<PAGE> 1
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 5, 1999
REGISTRATION NO. 333-74545
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BEYOND.COM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 7375 94-3212136
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>
1195 WEST FREMONT AVENUE
SUNNYVALE, CALIFORNIA 94087
(408) 616-4200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARK L. BREIER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BEYOND.COM CORPORATION
1195 WEST FREMONT AVENUE
SUNNYVALE, CALIFORNIA 94087
(408) 616-4200
COPIES OF ALL COMMUNICATIONS, INCLUDING ALL COMMUNICATIONS SENT TO THE AGENT FOR
SERVICE, SHOULD BE SENT TO:
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<S> <C>
RICHARD SCUDELLARI GLEN R. VAN LIGTEN
JUSTIN L. BASTIAN VENTURE LAW GROUP
ROCHELLE A. KRAUSE A PROFESSIONAL CORPORATION
MORRISON & FOERSTER LLP 2800 SAND HILL ROAD
755 PAGE MILL ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94304 (650) 854-4488
(650) 813-5600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If this Form is a post effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
This Amendment No. 2 is being filed for the sole purpose of filing Exhibits
1.1, 10.31 and 10.32. No changes have been made to the prospectus portion of
this Registration Statement since the filing of Amendment No. 1.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission filing fee............... $25,715
Nasdaq National Market listing fee.......................... $30,000
Printing and engraving expenses............................. $200,000
Legal fees and expenses..................................... $120,000
Accounting fees and expenses................................ $75,000
Transfer Agent and Registrar fees........................... $ 1,000
Miscellaneous............................................... $ 3,285
-------
Total............................................. 455,000
=======
</TABLE>
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ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond the indemnification specifically provided by the current
law.
Article IX of our Certificate of Incorporation, as amended, provides for
the indemnification of directors to the fullest extent permissible under
Delaware law.
Article VI of our Bylaws provides for the indemnification of officers,
directors and third parties acting on our behalf if such person acted in good
faith and in a manner reasonably believed to be in, and not opposed to, our best
interest and, with respect to any criminal action or proceeding, the indemnified
party had no reason to believe his or her conduct was unlawful.
We have entered into indemnification agreements with our directors and
executive officers, in addition to providing indemnification in our Bylaws, and
intend to enter into indemnification agreements with any new directors and
executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES; USES OF PROCEEDS FROM SALES OF
REGISTERED SECURITIES
During the past three years, we and our predecessors, software.net
Corporation, a Delaware corporation, software.net Corporation, a California
corporation and CyberSource Corporation, a California corporation (collectively,
"Predecessor"), have issued unregistered securities to a limited number of
persons as described below. The information regarding our shares of stock has
been adjusted to give effect to the one-for-two stock split of our common stock
effected in June 1996, and the conversion of all outstanding shares of preferred
stock into common stock in connection with our initial public offering in June
1998.
(1) On January 9, 1995, Predecessor issued an aggregate of 1,437,500
shares of Series A preferred stock which are convertible into 2,875,000
shares of common stock, to ten investors for a consideration of either
$0.40 per share of Series A preferred stock ($0.33 per share as adjusted
for the spin-off), or an aggregate of $575,000. The purchasers consisted of
one investor, who was related to a director as of that date and purchased
500,000 shares, and nine unaffiliated investors who purchased 937,500
shares.
(2) On February 27, 1996, Predecessor issued an aggregate of 548,020
shares of Series A preferred stock, which are convertible into 1,096,040
shares of common stock, to three investors for a consideration of either
$0.91 per share of Series A preferred stock ($0.76 per share as adjusted
for the
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<PAGE> 4
spin-off), or an aggregate of $498,697. The purchasers consisted of one
investor, who was related to a director as of that date and purchased
253,131 shares, and two unaffiliated investors who purchased 294,889
shares. Each of the purchasers had previously purchased Series A preferred
stock in January, 1995.
(3) On July 12, 1996, Predecessor issued an aggregate of 2,037,038
shares of Series B preferred stock which are convertible into 4,074,076
shares of common stock, to eleven investors for a consideration of either
$2.70 per share of Series B preferred stock ($2.25 per share as adjusted
for the spin-off), or an aggregate of approximately $5,500,000. The
purchasers consisted of one investor who is presently related to a director
and purchased 925,926 shares, and ten unaffiliated investors who purchased
1,111,112 shares.
(4) On September 26, 1997, September 30, 1997 and December 5, 1997,
Predecessor issued an aggregate of 3,000,000 shares of Series C preferred
stock which are convertible into 3,000,000 shares of common stock, to 19
investors for a consideration of either $2.04 per share of Series C
preferred stock ($1.70 per share as adjusted for the spin-off), or an
aggregate of approximately $6,120,000. The purchasers consisted of eleven
investors, certain of whom were, or are presently, related to one or more
of our directors and purchased 2,677,450 shares, and eight unaffiliated
investors who purchased 322,550 shares.
(5) On March 18, 1998 and April 3, 1998, Predecessor issued an
aggregate of 1,153,846 shares of Series D preferred stock which are
convertible into 1,153,846 shares of common stock, to eleven investors for
a consideration of either $2.60 per share of Series D preferred stock, or
an aggregate of approximately $3,000,000. The purchasers consisted of ten
investors, certain of whom were, or are presently, related to one or more
of our directors and purchased 1,145,264 shares, and one unaffiliated
investor who purchased 8,582 shares.
(6) In March 1998, Predecessor entered in an agreement with America
Online pursuant to which, subject to certain limited exceptions, America
Online agreed to buy shares of common stock at a price per share equal to
the initial public offering price (less the underwriters' discount) for an
aggregate purchase price of $2,000,000. Based on an initial public offering
price of $9.00 per share, America Online purchased 238,949 shares of common
stock on June 19, 1998. Concurrent with the purchase of the shares of
common stock by America Online, we issued to America Online a warrant to
purchase 358,423 shares of the common stock at a per share exercise price
of $8.37, which will vest in increments of 1/36 per month commencing March
1, 1998.
(7) In March 1998, Predecessor also issued to America Online a warrant
to purchase 369,578 shares of the Series D preferred stock at a price of
$2.60 per share, which vest in increments of 1/36 per month commencing
March 1, 1998; provided, however, that the warrant is not exercisable until
after August 31, 1999, except in the event of a change of control (as
defined herein). This warrant terminated in accordance with its terms
immediately prior to the consummation of our initial public offering.
(8) In May 1998, we issued shares of our capital stock to the
shareholders of the Predecessor in connection with the reincorporation
through a merger of the Predecessor with and into us. We believe this
transaction was exempt from registration under Section 2(3) on the basis
that such transaction did not involve a "sale" of securities.
(9) In November and December 1998, we issued and sold 7 1/4%
Convertible Subordinated Notes Due December 1, 2003 to several initial
purchasers in an aggregate principal amount of $63,250,000 (less discount).
The initial purchasers consisted of two purchasers, who were related to
certain directors as of that date and purchased an aggregate of $2,000
(less discount) of the securities, and an unaffiliated purchaser who
purchased $63,248,000 (less discount).
Except as indicated above, none of the foregoing transactions involved any
underwriters, underwriting discounts or commissions or any public offering, and
we believe that each transaction was exempt from the registration requirements
of the Securities Act by virtue of Section 4(2) thereof, Regulation D
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<PAGE> 5
promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients in such transactions represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access, through their relationships with us and the Predecessor, to
information about us and the Predecessor.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
The Exhibit Index attached hereto is hereby incorporated to this item by
reference thereto.
(b) FINANCIAL STATEMENT SCHEDULES
BEYOND.COM CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTION/ END OF
DESCRIPTION OF PERIOD EXPENSES WRITEOFF PERIOD
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Accounts receivable allowances...................... $ -- $ 77 $ (12) $ 65
Year ended December 31, 1997
Accounts receivable allowances...................... 65 240 (30) 275
Period ended December 31, 1998
Accounts receivable allowances...................... 275 730 (117) 878
</TABLE>
All other schedules are omitted because they are inapplicable or the
requested information is shown in the financial statements of the registrant or
related notes thereto.
ITEM 17. UNDERTAKINGS
We hereby undertake to:
(1) To file, during any period in which offers or sales are being made
of the securities registered hereby, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this registration statement
or any material change to such information in this registration
statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE> 6
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of our annual report pursuant to section 13(a)
or section 15(d) of the Exchange Act (and, where applicable, each filing of
an employee benefit plan's annual report pursuant to section 15(d) of the
Exchange Act) that is incorporated by reference in this registration
statement shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this amendment to this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Sunnyvale, California, on April 1, 1999.
Beyond.com Corporation
By: *
------------------------------------
Mark L. Breier
President, Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed by the following
persons in the capacities indicated.
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SIGNATURE TITLE DATE
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PRINCIPAL EXECUTIVE OFFICER:
By: * President, Chief Executive Officer April 1, 1999
---------------------------------------------- and Director
Mark L. Breier
PRINCIPAL FINANCIAL OFFICER
AND PRINCIPAL ACCOUNTING OFFICER:
By: * Vice President, Finance & April 1, 1999
---------------------------------------------- Administration and Chief Financial
Michael J. Praisner Officer
ADDITIONAL DIRECTORS:
By: * Chairman of the Board of Directors April 1, 1999
----------------------------------------------
William S. McKiernan
By: * Director April 1, 1999
----------------------------------------------
Douglas Carlston
By: * Director April 1, 1999
----------------------------------------------
John S. Chen
By: * Director April 1, 1999
----------------------------------------------
Bert Kolde
By: * Director April 1, 1999
----------------------------------------------
Ronald S. Posner
By: /s/ MICHAEL J. PRAISNER April 1, 1999
----------------------------------------------
Michael J. Praisner
Attorney-In-Fact
</TABLE>
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<PAGE> 8
EXHIBIT INDEX
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<CAPTION>
EXHIBIT NUMBER DESCRIPTION
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*1.1 Form of Underwriting Agreement
**2.1 Form of Agreement and Plan of Merger between the Registrant
and software.net Corporation, a California corporation
*****3.1 Form of Certificate of Incorporation, as amended
**3.2 Form of Bylaws of the Registrant
**4.1 Specimen of Certificate for Common Stock
**4.2 Common Stock Warrant issued by Registrant to America Online,
Inc
***4.3 Form of Indenture dated as of November 23, 1998, by and
between the Registrant and LaSalle National Bank
***4.4 Form of Registration Rights Agreement dated as of November
23, 1998, by and between the Company and Credit Suisse First
Boston Corporation, C.E. Unterberg, Towbin and Donaldson,
Lufkin & Jenrette Securities Corporation
***4.5 Purchase Agreement dated as of November 17, 1998, by and
between the Company and Credit Suisse First Boston
Corporation, C.E. Unterberg, Towbin and Donaldson, Lufkin &
Jenrette Securities Corporation
***4.6 Form of Notes (included in Exhibit 4.3)
-5.1 Opinion of Morrison & Foerster LLP
**10.1 Form of Indemnification Agreement
**10.2 1995 Stock Option Plan, as amended
**10.3 1998 Stock Option Plan
**10.4 Stock Option Agreement dated as of March 31, 1995, by and
between the Registrant and John Pettitt
**10.5 Series A Preferred Stock Purchase Agreement, as amended
**10.6 Series B Preferred Stock Purchase Agreement
**10.7 Series C Preferred Stock Purchase Agreement
**10.8 Series D Preferred Stock Purchase Agreement
**10.9 Common Stock and Warrants Subscription Agreement dated as of
March 18, 1998, by and between the Registrant and America
Online, Inc.
**10.10 Conveyance Agreement dated as of December 31, 1997, by and
between the Registrant and Internet Commerce Services
Corporation (now known as CyberSource Corporation)
**10.11 Interactive Marketing Agreement dated as of March 1, 1998,
by and between the Registrant and America Online, Inc
**10.12 Sponsorship Agreement dated as of March 30, 1998, by and
between the Registrant and Excite, Inc
**10.13 Co-Marketing Services Agreement dated as of June 23, 1997,
by and between the Registrant and Netscape Communications
Corporation
**10.14 Trademark License Agreement dated as of June 23, 1997, by
and between the Registrant and Netscape Communications
Corporation
**10.15 Offer letter to Mark Breier
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S> <C>
**10.16 Inter-Company Cross License Agreement dated as of April 23,
1998, by and between the Registrant and Internet Commerce
Services (now known as CyberSource Corporation), as amended
on May 19, 1998
**10.17 Promissory Note dated as of April 15, 1998, by and between
the Registrant and William S. McKiernan
**10.18 Pledge Agreement as of April 15, 1998, by and between the
Registrant and William S. McKiernan
**10.19 Internet Services and Products Agreement dated as of April
29, 1996, by and between the Registrant and Exodus
Communications, Inc.
**10.20 Office Building Lease dated as of July 8, 1997, as amended,
by and between the Registrant and PGP-South Bay Office
Towers, Inc.
**10.21 Agreement dated as of December 19, 1995, by and between the
Registrant and the United States Department of Defense, DFAS
(#N00140-96-G-D115)
**10.22 Internet Commerce Services Agreement dated as of April 23,
1998, by and between the Registrant and CyberSource
Corporation, as amended on May 19, 1998
**10.23 Sublease dated as of May 27, 1998 by and between the
Registrant and First Data Merchant Services Corporation
******10.24 Agreement dated as of June 12, 1998, by and between the
Registrant and the United States Department of Defense,
Defense Logistics Agency (#N00140-98-D-1756)
******10.25 Offer Letter from Registrant to Mala Anand, dated as of June
15, 1998
*******10.26 Agreement dated as of September 11, 1998, by and between the
Registrant and the United States National Imaging and
Mapping Agency (NIMA Contract #N00140-98-D-2139)
*******+10.27 Co-hosting Agreement dated as of September 21, 1998, by and
between the Registrant and Network Associates, Inc.
*******+10.28 Web Site Service Agreement dated as of September 21, 1998,
by and between the Registrant and Network Associates, Inc.
*******+10.29 Electronic Services Distribution Agreement dated as of
September 1, 1997, by and between the Registrant and McAfee
Software, Inc.
***10.30 Offer Letter to John D. Vigouroux dated as of October 26,
1998
*++10.31 Software Merchant Program Advertising and Promotion
Agreement dated as of February 5, 1999, by and between the
Registrant and Yahoo! Inc.
*10.32 Amended and Restated Agreement and Plan of Merger dated as
of March 15, 1999, by and among the Registrant,
BuyDirect.com, Inc., BD Acquisition, Inc. and certain
Principal Stockholders of BuyDirect.com, Inc.
***10.33 1999 Nonqualified Stock Option Plan
***10.34 1999 Stock Incentive Plan
-23.1 Consent of Ernst & Young LLP, independent auditors
-23.2 Consent of Morrison & Foerster LLP (to be included in
Exhibit 5.1)
-23.3 Consent of PricewaterhouseCoopers LLP, independent
accountants
-23.4 Consent of PricewaterhouseCoopers LLP, independent
accountants
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
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<C> <S> <C>
-24.1 Power of Attorney
-27.1 Financial Data Schedule
</TABLE>
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+ Certain portions of this exhibit have been granted confidential
treatment by the Commission. The omitted portions have been separately
filed with the Commission.
++ Confidential treatment has been requested as to certain portions of
this exhibit.
! To be filed.
- Previously filed.
* Filed herewith.
** Incorporated by reference to Beyond.com's Registration Statement on
Form S-1 (Reg. No. 333-51121), as amended, filed with the Commission on
June 17, 1998.
*** Incorporated by reference to Beyond.com's Registration Statement on
Form S-1 (Reg. No. 333-70957) initially filed with the Commission on
January 21, 1999.
***** Incorporated by reference to Beyond.com's Current Report on Form 8-K
filed with the Commission on December 31, 1998, as amended.
****** Incorporated by reference to Beyond.com's Quarterly Report on Form 10-Q
filed with the Commission on August 14, 1998.
******* Incorporated by reference to Beyond.com's Quarterly Report, as amended,
on Form 10-Q/A filed with the Commission on November 20, 1998.
<PAGE> 1
EXHIBIT 1.1
4,000,000 SHARES
BEYOND.COM CORPORATION
COMMON STOCK
UNDERWRITING AGREEMENT
March ___, 1999
CREDIT SUISSE FIRST BOSTON CORPORATION
BANCBOSTON ROBERTSON STEPHENS INC.
DONALDSON LUFKIN & JENRETTE SECURITIES CORPORATION
C.E. UNTERBERG, TOWBIN
As Representatives of the Several Underwriters,
c/o Credit Suisse First Boston Corporation,
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Beyond.com Corporation, a Delaware corporation (the
"COMPANY"), proposes to issue and sell 3,000,000 shares of its Common Stock, par
value $0.001 per share ("SECURITIES") and the stockholders listed in Schedule A
hereto ("SELLING STOCKHOLDERS") propose severally to sell an aggregate of
1,000,000 outstanding shares of the Securities (such 4,000,000 shares of
Securities being hereinafter referred to as the "FIRM SECURITIES"). The Company
also proposes to sell to the Underwriters, at the option of the Underwriters, an
aggregate of not more than 600,000 additional shares of its Securities as set
forth below (such 600,000 additional shares being hereinafter referred to as the
"OPTIONAL SECURITIES"). The Firm Securities and the Optional Securities are
herein collectively called the "OFFERED SECURITIES". The Company and the Selling
Stockholders hereby agree with the several Underwriters named in Schedule B
hereto ("UNDERWRITERS") as follows:
2. Representations and Warranties of the Company and the Selling
Stockholders. (a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(i) A registration statement (No. 333-74545) relating to the
Offered Securities, including a form of prospectus, has been filed with
the Securities and Exchange Commission ("COMMISSION") and either (A) has
been declared effective under the Securities Act of 1933 ("ACT") and is
not proposed to be amended or (B) is proposed to be amended by amendment
or post-effective amendment. If such registration statement (the "INITIAL
REGISTRATION STATEMENT") has been declared effective, either (A) an
additional registration statement (the "ADDITIONAL REGISTRATION
STATEMENT") relating to the Offered Securities may have been filed with
the Commission pursuant to Rule 462(b) ("RULE 462(b)") under the Act and,
if so filed, has become effective upon filing pursuant to such Rule and
the Offered Securities all have been duly registered under the Act
pursuant to the initial registration statement and, if applicable, the
additional registration statement or (B) such an additional registration
statement is proposed to be filed with the Commission pursuant to Rule
462(b) and will become effective upon filing pursuant to such Rule and
upon such filing the Offered Securities will all have been duly registered
under the Act pursuant to the initial registration statement and such
additional registration statement. If the Company does not propose to
amend the initial registration statement or if an additional registration
statement has been filed and the Company does not propose to amend it, and
if
<PAGE> 2
any post-effective amendment to either such registration statement has
been filed with the Commission prior to the execution and delivery of this
Agreement, the most recent amendment (if any) to each such registration
statement has been declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c) ("RULE 462(c)") under the
Act or, in the case of the additional registration statement, Rule 462(b).
For purposes of this Agreement, "EFFECTIVE TIME" with respect to the
initial registration statement or, if filed prior to the execution and
delivery of this Agreement, the additional registration statement means
(A) if the Company has advised the Representatives that it does not
propose to amend such registration statement, the date and time as of
which such registration statement, or the most recent post-effective
amendment thereto (if any) filed prior to the execution and delivery of
this Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (B) if the Company has
advised the Representatives that it proposes to file an amendment or
post-effective amendment to such registration statement, the date and time
as of which such registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared effective by the
Commission. If an additional registration statement has not been filed
prior to the execution and delivery of this Agreement but the Company has
advised the Representatives that it proposes to file one, "EFFECTIVE TIME"
with respect to such additional registration statement means the date and
time as of which such registration statement is filed and becomes
effective pursuant to Rule 462(b). "EFFECTIVE DATE" with respect to the
initial registration statement or the additional registration statement
(if any) means the date of the Effective Time thereof. The initial
registration statement, as amended at its Effective Time, including all
information contained in the additional registration statement (if any)
and deemed to be a part of the initial registration statement as of the
Effective Time of the additional registration statement pursuant to the
General Instructions of the Form on which it is filed and including all
information (if any) deemed to be a part of the initial registration
statement as of its Effective Time pursuant to Rule 430A(b) ("RULE
430A(b)") under the Act, is hereinafter referred to as the "INITIAL
REGISTRATION STATEMENT". The additional registration statement, as amended
at its Effective Time, including the contents of the initial registration
statement incorporated by reference therein and including all information
(if any) deemed to be a part of the additional registration statement as
of its Effective Time pursuant to Rule 430A(b), is hereinafter referred to
as the "ADDITIONAL REGISTRATION STATEMENT". The Initial Registration
Statement and the Additional Registration are hereinafter referred to
collectively as the "REGISTRATION Statements" and individually as a
"REGISTRATION STATEMENT". The form of prospectus relating to the Offered
Securities, as first filed with the Commission pursuant to and in
accordance with Rule 424(b) ("RULE 424(b)") under the Act or (if no such
filing is required) as included in a Registration Statement, is
hereinafter referred to as the "PROSPECTUS". No document has been or will
be prepared or distributed in reliance on Rule 434 under the Act.
(ii) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of
the Act and the rules and regulations of the Commission ("RULES AND
REGULATIONS") and did not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (B) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed or will conform, in all respects to the
requirements of the Act and the Rules and Regulations and did not include,
or will not include, any untrue statement of a material fact and did not
omit, or will not omit, to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(C) on the date of this Agreement, the Initial Registration Statement and,
if the Effective Time of the Additional Registration Statement is prior to
the execution and delivery of this Agreement, the Additional Registration
Statement each conforms, and at the time of filing of the Prospectus
pursuant to Rule 424(b) or (if no such filing is required) at the
Effective Date of the Additional Registration Statement in which the
Prospectus is included, each Registration Statement and the Prospectus
will conform, in all respects to the requirements of the Act and the Rules
and Regulations, and neither of such documents includes, or will include,
any untrue statement of a material fact or omits, or will omit, to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. If the
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Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement: on the Effective Date of the
Initial Registration Statement, the Initial Registration Statement and the
Prospectus will conform in all respects to the requirements of the Act and
the Rules and Regulations, neither of such documents will include any
untrue statement of a material fact or will omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and no Additional Registration Statement has been
or will be filed. The two preceding sentences do not apply to statements
in or omissions from a Registration Statement or the Prospectus based upon
written information furnished to the Company by any Underwriter through
the Representatives specifically for use therein, it being understood and
agreed that the only such information is that described as such in Section
7(c) hereof.
(iii) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
power and authority to own its properties and conduct its business as
described in the Prospectus; and the Company is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct
of its business requires such qualification, except where the failure to
be so qualified does not amount to a material liability or disability to
the Company and its subsidiaries, taken as a whole.
(iv) Each subsidiary of the Company has been duly incorporated and
is an existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority to own its
properties and conduct its business as described in the Prospectus; and
each subsidiary of the Company is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions in which
its ownership or lease of property or the conduct of its business requires
such qualification, except where the failure to be so qualified does not
amount to a material liability or disability to the Company and its
subsidiaries, taken as a whole; all of the issued and outstanding capital
stock of each subsidiary of the Company has been duly authorized and
validly issued and is fully paid and nonassessable; and the capital stock
of each subsidiary owned by the Company, directly or through subsidiaries,
is owned free from liens, encumbrances and defects.
(v) The Offered Securities to be issued and sold by the Company to
the Underwriters hereunder have been duly authorized and, when issued and
delivered against payment therefor as provided herein, will be validly
issued, fully paid and nonassessable and will conform to the description
thereof contained in the Prospectus, and all other outstanding shares of
capital stock of the Company have been duly authorized and validly issued,
fully paid and nonassessable and conform to the description thereof
contained in the Prospectus; and the stockholders of the Company have no
preemptive rights with respect to the Securities.
(vi) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person that would
give rise to a valid claim against the Company or any Underwriter for a
brokerage commission, finder's fee or other like payment in connection
with this offering.
(vii) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Act with respect to any securities of the Company
owned or to be owned by such person or to require the Company to include
such securities in the securities registered pursuant to a Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act.
(viii) The Securities are listed on the Nasdaq Stock Market's
National Market.
(ix) No consent, approval, authorization, or order of, or filing
with, any governmental agency or body or any court is required to be
obtained or made by the Company for the consummation of the transactions
contemplated by this Agreement in connection with the sale of the Offered
Securities,
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<PAGE> 4
except such as have been obtained and made under the Act and such as may
be required under state securities laws.
(x) The execution, delivery and performance of this Agreement, and
the consummation of the transactions herein contemplated will not result
in a breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or order of
any governmental agency or body or any court, domestic or foreign, having
jurisdiction over the Company or any subsidiary of the Company or any of
their properties, or any agreement or instrument to which the Company or
any such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company or
any such subsidiary is subject that is material to the Company and its
subsidiaries, taken as a whole, or the charter or by-laws of the Company
or any such subsidiary.
(xi) This Agreement has been duly authorized, executed and
delivered by the Company.
(xii) Except as disclosed in the Prospectus, the Company and its
subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and
except as disclosed in the Prospectus, the Company and its subsidiaries
hold any leased real or personal property under valid and enforceable
leases with no exceptions that would materially interfere with the use
made or to be made thereof by them.
(xiii) The Company and its subsidiaries possess adequate
certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by them
and have not received any notice of proceedings relating to the revocation
or modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole ("MATERIAL
ADVERSE EFFECT").
(xiv) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
might have a Material Adverse Effect.
(xv) The Company and its subsidiaries own, possess or can acquire
on reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.
(xvi) Except as disclosed in the Prospectus, neither the Company nor
any of its subsidiaries is in violation of any statute, any rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "ENVIRONMENTAL LAWS"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws,
is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead to
such a claim.
(xvii) Neither the Company nor any of its subsidiaries is in
violation of any federal or state law or
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<PAGE> 5
regulation relating to occupational safety and health and the Company and
its subsidiaries have received all permits, licenses or other approvals
required of them under applicable federal and state occupational safety
and health laws and regulations to conduct their respective businesses,
and the Company and each such subsidiary is in compliance with all terms
and conditions of any such permit, license or approval, except any such
violation of law or regulation, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals which would not, singly
or in the aggregate, have a Material Adverse Effect on or constitute a
materially adverse change in, or constitute a development involving a
prospective Material Adverse Effect on or change in, the condition
(financial or otherwise), earnings, properties, business affairs or
business prospects, net worth or results of operations of the Company or
any of its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus.
(xviii) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or
in the aggregate have a Material Adverse Effect, or would materially and
adversely affect the ability of the Company to perform its obligations
under this Agreement, or which are otherwise material in the context of
the sale of the Offered Securities; and no such actions, suits or
proceedings are threatened or, to the Company's knowledge, contemplated.
(xix) No receiver or liquidator (or similar person) has been
appointed in respect of the Company or any subsidiary of the Company or in
respect of any part of the assets of the Company or any assets of any
subsidiary of the Company; no resolution, order of any court, regulatory
body, governmental body or otherwise, or petition or application for an
order, has been passed, made or presented for the winding up of the
Company or any subsidiary of the Company or for the protection of the
Company or any such subsidiary from its creditors; and the Company has
not, and no subsidiary of the Company has stopped or suspended payments of
its debts, become unable to pay its debts or otherwise become insolvent.
(xx) The Company has filed all foreign, federal, state and local
tax returns that are required to be filed or has requested extensions
thereof (except in any case in which the failure so to file would not have
a Materially Adverse Effect) and has paid all taxes required to be paid by
it and any other assessment, fine or penalty levied against it, to the
extent that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good
faith or as described in or contemplated by Prospectus.
(xxi) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses
in which they are engaged; neither the Company nor any such subsidiary has
been refused any insurance coverage sought or applied for; and neither the
Company nor any such subsidiary has any reason to believe that it will not
be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), earnings,
properties, business affairs or business prospects, net worth or results
of operations of the Company or any of its subsidiaries, taken as a whole,
except as described in or contemplated by the Prospectus.
(xxii) The Company is in compliance in all material respects with
all presently applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension
plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986,
as amended, including the regulations
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<PAGE> 6
and published interpretations thereunder (the "Code"); and each "pension
plan" for which the Company would have any liability that is intended to
be qualified under Section 401(a) of the Code is so qualified in all
material respects and nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.
(xxiii) No default exists, and no event has occurred which, with
notice or lapse of time or both, would constitute a default in the due
performance and observance of any term, covenant or condition of any
indenture, mortgage, deed of trust, lease or other agreement or instrument
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of their respective properties
is bound.
(xxiv) Ernst & Young LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries and delivered
their report with respect to the audited consolidated financial statements
and schedules included in the Registration Statement and the Prospectus,
are independent public accountants within the meaning of the Securities
Act, and the applicable rules and regulations thereunder.
(xxv) The financial statements included in each Registration
Statement and the Prospectus present fairly the financial position of the
Company and its consolidated subsidiaries and of BuyDirect.com, a Delaware
corporation ("BUYDIRECT"), respectively, as of the dates shown and the
results of operations and cash flows of the Company and its consolidated
subsidiaries and of BuyDirect, respectively, for the periods shown, and
such financial statements have been prepared in conformity with the
generally accepted accounting principles in the United States ("GAAP")
applied on a consistent basis; the schedules included in each Registration
Statement present fairly the information required to be stated therein;
and the assumptions used in preparing the pro forma financial statements
included in each Registration Statement and the Prospectus provide a
reasonable basis for presenting the significant effects directly
attributable to the transactions or events described therein, the related
pro forma adjustments give appropriate effect to those assumptions, and
the pro forma columns therein reflect the proper application of those
adjustments to the corresponding historical financial statement amounts.
(xxvi) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance
that (i) transactions are executed in accordance with management's general
or specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxvii) Except as disclosed in the Prospectus, since the date of the
latest audited financial statements included in the Prospectus there has
been no material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or
other), business, properties or results of operations of the Company and
its subsidiaries taken as a whole or of BuyDirect, and, except as
disclosed in or contemplated by the Prospectus, there has been no dividend
or distribution of any kind declared, paid or made by the Company on any
class of its capital stock.
(xxviii) The Company is not and, after giving effect to the offering
and sale of the Offered Securities and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as defined in the Investment Company Act of 1940;
(xxix) The Company has reviewed its operations and making inquiries
of the Year 2000 compliance of any third parties with which the Company
has a material relationship to evaluate the extent to which the business
or operations of the Company or any of its subsidiaries will be affected
by the Year 2000 Problem. As a result of such review and except to the
extent otherwise disclosed in the Prospectus, the Company has no reason to
believe, and does not believe, that the Year 2000 Problem
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<PAGE> 7
will have a Material Adverse Effect or result in any material loss or
interference with the Company's business or operations. The "Year 2000
Problem" as used herein means any significant risk that computer hardware
or software used in the receipt, transmission, processing, manipulation,
storage, retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will not, in the
case of dates or time periods occurring after December 31, 1999, function
at least as effectively as in the case of dates or time periods occurring
prior to January 1, 2000.
(xxx) The execution and delivery of the Agreement and Plan of Merger
dated as of February 19, 1999 (the "MERGER AGREEMENT") by and among the
Company, BuyDirect, BD Acquisition, Inc. ("BD ACQUISITION"), a Delaware
corporation and certain principal stockholders of BuyDirect was duly
authorized by all necessary corporate action on the part of the Company
and BuyDirect. Each of the Company and BuyDirect had all corporate power
and authority to execute and deliver the Merger Agreement and has all
corporate power and authority to consummate the transactions contemplated
by the Merger Agreement, and the Merger Agreement at the time of execution
constituted a valid and binding obligation of each of the Company, BD
Acquisition and BuyDirect. Neither the Information Statement, dated March
___, 1999, nor any other documentation delivered by BuyDirect to its
stockholders in connection with the transactions contemplated by the
Merger Agreement contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, as of their respective dates.
(xxxi) Neither the Company nor any of its affiliates does business
with the government of Cuba or with any person or affiliate located in
Cuba within the meaning of Section 517.075, Florida Statutes and the
Company agrees to comply with such Section if prior to the completion of
the distribution of the Offered Securities it commences doing such
business.
(b) Each Selling Stockholder severally represents and warrants to, and
agrees with, the several Underwriters that:
(i) Such Selling Stockholder has and on each Closing Date
hereinafter mentioned will have valid and unencumbered title to the
Offered Securities to be delivered by such Selling Stockholder on such
Closing Date and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Offered Securities
to be delivered by such Selling Stockholder on such Closing Date
hereunder; and upon the delivery of and payment for the Offered Securities
on each Closing Date hereunder the several Underwriters will acquire valid
and unencumbered title to the Offered Securities to be delivered by such
Selling Stockholder on such Closing Date.
(ii) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (A) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all respects to the requirements of
the Act and the Rules and Regulations and did not include any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, (B) on the Effective Date of the Additional Registration
Statement (if any), each Registration Statement conformed, or will
conform, in all respects to the requirements of the Act and the Rules and
Regulations did not include, or will not include, any untrue statement of
a material fact and did not omit, or will not omit, to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (C) on the date of this Agreement, the Initial
Registration Statement and, if the Effective Time of the Additional
Registration Statement is prior to the execution and delivery of this
Agreement, the Additional Registration Statement each conforms, and at the
time of filing of the Prospectus pursuant to Rule 424(b) or (if no such
filing is required) at the Effective Date of the Additional Registration
Statement in which the Prospectus is included, each Registration Statement
and the Prospectus will conform, in all respects to the requirements of
the Act and the Rules and Regulations, and neither of such documents
includes, or will include, any untrue statement of a
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<PAGE> 8
material fact or omits, or will omit, to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. If the Effective Time of the Initial Registration Statement is
subsequent to the execution and delivery of this Agreement: on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement and the Prospectus will conform in all respects to
the requirements of the Act and the Rules and Regulations, neither of such
documents will include any untrue statement of a material fact or will
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading. The two preceding sentences
apply only to the extent that any statements in or omissions from a
Registration Statement or the Prospectus are based on written information
furnished to the Company by such Selling Stockholder specifically for use
therein.
(iii) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between such Selling Stockholder and any
person that would give rise to a valid claim against such Selling
Stockholder or any Underwriter for a brokerage commission, finder's fee or
other like payment in connection with this offering.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of
the representations, warranties and agreements herein contained, but subject to
the terms and conditions herein set forth, the Company and each Selling
Stockholder agree, severally and not jointly, to sell to each Underwriter, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
and each Selling Stockholder, at a purchase price of $__________ per share, that
number of Firm Securities (rounded up or down, as determined by Credit Suisse
First Boston Corporation ("CSFBC") in its discretion, in order to avoid
fractions) obtained by multiplying __________ Firm Securities in the case of the
Company and the number of Firm Securities set forth opposite the name of such
Selling Stockholder in Schedule A hereto, in the case of a Selling Stockholder,
in each case by a fraction the numerator of which is the number of Firm
Securities set forth opposite the name of such Underwriter in Schedule B hereto
and the denominator of which is the total number of Firm Securities.
Certificates in negotiable form for the Offered Securities to be sold by
the Selling Stockholders hereunder have been placed in custody, for delivery
under this Agreement, under Custody Agreements made with Bank Boston, N.A. as
custodian ("CUSTODIAN"). Each Selling Stockholder agrees that the shares
represented by the certificates held in custody for the Selling Stockholders
under such Custody Agreements are subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Stockholders for such
custody are to that extent irrevocable, and that the obligations of the Selling
Stockholders hereunder shall not be terminated by operation of law, whether by
the death of any individual Selling Stockholder or the occurrence of any other
event, or in the case of a trust, by the death of any trustee or trustees or the
termination of such trust. If any individual Selling Stockholder or any such
trustee or trustees should die, or if any other such event should occur, or if
any of such trusts should terminate, before the delivery of the Offered
Securities hereunder, certificates for such Offered Securities shall be
delivered by the Custodian in accordance with the terms and conditions of this
Agreement as if such death or other event or termination had not occurred,
regardless of whether or not the Custodian shall have received notice of such
death or other event or termination.
The Company and the Custodian will deliver the Firm Securities to the
Representatives for the accounts of the Underwriters, against payment of the
purchase price in Federal (same day) funds by official bank check or checks or
wire transfer to an account at a bank acceptable to CSFBC drawn to the order of
in the case of shares of Firm Securities and in the case of shares of
Firm Securities, at the office of ___________, at _______ A.M., New York time,
on ______, or at such other time not later than seven full business days
thereafter as CSFBC and the Company determine, such time being herein referred
to as the "FIRST CLOSING DATE". The certificates for the Firm Securities so to
be delivered will be in definitive form, in such denominations and registered in
such names as CSFBC requests and will be made available for checking and
packaging at the [above] office of ________________ at least 24 hours prior to
the First Closing Date.
In addition, upon written notice from CSFBC given to the Company and the
Selling Stockholders from time to time not more than 30 days subsequent to the
date of the Prospectus, the Underwriters may purchase all
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<PAGE> 9
or less than all of the Optional Securities at the purchase price per Security
to be paid for the Firm Securities. The Company agrees to sell to the
Underwriters the number of Optional Securities specified in such notice and the
Underwriters agree, severally and not jointly, to purchase such Optional
Securities. Such Optional Securities shall be purchased from the Company for the
account of each Underwriter in the same proportion as the number of Firm
Securities set forth opposite such Underwriter's name bears to the total number
of Firm Securities (subject to adjustment by CSFBC to eliminate fractions) and
may be purchased by the Underwriters only for the purpose of covering
over-allotments made in connection with the sale of the Firm Securities. No
Optional Securities shall be sold or delivered unless the Firm Securities
previously have been, or simultaneously are, sold and delivered. The right to
purchase the Optional Securities or any portion thereof may be exercised from
time to time and to the extent not previously exercised may be surrendered and
terminated at any time upon notice by CSFBC to the Company and the Selling
Stockholders.
Each time for the delivery of and payment for the Optional Securities,
being herein referred to as an "OPTIONAL CLOSING DATE", which may be the First
Closing Date (the First Closing Date and each Optional Closing Date, if any,
being sometimes referred to as a "CLOSING DATE"), shall be determined by CSFBC
but shall be not later than five full business days after written notice of
election to purchase Optional Securities is given. The Company will deliver the
Optional Securities being purchased on each Optional Closing Date to the
Representatives for the accounts of the several Underwriters, against payment of
the purchase price therefor in Federal (same day) funds by official bank check
or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to
the order of ________________ in the case of [ ] Optional Securities and [ ] in
the case of [ ] Optional Securities, at the [above] office of ________________.
The certificates for the Optional Securities being purchased on each Optional
Closing Date will be in definitive form, in such denominations and registered in
such names as CSFBC requests upon reasonable notice prior to such Optional
Closing Date and will be made available for checking and packaging at the
[above] office of ________________ at a reasonable time in advance of such
Optional Closing Date.
4. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Offered Securities for sale to the public as
set forth in the Prospectus.
5. Certain Agreements of the Company and the Selling Stockholders. The
Company agrees with the several Underwriters and the Selling Stockholders that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, the Company will
file the Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CSFBC,
subparagraph (4)) of Rule 424(b) not later than the earlier of (A) the
second business day following the execution and delivery of this Agreement
or (B) the fifteenth business day after the Effective Date of the Initial
Registration Statement.
The Company will advise CSFBC promptly of any such filing pursuant to Rule
424(b). If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement and an additional
registration statement is necessary to register a portion of the Offered
Securities under the Act but the Effective Time thereof has not occurred
as of such execution and delivery, the Company will file the additional
registration statement or, if filed, will file a post-effective amendment
thereto with the Commission pursuant to and in accordance with Rule 462(b)
on or prior to 10:00 P.M., New York time, on the date of this Agreement
or, if earlier, on or prior to the time the Prospectus is printed and
distributed to any Underwriter, or will make such filing at such later
date as shall have been consented to by CSFBC.
(b) The Company will advise CSFBC promptly of any proposal to
amend or supplement the initial or any additional registration statement
as filed or the related prospectus or the Initial Registration Statement,
the Additional Registration Statement (if any) or the Prospectus and will
not effect such amendment or supplementation without CSFBC's consent; and
the Company will also advise CSFBC promptly of the effectiveness of each
Registration Statement (if its Effective Time is
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<PAGE> 10
subsequent to the execution and delivery of this Agreement) and of any
amendment or supplementation of a Registration Statement or the Prospectus
and of the institution by the Commission of any stop order proceedings in
respect of a Registration Statement and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Offered
Securities is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, the Company will promptly
notify CSFBC of such event and will promptly prepare and file with the
Commission, at its own expense, an amendment or supplement which will
correct such statement or omission or an amendment which will effect such
compliance. Neither CSFBC's consent to, nor the Underwriters' delivery of,
any such amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6.
(d) As soon as practicable, but not later than the Availability
Date (as defined below), the Company will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) which will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "AVAILABILITY DATE" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of the Company's fiscal year,
"AVAILABILITY DATE" means the 90th day after the end of such fourth fiscal
quarter.
(e) The Company will furnish to the Representatives copies of each
Registration Statement (5 of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as a
prospectus relating to the Offered Securities is required to be delivered
under the Act in connection with sales by any Underwriter or dealer, the
Prospectus and all amendments and supplements to such documents, in each
case in such quantities as CSFBC requests. The Prospectus shall be so
furnished on or prior to 3:00 P.M., New York time, on the business day
following the later of the execution and delivery of this Agreement or the
Effective Time of the Initial Registration Statement. All other such
documents shall be so furnished as soon as available. The Company and the
Selling Stockholders will pay the expenses of printing and distributing to
the Underwriters all such documents.
(f) The Company will arrange for the qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and will continue such qualifications in effect so long as
required for the distribution.
(g) During the period of 2 years hereafter, the Company will
furnish to the Representatives and, upon request, to each of the other
Underwriters, as soon as practicable after the end of each fiscal year, a
copy of its annual report to stockholders for such year; and the Company
will furnish to the Representatives (i) as soon as available, a copy of
each report and any definitive proxy statement of the Company filed with
the Commission under the Securities Exchange Act of 1934 or mailed to
stockholders, and (ii) from time to time, such other information
concerning the Company as CSFBC may reasonably request.
(h) For a period of 90 days after the date of the initial public
offering of the Offered Securities, the Company will not offer, sell,
contract to sell, pledge or otherwise dispose of, directly or indirectly,
or file with the Commission a registration statement under the Act
relating to, any additional shares of its Securities or securities
convertible into or exchangeable or exercisable for any shares of its
Securities, or publicly disclose the intention to make any such offer,
sale, pledge, disposition or filing, without the prior written consent of
CSFBC, except issuances of Securities pursuant to the conversion
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<PAGE> 11
or exchange of convertible or exchangeable securities or the exercise of
warrants or options, in each case outstanding on the date hereof, grants
of employee stock options pursuant to the terms of a plan in effect on the
date hereof, issuances of Securities pursuant to the exercise of such
options or issuances of Securities pursuant to the Company's dividend
reinvestment plan, if any.
(i) The Company and each Selling Stockholder agree with the
several Underwriters that the Company and such Selling Stockholder will
pay all expenses incident to the performance of the obligations of the
Company and such Selling Stockholder, as the case may be, under this
Agreement, for any filing fees and other expenses (including fees and
disbursements of counsel) in connection with qualification of the Offered
Securities for sale under the laws of such jurisdictions as CSFBC
designates and the printing of memoranda relating thereto, for the filing
fee incident to, and the reasonable fees and disbursements of counsel to
the Underwriters in connection with, the review by the National
Association of Securities Dealers, Inc. of the Offered Securities, for any
travel expenses of the Company's officers and employees and any other
expenses of the Company in connection with attending or hosting meetings
with prospective purchasers of the Offered Securities, for any transfer
taxes on the sale by the Selling Stockholders of the Offered Securities to
the Underwriters and for expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto) to the Underwriters.
(j) Each Selling Stockholder agrees to deliver to CSFBC,
attention: Transactions Advisory Group on or prior to the First Closing
Date a properly completed and executed United States Treasury Department
Form W-9 (or other applicable form or statement specified by Treasury
Department regulations in lieu thereof).
(k) Each Selling Stockholder, other than John P. Pettitt, agrees,
for a period of 90 days after the date of the initial public offering of
the Offered Securities, not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, any additional shares of the
Securities of the Company or securities convertible into or exchangeable
or exercisable for any shares of Securities, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, without the
prior written consent of CSFBC. John P. Pettitt agrees, for a period of 90
days after the date of the initial public offering of the Offered
Securities, not to offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any additional shares of the
Securities of the Company or securities convertible into or exchangeable
or exercisable for any shares of Securities, or publicly disclose the
intention to make any such offer, sale, pledge or disposition, without the
prior written consent of CSFBC, provided that Mr. Pettitt shall have the
right to offer, sell, contract to sell, pledge or otherwise transfer,
distribute or dispose of, directly or indirectly, up to 58,936 shares on
or after the date that is 21 days after the date of the initial public
offering of the Offered Securities and up to an additional 58,936 shares
on or after the date that is 45 days after the date of the initial public
offering of the Offered Securities.
6. Conditions of the Obligations of the Underwriters. The obligations
of the several Underwriters to purchase and pay for the Firm Securities on the
First Closing Date and the Optional Securities to be purchased on each Optional
Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein, to
the accuracy of the statements of Company officers made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Stockholders of their obligations hereunder and to the following additional
conditions precedent:
(a) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the registration statement to
be filed shortly prior to such Effective Time), of Ernst & Young LLP
confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder
and stating to the effect that:
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<PAGE> 12
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) on the basis of a reading of the latest available
interim financial statements of the Company, inquiries of officials
of the Company who have responsibility for financial and accounting
matters and other specified procedures, nothing came to their
attention that caused them to believe that:
(A) at the date of the latest available balance sheet
read by such accountants, or at a subsequent specified date
not more than three business days prior to the date of such
letter, there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt of the
Company and its consolidated subsidiaries or, at the date of
the latest available balance sheet read by such accountants,
there was any decrease in consolidated net assets, as compared
with amounts shown on the latest balance sheet included in the
Prospectus; or
(B) for the period from the closing date of the latest
income statement included in the Prospectus to the closing
date of the latest available income statement read by such
accountants there were any decreases, as compared with the
corresponding period of the previous year, in consolidated net
revenues or net loss in the total or per share amounts of net
loss;
except in all cases set forth in clauses (A) and (B) above for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
(iii) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements (in each case
to the extent that such dollar amounts, percentages and other
financial information are derived from the general accounting
records of the Company and its subsidiaries subject to the internal
controls of the Company's accounting system or are derived directly
from such records by analysis or computation) with the results
obtained from inquiries, a reading of such general accounting
records and other procedures specified in such letter and have found
such dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise specified in
such letter; and
(iv) they have read the unaudited pro forma condensed
consolidated balance sheet as of December 31, 1998, and the
unaudited pro forma condensed consolidated statement of operations
for the year ended December 31, 1998, included in the Registration
Statements (the "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS"), inquired of certain officials of the Company
and of BuyDirect who have responsibility for financial and
accounting matters as to the basis for their determination of the
pro forma adjustments and whether the Unaudited Pro Forma Condensed
Consolidated Financial Statements referred to in this subsection
comply as to form in all material respects with the applicable
requirements of Rule 11-02 of Regulation S-X, and proved the
arithmetic accuracy of the application of the pro forma adjustments
to the historical amounts in the Unaudited Pro Forma Condensed
Consolidated Financial Statements. Such letter shall indicate that
nothing came to their attention as a result of the procedures
specified in this subsection that caused them to believe that the
Unaudited Pro Forma Condensed Consolidated Financial Statements do
not comply as to form in all material respects with the applicable
requirements of Rule 11-02 of Regulation S-X and that the pro forma
adjustments have not been properly applied to the
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<PAGE> 13
historical amounts in the compilation of the Unaudited Pro Forma
Condensed Consolidated Financial Statements.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statements is subsequent to the execution and delivery of
this Agreement, "REGISTRATION STATEMENTS" shall mean the initial
registration statement as proposed to be amended by the amendment or
post-effective amendment to be filed shortly prior to its Effective Time,
(ii) if the Effective Time of the Initial Registration Statements is prior
to the execution and delivery of this Agreement but the Effective Time of
the Additional Registration Statement is subsequent to such execution and
delivery, "REGISTRATION Statements" shall mean the Initial Registration
Statement and the additional registration statement as proposed to be
filed or as proposed to be amended by the post-effective amendment to be
filed shortly prior to its Effective Time, and (iii) "PROSPECTUS" shall
mean the prospectus included in the Registration Statements.
(b) The Representatives shall have received a letter, dated the
date of delivery thereof (which, if the Effective Time of the Initial
Registration Statement is prior to the execution and delivery of this
Agreement, shall be on or prior to the date of this Agreement or, if the
Effective Time of the Initial Registration Statement is subsequent to the
execution and delivery of this Agreement, shall be prior to the filing of
the amendment or post-effective amendment to the registration statement to
be filed shortly prior to such Effective Time), of PricewaterhouseCoopers
LLP confirming that they are independent public accountants within the
meaning of the Act and the applicable published Rules and Regulations
thereunder and stating to the effect that:
(i) in their opinion the financial statements and schedules
examined by them and included in the Registration Statements comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published Rules and
Regulations;
(ii) on the basis of a reading of the latest available
interim financial statements of BuyDirect, inquiries of officials of
BuyDirect who have responsibility for financial and accounting
matters and other specified procedures, nothing came to their
attention that caused them to believe that:
(A) at the date of the latest available balance sheet
read by such accountants, or at a subsequent specified date
not more than three business days prior to the date of such
letter, there was any change in the capital stock or any
increase in short-term indebtedness or long-term debt of
BuyDirect and its consolidated subsidiary or, at the date of
the latest available balance sheet read by such accountants,
there was any decrease in consolidated net assets, as compared
with amounts shown on the latest balance sheet included in the
Prospectus; or
(B) for the period from the closing date of the latest
income statement included in the Prospectus to the closing
date of the latest available income statement read by such
accountants there were any decreases, as compared with the
corresponding period of the previous year, in consolidated net
revenues or net loss in the total;
except in all cases set forth in clauses (A) and (B) above for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(iii) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements (in each case
to the extent that such dollar amounts, percentages and other
financial information
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<PAGE> 14
are derived from the general accounting records of BuyDirect and its
subsidiaries subject to the internal controls of BuyDirect's
accounting system or are derived directly from such records by
analysis or computation) with the results obtained from inquiries, a
reading of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement with
such results, except as otherwise specified in such letter.
For purposes of this subsection, (i) if the Effective Time of the Initial
Registration Statements is subsequent to the execution and delivery of
this Agreement, "REGISTRATION STATEMENTS" shall mean the initial
registration statement as proposed to be amended by the amendment or
post-effective amendment to be filed shortly prior to its Effective Time,
(ii) if the Effective Time of the Initial Registration Statements is prior
to the execution and delivery of this Agreement but the Effective Time of
the Additional Registration Statement is subsequent to such execution and
delivery, "REGISTRATION STATEMENTS" shall mean the Initial Registration
Statement and the additional registration statement as proposed to be
filed or as proposed to be amended by the post-effective amendment to be
filed shortly prior to its Effective Time, and (iii) "PROSPECTUS" shall
mean the prospectus included in the Registration Statements.
(c) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have been consented to
by CSFBC. If the Effective Time of the Additional Registration Statement
(if any) is not prior to the execution and delivery of this Agreement,
such Effective Time shall have occurred not later than 10:00 P.M., New
York time, on the date of this Agreement or, if earlier, the time the
Prospectus is printed and distributed to any Underwriter, or shall have
occurred at such later date as shall have been consented to by CSFBC. If
the Effective Time of the Initial Registration Statement is prior to the
execution and delivery of this Agreement, the Prospectus shall have been
filed with the Commission in accordance with the Rules and Regulations and
Section 5(a) of this Agreement. Prior to such Closing Date, no stop order
suspending the effectiveness of a Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or,
to the knowledge of any Selling Stockholder, the Company or the
Representatives, shall be contemplated by the Commission.
(d) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company or its
subsidiaries which, in the judgment of a majority in interest of the
Underwriters including the Representatives, is material and adverse and
makes it impractical or inadvisable to proceed with completion of the
public offering or the sale of and payment for the Offered Securities;
(ii) any downgrading in the rating of any debt securities of the Company
by any "nationally recognized statistical rating organization" (as defined
for purposes of Rule 436(g) under the Act), or any public announcement
that any such organization has under surveillance or review its rating of
any debt securities of the Company (other than an announcement with
positive implications of a possible upgrading, and no implication of a
possible downgrading, of such rating); (iii) any suspension or limitation
of trading in securities generally on the New York Stock Exchange, or any
setting of minimum prices for trading on such exchange, or any suspension
of trading of any securities of the Company on any exchange or in the
over-the-counter market; (iv) any banking moratorium declared by U.S.
Federal or New York authorities; or (v) any outbreak or escalation of
major hostilities in which the United States is involved, any declaration
of war by Congress or any other substantial national or international
calamity or emergency if, in the judgment of a majority in interest of the
Underwriters including the Representatives, the effect of any such
outbreak, escalation, declaration, calamity or emergency makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for the Offered Securities.
(e) The Representatives shall have received an opinion, dated such
Closing Date, of Morrison
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<PAGE> 15
& Foerster LLP, counsel for the Company, to the effect that:
(i) The Company has been duly incorporated and is an
existing corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation in
good standing in all other jurisdictions in which its ownership or
lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified does not
amount to a material liability or disability to the Company and its
subsidiaries, taken as a whole;
(ii) The Offered Securities delivered on such Closing Date
and all other outstanding shares of the Common Stock of the Company
have been duly authorized and validly issued, are fully paid and
nonassessable and conform to the description thereof contained in
the Prospectus; and the stockholders of the Company have no
preemptive rights with respect to the Securities;
(iii) Except as disclosed in the Prospectus or waived, there
are no contracts, agreements or understandings known to such counsel
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act
with respect to any securities of the Company owned or to be owned
by such person or to require the Company to include such securities
in the securities registered pursuant to the Registration Statement
or in any securities being registered pursuant to any other
registration statement filed by the Company under the Act;
(iv) The Company is not and, after giving effect to the
offering and sale of the Offered Securities and the application of
the proceeds thereof as described in the Prospectus, will not be an
"investment company" as defined in the Investment Company Act of
1940.
(v) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required to be obtained or made by the Company or any Selling
Stockholder for the consummation of the transactions contemplated by
this Agreement or the Custody Agreement in connection with the sale
of the Offered Securities, except such as have been obtained and
made under the Act and such as may be required under state
securities laws;
(vi) Neither the execution, delivery and performance of this
Agreement or, to the knowledge of such counsel, the Custody
Agreement nor the consummation of the transactions herein
contemplated will result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute,
any rule, regulation or order of any governmental agency or body or
to the knowledge of such counsel any court having jurisdiction over
the Company or any subsidiary of the Company or any of their
properties, or any agreement or instrument to which the Company or
any such subsidiary is a party or by which the Company or any such
subsidiary is bound or to which any of the properties of the Company
or any such subsidiary is subject which is attached as an exhibit to
the Registration Statement, or the charter or by-laws of the Company
or any such subsidiary;
(vii) The Initial Registration Statement was declared
effective under the Act as of the date and time specified in such
opinion, the Additional Registration Statement (if any) was filed
and became effective under the Act as of the date and time (if
determinable) specified in such opinion, the Prospectus either was
filed with the Commission pursuant to the subparagraph of Rule
424(b) specified in such opinion on the date specified therein or
was included in the Initial Registration Statement or the Additional
Registration Statement (as the case may be), and, to the best of the
knowledge of such counsel, no stop order suspending the
effectiveness of a Registration Statement or any part thereof has
been issued and no
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<PAGE> 16
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and each Registration Statement and the
Prospectus, and each amendment or supplement thereto, as of their
respective effective or issue dates, complied as to form in all
material respects with the requirements of the Act and the Rules and
Regulations; such counsel has no reason to believe that any part of
a Registration Statement or any amendment thereto, as of its
effective date or as of such Closing Date, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; or that the Prospectus or any amendment or
supplement thereto, as of its issue date or as of such Closing Date,
contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading; the descriptions in the Registration
Statements and Prospectus of statutes, legal and governmental
proceedings and contracts and other documents are accurate and
fairly present the information required to be shown; and such
counsel does not know of any legal or governmental proceedings
required to be described in a Registration Statement or the
Prospectus which are not described as required or of any contracts
or documents of a character required to be described in a
Registration Statement or the Prospectus or to be filed as exhibits
to a Registration Statement which are not described and filed as
required; it being understood that such counsel need express no
opinion as to the financial statements or other financial data
contained in the Registration Statements or the Prospectus; and
(xix) This Agreement has been duly authorized, executed and
delivered by the Company.
Such counsel's opinions shall relate to California, Delaware, New
York and United States federal law.
Such counsel's opinions may include, when and where applicable, such
assumptions, qualifications, exceptions and limitations as are customary
for opinions with respect to the foregoing matters.
(f) The Representatives shall have received an opinion, dated such
Closing Date, of Shearman & Sterling, counsel for the Company, to the
effect that:
(i) The Company had all requisite corporate power and
authority to enter into the Merger Agreement and the Transactional
Agreements (as defined in the Merger Agreement) and to consummate
the transactions contemplated thereby. The execution and delivery of
the Merger Agreement and the Transactional Agreements and the
consummation of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the
Company. The stockholders of the Company are not required to approve
the Merger Agreement, the Transactional Agreements or the
transactions contemplated thereby under applicable law. The Merger
Agreement and the Transactional Agreements have been duly executed
and delivered by the Company and constitute valid and binding
obligations of the Company;
(ii) BD Acquisition, Inc. ("SUB") had all requisite corporate
power and authority to enter into the Merger Agreement and to
consummate the transactions contemplated thereby. The execution and
delivery of the Merger Agreement and the consummation of the
transactions contemplated thereby have been duly authorized by all
necessary corporate action on the part of Sub. The Merger Agreement
has been duly executed and delivered by Sub and constitutes a valid
and binding obligation of Sub;
(iii) The securities issued by the Company pursuant to the
Merger Agreement have been duly authorized and validly issued, are
fully paid and nonaassessable and have been
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<PAGE> 17
issued in compliance with the regulations and qualification
requirements of all applicable federal and state securities laws;
and
(iv) No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity,
is required by or with respect to the Company and Sub in connection
with the execution and delivery of the Merger Agreement and the
Transactional Agreements by the Company, or the Merger Agreement by
Sub, or the consummation by the Company and Sub of the transactions
contemplated thereby, except for (i) the filing of a Certificate of
Merger with the Secretary of State of Delaware, (ii) any filings as
may be required under applicable state or federal securities laws
and the laws of any foreign country, and (iii) such other consents,
authorizations, filings, approvals and registrations, which if not
obtained or made would not have a material adverse effect on the
Company.
Such counsel's opinions may include, when and where applicable, such
assumptions, qualifications, exceptions and limitations as are customary
for opinions with respect to the foregoing matters.
(g) The Representatives shall have received the opinion
contemplated in the Power of Attorney executed and delivered by each
Selling Stockholder and an opinion, dated such Closing Date, of Morrison &
Foerster LLP, counsel for the Selling Stockholders, to the effect that:
(i) Each Selling Stockholder had valid and unencumbered
title to the Offered Securities delivered by such Selling
Stockholder on such Closing Date and had full right, power and
authority to sell, assign, transfer and deliver the Offered
Securities delivered by such Selling Stockholder on such Closing
Date hereunder; and the several Underwriters have acquired valid and
unencumbered title to the Offered Securities purchased by them from
the Selling Stockholders on such Closing Date hereunder;
(ii) No consent, approval, authorization or order of, or
filing with, any governmental agency or body or any court is
required to be obtained or made by any Stockholder for the
consummation of the transactions contemplated by the Custody
Agreement or this Agreement in connection with the sale of the
Offered Securities sold by the Selling Stockholders, except such as
have been obtained and made under the Act and such as may be
required under state securities laws;
(iii) The execution, delivery and performance of the Custody
Agreement and this Agreement and the consummation of the
transactions therein and herein contemplated will not result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any statute, any rule, regulation or
order of any governmental agency or body or any court having
jurisdiction over any Selling Stockholder or any of their properties
or any agreement or instrument to which any Selling Stockholder is a
party or by which any Selling Stockholder is bound or to which any
of the properties of any Selling Stockholder is subject;
(iv) The Power of Attorney and related Custody Agreement with
respect to each Selling Stockholder has been duly authorized,
executed and delivered by such Selling Stockholder and constitute
valid and legally binding obligations of each such Selling
Stockholder enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles; and
(v) This Agreement has been duly authorized, executed and
delivered by each Selling Stockholder.
(h) The Representatives shall have received from Venture Law
Group, A Professional
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<PAGE> 18
Corporation, counsel for the Underwriters, such opinion or opinions, dated
such Closing Date, with respect to the incorporation of the Company, the
validity of the Offered Securities delivered on such Closing Date, the
Registration Statements, the Prospectus and other related matters as the
Representatives may require, and the Selling Stockholders and the Company
shall have furnished to such counsel such documents as they request for
the purpose of enabling them to pass upon such matters.
(i) The Representatives shall have received a certificate, dated
such Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that: the representations and warranties of the Company in this Agreement
are true and correct; the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied
hereunder at or prior to such Closing Date; no stop order suspending the
effectiveness of any Registration Statement has been issued and no
proceedings for that purpose have been instituted or are contemplated by
the Commission; the Additional Registration Statement (if any) satisfying
the requirements of subparagraphs (1) and (3) of Rule 462(b) was filed
pursuant to Rule 462(b), including payment of the applicable filing fee in
accordance with Rule 111(a) or (b) under the Act, prior to the time the
Prospectus was printed and distributed to any Underwriter; and, subsequent
to the respective dates of the most recent financial statements in the
Prospectus, there has been no material adverse change, nor any development
or event involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole except as set forth in or
contemplated by the Prospectus or as described in such certificate.
(j) The Representatives shall have received a letter, dated such
Closing Date, of Ernst & Young LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred to
in such subsection will be a date not more than three days prior to such
Closing Date for the purposes of this subsection.
(k) The Representatives shall have received a letter, dated such
Closing Date, of PricewaterhouseCoopers LLP which meets the
requirements of subsection (b) of this Section, except that the specified
date referred to in such subsection will be a date not more than three
days prior to such Closing Date for the purposes of this subsection.
The Selling Stockholders and the Company will furnish the Representatives with
such conformed copies of such opinions, certificates, letters and documents as
the Representatives reasonably request. CSFBC may in its sole discretion waive
on behalf of the Underwriters compliance with any conditions to the obligations
of the Underwriters hereunder, whether in respect of an Optional Closing Date or
otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Underwriter, its partners, directors and officers and each
person, if any who controls such Underwriter within the meaning of Section 15 of
the Act, against any losses, claims, damages or liabilities, joint or several,
to which such Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement, the
Prospectus, or any amendment or supplement thereto, or any related preliminary
prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each Underwriter
for any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred; provided, however, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Company by any Underwriter through the Representatives specifically for
use therein, it being understood and agreed that the only such
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<PAGE> 19
information furnished by any Underwriter consists of the information described
as such in subsection (c) below.
(b) The Selling Stockholders other than John P. Pettitt, jointly and
severally, will indemnify and hold harmless each Underwriter, its partners,
directors and officers and each person who controls such Underwriter within the
meaning of Section 15 of the Act, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses reasonably
incurred by such Underwriter in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred;
provided, however, that the Selling Stockholders will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement in or omission
or alleged omission from any of such documents in reliance upon and in
conformity with written information furnished to the Company by an Underwriter
through the Representatives specifically for use therein, it being understood
and agreed that the only such information furnished by any Underwriter consists
of the information described as such in subsection (c) below; and provided
further that the liability of each Selling Stockholder pursuant to this
subsection shall not exceed the product of the number of Shares sold by such
Selling Stockholder and the public offering price of the Shares as set forth in
the Prospectus.
John P. Pettitt will indemnify and hold harmless each Underwriter, its
partners, directors and officers and each person who controls such Underwriter
within the meaning of Section 15 of the Act, against any losses, claims, damages
or liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any Registration Statement, the Prospectus, or any amendment or supplement
thereto, or any related preliminary prospectus, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or any related preliminary prospectus in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
expressly for use therein, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that such Selling Stockholder
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to the Company by an Underwriter through the Representatives specifically for
use therein, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such in
subsection (c) below; and provided further that the liability of such Selling
Stockholder pursuant to this subsection shall not exceed the product of the
number of Shares sold by such Selling Stockholder and the public offering price
of the Shares as set forth in the Prospectus.
(c) Each Underwriter will severally and not jointly indemnify and hold
harmless the Company, its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the Act, and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue
-19-
<PAGE> 20
statement or alleged untrue statement of any material fact contained in any
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or any related preliminary prospectus, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by the Company and
each Selling Stockholder in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred, it being
understood and agreed that the only such information furnished by any
Underwriter consists of (i) the following information in the Prospectus
furnished on behalf of each Underwriter: the information on the cover page
concerning the terms of the offering by the Underwriters, the second paragraph
on the cover page concerning over-allotments, the last paragraph under the
caption "Underwriting" regarding stabilizing and passive market making, the
concession and reallowance figures appearing in the fourth paragraph under the
caption "Underwriting" and the information contained in the ninth paragraph
under the caption "Underwriting"; and (ii) the following information in the
Prospectus furnished on behalf of C.E. Unterberg, Towbin and Donaldson, Lufkin &
Jenrette: information in the eighth paragraph under the caption "Underwriting"
concerning the acquisition of shares of the Company's stock by such underwriters
and affiliates thereof and agreements with the National Association of
Securities Dealers regarding such shares.
(d) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying party under
subsection (a), (b) or (c) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a), (b) or (c) above. In case any such action
is brought against any indemnified party and it notifies an indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Section for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened action in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on any claims
that are the subject matter of such action.
(e) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a), (b)
or (c) above, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of the losses, claims, damages
or liabilities referred to in subsection (a), (b) or (c) above (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other from the offering of the Securities or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Selling Stockholders on
the one hand and the Underwriters on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Company and the Selling Stockholders bear to the total underwriting discounts
and commissions received by the Underwriters. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Selling
Stockholders or the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such untrue
statement or omission. The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any action or claim which is the subject of this subsection (e).
Notwithstanding the provisions of this subsection (e), no
-20-
<PAGE> 21
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (e) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(f) The obligations of the Company and the Selling Stockholders under
this Section shall be in addition to any liability which the Company and the
Selling Stockholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter (as
hereinafter defined) within the meaning of the Act; and the obligations of the
Underwriters under this Section shall be in addition to any liability which the
respective Underwriters may otherwise have and shall extend, upon the same terms
and conditions, to each director of the Company, to each officer of the Company
who has signed a Registration Statement and to each person, if any, who controls
the Company within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default
in their obligations to purchase Offered Securities hereunder on either the
First or any Optional Closing Date and the aggregate number of shares of Offered
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total number of shares of Offered Securities
that the Underwriters are obligated to purchase on such Closing Date, CSFBC may
make arrangements satisfactory to the Company and the Selling Stockholders for
the purchase of such Offered Securities by other persons, including any of the
Underwriters, but if no such arrangements are made by such Closing Date, the
non-defaulting Underwriters shall be obligated severally, in proportion to their
respective commitments hereunder, to purchase the Offered Securities that such
defaulting Underwriters agreed but failed to purchase on such Closing Date. If
any Underwriter or Underwriters so default and the aggregate number of shares of
Offered Securities with respect to which such default or defaults occur exceeds
10% of the total number of shares of Offered Securities that the Underwriters
are obligated to purchase on such Closing Date and arrangements satisfactory to
CSFBC, the Company and the Selling Stockholders for the purchase of such Offered
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter, the Company or the Selling Stockholders, except as
provided in Section 9 (provided that if such default occurs with respect to
Optional Securities after the First Closing Date, this Agreement will not
terminate as to the Firm Securities or any Optional Securities purchased prior
to such termination). As used in this Agreement, the term "Underwriter" includes
any person substituted for an Underwriter under this Section. Nothing herein
will relieve a defaulting Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Selling Stockholders, of the Company or its officers and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, any Selling
Stockholder, the Company or any of their respective representatives, officers or
directors or any controlling person, and will survive delivery of and payment
for the Offered Securities. If this Agreement is terminated pursuant to Section
8 or if for any reason the purchase of the Offered Securities by the
Underwriters is not consummated, the Company and the Selling Stockholders shall
remain responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of the Company, the Selling
Stockholders, and the Underwriters pursuant to Section 7 shall remain in effect,
and if any Offered Securities have been purchased hereunder the representations
and warranties in Section 2 and all obligations under Section 5 shall also
remain in effect. If the purchase of the Offered Securities by the Underwriters
is not consummated for any reason other than solely because of the termination
of this Agreement pursuant to Section 8 or the occurrence of any event specified
in clause (iii), (iv) or (v) of Section 6(c), the Company and the Selling
Stockholders will, jointly and severally, reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Offered Securities.
-21-
<PAGE> 22
10. Notices. All communications hereunder will be in writing and, if
sent to the Underwriters, will be mailed, delivered or telegraphed and confirmed
to the Representatives c/o Credit Suisse First Boston Corporation, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Investment Banking
Department - Transactions Advisory Group, or, if sent to the Company, will be
mailed, delivered or telegraphed and confirmed to it at Beyond.com Corporation,
1195 West Fremont Avenue, Sunnyvale, CA 94087, Attention: Michael Praisner, or,
if sent to the Selling Stockholders or any of them, will be mailed, delivered or
telegraphed and confirmed to William McKiernan at Cybersource, 550 South
Winchester Boulevard, San Jose, CA 95128; provided, however, that any notice to
an Underwriter pursuant to Section 7 will be mailed, delivered or telegraphed
and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective personal representatives
and successors and the officers and directors and controlling persons referred
to in Section 7, and no other person will have any right or obligation
hereunder.
12. Representation. The Representatives will act for the several
Underwriters in connection with the transactions contemplated by this Agreement,
and any action under this Agreement taken by the Representatives jointly or by
CSFBC will be binding upon all the Underwriters. William S. McKiernan and Steven
P. Novak will act for the Selling Stockholders in connection with such
transactions, and any action under or in respect of this Agreement taken by
William S. McKiernan and Steven P. Novak will be binding upon all the Selling
Stockholders.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the
Federal and state courts in the Borough of Manhattan in The City of New York in
any suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. The Company irrevocably appoints
____________________, as its authorized agent in the Borough of Manhattan in The
City of New York upon which process may be served in any such suit or
proceeding, and agrees that service of process upon such agent, and written
notice of said service to the Company by the person serving the same to the
address provided in Section 10, shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. The Company
further agrees to take any and all action as may be necessary to maintain such
designation and appointment of such agent in full force and effect for a period
of seven years from the date of this Agreement.
-22-
<PAGE> 23
If the foregoing is in accordance with the Representatives' understanding
of our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement among the Selling
Stockholders, the Company and the several Underwriters in accordance with its
terms.
Very truly yours,
-------------------------------------------------
[Insert name or names of Selling Stockholder[s]]
By: _____________________________________________
Attorney in Fact
BEYOND.COM CORPORATION
By: _____________________________________________
Title: __________________________________________
The foregoing Underwriting
Agreement is hereby confirmed and
accepted as of the date first above
written.
CREDIT SUISSE FIRST BOSTON CORPORATION
BANCBOSTON ROBERTSON STEPHENS INC.
DONALDSON LUFKIN & JENRETTE SECURITIES
CORPORATION
C.E. UNTERBERG, TOWBIN
Acting on behalf of themselves and as the
Representatives of the several
Underwriters.
By CREDIT SUISSE FIRST BOSTON CORPORATION
By ________________________________________
Title:_____________________________________
-23-
<PAGE> 24
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
FIRM SECURITIES
SELLING STOCKHOLDER TO BE SOLD
------------------- ---------------
<S> <C>
William S. McKiernan 530,887
Vulcan Ventures, Inc. 179,762
Entities affiliated with C.E. Unterberg, Towbin 103,527
Global Retail Partners, L.P and its affiliates 114,552
John P. Pettitt 71,272
---------------
Total.......................................... ===============
</TABLE>
-24-
<PAGE> 25
SCHEDULE B
<TABLE>
<CAPTION>
NUMBER OF
FIRM SECURITIES
UNDERWRITER TO BE PURCHASED
----------- ---------------
<S> <C>
Credit Suisse First Boston Corporation
BancBoston Robertson Stephens Inc.
Donaldson Lufkin & Jenrette Securities Corporation
C.E. Unterberg, Towbin
---------------
Total.......................................... ===============
</TABLE>
-25-
<PAGE> 1
EXHIBIT 10.31
Confidential Treatment has been requested with respect to portions of the
agreement indicated with an asterisk [*]. A complete copy of this agreement,
including the redacted terms, has been separately filed with the Securities and
Exchange Commission.
EXECUTION COPY
SOFTWARE MERCHANT PROGRAM
ADVERTISING AND PROMOTION AGREEMENT
This Advertising and Promotion Agreement (this "Agreement") is entered
into as of February 5, 1999 (the "Effective Date") between Yahoo! Inc., a
California corporation with offices at 3420 Central Expressway, Santa Clara, CA
95051 ("Yahoo") and Beyond.com, Corporation, a Delaware corporation with offices
at 1195 West Fremont Avenue, Sunnyvale, CA 94087, ("Beyond.com").
In consideration of the mutual promises contained in this Agreement,
Yahoo and Beyond.com hereby agree as follows:
1. DEFINITIONS.
The following terms are used in this Agreement with the respective
meanings set forth below:
"Beyond.com Banner" shall mean an advertising promotion substantially
similar in form as that set forth on Exhibit B that: (a) promotes the on-line
sale of Software Products, (b) has dimensions no larger than 468 pixels wide by
60 pixels high, (c) does not have "looped" animation, (d) does not have any
animation longer than six seconds, (e) has a file size no greater than 12K, and
(f) will permit users to navigate directly to a Page on the Beyond.com Site or
in the Beyond.com Store relating to the Software Product promoted in the
Beyond.com Banner. Yahoo may modify these specifications at its discretion,
provided such modification does not adversely impact Beyond.com.
"Beyond.com Button" shall mean a link substantially similar in form as
that set forth on Exhibit B that: (a) contains a Beyond.com logo and has
dimensions no larger than 88 pixels wide by 31 pixels high and promotes Software
Products, (b) does not contain animation, (c) has a file size no greater than
1.5K, (d) and will permit users to navigate directly to a Page on the Beyond.com
Site relating to the online sale of Software Products relevant to the content on
the Pace on which such Beyond.com Button appears. Yahoo may modify these
specifications at its discretion, provided such modification does not adversely
impact Beyond.com.
"Beyond.com [*] Promotion" shall mean a promotion substantially similar
in form as that set forth on Exhibit B that: (a) has dimensions no larger than
230 pixels wide by 33 pixels high and promotes Software Products, (b) has no
animation longer than six seconds, (c) does not have "looped" animation, and (d)
has a file size no greater than 3K. In addition, the Beyond.com [*] Promotion
shall comply with Yahoo's current [*] promotion guidelines attached as Exhibit
D, which may be modified by Yahoo at its discretion.
"Beyond.com [*] Button" shall mean a link substantially similar in form
as that set forth on Exhibit B that: (a) contains a Beyond.com logo and has
dimensions no larger than 81 pixels wide by 31 pixels high and promotes
Software-Products, (b) has no animation longer than four
<PAGE> 2
(4) seconds, (c) does not have "looped" animation, (d) has a file size no
greater than 4K, and (e) and will permit users to navigate directly to a Page on
the Beyond.com Site relating to the online sale of Software Products relevant to
the content on the Page on which such Beyond.com Button appears. Yahoo may
modify these specifications at its discretion, provided such modification does
not adversely impact Beyond.com.
[*]
"Beyond.com [*]" shall mean a promotion substantially similar in form as
that set forth on Exhibit B that: (a) has dimensions mutually agreed upon by the
parties and promotes compelling content that is mutually agreed upon by
Beyond.com and Yahoo, (b) [*] software interests, (c) offers new content
relevant to Beyond.com Software Products no less than two (2) times per week and
(d) will permit users to navigate directly to a Page on the Beyond.com Site
dedicated to the online purchase of the product promoted in the [*]. Yahoo may
modify these specifications at its discretion, provided such modification does
not adversely impact Beyond.com.
"Beyond.com [*] Banner" shall mean an advertising promotion
substantially similar in form as that set forth on Exhibit B that: (a) promotes
the on-line sale of Software Products, (b) has dimensions no larger than 468
pixels wide by 60 pixels high, (c) does not have "looped" animation, (d) does
not have any animation longer than six seconds, (e) has a file size no greater
than 12K, and (f) will permit users to navigate directly to a Page in the
Beyond.com Store relating to the Software Product promoted in the Beyond.com [*]
Banner. Yahoo may modify these specifications at its discretion, provided such
modification does not adversely impact Beyond.com.
"Beyond.com Site" shall mean the web site owned by Beyond.com currently
located at http://www.beyond.com or any successor url.
"Beyond.com Store" shall mean an online store created with [*] and
located [*].
"Beyond.com [*]" shall mean a promotion substantially similar in form as
that set forth on Exhibit B that: (a) has dimensions no larger than 150 pixels
wide by 275 pixels high and visually promotes Software Products (through a
"product shot"), (b) contains no more than fifty (50) characters of text, (c)
does not contain animation, (d) is in JPEG format, (e) has a file size no
greater than 20K, (f) contains the Beyond.com logo which shall be no greater
than ten percent (10%) of the module, (g) and will permit users to navigate
directly to a Page in the Beyond.com Store relating to the Software Product
promoted in the [*]. Yahoo may modify these specifications at its discretion,
provided such modification does not adversely impact Beyond.com.
"[*] Pages" shall mean those Pages identified as such on Exhibit A;
provided that, Yahoo shall use commercially reasonable efforts to assist
Beyond.com in identifying those Pages that best suit its needs and modifying the
[*] Pages accordingly; provided further that, under no circumstances shall more
than thirty percent (30%) of the [*] Pages be modified.
<PAGE> 3
"[*]" shall mean [*] as measured by Yahoo's advertiser reporting system,
the accuracy of which is periodically reviewed and certified by Ernst & Young,
LLP or a similarly reputable and independent entity.
"Launch Date" shall mean the date on which Yahoo activates the
Beyond.com Button.
"[*]" shall mean the personalized property on the World Wide Web
commonly known as [*].
"[*] Pages" shall mean those Pages identified as such on Exhibit B.
"Page" means any World Wide Web page (or, for online media other than
Web sites, the equivalent unit of the relevant protocol).
"Page View" shall mean a user's request for a Page as measured by
Yahoo's advertiser reporting system, the accuracy of which is periodically
reviewed and certified by Ernst & Young, LLP or a similarly reputable and
independent entity.
"Run of Network" shall mean banners rotating throughout the Yahoo
Properties.
"[*] Pages" shall mean those Pages identified as such on Exhibit A.
"Software Merchant" shall mean any company or other entity engaged in
the on-line sale of Software Products.
"Software Merchant Program" shall mean Yahoo's program consisting of
certain marketing, advertising and promotional activities with Software
Merchants substantially similar to those set forth in this Agreement.
"Software Products" shall mean personal computer software products.
"Term" shall mean the period beginning on [*] and continuing for a
period of eighteen (18) months.
"Yahoo [*] Pages" shall mean those Pages identified as such on Exhibit
B.
"Yahoo Main Site" shall mean Yahoo's principal U.S. based directory to
the World Wide Web currently located at http://www.yahoo.com or any successor
url.
"Yahoo Properties" shall mean any Yahoo branded or co-branded media
properties, including, without limitation, Internet guides, that are developed
in whole or in part by Yahoo or its affiliates.
"Yahoo [*] Pages" shall mean those Pages identified as such on Exhibit
B.
"Yahoo Store" shall mean that Yahoo branded property containing various
online stores and currently located at http://store.yahoo.com or any successor
url.
<PAGE> 4
2. BEYOND.COM BANNER.
2.1 Yahoo shall provide the Beyond.com Banner, on a rotating basis
until its Page View obligations are met, on the [*] Pages (in
the placement as set forth in Exhibit B) and [*].
3. BEYOND.COM [*] BANNER.
3.1 Yahoo shall provide the Beyond.com [*] Banner, on a rotating
basis until its Page View obligations are met, on the [*] Pages
(in the placement as set forth in Exhibit B).
4. BEYOND.COM BUTTON.
4.1 Yahoo shall provide the Beyond.com Button, accompanied by one
(1) text link, on a rotating basis until its Page View
obligations are met, on the [*] Pages and [*] Pages (in the
placement as set forth in Exhibit B). Such [*] Pages shall be
those [*] set forth on Exhibit A. Yahoo shall provide up to
three (3) text links to accompany the Beyond.com Button on
certain of the [*] Pages based on such pages' capacity as
reasonably determined by Yahoo. In no case shall any Beyond.com
Button text link exceed sixteen (16) characters. Further, each
Beyond.com Button text link shall promote Software Products and
permit users to navigate directly to a Page on the Beyond.com
Site relating to the Software Products relevant to the [*] Page
or [*] Page on which such text link appears.
5. BEYOND.COM [*] BUTTON.
5.1 Yahoo shall provide the Beyond.com [*] Button on a rotating
basis until its Page View obligations are met, on the [*] Pages
(in the placement as set forth in Exhibit B).
6. BEYOND.COM [*].
6.1 Yahoo shall provide the Beyond.com [*] on a rotating basis until
its Page View obligations are met, on the [*] Pages (in the
placement as set forth in Exhibit B).
7. BEYOND.COM [*] PROMOTION.
7.1 Yahoo shall provide the Beyond.com [*] Promotion on a rotating
basis until its Page View obligations are met, on the [*] (in
the placement as set forth in Exhibit B), currently located at
[*].
<PAGE> 5
8. BEYOND.COM [*].
8.1 Yahoo shall provide the Beyond.com [*] on certain versions of
[*] that are co-branded with various original equipment
manufacturers. The determination of which versions of [*] that
the [*] appears on shall be in Yahoo's sole discretion. For
clarity, Yahoo shall have no Page View obligations with respect
to the [*].
9. IMPLEMENTATION.
9.1 Subject to the provisions of this Agreement, Yahoo will be
solely responsible for the user interface and placement of the
[*] and Beyond.com shall be solely responsible for and shall
provide Yahoo with all artwork and design elements of the [*].
9.2 Beyond.com shall promptly provide Yahoo all URLS, URL formats
(as applicable, content, and other materials necessary for Yahoo
to provide the [*]. All content and material contained in the
[*] are subject to Yahoo's approval and must comply with all
applicable federal, state and local laws, rules and regulations,
including, without limitation, consumer protection laws and
rules and regulations governing product claims, truth in
labeling, and false advertising.
9.3 Each party hereby grants the other party a limited,
non-exclusive, worldwide, fully paid license to use, reproduce
and display such party's trade names, trademarks, service names,
other proprietary marks and any other intellectual property
provided hereunder, solely as is reasonably necessary for the
receiving party to perform its obligations under this Agreement.
Except for the limited license set forth in this Section 9.3,
neither party shall have any right to use any of the other
party's trade names, trademarks, service names, other
proprietary marks and any other intellectual property.
9.4 [*]
9.5 [*]
9.6 The Beyond.com Site shall comply with the scale, speed and
performance requirements mutually agreed upon by the parties but
in no event less than that which is reasonably equivalent to the
Yahoo Main Site.
10. [*].
10.1 [*]
10.2 [*]
<PAGE> 6
11. PAGE VIEWS.
11.1 With respect to the [*], Yahoo shall deliver [*] Page Views.
11.2 Yahoo will [*] deliver such Page Views as follows: [*] Page
Views of the Beyond.com Button; [*] Page Views of the Beyond.Com
[*] Promotion; [*] Page Views of the Beyond.com [*]; [*] Page
Views of the Beyond.com [*] Banner; [*] Page Views of the
Beyond.com Banner on the [*] Pages; [*] Page Views of the
Beyond.com Banner on [*]; [*] Page Views of the Beyond.com [*]
Promotion. Notwithstanding the foregoing, Yahoo's Page View
obligations are with respect to the program as a whole as set
forth in Section 11.1 above and Yahoo shall not be in breach of
this Agreement for failure to deliver the number of Page Views
in any of the areas set forth in this Section 11.2. In the event
that Yahoo materially alters an area on which a Page View
referenced above is to be delivered, and such alteration has a
material adverse effect on the value of the applicable Page
Views to Beyond.com, Yahoo shall use commercially reasonable
efforts to assist Beyond.com in determining adequate alternative
areas on which such effected Page Views may be delivered and
modifying its delivery obligations under this Section 11.2
accordingly.
11.3 In the event that Yahoo fails to deliver the number of Page
Views referred to in Section 11.1 above by the expiration of the
Term, Yahoo will "make good" the shortfall by extending its
obligations under Sections 2-8 in the areas of the Yahoo Main
Site set forth therein (or similar inventory) beyond the end of
the Term until such Yahoo Page View obligation is satisfied. The
provisions set forth in this Section 11.3 set forth the entire
liability of Yahoo, and Beyond.com's sole remedy, for Yahoo's
breach of its Page View obligations set forth in this Section
11.
11.4 Yahoo shall provide Beyond.com access twenty-four hours a day,
seven days a week, to an electronic database that describes
Yahoo's calculation of the Page Views.
12. COMPENSATION.
12.1 Slotting Fee. In consideration of Yahoo's performance and
obligations as set forth herein, Beyond.com will pay Yahoo a
slotting fee equal to [*]. Such fee shall be payable as follows:
(i) [*] within three (3) business days of execution of this
Agreement, with [*] of such payment designated as a set up fee
for design, consultation, development, implementation and
placement of the [*]; and (ii) [*] payments equal to [*] payable
on the first business day of each [*] provided that the first
payment (for the [*]) shall be due three (3) business days after
the Launch Date.
12.2 [*] Fee. In addition to the compensation described in Section
11.1 above, Beyond.com shall pay Yahoo a [*] fee equal to [*].
Such [*] Fee payments shall
<PAGE> 7
be made within ten (10) days of the end of the [*] to which they
relate (e.g., the first [*] Fee payment for: [*] Fees earned
from the [*] to [*], shall be due on or before [*]; the second
[*] Fee payment for [*] Fees earned between [*] and [*], shall
be due on or before [*], etc.).
12.3 Payment Information. All payments herein are non-refundable and
non-creditable and shall be made by Beyond.com via transfer into
Yahoo's main account pursuant to the wire transfer instructions
set forth on Exhibit C.
12.4 Late Payments. Any portion of the above payments which has not
been paid to Yahoo within ten (10) days of the dates set forth
above shall bear interest at the lesser of (i) one percent (1%)
per month or (ii) the maximum amount allowed by law.
Notwithstanding the foregoing, any failure by Beyond.com to make
the payments specified in Sections 12.1 and 12.2 on the dates
set forth therein shall constitute a material breach of this
Agreement.
13. TERMINATION.
13.1 Term. This Agreement shall commence upon [*] and, unless
terminated as provided herein, shall remain in effect for the
Term.
13.2 Termination by Either Party with Cause. This Agreement may be
terminated at any time by either party: (i) immediately upon
written notice if the other party: (a) files a petition in
bankruptcy; or (b) makes an assignment for the benefit of its
creditors; or (ii) thirty (30) days after written notice to the
other party of such other party's breach of any of its
obligations under this Agreement in any material respect (ten
(10) days in the case of a failure to pay), which breach is not
remedied within such notice period. In the event that Yahoo
provides a notice of termination under clause (ii) above, Yahoo
shall have the right to suspend performance under Sections 2, 3,
4, 5, 6 and 7 of this Agreement for the notice period unless and
until the breach is fully remedied by Beyond.com prior to the
expiration of the notice period.
13.3 Termination by Yahoo. Yahoo may terminate this Agreement upon
forty-five (45) days written notice to Beyond.com if at any time
during the Term Yahoo reasonably determines that the Beyond.com
site is not fully operational with support for conducting
on-line sales of Software Products and such deficiency is not
cured within the forty-five (45) day notice period.
13.4 Survival. The provisions of Sections 1, 11.3, 12, 13.4 and 14-18
shall survive expiration or proper termination of this
Agreement; provided that Beyond.com's payment obligations
pursuant to Section 12 shall not survive termination of this
Agreement by Beyond.com under Section 13.2(ii) (a Yahoo breach).
<PAGE> 8
14. CONFIDENTIAL INFORMATION AND PUBLICITY.
14.1 Terms and Conditions. The terms and conditions of this Agreement
shall be considered confidential and shall not be disclosed to
any third parties except to such party's accountants, attorneys,
or except as otherwise required by law. Neither party shall make
any public announcement regarding the existence of this
Agreement without the other party's prior written approval and
consent unless required by law but even then only after
reasonable notice to the other party.
14.2 Publicity. Any and all publicity relating to this Agreement and
subsequent transactions between Yahoo and Beyond.com and the
method of its release shall be approved in advance of the
release by both Yahoo and Beyond.com, provided that, as soon as
reasonably practicable following the Effective Date, the parties
shall work in good faith to announce the existence of this
relationship through a mutually issued press release
substantially similar to that attached as Exhibit F.
14.3 Nondisclosure Agreement. Yahoo and Beyond.com acknowledge and
agree to the terms of the Mutual Nondisclosure Agreement
attached hereto as Exhibit E with respect to the use and
disclosure of confidential information and all discussions
pertaining to or leading to this Agreement.
14.4 User Data. All information and data provided to Yahoo by users
of the Yahoo Properties or otherwise collected by Yahoo relating
to user activity on the Yahoo Properties [*]. All information
and data provided to Beyond.com on the Beyond.com Site or
otherwise collected by Beyond.com relating to user activity on
the Beyond.com Site [*]. Each party agrees to use such
information only as authorized by the user and consistent with
its published privacy policy.
14.5 Privacy of User Information. Beyond.com shall ensure that all
information provided by users of the Beyond.com Site is
maintained, accessed and transmitted in a secure environment and
in compliance with security specifications employed through the
use of SSL technology. Beyond.com shall provide a link to its
policy regarding the protection of user data on those pages of
the Beyond.com Site where the user is requested to provide
personal or financial information.
15. INDEMNIFICATION.
15.1 Beyond.com, at its own expense, will indemnify, defend and hold
harmless Yahoo and its employees, representatives, agents and
affiliates, against any claim, suit, action, or other proceeding
brought against Yahoo based on or arising from a claim any
Beyond.com trademark, service mark or other Beyond.com brand
feature, any material, product or service produced, distributed,
offered or provided by Beyond.com, or any material presented on
the Beyond.com Site, infringes in any manner any copyright,
patent, trademark, trade secret or any other intellectual
property right of any third party, is or contains any material
or information that is
<PAGE> 9
obscene, defamatory, libelous, slanderous, or that violates any
law or regulation, or that otherwise violates any rights of any
person or entity, including, without limitation, rights of
publicity, privacy or personality, or has otherwise resulted in
any consumer fraud, product liability, tort, breach of contract,
injury, damage or harm of any kind to any third party; provided,
however, that in any such case: (x) Yahoo provides Beyond.com
with prompt notice of any such claim; (y) Yahoo permits
Beyond.com to assume and control the defense of such action upon
Beyond.com's written notice to Yahoo of its intention to
indemnify; and (z) upon Beyond.com's written request, and at no
expense to Yahoo, Yahoo will provide to Beyond.com all available
information and assistance necessary for Beyond.com to defend
such claim. Beyond.com will not enter into any settlement or
compromise of any such claim, which settlement or compromise
would result in any liability to Yahoo, without Yahoo's prior
written consent, which shall not unreasonably be withheld.
Beyond.com will pay any and all costs, damages, and expenses,
including, but not limited to, reasonable attorneys' fees and
costs awarded against or otherwise incurred by Yahoo in
connection with or arising from any such claim, suit, action or
proceeding.
15.2 Yahoo, at its own expense, will indemnify, defend and hold
harmless Beyond.com and its employees, representatives, agents
and affiliates, against any claim, suit, action, or other
proceeding brought against Beyond.com based on or arising from a
claim that any Yahoo trademark, service mark or other Yahoo
brand feature infringes in any manner any copyright, patent,
trademark, trade secret or any other intellectual property right
of any third party; provided, however, that in any such case:
(x) Beyond.com provides Yahoo with prompt notice of any such
claim; (y) Beyond.com permits Yahoo to assume and control the
defense of such action upon Yahoo's written notice to Beyond.com
of its intention to indemnify; and (z) upon Yahoo's written
request, and at no expense to Beyond.com, Beyond.com will
provide to Yahoo all available information and assistance
necessary for Yahoo to defend such claim. Yahoo will not enter
into any settlement or compromise of any such claim, which
settlement or compromise would result in any liability to
Beyond.com, without Beyond.com's prior written consent, which
shall not unreasonably be withheld. Yahoo will pay any and all
costs, damages, and expenses, including, but not limited to,
reasonable attorneys' fees and costs awarded against or
otherwise incurred by Beyond.com in connection with or arising
from any such claim, suit, action or proceeding.
16. LIMITATION OF LIABILITY.
16.1 EXCEPT AS PROVIDED IN SECTION 15, UNDER NO CIRCUMSTANCES SHALL
BEYOND.COM, YAHOO, OR ANY OF THEIR RESPECTIVE AFFILIATES BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM THIS
AGREEMENT, EVEN IF THAT PARTY HAS BEEN
<PAGE> 10
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH AS, BUT NOT
LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST
BUSINESS.
17. INSURANCE.
17.1 Beyond.com agrees that it will maintain insurance with a carrier
that is reasonably acceptable by Yahoo and with coverage for
commercial general liability errors and omissions of at least
one million dollars per occurrence.
18. GENERAL PROVISIONS.
18.1 Independent Contractors. It is the intention of Yahoo and
Beyond.com that Yahoo and Beyond.com are, and shall be deemed to
be, independent contractors with respect to the subject matter
of this Agreement and nothing contained in this Agreement shall
be deemed or construed in any manner whatsoever as creating any
partnership, joint venture, employment, agency, fiduciary or
other relationship between Yahoo and Beyond.com.
18.2 Entire Agreement. This Agreement, together with all Exhibits
hereto, represents the entire agreement between Yahoo and
Beyond.com with respect to the subject matter hereof and thereof
and shall supersede all prior agreements and communications of
the parties, oral or written, including without limitation the
Letter of Intent executed on or about January 18, 1999, between
Yahoo and Beyond.com.
18.3 Amendment and Waiver. No amendment to, or waiver of, any
provision of this Agreement shall be effective unless in writing
and signed by both parties. The waiver by any party of any
breach or default shall not constitute a waiver of any different
or subsequent breach or default.
18.4 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of
California without regard to the conflicts of laws principles
thereof.
18.5 Successors and Assigns. Neither party shall assign its rights or
obligations under this Agreement without the prior written
consent of the other party, which shall not unreasonably be
withheld or delayed. Notwithstanding the foregoing, either party
may assign this Agreement to an entity who acquires
substantially all of the stock or assets of a party to this
Agreement; provided that consent will be required in the event
that the non-assigning party reasonably determines that the
assignee will not have sufficient capital or assets to perform
its obligations hereunder, or that the assignee is a direct
competitor of the non-assigning party. All terms and
<PAGE> 11
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted
transferees, successors and assigns.
18.6 Force Majeure. Neither party shall be liable for failure to
perform or delay in performing any obligation (other than the
payment of money) under this Agreement if such failure or delay
is due to fire, flood, earthquake, strike (declared or
undeclared), embargo, blockade, legal prohibition, governmental
action, riot, insurrection, damage, destruction or any other
similar cause beyond the control of such party.
18.7 Notices. All notices, requests and other communications called
for by this agreement shall be deemed to have been given
immediately if made by facsimile or Electronic mail (confirmed
by concurrent written notice sent via overnight courier for
delivery by the next business day), if to Yahoo at 3420 Central
Expressway, Santa Clara, CA 95051, Fax: (408) 731-3301
Attention: Vice President (e-mail: [*]), with a copy to its
General Counsel (e-mail: [*]), and if to Beyond.com at the
physical and Electronic mail addresses set forth on the
signature page of this Agreement, or to such other addresses as
either party shall specify to the other. Notice by any other
means shall be deemed made when actually received by the party
to which notice is provided.
18.8 Severability. If any provision of this Agreement is held to be
invalid, illegal or unenforceable for any reason, such
invalidity, illegality or unenforceability shall not effect any
other provisions of this Agreement, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision
had never been contained herein.
18.9 Sole Responsibility. Beyond.com will remain solely responsible
for the operation of the Beyond.com Site, and Yahoo will remain
solely responsible for the operation of the Yahoo Main Site.
Each party: (a) acknowledges that the Beyond.com Site and the
Yahoo Main Site may be subject to temporary shutdowns due to
causes beyond the operating party's reasonable control; and (b)
subject to the terms of this Agreement, retains sole right and
control over the programming, content and conduct of
transactions over its respective Internet-based service.
18.10 Counterparts. This Agreement may be executed in two
counterparts, both of which taken together shall constitute a
single instrument. Execution and delivery of this Agreement may
be evidenced by facsimile transmission.
18.11 Authority. Each of Yahoo and Beyond.com represents and warrants
that the negotiation and entry of this Agreement will not
violate, conflict with, interfere with, result in a breach of,
or constitute a default under any other agreement to which they
are a party.
<PAGE> 12
18.12 Attorneys Fees. The prevailing party in any action to enforce
this Agreement shall be entitled to reimbursement of its
expenses, including reasonable attorneys' fees.
[Signature Page Follows]
<PAGE> 13
YAHOO! INC. BEYOND.COM, INC.
By: /s/ ELLEN SIMINOFF By: /s/ JOHN VIGOUROUX
------------------------------- --------------------------------
Name: Ellen Siminoff Name: John Vigouroux
Title: Vice President, Title: Vice President,
Business Development Business Development
Attn: VP, Business Development
3420 Central Expressway
Santa Clara, CA 95051
Tel: (408) 731-3300
Fax: (408) 731-3302 Tel:
-------------------------------
e-mail: [*] Fax:
-------------------------------
<PAGE> 1
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
by and among
Beyond.com Corporation,
a Delaware corporation,
BuyDirect.com, Inc.
a Delaware corporation,
BD Acquisition, Inc.,
a Delaware corporation,
and
Certain Principal Stockholders
of BuyDirect.com, Inc.
Dated as of March 15, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
1. The Merger; Effective Time. 1
1.1 The Merger. 1
1.2 Effective Time of the Merger. 2
1.3 The Merger Consideration. 2
2. The Purchaser and the Surviving Corporation. 3
2.1 Certificate of Incorporation of the Surviving Corporation. 3
2.2 Bylaws of the Surviving Corporation. 4
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
2.3 Directors and Officers of the Surviving Corporation. 4
3. Treatment of Shares. 4
3.1 Exchange of Shares. 4
3.2 Mechanics of Exchange. 8
3.3 No Further Rights in Stock. 10
3.4 Closing. 10
3.5 Supplementary Action. 10
3.6 Dissenting Shares 11
3.7 Adjustment of Consideration 11
4. Closing Conditions. 12
4.1 Conditions Precedent to Obligations of the
Purchaser and Merger Sub. 12
4.2 Conditions Precedent to Obligations of the Company. 15
5. Representations and Warranties of the Company,
the Subsidiary and the Principal Stockholders 17
5.1 Organization, Good Standing, Qualification. 17
5.2 Certificate of Incorporation and Bylaws; Records. 18
5.3 Capitalization. 19
5.4 Authority; Binding Nature of Agreements. 20
5.5 Subsidiaries 20
5.6 Non-Contravention; Consents. 22
5.7 Intellectual Property 23
5.8 Proceedings; Orders. 24
5.9 Financial Statements. 25
5.10 Title to Assets. 26
5.11 Contracts. 27
5.12 Employees. 29
5.13 Compliance with Legal Requirements. 30
5.14 Governmental Authorizations. 30
5.15 Tax Matters. 31
5.16 Securities Laws Compliance; Registration Rights. 33
5.17 Finders and Brokers; Fees. 33
5.18 Environmental Compliance. 33
5.19 Insurance. 33
5.20 Related Party Transactions. 34
5.21 Absence of Changes. 35
5.22 The Principal Stockholders 37
5.23 Powers of Attorney. 39
5.24 Benefit Plans; ERISA. 39
5.25 Full Disclosure. 41
5.26 Board of Directors; Stockholder Approval 41
5.27 Customers 42
5.28 Click/Conversion Rate Data 42
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
6. Representations and Warranties of the Purchaser and Merger Sub. 42
6.1 Organization, Good Standing, Authority; Binding Nature of Agreement. 42
6.2 Purchaser Stock. 43
6.3 Authority; Binding Nature of Agreements. 43
6.4 Non-Contravention; Consents. 43
6.5 Finders and Brokers. 44
6.6 Capitalization. 44
6.7 Reports and Financial Statements; Absence of Certain Changes. 46
6.8 Compliance with Applicable Law. 47
6.9 Complete Copies of Requested Reports. 47
6.10 Intellectual Property. 47
6.11 Full Disclosure. 48
6.12 Contracts. 48
6.13 S-3 Registrant Status. 49
6.14 Trading By Affiliates. 49
7. Pre-Closing Covenants of the Company
and the Principal Stockholders. 49
7.1 Corporate Proceedings; Stockholder Approval. 50
7.2 Access and Investigation. 51
7.3 Operation of Business. 51
7.4 Filings and Consents. 53
7.5 Notification; Updates to Company Disclosure Schedule. 54
7.6 No Negotiation. 55
7.7 Best Efforts. 55
8. Pre-Closing Covenants of the Purchaser. 56
8.1 Corporate Proceedings. 56
8.2 Access and Investigation. 56
8.3 Filings and Consents. 56
8.4 Notification. 57
8.5 Best Efforts. 58
9. Other Agreements. 58
9.1 Options. 58
9.2 Confidentiality. 59
9.3 Public Disclosure. 59
9.4 No Inconsistent Action. 59
9.5 Voting of Shares; Further Assurances. 59
9.6 No Inconsistent Agreement. 60
9.7 Use of Intellectual Property. 60
9.8 Tax-Free Reorganization. 60
10. Termination. 60
10.1 Termination Events. 60
10.2 Termination Procedures. 61
10.3 Effect of Termination. 62
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
11. Indemnification, etc. 62
11.1 Survival of Representations and Covenants. 62
11.2 Indemnification by the Selling Stockholders 62
11.3 Setoff. 64
11.4 Defense of Third Party Claims. 64
11.5 Sole Remedy. 65
11.6 Exercise of Remedies by Indemnities Other than the
Purchaser and by Selling Stockholders. 66
12. Miscellaneous. 66
12.1 Further Assurances. 66
12.2 Fees and Expenses. 66
12.3 Attorneys' Fees. 66
12.4 Transfer Taxes. 67
12.5 Governing Law; Venue. 67
12.6 Successors and Assigns. 68
12.7 Entire Agreement. 68
12.8 Separability. 68
12.9 Amendments. 68
12.10 Notices. 69
12.11 Publicity and Use of Confidential Information. 70
12.12 Counterparts. 70
12.13 Delays or Omissions; Waivers. 71
12.14 Remedies Cumulative; Specific Performance. 71
12.15 Headings. 71
12.16 Construction. 72
12.17 No Third Party Beneficiaries. 72
</TABLE>
<PAGE> 5
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the "Agreement") is
entered into as of March 15, 1999, by and among Beyond.com Corporation, a
Delaware corporation (the "Purchaser"), BuyDirect.com, Inc. a Delaware
corporation (the "Company"), and BD Acquisition, Inc., a Delaware corporation
and a wholly-owned subsidiary of the Purchaser (the "Merger Sub," and together
with the Company, the "Constituent Corporations"), and certain holders of shares
of capital stock of the Company (the "Principal Stockholders"), identified on
the signature pages of this Agreement. Certain capitalized terms in this
Agreement are defined in Exhibit A.
RECITALS
The Board of Directors of the Purchaser, the Merger Sub and the Company
each have determined that it is in the best interests of their respective
stockholders for the Purchaser to acquire the Company by the merger of the
Merger Sub with and into the Company upon the terms, and subject to the
conditions, set forth herein (the "Merger").
For federal income tax purposes, it is intended that the Merger
constitute a reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code") and that this Agreement shall
constitute a plan of reorganization for purposes of Section 368 of the Code.
The purchaser, the company, the merger sub and the principal
stockholders entered into that certain agreement and plan of merger, dated as of
February 19, 1999 (the "original agreement"), and wish to amend and restate the
original agreement so that it reads hereafter as set forth herein.
As an inducement to the Purchaser and the Merger Sub to enter into this
Agreement, each of the Selling Stockholders agree to enter into, on or prior to
the closing of the Merger, an escrow agreement (the "Escrow Agreement") among
the Purchaser, the Selling Stockholders and an escrow agent (the "Escrow Agent")
substantially in the form attached hereto as Exhibit B.
AGREEMENT
The purchaser, the company and the merger sub, intending to be legally
bound, hereby amend and restate the original agreement and supersede and replace
it with the agreement and, effective as of February 19, 1999, hereby agree as
follows:
<PAGE> 6
1. The Merger; Effective Time.
1.1 The Merger.
Subject to the terms and conditions of this Agreement, at the Effective
Time (as defined in Section 1.2 hereof), Merger Sub shall be merged with and
into the Company. As a result of the Merger, the Company shall continue as the
surviving corporation in such Merger (the "Surviving Corporation"), and the
separate existence of Merger Sub shall thereupon cease. The Merger shall have
the effects set forth in Section 259 of the General Corporation Law of the State
of Delaware (the "DGCL"). Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, powers,
privileges and franchises of each of the Company and the Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of the
Company and the Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation. Immediately following the Effective Time, the Surviving
Corporation shall be a wholly owned subsidiary of the Purchaser.
1.2 Effective Time of the Merger.
The Merger shall become effective upon the completion of the filing of
a properly executed Certificate of Merger in accordance with the DGCL with the
Secretary of State of the State of Delaware, which filing shall be made as soon
as practicable and in no event later than the second business day after the
satisfaction or waiver of the conditions set forth in Section 4 hereof (or such
other date as may be agreed in writing by each of the parties hereto). When used
in this Agreement, the term "Effective Time" with respect to the Merger shall
mean the date and time at which such Certificate of Merger has been accepted for
filing by the Secretary of State of the State of Delaware (or such later time as
may be agreed in writing by the Company and the Purchaser and specified in the
Certificate of Merger).
1.3 The Merger Consideration.
(a) Subject to adjustment as set forth in Section 3.7, the
maximum number of shares of Purchaser Stock to be issued (including Purchaser
Stock to be reserved for issuance upon exercise of any of the Company's options
and warrants to be assumed by the Purchaser) in exchange for the acquisition by
the Purchaser of all the shares of capital stock of the Company outstanding
immediately prior to the Effective Time and all unexpired and unexercised
options and warrants to acquire capital stock outstanding immediately prior to
the Effective Time (collectively referred to as the "Options") of the Company
shall be 5,400,000 (as adjusted in accordance with Section 3.7, the "Gross
Merger Consideration"). No adjustment shall be made in the number of shares of
Purchaser Stock issued in the Merger as a result of any cash proceeds received
by the Company from the date hereof to the Closing Date pursuant to the exercise
of options or warrants to acquire shares of capital stock of the Company. The
Gross Merger Consideration shall be allocated among the Selling Stockholders and
holders of the Options as described in Sections 1.3(b) and 3.1 hereof.
<PAGE> 7
(b) The Gross Merger Consideration shall first be allocated to
satisfy the respective liquidation preference of each series of Preferred Stock
as set forth in the Fourth Amended and Restated Certificate of Incorporation of
the Company, as amended, and as in effect as of the date hereof (the "Company
Certificate of Incorporation"). The Gross Merger Consideration shall accordingly
be reduced by a number of shares of Purchaser Stock equal to the sum of: (i) the
Aggregate Series A Liquidation Preference divided by the Average Purchaser Stock
Price prior to the Closing Date; (ii) the Aggregate Series B Liquidation
Preference divided by the Average Purchaser Stock Price prior to the Closing
Date; (iii) the Aggregate Series C Liquidation Preference divided by the Average
Purchaser Stock Price prior to the Closing Date; (iv) the Aggregate Series D
Liquidation Preference divided by the Average Purchaser Stock Price prior to the
Closing Date; plus (v) the Aggregate Series E Liquidation Preference divided by
the Average Purchaser Stock Price prior to the Closing Date (such remaining
amount of the Gross Merger Consideration hereinafter referred to as the "Net
Merger Consideration").
For purposes of this Section 1.3(b), the following terms shall have the
following meanings:
"Aggregate Series A Liquidation Preference" means the product of (i)
the aggregate number of shares of Series A Preferred Stock outstanding
immediately prior to the Effective Time, times (ii) $0.074.
"Aggregate Series B Liquidation Preference" means the product of (i)
the aggregate number of shares of Series B Preferred Stock outstanding
immediately prior to the Effective Time, times (ii) $0.229.
"Aggregate Series C Liquidation Preference" means the product of (i)
the aggregate number of shares of Series C Preferred Stock outstanding
immediately prior to the Effective Time, times (ii) $0.826.
"Aggregate Series D Liquidation Preference" means the product of (i)
the aggregate number of shares of Series D Preferred Stock outstanding
immediately prior to the Effective Time, times (ii) $1.65.
"Aggregate Series E Liquidation Preference" means the product of (i)
the aggregate number of shares of Series E Preferred Stock outstanding
immediately prior to the Effective Time, times (ii) $1.65.
2. The Purchaser and the Surviving Corporation.
2.1 Certificate of Incorporation of the Surviving Corporation.
The Certificate of Incorporation of the Merger Sub as in effect at the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation until duly amended in accordance with applicable law (except that
Article I of the Certificate of Incorporation
<PAGE> 8
shall be amended as of the Effective Time to read as follows: "The name of the
Corporation is BuyDirect.com, Inc.").
2.2 Bylaws of the Surviving Corporation.
The Bylaws of the Merger Sub as in effect at the Effective Time shall
be the Bylaws of the Surviving Corporation until thereafter amended in
accordance with applicable law, the Certificate of Incorporation of the
Surviving Corporation and such Bylaws.
2.3 Directors and Officers of the Surviving Corporation.
(a) The directors of the Merger Sub at the Effective Time
shall be the initial directors of the Surviving Corporation and shall hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
(b) The officers of the Merger Sub at the Effective Time shall
be the initial officers of the Surviving Corporation and shall hold office from
the Effective Time until the earlier of their resignation or removal or until
their respective successors are duly elected or appointed and qualified in the
manner provided in the Certificate of Incorporation and Bylaws of the Surviving
Corporation, or as otherwise provided by law.
3. Treatment of Shares.
3.1 Exchange of Shares.
At the Effective Time, by virtue of the Merger and without any action
on the part of the Purchaser, the Merger Sub, the Company, the holders of any
shares of capital stock of the Company or the holders of any shares of capital
stock of Merger Sub:
(a) Each share of common stock, par value $0.01 per share, of
Merger Sub, which shall be outstanding immediately prior to the Effective Time,
shall be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(b) Each share of common stock, par value $0.0001 per share
("Common Stock"), of the Company and each share of each series of Preferred
Stock, par value $0.0001 per share (collectively, the "Preferred Stock"), of the
Company outstanding immediately prior to the Effective Time (other than the
Treasury Shares as set forth below) (the Common Stock and the Preferred Stock
hereinafter collectively referred to as the "Stock"), shall, at the Effective
Time, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and exchanged for the right to receive a portion of
the Gross Merger Consideration as follows:
(i) each share of Series A Preferred Stock
outstanding immediately prior to the Effective Time shall be converted into the
right to receive the number of
<PAGE> 9
shares of Purchaser Stock (carried out to five decimal places and rounded up if
the sixth decimal place is five or greater) equal to the sum of (A) $0.074
divided by the Average Purchaser Stock Price prior to the Closing Date and (B)
the Exchange Ratio;
(ii) each share of Series B Preferred Stock
outstanding immediately prior to the Effective Time shall be converted into the
right to receive the number of shares of Purchaser Stock (carried out to five
decimal places and rounded up if the sixth decimal place is five or greater)
equal to the sum of (A) $0.229 divided by the Average Purchaser Stock Price
prior to the Closing Date and (B) the Exchange Ratio;
(iii) each share of Series C Preferred Stock
outstanding immediately prior to the Effective Time shall be converted into the
right to receive the number of shares of Purchaser Stock (carried out to five
decimal places and rounded up if the sixth decimal place is five or greater)
equal to the sum of (A) $0.826 divided by the Average Purchaser Stock Price
prior to the Closing Date and (B) the Exchange Ratio;
(iv) each share of Series D Preferred Stock
outstanding immediately prior to the Effective Time shall be converted into the
right to receive the number of shares of Purchaser Stock (carried out to five
decimal places and rounded up if the sixth decimal place is five or greater)
equal to the sum of (A) $1.65 divided by the Average Purchaser Stock Price prior
to the Closing Date and (B) the Exchange Ratio; and
(v) each share of Series E Preferred stock
outstanding immediately prior to the Effective Time shall be converted into the
right to receive the number of shares of Purchaser Stock (carried out to five
decimal places and rounded up if the sixth decimal place is five or greater)
equal to the sum of (A) $1.65 divided by the Average Purchaser Stock Price prior
to the Closing Date and (B) the Exchange Ratio;
(vi) each share of Common Stock shall be converted
into the right to receive the number of shares of Purchaser Stock equal to the
Exchange Ratio (carried out to five decimal places and rounded up if the sixth
decimal place is five or greater).
For purposes of this Section 3.1, the following terms shall have the
following meanings:
"Exchange Ratio" means the Net Merger Consideration divided by the
Fully Diluted Shares.
"Fully Diluted Shares" means the sum of (A) the number of shares of
Stock issued and outstanding immediately prior to the Effective Time and (B) the
Total Options.
"Total Options" means the number of shares of Stock subject to the
Options outstanding immediately prior to the Effective Time.
(c) At the Effective Time, all Options shall be assumed by
Purchaser in accordance with provisions described below.
<PAGE> 10
(i) At the Effective Time, each Option, whether or
not exercisable or vested, shall be, in connection with the Merger, assumed by
the Purchaser. Each Option so assumed by the Purchaser under this Agreement
shall continue to have, and be subject to, the same terms and conditions set
forth in the Company's 1998 Stock Option Plan (the "Option Plan") and/or as
provided in the respective option or warrant agreements governing such Option
immediately prior to the Effective Time, except that (A) such Option shall be
exercisable for that number of whole shares of Purchaser equal to the product of
the number of shares of Common Stock that were issuable upon exercise of such
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Purchaser Stock, and (B)
the per share exercise price for the shares of Purchaser Stock issuable upon
exercise of such assumed Option shall be equal to the quotient determined by
dividing the exercise price per share of Common Stock at which such Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
(ii) It is the intention of the parties that the
Options assumed by the Purchaser qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent the
Options qualified as incentive stock options immediately prior to the Effective
Time.
(iii) Promptly following the Effective Time, the
Purchaser will issue to each holder of an outstanding Option a document
evidencing the foregoing assumption of such Option by the Purchaser.
(iv) The Company (A) represents that the Options
shall be "considered assumed" for purposes of Section 11(c) of the Option Plan
or pursuant to the appropriate warrant agreement and that no acceleration of
vesting or exercisability of Options or lapse of any repurchase right with
respect to Stock issued under previously exercised Options will occur by virtue
of the consummation of the transactions and (B) except as disclosed on the
Company Disclosure Schedule, acknowledges that the amount of the Gross Merger
Consideration to be tendered hereunder is based, in part, on the assumption that
the exchange mechanism set forth in this Section 3.1(c) will not result in the
acceleration of vesting or exercisability of Options or lapse of any repurchase
right with respect to Stock issued under previously exercised Options.
(d) Each share of Common Stock and Preferred Stock held in the
treasury of the Company (the "Treasury Shares"), and each such share of Common
Stock and Preferred Stock held by the Purchaser or any subsidiary of the
Purchaser immediately prior to the Effective Time, shall automatically be
canceled and retired and cease to exist, and no consideration shall be given in
exchange therefor.
(e) Eighty-five percent (85%) of the Gross Merger
Consideration for the Stock shall be paid, without interest thereon, upon the
surrender of the certificates formerly representing the Stock in accordance with
Section 3.2 hereof, and the remainder of the Gross Merger Consideration shall be
deposited with the Escrow Agent and held in
<PAGE> 11
escrow by the Escrow Agent pursuant to the terms of the Escrow Agreement (the
aggregate number of shares of Purchaser Stock so held by the Escrow Agent
constituting the "Escrow Fund").
(f) No fractional share of Purchaser Stock shall be issued in
the Merger. In lieu of fractional shares, the Selling Stockholders upon
surrender of their Certificates as set forth in Section 3.2 hereof shall be paid
an amount in cash, without interest, rounded to the nearest cent, determined by
multiplying the fractional interest to which such Selling Stockholder would
otherwise be entitled by the Average Purchaser Stock Price prior to the Closing
Date.
(g) Except as provided in Section 9.1 below, the shares of
Purchaser Stock issued in connection with the Transactions will not be
registered under the Securities Act. Such shares may not be transferred or
resold thereafter, except in compliance with the terms of this Agreement and the
Transactional Agreements and following registration under the Securities Act or
in reliance on an exemption from registration under the Securities Act.
(h) As of the Effective Time, all shares of Common Stock and
Preferred Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a Certificate
(as defined in Section 3.2 below) shall cease to have any rights with respect
thereto, except the right to receive, upon surrender of such Certificate in
accordance with Section 3.2 hereof, the portion of the Gross Merger
Consideration to which such holder is entitled pursuant to Section 3.1(b)
hereof.
(i) No dividends or other distributions declared or made after
the Effective Time with respect to shares of Purchaser Stock with a record date
after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Purchaser Stock that such holder would
be entitled to receive upon surrender of such Certificate, until such holder
shall surrender such Certificate in accordance with Section 3.2 below. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to the holder of certificates whole shares of Purchaser
Stock issued in exchange therefor, without interest, (i) promptly, the amount of
any cash payable with respect to fractional shares of Stock to which such holder
is entitled pursuant to Section 3.1(f) hereof, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time, but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such whole shares of
Purchaser Stock.
3.2 Mechanics of Exchange.
(a) At the Effective Time, the Selling Stockholders shall be
entitled to surrender the certificate or certificates which immediately prior to
the Effective Time represented the Stock (the "Certificates"), and which were
converted into the right to receive a portion of the Gross Merger Consideration,
to the Purchaser for cancellation in exchange for the
<PAGE> 12
portion of the Gross Merger Consideration to which such holder is entitled
pursuant to Section 3.1(b) hereof.
Upon surrender of a Certificate for cancellation to the Purchaser,
together with such documents as may reasonably be required by the Purchaser:
(i) the holder of such Certificate shall be entitled
to receive in exchange therefor:
(A) one or more certificates representing, in the aggregate,
that whole number of shares of Purchaser Stock that is equal to that number of
shares of Purchaser Stock that such holder has the right to receive in respect
to such Certificate pursuant to the provisions of Section 3.1 hereof (after
taking into account all shares of Stock then held by such holder), less the
number of shares that represents such Selling Stockholder's pro rata portion of
the number of shares of Purchaser Stock that are to be held in escrow by the
Escrow Agent pursuant to the Escrow Agreement (such Purchaser Stock being the
"Escrow Shares"); and
(B) a check in the amount equal to the cash, if any, to which
such holder is entitled pursuant to the provisions of this Article 3 (including
any cash in lieu of any fractional shares of Purchaser Stock to which such
holder is entitled pursuant to Section 3.1(f), together with any dividends or
distributions with respect thereto as such holder is entitled pursuant to
Section 3.1(i) (together the "Additional Payments"));
(ii) Purchaser shall deliver to the Escrow Agent one
or more certificates registered in the name of the Escrow Agent, on behalf of
and as nominee for the Selling Stockholders representing, in the aggregate, the
Escrow Shares, which will be held in escrow by the Escrow Agent in accordance
with the Escrow Agreement; and
(iii) the Certificate so surrendered shall forthwith
be canceled.
No interest shall be paid or accrued for the benefit of holders of the
Certificates on the consideration payable upon the surrender of the
Certificates. It shall be a condition of payment that the Certificates so
surrendered shall be properly endorsed or otherwise in proper form for transfer
to the Purchaser.
(b) From and after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of shares of Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates formerly representing the Stock set forth on
Schedule IA attached hereto are presented to the Surviving Corporation for
payment, they shall be canceled and exchanged for the applicable portion of the
Gross Merger Consideration in accordance with the procedures set forth in this
Article 3.
(c) In the event that any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Selling
Stockholder
<PAGE> 13
claiming such Certificate to be lost, stolen or destroyed, the Purchaser will
issue or cause to be issued in exchange for such lost, stolen or destroyed
Certificate the applicable portion of the Gross Merger Consideration and any
Additional Payments, if any, for which the shares of Stock represented by the
Certificate are exchanged in accordance with this Article 3. When authorizing
such issuance in exchange therefor, the Purchaser may, in its discretion and as
a condition precedent to the issuance thereof, require such Selling Stockholder
to give the Purchaser a bond in such sum as it may direct as indemnity, or such
other form of indemnity, as it shall direct, against any claim that may be made
against the Purchaser with respect to the Certificate alleged to have been lost,
stolen or destroyed.
(d) The Purchaser may, at its option, meet its obligations
under this Section 3.2 through a bank or trust company selected by the Purchaser
to act as exchange agent in connection with the Transactions.
(e) If any certificate for Purchaser Stock is to be issued in
a name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the person
requesting such exchange shall (i) pay to the Purchaser any transfer or other
taxes required by reason of the issuance of certificates for such securities in
a name other than that of the registered holder of the Certificate surrendered,
or (ii) establish to the satisfaction of the Purchaser that such tax has been
paid or is not applicable.
(f) Each of the Surviving Corporation and the Purchaser shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any Selling Stockholder, such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withhold by the Surviving Corporation or the Purchaser, as
the case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Selling Stockholders in respect of which
such deduction and withholding are made by the Surviving Corporation or the
Purchaser, as the case may be.
(g) Notwithstanding anything in this Agreement to the
contrary, neither the Purchaser nor any other party hereto shall be liable to a
holder of shares of Stock for any portion of the Gross Merger Consideration, any
dividends on shares of Purchaser Stock issued as part of the Gross Merger
Consideration, or, in accordance with Section 3.1(f) hereof, any payment for any
fractional interests, delivered to a public official pursuant to applicable
escheat laws following the passage of time specified therein.
3.3 No Further Rights in Stock.
All cash, cash equivalents or securities received by each Selling
Stockholder pursuant to this Agreement shall be deemed to have been delivered
and received in full satisfaction of all rights pertaining to such Selling
Stockholder's shares of Stock. At the Effective Time
<PAGE> 14
of the Merger, the Selling Stockholders shall cease to have any rights with
respect to shares of Stock, and their sole right shall be to receive the portion
of the Gross Merger Consideration to which they are entitled pursuant to this
Agreement.
3.4 Closing.
The closing of the Merger and the Transactions (the "Closing") shall
take place at the offices of Perkins Coie LLP, 250 Montgomery Street, Suite
1600, San Francisco, California 94105 at 9:00 a.m., local time, on the second
business day after the day on which all of the conditions set forth in Sections
4.1 and 4.2 hereof are satisfied or waived, or at such other date, time and
place as the Company and the Purchaser shall otherwise agree (the date of such
Closing, the "Closing Date").
3.5 Supplementary Action.
If at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either Constituent Corporation, or otherwise to carry out
the provisions of this Agreement, the officers and directors of the Surviving
Corporation are hereby authorized and empowered on behalf of the Constituent
Corporations, in the name of and on behalf of either Constituent Corporation as
appropriate, to execute and deliver any and all things necessary or proper to
vest or to perfect or confirm title to such property or rights in the Surviving
Corporation, and otherwise to carry out the purposes and provisions of this
Agreement.
3.6 Dissenting Shares.
(a) If holders of Stock are entitled to dissent from the
Merger and demand appraisal of the Stock under applicable law (each person
electing to exercise such rights, a "Dissenting Holder"), any shares of Stock
held by a Dissenting Holder as to which appraisal has been so demanded in
accordance with applicable law ("Dissenting Shares") shall not be exchanged as
described in this Article 3, but shall from and after the Effective Time
represent only the right to receive such consideration as may be determined to
be due such Dissenting Holder pursuant to applicable law; provided, that each
share of Stock held by a Dissenting Holder who shall, after the Effective Time,
withdraw its demand for appraisal or lose its rights of appraisal with respect
to such shares of Stock, in either case pursuant to applicable law, shall not be
deemed a Dissenting Share, but shall be deemed to be converted, as of the
Effective Time, into the applicable portion of the Gross Merger Consideration in
accordance with Section 3.1(b).
(b) The Company shall give the Purchaser prompt notice of any
written demands for appraisal of any shares of Stock, withdrawals of such
demands or failures to perfect appraisal rights resulting in a loss of such
rights, and any other instruments received by the Company which relate to any
such demand for appraisal. The Company shall not voluntarily make any payment
with respect to any demands or
<PAGE> 15
potential demands for appraisal of Stock or offer to settle or settle any such
demands or potential demands. Purchaser shall be responsible for any settlement
of claims with respect to any Dissenting Shares, which settlements may be paid
in cash, Purchaser Stock or such other consideration as Purchaser may determine,
except as otherwise required under applicable law.
3.7 Adjustment of Consideration
(a) Not later than five Business Days prior to the date for
the Closing, the Company shall deliver to the Purchaser the January Audited
Balance Sheet, together with an unqualified report thereon of the Company's
Accountants stating that the January Audited Balance Sheet fairly presents the
consolidated financial position of the Company as of January 31, 1999. In
connection with the preparation and review of the January Audited Balance Sheet,
employees of the Purchaser and the Purchaser's Accountants, at reasonable times
and for reasonable durations, shall be entitled to review the work papers of the
Company and the Company's Accountants prepared in connection with the
preparation of the January Audited Balance Sheet and, at reasonable times and
for reasonable durations, shall be entitled to discuss the January Audited
Balance Sheet with the employees of the Company and the Company's Accountants
prior to the Effective Time.
(b) In the event that the Net Debt Balance calculated based
upon the January Audited Balance Sheet is less than $0.00, either (i) the Gross
Merger Consideration shall be increased by an amount equal to the amount of such
deficiency divided by the Average Purchaser Stock Price prior to the date of
this Agreement, or (ii) at the sole discretion of the Purchaser, the amount of
such deficiency shall be paid in cash, without interest, to the Selling
Stockholders at the Effective Time on a pro rata basis that is in proportion to
the number of shares of Purchaser Stock to which such Selling Stockholder was
entitled as of the Effective Time. In the event that the Net Debt Balance
calculated based upon the January Audited Balance Sheet is greater than $0.00,
then Gross Merger Consideration shall be decreased by an amount equal to the
amount of such excess divided by the Average Purchaser Stock Price prior to the
date of this Agreement.
4. Closing Conditions.
4.1 Conditions Precedent to Obligations of the Purchaser and Merger
Sub.
The Purchaser's and Merger Sub's obligations to consummate the Merger
and to take the other actions required to be taken by the Purchaser and Merger
Sub at the Closing to consummate the Transactions are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Purchaser, in whole or in part, in accordance
with Section 12.13):
(a) the representations and warranties made by the Principal
<PAGE> 16
Stockholders and the Company in Section 5 hereof or in any Transactional
Agreement that are not qualified as to materiality shall be true and accurate in
all material respects, and the representations and warranties made by the
Principal Stockholders and the Company contained in Section 5 hereof or in any
Transactional Agreement that are qualified as to materiality shall be true and
accurate, in each case as of the date of this Agreement and, except to the
extent that such representations and warranties speak specifically as of an
earlier date, as of the Closing Date as though made on and as of the Closing
Date;
(b) all covenants, agreements and conditions contained in this
Agreement or in any other Transactional Agreement to be observed by the
Principal Stockholders and/or the Company on or prior to the Closing shall have
been performed or complied with in all material respects on or prior to the
Closing;
(c) the Selling Stockholders, Principal Stockholders or the
Company, as the case may be, shall have executed and delivered the following
documents to the Purchaser, all of which shall be in full force and effect as of
the Closing:
(i) the Escrow Agreement, duly executed by the
holders of at least 90% of the issued and outstanding shares of Stock;
(ii) a Registration Rights Agreement in the form of
Exhibit C (the "Rights Agreement"), duly executed by the Stockholder
Representative;
(iii) the Investment Agreement in the form of Exhibit
D (the "Investment Agreement"), duly executed by each of the Selling
Stockholders and the Stockholder Representative;
(iv) the Offer Letters and Protective Covenant
Letters, forms of which are attached hereto as Exhibits E-1 and E-2,
respectively, duly executed by each of Mr. Bong Suh, Mr. Jody Sherman and Mr.
Bill Headapohl.
(v) the legal opinion of Perkins Coie LLP, counsel to
the Company, dated the Closing Date, in form and substance reasonably acceptable
to counsel to the Purchaser;
(vi) a certificate (the "Stockholder Representative
Closing Certificate" and the "Company Closing Certificate", respectively)
executed by the Stockholder Representative and a senior executive officer of the
Company, respectively, dated as of the Closing, and certifying to the
satisfaction of the conditions specified in Sections 4.1(a) and (b);
(vii) the written resignations of the members of the
Company Board;
<PAGE> 17
(viii) written evidence reasonably satisfactory to
Purchaser and its counsel of the execution of the ZDNet Agreement;
(ix) written evidence reasonably satisfactory to
Purchaser and its counsel of the grant of Options to the employees of the
Company as set forth on the schedule provided to the Purchaser pursuant to
Section 5.3; and
(x) such other documents reasonably satisfactory to
Purchaser as the Purchaser may request in good faith for the purpose of (A)
evidencing the accuracy of any representation or warranty made by the Company or
the Selling Stockholders, (B) evidencing the compliance by the Company or the
Selling Stockholders with, or the performance by the Company or the Selling
Stockholders of, any covenant or obligation set forth in this Agreement or any
other Transactional Agreement, (C) evidencing the satisfaction of the conditions
set forth in this Section 4.1, or (D) otherwise facilitating the consummation or
performance of any of the Transactions;
(d) to the satisfaction of Purchaser and its counsel, the
offer and sale of the Purchaser Stock pursuant to the terms of this Agreement
shall comply with an exemption from registration under the Securities Act and/or
any applicable federal or state securities laws and regulations;
(e) all corporate and other proceedings required to be taken
on the part of the Company and the Selling Stockholders in connection with this
Agreement, the Transactional Agreements and the Transactions, and all documents
incident thereto, shall be reasonably satisfactory in form and in substance to
the Purchaser and its counsel;
(f) each of the Consents identified or required to be
identified in Part 5.5 of the Company Disclosure Schedule shall have been
obtained and shall be in full force and effect;
(g) no event or events shall have occurred, or shall be
reasonably likely to occur, which, individually or in the aggregate, have had,
or are reasonably likely to have, a material adverse effect on the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects since the date of this Agreement;
(h) there shall not have been commenced or expressly
threatened against the Purchaser, the Company or any of their respective
affiliates any Proceeding (i) involving any challenge to, or seeking damages or
other relief in connection with, any of the Transactions, or (ii) that is likely
to have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions or have a material adverse effect on
the Company; provided, however, that such Proceeding shall not have been caused
by, or shall not be the result of, directly or indirectly, the failure of the
Purchaser to fulfill its obligations under this Agreement;
(i) neither the consummation nor the performance of any the
Transactions will, directly or indirectly (with or without notice or lapse of
time),
<PAGE> 18
contravene or conflict with or result in a violation of, or cause the Purchaser
or the Company, or any Person affiliated with the Purchaser or the Company, to
suffer any material adverse consequence under, (i) any applicable legal
requirement or Order, or (ii) any legal requirement or Order that has been
proposed by or before any Governmental Body;
(j) the Purchaser and Merger Sub shall have received good
standing certificates for the Company from the Secretary of State of Delaware,
dated as of a date not earlier than five business days prior to the Effective
Time;
(k) no temporary restraining order, preliminary or permanent
injunction or other order issued by a court of other Governmental Body of
competent jurisdiction shall be in effect and have the effect of making the
Merger illegal or otherwise prohibiting the consummation of the Merger;
(l) the Company shall have delivered the Audited Financial
Statements, together with an unqualified report thereon of the Company's
Accountants stating that the Audited Financial Statements fairly present the
consolidated financial position of the Company as of the respective dates
thereof and the results of operation of the Company, changes in stockholder's
equity and cash flows for the periods covered thereby;
(m) the Company shall have delivered the January Audited
Balance Sheet, together with an unqualified report thereon of the Company's
Accountants stating that the January Audited Balance Sheet fairly presents the
consolidated financial position of the Company as of January 31, 1999 and was
prepared in accordance with U.S. GAAP applied on a basis consistent with the
preparation of the Audited Financial Statements; and
(n) the Company shall have obtained all approvals of the
Selling Stockholders necessary to approve the Merger, this Agreement, the
Transactional Agreement and the Transactions.
4.2 Conditions Precedent to Obligations of the Company.
The Company's obligation to take the actions required to be taken by
the Company at the Closing to consummate the Transactions is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Company, in whole or in part, in accordance
with Section 12.13):
(a) the representations and warranties made by the Purchaser
and Merger Sub in Section 6 and in any Transactional Agreement that are not
qualified as to materiality shall be true and correct in all material respects,
and the representations and warranties made by the Purchaser and Merger Sub
contained in Section 6 hereof or in any Transactional Agreement that are
qualified as to materiality shall be true and accurate, in each case as of the
date of this Agreement and, except to the extent that such
<PAGE> 19
representations and warranties speak as of an earlier date, as of the Closing
Date as though made on and as of the Closing Date;
(b) all covenants, agreements and conditions contained in this
Agreement or in any other Transactional Agreement to be observed by the
Purchaser and Merger Sub on or prior to the Closing shall have been performed or
complied with in all material respects on or prior to the Closing;
(c) the Purchaser and Merger Sub, as the case may be, shall
have duly executed and delivered the following documents to the Selling
Stockholders and/or the Company, as the case may be, which shall be in full
force and effect:
(i) the Escrow Agreement;
(ii) the Rights Agreement;
(iii) the Offer Letters and Protective Covenant
Letters, duly executed by the Purchaser for each of Mr. Bong Suh, Mr. Jody
Sherman and Mr. Bill Headapohl;
(iv) a certificate (the "Purchaser Closing
Certificate") executed by a senior executive officer of the Purchaser, dated the
Closing Date and certifying to the satisfaction of the conditions specified in
Sections 4.2(a) and (b);
(v) the legal opinion of Shearman & Sterling, counsel
to the Purchaser, dated the Closing Date, in form and substance reasonably
acceptable to counsel to the Company; and
(vi) such other documents reasonably satisfactory to
the Company as the Company may request in good faith for the purpose of (A)
evidencing the accuracy of any representation or warranty made by the Purchaser,
(B) evidencing the compliance by the Purchaser with, or the performance by the
Purchaser of any covenant or obligation set forth in this Agreement or any
Transactional Agreement, (C) evidencing the satisfaction of the conditions set
forth in this Section 4.2, or (D) otherwise facilitating the consummation or
performance of any of the Transactions;
(d) all corporate and other proceedings required to be taken
on the part of the Purchaser and Merger Sub in connection with this Agreement,
the Transactional Agreements and the Transactions, and all documents incident
thereto, shall be reasonably satisfactory in form and in substance to the
Company and its counsel;
(e) no event or events shall have occurred, or shall be
reasonably likely to occur, which, individually or in the aggregate, have had,
or could reasonably be excepted to have, a material adverse effect on the
Purchaser's business, condition assets, liabilities, operations, financial
performance or prospects (provided that changes in the trading price of
Purchaser Stock shall not constitute a change with respect to Purchaser) since
the date of this Agreement;
<PAGE> 20
(f) there shall not have been commenced or expressly
threatened against the Purchaser, the Company or any of their respective
affiliates any Proceeding (i) involving any challenge to, or seeking damages or
other relief in connection with, any of the Transactions, or (ii) that is likely
to have the effect of preventing, delaying, making illegal or otherwise
interfering with any of the Transactions or have a material adverse effect on
the Purchaser; provided, however, that such Proceeding shall not have been
caused by, or shall not be the result of, directly or indirectly, the failure of
the Company to fulfill its obligations under this Agreement;
(g) neither the consummation nor the performance of any the
Transactions will, directly or indirectly (with or without notice or lapse of
time), contravene or conflict with or result in a violation of, or cause the
Principal Stockholders to suffer any material adverse consequence under, (i) any
applicable legal requirement or Order, or (ii) any legal requirement or Order
that has been proposed by or before any Governmental Body;
(h) no temporary restraining order, preliminary or permanent
injunction or other order issued by a court or other Governmental Body of
competent jurisdiction shall be in effect and have the effect of making the
Merger illegal or otherwise prohibiting the consummation of the Merger; and
(i) Perkins Coie LLP, counsel to the Company, shall have
delivered to the Stockholder Representative a tax opinion to the effect that the
merger will be treated as a reorganization within the meaning of Section
368(a)(2)(E) of the Code, and the Purchaser and the Company shall provide to
Perkins Coie LLP a certificate containing reasonable and customary
representations, in form and substance satisfactory to Perkins Coie LLP, upon
which it and the Selling Stockholders can rely.
5. Representations and Warranties of the Company, the Subsidiary and the
Principal Stockholders.
Except as specifically set forth in the disclosure schedule provided by
the Company and attached hereto (the "Company Disclosure Schedule"), the parts
of which are numbered to correspond to the Section numbers of this Agreement,
the Principal Stockholders and the Company hereby represent and warrant to each
Indemnitee (as defined in Section 11.2) as follows:
5.1 Organization, Good Standing, Qualification.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, is duly
qualified to conduct business and is in both corporate and tax good standing
under the laws of each jurisdiction in which the failure to be so qualified
could materially adversely affect the Company, its
<PAGE> 21
business, prospects or financial condition. The Company has all requisite
corporate power and authority to own and operate its properties and assets, to
carry on its business as currently conducted, to execute and deliver this
Agreement and the Transactional Agreements, and to carry out the provisions
hereof and thereof.
(b) The Company has never approved, or commenced any
proceeding, or made any election contemplating, the dissolution or liquidation
of the Company or the winding up or cessation of the Company's business or
affairs.
(c) The Company has no subsidiaries, other than BuyDirect,
Inc., a Delaware corporation (the "Subsidiary"), and does not own, beneficially
or otherwise, any shares or other securities of, or any other direct or any
other indirect interest of any nature in, any Entity.
(d) Except as set forth on part 5.1(d) of the Company
Disclosure Schedule, the Company was never operated as a sole proprietorship, or
any other business entity, prior to its incorporation.
5.2 Certificate of Incorporation and Bylaws; Records.
(a) The Company has delivered to the Purchaser accurate and
complete copies of:
(i) the Company's Certificate of Incorporation and
bylaws, including all amendments thereto, as presently in effect;
(ii) the stock records of the Company; and
(iii) the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the stockholders of the Company, the Company
Board and all committees of the Company Board.
There have been no meetings or other proceedings of the stockholders of
the Company, the Company Board or any committee of the Company Board that are
not memorialized in such minutes or other records.
(b) The Company has never conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name, other than the names listed on Part 5.2
of the Company Disclosure Schedule.
(c) There has not been, and is not now, any violation of the
Company's Certificate of Incorporation or bylaws or of any resolution adopted by
the Company's stockholders, the Company Board or any committee of the Company
Board.
5.3 Capitalization.
<PAGE> 22
(a) The authorized capital stock of the Company consists of
41,268,581 shares of capital stock, comprised of 21,789,121 shares of Common
Stock, of which 316,000 shares are issued and outstanding as of the date of this
Agreement, and 19,479,460 shares of Preferred Stock, of which 8,100,001 shares
of Series A Preferred Stock, 2,621,356 shares of Series B Preferred Stock,
2,129,631 shares of Series C Preferred Stock, 3,703,739 shares of Series D
Preferred Stock, and no shares of Series E Preferred Stock are issued and
outstanding as of the date of this Agreement. No other shares of capital stock
are authorized, issued or outstanding. All issued and outstanding shares of the
Company's capital stock have been duly authorized and validly issued, are fully
paid and nonassessable, and have been issued in full compliance with all
applicable securities laws and other applicable legal requirements. 1,993,661
shares of Common Stock, 623,027 shares of Series B Preferred Stock and 2,005,400
shares of Series E Preferred Stock are reserved for issuance upon the exercise
of the Options. The Company has delivered to the Purchaser a schedule setting
forth: (i) the names of the employees/consultants and other Persons who have
been granted Options; (ii) the number, exercise price and vesting schedule of
Options held by such employees/consultants and other Persons as of the date of
this Agreement and (iii) the number, exercise price and vesting schedule of
Options to be granted to existing or new employees/consultants and other Persons
prior to the Closing (none of which may be granted with an exercise price less
than fair market value on the date of grant; provided, however, the Company
shall not be obligated to grant such Options) ("Interim Grants").
(b) Except as set forth on the schedule provided to the
Purchaser pursuant to Section 5.3 or Part 5.3 of the Company Disclosure
Schedule, there is no:
(i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company; or
(ii) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any shares of the
capital stock or other securities of the Company.
(c) The Company has never repurchased, redeemed or otherwise
reacquired (or agreed, committed or offered (in writing or otherwise) to
repurchase, redeem or otherwise reacquire) any shares of capital stock or other
securities of the Company.
(d) None of the issued and outstanding shares of Stock was
issued in violation of any preemptive rights under the Company's Certificate of
Incorporation or bylaws or, to the knowledge of the Company, other instruments
or agreements.
(e) Except as set forth in the schedule provided to the
Purchaser pursuant to Section 5.3 or Part 5.3 of the Disclosure Schedule, there
are no voting trusts, stockholder agreements, proxies or other agreements or
understandings in effect to which the Company is a party or of which the Company
or any Principal Stockholder has
<PAGE> 23
knowledge with respect to the voting or transfer of any shares of capital stock
of or any other interest in the Company. Except as set forth in Part 5.3 of the
Disclosure Schedule, the Company has not granted or agreed to grant to any
Person any rights to subscribe for securities of the Company, to nominate for
election or have elected any Person to the Board of Directors of the Company or
to register any securities of the Company under the Securities Act.
(f) The stock register of the Company accurately records the
name and address of each registered owner of shares of capital stock of the
Company and the certificate number of each certificate evidencing shares of
capital stock issued by the Company, the number of shares evidenced by each such
certificate, the date of issuance thereof and, in the case of cancellation, the
date of cancellation, in all such cases as would not have a material adverse
effect on the Company.
5.4 Authority; Binding Nature of Agreements.
The Company has the corporate power and authority to enter into and to
perform its obligations under this Agreement and the Transactional Agreements,
and the execution, delivery and performance by the Company of this Agreement and
the Transactional Agreements have been duly authorized by all necessary action
on the part of the Company Board and its stockholders. This Agreement and the
Transactional Agreements constitute, or upon execution and delivery will
constitute, the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the enforcement
of creditor's rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in law or equity.
5.5 Subsidiaries
(a) Except as set forth on Part 5.5(b) of the Company
Disclosure Schedule, there are no corporations, partnerships, joint ventures,
associations or other entities to which the Company owns, beneficially or of
record, any direct or indirect equity or other interest or any right (contingent
or otherwise) to acquire the same. Other than the Subsidiary, the Company is not
a member of, nor is any part of the Business conducted through, any partnership.
Except as set forth in Part 5.5(b) of the Company Disclosure Schedule, the
Company is not a participant in any joint venture or similar arrangement.
(b) The Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization, is duly qualified to conduct business and is in both corporate and
tax good standing under the laws of each jurisdiction in which the failure to be
so qualified could materially adversely affect the Company, its business,
prospects or financial condition. The Subsidiary has all requisite corporate
power and authority to own and operate its properties and assets, to carry on
its business as currently conducted, to execute and deliver this Agreement and
the Transaction Agreements, and to carry out the provisions hereof and thereof,
<PAGE> 24
(c) All issued and outstanding shares of capital stock of the
Subsidiary (the "Subsidiary Stock") have been duly authorized and validly
issued, fully paid, and nonassessable, have been issued in full compliance with
all applicable securities laws and other applicable legal requirements, and are
owned by the Company, whether directly or indirectly, free and clear of all
encumbrances. None of the shares of Subsidiary Stock was issued in violation of
any preemptive rights under the Subsidiary's Certificate of Incorporation or
bylaws or, to the knowledge of the Company or the Subsidiary, other instruments
or agreements.
(d) There is no outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire any shares of
capital stock or other securities of the Subsidiary, or outstanding security,
instrument or obligation that is or may be convertible into or exchangable for
any shares of capital stock or other securities of the Subsidiary.
(e) Except as set forth in Part 5.5(f) of the Company
Disclosure Schedule, the Company has delivered to the Purchaser accurate and
complete copies of the Subsidiary's Certificate of Incorporation and bylaws,
including all amendments thereto, as presently in effect. All actions taken by
the Subsidiary have been duly authorized and no action of the Subsidiary in any
respect conflicts with, constitutes a default under or results in a violation of
any provision of its Certificate of Incorporation or bylaws.
(f) Except as set forth in Part 5.5(g) of the Company
Disclosure Schedule, the Subsidiary is not a member of, nor is any part of its
business conducted through, any partnership, nor is the Subsidiary a participant
in any joint venture or similar arrangement.
(g) Except as set forth in Part 5.5(g) of the Company
Disclosure Schedule, there are no voting trusts, shareholder agreements, proxies
or other agreements or understandings in effect with respect to the voting or
transfer of any shares of capital stock of or any other interests in the
Subsidiary.
5.6 Non-Contravention; Consents.
The execution and delivery of this Agreement and the Transactional
Agreements, and the consummation of the Transactions, by the Company will not,
directly or indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i)
the Company's Certificate of Incorporation or bylaws, or (ii) any resolution
adopted by the Company Board or any committee thereof or the stockholders of the
Company or the Subsidiary;
(b) contravene, conflict with or result in a violation of, or
give any
<PAGE> 25
Governmental Body or other Person the right to challenge any of the Transactions
or to exercise any material remedy or obtain any material relief under, any
legal requirement or any Order to which the Company or the Subsidiary or any
material assets owned or used by them are subject;
(c) contravene, conflict with or result in a material
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by the Company or the Subsidiary or any
of their employees or that otherwise relates to the Company's or the
Subsidiary's business or to any of the assets owned or used by the Company or
the Subsidiary;
(d) contravene, conflict with or result in a material
violation or material breach of, or material default under, any Company
Contract;
(e) except as set forth in Part 5.6(f) of the Company
Disclosure Schedule, give any Person the right to any payment by the Company or
the Subsidiary or give rise to any acceleration or change in the award, grant,
vesting or determination of options, warrants, rights, severance payments or
other contingent obligations of any nature whatsoever of the Company or the
Subsidiary in favor of any Person, in any such case as a result of the change in
control of the Company or otherwise resulting from the Transactions; or
(f) result in the imposition or creation of any material
encumbrance upon or with respect to any asset owned or used by the Company or
the Subsidiary.
Except as set forth in Part 5.6 of the Company Disclosure Schedule,
neither the Company nor the Subsidiary will be required to make any filing with
or give any notice to, or obtain any Consent from, any Person or Governmental
Body in connection with the execution and delivery of this Agreement and the
Transactional Agreements or the consummation or performance of any of the
Transactions.
5.7 Intellectual Property.
(a) Part 5.7 of the Company Disclosure Schedule sets forth a
complete list, in all material respects, of all patents, trademarks, copyrights,
trade names and service marks, and any registrations and applications for
registrations thereof owned by the Company or the Subsidiary (together with all
other material Proprietary Assets owned by the Company or the subsidiary, "Owned
Proprietary Assets"). Part 5.7 of the Company Disclosure Schedule also sets
forth a complete list of all material licenses, sublicenses and other agreements
as to which the Company or the Subsidiary is a party in connection with any
Proprietary Assets (excluding object code, end-user or shrink wrap licenses
granted to end-users in the ordinary course of business that permit use of
software products without a right to modify, distribute or sublicense the same
("Licensed
<PAGE> 26
Proprietary Assets" and, together with Owned Proprietary Assets, "Company
Proprietary Assets"). The Company and the Subsidiary are not in breach of or
default under any of the Licensed Proprietary Assets that are material to the
Company or its Business. Except as set forth in Part 5.7 of the Company
Disclosure Schedule and except for any consents to transfer required under any
of the Licensed Proprietary Assets, the execution and delivery of this Agreement
by the Company, and the consummation of the transactions contemplated hereby,
(i) will not cause the Company or the Subsidiary to be in material violation or
default under any of the Licensed Proprietary Assets, (ii) will not entitle any
other party to any material Licensed Proprietary Assets to terminate or modify
any of the Licensed Proprietary Assets or (iii) will not require the Company or
to the Subsidiary to repay any funds already received by it from a third party.
(b) Except as set forth in Part 5.7 of the Company Disclosure
Schedule, the Company or the Subsidiary is the sole and exclusive owner or
licensee of (free and clear of any liens or encumbrances), the Company
Proprietary Assets, and has proper rights to the use thereof or the material
covered thereby in connection with the services or products in respect of which
the Company Proprietary Assets are being used.
(c) Except as set forth in Part 5.7 of the Company Disclosure
Schedule, no claims with respect to the Company Proprietary Assets have been
asserted expressly or, to the knowledge of the Company, are threatened by any
person nor, to the knowledge of the Company, are there any valid grounds for any
bona fide claims: (i) to the effect that the sale, licensing or use of any of
the products of the Company or the Subsidiary as now sold, licensed or used by
the Company or the Subsidiary or that the use of the Company Proprietary Assets
infringes on any third party's Proprietary Assets; (ii) against the use by the
Company or the Subsidiary of the Company Proprietary Assets as used in the
Company's business as currently conducted; or (iii) challenging the ownership by
the Company or the Subsidiary, validity or enforceability of any of the Company
Proprietary Assets.
(d) To the knowledge of the Company, there is and has been no
material unauthorized use, infringement or misappropriation of any of the
Company Proprietary Assets by any third party, including any employee or former
employee of the Company or the Subsidiary.
(e) To the knowledge of the Company, none of the Company
Proprietary Assets or products or services of the Company or the Subsidiary is
subject to any outstanding decree, order, judgment, or stipulation restricting
in any manner the licensing thereof by the Company or the Subsidiary.
(f) Neither the Company nor the Subsidiary has entered into
any agreement under which the Company is restricted from selling, licensing or
otherwise distributing any of its products or services to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
(g) The Proprietary Assets set forth on Part 5.7 of the
Company
<PAGE> 27
Disclosure Schedule include all of the Proprietary Assets material to the
operation of the business of Company or the Subsidiary in a manner consistent
with current practice.
(h) With respect to all computer software material to the
operation of the Business: (1) the software is free of all viruses, worms,
trojan horses and other material known contaminants; (2) the software does not
contain any bugs, errors, or problems of a material nature that disrupt its
operation or have an adverse impact on the operation of other software programs
or operating systems; (3) the Company and the Subsidiary have obtained all
approvals necessary for exporting the software outside the United States and
importing the software into any country in which the software is now sold or
licensed for use, and all such export and import approvals in the United States
and throughout the world are valid, current, outstanding and in full force and
effect; and (4) no rights in the software have been transferred to any third
party except to the customers of the Company or the Subsidiary to whom the
Company or the Subsidiary has licensed the software in the ordinary course of
business.
(i) To the best of the Company's knowledge, the Company has
complied with Section 5(a) of the Federal Commission Act.
5.8 Proceedings; Orders.
(a) Except as described in reasonable detail in Part 5.8 of
the Company Disclosure Schedule, there is no pending Proceeding, and, to the
Company's knowledge, no Person has threatened to commence any Proceeding:
(i) that involves the Company or the Subsidiary or
that otherwise relates to or might affect the Company's or the Subsidiary's
business or any of the material assets owned or used by the Company or the
Subsidiary (whether or not the Company or the Subsidiary is named as a party
thereto); or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the
Transactions or the Company's ability to comply with or perform its obligations
and covenants under the Transactional Agreements, and, to the knowledge of the
Company, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that might directly or indirectly give rise to or serve as
a basis for the commencement of any such Proceeding.
(b) The Company has delivered to the Purchaser accurate and
complete copies of all pleadings, correspondence and other written materials to
which the Company has access that relate to the Proceedings identified in Part
5.8 of the Company Disclosure Schedule, if any. None of the matters set forth in
Part 5.8 of the Company Disclosure Schedule has had or is reasonably likely to
have a material adverse effect on the Company or the Subsidiary.
(c) There is no Order to which the Company or the Subsidiary,
or any of the assets owned or used by the Company or the Subsidiary, is subject
nor are there
<PAGE> 28
any such Orders threatened which are reasonably likely to be imposed by any
Governmental Body.
(d) To the Company's knowledge, no officer or employee of the
Company or the Subsidiary is subject to any Order that prohibits such officer or
employee from engaging in or continuing any conduct, activity or practice
relating to the Company's business.
5.9 Financial Statements.
(a) The Company has delivered to the Purchaser the following
financial statements and notes (collectively, the "Financial Statements"), which
are attached as Part 5.9 of the Company Disclosure Schedule:
(i) the unaudited consolidated balance sheet of the
Company as of December 31, 1998, and the related unaudited statements of
operations, changes in shareholder's equity and cash flows of the Company and
the Subsidiary for the period ended December 31, 1998, together with the notes
thereto;
(ii) the unaudited consolidated balance sheet of the
Company as of January 31, 1999 (the "Unaudited Interim Balance Sheet"), and the
related unaudited statements of operations of the Company for the one (1) month
then ended.
(b) All the Financial Statements are accurate and complete in
all material respects, and the dollar amount of each line item included in the
Financial Statements is accurate in all material respects. The Financial
Statements are in accordance with the books and records of the Company and the
Subsidiary and present fairly the consolidated financial position of the Company
and the Subsidiary as of the respective dates thereof and the results of
operations of the Company and the Subsidiary, changes in shareholder's equity
and cash flows for the periods covered thereby. The Financial Statements have
been prepared in accordance with U.S. GAAP, applied on a consistent basis
throughout the periods covered, except that there have been no year end
adjustments or footnote disclosure.
(c) Neither the Company nor the Subsidiary has, and as of the
Closing Date will not have, any Liabilities in excess of $50,000, individually
or in the aggregate, except for Liabilities identified as such in the
"liabilities" column of the Unaudited Interim Balance Sheet.
5.10 Title to Assets.
(a) The Company and the Subsidiary own, and have good, valid
and marketable title to, all assets purported to be owned by them, free and
clear of any material encumbrances, except liens for current taxes and
assessments not delinquent.
(b) Part 5.10(b) of the Company Disclosure Schedule identifies
all
<PAGE> 29
equipment, furniture, fixtures, improvements and other tangible assets owned by
the Company or the Subsidiary with a value over Twenty Five Thousand Dollars
($25,000).
(c) Each asset identified in Part 5.10(b) of the Company
Disclosure Schedule:
(i) is free of material defects and deficiencies and
in good condition and repair, consistent with its age and intended use (ordinary
wear and tear excepted); and
(ii) is adequate for the uses to which it is being
put.
(d) Neither the Company nor the Subsidiary own any real
property or any interest in real property, except for the leaseholds created
under the real property leases identified in Part 5.10(d) of the Company
Disclosure Schedule (the "Leased Premises"). Part 5.10(d) of the Company
Disclosure Schedule contains a true, complete and correct list of the street
address to each parcel of Leased Premises. The Company has made available to
Purchaser true, complete and correct copies of each lease or sublease for each
parcel of Leased Premises listed in Part 5.10(d) of the Company Disclosure
Schedule (including, without limitation, all amendments, consents for
alterations and documents recording variations and evidence of commencement
dates and expiration dates). The Company and the Subsidiary enjoy peaceful and
undisturbed possession of such premises.
(e) Part 5.10(e) of the Company Disclosure Schedule identifies
all assets that are leased or licensed to the Company or the Subsidiary that
have a value in excess of $25,000. All leases pursuant to which the Company or
the Subsidiary leases real or personal property are in good standing and are
valid and effective in accordance with their respective terms and, to the
knowledge of the Company, there exists no default thereunder.
5.11 Contracts.
(a) Part 5.11 of the Company Disclosure Schedule identifies
each of the following contracts, agreements and commitments (including the
leases listed on Part 5.10 of the Company Disclosure Schedule, the "Company
Contracts"):
(i) each contract, agreement, invoice, purchase order
and other arrangement for the purchase of inventory, other materials or personal
property with any supplier or for the furnishing of services to the Company or
the Subsidiary or otherwise related to the Business under the terms of which the
Company or the Subsidiary could reasonably be expected to pay or otherwise give
consideration of more than $25,000 in the aggregate during the calendar year
ending December 31, 1999 or $25,000 over the remaining term of such contract,
and which cannot be canceled by the Company or the Subsidiary without penalty or
further payment and without more than 30 days' notice;
<PAGE> 30
(ii) each contract, agreement, invoice, sales order
and other arrangement for the sale of inventory or other personal property or
for the furnishing of services by the Company or the Subsidiary or otherwise
related to the Business under the terms of which the Company or the Subsidiary
could reasonably be expected to receive consideration of more than $25,000 in
the aggregate during the calendar year ending December 31, 1999 or $25,000 over
the remaining term of the contract, and which cannot be canceled by the Company
or the Subsidiary without penalty or further payment and without more than 30
days' notice;
(iii) each material broker, distributor, dealer,
manufacturer's representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising contract, agreement or
commitment;
(iv) each contract, agreement or commitment with any
present or former employee, independent contractor or consultant;
(v) each contract, agreement or commitment relating
to Indebtedness of the Company or the Subsidiary;
(vi) each contract, agreement or commitment with any
Governmental Body;
(vii) each contract, agreement or commitment limiting
or purporting to limit the ability of the Company, the Subsidiary, the Business
or any successor thereto to compete in any line of business or with any person
or in any geographic area or during any period of time;
(viii) each contract, agreement or commitment
providing for benefits under any Plan;
(ix) each contract, agreement or commitment that
materially limits or restricts, or could reasonably be expected to materially
limit and restrict, the ability of the Company or the Subsidiary or, immediately
after the Effective Time, Purchaser or any subsidiary thereof, to use, modify,
display, reproduce, distribute, license, sell or provide the Company's or the
Subsidiary's products or services;
(x) each material contract relating to content
delivery or linking of web pages; and
(xi) each contract, agreement or commitment, whether
or not made in the ordinary course of business, which is material to the Company
or the Subsidiary or the conduct of the Business or the absence of which could
reasonably be expected to have a material adverse effect.
The Company has delivered to the Purchaser accurate and complete copies
of all Company Contracts identified in Part 5.11 of the Company Disclosure
Schedule, including all amendments thereto.
<PAGE> 31
(b) Each Company Contract, to the extent material to the
Company and its Business, is currently valid and in full force and effect, and
is enforceable by the Company or the Subsidiary in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditor's rights generally and by general principles of equity
regardless of whether such enforceability is considered in a proceeding in law
or equity.
(c) Except as set forth on Part 5.11(b) of the Company
Disclosure Schedule, each Company Contract and Subsidiary Contract, upon
consummation of the transactions contemplated by this Agreement, each Company
Contract shall continue in full force and effect without penalty or other
adverse consequence.
(d) Neither the Company nor the Subsidiary is in material
default under any Company Contract, and, to the knowledge of the Company, (i) no
Person has materially violated or breached, or declared or committed any
material default under, any Company Contract and (ii) the Company and the
Subsidiary have not waived any of its rights under any Company Contract.
(e) (i) Neither the Company nor the Subsidiary has ever
guaranteed or otherwise agreed to cause, insure or become liable for, and has
never pledged any of its assets to secure, the performance or payment of any
obligation or other Liability of any other Person and (ii) neither the Company
nor the Subsidiary has ever been a party to or bound by any joint venture
agreement, partnership agreement, profit-sharing agreement, cost-sharing
agreement, loss-sharing agreement or similar Contract.
(f) No Person is renegotiating any amount paid or payable to
the Company or the Subsidiary under any Company Contract or any other material
term or provision of any Company Contract.
(g) No party to any Company Contract has notified the Company
or the Subsidiary to the effect that the Company or the Subsidiary has failed to
perform a material obligation thereunder.
5.12 Employees.
(a) Part 5.12(a) of the Company Disclosure Schedule contains a
list of all employees of the Company as of the date of this Agreement. The
Company has delivered to the Purchaser a true and complete list of the name,
title, position or job function, location of employment, salary, bonus, vested
deferred compensation or pension benefit, accrued vacation and severance
benefit, paid or payable, in cash or otherwise, of each current employee,
officer, director, consultant or agent of the Company whose annual compensation
exceeded in 1998, or in 1999 is expected to exceed, $75,000 of the Company as of
the date of this Agreement.
<PAGE> 32
(b) Part 5.12(b) of the Company Disclosure Schedule contains a
list of individuals who are currently performing services for the Company
business and are classified as "consultants" or "independent contractors." The
Company has delivered to the Purchaser copies of each agreement to which it is a
party with any such consultant or independent contractor pursuant to which the
Company is obligated to pay such consultant or independent contractor in excess
of $15,000 annually or that cannot be terminated by the Company on less than 30
days' notice without any material cost to the Company. No condition or set of
circumstances exists pursuant to which any such consultant or independent
contractor could be reclassified as an employee of the Company for federal
income tax purposes.
(c) The Subsidiary has no employees, consultants or
independent contractors.
(d) The Company has no collective bargaining agreements or
union contracts with any of its employees. To the knowledge of the Company,
there is no labor union organizing activity pending or threatened with respect
to the Company. The employment of each of the Company's employees is terminable
by the Company at will; and no employee has any agreement or contract, written
or verbal, regarding his or her employment.
(e) To the knowledge of the Company, (i) no employee of the
Company, nor any consultant with whom the Company has contracted, is in
violation of any material term of any employment or consulting contract,
proprietary information agreement, non-competition covenant or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company, and (ii) the continued employment by the Company of its present
employees, and the performance of the Company's contracts with its independent
contractors, will not result in any such violation. The Company has not received
any notice (written or otherwise) alleging that any such violation has occurred.
No employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. No officer or key employee, or any group of employees, has
given written notice to the Company of his, her or their intent to terminate
his, her or their employment with the Company.
5.13 Compliance with Legal Requirements.
(a) The Company and the Subsidiary are in compliance with each
legal requirement that is applicable to them or to the conduct of their business
or the ownership or use of any of their assets.
(b) Neither the Company nor the Subsidiary has received, at
any time, any notice from any Governmental Body or any other Person regarding
(i) any actual, alleged, possible or potential violation of, or failure to
comply with, any legal requirement by the Company, or (ii) any actual, alleged,
possible or potential obligation
<PAGE> 33
on the part of the Company to undertake, or to bear all or any portion of the
cost of, any cleanup or any remedial, corrective or response action of any
nature.
5.14 Governmental Authorizations.
(a) Part 5.14 of the Company Disclosure Schedule identifies
each Governmental Authorization held by the Company or the Subsidiary. The
Company has delivered to the Purchaser accurate and complete copies of all such
Governmental Authorizations, including all renewals thereof and all amendments
thereto. Each Governmental Authorization identified or required to be identified
in Part 5.14 of the Company Disclosure Schedule is, in all material respects,
valid and in full force and effect.
(b) To the knowledge of the Company, the Governmental
Authorizations identified in Part 5.14 of the Company Disclosure Schedule
constitute all the material Governmental Authorizations necessary (i) to enable
the Company to conduct its business in the manner in which its business is
currently being conducted, and (ii) to permit the Company to own and use its
assets in the manner in which they are currently owned and used.
5.15 Tax Matters.
(a) Except to the extent set forth in Part 5.15 of the Company
Disclosure Schedule, each Tax required to have been paid, or claimed by any
Governmental Body to be payable, by the Company (whether pursuant to any Tax
Return or otherwise) for periods ending on or before the Closing Date has been
duly paid in full on a timely basis, except to the extent being contemplated by
the Company or the Subsidiary through appropriate proceedings. Any Tax required
to have been withheld or collected by the Company or the Subsidiary for periods
ending on or before the Closing Date has been duly withheld and collected, and
(to the extent required) each such Tax has been paid to the appropriate
Governmental Body.
(b) Part 5.15 of the Company Disclosure Schedule accurately
identifies all Tax Returns required to be filed by or on behalf of the Company
or the Subsidiary with any Governmental Body with respect to any taxable period
ending after the date hereof and on or before the Closing Date ("Returns"). All
Returns (i) have been, or will be, filed when due, and (ii) have been, or will
be when filed, accurately and completely prepared pursuant to applicable law.
All amounts shown on the Returns to be due on or before the Closing Date, and
all amounts otherwise payable in connection with the Returns on or before the
Closing Date, have been paid on or before the Closing Date. The Company has
delivered to the Purchaser copies of all Returns filed for the fiscal periods
ended December 31, 1997 and December 31, 1998.
(c) The Company's and the Subsidiary's liability for unpaid
Taxes for all periods ending on or before the date of the Financial Statements
does not, in the aggregate, exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred taxes) reported in the Financial
Statements. The Company will
<PAGE> 34
establish, in the Ordinary Course of Business, reserves adequate for the payment
of all Taxes of the Company and the Subsidiary for the period from December 31,
1998 through the Closing Date, and the Company will disclose the dollar amount
of such reserves to the Purchaser on or prior to the Closing Date.
(d) Part 5.15 of the Company Disclosure Schedule identifies
each examination or audit of any Return that has been conducted by any
Governmental Body for the fiscal periods ended December 31, 1997 and December
31, 1998. The Company has delivered to the Purchaser copies of all audit reports
and similar documents (to which the Company or the Subsidiary has access)
relating to Returns. No extension or waiver of the limitation period applicable
to any of the Returns has been granted (by the Company, the Subsidiary or any
other Person), and no such extension or waiver has been requested from the
Company or the Subsidiary.
(e) No claim or other Proceeding is pending or has been
threatened in writing against or with respect to the Company or the Subsidiary
in respect of any Tax. The Company has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. Neither the Company
nor the Subsidiary has been, and will not be, required to include any adjustment
in taxable income for any tax period (or portion thereof) pursuant to Section
481 or 263A of the Code or any comparable provision under state or foreign Tax
laws as a result of transactions or events occurring, or accounting methods
employed, prior to the Closing. Neither the Company nor the Subsidiary is liable
for Taxes incurred by any individual, trust, corporation, partnership or any
other Entity either as a transferee, pursuant to Treasury Regulations Section
1.1502 6 (or any successor provision), or any similar provision of state or
local Tax law.
(f) Neither the Company nor the Subsidiary is party to any
agreement, plan, arrangement or other Contract covering any employee or
independent contractor or former employee or independent contractor of the
Company that, individually or collectively, could give rise directly or
indirectly to the payment of any amount that would not be deductible pursuant to
Section 280G (without regard to Section 280G(b)(4)) or Section 162(m) of the
Code. Except as set forth in Part 5.14 of the Company Disclosure Schedule,
neither the Company nor the Subsidiary is, and has been, a party to or bound by
any tax indemnity agreement, tax-sharing agreement or tax allocation agreement.
(g) The Company is not a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code and has not been
a United States real property holding corporation within the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(h) Neither the Company nor the Subsidiary has net operating
losses or other tax attributes presently subject to limitation under Code
Section 382, 383 or 384, or the federal consolidated return regulations.
<PAGE> 35
(i) For purposes of the Selling Stockholders' indemnification
pursuant to Section 11.2, the representations in this Section 5.15 shall be
deemed to have been made with no exception for items disclosed on Part 5.15 of
the Company Disclosure Schedule or otherwise.
5.16 Securities Laws Compliance; Registration Rights.
The Company and the Subsidiaries has complied with all federal and
state securities laws in connection with all offers and sales of securities
issued by the Company or the Subsidiary prior to the date of this Agreement.
Neither the Company nor the Subsidiary has heretofore granted any other
purchaser of its securities the right to require the Company to register any
securities under the Securities Act or to qualify for any exemption thereunder.
5.17 Finders and Brokers; Fees.
(a) Except as set forth in Part 5.17 of the Company Disclosure
Schedule (which obligations which will remain the exclusive obligations of the
Principal Stockholders), neither the Company, the Subsidiary nor any person
acting on behalf of the Company has engaged any finder, broker, investment bank,
intermediary or any similar person in connection with the Transactions.
(b) Neither the Company nor the Subsidiary has entered into a
contract or other agreement that provides that a fee shall be paid to any Person
or Entity if the Transactions are consummated.
5.18 Environmental Compliance.
The Company and the Subsidiary are, and have been, at all times in
compliance in all material respects with all Environmental Laws.
5.19 Insurance.
(a) Part 5.19 of the Company Disclosure Schedule sets forth
each insurance policy maintained by or at the expense of, or for the direct or
indirect benefit of, the Company or the Subsidiary.
(b) The Company has delivered to the Purchaser copies of all
of the insurance policies identified in Part 5.19 of the Company Disclosure
Schedule (including all renewals thereof and endorsements thereto) and binders
relating thereto.
(c) Each of the policies identified in Part 5.19 of the
Company Disclosure Schedule is legal, valid, binding and enforceable in
accordance with its terms and is in full force and effect. Neither the Company
nor the Subsidiary is in breach or default (including any breach or default with
respect to the payment of premiums or the giving of notice), and no event has
occurred which, with notice or the lapse of time,
<PAGE> 36
would constitute a material breach or default or permit termination or
modification, under the policy. All of the information contained in the
applications submitted in connection with said policies was (at the times said
applications were submitted) accurate and complete in all material respects, and
all premiums and other amounts owing with respect to said policies have been
paid in full on a timely basis.
(d) There is no pending claim under or based upon any of the
policies identified in Part 5.19 of the Company Disclosure Schedule, and no
event has occurred, and no condition or circumstance exists, that might (with or
without notice or lapse of time) directly or indirectly give rise to or serve as
a basis for any such claim.
(e) Neither the Company nor the Subsidiary has received:
(i) any written notice regarding the actual or
possible cancellation or invalidation of any of the policies identified in Part
5.19 of the Company Disclosure Schedule or regarding any actual or possible
adjustment in the amount of the premiums payable with respect to any of said
policies; or
(ii) any written notice regarding any actual or
possible refusal of coverage under, or any actual or possible rejection of any
claim under, any of the policies identified in Part 5.19 of the Company
Disclosure Schedule.
5.20 Related Party Transactions.
(a) No Related Party has, and no Related Party has at any time
since December 31, 1998, had, any direct or indirect material interest of any
nature in any material asset of the Company or any Company Contract.
(b) No Related Party is, or has at any time since December 31,
1998, been, indebted to the Company or the Subsidiary for an amount,
individually or in the aggregate, in excess of Twenty Five Thousand Dollars
($25,000).
(c) Since December 31, 1998, no Related Party has entered
into, or has had any direct or indirect material financial interest in, any
Company Contract transaction or business dealing of any nature involving the
Company or the Subsidiary.
(d) No Related Party is competing, or has at any time since
December 31, 1998, competed, directly or indirectly, with the Company or the
Subsidiary in any market served by the Company or the Subsidiary.
5.21 Absence of Changes.
Since December 31, 1998:
(a) there has not been any material adverse change in the
Company's business, assets, liabilities, operations or prospects (or in any
aspect or portion thereof),
<PAGE> 37
and, to the knowledge of the Company or the Subsidiary, no event has occurred
that is likely to have a material adverse effect on the Company's business,
assets, liabilities, operations or prospects (or on any aspect or portion
thereof);
(b) neither the Company nor the Subsidiary has declared,
accrued, set aside or paid any dividend or made any other distribution in
respect of any shares of capital stock;
(c) neither the Company nor the Subsidiary has effected or
been a party to any Acquisition Transaction, recapitalization, reclassification
of shares, stock split, reverse stock split or similar transaction;
(d) neither the Company nor the Subsidiary has made any
capital expenditure in excess of $50,000 individually or $300,000 in the
aggregate;
(e) neither the Company nor the Subsidiary has pledged or
hypothecated any of its material assets or otherwise permitted any of its
material assets to become subject to any encumbrance;
(f) neither the Company nor the Subsidiary has made any loan
to, guaranteed any indebtedness of or otherwise incurred any indebtedness on
behalf of any person in excess of $25,000;
(g) neither the Company nor the Subsidiary has failed to pay
or otherwise discharge when due any liability in excess of $25,000;
(h) there has been no resignation or termination of employment
of any officer or Key Employee of the Company;
(i) there has been no borrowing or agreement to borrow by the
Company or the Subsidiary, or material change in the contingent obligations of
the Company or the Subsidiary, by way of guaranty, endorsement, indemnity,
warranty or otherwise or grant of a mortgage or security interest in any
property of the Company or the Subsidiary,;
(j) neither the Company nor the Subsidiary has discharged any
encumbrance or discharged, paid or forgiven any indebtedness or other Liability
in excess of $25,000, individually or in the aggregate, except for accounts
payable that (i) are reflected as current liabilities in the "liabilities"
column of the Unaudited Interim Balance Sheet or have been incurred by the
Company since the date of the Unaudited Interim Balance Sheet in the Ordinary
Course of Business, and (ii) have been discharged or paid in the Ordinary Course
of Business;
(k) neither the Company nor the Subsidiary has forgiven any
material debt or otherwise released or waived any right or claim;
<PAGE> 38
(l) neither the Company nor the Subsidiary has changed any of
its methods of accounting or accounting practices in any material respect;
(m) neither the Company nor the Subsidiary has received notice
that there has been a loss of, or cancellation of a material order by, any
customer of the Company;
(n) neither the Company nor the Subsidiary has agreed,
committed or offered (in writing or otherwise), and has not attempted, to take
any of the actions referred to in clauses (c) through (m) above;
(o) made any material changes in its customary methods of
operations or the customary methods of operations of the Business, including,
without limitation, practices and policies relating to research and development,
licensing, purchasing, inventories, marketing, selling and pricing;
(p) sold, transferred, leased, subleased, licensed,
sublicensed or otherwise disposed of any properties or assets, real, personal or
mixed (including, without limitation, leasehold interests and intangible
property), other than the sale of inventories or advertisement space in the
ordinary course of business consistent with past practice;
(q) except as listing on Part 5.21(q), neither the Company nor
the Subsidiary has issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of, or
any other interest in, the Company or the Subsidiary;
(r) entered into any agreement, arrangement or transaction
with, or made any commitments or promises to, any of its directors, officers,
employees, stockholders or affiliates, or with any relative, beneficiary, spouse
or affiliate of any such person;
(s) granted or announced any increase in the wages, salaries,
compensation, bonuses, incentives, pension or other benefits payable by it to
any of its employees, including, without limitation, any increase or change
pursuant to any Plan or established or increased or promised to increase any
benefits under any Plan, in either case, except as required by Law or any
collective bargaining agreement;
(t) written down or written up (or failed to write down or
write up in accordance with U.S. GAAP) the value of any inventories, receivables
or revalued any of its assets;
(u) amended, terminated, canceled or compromised any material
claims or waived any other rights of substantial value to the Company or the
Subsidiary;
(v) failed to maintain the material assets owned by the
Company or the
<PAGE> 39
Subsidiary in accordance with good business practice and in good operating
condition and repair;
(w) made any express or deemed election or settled or
compromised any liability, with respect to Taxes; and
(x) suffered any damage, destruction or loss with respect to
any of the assets of the Company or the Subsidiary which in the aggregate have a
replacement cost of more than $100,000, whether or not any such damage,
destruction or loss shall have been covered by insurance.
5.22 The Principal Stockholders
Each Principal Stockholder represents and warrants as follows:
(a) The Principal Stockholder owns, beneficially and of
record, that number of shares of Common Stock and Options specified opposite the
Principal Stockholder's name on Schedule IA attached hereto, free and clear of
any encumbrances. The Principal Stockholder has delivered to the Purchaser
copies of the stock certificate(s) evidencing the Stock.
(b) The Principal Stockholder has the absolute and
unrestricted right, power and authority to enter into and to perform his
respective obligations under this Agreement and the other Transactional
Agreements to which he is contemplated to be a party. This Agreement and the
other Transactional Agreements constitute, or upon execution and delivery will
constitute, the legal, valid and binding obligations of the Principal
Stockholder, enforceable against him in accordance with their respective terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditor's rights generally and by general principles of equity
regardless of whether such enforceability is considered in a proceeding in law
or equity.
(c) To the knowledge of the Principal Stockholder, the
execution and delivery of this Agreement and the other Transactional Agreements,
and the consummation of the Transactions, by the Principal Stockholder will not,
directly or indirectly (with or without notice or lapse of time), contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the Transactions or to exercise any
remedy or obtain any relief under, any legal requirement or any Order to which
the Principal Stockholder is subject.
(d) The Principal Stockholder is not a party to, nor is there
pending any Proceeding, and, to the knowledge of the Principal Stockholder, no
Person has threatened to commence any Proceeding, that challenges, or that is
reasonably likely to have the effect of preventing, delaying or making illegal,
any of the Transactions or the
<PAGE> 40
Principal Stockholder's ability to comply with or perform his obligations and
covenants under the Transactional Agreements; and, to the knowledge of the
Principal Stockholder, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that might directly or indirectly give rise to
or serve as a basis for the commencement of any such Proceeding.
(e) The Principal Stockholder is not subject to any Order that
relates to the Company's business or to any of the assets owned or used by the
Company.
(f) To the knowledge of the Principal Stockholder, there is no
proposed Order that, if issued or otherwise put into effect, may have a material
adverse effect on the ability of the Principal Stockholder to comply with or
perform any covenant or obligation under this Agreement and the other
Transactional Agreements.
(g) To the knowledge of the Principal Stockholder, no
Governmental Body has proposed any legal requirement (other than any legal
requirement that would be applicable generally to the Internet connectivity
industry) that, if adopted or otherwise put into effect, may adversely affect
his ability to comply with or perform any of his covenants or obligations under
this Agreement and the other Transactional Agreements.
(h) Except for BancBoston Robertson Stephens, neither the
Principal Stockholder nor any person acting on his behalf has negotiated with
any finder, broker, intermediary or any similar person in connection with the
transactions contemplated herein. The Principal Stockholder will indemnify the
Purchaser, the Company and Merger Sub and hold them harmless from any liability
or expense arising from any claim for brokerage commissions, finder's fees or
other similar compensation based upon any agreement, arrangement or
understanding made by or on behalf of the Principal Stockholder or the Company.
(i) All information regarding the Principal Stockholder that
such Principal Stockholder has furnished to the Purchaser or any of its
representatives is accurate and complete in all material respects.
(j) The Principal Stockholder has the capacity and financial
capability to comply with and perform all his covenants and obligations under
this Agreement and each of the other Transactional Agreements. The Gross Merger
Consideration represents reasonably equivalent value for the Stock.
5.23 Powers of Attorney.
Neither the Company nor the Subsidiary has given a power of attorney to
any Person.
5.24 Benefit Plans; ERISA.
(a) Part 5.24 of the Company Disclosure Schedule lists (i) all
"employee benefit plans" within the meaning of Section 3(3) of ERISA, (ii) all
employment agreements, including, but not limited to, any individual benefit
arrangement, policy or practice with
<PAGE> 41
respect to any current or former employee or director of the Company, the
Subsidiary or Member of the Controlled Group, and (iii) all other employee
benefit, bonus or other incentive compensation, stock option, stock purchase,
stock appreciation, severance pay, lay-off or reduction in force, change in
control, sick pay, vacation pay, salary continuation, leave of absence,
educational assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, whether legally binding or not, which the
Company or the Subsidiary maintains, contributes to or has any obligation to or
liability for (collectively, the "Plans").
(b) None of the Plans is a Defined Benefit Plan, and neither
the Company, the Subsidiary nor, to the knowledge of the Company, any Member of
the Controlled Group has ever sponsored, maintained or contributed to, or ever
been obligated to contribute to, a Defined Benefit Plan that could reasonably be
expected to result in a material amount of liability under Title IV of ERISA.
(c) None of the Plans is a Multiemployer Plan, and neither the
Company, the Subsidiary nor, to the knowledge of the Company, any Member of the
Controlled Group has ever contributed to, or ever been obligated to contribute
to, a Multiemployer Plan that could reasonably be expected to result in a
material amount of liability under Title IV of ERISA.
(d) Neither the Company nor the Subsidiary maintains or
contributes to any welfare benefit plan which provides or promises health
benefits to an employee after the employee's termination of employment or
retirement except as required under Section 4980B of the Code and Sections 601
through 608 of ERISA.
(e) Each Plan that is an "employee benefit plan," as defined
in Section 3(3) of ERISA, complies in all material respects by its terms and in
operation with the requirements provided by ERISA and the Code.
(f) To the knowledge of the Company, all reports, forms and
other documents required to be filed with any government entity with respect to
any Plan (including, without limitation, summary plan descriptions, Forms 5500
and summary annual reports) have been timely filed and are accurate.
(g) Each Plan intended to qualify under Section 401(a) of the
Code is the subject of a favorable determination letter issued by the Internal
Revenue Service. To the Company's knowledge, nothing has occurred since the date
of the Internal Revenue Service's favorable determination letter that could
adversely affect the qualification of the Plan.
(h) All contributions owed for all periods ending prior to the
Closing Date (including periods from the first day of the current plan year to
the Closing Date) under any Plan have been or will be made prior to the Closing
Date by the Company.
(i) To the knowledge of the Company, with respect to each
Plan:
<PAGE> 42
(i) no prohibited transactions (as defined in Section
406 or 407 of ERISA or Section 4975 of the Code) have occurred for which an
exemption is not available that could reasonably be expected to result in a
material amount of liability to the Company or the Subsidiary;
(ii) no actions or claims (other than routine claims
for benefits made in the ordinary course of Plan administration for which Plan
administrative review procedures have not been exhausted) are pending,
threatened or imminent, against or with respect to the Plan, any employer who is
participating (or who has participated) in the Plan or any fiduciary (as defined
in Section 3(21) of ERISA) of the Plan that could reasonably be expected to
result in a material amount of liability to the Company or the Subsidiary and no
facts exist which could give rise to any such action or claim; and
(iii) except as set forth in Part 5.24(i)(iii) of the
Company Disclosure Schedule, the Plan provides that it may be amended or
terminated at any time and, except for benefits protected under Section 411(d)
of the Code, all benefits payable to current or former employees or any
beneficiary may be amended or terminated by the Company at any time without a
material amount of liability.
(j) None of the Company, the Subsidiary or any Member of the
Controlled Group has any Plan-related liability or, to the knowledge of the
Company, is threatened with such liability (whether joint or several) (i) for
any excise tax imposed by Section 4971, 4975, 4976, 4977 or 4979 of the Code, or
(ii) for a fine under Section 502 of ERISA, which excise tax or fine could
reasonably be expected to result in a material amount of liability to the
Company or the Subsidiary.
(k) To the knowledge of the Company, all the "group health
plans" (as defined in Section 607(1) or 733(a)(1) of ERISA or Section
4980B(g)(2) of the Code) that are part of the Plans listed in the Company
Disclosure Schedule are in material compliance with the continuation of group
health coverage provisions contained in Section 4980B of the Code and Sections
601 through 608 of ERISA.
(l) Copies of all documents creating or evidencing any Plan
and all reports, forms and other documents required to be filed with any
governmental entity (including, without limitation, summary plan descriptions,
Forms 5500 and summary annual reports for all plans subject to ERISA), have been
delivered or made available to Purchaser. To the knowledge of the Company, there
are no negotiations, demands or proposals which are pending or have been made
which concern matters now covered, or that would be covered, by any Plan.
(m) All expenses and liabilities relating to contributions
required by law and by the terms of the Plans described in the Company
Disclosure Schedule have been, and on the Closing Date will be, fully and
properly accrued on the Company's books and records and disclosed in accordance
with GAAP, or other generally accepted accounting principles.
5.25 Full Disclosure.
<PAGE> 43
Neither this Agreement (including all Schedules and Exhibits hereto),
nor any of the Transactional Agreements, contains or will contain any untrue
statement of material fact; and none of such documents omits or will omit to
state any material fact necessary to make any of the representations, warranties
or other statements or information contained therein when read collectively not
misleading.
5.26 Board of Directors; Stockholder Approval
The Board of Directors of the Company, by unanimous written
consent or at a meeting duly called and held, has by unanimous vote of all
directors (i) determined that the Merger is fair and in the best interests of
the Company and its stockholders, (ii) approved the Merger and this Agreement in
accordance with the terms of the provisions of the DGCL, and (iii) directed that
this Agreement and the Merger be submitted to the Selling Stockholders for their
approval and resolved to recommend that the Selling Stockholders approve the
Merger, this Agreement and the transactions contemplated hereby.
The only actions by the stockholders of the Company required
to approve the Merger, this Agreement and the transactions contemplated hereby
is the affirmative vote, or consent or consents in writing, of (i) the holders
of a majority of the outstanding shares of the Stock and (ii) the holders of a
majority of the outstanding shares of the Series B Preferred Stock, Series C
Preferred Stock and the Series D Preferred Stock, voting together as a single
class. The Principal Stockholders, as a group, hold the requisite number of
shares of Stock to approve, by written consent, the Merger, this Agreement and
the transactions contemplated hereby.
5.27 Customers
No single customer of the Company accounted for more than 5% of the
gross revenue of the Company in the quarter ended December 31, 1998 and the ten
most significant customers of the Company (by revenue) did not, as a group,
account for more than 20% of the gross revenue of the Company in the quarter
ended December 31, 1998. Since inception of the Company, more than 200,000
customers have purchased products using the Company's service.
5.28 Click/Conversion Rate Data
True and complete copies of (i) conversion rate data for the Company by
month since the later of the inception of each contract or the formation of the
Company
<PAGE> 44
through January 31, 1999 (the "Conversion Rate Data"), (ii) click-thru rate data
for the Company by month (and, in the case of the contracts with CNET and ZDNet,
by type of link) since the later of the inception of each contract or the
formation of the Company through January 31, 1999 (the "Click-thru Rate Data")
and (ii) a description of the assumptions and methodologies used in preparing
the Conversion Rate Data and the Click-thru Rate Data (the "Methodologies") have
been delivered by the Company to the Purchaser. The Conversion Rate Data and the
Click-thru Rate Data were prepared on the basis of the Methodologies, which
represent a reasonable basis for such preparation, in accordance with the
operating records of the Company and are in all material respects complete and
correct.
6. Representations and Warranties of the Purchaser and Merger Sub.
Except as specifically set forth in the disclosure schedule provided by
Purchaser and Merger Sub and attached hereto (the "Purchaser Disclosure
Schedule"), the parts of which are numbered to correspond to the Section number
of this Agreement, the Purchaser and Merger Sub hereby represent and warrant to
the Principal Stockholders as follows:
6.1 Organization, Good Standing, Authority; Binding Nature of
Agreement.
(a) The Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, is
qualified to conduct business and is in both corporate and tax good standing
under the laws of each jurisdiction in which the failure to be so qualified
could materially adversely affect the Purchaser, its business, prospects or
financial condition. The Purchaser has all requisite corporate power and
authority to own and operate its properties and assets, to carry out its
business as currently conducted, to execute and deliver this Agreement and the
Transactional Agreements and to carry out the provisions hereof and thereof.
Merger Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, is qualified to conduct
business and is in both corporate and tax good standing under the laws of each
jurisdiction in which the failure to be so qualified could materially adversely
affect the Purchaser, its business, prospects or financial condition and has all
requisite corporate power and authority to execute and deliver this Agreement
and the Transactional Agreements and to carry out the provisions hereof and
thereof.
6.2 Purchaser Stock.
The Purchaser Stock to be issued to the Selling Stockholders, when
issued in connection with this Agreement and the Transactional Agreements, will
be duly authorized, validly issued, fully paid and nonassessable.
6.3 Authority; Binding Nature of Agreements.
Each of the Purchaser and Merger Sub has the corporate power and
authority to enter into and to perform its obligations under this Agreement and
the Transactional Agreements
<PAGE> 45
and the execution, delivery and performance by the Purchaser and Merger Sub of
this Agreement and the Transactional Agreements have been duly authorized by all
necessary action on the part of the Purchaser Board, Merger Sub Board, and the
stockholders of Merger Sub. This Agreement and the Transactional Agreements
constitute, or upon execution and delivery will constitute, the legal, valid and
binding obligations of the Purchaser and Merger Sub, enforceable against the
Purchaser and Merger Sub in accordance with their respective terms, except to
the extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the enforcement
of creditor's rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in law or equity.
6.4 Non-Contravention; Consents.
The execution and delivery of this Agreement and the Transactional
Agreements, and the consummation of the Transactions, by the Purchaser and
Merger Sub will not, directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i)
the Purchaser's and Merger Sub's Certificate of Incorporation or bylaws, or (ii)
any resolution adopted by the Purchaser Board, the Merger Sub Board or any
respective committee thereof or the respective stockholders of the Purchaser and
Merger Sub;
(b) contravene, conflict with or result in a violation of, or
give any Governmental Body or other Person the right to challenge any of the
Transactions or to exercise any remedy or obtain any relief under, any legal
requirement or any Order to which the Purchaser and Merger Sub or any material
assets owned or used by it are subject;
(c) contravene, conflict with or result in a material
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
Governmental Authorization that is held by the Purchaser or Merger Sub or any of
their respective employees or that otherwise relates to the Purchaser and Merger
Sub's business or to any of the assets owned or used by the Purchaser and Merger
Sub;
(d) contravene, conflict with or result in a material
violation or material breach of, or material default under, any Purchaser
Contract;
(e) give any Person the right to any payment by the Purchaser
or Merger Sub or give rise to any acceleration or change in the award, grant,
vesting or determination of options, warrants, rights, severance payments or
other contingent obligations of any nature whatsoever of the Purchaser or Merger
Sub in favor of any Person, in any such case as a result of the change in
control of Merger Sub or otherwise resulting from the Transactions; or
(f) result in the imposition or creation of any material
encumbrance
<PAGE> 46
upon or with respect to any asset owned or used by the Purchaser and Merger Sub.
Except as set forth in Part 6.5 of the Purchaser Disclosure Schedule,
the Purchaser and Merger Sub will not be required to make any filing with or
give any notice to, or obtain any Consent from, any Person or Governmental Body
in connection with the execution and delivery of this Agreement and the
Transactional Agreements or the consummation or performance of any of the
Transactions.
6.5 Finders and Brokers.
The Purchaser and Merger Sub will indemnify the Selling Stockholders
and the Company and hold them harmless from any liability or expense arising
from any claim for brokerage commissions, finder's fees or other similar
compensation based upon any agreement, arrangement or understanding made by or
on behalf of the Purchaser or Merger Sub.
6.6 Capitalization.
(a) The authorized capital stock of the Purchaser consists of
65,000,000 shares of capital stock, comprised of 50,000,000 shares of common
stock, of which 27,485,732 shares are issued and outstanding as of the date of
this Agreement, and 15,000,000 shares of preferred stock, none of which are
issued and outstanding as of the date of this Agreement. No other shares of
capital stock are authorized, issued or outstanding. All issued and outstanding
shares of the Purchaser's capital stock have been duly authorized and validly
issued, are fully paid and nonassessable, and have been issued in full
compliance with all applicable securities laws and other applicable legal
requirements. 55,999 shares of Purchaser Stock are reserved for issuance upon
the exercise of options issued upon the Purchaser's 1998 Stock Option Plan (the
"Purchaser Option Plan") and 3,448,745 shares of Purchaser Stock are issuable
upon conversion of the 7 1/4% Convertible Subordinated Notes Due December 1,
2003.
(b) Except as set forth on Part 6.6 of the Purchaser
Disclosure Schedule, there is no:
(i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Purchaser; or
(ii) outstanding security instrument or obligation
that is or may become convertible into or exchangeable for any shares of the
capital stock or other securities of the Purchaser.
(c) The Purchaser has never repurchased, redeemed or otherwise
acquired (or agreed, committed or offered (in writing or otherwise to
repurchase, redeem or otherwise reacquire) any shares of capital stock or other
securities of the Company, except for employees of the Purchaser pursuant to the
terms of the Purchaser Option
<PAGE> 47
Plan.
(d) None of the issued and outstanding shares of capital stock
of the Purchaser has been issued in violation of any applicable preemptive
rights under the Purchaser's Certificate of Incorporation or bylaws or, to the
knowledge of the Purchaser, other instruments or agreements.
(e) Except as set forth on Part 6.6 of the Purchaser
Disclosure Schedule and as contemplated by this Agreement, the Purchaser has not
granted to any Person any rights to subscribe for securities of the Purchaser.
(f) The authorized capital stock of Merger Sub consists of
1,000 shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding as of the date of this Agreement, and all of which shares
are owned beneficially and of record by the Purchaser. All issued and
outstanding shares of Merger Sub's capital stock have been duly authorized and
validly issued, are fully paid and nonassessable, and have been issued in full
compliance with all applicable legal requirements. There are no outstanding
options, warrants or other rights to purchase, or securities convertible into or
exchangeable for, shares of the capital stock of Merger Sub, and there are no
agreements or commitments to which Merger Sub is a party or by which it is bound
pursuant to which Merger Sub is or may become obligated to issue additional
shares of its capital stock.
6.7 Reports and Financial Statements; Absence of Certain Changes.
(a) The Purchaser has filed all reports required to be filed
with the SEC pursuant to the Exchange Act, if any, since its initial public
offering on June 22, 1998 (all such reports, including those to be filed prior
to the Closing Date, collectively, the "Purchaser SEC Reports"), and has
previously furnished or made available to the Company true and complete copies
of all the Purchaser SEC Reports filed, if any, with respect to periods
beginning after June 22, 1998 (including any exhibits thereto) and will promptly
deliver to the Company any Purchaser SEC Reports filed between the date hereof
and the Effective Time. All of such Purchaser SEC Reports complied at the time
they were filed in all material respects with applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
None of such Purchaser SEC Reports, as of their respective dates (as amended
through the date hereof), contained or, with respect to Purchaser SEC Reports
filed after the date hereof, will contain any untrue statement of a material
fact or omitted or, with respect to Purchaser SEC Reports filed after the date
hereof, will omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements of the
Purchaser included in the Purchaser SEC Reports comply in all material respects
with the published rules and regulations of the SEC with respect thereto, and
such audited financial statements (i) were prepared from the books and records
of the Purchaser, (ii) were prepared in accordance with U.S. GAAP applied on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto) and (iii) present fairly the financial position
<PAGE> 48
of the Purchaser as of the dates thereof and the results of operations and cash
flows (or changes in financial position, for the nine months ended September 30,
1998 and earlier fiscal years) for the periods then ended. The unaudited
financial statements included in the Purchaser SEC Reports comply in all
material respects with the published rules and regulations of the SEC with
respect thereto; and such unaudited financial statements (i) were prepared from
the books and records of the Purchaser, (ii) were prepared in accordance with
U.S. GAAP, except as otherwise permitted under the Exchange Act and the rules
and regulations thereunder, on a consistent basis (except as may be indicated
therein or in the notes or schedules thereto) and (iii) present fairly the
financial position of the Purchaser as of the dates thereof and the results of
operations and cash flows (or changes in financial condition) for the periods
then ended, subject to normal year-end adjustments and any other adjustments
described therein or in the notes or schedules thereto. The foregoing
representations and warranties shall also be deemed to be made with respect to
all filings made with the SEC on or before the Effective Time.
(b) The unaudited financial statements of the Purchaser for
the fiscal year ended December 31, 1998 (i) have been provided to the Company on
or prior to the date hereof and (ii) were prepared in accordance with U.S. GAAP,
except as otherwise permitted under the Exchange Act and the rules and
regulations thereunder, on a consistent basis (except as may be indicated
therein or in the notes or schedules thereto), and (ii) present fairly the
financial position of the Purchaser as of December 31, 1998 and the results of
operations and cash flows (or changes in financial condition) for the fiscal
year then ended, subject to normal adjustments that would not in the aggregate
be material in amount or effect.
(c) Except as specifically contemplated by this Agreement or
reflected in the Purchaser SEC Reports, since December 31, 1998 there has not
been (i) any change or event having a material adverse effect on the Purchaser
(provided that changes in the trading price of Purchaser Stock shall not in
itself constitute such a change or event with respect to Purchaser), (ii) any
declaration setting aside or payment of any dividend or distribution with
respect to the common stock of Purchaser other than consistent with past
practices, or (iii) any material change in the Purchaser's accounting
principles, procedures or methods.
6.8 Compliance with Applicable Law.
Except as disclosed in the Purchaser SEC Reports filed prior to the
date of this Agreement, the Purchaser holds all licenses, franchises, permits,
variances, exemptions, orders, approvals and authorizations necessary for the
lawful conduct of its business under and pursuant to, and the business of the
Purchaser is not being conducted in violation of, any provision of any federal,
state, local or foreign statute, law, ordinance, rule, regulation, judgment,
decree, order, concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Purchaser, except to
the extent that the failure or violation would not in the aggregate have a
material adverse effect.
<PAGE> 49
6.9 Complete Copies of Requested Reports.
The Purchaser has delivered or made available (through public sources
or directly) true and complete copies of each document that has been reasonably
requested by the Company or its counsel in connection with their legal and
accounting review of the Purchaser.
6.10 Intellectual Property.
(a) Except as set forth in Part 6.10 of the Purchaser
Disclosure Schedule, Purchaser owns or has the right to use all material
Proprietary Assets owned by Purchaser or licensed to Purchaser and presently
used in connection with the business of Purchaser ("Purchaser Proprietary
Assets"). To the knowledge of Purchaser, use of the Purchaser Proprietary Assets
in connection with the business of Purchaser does not infringe upon or
misappropriate the Proprietary Assets of any third party, and no claim has been
asserted to the Purchaser that the use of such Proprietary Assets infringes upon
or misappropriates the Proprietary Assets of any third party.
(b) Except as set forth in Part 6.10 of the Pur chaser
Disclosure Schedule, to the knowledge of Purchaser, Purchaser is entitled to use
the Purchaser Proprietary Assets in the continued operation of the business of
Purchaser, subject to the terms of any licenses of Purchaser Proprietary Assets.
The Purchaser Proprietary Assets have not been adjudged invalid or unenforceable
in whole or part, and to the knowledge of Purchaser, are valid and enforceable.
(c) To the knowledge of Purchaser, no person is engaging in
any activity that infringes upon the Purchaser Proprietary Assets. The
consummation of the transactions contemplated by this Agreement will not result
in the termination or impairment of any of the Purchaser Proprietary Assets or
licenses of Purchaser Proprietary Assets.
(d) To the best of the Purchaser's knowledge, the Purchaser
has complied with Section 5(a) of the Federal Commission Act.
6.11 Full Disclosure.
(a) Neither this Agreement (including all Schedules and
Exhibits hereto) nor any of the Transactional Agreements, contains any untrue
statement of material fact; and none of such documents omits or will omit to
state any material fact necessary to make any of the representations, warranties
or other statements or information contained therein when read collectively not
misleading.
(b) All of the information set forth in the Information
Statement and all other information regarding the Purchaser or Merger Sub and
the business, condition, assets, liabilities, operations, financial performance,
net income and prospects of either that has been furnished to the Company or any
of its representatives by or on behalf of
<PAGE> 50
the Purchaser, Merger Sub or any of the Purchaser's representatives, is accurate
and complete in all material respects.
(c) The Purchaser has delivered or made available through
public sources or directly true and complete copies of each document that has
been reasonably requested by the Company or its counsel in connection with their
legal and accounting review of the Purchaser.
6.12 Contracts.
(a) Except as set forth in Part 6.12 of the Purchaser
Disclosure Schedule or as contemplated by this Agreement, no Purchaser Contracts
have come into existence since June 22, 1998 that will be required to be filed
as exhibits to the Purchaser's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998, or the Purchaser's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1999.
(b) The Purchaser has previously made available for inspection
and copying to the Company complete and correct copies (or, in the case of oral
contracts, a complete and correct description) of each Purchaser Contract (and
any amendments or supplements thereto) listed on Part 6.12 of the Purchaser
Disclosure Schedule. Except as set forth on Part 6.12 of the Purchaser
Disclosure Schedule, (i) each Purchaser Contract (including any Purchaser
Contract filed with the Purchaser SEC Reports) listed is in full force and
effect, (ii) neither the Purchaser nor, to its knowledge, any other party is in
material default under any such Purchaser Contract, and no event has occurred
which constitutes, or with the lapse of time or the giving of notice or both
would constitute, a material default, (iii) to the knowledge of the Purchaser,
there are no material disputes or disagreements between the Purchaser and any
other party with respect to any such Purchaser Contract, and (iv) each other
party to each such Purchaser Contract has consented or been given notice (or
prior to the Closing Date shall have consented or been given notice), where such
consent or the giving of such notice is necessary, sufficient that such
Purchaser Contract shall remain in full force and effect following the
consummation of the Transactions, without material modification in the rights or
obligations of the Purchaser thereunder.
6.13 S-3 Registrant Status.
But for the fact that the Purchaser has not been subject to the
requirements of Section 12 or 15(d) of the Exchange Act, and consequently has
not filed the reports required to be filed thereunder, for a period of at least
twelve calendar months immediately preceding the date hereof, the Purchaser
believes that as of the date of this Agreement it would be eligible to use Form
S-3 for the registration of securities under the Securities Act, and the
Purchaser has no
<PAGE> 51
reason to believe that it will not become eligible to so use Form S 3 on or
immediately after the date that is one year following the initial public
offering of the Purchaser.
6.14 Trading By Affiliates.
Except as described in the Purchaser SEC Reports, to the knowledge of
the Purchaser, no affiliate as defined in the Exchange Act of the Purchaser has
purchased or sold shares of the Purchaser's common stock or other securities
since the Purchaser's initial public offering.
6.15 Customers.
Since inception of the Purchaser, more than 600,000 customers have
purchased products using the Purchaser's service.
6.16 Click/Conversion Rata Data.
True and complete copies of (i) conversion rate data for the Purchaser
by month since the later of the inception of each contract or the formation of
the Company through January 31, 1999 (the "Conversion Rate Data"), (ii)
click-thru rate data for the Company by month since the later of the inception
of each contract or the formation of the Company through January 31, 1999 (the
"Click-thru Rate Data") and (ii) a description of the assumptions and
methodologies used in preparing the Conversion Rate Data and the Click-thru Rate
Data (the "Methodologies") have been delivered by the Purchaser to the Company.
The Conversion Rate Data and the Click-thru Rate Data were prepared on the basis
of the Methodologies, which represent a reasonable basis for such preparation,
in accordance with the operating records of the Purchaser and are in all
material respects complete and correct.
7. Pre-Closing Covenants of the Company and the Principal Stockholders.
7.1 Corporate Proceedings; Stockholder Approval.
The Principal Stockholders and the Company shall ensure that (i)
resolutions (in form satisfactory to the Purchaser) of the Company Board
approving or adopting, as applicable, all necessary further action of the
Company Board, the Merger, this Agreement, the Transactional Agreements and the
Transactions and recommending approval by the Company's stockholders of the
Merger, this Agreement, the Transactional Agreements and the Transactions, are
passed as necessary pursuant to applicable law, and (ii) the stockholders of the
Company, acting by written consent as pursuant to Section 228 of the DGCL
(unless otherwise required), take all necessary action to approve or adopt, as
applicable, the Merger, the Agreement, the Transactional Agreements and the
Transactions. In furtherance, and not in limitation of the foregoing:
(a) the Company, acting through the Company Board, shall, in
<PAGE> 52
accordance with all applicable legal requirements and its Certificate of
Incorporation and Bylaws (i) promptly solicit an action by written consent in
lieu of a meeting of stockholders of the Company (or if, required by law, duly
call, give notice of, convene and hold a meeting of stockholders of the Company)
as soon as practicable a meeting to approve and adopt the Merger, this
Agreement, the Transactional Agreements and the Transactions, and (ii) recommend
the approval and adoption of the Merger, this Agreement, the Transactional
Agreements and the Transactions by the Company's stockholders and allow the
Purchaser to include in the Information Statement such recommendation, and take
all lawful action to solicit such approval. The Company shall consult with the
Purchaser as to the timing and procedures of such consent solicitation (or such
meeting); and
(b) the Company will use commercially reasonable efforts to
cooperate fully with respect to all requests by the Purchaser to facilitate the
preparation and mailing of the Information Statement to the Company's
stockholders in connection with the consent solicitation (or meeting) described
above. The Company shall furnish the Purchaser with all information concerning
the Company, its capital stock, the Principal Stockholders, the holders of the
Options and other matters, and shall take all other actions, as the Purchaser
may reasonably request in connection with the Information Statement. Such
information provided by the Company shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made not misleading. Whenever the Company obtains any knowledge
of any event which should be set forth in an amendment or a supplement to the
Information Statement, the Company will promptly inform the Purchaser and will
cooperate in mailing to the Principal Stockholders such amendment or supplement.
7.2 Access and Investigation.
The Company and the Principal Stockholders shall ensure that, at all
times during the Pre-Closing Period:
(a) The Company and its representatives provide the Purchaser
and its representatives with reasonable access at reasonable times to the
Company's premises and assets and to those officers, directors, employees,
agents, representatives, accountants and counsel of the Company who have any
knowledge relating to the Company and to all existing books, records, Tax
Returns, work papers and other documents and information relating to the
Company;
(b) The Company and its representatives provide the Purchaser
and its representatives with such copies of existing books, records, Tax
Returns, work papers and other documents and information relating to the Company
as the Purchaser may reasonably request in good faith; and
(c) The Company and its representatives compile and provide
the Purchaser and its representatives with such additional financial, operating
and other data
<PAGE> 53
and information regarding the Company as the Purchaser may reasonably request in
good faith.
7.3 Operation of Business.
During the Pre-Closing Period, the Company shall not conduct its
business other than in the Ordinary Course of Business and in a manner
consistent with the Company's past practice, except as expressly permitted by
this Agreement or as agreed to by Purchaser in writing. Without limiting the
generality of the foregoing, the Company and the Principal Stockholders shall
ensure that
(a) the Principal Stockholders do not directly or indirectly
sell or otherwise transfer, or offer, agree or commit (in writing or otherwise)
to sell or otherwise transfer, any of their Stock or any interest in or right
relating to any of their Stock;
(b) the Principal Stockholders do not permit, or offer, agree
or commit (in writing or otherwise) to permit, any of the Stock to become
subject, directly or indirectly, to any encumbrance;
(c) the Company uses commercially reasonable efforts to
preserve intact its current business organization, keep available the services
of its current officers and employees and maintain its relations and goodwill
with all suppliers, customers, landlords, creditors, licensors, licensees,
employees and other Persons having business relationships with the Company;
(d) the Company keeps in full force all its existing insurance
policies;
(e) the Company's officers confer regularly with the Purchaser
concerning operational matters and otherwise report regularly to the Purchaser
concerning the status of the Company's business, condition, assets, liabilities,
operations, financial performance and prospects;
(f) the Company immediately notifies the Purchaser of any
inquiry, proposal or offer from any Person relating to any Acquisition
Transaction and of the terms thereof;
(g) the Company does not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and does not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities, except for repurchases in the Ordinary Course
of Business of shares for which the Company has a repurchase right under the
Company's 1998 Stock Plan;
(h) the Company does not sell or otherwise issue (or grant any
warrants, options or other rights to purchase) any shares of capital stock or
any other securities, except as specifically provided in Section 9.1(b), except
for the Interim Grants and the shares of Series E Preferred Stock issuable to
ZDNet under the ZDNet
<PAGE> 54
Agreement;
(i) the Company does not amend its Certificate of
Incorporation or Bylaws, and does not effect or become a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction, or enter into any transaction
or take any other action of the type referred to in Section 5.20(c) through (n);
(j) the Company does not form any subsidiary or acquire any
equity interest or other interest in any other Entity;
(k) the Company does not make any capital expenditure when
added to all other capital expenditures made on behalf of the Company during the
Pre Closing Period, do not exceed Fifty Thousand Dollars ($50,000), unless
approved in advance in writing by the Purchaser;
(l) the Company does not enter into or amend, or permit any of
the material assets owned or used by the Company to become bound by, any
Contract;
(m) the Company does not incur, assume or otherwise become
subject to any Liability, except for current liabilities incurred in the
Ordinary Course of Business, unless approved in advance in writing by the
Purchaser;
(n) the Company does not establish or adopt any employee
benefit plan (as defined in Section 3(3) of ERISA), does not pay any bonus or
make any profit-sharing or similar payment to, or increase the amount of the
wages, salary, commissions, fringe benefits, equity-based incentive awards or
other compensation or remuneration payable to, or enter into any employment,
change in control or severance agreement with, any of its directors, officers or
employees;
(o) the Company does not change any of its methods of
accounting or accounting practices in any material respect;
(p) the Company does not make any express or deemed Tax
election;
(q) the Company does not commence any Proceeding;
(r) the Company does not sell, transfer, lease, sublease,
license, sublicense or otherwise dispose of any properties or assets, real,
personal or mixed (including, without limitation, leasehold interests and
intangible property), other than the sale of inventories in the ordinary course
of business consistent with past practice; and
(s) the Company or the Stockholders do not disclose any secret
or confidential Intellectual Property (except by way of issuance of a patent) or
permit to lapse or go abandoned any Intellectual Property (or any registration
or grant thereof or any application relating thereto) to or under which the
Company has any right, title,
<PAGE> 55
interest or license.
7.4 Filings and Consents.
The Company and the Principal Stockholders shall ensure that:
(a) each filing or notice required to be made or given
(pursuant to any applicable legal requirement, Order or Contract, or otherwise)
by the Company or the Principal Stockholders in connection with the execution
and delivery of any of the Transactional Agreements or in connection with the
consummation or performance of any of the Transactions (including each of the
filings and notices identified in Part 5.5 of the Company Disclosure Schedule)
is made or given as soon as possible after the date of this Agreement;
(b) each Consent required to be obtained (pursuant to any
applicable legal requirement, Order or Contract, or otherwise) by the Company or
the Principal Stockholders in connection with the execution and delivery of any
of the Transactional Agreements or in connection with the consummation or
performance of any of the Transactions (including each of the Consents
identified in Part 5.5 of the Company Disclosure Schedule) is obtained as soon
as possible after the date of this Agreement and remains in full force and
effect through the Closing Date and beyond;
(c) the Company promptly delivers to the Purchaser a copy of
each filing made, each notice given and each Consent obtained by the Company or
the Principal Stockholders during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Company and its
representatives cooperate with the Purchaser and with the Purchaser's
representatives, and prepare and make available such documents and take such
other actions as the Purchaser may request in good faith, in connection with any
filing, notice or Consent that the Purchaser is required or elects to make, give
or obtain.
7.5 Notification; Updates to Company Disclosure Schedule.
(a) During the Pre-Closing Period, the Company and the
Principal Stockholders shall promptly notify the Purchaser in writing of:
(i) the discovery by the Company or the Principal
Stockholders of any event, condition, fact or circumstance that constitutes a
breach of any representation or warranty made by the Company or the Principal
Stockholders in this Agreement or in any of the other Transactional Agreements;
(ii) any event, condition, fact or circumstance that
may make the timely satisfaction of any of the conditions set forth in Section
4.1, impossible or unlikely; and
<PAGE> 56
(iii) all other material developments affecting the
assets, Liabilities, business, financial condition, operations, results of
operations, customer or supplier relations, employee relations, projections or
prospects of the Company.
(b) If any event, condition, fact or circumstance that is
required to be disclosed pursuant to Section 7.5(a) requires any change in the
Disclosure Schedule or Information Statement, or if any such event, condition,
fact or circumstance would require such a change assuming the Company Disclosure
Schedule were dated as of the date of the occurrence, existence or discovery of
such event, condition, fact or circumstance, then the Company and the Principal
Stockholders shall promptly deliver to the Purchaser an update to the Disclosure
Schedule or Information Statement (a "Disclosure Schedule Update") specifying
such change; provided, however, that the delivery of such Disclosure Schedule
Update shall in no way limit or modify the rights of the Purchaser and Merger
Sub under this Agreement and specifically that Purchaser and Merger Sub shall
continue to possess the termination and indemnification rights set forth in
Article X and Article XI, respectively, well as have the benefit of the
condition to closing set forth in Section 4.1(a) based on the information
contained in the original Disclosure Schedule.
7.6 No Negotiation.
Neither the Company nor the Principal Stockholders nor any of their
respective representatives, nor any of their employees, directors,
representatives, affiliates or advisors (including, without limitation, legal,
accounting, financial and investment banking advisors) will directly or
indirectly on behalf of the Company or the Selling Stockholders:
(a) enter into any agreement (or grant any option or right) to
sell, transfer or otherwise dispose of the shares of capital stock or the assets
of the Company or issue any controlling interest in shares of capital stock of
the Company, directly or indirectly, to any person other than options and shares
issuable upon exercise of the options in the ordinary course;
(b) hold any discussion with any person concerning the Company
in connection therewith or provide any information to, any person concerning the
Company in connection therewith; or
(c) respond to any inquiry made by any person concerning a
proposed acquisition of any assets or capital stock of the Company, except to
advise such person that the Company has entered into this Agreement. The Company
and the Selling Stockholders further agree to advise the Purchaser immediately
upon receiving any inquiry from any such person.
7.7 Best Efforts.
During the Pre-Closing Period, the Company and the Principal
Stockholders shall use
<PAGE> 57
their Best Efforts to cause the conditions set forth in Section 4.1 to be
satisfied on a timely basis, and shall not take any action or omit to take any
action, the taking or omission of which would or could reasonably be expected to
result in any of the representations and warranties set forth in Section 5 of
this Agreement becoming untrue, in any of the conditions of Closing set forth in
Section 4.1 not being satisfied or in the business of the Company becoming
materially less valuable.
8. Pre-Closing Covenants of the Purchaser.
8.1 Corporate Proceedings.
(a) The Purchaser shall ensure that resolutions (in form
satisfactory to the Purchaser) of the Purchaser Board approving or adopting, as
applicable, all necessary further action of the Purchaser Board, this Agreement,
the other Transactional Agreements and the Transactions and recommending
approval by the Purchaser's stockholders of the Agreement, the other
Transactional Agreements and the Transactions, are passed as necessary pursuant
to applicable law.
(b) Prior to or after the signing of this Agreement, the
Purchaser will prepare an Information Statement (the "Information Statement"),
subject to Section 7.1(b), and use its Best Efforts to cause the Information
Statement and any other disclosure documents deemed appropriate by the Purchaser
to be mailed to the Selling Stockholders in connection with obtaining the
approval of such Selling Stockholders of the Merger and this Agreement and the
other Transactional Agreements to which the Purchaser is a party.
8.2 Access and Investigation.
The Purchaser shall ensure that, at all times during the Pre-Closing
Period:
(a) the Purchaser and its representatives provide the Company
and its representatives with free and complete access at reasonable times to the
Purchaser's premises and assets and to all existing books, records, Tax Returns,
work papers and other documents and information relating to the Purchaser;
(b) the Purchaser and its representatives provide the Company
and its representatives with such copies of existing books, records, Tax
Returns, work papers and other documents and information relating to the
Purchaser as the Company may request in good faith; and
(c) the Purchaser and its representatives compile and provide
the Company and its representatives with such additional financial, operating
and other data and information regarding the Purchaser as the Company may
request in good faith.
8.3 Filings and Consents.
<PAGE> 58
The Purchaser shall ensure that:
(a) each filing or notice required to be made or given
(pursuant to any applicable legal requirement, Order or Contract, or otherwise)
by the Purchaser in connection with the execution and delivery of any of the
Transactional Agreements or in connection with the consummation or performance
of any of the Transactions is made or given as soon as possible after the date
of this Agreement;
(b) each Consent required to be obtained (pursuant to any
applicable legal requirement, Order or Contract, or otherwise) by the Purchaser
in connection with the execution and delivery of any of the Transactional
Agreements or in connection with the consummation or performance of any of the
Transactions is obtained as soon as possible after the date of this Agreement
and remains in full force and effect through the Closing Date;
(c) the Purchaser promptly delivers to the Purchaser a copy of
each filing made, each notice given and each Consent obtained by the Purchaser
during the Pre-Closing Period; and
(d) during the Pre-Closing Period, the Purchaser and its
representatives cooperate with the Company and its representatives, and prepare
and make available such documents and take such other actions as the Company may
request in good faith, in connection with any filing, notice or Consent that the
Company is required or elects to make, give or obtain.
8.4 Notification.
During the Pre-Closing Period, the Purchaser shall promptly notify the
Company in writing of:
(a) the discovery by the Purchaser of any event, condition,
fact or circumstance that might constitute a breach of any representation or
warranty made by the Purchaser in this Agreement or in any of the other
Transactional Agreements;
(b) any breach of any covenant or obligation of the Purchaser
or the Principal Stockholders; and
(c) any event, condition, fact or circumstance that may make
the timely satisfaction of any of the conditions set forth in Section 4.2,
impossible or unlikely.
8.5 Best Efforts.
During the Pre-Closing Period, the Purchaser shall use its Best Efforts
to cause the conditions set forth in Section 4.2 to be satisfied on a timely
basis, and shall not take any action or omit to take any action, the taking or
omission of which would or could
<PAGE> 59
reasonably be expected to result in any of the representations and warranties
set forth in Section 6 of this Agreement becoming untrue or in any of the
conditions of closing set forth in Section 4.2 not being satisfied.
9. Other Agreements.
9.1 Options.
(a) Purchaser agrees that as soon as reasonably practicable
after the Closing Date, but in no event later than 15 days following the Closing
Date, it will cause to be filed one or more registration statements on Form S-8
under the Securities Act, or amendments to its existing registration statements
on Form S-8, in order to register the shares of Purchaser Stock issuable upon
exercise of the aforesaid converted Options.
(b) Anything herein to the contrary notwithstanding, the
Company and the Purchaser agree that the Company may grant to the employees of
the Company prior to the Closing Date the remaining Options available for grant
under the Option Plan in accordance with the schedule provided to the Purchaser
pursuant to Section 5.3, it being agreed that such amount shall not exceed
1,149,161 Options (the "Pre-Closing Grants"). The Purchaser and the Company
agree that each Pre-Closing Grant Agreement shall, to the extent consistent with
the terms of the Option Plan, contain terms that are customarily contained in
the stock option award agreements evidencing option grants made by the Purchaser
to its employees under the Purchaser Option Plan. Anything in this Section
9.1(b) to the contrary notwithstanding, no Pre-Closing Grant Agreement shall
permit exercise prior to the date of vesting. Each Pre-Closing Grant Agreement
shall state that the grant of Options thereunder shall be null and void unless
prior to the Closing Date the Company receives approval of all Pre-Closing
Grants by the Selling Stockholders in the manner contemplated by Section
280G(b)(5) of the Code such that no such Pre-Closing Grant is a "parachute
payment" as defined in Section 280G(b)(2) of the Code.
(c) With respect to each Option listed on the schedule
provided to the Purchaser pursuant to Section 5.3 that was granted by the
Company under the Option Plan on February 1, 1999 or February 8, 1999 (each, a
"February Grant"), the Company shall take all necessary action so that the
portion of each such February Grant which is scheduled to vest on the third
anniversary of the applicable date of grant (or, if any such February Grant
vests on a monthly basis during the third year following grant, the portion of
such February Grant vesting during such third year) will become fully vested and
exercisable prior to the Closing Date. Except as provided in this Section
9.1(c), no other adjustments or modifications shall be made to any Options. The
acceleration of vesting and exercisability described in this Section 9.1(c)
shall be null and void unless prior to the Closing Date the Company receives
approval of such acceleration and vesting by the Selling Stockholders in the
manner contemplated by Section 280G(b)(5) of the Code such that the acceleration
and vesting described in this Section 9.1(c) is not considered a "parachute
payment" as defined in Section 280G(b)(2) of the Code.
<PAGE> 60
9.2 Confidentiality.
Each of the parties hereto hereby agrees to and reaffirms the terms and
provisions of the Mutual Nondisclosure Agreement by and between the Purchaser
and the Company.
9.3 Public Disclosure.
Unless otherwise required by law (including, without limitation,
securities laws) or, as to the Purchaser, by the rules and regulations of the
National Association of Securities Dealers, Inc., prior to the Effective Time,
no disclosure (whether or not in response to an inquiry) of the subject matter
of this Agreement or any Transactional Agreement shall be made by any party
hereto unless approved by the Purchaser and the Company prior to release;
provided, that such approval shall not be unreasonably withheld.
9.4 No Inconsistent Action.
Neither the Purchaser nor the Company and the Selling Stockholders
shall take any action inconsistent with the treatment of the Merger as a
reorganization under Section 368(a)(2)(E) of the Code.
9.5 Voting of Shares; Further Assurances.
(a) Each Principal Stockholder, by this Agreement, does hereby
constitute and appoint Purchaser, or any nominee of Purchaser, with full power
of substitution, during and for the term of this Agreement, as such Principal
Stockholder's true and lawful attorney and proxy, for and in such Principal
Stockholder's name, place and stead, to vote each of the Principal Stockholder's
Stock as such Principal Stockholder's proxy, at every annual, special or
adjourned meeting of stockholders of the Company (including, the right to sign
such Principal Stockholder's name (as stockholder) to any consent, certificate
or other document relating to the Company that the law of the State of Delaware
may permit or require) (i) in favor of the adoption of this Agreement and
approval of the Merger and the other transactions contemplated by this
Agreement, (ii) against any proposal for any recapitalization, merger, sale of
assets or other business combination between the Company and any person or
entity (other than the Merger), (iii) in favor of any proposal regarding any
matter requiring approval of the Selling Stockholders under Section 9.1 and (iv)
in favor of any other matter necessary to effect the consummation of the
transactions contemplated by this Agreement.
(b) Each Principal Stockholder does hereby waives any right to
receive written notice regarding the Merger as provided in the Certificate of
Incorporation of the Company.
9.6 No Inconsistent Agreement.
Each Principal Stockholder hereby covenants and agrees that, except as
contemplated by this Agreement, the Principal Stockholder shall not enter into
any voting agreement or
<PAGE> 61
grant a proxy or power of attorney with respect to the Stock which is
inconsistent with this Agreement.
9.7 Use of Intellectual Property.
(a) The Selling Stockholders acknowledge that from and after
the Closing, the name "Buy Direct" and all similar or related names, marks and
logos (all of such names, marks and logos being the "Company Names") shall be
owned by the Company, that none of the Selling Stockholders nor any of their
affiliates will contest the ownership or validity of any rights of Purchaser,
Company or any of their respective subsidiaries in or to the Company Names.
(b) Except as set forth in Part 9.8 of the Disclosure
Schedule, from and after the Closing, none of the Selling Stockholders nor any
of its Affiliates shall use any of the Company Proprietary Assets.
9.8 Tax-Free Reorganization.
The parties intend that the Merger qualify as a tax-free reorganization
under Section 368(a) of the Code. None of the Purchaser, Merger Sub, the Company
or the Subsidiary shall take any action or agree to take any action that
knowingly would cause the Merger not to be treated as a tax-free reorganization
under Section 368(a) of the Code.
10. Termination.
10.1 Termination Events.
This Agreement may be terminated prior to Closing:
(a) by the Purchaser if there is a material breach of any
covenant or obligation of the Company or the Selling Stockholders and such
breach has not been cured within ten (10) business days after written notice of
such breach is given to the Company;
(b) by the Company if there is a material breach of any
covenant or obligation of the Purchaser and such breach has not been cured
within ten (10) business days after written notice of such breach is given to
the Purchaser;
(c) by either the Purchaser or the Company if the Closing has
not taken place on or before March 31, 1999; provided, however, that the right
to terminate this Agreement pursuant to this Section 10.1 shall not be available
to any party whose
<PAGE> 62
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Effective Date to occur on or
prior to such date;
(d) by Purchaser, Merger Sub or the Company if any
Governmental Authority shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; or
(e) by the mutual consent of the Purchaser and the Company.
10.2 Termination Procedures.
If the Purchaser wishes to terminate this Agreement pursuant to Section
10.1(a), Section 10.1(c) or Section 10.01(d), the Purchaser shall deliver to the
Company and the Stockholder Representative a written notice stating that the
Purchaser is terminating this Agreement and setting forth a brief description of
the basis on which the Purchaser is terminating this Agreement. If the Company
wishes to terminate this Agreement pursuant to Section 10.1(b), Section 10.1(c)
or Section 10.01(d), the Company shall deliver to the Purchaser a written notice
stating that the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Company is terminating this Agreement.
10.3 Effect of Termination.
If this Agreement is terminated pursuant to Section 10.1, all further
obligations of the parties under this Agreement shall terminate; provided, that
each party shall remain liable for any breaches of this Agreement prior to its
termination and provided, further, that Sections 9.2, 9.3, 10, 11, 12.2 and 12.3
shall survive the termination of this Agreement.
11. Indemnification, etc.
11.1 Survival of Representations and Covenants.
(a) The representations, warranties, covenants and obligations
of each party set forth in this Agreement or any Transactional Agreement shall
survive the Closing Date, but not any Change of Control of the Purchaser, except
for the covenant contained in Section 9.8 hereof or unless otherwise agreed. Any
representation made relating to Tax matters and representation relating to the
capitalization of the Company shall survive the Closing and continue until the
expiration of the statute of limitation period or periods applicable to them,
including any statute of limitations governing fraud. All other representations
and warranties (as well as covenants and obligations to be performed prior to
the Closing Date) of the parties in this Agreement or any Transactional
Agreement shall terminate on the date 15 months after the Closing Date. If
<PAGE> 63
the Purchaser shall give the Company and the Stockholder Representative written
notice of a claim prior to the expiration of the applicable survival period,
then the relevant representation or warranty or covenant, as the case may be,
shall survive as to such claim until such claim shall have been finally
resolved.
(b) For purposes of this Agreement, although each statement or
other item of information set forth in the Company Disclosure Schedule qualifies
the specific representation and warranty to which such information refers, all
such statements and other items of information set forth in the Company
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company and the Selling Stockholders in this Agreement.
(c) The representations, warranties, covenants and obligations
of the Company or the Selling Stockholders are made to the Purchaser and for the
benefit of each Indemnitee (as defined in Section 11.2(a) below).
11.2 Indemnification by the Selling Stockholders.
(a) Subject to the remainder of this Section 11.2 and Section
11.5 hereof, the Selling Stockholders covenant and agree to defend, indemnify
and hold harmless the Purchaser and each of its officers, directors, employees,
agents and representatives (collectively, the "Indemnitees", and individually
each an "Indemnitee") from and against, and shall compensate and reimburse each
of the Indemnitees for, any Damages which are suffered or incurred by any of the
Indemnitees (regardless of whether or not such Damages relate to any third party
claim) directly or indirectly arising or resulting from or connected with (i)
any breach of any representation or warranty (provided that solely for purposes
of determining the amount of Damages with respect to the breach hereof and not
for determining the existence of a breach or claim, each such representation or
warranty shall be read as if all qualifications as to materiality were deleted
therefrom) made by the Company or the Selling Stockholders in this Agreement or
any Transactional Agreement, (ii) any breach of any covenant or agreement by the
Company or any Selling Stockholder in this Agreement or any other Transactional
Agreement, or (iii) any and all Damages suffered or incurred by Purchaser or the
Company by reason of or in connection with any claim or cause of action of any
third party to the extent arising out of any action, inaction, event, condition,
liability or obligation of the Company or the Selling Stockholders occurring or
existing prior to the Effective Time.
To the extent that the Company's or any Selling Stockholders'
undertakings set forth in this Section 11.2 may be unenforceable, each Selling
Stockholder shall contribute the maximum amount that it is permitted to
contribute under applicable Law to the payment and satisfaction of all Losses
incurred by the Company, the Purchaser, Merger Sub or other Indemnitee subject
to the limitations imposed by this Agreement.
<PAGE> 64
(b) After Closing, the Selling Stockholders shall not be
required to indemnify any Indemnitee with respect to any claim for
indemnification pursuant to Section 11.2(a) unless and until the aggregate
amount of indemnifiable Damages suffered by all Indemnitees subject to
indemnification pursuant to this Agreement exceeds $175,000 (the "Threshold"),
at which point the Selling Stockholders shall indemnify the full amount of such
claims and all claims thereafter, subject to any other applicable limitations in
this Section 11.2 on the Selling Stockholders' indemnification obligations. The
aggregation of claims must only reach the Threshold once, and after such point
the Indemnitees may seek indemnification for all claims which may arise under
this Section 11.2. Notwithstanding anything to the contrary in the foregoing,
Damages resulting from (i) fraud or willful misconduct, (ii) breach of any
representation relating to Tax matters, (iii) breach of any representation
relating to the capitalization of the Company, or (iv) breach of any covenant or
agreement by the Company or Selling Stockholder in the Agreement or any
Transactional Agreement shall not be subject to the Threshold and shall be
indemnifiable up to the total consideration received by the Selling Stockholders
pursuant to this Agreement.
(c) The Selling Stockholders acknowledge and agree that if
there is any breach of any representation, warranty or other provision relating
to the Selling Stockholders or the Company's business, condition, assets,
liabilities, operations, financial performance, net income or prospects (or any
aspect or portion thereof), then the Purchaser itself shall be deemed, by virtue
of its ownership of the Company, to have incurred Damages, if any, as a result
of such breach or Liability, and the Purchaser shall be entitled to such
indemnification as may be available pursuant to the terms of this Section 11.
Nothing contained in this Section 11.2(c) shall have the effect of (i) limiting
the circumstances under which the Purchaser may otherwise be deemed to have
incurred Damages for purposes of this Agreement, (ii) limiting the other types
of Damages that the Purchaser may be deemed to have incurred (whether in
connection with any such breach or Liability or otherwise), or (iii) limiting
the rights of the Purchaser or any of the other Indemnitees under this Section
11.2.
(d) The number of shares of Purchaser Stock to be released to
Purchaser pursuant to the terms of this Agreement and the Escrow Agreement shall
be calculated by dividing the dollar amount of the Damages by the Average
Purchaser Stock Price on the date an Indemnitee shall make a claim for Damages.
(e) The Selling Stockholders are not required to make any
indemnification payment hereunder unless a claim is initiated prior to
expiration of the applicable survival period set forth in Section 11.1(a).
11.3 Setoff.
In addition to any rights of setoff or other rights that any Person may
have
<PAGE> 65
at common law or otherwise, each Person shall have the right to set off any
amount that may be owed to it by the other under this Section 11 against any
amount otherwise payable by such Person hereunder.
11.4 Defense of Third Party Claims.
In the event of the assertion or commencement by any Person of any
claim or Proceeding (whether against the Purchaser, the Company, the Selling
Stockholders, any other Indemnitee or any other Person) with respect to which a
party hereto may become obligated hereunder to indemnify, hold harmless,
compensate or reimburse any Indemnitee pursuant to this Section 11, the party to
be indemnified (the "Indemnified Party") shall reasonably promptly, but in any
event within 60 days following the Indemnified Party's actual knowledge thereof,
notify the Person providing the indemnification hereunder (the "Indemnifying
Party") of such claim or Proceeding by providing notice to the Stockholder
Representative; provided, however, that the failure to provide such notice shall
not release the Selling Stockholders from any of their obligations under this
Section 11, except to the extent that the Selling Stockholders are materially
prejudiced by such failure. In any such event, the Indemnified Party may proceed
with the defense of such claim or Proceeding and the Indemnifying Party shall
bear and pay all costs and expenses (including attorneys fees and costs) in
connection with the Indemnified Party's defense of any such claim or Proceeding
(whether or not incurred by the Indemnified Party); provided, that all such
expenses paid by the Selling Stockholders, combined with any other
indemnification, will in no event exceed the respective indemnification
limitations set forth in Section 11.5(a).
If the Indemnified Party so proceeds with the defense of any such claim
or Proceeding:
(a) all expenses reasonably incurred and relating to the
defense of such claim or Proceeding (whether or not incurred by the Indemnified
Party) shall be borne and paid exclusively by the Indemnifying Party;
(b) the Indemnifying Party shall make available to the
Indemnified Party any documents and materials in the possession or control of
the Indemnifying Party that may be necessary to the defense of such claim or
Proceeding;
(c) the Indemnified Party shall keep the Stockholder
Representative informed of all material developments and events relating to such
claim or Proceeding;
(d) the Stockholder Representative shall have the right to
participate in the defense of such claim or Proceeding at his own expense; and
(e) the Indemnified Party shall not settle, adjust or
compromise such claim or Proceeding without the prior written consent of the
Stockholder Representative, which consent shall not be unreasonably withheld.
<PAGE> 66
11.5 Sole Remedy.
Other than rights to equitable relief and with respect to claims for
fraud, the sole remedy available to any Indemnitee or other Person for breaches
of this Agreement or the Transactional Agreements shall be limited to the rights
set forth in this Section 11. The maximum aggregate amount payable by each
Selling Stockholder, to any and all Indemnitees for any and all Damages arising
out of, or in connection with, this Agreement, any Transactional Agreement, any
certificate, any other document delivered, or any of the Transactions, shall not
exceed such Selling Stockholder's pro rata portion of the Escrow Fund; provided,
however, any Damages resulting from (i) fraud or willful misconduct, (ii) breach
of any representation relating to Tax matters, (iii) breach of any
representation relating to the capitalization of the Company, or (iv) breach of
any covenant or agreement by the Company or Selling Stockholder in the Agreement
or any Transactional Agreement, shall not be subject to such limitation and
shall be indemnifiable in full. In no event will any other Person except the
named Indemnitees have any rights to any payments whatsoever. Any claims for
Damages hereunder against Purchaser shall be subject to the same limitations set
forth in favor of the Selling Stockholders in this Section 11.
11.6 Exercise of Remedies by Indemnities Other than the Purchaser and
by Selling Stockholders.
(a) No Person other than an Indemnitee (or any successor or
assignee thereof) shall be permitted to assert any indemnification claim or
exercise any other remedy under this Agreement unless the Purchaser, the Company
and the Selling Stockholders (or any successor assignee thereof) shall have
consented to the assertion of such indemnification claim or the exercising of
such other remedy.
(b) No Selling Stockholder shall be permitted to exercise any
remedy under this Agreement except through the Stockholder Representative.
12. Miscellaneous.
12.1 Further Assurances.
Each party hereto shall execute and/or cause to be delivered to each
other party hereto such instruments and other documents, and shall take such
other actions, as such other party may reasonably request (prior to, at or after
the Closing) for the purpose of carrying out or evidencing any of the
Transactions.
12.2 Fees and Expenses.
Subject to the provisions of this Agreement (including the
indemnification and other obligations of the Principal Stockholders pursuant to
Section 11), each party shall bear and pay all fees, costs and expenses that
have been incurred or that are in the future
<PAGE> 67
incurred by or on behalf of such party in connection with the Transactions.
Notwithstanding anything to the contrary in the foregoing, all fees, costs and
expenses of professional advisors to the Selling Stockholders and the Company
(including, without limitation, those of BancBoston Robertson Stephens, Perkins
Coie LLP and PriceWaterhouse Coopers LLP) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the
Principal Stockholders; provided, however, that up to $400,000 of such
professional fees, costs and expenses shall be paid by the Purchaser.
12.3 Attorneys' Fees.
If any legal action or other legal proceeding (including arbitration)
relating to the Transactions or the enforcement of any provision of any of the
Transactional Agreements is brought against any party hereto, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party may
be entitled).
12.4 Transfer Taxes.
The Principal Stockholders shall be responsible for sales, use and
transfer taxes, including but not limited to any value added, stock transfer,
gross receipts, stamp duty and real, personal or intangible property transfer
taxes, due by reason of the consummation of the Transactions, including but not
limited to any interest or penalties in respect thereof.
12.5 Governing Law; Venue.
(a) Except to the extent that Delaware law is mandatorily
applicable to the Merger and the rights of the parties hereunder, this Agreement
is to be construed in accordance with and governed by the laws of the State of
California (as permitted by Section 1646.5 of the California Civil Code or any
similar successor provision), without giving effect to any choice of law rule
that would cause the application of the laws of any jurisdiction other than the
State of California to the rights and duties of the parties.
(b) Any legal action or other legal proceeding relating to
this Agreement or the enforcement of any provision of this Agreement may be
brought or otherwise commenced in any state or federal court located in the
County of San Francisco, California. Each party to this Agreement:
(i) expressly and irrevocably consents and submits to
the jurisdiction of each state and federal court located in the County of San
Francisco, California (and each appellate court located in the State of
California) in connection with any such legal proceeding;
(ii) agrees that each state and federal court located
in the County of San Francisco, California shall be deemed to be a convenient
forum; and
<PAGE> 68
(iii) agrees not to assert (by way of motion, as a
defense or otherwise), in any such legal proceeding commenced in any state or
federal court located in the County of San Francisco, California any claim that
such party is not subject personally to the jurisdiction of such court, that
such legal proceeding has been brought in an inconvenient forum, that the venue
of such proceeding is improper or that this Agreement or the subject matter of
this Agreement may not be enforced in or by such court.
(c) The parties agree that if any Proceeding is commenced
against any Indemnitee by any Person in or before any court or other tribunal
anywhere in the world, then such Indemnitee may proceed against the applicable
party in such court or tribunal with respect to any indemnification claim or
other claim arising directly or indirectly from or relating directly or
indirectly to such Proceeding or any matters alleged therein or any of the
circumstances giving rise thereto.
(d) Nothing contained in Section 12.5(b) or (c) shall be
deemed to limit or otherwise affect the right of any Indemnitee to commence any
legal proceeding or otherwise proceed against the Principal Stockholders in any
other forum or jurisdiction.
12.6 Successors and Assigns.
Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto and the Indemnitees
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Stock from time to time. None of the parties hereto may assign
any of its or their rights or obligations hereunder to any other party (by
contract, operation of law or otherwise) without the prior written consent of
the other, which consent shall not be unreasonably withheld, and any attempted
assignment in violation thereof shall be void and of no effect.
12.7 Entire Agreement.
The Transactional Agreements, the Schedules and the Exhibits thereto
and the other documents contemplated expressly thereby constitute the full and
entire understanding and agreement between the parties with regard to the
subjects thereof and supersede all prior agreements and understandings among or
between any of the Parties relating to the subject matter hereof.
12.8 Separability.
In case any provision of this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
12.9 Amendments.
<PAGE> 69
This Agreement may be amended or modified only upon the mutual written
consent of the Principal Stockholders, the Company and the Purchaser. Any
amendment or modification effected pursuant to this Section 12.9 shall be in
writing and be binding upon the Principal Stockholders, the Company and the
Purchaser.
12.10 Notices.
Any notice or other communication required or permitted to be delivered
to any party under this Agreement shall be in writing and shall be deemed
properly delivered, given and received when delivered (by hand, by registered
mail, by courier or express delivery service or by telecopier during business
hours) to the address or telecopier number set forth beneath the name of such
party below (or to such other address or telecopier number as such party shall
have specified in a written notice given to the other parties hereto):
if to the Company:
BuyDirect.com, Inc.
One Beach Street, Suite 310
San Francisco, CA 94133
Attention: Bong Suh
Telecopier: 415-835-9192
with a copy to:
Perkins Coie LLP
2420 Sand Hill Road, Suite 203
Menlo Park, California 94025
Attention: Buddy Arnheim, Esq.
Telecopier: 650
0366
if to the Principal Stockholders:
c/o Stockholder Representative
BuyDirect.com, Inc.
One Beach Street, Suite 310
San Francisco, CA 94133
Attention: Bong Suh
Bill Headapohl
Telecopier: 415-835-9192
if to the Purchaser:
<PAGE> 70
Beyond.com Corporation
1195 West Fremont Avenue
Sunnyvale, CA 94087
Attention: Michael Praisner
Telecopier: 408-530-0800
with a copy to:
Shearman & Sterling
1550 El Camino Real
Menlo Park, California 94025
Attention: Christopher D. Dillon, Esq.
Kevin Kennedy, Esq.
Telecopier: 650-330-2299
12.11 Publicity and Use of Confidential Information.
(a) Notwithstanding anything to the contrary contained in any
agreement among the parties hereto, after the Closing the Purchaser shall have
the right to disclose the Company's financial statements and related
information, the terms of this Agreement and the identity of the Company to
potential investors of the Purchaser, through the use of printed offering
materials or otherwise or as otherwise required by applicable legal
requirements.
(b) The Principal Stockholders shall keep strictly
confidential, and shall not use, or disclose to any other Person, any non public
document or other information in the Principal Stockholders' possession that
relates directly or indirectly to the business of the Company, the Purchaser or
any affiliate of the Purchaser.
(c) The Principal Stockholders shall not issue or disseminate
any press release or other publicity concerning any of the Transactions, or
permit any press release or other publicity concerning any of the Transactions
to be issued or otherwise disseminated by or on behalf of the Principal
Stockholders without the Purchaser's prior written consent, and the Principal
Stockholders shall continue to keep the terms of this Agreement and the other
Transactional Agreements strictly confidential.
12.12 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument.
12.13 Delays or Omissions; Waivers.
(a) No failure on the part of any Person to exercise any
power, right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such
<PAGE> 71
power, right, privilege or remedy; and no single or partial exercise or waiver
of any such power, right, privilege or remedy shall preclude any other or
further exercise thereof or of any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising
out of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
12.14 Remedies Cumulative; Specific Performance.
All remedies, either under this Agreement or by law or otherwise
afforded to the parties hereto, shall be cumulative and not alternative. Each of
the parties agrees that:
(a) in the event of any breach or threatened breach by a party
or Company of any covenant, obligation or other provision set forth in this
Agreement, the other party shall be entitled (in addition to any other remedy
that may be available to it) to (i) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (ii) an injunction restraining such breach or threatened
breach; and
(b) neither the Purchaser nor any other Indemnitee, on the one
hand, nor the Principal Stockholders, on the other, shall be required to provide
any bond or other security in connection with any such decree, order or
injunction or in connection with any related action or Proceeding.
12.15 Headings.
The underlined headings contained in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not
be referred to in connection with the construction or interpretation of this
Agreement.
12.16 Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and
"including,"
<PAGE> 72
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise specified, all references in this
Agreement to "Sections," "Exhibits" and "Schedules" are intended to refer to
Sections of this Agreement and Exhibits and Schedules to this Agreement.
12.17 No Third Party Beneficiaries.
Except for the provisions of Article XI relating to indemnified
parties, this Agreement shall be binding upon and inure solely to the benefit of
the parties hereto and their permitted assigns and nothing herein, whether
express or implied, is intended to or shall confer upon any other person any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED AGREEMENT AND PLAN OF MERGER as of the date set forth in the first
paragraph hereof.
COMPANY: BuyDirect.com, Inc.,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
PURCHASER: Beyond.com Corporation,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
MERGER SUB: BD Acquisition, Inc.,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE> 73
PRINCIPAL STOCKHOLDERS: At Home Network Corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
<PAGE> 74
CNET, Inc.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Bayview Investments
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
By:
-----------------------------------
Name:
---------------------------------
By:
-----------------------------------
Name:
---------------------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------
INDEX OF SCHEDULES AND EXHIBITS
Schedule IA Schedule of Stock Ownership
Schedule III Disclosure Schedule
Exhibit A Certain Definitions
Exhibit B Form of Escrow Agreement
Exhibit C Form of Registration Rights Agreement
<PAGE> 75
Exhibit D Form of Investment Agreement
Exhibit E Forms of Offer Letters and Protective Covenant Letters
Exhibit F Financial Statements of the Company
Agreement and Plan of Merger
Schedule IA
SCHEDULE OF STOCK OWNERSHIP
<PAGE> 76
Agreement and Plan of Merger
Schedule III
DISCLOSURE SCHEDULE
Agreement and Plan of Merger
Exhibit A
CERTAIN DEFINITIONS
For purposes of this Agreement:
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale or other disposition of all or any portion of the
Company's business or
<PAGE> 77
assets (other than in the Ordinary Course of Business);
(b) the issuance, sale or other disposition of (i) any capital
stock of the Company, (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock of the Company, or (iii)
any security, instrument or obligation that is or may become convertible into or
exchangeable for any capital stock of the Company; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving the Company.
Additional Payments. "Additional Payments" shall have the meaning
specified in Section 3.2(a).
Affiliate. "Affiliate" means, with respect to any specified Person, any
other Person that directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
Aggregate Series A Liquidation Preference. "Aggregate Series A
Liquidation Preference" shall have the meaning specified in Section 1.3(b).
Aggregate Series B Liquidation Preference. "Aggregate Series B
Liquidation Preference" shall have the meaning specified in Section 1.3(b).
Aggregate Series C Liquidation Preference. "Aggregate Series C
Liquidation Preference" shall have the meaning specified in Section 1.3(b).
Aggregate Series D Liquidation Preference. "Aggregate Series D
Liquidation Preference" shall have the meaning specified in Section 1.3(b).
Aggregate Series E Liquidation Preference. "Aggregate Series E
Liquidation Preference" shall have the meaning specified in Section 1.3(b).
Agreement. "Agreement" shall mean the Agreement and Plan of Merger to
which this Exhibit A is attached (including the Company Disclosure Schedule, the
Purchaser Disclosure Schedule and all other schedules and exhibits attached
thereto), as it may be amended from time to time.
Audited Financial Statements. "Audited Financial Statements" shall mean
the audited consolidated balance sheet of the Company for the fiscal year ended
December 31, 1998, and the related audited consolidated statements of income,
retained earnings, stockholder's equity and changes in the financial position of
the Company, together with all related notes and schedules thereto, accompanied
by the unqualified reports thereon of the Company's Accountants.
Average Purchaser Stock Price. "Average Purchaser Stock Price" shall
refer to the average of the closing price of the Purchaser Stock on the Nasdaq
Stock Market for
<PAGE> 78
the five consecutive trading days ending on (and including) the trading day that
is two days prior to a given date.
Best Efforts. "Best Efforts" shall mean the efforts that a prudent
Person desiring to achieve a particular result would use in order to ensure that
such result is achieved as expeditiously as possible.
Business. "Business" shall mean the consolidated business of online
retailing and reselling to consumers, commercial customers and government
customers of software and peripherals.
Business Day. "Business Day" shall mean any day that is not a Saturday,
a Sunday or other day on which banks are required or authorized by law to be
closed in San Francisco, California.
Certificates. "Certificates" shall have the meaning specified in
Section 3.2.
Change of Control of the Purchaser. "Change of Control of the
Purchaser" shall mean the consummation of:
(i) any sale or other disposition of all or
substantially all of the assets of the Purchaser (other than in the ordinary
course of the Purchaser's business); or
(ii) any merger, consolidation, business combination,
share exchange, reorganization or similar transaction involving the Purchaser
pursuant to which the stockholders of the Purchaser immediately prior to the
consummation of such transaction will own less than 50% of the equity interest
in the entity surviving such transaction.
Closing. "Closing" shall have the meaning specified in Section 3.4.
Closing Date. "Closing Date" shall have the meaning specified in
Section 3.4.
Code. "Code" shall have the meaning specified in the recitals to this
Agreement.
Common Stock. "Common Stock" shall mean the common stock, $0.0001 par
value per share, of the Company.
Company. "Company" shall have the meaning specified in the preamble of
this Agreement.
Company Board. "Company Board" shall mean the members of the board of
directors of the Company.
Company Closing Certificate. "Company Closing Certificate" shall have
the meaning specified in Section 4.1(c)(vi).
<PAGE> 79
Company Contract. "Company Contract" shall mean any contract listed on
the Company Disclosure Schedule.
Company Proprietary Assets. "Company Proprietary Assets" shall have the
meaning specified in Section 5.7.
Company Systems. "Company Systems" shall mean all computer, hardware,
software, systems and equipment (including embedded microcontrollers in
non-computer equipment) embedded within current products of the Company or the
Subsidiary, and/or necessary for the Company or the Subsidiary to carry on its
business as currently conducted.
Company's Accountants. "Company's Accountants" shall mean
PriceWaterhouseCoopers, independent accountants of the Company. Consent.
"Consent" shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
Constituent Corporations. "Constituent Corporations" shall refer to the
Company and Merger Sub.
Contract. "Contract" shall mean, with respect to any Person, any
written or oral or other contract, arrangement or other agreement to which such
Person is a party or by which its properties or assets may be bound or affected
or under which it or its respective business, properties or assets receive
benefits.
Core Contracts. "Core Contracts" shall mean the Co-Branded Software
Site Agreement (undated) between the Company and At Home Corporation, the
Co-Branded Software Site Agreement, dated as of February 12, 1999, between the
Company and Service Co, LLC, the Promotion Agreement, dated as of November 1,
1998, between the Company and CNET, Inc., the Commerce Partner and Sponsorship
Agreement, dated as of November 18, 1998, between the Company and Xoom Inc., and
the ZDNet Agreement.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, Liability, settlement, judgment, award, fine, penalty,
Tax, fee (including any legal fee, expert fee, accounting fee or advisory fee),
charge, cost (including any cost of investigation) or expense of any nature.
Defined Benefit Plan. "Defined Benefit Plan" shall mean either a plan
described in Section 3(35) of ERISA or a plan subject to the minimum funding
standards set forth in Section 302 of ERISA and Section 412 of the Code.
DGCL. "DGCL" shall have the meaning specified in Section 1.1.
Disclosure Schedule. "Disclosure Schedule" shall have the meaning
specified in Section 5.
<PAGE> 80
Disclosure Schedule Update. "Disclosure Schedule Update" shall have the
meaning specified in Section 7.5.
Dissenting Holder. "Dissenting Holder" shall have the meaning specified
in Section 3.6.
Dissenting Shares. "Dissenting Shares" shall have the meaning specified
in Section 3.6.
Effective Time. "Effective Time" shall have the meaning specified in
Section 1.2.
Entity. "Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust or company (including any limited
liability company or joint stock company).
Environmental Law. "Environmental Law" shall mean any federal, state,
local or foreign legal requirement relating to pollution or protection of human
health or the environment.
ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
Escrow Account. "Escrow Account" shall mean the account into which the
Escrow Fund is deposited.
Escrow Agent. "Escrow Agent" shall have the meaning specified in the
recitals to this Agreement.
Escrow Agreement. "Escrow Agreement" shall have the meaning specified
in the recitals to this Agreement.
Escrow Fund. "Escrow Fund" shall have the meaning specified in Section
3.1(e).
Escrow Shares. "Escrow Shares" shall have the meaning specified in
Section 3.2(a).
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Exchange Ratio. "Exchange Ratio" shall have the meaning specified in
Section 3.1(b).
Financial Statements. "Financial Statements" shall have the meaning
specified in Section 5.9(a).
<PAGE> 81
Fully Diluted Shares. "Fully Diluted Shares" shall have the meaning
specified in Section 3.1(b).
Governmental Authorization. "Governmental Authorization" shall mean
any:
(a) permit, license, certificate, franchise, approval,
consent, permission, clearance, waiver, certification, designation,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any legal requirement; or
(b) right under any Contract with any Governmental Body.
Governmental Body. "Governmental Body" shall mean any:
(a) nation, principality, state, province, territory, county,
municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other
government; or
(c) individual, Entity or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature. Indemnified Party.
"Indemnified Party" shall have the meaning specified in Section 11.4.
Indemnifying Party. "Indemnifying Party" shall have the meaning
specified in Section 11.4.
Indemnitee. "Indemnitee" shall have the meaning specified in Section
11.2(a).
Information Statement. "Information Statement" shall mean the
disclosure document prepared and mailed to the Company's stockholders in
accordance with Section 7.1.
Interim Grants. "Interim Grants" shall have the meaning specified in
Section 5.3(a).
Investment Agreement. "Investment Agreement" shall have the meaning
specified in Section 4.1(c).
January Audited Balance Sheet. "January Audited Balance Sheet" shall
mean the balance sheet of the Company as of January 31, 1999.
Key Employees. "Key Employees" shall refer to each of Bong Suh, Jody
Sherman, Bill Headapohl, Kathryn Weller and Erik Lou.
<PAGE> 82
Leased Premises. "Leased Premises" shall mean the premises and
facilities identified in Part 5.10(d) of the Disclosure Schedule.
Liability. "Liability" shall mean any debt, obligation, duty or
liability of any nature (including any unknown, undisclosed, unmatured,
unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless of whether such
debt, obligation, duty or liability would be required to be disclosed on a
balance sheet prepared in accordance with generally accepted accounting
principles and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
Licensed Proprietary Assets. "Licensed Proprietary Assets" shall have
the meaning specified in Section 5.7.
Member of the Controlled Group. "Member of the Controlled Group" shall
mean each trade or business, whether or not incorporated, which would be treated
as a single employer with the Company under Section 4001 of ERISA or Section
414(b), (c), (m) or (o) of the Code.
Merger. "Merger" shall have the meaning specified in the recitals to
this Agreement.
Merger Sub. "Merger Sub" shall have the meaning specified in the
preamble to this Agreement.
Merger Sub Board. "Merger Sub Board" shall refer to the Board of
Directors of Merger Sub. Multiemployer Plan. "Multiemployer Plan" shall mean a
plan described in Section 3(37) of ERISA.
Net Debt Balance. "Net Debt Balance" shall mean the number, based on
the January Audited Balance Sheet, obtained by applying the following formula:
(i) total debt (including accrued or contingent
liabilities net of any underlying leased asset and excluding principal and
accrued interest on the Convertible Promissory Notes issued in connection with
the Series D Preferred Stock financing, which such principal and accrued
interest were converted into Series D Preferred Stock on February 10, 1999);
(ii) plus the amount of accounts payable more than 30
days overdue, except for such amounts that if paid would represent a prepaid
expense;
(iii) less the amount of cash and the cash proceeds
from the sale of the Series D Convertible Preferred Stock to At Home Network
Corporation on February __, 1999;
(iv) less the amount of net accounts receivables more
than 30 days old and any pre-paid At Home Network Corporation media fees;
(v) less the amount of total cash proceeds that the
Company would have received upon the exercise of all of the Options (except with
respect to Options granted
<PAGE> 83
on or after the date hereof);
(vi) plus $1.1 million; and
(vii) plus the amount of professional fees and
expenses incurred by the Company in connection with the Merger and invoiced by
the Company at Closing in excess of $400,000. Any such expenses not invoiced by
the Company at the Closing shall not be assumed by the Purchaser
Net Merger Consideration. "Net Merger Consideration" shall have the
meaning specified in Section 1.3.
Option Plan. "Option Plan" shall have the meaning specified in Section
3.1(c)(i).
Options. "Options" shall have the meaning specified in Section 1.3.
Order. "Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
subpoena, writ or award that is or has been issued, made, entered, rendered or
otherwise put into effect by or under the authority of any court, administrative
agency or other Governmental Body or any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is or has been
entered into in connection with any Proceeding.
Ordinary Course of Business. An action taken by or on behalf of the
Company shall not be deemed to have been taken in the "Ordinary Course of
Business" unless:
(a) such action is recurring in nature, is consistent with the
Company's past practices and is taken in the ordinary course of the Company's
normal day to day operations;
(b) such action is taken in accordance with sound and prudent
business practices;
(c) such action is not required to be authorized by the
Company's shareholders, the Company Board or any committee of the Company Board
and does not require any other separate or special authorization of any nature;
and
(d) such action is similar in nature and magnitude to actions
customarily taken, without any separate or special authorization, in the
ordinary course of the normal day to day operations of other Entities that are
engaged in businesses similar to the Company's business.
Owned Proprietary Assets. "Owned Proprietary Assets" shall have the
meaning specified in Section 5.7.
<PAGE> 84
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Plans. "Plans" shall have the meaning specified in Section 5.24(a).
Pre-Closing Period. "Pre-Closing Period" shall mean the period from the
date of this Agreement until the Closing Date.
Principal Stockholders. "Principal Stockholders" shall have the meaning
specified in the preambles to this Agreement.
Proceeding. "Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), hearing,
inquiry, audit or investigation that is or has been commenced, brought,
conducted or heard by or before, or that otherwise has involved or may involve,
any Governmental Body or any arbitrator or arbitration panel.
Preferred Stock. "Preferred Stock" shall have the meaning specified in
Section 3.1(b).
Proprietary Asset. "Proprietary Asset" shall mean any patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, service mark (whether registered or unregistered),
service mark application, copyright (whether registered or unregistered),
copyright application, trade secret, know how, franchise, system, computer
software, invention, design, proprietary product, technology, proprietary right
or other intellectual property right.
Purchaser. "Purchaser" shall have the meaning specified in the preamble
to this Agreement.
Purchaser Board. "Purchaser Board" shall refer to the Board of
Directors of Purchaser.
Purchaser Closing Certificate. "Purchaser Closing Certificate" hall
have the meaning specified in Section 4.2(c)(iv).
Purchaser Contract. "Purchaser Contract" shall refer to those contracts
required by Regulation S K to be filed in connection with the Purchaser SEC
Reports.
Purchaser Option Plan. "Purchaser Option Plan" shall refer to the 1998
Stock Incentive Plan of Purchaser.
Purchaser Proprietary Assets. "Purchaser Proprietary Assets" shall have
the meaning specified in Section 6.10.
Purchaser SEC Reports. "Purchaser SEC Reports" shall have the meaning
<PAGE> 85
specified in Section 6.7.
Purchaser Stock. "Purchaser Stock" shall refer to the Common Stock of
Purchaser, par value $.0001 per share, of Purchaser.
Purchaser Systems. "Purchaser Systems" shall mean all computer,
hardware, software, systems, and equipment (including embedded microcontrollers
in non-computer equipment) embedded within current products of Purchaser, and/or
necessary for Purchaser to carry on its businesses as currently conducted.
Purchaser's Accountants. "Purchaser's Accountants" shall mean Ernst &
Young LLP, independent accountants of the Purchaser.
Reference Balance Sheet. "Reference Balance Sheet" shall mean the
unaudited consolidated balance sheet (including the related notes and schedules
thereto) of the Company, dated as of December 31, 1998.
Related Party. Each of the following shall be deemed to be a "Related
Party":
(a) the Principal Stockholders;
(b) each individual who is, or who has at any time been, an
officer of the Principal Stockholders or the Company;
(c) each member of the family of each of the individuals
referred to in clause (b) above; and
(d) any Entity (other than the Principal Stockholders or the
Company) in which any one of the Persons referred to in clause (a), (b) or (c)
above holds (or in which more than one of such individuals collectively hold),
beneficially or otherwise, a material voting, proprietary or equity interest.
Returns. "Returns" shall have the meaning specified in Section 5.15(b).
Rights Agreement. "Rights Agreement" shall refer to that certain
Registration Rights Agreement by and among the Purchaser and the Principal
Stockholders substantially in the form of Exhibit C attached hereto.
SEC. "SEC" shall mean the Securities and Exchange Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as amended.
Selling Stockholders. "Selling Stockholders" shall refer to those
individuals and Entities which are holders of record of a certificate or
certificates which immediately prior to the Effective Time represented the
outstanding shares of any class or series of Stock and listed on Schedule IA
hereto.
<PAGE> 86
Series A Preferred Stock. "Series A Preferred Stock" shall mean the
series A preferred stock, par value $0.0001 per share, of the Company.
Series B Preferred Stock. "Series B Preferred Stock" shall mean the
series B preferred stock, par value $0.0001 per share, of the Company.
Series C Preferred Stock. "Series C Preferred Stock" shall mean the
series C preferred stock, par value $0.0001 per share, of the Company.
Series D Preferred Stock. "Series D Preferred Stock" shall mean the
series D preferred stock, par value $0.0001 per share, of the Company.
Series E Preferred Stock. "Series E Preferred Stock" shall mean the
series E preferred stock, par value $0.0001 per share, of the Company.
Stockholder Representative. "Stockholder Representative" shall refer to
the individual or Entity elected by the Principal Stockholders pursuant to
Section 2.4 of the Investment Agreement.
Stockholder Representative Closing Certificate. "Stockholder Closing
Representative Certificate" shall have the meaning specified in Section
4.1(c)(vi).
Stock. "Stock" shall have the meaning specified in Section 3.1(b).
Subsidiary Board. "Subsidiary Board" shall have the mean the Board of
Directors of Subsidiary.
Surviving Corporation. "Surviving Corporation" shall have the meaning
specified in Section 1.1.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, estimated tax, gross receipts tax, value added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), that is, has been or
in the future may be (a) imposed, assessed or collected by or under the
authority of any Governmental Body, or (b) payable pursuant to any tax sharing
agreement or similar Contract.
Tax Return. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or in the future may be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or
<PAGE> 87
payment of any Tax or in connection with the administration, implementation or
enforcement of or compliance with any legal requirement relating to any Tax.
Threshold. "Threshold" shall have the meaning specified in Section
11.2(b).
Total Options. "Total Options" shall have the meaning specified in
Section 3.1(b).
Transaction Expenses. "Transaction Expenses" shall mean all fees, costs
and expenses including, without limitation all attorneys' fees, that have been
incurred or that are in the future incurred by or on behalf of the Company or
the Principal Stockholders in connection with the sale of the Stock and the
preparation, execution and delivery of the Transactional Agreements.
Transactional Agreements. "Transactional Agreements" shall mean the
Agreement, the Rights Agreement, the Investment Agreement, the Employment and
Non-Competition Agreement, the Escrow Agreement, the Voting Agreement, the
Principal Stockholders Closing Certificate and Company Closing Certificate, the
Purchaser Closing Certificate, and all other agreements, certificates and
instruments executed or contemplated to be executed by any of the parties hereto
in connection with the Transactions.
Transactions. "Transactions" shall mean (a) the execution and delivery
of this Agreement and the other Transactional Agreements and (b) all the
transactions contemplated by this Agreement and the other Transactional
Agreements.
Treasury Shares. "Treasury Shares" shall have the meaning specified in
Section 3.1(d).
Unaudited Interim Balance Sheet. "Unaudited Interim Balance Sheet"
shall have the meaning specified in Section 5.9(a).
U.S. GAAP. "U.S. GAAP" shall mean United States generally accepted
accounting principles and practices as in effect from time to time and applied
consistently throughout the periods involved.
Year 2000 Compliant. "Year 2000 Compliant" shall mean, when used with
respect to the Purchaser Systems or Company Systems, that such Systems are able
to record, store, process and present calendar dates falling on or after January
1, 2000, in the same manner, and with the same functionality, as they record,
store, process and present calendar dates falling on or before December 31,
1999.
ZDNet Agreement. "ZDNet Agreement" shall refer to that certain
agreement, dated as of [the date hereof] by and between the Company and ZDNet
providing for ___________.
