with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore
given in respect of the Shares, if any, are not irrevocable, and that such
proxies are hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy
set forth in this Section 5 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Shareholder under this Agreement. Such
Shareholder hereby further affirms that the irrevocable proxy is coupled with an
interest and, except as set forth in Section 8 hereof, is intended to be
irrevocable in accordance with the provisions of Section 705 of the California
General Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by Parent,
--------------------------------
the Shareholder agrees to execute all documents and to take all actions
4
<PAGE>
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time of the
Merger. Parent will cooperate with the Shareholder and the Company to permit the
cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or take
any action to facilitate the making of, any offer or proposal which constitutes
or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the
event of an unsolicited written Acquisition Proposal, engage in negotiations or
discussions with, or provide any information or data to, any person (other than
Parent, any of its affiliates or representatives and except for information
which has been previously publicly disseminated by the Company) relating to any
Acquisition Proposal. The foregoing shall not apply to the extent that it is
inconsistent with any of Shareholder's duties as a director and/or officer of
the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the
5
<PAGE>
Merger Agreement in accordance with its terms, or (b) the Effective Time (as
defined in the Merger Agreement); provided, however, that Sections 8 and 10
-------- -------
shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be
entitled, in addition to any other relief to which the party is entitled, to
reimbursement of its actual attorneys fees.
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
6
<PAGE>
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Cyber Depot
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.
(e) This Agreement (including the Merger Agreement and any
other documents and instruments referred to herein) constitutes the entire
agreement,
7
<PAGE>
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving effect to
the principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in
the event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in any
action for specific performance, the defense of adequacy of a remedy at law, and
(ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
CYBER DEPOT
By: /s/ Robert J. McNulty
_______________________________
Name: Robert J. McNulty
Title: Chief Executive Officer
9
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
<TABLE>
<CAPTION>
<S> <C>
Common Stock 250,000
Options 100,000
Warrants 0
</TABLE>
10
<PAGE>
EXHIBIT (C)(4)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Kipling Isle (the "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), warrants and options to purchase Common Stock (collectively, the
- - -----
"Options") of Shopping.com, a California corporation (the "Company"), set forth
- - -------- -------
on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, and in order to induce Parent to enter into the Merger
Agreement, the Shareholder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
execution and delivery by Parent of the Merger Agreement and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
<PAGE>
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing the
Shares owned by such Shareholder are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(b) This Agreement has been duly authorized, executed and delivered
by Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) the
2
<PAGE>
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent is a party or bound. The consummation by Parent of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Parent, except for any necessary
filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
4
<PAGE>
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time of the
Merger. Parent will cooperate with the Shareholder and the Company to permit
the cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the Company)
relating to any Acquisition Proposal. The foregoing shall not apply to the
extent that it is inconsistent with any of Shareholder's duties as a director
and/or officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the
5
<PAGE>
Merger Agreement in accordance with its terms, or (b) the Effective Time (as
defined in the Merger Agreement); provided, however, that Sections 8 and 10
-------- -------
shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be entitled,
in addition to any other relief to which the party is entitled, to reimbursement
of its actual attorneys fees.
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
6
<PAGE>
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Kipling Isle
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which shall be considered one and
the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
7
<PAGE>
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
KIPLING ISLE
By: /s/ Paul Hill
_______________________________
Name: Paul Hill
Title:
9
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
Common Stock 66,667
Options 100,000
Warrants 33,334
10
<PAGE>
EXHIBIT (c)(5)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Paul Hill (in his or her individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, and in order to induce Parent to enter into the Merger
Agreement, the Shareholder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the execution
and delivery by Parent of the Merger Agreement and the mutual representations,
warranties, covenants and agreements set forth herein and therein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the
shares of Common Stock (as may be adjusted from time to time pursuant to Section
6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
<PAGE>
(b) Such Shareholder has the legal capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by
such Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor
the consummation by such Shareholder of the transactions contemplated hereby
will violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing
the Shares owned by such Shareholder are now and at all times during the term
hereof will be held by such Shareholder, or by a nominee or custodian for the
benefit of such Shareholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by Parent and constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) the
2
<PAGE>
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor
the consummation by Parent of the transactions contemplated hereby will result
in a violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent is a party or bound. The consummation by Parent of the transactions
contemplated hereby will not violate, or require any consent, approval, or
notice under, any provision of any judgment, order, decree, statute, law, rule
or regulation applicable to Parent, except for any necessary filing under the
HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore
given in respect of the Shares, if any, are not irrevocable, and that such
proxies are hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy
set forth in this Section 5 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Shareholder under this Agreement. Such
Shareholder hereby further affirms that the irrevocable proxy is coupled with an
interest and, except as set forth in Section 8 hereof, is intended to be
irrevocable in accordance with the provisions of Section 705 of the California
General Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by Parent,
--------------------------------
the Shareholder agrees to execute all documents and to take all actions
4
<PAGE>
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time of the
Merger. Parent will cooperate with the Shareholder and the Company to permit the
cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or take
any action to facilitate the making of, any offer or proposal which constitutes
or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the
event of an unsolicited written Acquisition Proposal, engage in negotiations or
discussions with, or provide any information or data to, any person (other than
Parent, any of its affiliates or representatives and except for information
which has been previously publicly disseminated by the Company) relating to any
Acquisition Proposal. The foregoing shall not apply to the extent that it is
inconsistent with any of Shareholder's duties as a director and/or officer of
the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the
5
<PAGE>
Merger Agreement in accordance with its terms, or (b) the Effective Time (as
defined in the Merger Agreement); provided, however, that Sections 8 and 10
-------- -------
shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be entitled,
in addition to any other relief to which the party is entitled, to reimbursement
of its actual attorneys fees.
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
6
<PAGE>
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Paul Hill
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.
(e) This Agreement (including the Merger Agreement and any
other documents and instruments referred to herein) constitutes the entire
agreement,
7
<PAGE>
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without giving effect to
the principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in
the event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in any
action for specific performance, the defense of adequacy of a remedy at law, and
(ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ Paul Hill
__________________________________
Paul Hill
9
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
<TABLE>
<CAPTION>
<S> <C>
Common Stock 0
Options 25,000
Warrants 0
</TABLE>
10
<PAGE>
EXHIBIT (C)(6)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and Ed
------
Bradley (in his or her individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
-------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, and in order to induce Parent to enter into the Merger
Agreement, the Shareholder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
execution and delivery by Parent of the Merger Agreement and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
1
<PAGE>
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing the
Shares owned by such Shareholder are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement.
(b) This Agreement has been duly authorized, executed and delivered
by Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) the
2
<PAGE>
availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the court before which any proceeding therefor
may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent is a party or bound. The consummation by Parent of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Parent, except for any necessary
filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
4
<PAGE>
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time of the
Merger. Parent will cooperate with the Shareholder and the Company to permit
the cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the Company)
relating to any Acquisition Proposal. The foregoing shall not apply to the
extent that it is inconsistent with any of Shareholder's duties as a director
and/or officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the
5
<PAGE>
Merger Agreement in accordance with its terms, or (b) the Effective Time
(as defined in the Merger Agreement); provided, however, that Sections 8
-------- -------
and 10 shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be entitled,
in addition to any other relief to which the party is entitled, to reimbursement
of its actual attorneys fees.
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
6
<PAGE>
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Ed Bradley
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall be considered one
and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
7
<PAGE>
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ Ed Bradley
_______________________________
Ed Bradley
9
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
<TABLE>
<CAPTION>
<S> <C>
Common Stock 0
Options 125,000
Warrants 0
</TABLE>
10
<PAGE>
EXHIBIT (c)(7)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Mark Winkler (in his or her individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Company is engaged in the business of retail sales on or
through the Internet (the "Business");
WHEREAS, the Shareholder is an officer of the Company and has
knowledge of trade secrets, customer information and other confidential and
proprietary information of the Company and, in order to protect the goodwill,
trade secrets and other confidential and proprietary information of the
Business, Parent has requested the Shareholder to enter into this Agreement;
WHEREAS, as an officer of the Company with a significant equity
interest therein, the Shareholder has a material economic interest in the
consummation of the Offer and the Merger and, in order to induce Parent to enter
into the Merger Agreement, Shareholder has agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the execution
and delivery by Parent of the Merger Agreement and the mutual representations,
warranties, covenants and agreements set forth herein and therein, and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
<PAGE>
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the
shares of Common Stock (as may be adjusted from time to time pursuant to Section
6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
(b) Such Shareholder has the legal capacity to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by
such Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing
the Shares owned by such Shareholder are now and at all times during the term
hereof will be held by such Shareholder, or by a nominee or custodian for the
benefit of such Shareholder, free and clear of all liens, claims, security
interests, proxies, voting trusts or agreements, understandings or arrangements
or any other encumbrances whatsoever, except for any such encumbrances or
proxies arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
2
<PAGE>
(b) This Agreement has been duly authorized, executed and
delivered by Parent and constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind
to which Parent is a party or bound. The consummation by Parent of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Parent, except for any necessary
filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore given
in respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy
set forth in this Section 5 is given in connection with the execution of the
Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Shareholder under this Agreement. Such
Shareholder hereby further affirms that the irrevocable proxy is coupled with an
interest and, except as set forth in Section 8 hereof, is intended to be
irrevocable in accordance with the provisions of Section 705 of the California
General Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time
4
<PAGE>
of the Merger. Parent will cooperate with the Shareholder and the Company to
permit the cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for informa tion which has been previously publicly disseminated by the
Company) relating to any Acquisition Proposal. The foregoing shall not apply to
the extent it is inconsistent with any of Shareholder's duties as a director
and/or officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the Merger Agreement in accordance with its terms, or (b) the
Effective Time (as defined in the Merger Agreement); provided, however, that
-------- -------
Sections 8 and 10 shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be entitled,
in addition to any other relief to which the party is entitled, to reimbursement
of its actual attorneys fees.
5
<PAGE>
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Non-Competition and Non-Disclosure.
----------------------------------
(a) Definitions. As used in this Section 13, terms defined in
------------
the preamble and recitals of this Agreement shall have the meanings set forth
therein and the following terms shall have the meanings set forth below.
(i) "Affiliate" shall mean, with respect to any person
---------
or entity, the subsidiaries of such person or entity and any other person or
entity which directly or indirectly controls, is controlled by or is under
common control with such person or entity;
(ii) "Business" shall have the meaning set forth in the
--------
Recitals;
(iii) "Confidential Information" shall mean all
------------------------
information respecting the business and activities of Parent and/or any
Affiliate, including, without limitation, the clients, customers, suppliers,
employees, consultants, computer or other files, projects, products, computer
disks or other media, computer hardware or computer software programs, marketing
plans, financial information, methodologies, know-how, processes, practices,
approaches, projections, forecasts, formats, systems, data gathering methods
and/or strategies of Parent and/or any Affiliate thereof. Notwithstanding the
immediately preceding sentence, Confidential Information shall not include (x)
any information that is, or becomes, a part of the public domain or generally
available to the public (unless such availability occurs as a result of any
breach by the Shareholder of any portion of this Agreement or any other
obligation the Shareholder owes to Parent and/or any Affiliate thereof) or (y)
any business knowledge and experience of the type usually acquired by persons
engaged in positions similar to the Shareholder's position as an officer of the
Company, to the extent such knowledge and experience is not specific to Parent
or any of its Affiliates and not proprietary to Parent or any of its Affiliates;
6
<PAGE>
(iv) "Effective Date" shall mean the date of the
--------------
consummation of the Merger;
(v) "potential business" shall mean any current or
------------------
reasonably foreseeable material commercial activity or any current or reasonably
foreseeable material commercial opportunities associated in any way with the
Business;
(vi) "potential client" or "potential customer" shall
---------------- ------------------
mean a person or entity that Parent, the Company or any of their Affiliates (i)
as of the date hereof, is, or in the reasonably foreseeable future can
reasonably be expected to be, soliciting (or has targeted for solicitation, or
can reasonably be expected to be so targeting in the reasonably foreseeable
future), and/or (ii) at any time or from time to time, within the 12-month
period prior to the date hereof, has been soliciting, in the case of each of
clause (i) or (ii) for or in respect of the Business;
(viii) "Restricted Area" shall mean each county in the
---------------
continental United States where the Business is conducted;
(ix) "Term" shall mean the period commencing on the
----
Effective Date and ending on the date that is eighteen months following the
Effective Time; and
(x) "Trade Secrets" shall mean the whole or any
-------------
portion or phase of any scientific or technical information, design, process,
procedure, computer program, formula or improvement of Parent, the Company or
any of their Affiliates that is valuable and not generally known to the
competitors of Parent, the Company or any of their Affiliates, whether or not in
written or tangible form. Notwithstanding the immediately preceding sentence,
Trade Secrets shall not include (x) any information that is, or becomes, a part
of the public domain or generally available to the public (unless such
availability occurs as a result of any breach by Shareholder of this Agreement
or any Affiliate thereof) or (y) any business knowledge and experience of the
type usually acquired by persons engaged in positions similar to Shareholder's
position as an officer of the Company, to the extent such knowledge and
experience is not specific to Parent or any of its Affiliates and not
proprietary to Parent or any of its Affiliates.
(b) No Competitive Business. As an inducement for Parent to
------------------------
enter into the Merger Agreement, to agree to the Offer and to consummate the
transactions contemplated by the Merger Agreement, Shareholder agrees that,
during the Term (the "Specified Period"), at any time or for any reason,
Shareholder shall not, anywhere in the Restricted Area, directly or indirectly
(a) engage, without the prior express written consent
7
<PAGE>
of Parent, in any business or activity, whether as an employee, consultant,
partner, principal, agent, representative, stockholder (except as a holder of
less than 5% of the combined voting power of the outstanding stock of a publicly
held company) or in any other individual, corporate or representative capacity,
or render any services or provide any advice to any business, activity, person
or entity, if Shareholder knows or reasonably should know that such business,
activity, service, person or entity, directly or indirectly, is similar to, or
competes or is competitive in any material manner with, the Business as it is
currently defined (the business of retail sales on or through the Internet), or
(b) meaningfully assist, help or otherwise support, without the prior express
written consent of Parent, any person, business, corporation, partnership or
other entity or activity, whether as an employee, consultant, partner,
principal, agent, representative, stockholder (except as a holder of less than
5% of the combined voting power of the outstanding stock of a publicly held
company) or in any other individual, corporate or representative capacity, to
create, commence or otherwise initiate, or to develop, enhance or otherwise
further, any business or activity if Shareholder knows or reasonably should know
that such business or activity, is similar to, or directly or indirectly
competes or is competitive with, the Business.
(c) No Interference with the Business. As an inducement for
----------------------------------
Parent to enter into the Merger Agreement, to agree to the Offer and to
consummate the transactions contemplated by the Merger Agreement, Shareholder
agrees that for the Specified Period, at any time or for any reason, Shareholder
shall not directly or indirectly (a) with respect to the Business, take any
action to solicit or divert any business (or potential business) or clients or
customers (or potential clients or potential customers) away from Parent or any
Affiliate, (b) induce customers, potential customers, clients, potential
clients, suppliers, agents or other persons under contract or otherwise
associated or doing business with respect to the Business with Parent or any
Affiliate to terminate, reduce or alter any such association or business with
respect to the Business with or from Parent or any Affiliate, and/or (c)
knowingly induce any person in the employment of Parent or any Affiliate in the
Business to (i) terminate such employment, (ii) with respect to the Business,
interfere with the customers, suppliers, or clients of Parent or any Affiliate
in any manner or the business of Parent or any Affiliate in any manner.
(d) No Disclosure of Proprietary Information. Shareholder
-----------------------------------------
hereby agrees that he or she will not directly or indirectly disclose to any
person, or use or otherwise exploit for his own benefit or for the benefit of
any person, other than Parent and/or its Affiliates, any Confidential
Information or Trade Secrets other than any of the foregoing which becomes
public information without any breach of this Agreement by Shareholder.
(e) Shareholder represents and warrants that the provisions of
this Section 13 are reasonable and are necessary to protect the legitimate
business interests of
8
<PAGE>
Parent and the Company. Shareholder represents and warrants that Shareholder has
no right, title, interest or claim in, to or under any Trade Secrets,
Confidential Information or other property (other than the Shares) that is the
subject of the Merger Agreement. In consideration for the mutual promises
contained herein, Shareholder agrees and covenants that he or she will not
request or otherwise pursue a determination that the provisions of this Section
13 are unenforceable as written.
SECTION 14. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Mark Winkler
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
9
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall be considered one
and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restric-
10
<PAGE>
tions of this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ Mark Winkler
_______________________________
Mark Winkler
12
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
Common Stock 25,000
Options 50,000
Warrants 0
13
<PAGE>
EXHIBIT (C)(8)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Kristine Webster (in his or her individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
the "Options") of Shopping.com, a California corporation (the "Company"), set
-------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, and in order to induce Parent to enter into the Merger
Agreement, the Shareholder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the execution and
delivery by Parent of the Merger Agreement and the mutual representations,
warranties, covenants and agreements set forth herein and therein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
<PAGE>
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing the
Shares owned by such Shareholder are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(b) This Agreement has been duly authorized, executed and delivered
by Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) the
2
<PAGE>
availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the court before which any proceeding therefor
may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent is a party or bound. The consummation by Parent of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Parent, except for any necessary
filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach
to any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
4
<PAGE>
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time of the
Merger. Parent will cooperate with the Shareholder and the Company to permit
the cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the Company)
relating to any Acquisition Proposal. The foregoing shall not apply to the
extent that it is inconsistent with any of Shareholder's duties as a director
and/or officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the
5
<PAGE>
Merger Agreement in accordance with its terms, or (b) the Effective Time (as
defined in the Merger Agreement); provided, however, that
-------- -------
Sections 8 and 10 shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be
entitled, in addition to any other relief to which the party is entitled, to
reimbursement of its actual attorneys fees.
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
6
<PAGE>
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Kristine Webster
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
7
<PAGE>
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ Kristine Webster
_______________________________
Kristine Webster
9
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
Common Stock 28,334
Options 50,000
Warrants 4,167
10
<PAGE>
EXHIBIT (C)(9)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
John Markley (in his or her individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, and in order to induce Parent to enter into the Merger
Agreement, the Shareholder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
execution and delivery by Parent of the Merger Agreement and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
<PAGE>
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing the
Shares owned by such Shareholder are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(b) This Agreement has been duly authorized, executed and delivered
by Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) the
2
<PAGE>
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent is a party or bound. The consummation by Parent of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Parent, except for any necessary
filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach
to any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
4
<PAGE>
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time of the
Merger. Parent will cooperate with the Shareholder and the Company to permit
the cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the Company)
relating to any Acquisition Proposal. The foregoing shall not apply to the
extent that it is inconsistent with any of Shareholder's duties as a director
and/or officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the
5
<PAGE>
Merger Agreement in accordance with its terms, or (b) the Effective Time (as
defined in the Merger Agreement); provided, however, that Sections 8 and 10
-------- -------
shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be
entitled, in addition to any other relief to which the party is entitled, to
reimbursement of its actual attorneys fees.
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
6
<PAGE>
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: John Markley
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
7
<PAGE>
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
(k) On its formation, the Purchaser shall be an intended third-party
beneficiary of the provisions of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L.Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ John Markley
_______________________________
John Markley
9
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
Common Stock 0
Options 275,000
Warrants 0
10
<PAGE>
EXHIBIT (C)(10)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Frank Denny (in his or her individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Company is engaged in the business of retail sales on or
through the Internet (the "Business");
WHEREAS, the Shareholder is an officer of the Company and has
knowledge of trade secrets, customer information and other confidential and
proprietary information of the Company and, in order to protect the goodwill,
trade secrets and other confidential and proprietary information of the
Business, Parent has requested the Shareholder to enter into this Agreement;
WHEREAS, as an officer of the Company with a significant equity
interest therein, the Shareholder has a material economic interest in the
consummation of the Offer and the Merger and, in order to induce Parent to enter
into the Merger Agreement, Share holder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
execution and delivery by Parent of the Merger Agreement and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
- - --------
1
<PAGE>
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing the
Shares owned by such Shareholder are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
2
<PAGE>
(b) This Agreement has been duly authorized, executed and delivered by
Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally and
(ii) the availability of the remedy of specific performance or injunctive or
other forms of equitable relief may be subject to equitable defenses and would
be subject to the discretion of the court before which any proceeding therefor
may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent is a party or bound. The consummation by Parent of the transactions
contemplated hereby will not violate, or require any consent, approval, or
notice under, any provision of any judgment, order, decree, statute, law, rule
or regulation applicable to Parent, except for any necessary filing under the
HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the share holders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time
4
<PAGE>
of the Merger. Parent will cooperate with the Shareholder and the Company to
permit the cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the Company)
relating to any Acquisition Proposal. The foregoing shall not apply to the
extent it is inconsistent with any of Shareholder's duties as a director and/or
officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the Merger Agreement in accordance with its terms, or (b) the
Effective Time (as defined in the Merger Agreement); provided, however, that
-------- -------
Sections 8 and 10 shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be entitled,
in addition to any other relief to which the party is entitled, to reimbursement
of its actual attorneys fees.
5
<PAGE>
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Non-Competition and Non-Disclosure.
----------------------------------
(a) Definitions. As used in this Section 13, terms defined in
-----------
the preamble and recitals of this Agreement shall have the meanings set forth
therein and the following terms shall have the meanings set forth below.
(i) "Affiliate" shall mean, with respect to any person
---------
or entity, the subsidiaries of such person or entity and any other person or
entity which directly or indirectly controls, is controlled by or is under
common control with such person or entity;
(ii) "Business" shall have the meaning set forth in the
--------
Recitals;
(iii) "Confidential Information" shall mean all
------------------------
information respecting the business and activities of Parent and/or any
Affiliate, including, without limitation, the clients, customers, suppliers,
employees, consultants, computer or other files, projects, products, computer
disks or other media, computer hardware or computer software programs, marketing
plans, financial information, methodologies, know-how, processes, practices,
approaches, projections, forecasts, formats, systems, data gathering methods
and/or strategies of Parent and/or any Affiliate thereof. Notwithstanding the
immediately preceding sentence, Confidential Information shall not include (x)
any information that is, or becomes, a part of the public domain or generally
available to the public (unless such availability occurs as a result of any
breach by the Shareholder of any portion of this Agreement or any other
obligation the Shareholder owes to Parent and/or any Affiliate thereof) or (y)
any business knowledge and experience of the type usually acquired by persons
engaged in positions similar to the Shareholder's position as an officer of the
Company, to the extent such knowledge and experience is not specific to Parent
or any of its Affiliates and not proprietary to Parent or any of its Affiliates;
6
<PAGE>
(iv) "Effective Date" shall mean the date of the
--------------
consummation of the Merger;
(v) "potential business" shall mean any current or
------------------
reasonably foreseeable material commercial activity or any current or reasonably
foreseeable material commercial opportunities associated in any way with the
Business;
(vi) "potential client" or "potential customer" shall
---------------- ------------------
mean a person or entity that Parent, the Company or any of their Affiliates (i)
as of the date hereof, is, or in the reasonably foreseeable future can
reasonably be expected to be, soliciting (or has targeted for solicitation, or
can reasonably be expected to be so targeting in the reasonably foreseeable
future), and/or (ii) at any time or from time to time, within the 12-month
period prior to the date hereof, has been soliciting, in the case of each of
clause (i) or (ii) for or in respect of the Business;
(viii) "Restricted Area" shall mean each county in the
---------------
continental United States where the Business is conducted;
(ix) "Term" shall mean the period commencing on the
----
Effective Date and ending on the date that is eighteen months following the
Effective Time; and
(x) "Trade Secrets" shall mean the whole or any
-------------
portion or phase of any scientific or technical information, design, process,
procedure, computer program, formula or improvement of Parent, the Company or
any of their Affiliates that is valuable and not generally known to the
competitors of Parent, the Company or any of their Affiliates, whether or not in
written or tangible form. Notwithstanding the immediately preceding sentence,
Trade Secrets shall not include (x) any information that is, or becomes, a part
of the public domain or generally available to the public (unless such
availability occurs as a result of any breach by Shareholder of this Agreement
or any Affiliate thereof) or (y) any business knowledge and experience of the
type usually acquired by persons engaged in positions similar to Shareholder's
position as an officer of the Company, to the extent such knowledge and
experience is not specific to Parent or any of its Affiliates and not
proprietary to Parent or any of its Affiliates.
(b) No Competitive Business. As an inducement for Parent to
-----------------------
enter into the Merger Agreement, to agree to the Offer and to consummate the
transactions contemplated by the Merger Agreement, Shareholder agrees that,
during the Term (the "Specified Period"), at any time or for any reason,
Shareholder shall not, anywhere in the Restricted Area, directly or indirectly
(a) engage, without the prior express written consent
7
<PAGE>
of Parent, in any business or activity, whether as an employee, consultant,
partner, principal, agent, representative, stockholder (except as a holder of
less than 5% of the combined voting power of the outstanding stock of a publicly
held company) or in any other individual, corporate or representative capacity,
or render any services or provide any advice to any business, activity, person
or entity, if Shareholder knows or reasonably should know that such business,
activity, service, person or entity, directly or indirectly, is similar to, or
competes or is competitive in any material manner with, the Business as it is
currently defined (the business of retail sales on or through the Internet), or
(b) meaningfully assist, help or otherwise support, without the prior express
written consent of Parent, any person, business, corporation, partnership or
other entity or activity, whether as an employee, consultant, partner,
principal, agent, representative, stockholder (except as a holder of less than
5% of the combined voting power of the outstanding stock of a publicly held
company) or in any other individual, corporate or representative capacity, to
create, commence or otherwise initiate, or to develop, enhance or otherwise
further, any business or activity if Shareholder knows or reasonably should know
that such business or activity, is similar to, or directly or indirectly
competes or is competitive with, the Business.
(c) No Interference with the Business. As an inducement for
---------------------------------
Parent to enter into the Merger Agreement, to agree to the Offer and to
consummate the transactions contemplated by the Merger Agreement, Shareholder
agrees that for the Specified Period, at any time or for any reason, Shareholder
shall not directly or indirectly (a) with respect to the Business, take any
action to solicit or divert any business (or potential business) or clients or
customers (or potential clients or potential customers) away from Parent or any
Affiliate, (b) induce customers, potential customers, clients, potential
clients, suppliers, agents or other persons under contract or otherwise
associated or doing business with respect to the Business with Parent or any
Affiliate to terminate, reduce or alter any such association or business with
respect to the Business with or from Parent or any Affiliate, and/or (c)
knowingly induce any person in the employment of Parent or any Affiliate in the
Business to (i) terminate such employment, (ii) with respect to the Business,
interfere with the customers, suppliers, or clients of Parent or any Affiliate
in any manner or the business of Parent or any Affiliate in any manner.
(d) No Disclosure of Proprietary Information. Shareholder
----------------------------------------
hereby agrees that he or she will not directly or indirectly disclose to any
person, or use or otherwise exploit for his own benefit or for the benefit of
any person, other than Parent and/or its Affiliates, any Confidential
Information or Trade Secrets other than any of the foregoing which becomes
public information without any breach of this Agreement by Shareholder.
(e) Shareholder represents and warrants that the provisions of
this Section 13 are reasonable and are necessary to protect the legitimate
business interests of
8
<PAGE>
Parent and the Company. Shareholder represents and warrants that Shareholder has
no right, title, interest or claim in, to or under any Trade Secrets,
Confidential Information or other property (other than the Shares) that is the
subject of the Merger Agreement. In consider ation for the mutual promises
contained herein, Shareholder agrees and covenants that he or she will not
request or otherwise pursue a determination that the provisions of this Section
13 are unenforceable as written.
SECTION 14. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Frank Denny
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
9
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall be considered one
and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by, the parties and their
respective successors and assigns, and the provisions of this Agreement are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restric-
10
<PAGE>
tions of this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ Frank Denny
_______________________________
Frank Denny
12
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
<TABLE>
<CAPTION>
<S> <C>
Common Stock 0
Options 1,175,000
Warrants 0
</TABLE>
13
<PAGE>
EXHIBIT (C)(11)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Pat Demicco (in his or her individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Company is engaged in the business of retail sales on or
through the Internet (the "Business");
WHEREAS, the Shareholder is an officer of the Company and has
knowledge of trade secrets, customer information and other confidential and
proprietary information of the Company and, in order to protect the goodwill,
trade secrets and other confidential and proprietary information of the
Business, Parent has requested the Shareholder to enter into this Agreement;
WHEREAS, as an officer of the Company with a significant equity
interest therein, the Shareholder has a material economic interest in the
consummation of the Offer and the Merger and, in order to induce Parent to enter
into the Merger Agreement, Shareholder has agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
execution and delivery by Parent of the Merger Agreement and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
<PAGE>
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the shares
of Common Stock (as may be adjusted from time to time pursuant to Section 6
hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing the
Shares owned by such Shareholder are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
2
<PAGE>
(b) This Agreement has been duly authorized, executed and delivered
by Parent and constitutes the legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind
to which Parent is a party or bound. The consummation by Parent of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Parent, except for any necessary
filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or understanding with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore given in
respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach to
any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time
4
<PAGE>
of the Merger. Parent will cooperate with the Shareholder and the Company to
permit the cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the
Company) relating to any Acquisition Proposal. The foregoing shall not apply to
the extent it is inconsistent with any of Shareholder's duties as a director
and/or officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the Merger Agreement in accordance with its terms, or (b) the
Effective Time (as defined in the Merger Agreement); provided, however, that
-------- -------
Sections 8 and 10 shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be entitled,
in addition to any other relief to which the party is entitled, to reimbursement
of its actual attorneys fees.
5
<PAGE>
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Non-Competition and Non-Disclosure.
----------------------------------
(a) Definitions. As used in this Section 13, terms defined in
-----------------
the preamble and recitals of this Agreement shall have the meanings set forth
therein and the following terms shall have the meanings set forth below.
(i) "Affiliate" shall mean, with respect to any person or entity,
---------
the subsidiaries of such person or entity and any other person or entity which
directly or indirectly controls, is controlled by or is under common control
with such person or entity;
(ii) "Business" shall have the meaning set forth in the
--------
Recitals;
(iii) "Confidential Information" shall mean all information
------------------------
respecting the business and activities of Parent and/or any Affiliate,
including, without limitation, the clients, customers, suppliers, employees,
consultants, computer or other files, projects, products, computer disks or
other media, computer hardware or computer software programs, marketing plans,
financial information, methodologies, know-how, processes, practices,
approaches, projections, forecasts, formats, systems, data gathering methods
and/or strategies of Parent and/or any Affiliate thereof. Notwithstanding the
immediately preceding sentence, Confidential Information shall not include (x)
any information that is, or becomes, a part of the public domain or generally
available to the public (unless such availability occurs as a result of any
breach by the Shareholder of any portion of this Agree ment or any other
obligation the Shareholder owes to Parent and/or any Affiliate thereof) or (y)
any business knowledge and experience of the type usually acquired by persons
engaged in positions similar to the Shareholder's position as an officer of the
Company, to the extent such knowledge and experience is not specific to Parent
or any of its Affiliates and not proprietary to Parent or any of its Affiliates;
6
<PAGE>
(iv) "Effective Date" shall mean the date of the consummation of
--------------
the Merger;
(v) "potential business" shall mean any current or reasonably
------------------
foreseeable material commercial activity or any current or reasonably
foreseeable material commercial opportunities associated in any way with the
Business;
(vi) "potential client" or "potential customer" shall mean a
---------------- ------------------
person or entity that Parent, the Company or any of their Affiliates (i) as of
the date hereof, is, or in the reasonably foreseeable future can reasonably be
expected to be, soliciting (or has targeted for solicitation, or can reasonably
be expected to be so targeting in the reasonably foreseeable future), and/or
(ii) at any time or from time to time, within the 12-month period prior to the
date hereof, has been soliciting, in the case of each of clause (i) or (ii) for
or in respect of the Business;
(viii) "Restricted Area" shall mean each county in the
---------------
continental United States where the Business is conducted;
(ix) "Term" shall mean the period commencing on the Effective
----
Date and ending on the date that is eighteen months following the Effective
Time; and
(x) "Trade Secrets" shall mean the whole or any portion or phase
-------------
of any scientific or technical information, design, process, procedure, computer
program, formula or improvement of Parent, the Company or any of their
Affiliates that is valuable and not generally known to the competitors of
Parent, the Company or any of their Affiliates, whether or not in written or
tangible form. Notwithstanding the immediately preceding sentence, Trade
Secrets shall not include (x) any information that is, or becomes, a part of the
public domain or generally available to the public (unless such availability
occurs as a result of any breach by Shareholder of this Agreement or any
Affiliate thereof) or (y) any business knowledge and experience of the type
usually acquired by persons engaged in positions similar to Shareholder's
position as an officer of the Company, to the extent such knowledge and
experience is not specific to Parent or any of its Affiliates and not
proprietary to Parent or any of its Affiliates.
(b) No Competitive Business. As an inducement for Parent to
-----------------------------
enter into the Merger Agreement, to agree to the Offer and to consummate the
transactions contemplated by the Merger Agreement, Shareholder agrees that,
during the Term (the "Specified Period"), at any time or for any reason,
Shareholder shall not, anywhere in the Restricted Area, directly or indirectly
(a) engage, without the prior express written consent
7
<PAGE>
of Parent, in any business or activity, whether as an employee, consultant,
partner, principal, agent, representative, stockholder (except as a holder of
less than 5% of the combined voting power of the outstanding stock of a publicly
held company) or in any other individual, corporate or representative capacity,
or render any services or provide any advice to any business, activity, person
or entity, if Shareholder knows or reasonably should know that such business,
activity, service, person or entity, directly or indirectly, is similar to, or
competes or is competitive in any material manner with, the Business as it is
currently defined (the business of retail sales on or through the Internet), or
(b) meaningfully assist, help or otherwise support, without the prior express
written consent of Parent, any person, business, corporation, partnership or
other entity or activity, whether as an employee, consultant, partner,
principal, agent, representative, stockholder (except as a holder of less than
5% of the combined voting power of the outstanding stock of a publicly held
company) or in any other individual, corporate or representative capacity, to
create, commence or otherwise initiate, or to develop, enhance or otherwise
further, any business or activity if Shareholder knows or reasonably should know
that such business or activity, is similar to, or directly or indirectly
competes or is competitive with, the Business.
(c) No Interference with the Business. As an inducement for
---------------------------------------
Parent to enter into the Merger Agreement, to agree to the Offer and to
consummate the transactions contemplated by the Merger Agreement, Shareholder
agrees that for the Specified Period, at any time or for any reason, Shareholder
shall not directly or indirectly (a) with respect to the Business, take any
action to solicit or divert any business (or potential business) or clients or
customers (or potential clients or potential customers) away from Parent or any
Affiliate, (b) induce customers, potential customers, clients, potential
clients, suppliers, agents or other persons under contract or otherwise
associated or doing business with respect to the Business with Parent or any
Affiliate to terminate, reduce or alter any such association or business with
respect to the Business with or from Parent or any Affiliate, and/or (c)
knowingly induce any person in the employment of Parent or any Affiliate in the
Business to (i) terminate such employment, (ii) with respect to the Business,
interfere with the customers, suppliers, or clients of Parent or any Affiliate
in any manner or the business of Parent or any Affiliate in any manner.
(d) No Disclosure of Proprietary Information. Shareholder
-----------------------------------------
hereby agrees that he or she will not directly or indirectly disclose to any
person, or use or otherwise exploit for his own benefit or for the benefit of
any person, other than Parent and/or its Affiliates, any Confidential
Information or Trade Secrets other than any of the foregoing which becomes
public information without any breach of this Agreement by Shareholder.
(e) Shareholder represents and warrants that the provisions of this
Section 13 are reasonable and are necessary to protect the legitimate business
interests of
8
<PAGE>
Parent and the Company. Shareholder represents and warrants that Shareholder has
no right, title, interest or claim in, to or under any Trade Secrets,
Confidential Information or other property (other than the Shares) that is the
subject of the Merger Agreement. In consideration for the mutual promises
contained herein, Shareholder agrees and covenants that he or she will not
request or otherwise pursue a determination that the provisions of this Section
13 are unenforceable as written.
SECTION 14. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Pat Demicco
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
9
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall be considered one
and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by, the parties and their
respective successors and assigns, and the provisions of this Agreement are not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restric-
10
<PAGE>
tions of this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
(k) On its formation, the Purchaser shall be an intended third-
party beneficiary of the provisions of this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ Pat Demicco
_______________________________
Pat Demicco
12
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
Common Stock 0
Options 175,000
Warrants 0
13
<PAGE>
EXHIBIT (c)(12)
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by
---------
and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and
------
Randy Read (in his or her individual capacity, a "Shareholder").
-----------
WHEREAS, the Shareholder is, as of the date hereof, the record and
beneficial owner of the shares of common stock, no par value (the "Common
------
Stock"), and/or warrants and/or options to purchase Common Stock (collectively,
- - -----
the "Options") of Shopping.com, a California corporation (the "Company"), set
------- -------
forth on Annex I hereto;
WHEREAS, Parent and the Company concurrently herewith are entering
into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger
------
Agreement"), which provides, among other things, for the acquisition of the
- - ---------
Company by Parent by means of a cash tender offer (the "Offer") for all of the
-----
outstanding shares of Common Stock and for the subsequent merger (the "Merger")
------
of the Purchaser (as defined in the Merger Agreement) with and into the Company
upon the terms and subject to the conditions set forth in the Merger Agreement;
and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, and in order to induce Parent to enter into the Merger
Agreement, the Shareholder has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
execution and delivery by Parent of the Merger Agreement and the mutual
representations, warranties, covenants and agreements set forth herein and
therein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
- - --------
SECTION 1. Representations and Warranties of the Shareholder. The
-------------------------------------------------
Shareholder hereby represents and warrants to Parent as follows:
(a) Such Shareholder is the record and beneficial owner of the
shares of Common Stock (as may be adjusted from time to time pursuant to Section
6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to
------
this Agreement.
1
<PAGE>
(b) Such Shareholder has the legal capacity to execute and deliver
this Agreement and to consummate the transactions contemplated hereby.
(c) This Agreement has been validly executed and delivered by such
Shareholder and constitutes the legal, valid and binding obligation of such
Shareholder, enforceable against such Shareholder in accordance with its terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other laws of general application affecting enforcement of
creditors' rights generally, and (ii) the availability of the remedy of specific
performance or injunctive or other forms of equitable relief may be subject to
equitable defenses and would be subject to the discretion of the court before
which any proceeding therefor may be brought.
(d) Neither the execution and delivery of this Agreement nor the
consummation by such Shareholder of the transactions contemplated hereby will
violate any other agreement to which such Shareholder is a party.
(e) The Shares and/or Options and the certificates representing the
Shares owned by such Shareholder are now and at all times during the term hereof
will be held by such Shareholder, or by a nominee or custodian for the benefit
of such Shareholder, free and clear of all liens, claims, security interests,
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
SECTION 2. Representations and Warranties of Parent. Parent hereby
----------------------------------------
represents and warrants to the Shareholder as follows:
(a) Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, and Parent has all
requisite corporate power and authority to execute and deliver this Agreement
and to consum mate the transactions contemplated hereby, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.
(b) This Agreement has been duly authorized, executed and
delivered by Parent and constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally and (ii) the
2
<PAGE>
availability of the remedy of specific performance or injunctive or other forms
of equitable relief may be subject to equitable defenses and would be subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) Neither the execution and delivery of this Agreement nor the
consummation by Parent of the transactions contemplated hereby will result in a
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which Parent is a party or bound. The consummation by Parent of the
transactions contemplated hereby will not violate, or require any consent,
approval, or notice under, any provision of any judgment, order, decree,
statute, law, rule or regulation applicable to Parent, except for any necessary
filing under the HSR Act or state takeover laws.
SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby
-------------------------------
agrees that it shall tender the Shares into the Offer promptly, and in any event
no later than the tenth business day following the commencement of the Offer
pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall
not withdraw any Shares so tendered unless the Offer is terminated or has
expired. Parent shall cause Purchaser to agree to purchase all the Shares so
tendered at a price per Share equal to $19.00 per Share or any higher price that
may be paid in the Offer; provided, however, that Purchaser's obligation to
-------- -------
accept for payment and pay for the Shares in the Offer is subject to all the
terms and conditions of the Offer set forth in the Merger Agreement and Annex A
thereto.
SECTION 4. Transfer of the Shares. Prior to the termination of this
----------------------
Agreement, except as otherwise provided herein, the Shareholder shall not: (i)
transfer (which term shall include, without limitation, for the purposes of this
Agreement, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of the Shares; (ii) enter into any contract, option or
other agreement or under standing with respect to any transfer of any or all of
the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or
other authorization or consent in or with respect to the Shares; (iv) deposit
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of such Shareholder's
obligations hereunder or the transactions contemplated hereby.
3
<PAGE>
SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy.
------------------------------------------------
(a) The Shareholder hereby irrevocably grants to, and appoints,
Parent and any nominee thereof, its proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Shareholder, to
vote the Shares, or grant a consent or approval in respect of the Shares, in
connection with any meeting of the shareholders of the Company (i) in favor of
the Merger, and (ii) against any action or agreement which would impede,
interfere with or prevent the Merger, including any other extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Company and a third party or any other proposal of a third party to acquire
the Company; provided, however, that such irrevocable proxy shall be immediately
-------- -------
revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser
waives the Minimum Condition (as defined in the Merger Agreement) and accepts
for payment the Revised Minimum Number of Shares (as defined in the Merger
Agreement).
(b) The Shareholder represents that any proxies heretofore given
in respect of the Shares, if any, are not irrevocable, and that such proxies are
hereby revoked.
(c) The Shareholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and,
except as set forth in Section 8 hereof, is intended to be irrevocable in
accordance with the provisions of Section 705 of the California General
Corporation Law.
SECTION 6. Certain Events. In the event of any stock split, stock
--------------
dividend, merger, reorganization, recapitalization or other change in the
capital structure of the Company affecting the Common Stock or the acquisition
of additional shares of Common Stock or other securities or rights of the
Company by the Shareholder, the number of Shares shall be adjusted
appropriately, and this Agreement and the obligations hereunder shall attach
to any additional shares of Common Stock or other securities or rights of the
Company issued to or acquired by the Shareholder.
SECTION 7. Exercise of Company Common Stock. If requested by
--------------------------------
Parent, the Shareholder agrees to execute all documents and to take all actions
4
<PAGE>
necessary to convert all Options to purchase shares of the Common Stock held by
such shareholder into that number of shares of Common Stock equal to the net
number of shares of Common Stock into which such Options would have been
convertible at the election of the Shareholder for cash or pursuant to the
cashless exercise procedure immediately prior to the Effective Time of the
Merger. Parent will cooperate with the Shareholder and the Company to permit
the cashless exercise of Options held by the Shareholder.
SECTION 8. Certain Other Agreements. The Shareholder will notify
------------------------
Parent immediately if any proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with such Shareholder or its officers, directors, employees,
investment bankers, attorneys, accountants or other agents, if any, in each case
in connection with any Acquisition Proposal (as such terms is defined in the
Merger Agreement) indicating, in connection with such notice, the name of the
person making such Acquisition Proposal and the terms and conditions of any
proposals or offers. The Shareholder agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. Such
Shareholder agrees that it shall keep Parent informed, on a current basis, of
the status and terms of any Acquisition Proposal. Such Shareholder agrees that
it will not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii)
in the event of an unsolicited written Acquisition Proposal, engage in
negotiations or discussions with, or provide any information or data to, any
person (other than Parent, any of its affiliates or representatives and except
for information which has been previously publicly disseminated by the Company)
relating to any Acquisition Proposal. The foregoing shall not apply to the
extent that it is inconsistent with any of Shareholder's duties as a director
and/or officer of the Company.
SECTION 9. Further Assurances. The Shareholder shall, upon request
------------------
of Parent or the Purchaser, execute and deliver any additional documents and
take such further actions as may reasonably be deemed by Parent to be necessary
or desirable to carry out the provisions hereof and to vest the power to vote
the Shares as contemplated by Section 5 hereof in Parent.
SECTION 10. Termination. Subject to Section 5(a) hereof, this
-----------
Agreement, and all rights and obligations of the parties hereunder, shall
terminate immediately upon the earlier of (a) six months following the
termination of the
5
<PAGE>
Merger Agreement in accordance with its terms, or (b) the Effective Time (as
defined in the Merger Agreement); provided, however, that Sections 8 and 10
-------- -------
shall survive any termination of this Agreement.
SECTION 11. Expenses. All fees and expenses incurred by any one
--------
party hereto shall be borne by the party incurring such fees and expenses;
provided, that if any legal action is instituted to enforce or interpret the
- - --------
terms of this Agreement, the prevailing party in such action shall be
entitled, in addition to any other relief to which the party is entitled, to
reimbursement of its actual attorneys fees.
SECTION 12. Public Announcements. The Shareholder and Parent each
--------------------
agree that it will not (and Parent agrees that it will cause the Purchaser to
not) issue any press release or otherwise make any public statement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of the other party, which consent shall not be unreasonably withheld or
delayed; provided, however, that such disclosure can be made without obtaining
-------- -------
such prior consent if (i) the disclosure is required by law, and (ii) the party
making such disclosure has first used its best efforts to consult with the other
party about the form and substance of such disclosure.
SECTION 13. Miscellaneous.
-------------
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices and other communications hereunder shall be in
writing and shall be deemed given upon (i) transmitter's confirmation of a
receipt of a facsimile transmission, (ii) confirmed delivery by a standard
overnight carrier or when delivered by hand or (iii) the expiration of five
business days after the day when mailed in the United States by certified or
registered mail, postage prepaid, addressed at the following addresses (or at
such other address for a party as shall be specified by like notice):
6
<PAGE>
(A) if to the Shareholder, to:
Shopping.com
2101 East Coast Highway, Garden Level
Corona Del Mar, California 92625
Telephone: (949) 640-4393
Facsimile: (949) 640-4374
Attention: Randy Read
(B) if to Parent or the Purchaser, to:
Compaq Computer Corporation
20555 State Highway 249
Houston, Texas 77070
Telephone: (281) 370-0670
Facsimile: (281) 927-8835
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher
& Flom LLP
525 University Avenue, Suite 220
Palo Alto, California 94301
Telephone: (650) 470-4500
Facsimile: (650) 470-4570
Attention: Kenton J. King, Esq.
(c) The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(d) This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall be considered
one and the same agreement.
(e) This Agreement (including the Merger Agreement and any other
documents and instruments referred to herein) constitutes the entire agreement,
7
<PAGE>
and supersedes all prior agreements and understandings, whether written and
oral, among the parties hereto with respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California without giving effect to the
principles of conflicts of laws thereof.
(g) Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by, the parties and their respective
successors and assigns, and the provisions of this Agreement are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(h) If any term, provision, covenant or restriction herein is held by
a court of competent jurisdiction or other authority to be invalid, void or
unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(i) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Agreement, each non-breaching party would be
irreparably and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (i) will waive, in
any action for specific performance, the defense of adequacy of a remedy at law,
and (ii) shall be entitled, in addition to any other remedy to which they may be
entitled at law or in equity, to compel specific performance of this Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
(k) On its formation, the Purchaser shall be an intended third-party
beneficiary of the provisions of this Agreement.
8
<PAGE>
IN WITNESS WHEREOF, Parent and the Shareholder have caused this
Agreement to be duly executed and delivered as of the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
_______________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
/s/ Randy Read
_______________________________
Randy Read
9
<PAGE>
ANNEX I
Ownership of Common Stock, Warrants or
Options to Purchase Common Stock
Common Stock 0
Options 75,000
Warrants 0
10
<PAGE>
EXHIBIT (c)(13)
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated January 11, 1999 (this "Agreement"), by
---------
and among Compaq Computer Corporation, a Delaware corporation ("Parent"), and
------
Shopping.com, a California corporation (the "Company").
-------
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent and the Company are entering into an Agreement and Plan of
Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"; capitalized terms used but not defined in this Agreement
- - -----------------
shall have the meanings ascribed to them in the Merger Agreement), which
provides, upon the terms and subject to the conditions thereof, for (i) the
commencement by the Purchaser (as defined in the Merger Agreement) of a tender
offer (the "Offer") to purchase all of the issued and outstanding shares of the
-----
common stock, no par value, of the Company ("Common Stock") at the applicable
------------
Offer Price, and (ii) the subsequent merger of the Purchaser with and into the
Company (the "Merger"), whereby each share of Common Stock, other than shares
------
owned directly or indirectly by Parent, the Purchaser or the Company and other
than dissenting shares, will be converted into the right to receive in cash the
Offer Price applicable thereto; and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has required that the Company agree, and in order to
induce Parent to enter into the Merger Agreement, the Company has agreed, to
grant the Purchaser certain options to purchase shares of Common Stock of the
Company, upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
ARTICLE I
THE OPTIONS
SECTION 1.1. Grant of Top-Up Stock Option. Subject to the terms and
----------------------------
conditions set forth herein, the Company hereby grants to the Purchaser an
irrevocable option (the "Top-Up Stock Option") to purchase that number of shares
-------------------
of Common Stock (the "Top-Up Option Shares") equal to the number of shares of
--------------------
Common Stock that, when added to the number of shares of Common Stock owned by
the Purchaser and its affiliates immediately following consummation of the
Offer, shall constitute 90% of the shares of Common Stock then outstanding on a
fully diluted basis (assuming the issuance of the Top-Up Option Shares) at a
purchase price per Top-Up Option Share equal to the Offer Price; provided,
--------
however, that the Top-Up Stock Option shall not be
- - -------
<PAGE>
exercisable if the number of shares of Common Stock subject thereto exceeds the
number of authorized shares of Common Stock available for issuance. The Company
agrees to provide Parent and the Purchaser with information regarding the number
of shares of Common Stock available for issuance on an ongoing basis.
SECTION 1.2. Exercise of Top-Up Stock Option. (a) Subject to the
-------------------------------
conditions set forth in Section 2.1 and any additional requirements of law, the
Top-Up Stock Option may be exercised by the Purchaser, in whole, but not in
part, at any one time after the occurrence of a Top-Up Exercise Event (as
defined below) and prior to the Top-Up Termination Date (as defined below).
(b) A "Top-Up Exercise Event" shall occur for purposes of this
---------------------
Agreement upon the Purchaser's acceptance for payment pursuant to the Offer of
shares of Common Stock constituting more than 50% but less than 90% of the
shares of Common Stock then outstanding on a fully diluted basis.
(c) Except as provided in the last sentence of this Section 1.2.(c),
the "Top-Up Termination Date" shall occur for purposes of this Agreement upon
-----------------------
the earliest to occur of: (i) the Effective Time; (ii) the date which is ten
(10) business days after the occurrence of a Top-Exercise Event; (iii) the
termination of the Merger Agreement; and (iv) the date on which the Purchaser
waives the Minimum Condition and accepts for payment the Revised Minimum Number
of Shares.
Notwithstanding the occurrence of the Top-Up Termination Date, the Purchaser
shall be entitled to purchase the Top-Up Option Shares if it has exercised the
Top-Up Option in accordance with the terms hereof prior to such occurrence, and
the occurrence of the Top-Up Termination Date shall not affect any rights
hereunder which by their terms do not terminate or expire prior to or as of such
date.
(d) In the event the Purchaser wishes to exercise the Top-Up Stock
Option, the Purchaser shall send to the Company a written notice (a "Top-Up
------
Exercise Notice," the date of which notice is referred to herein as the "Top-Up
- - --------------- ------
Notice Date") specifying the denominations of the certificate or certificates
- - -----------
evidencing the Top-Up Option Shares which the Purchaser wishes to receive, the
place for the closing of the purchase and sale pursuant to the Top-Up Option
(the "Top-Up Closing") and a date not earlier than three (3) business days nor
--------------
later than ten (10) business days from the Top-Up Notice Date for the Top-Up
Closing (the "Top-Up Closing Date"); provided, however, that (i) if the Top-Up
------------------- -------- -------
Closing cannot be consummated by reason of any applicable laws or orders, the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which such restriction on consummation has expired or
been terminated, and (ii) without limiting the foregoing, if prior notification
to or approval of any Governmental Entity is required in connection with such
purchase, the Purchaser and the Company shall promptly file the required notice
or application for approval and shall cooperate in the expeditious filing of
such notice or application, and the period of time that otherwise would run
pursuant to this sentence shall run instead from the date on which, as the case
may be, (A) any required notification period has expired or been terminated, or
(B) any required approval has been obtained, and in either event, any requisite
-2-
<PAGE>
waiting period has expired or been terminated. The Company shall, within two
(2) business days after receipt of the Top-Up Exercise Notice, deliver written
notice to the Purchaser specifying the number of Top-Up Option Shares and the
aggregate purchase price therefor.
SECTION 1.3. Grant of Topping Fee Option. (a) The Company hereby
---------------------------
grants to Parent an irrevocable option (the "Topping Fee Option") to purchase up
------------------
to a number of shares of Common Stock equal to the Topping Fee Option Number (as
defined in Section 1.3(b)). The Topping Fee Option shall be exercisable in the
manner set forth in Section 2.2 at a purchase price per share equal to the
Offer Price (the "Exercise Price"). The Topping Fee Option granted pursuant to
--------------
this Agreement shall expire on the earliest to occur of: (i) the Effective Time,
and (ii) six (6) months after any termination of the Merger Agreement pursuant
to Article VII thereof (the "Topping Fee Termination Date"); provided, however,
---------------------------- -------- -------
that the Topping Fee Option shall not expire if the Topping Fee Exercise Notice
(as defined below) has been given by Parent prior to the Topping Fee Termination
Date.
(b) For purposes of this Agreement, the "Topping Fee Option Number"
shall initially be that number of authorized shares of the Company's Common
Stock available for issuance, and shall be adjusted hereafter to reflect changes
in the Company's capitalization occurring after the date hereof in accordance
with Section 1.5.
SECTION 1.4. Exercise Of Topping Fee Option. At any time or from time
------------------------------
to time prior to the Topping Fee Termination Date, Parent (or its designee) may
exercise the Topping Fee Option, in whole or in part, if on or after the date
hereof:
(a) any corporation, partnership, individual, trust, unincorporated
association, or other entity or "person" (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than
------------
Parent or any of its "affiliates" (as defined in the Exchange Act) (a "Third
-----
Party"), shall have:
- - -----
(i) commenced a bona fide tender offer or exchange offer for any
---- ----
shares of Common Stock of the Company, the consummation of which would
result in "beneficial ownership" (as defined under the Exchange Act) by
such Third Party (together with all such Third Party's affiliates and
"associates" (as such term is defined in the Exchange Act)) of 15% or more
of the then outstanding voting equity of the Company (either on a primary
or a fully diluted basis);
(ii) acquired beneficial ownership of shares of Common Stock of
the Company which, when aggregated with any shares of Company Stock already
owned by such Third Party, its affiliates and associates, would result in
the aggregate beneficial ownership by such Third Party its affiliates and
associates of 15% or more of the then outstanding voting equity of the
Company (either on a primary or a fully diluted basis), provided, however,
-------- -------
that "Third Party" for purposes of this clause (ii) shall not include any
corporation, partnership, person or other entity or group which
beneficially owns more than
-3-
<PAGE>
15% of the outstanding voting equity of the Company (either on a primary or
a fully diluted basis) as of the date hereof and that does not, after the
date hereof, increase such ownership percentage by more than an additional
1% of the outstanding voting equity of the Company (either on a primary or
a fully diluted basis);
(iii) solicited "proxies" in a "solicitation" subject to the
proxy rules under the Exchange Act or executed any written consent with
respect to, or become a "participant" in, any "solicitation" (as such terms
are defined in Regulation 14A under the Exchange Act), in each case with
respect to the Common Stock of the Company; or
(b) any of the events described in Section 7.1(d)(ii) or (d)(iii) of
the Merger Agreement that would allow Parent to terminate the Merger Agreement
has occurred (but without the necessity of Parent having terminated the Merger
Agreement).
In the event that Parent wishes to exercise all or any part of the
Topping Fee Option, Parent shall give written notice (the "Topping Fee Exercise
--------------------
Notice," with the date of the Topping Fee Exercise Notice being referred to
- - ------
herein as the "Topping Fee Notice Date") to the Company, specifying the number
-----------------------
of shares of Common Stock of the Company it will purchase and a place and date
(not earlier than three (3) nor later than ten (10) business days from the
Topping Fee Notice Date) for closing such purchase (a "Topping Fee Closing");
-------------------
provided, however, that (i) if the Topping Fee Closing cannot be consummated by
- - -------- -------
reason of any applicable laws or orders, the period of time that otherwise would
run pursuant to this sentence shall run instead from the date on which such
restriction on consummation has expired or been terminated, and (ii) without
limiting the foregoing, if prior notification to or approval of any Governmental
Entity is required in connection with such purchase, Parent and the Company
shall promptly file the required notice or application for approval and shall
cooperate in the expeditious filing of such notice or application, and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which, as the case may be, (A) any required
notification period has expired or been terminated, or (B) any required approval
has been obtained, and in either event, any requisite waiting period has expired
or been terminated.
SECTION 1.5. Adjustments Upon Share Issuances, Changes in
--------------------------------------------
Capitalization, etc. (a) In the event of any change in the Common Stock or in
- - --------------------
the number of outstanding shares of Common Stock by reason of a stock dividend,
split-up, recapitalization, combination, exchange of shares or similar
transaction or any other change in the corporate or capital structure of the
Company (including, without limitation, the declaration or payment of an
extraordinary dividend of cash, securities or other property), the type and
number of the shares to be issued by the Company upon exercise of the Topping
Fee Option granted hereunder shall be adjusted appropriately, and proper
provision shall be made in the agreements governing such transaction, so that
Parent shall receive upon exercise of such Option the number and class of shares
or other securities or property that Parent would have received with respect to
the Common Stock if such Option had been exercised immediately prior to such
event or the record date therefor, as applicable, and such Common Stock
-4-
<PAGE>
had elected to the fullest extent it would have been permitted to elect, to
receive such securities, cash or other property.
(b) In the event that the Company shall enter into an agreement (i)
to consolidate with or merge into any person, other than Parent or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Parent or one of
its subsidiaries, to merge into the Company and the Company shall be the
continuing or surviving corporation, but, in connection with such merger, the
then outstanding shares of Company's Common Stock shall be changed into or
exchanged for stock or other securities of the Company or any other person or
cash or any other property, or the then outstanding shares of Company's Common
Stock shall after such merger represent less than 50% of the outstanding shares
and share equivalents of the surviving corporation, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Parent or one of its subsidiaries, then, and in each such case, proper
provision shall be made in the agreements governing such transaction so that
Parent shall receive upon exercise of the Topping Fee Option granted hereunder
the number and class of shares or other securities or property that Parent would
have received with respect to the Common Stock if such Option had been exercised
immediately prior to such transaction or the record date therefor, as
applicable, and such Common Stock had elected to the fullest extent it would
have been permitted to elect, to receive such securities, cash or other
property.
(c) The rights of Parent under this Section 1.5 shall be in addition
to, and shall in no way limit, its rights against the Company for any breach of
the Merger Agreement.
(d) The provisions of this Agreement shall apply with appropriate
adjustments to any securities for which the Topping Fee Option granted hereunder
becomes exercisable pursuant to this Section 1.5.
ARTICLE II
CLOSING
SECTION 2.1. Conditions to Closing. The obligation of the Company to
---------------------
deliver any shares of Common Stock to Parent upon the exercise of the Top-Up
Option or the Topping Fee Option, as applicable, is subject to the following
conditions:
(a) All waiting periods, if any, under the HSR Act applicable to the
issuance of Common Stock pursuant to the Top-Up Option or the Topping Fee
Option hereunder shall have expired or have been terminated; and
(b) There shall be no preliminary or permanent injunction or other
final, non-appealable judgment by a court of competent jurisdiction
preventing or prohibiting the exercise of the Top-Up Option or the Topping
Fee Option, as applicable, or the delivery of the shares of Common Stock in
respect of any such exercise.
-5-
<PAGE>
SECTION 2.2. Closing. (a) At any Top-Up Closing or Topping Fee
-------
Closing, (i) the Company shall deliver to the Purchaser or Parent, as
applicable, a certificate or certificates evidencing the applicable number of
shares of Common Stock being purchased in proper form for transfer upon exercise
of the Top-Up Option or the Topping Fee Option, as applicable, in the
denominations designated by the Purchaser or Parent in the Top-Up Exercise
Notice or the Topping Fee Exercise Notice, in each case as applicable, and, if
the Topping Fee Option has been exercised in part, a new Topping Fee Option
evidencing the rights of Parent to purchase the balance of the shares of Common
Stock subject thereto, and (ii) the Purchaser or Parent shall purchase the
shares of Common Stock from the Company at the Offer Price or the Exercise
Price, as applicable. Payment by the Purchaser of the Offer Price or Parent of
the Exercise Price may be made, at the option of the Purchaser or Parent, by
delivery of (i) cash by wire transfer, or (ii) a promissory note, (adequately
secured by collateral other than the Shares acquired), in form and substance
reasonably satisfactory to the Company and in a principal face amount equal to
the aggregate amount of the applicable purchase price, which promissory note
shall bear interest at a rate equal to 6% per annum (or such level of interest
rate that is adequate to prevent imputed income under applicable regulations)
and shall be payable in full with accrued interest upon the earlier to occur of
(i) five (5) business days after the applicable Closing hereunder, and (ii) two
(2) business days following written demand given by the Company to the Purchaser
or Parent at any time following the Effective Time.
(b) The Company shall pay all expenses, and any and all federal,
state and local taxes and other charges, that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
2.2.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent (except as
otherwise may be prohibited, restricted or limited by law or any rule or
regulation of a regulatory entity) as follows:
SECTION 3.1. Organization; Authority Relative to this Agreement. The
--------------------------------------------------
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California. The Company has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due and valid authorization, execution and delivery by
Parent, constitutes a valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally, and by general
equitable principles.
-6-
<PAGE>
SECTION 3.2. Authority to Issue Shares. The Company has taken all
-------------------------
necessary corporate action to authorize and reserve and permit it to issue, and
at all times from the date hereof through the Top-Up Termination Date and the
Topping Fee Termination Date shall have reserved, the shares of Common Stock
issuable pursuant to this Agreement. All of the shares of Common Stock issuable
pursuant to this Agreement, upon their issuance and delivery in accordance with
the terms of this Agreement, will be duly authorized, validly issued, fully paid
and nonassessable, will be delivered free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Purchaser's or Parent's, as applicable, voting rights,
charges, adverse rights and other encumbrances of any nature whatsoever (other
than this Agreement) and will not be subject to any preemptive rights.
SECTION 3.3. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by the Company does not, and the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby will not, (i) conflict with or violate the
articles of incorporation or bylaws of the Company, (ii) assuming that all
consents and filings described in Section 3.3(b) have been obtained or made,
conflict with or violate any law applicable to the Company or by which any
property or asset of the Company is bound or affected, or (iii) result in any
violation pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company is a party or by which the Company or any of its properties may be bound
or affected.
(b) No consent of, or filing with, any Governmental Entity is
required by the Company in connection with the execution and delivery of this
Agreement, the performance by the Company of its obligations hereunder or the
consummation by the Company of the transactions contemplated hereby, except for
(i) compliance with the HSR Act, and (ii) consents or filings the failure of
which to be obtained or made would not, individually or in the aggregate,
prevent or materially delay the consummation of the transactions contemplated
hereby or the performance by the Company of any of its obligations hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company as follows:
SECTION 4.1. Organization; Authority Relative to this Agreement.
--------------------------------------------------
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. Parent has all
requisite corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent and
the consummation by Parent of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part of
Parent. This Agreement has been duly and validly executed and delivered by
Parent and, assuming the due and valid authorization,
-7-
<PAGE>
execution and delivery by the Company, constitutes a valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally, and by general equitable principles.
SECTION 4.2. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Parent do not, and the performance
by Parent of its obligations hereunder and the consummation of the transactions
contemplated hereby will not, (i) conflict with or violate the articles of
incorporation or bylaws or equivalent organizational documents of Parent, (ii)
assuming that all consents and filings described in Section 4.2(b) have been
obtained or made, conflict with or violate any law applicable to Parent or by
which any property or asset of Parent is bound or affected or (iii) result in
any violation pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent is a party or by which Parent or any of its properties may be
bound or affected.
(b) No consent of, or filing with, any Governmental Entity is
required by Parent in connection with the execution and delivery of this
Agreement, the performance by Parent of any of its obligations hereunder or the
consummation by Parent of the transactions contemplated hereby, except for (i)
compliance with the HSR Act, and (ii) consents or filings the failure of which
to be obtained or made would not, individually or in the aggregate, prevent or
materially delay the consummation of the transactions contemplated hereby or the
performance by Parent of any of its obligations hereunder.
SECTION 4.3. Investment Intent. The purchase of shares of Common
-----------------
Stock pursuant to this Agreement is for the account of the Purchaser or Parent,
as applicable, for the purpose of investment and not with a view to or for sale
in connection with any distribution thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"), and the rules and regulations
--------------
promulgated thereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1. Registration Rights; Listing of Shares. Upon the
--------------------------------------
written request of Parent, the Company agrees to effect up to two registrations
under the Securities Act and any applicable state securities laws covering any
part or all of the Topping Fee Option (provided that only shares of Common Stock
will be distributed to the public) and any part or all of the shares of Common
Stock purchased pursuant to the Topping Fee Option, which registration shall be
continued in effect for 90 days, unless, in the written opinion of counsel to
the Company, addressed to Parent and reasonably satisfactory in form and
substance to counsel for Parent, such registration is not required for the sale
and distribution of such shares of Common Stock in the manner contemplated by
Parent. The registration effected under this paragraph shall be effected at the
Company's expense except for any underwriting commissions. If shares of Common
Stock are offered in a firm
-8-
<PAGE>
commitment underwriting, the Company will provide reasonable and customary
indemnification to the underwriters. In the event of any demand for registration
pursuant to this paragraph, the Company may delay the filing of the registration
statement for a period of up to 90 days if, in the good faith judgment of the
Board of Directors of the Company, such delay is necessary in order to avoid
interference with a planned material transaction involving the Company. In the
event the Company effects a registration of its Common Stock for its own account
or for any other shareholder of the Company (other than on Form S-4 or Form S-8,
or any successor or similar form), it shall allow Parent to participate in such
registration; provided, however, that if the managing underwriters in such
-------- -------
offering advise the Company in writing that in their opinion the number of
shares of Common Stock requested to be included in such registration exceeds the
number which can be sold in such offering, the Company will include the
securities requested to be included therein pro rata among the holders
--- ----
requesting to be included.
SECTION 5.2. Restrictive Legends. Certificates evidencing the
-------------------
shares of Common Stock to be delivered hereunder may include legends legally
required including the legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES OR BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO
REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF
JANUARY 11, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON
REQUEST.
It is understood and agreed that (i) the reference to the resale restrictions of
the Securities Act and state securities or blue sky laws in the foregoing legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Company or Parent, as the case may be, shall have delivered to the other
party a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance reasonably
satisfactory to the other party, to the effect that such legend is not required
for purposes of the Securities Act or such laws; (ii) the reference to the
provisions of this Agreement in the foregoing legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares of
Common Stock have been sold or transferred in compliance with the provisions of
this Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law. Certificates representing shares sold in a registered public offering
pursuant to Section 5.1 shall not be required to bear the legend set forth in
this Section 5.2.
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<PAGE>
SECTION 5.3. Certain Repurchases. (a) Upon written notice to the
-------------------
Company by Parent (the "Repurchase Notice") at any time prior to the Topping Fee
-----------------
Termination Date (the "Repurchase Period"), the Company and its successors in
-----------------
interest shall repurchase from Parent all or any portion of (i) the Topping Fee
Option, as specified by Parent, at the Option Repurchase Price set forth in
Section 5.3(b)(i), or (ii) the shares of the Company's Common Stock purchased by
Parent pursuant to the Topping Fee Option, as specified by Parent, at the Share
Repurchase Price set forth in Section 5.3(b)(iii).
(b) For purposes of this Section 5.3, the following definitions shall
apply: (i) "Option Repurchase Price" shall mean (A) the difference between the
-----------------------
Option Repurchase Market/Offer Price (as defined below) for shares of the
Company's Common Stock as of the date of the applicable Repurchase Notice and
the Exercise Price, multiplied by (B) the number of shares of the Company's
Common Stock purchasable pursuant to the Topping Fee Option or the portion
thereof covered by the applicable Repurchase Notice, but only if the Option
Repurchase Market/Offer Price is greater than the Exercise Price; (ii) "Option
------
Repurchase Market/Offer Price" shall mean, as of any date, the higher of (A) the
- - -----------------------------
highest price per share offered as of such date pursuant to any tender or
exchange offer or other offer with respect to a business combination offer
involving the Company or any of its material subsidiaries as the target party
which was made prior to such date and not terminated or withdrawn as of such
date, and (B) the Fair Market Value (as defined below) of the Company's Common
Stock as of such date; (iii) "Share Repurchase Price" shall mean the product of
----------------------
(A) the sum of (1) the Exercise Price paid by Parent per share of the Company's
Common Stock acquired pursuant to the Topping Fee Option, and (2) if the Share
Repurchase Market/Offer Price (as defined below) is greater than the Exercise
Price, the difference between the Share Repurchase Market/Offer Price and the
Exercise Price, and (B) the number of shares of the Company's Common Stock to be
repurchased pursuant to this Section 5.3; (iv) "Share Repurchase Market/Offer
-----------------------------
Price" shall mean, as of any date, the higher of (A) the highest price per share
- - -----
offered pursuant to a tender or exchange offer or other business combination
offer involving the Company as the target party during the Repurchase Period
prior to the delivery by Parent of a Repurchase Notice, and (B) the Fair Market
Value (as defined below) of the Company's Common Stock as of such date; (v)
"Fair Market Value" shall mean, with respect to any security, the per share
- - ------------------
average of the last sale prices on The Nasdaq National Market (or such other
national stock exchange or national market system as shall then be the primary
trading market for such security) for the ten (10) trading days immediately
preceding the applicable date.
(c) In the event that Parent exercises its rights under this Section
5.3, the Company shall, within ten (10) business days thereafter, pay the
required amount to Parent in immediately available funds, and Parent shall
surrender to the Company the Topping Fee Option or any certificate or
certificates evidencing the shares of the Company's Common Stock purchased by
Parent pursuant thereto, and Parent shall warrant that it has sole beneficial
ownership of the Topping Fee Option or such shares and that the Topping Fee
Option or such shares are then free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever.
-10-
<PAGE>
SECTION 5.4. Best Efforts. Subject to the terms and conditions of
------------
this Agreement, the Parent and the Company shall each use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
Each party shall promptly consult with the other and provide any necessary
information and material with respect to all filings made by such party with any
governmental or regulatory authority in connection with this Agreement or the
transactions contemplated hereby.
SECTION 5.5. Further Assurances. The Company shall perform such
------------------
further acts and execute such further documents and instruments as may
reasonably be required to vest in the Purchaser and Parent the power to carry
out the provisions of this Agreement. If the Purchaser or Parent shall exercise
any applicable Option granted hereunder, or any portion thereof, in accordance
with the terms of this Agreement, the Company shall, without additional
consideration, execute and deliver all such further documents and instruments
and take all such further action as the Purchaser or Parent may reasonably
request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
SECTION 5.6. Survival. All of the representations, warranties and
--------
covenants contained herein shall survive a Closing hereunder and shall be deemed
to have been made as of the date hereof and as of the date of each Closing.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Amendment. This Agreement may not be amended except by
---------
an instrument in writing signed by the parties hereto.
SECTION 6.2. Waiver. Any party hereto may (a) extend the time for or
------
waive compliance with the performance of any obligation or other act of any
other party hereto or (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.3. Fees and Expenses. Subject to Section 2.2(b) and except
-----------------
as provided in Section 9.1 of the Merger Agreement, all costs, fees and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such expenses; provided, that if any legal action is instituted to enforce or
--------
interpret the terms of this Agreement, the prevailing party in such action shall
be entitled, in addition to any other relief to which the party is entitled, to
reimbursement of its actual attorneys fees.
-11-
<PAGE>
SECTION 6.4. Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by telecopy or by overnight courier (providing
proof of delivery) to the respective parties at their addresses as specified in
Section 9.4 of the Merger Agreement.
SECTION 6.5. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner to the fullest extent permitted by applicable law in order that the
transactions contemplated hereby may be consummated as originally contemplated
to the fullest extent possible.
SECTION 6.6. Assignment; Binding Effect; Benefit. Neither this
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Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, in whole or in part, by operation of law or otherwise, by any of the
parties hereto without the prior written consent of the other parties, except
that Parent or the Purchaser may assign, in its discretion, any or all of its
rights, interests and obligations hereunder to any direct or indirect subsidiary
of Parent (or, in the case of the Purchaser, to Parent), but no such assignment
shall relieve Parent or the Purchaser of any of its respective obligations
hereunder. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties hereto and
their respective successors and permitted assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement, express
or implied, is intended to confer on any person other than the parties hereto or
their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
SECTION 6.7. Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of California, without giving
effect to the principles of conflicts of laws thereof.
SECTION 6.8. Headings. The descriptive headings contained in this
--------
Agreement are included for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 6.9. Counterparts. This Agreement may be executed and
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delivered (including by facsimile transmission) in two or more counterparts, all
of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
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<PAGE>
SECTION 6.10. Entire Agreement. This Agreement constitutes the
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entire agreement, and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of this
Agreement.
SECTION 6.11. Specific Performance. Each of the parties hereto
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acknowledges and agrees that in the event of any breach of this Agreement, each
non-breaching party would be irreparably and immediately harmed and could not be
made whole by monetary damages. It is accordingly agreed that the parties hereto
(i) will waive, in any action for specific performance, the defense of adequacy
of a remedy at law, and (ii) shall be entitled, in addition to any other remedy
to which they may be entitled at law or in equity, to compel specific
performance of this Agreement.
SECTION 6.12 Third-party beneficiary. On its formation, the
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Purchaser shall be an intended third-party beneficiary of the provisions of this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the date first written above.
COMPAQ COMPUTER CORPORATION
By: /s/ Earl L. Mason
________________________________
Name: Earl L. Mason
Title: Senior Vice President and
Chief Financial Officer
SHOPPING.COM
By: /s/ Frank W. Denny
________________________________
Name: Frank W. Denny
Title: President and Chief
Executive Officer
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