-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NXJa3yW2MkIQWrkogb4qoK+pYBdUhyZ8bK4EukKMCGjuA+sbBmcb5Ap0wp1BuYKo eR56sOdW4UsigSIseXr1Uw== 0000929624-99-000064.txt : 19990121 0000929624-99-000064.hdr.sgml : 19990121 ACCESSION NUMBER: 0000929624-99-000064 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 23 FILED AS OF DATE: 19990115 DATE AS OF CHANGE: 19990120 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHOPPING COM CENTRAL INDEX KEY: 0001045360 STANDARD INDUSTRIAL CLASSIFICATION: 5311 IRS NUMBER: 330733679 STATE OF INCORPORATION: CA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-53689 FILM NUMBER: 99507501 BUSINESS ADDRESS: STREET 1: 2101 E COAST HIGHWAY GARDEN LEVEL CITY: CORONA DEL MAR STATE: CA ZIP: 92625 BUSINESS PHONE: 7146404393 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: COMPAQ INTERESTS INC CENTRAL INDEX KEY: 0001076825 STANDARD INDUSTRIAL CLASSIFICATION: 3571 IRS NUMBER: 760550398 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 20555 S H 249, MC 110701 STREET 2: C/O COMPAQ COMPUTER CORP CITY: HOUSTON STATE: TX ZIP: 77070 BUSINESS PHONE: 2815142937 MAIL ADDRESS: STREET 1: 20555 S H 249, MC110701 STREET 2: C/O COMPAQ COMPUTER CORP CITY: HOUSTON STATE: TX ZIP: 77070 SC 14D1 1 SCHEDULE 14D-1 - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934 ---------------- Shopping.com (Name of Subject Company) Compaq Interests, Inc. Compaq Computer Corporation (Bidders) ---------------- Common Stock, no par value (Title of Class of Securities) ---------------- 82509Q-10-6 (CUSIP Number of Class of Securities) ---------------- Thomas C. Siekman Senior Vice President, General Counsel and Secretary Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 (281) 370-0670 (Name, Address and Telephone Number of Person authorized to Receive Notices and Communications on Behalf of Bidder) Copy to: Kenton J. King, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 (650) 470-4500 ---------------- CALCULATION OF FILING FEE - - ------------------------------------------------------------------------------- - - -------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee - - ------------------------------------------------------------------------------ $286,830,764.00 $57,366.15
- - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- * For purposes of calculating fee only. This amount assumes (i) the purchase of 8,140,793 outstanding shares of common stock of Shopping.com, and (ii) 6,955,563 shares of common stock of Shopping.com which may be issued upon exercise of outstanding warrants and options, in each case, at $19.00 in cash per share. The amount of the filing fee calculated in accordance with Regulation 240.0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of one percentum of the value of shares to be purchased. [_]Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not applicable. Filing Party: Not applicable. Form or Registration No.: Not applicable. Date Filed: Not applicable. - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- SCHEDULE 14D-1 CUSIP No. 82509Q-10-6 1.Names of Reporting Persons I.R.S. Identification Nos. of Above Persons Compaq Interests, Inc. Compaq Computer Corporation - - -------------------------------------------------------------------------------- 2.Check the Appropriate Box if a Member of a Group (a) [_] (b) [_] - - -------------------------------------------------------------------------------- 3.SEC Use Only - - -------------------------------------------------------------------------------- 4.Source of Funds WC - - -------------------------------------------------------------------------------- 5.Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f) [_] - - -------------------------------------------------------------------------------- 6.Citizenship or Place of Organization Compaq Interests Inc.: Delaware Compaq Computer Corporation: Delaware - - -------------------------------------------------------------------------------- 7.Aggregate Amount Beneficially Owned by Each Reporting Person 13,995,120 (see the Offer to Purchase) - - -------------------------------------------------------------------------------- 8.Check if the Aggregate Amount in Row (7) Excludes Certain Shares [_] - - -------------------------------------------------------------------------------- 9.Percent of Class Represented by Amount in Row (7) 56.0% - - -------------------------------------------------------------------------------- 10.Type of Reporting Person CO 2 TENDER OFFER This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to the offer by Compaq Interests, Inc., a Delaware corporation (the "Purchaser"), and an indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation ("Parent"), to purchase all of the outstanding shares (the "Shares") of common stock, no par value (the "Common Stock") of Shopping.com, a California corporation (the "Company"), at $19.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated January 15, 1999 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a copy of which is attached hereto as Exhibit (a)(2) (which together constitute the "Offer"). Item 1. Security and Subject Company. (a) The name of the subject company is Shopping.com, a California corporation, and the address of its principal executive offices is 2101 East Coast Highway, Garden Level, Corona Del Mar, California 92625. (b) The class of securities to which this Statement relates is the Common Stock. The Company has represented that as of January 11, 1999, there were (1) 8,140,793 shares of Common Stock issued and outstanding, (2) outstanding options to purchase an aggregate of 2,743,325 shares of Common Stock, and (3) outstanding warrants to purchase an aggregate of 4,212,238 shares of Common Stock. Purchaser is seeking to purchase all of the outstanding Shares at a purchase price of $19.00 per Share, net to the seller in cash. (c) The information set forth in "Section 6--Price Range of the Shares; Dividends on the Shares" of the Offer to Purchase is incorporated herein by reference. Item 2. Identity and Background. (a)-(d), (g) This Statement is being filed by Parent and the Purchaser. The information set forth in the "INTRODUCTION" and "Section 9--Certain Information Concerning Parent and the Purchaser" of the Offer to Purchase is incorporated herein by reference. The name, business address, present principal occupation or employment, the material occupations, positions, offices or employments for the past five years and citizenship of each director and executive officer of Parent and the Purchaser and the name, principal business and address of any corporation or other organization in which such occupations, positions, offices and employments are or were carried on are set forth in Schedule I of the Offer to Purchase and incorporated herein by reference. (e)-(f) During the last five years neither Parent or the Purchaser nor, to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I of the Offer to Purchase have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. Item 3. Past Contacts, Transactions or Negotiations with the Subject Company. (a)(1) Other than the transactions described in Item 3(b) below, neither Parent or the Purchaser nor, to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I of the Offer to Purchase, has entered into any transaction with the Company, or any of the Company's affiliates which are corporations, since the commencement of the Company's third full fiscal year preceding the date of this Statement, the aggregate amount of which was equal to or greater than one percent of the consolidated revenues of the Company for (i) the fiscal year in which such transaction occurred, or (ii) the portion of the current fiscal year which has occurred if the transaction occurred in such year. (a)(2) Other than the transactions described in Item 3(b) below, neither Parent or the Purchaser, nor, to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I of the Offer to Purchase, has 3 entered into any transaction since the commencement of the Company's third full fiscal year preceding the date of this Statement, with the executive officers, directors or affiliates of the Company which are not corporations, in which the aggregate amount involved in such transaction or in a series of similar transactions, including all periodic installments in the case of any lease or other agreement providing for periodic payments or installments, exceeded $40,000. (b) The information set forth in the "INTRODUCTION," "Section 9--Certain Information Concerning Parent and the Purchaser," "Section 11--Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements" and "Section 12--Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. Item 4. Source and Amount of Funds or Other Consideration. (a) The information set forth in "Section 10--Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. (b) Not applicable. (c) Not applicable. Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder. (a)-(e) The information set forth in the "INTRODUCTION," "Section 11-- Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements" and "Section 12--Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in "Section 7--Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations" of the Offer to Purchase is incorporated herein by reference. Item 6. Interest in Securities of the Subject Company. (a)-(b) The information set forth in "Section 9--Certain Information Concerning Parent and the Purchaser" and "Section 11--Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements" of the Offer to Purchase is incorporated herein by reference. Item 7. Contracts, Arrangements, Understandings or Relationships with Respect to the Subject Company's Securities. The information set forth in the "INTRODUCTION," "Section 10--Source and Amount of Funds," "Section 11--Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements," "Section 12--Plans for the Company; Other Matters" and "Section 16--Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. Item 8. Persons Retained, Employed or to be Compensated. The information set forth in "Section 16--Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. Item 9. Financial Statements of Certain Bidders. The information set forth in "Section 9--Certain Information Concerning Parent and the Purchaser" of the Offer to Purchase is incorporated herein by reference. 4 Item 10. Additional Information. (a) Except as disclosed in Items 3 and 7 above, there are no present or proposed material contracts, arrangements, understandings or relationships between Parent or the Purchaser, or to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I of the Offer to Purchase, and the Company, or any of its executive officers, directors, controlling persons or subsidiaries. (b)-(c) The information set forth in the "INTRODUCTION," "Section 14-- Conditions of the Offer" and "Section 15--Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in "Section 7--Effect of the Offer on the Market for Shares; Stock Listing; Exchange Act Registration; Margin Regulations" of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letters of Transmittal, to the extent not otherwise incorporated herein by reference, is incorporated herein by reference. Item 11. Materials to be Filed as Exhibits. (a)(1) Offer to Purchase, dated January 15, 1999. (a)(2) Letter of Transmittal. (a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their Clients. (a)(4) Letter to Clients. (a)(5) Notice of Guaranteed Delivery. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Press Release issued by Parent, dated January 11, 1999. (a)(8) Form of Summary Advertisement, dated January 15, 1999. (a)(9) Fairness Opinion of Trautman Kramer & Company, dated January 11, 1999. (c)(1) Agreement and Plan of Merger, dated January 11, 1999, by and between Parent and the Company. (c)(2) Shareholder Agreement, dated January 11, 1999, by and between Parent and Robert McNulty. (c)(3) Shareholder Agreement, dated January 11, 1999, by and between Parent and Cyber Depot. (c)(4) Shareholder Agreement, dated January 11, 1999, by and between Parent and Kipling Isle. (c)(5) Shareholder Agreement, dated January 11, 1999, by and between Parent and Paul Hill. (c)(6) Shareholder Agreement, dated January 11, 1999, by and between Parent and Ed Bradley. (c)(7) Shareholder Agreement, dated January 11, 1999, by and between Parent and Mark Winkler. (c)(8) Shareholder Agreement, dated January 11, 1999, by and between Parent and Kristine Webster. (c)(9) Shareholder Agreement, dated January 11, 1999, by and between Parent and John Markley. (c)(10) Shareholder Agreement, dated January 11, 1999, by and between Parent and Frank Denny. (c)(11) Shareholder Agreement, dated January 11, 1999, by and between Parent and Pat Demicco. (c)(12) Shareholder Agreement, dated January 11, 1999, by and between Parent and Randy Read. (c)(13) Stock Option Agreement, dated January 11, 1999, by and between Parent and the Company. (d) None (e) Not applicable. (f) None.
5 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: January 15, 1999 Compaq Interests, inc. By: /s/ Earl L. Mason ---------------------------------- Name: Earl L. Mason Title: President 6 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: January 15, 1999 Compaq Computer Corporation By: /s/ Earl L. Mason ---------------------------------- Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer 7 INDEX TO EXHIBITS
Exhibit Number Exhibit ------- ------- (a)(1) Offer to Purchase, dated January 15, 1999. (a)(2) Letter of Transmittal. (a)(3) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their Clients. (a)(4) Letter to Clients. (a)(5) Notice of Guaranteed Delivery. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Press Release issued by Parent, dated January 11, 1999. (a)(8) Form of Summary Advertisement, dated January 15, 1999. (a)(9) Fairness Opinion of Trautman Kramer & Company dated January 11, 1999. (c)(1) Agreement and Plan of Merger, dated January 11, 1999, by and between Parent and the Company. (c)(2) Shareholder Agreement, dated January 11, 1999, by and between Parent and Robert McNulty. (c)(3) Shareholder Agreement, dated January 11, 1999, by and between Parent and Cyber Depot. (c)(4) Shareholder Agreement, dated January 11, 1999, by and between Parent and Kipling Isle. (c)(5) Shareholder Agreement, dated January 11, 1999, by and between Parent and Paul Hill. (c)(6) Shareholder Agreement, dated January 11, 1999, by and between Parent and Ed Bradley. (c)(7) Shareholder Agreement, dated January 11, 1999, by and between Parent and Mark Winkler. (c)(8) Shareholder Agreement, dated January 11, 1999, by and between Parent and Kristine Webster. (c)(9) Shareholder Agreement, dated January 11, 1999, by and between Parent and John Markley. (c)(10) Shareholder Agreement, dated January 11, 1999, by and between Parent and Frank Denny. (c)(11) Shareholder Agreement, dated January 11, 1999, by and between Parent and Pat Demicco. (c)(12) Shareholder Agreement, dated January 11, 1999, by and between Parent and Randy Read. (c)(13) Stock Option Agreement, dated January 11, 1999, by and between Parent and the Company. (d) None (e) Not applicable. (f) None.
8 EX-99.(A)(1) 2 OFFER TO PURCHASE, DATED JANUARY 15, 1999 EXHIBIT (a)(1) Offer to Purchase for Cash All Outstanding Shares of Common Stock of Shopping.com by Compaq Interests, Inc. an indirect wholly owned subsidiary of Compaq Computer Corporation at $19.00 Net Per Share THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 12, 1999, UNLESS THE OFFER IS EXTENDED. THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED JANUARY 11, 1999, BY AND BETWEEN COMPAQ COMPUTER CORPORATION AND SHOPPING.COM. THE BOARD OF DIRECTORS OF SHOPPING.COM HAS UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER AGREEMENT, THE OFFER, THE MERGER AND THE OPTION AGREEMENT IS FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES THEN OWNED BY THE PURCHASER, REPRESENTS AT LEAST NINETY PERCENT (90%) OF THE SHARES OUTSTANDING ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"), THE EXPIRATION OR TERMINATION OF ANY APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER, AND THE OTHER CONDITIONS SET FORTH IN THIS OFFER TO PURCHASE. SEE SECTION 14. IN THE EVENT THAT THE MINIMUM CONDITION IS NOT SATISFIED ON THE INITIAL EXPIRATION DATE, THE PURCHASER MAY ELECT TO EXTEND THE OFFER AND MAY WAIVE THE MINIMUM CONDITION AND AMEND THE OFFER TO REDUCE THE NUMBER OF SHARES SUBJECT TO THE OFFER TO SUCH NUMBER OF SHARES THAT, WHEN ADDED TO THE SHARES THEN OWNED BY THE PURCHASER, WILL EQUAL 49.9999% OF THE SHARES THEN OUTSTANDING (THE "REVISED MINIMUM NUMBER") AND, IF A GREATER NUMBER OF SHARES IS TENDERED INTO THE OFFER AND NOT WITHDRAWN, PURCHASE, ON A PRO RATA BASIS, THE REVISED MINIMUM NUMBER OF SHARES (THE "REVISED MINIMUM NUMBER PRORATION") (IT BEING UNDERSTOOD THAT THE PURCHASER MAY, BUT SHALL NOT IN ANY EVENT BE REQUIRED TO ACCEPT FOR PAYMENT, OR PAY FOR, ANY SHARES IF LESS THAN THE REVISED MINIMUM NUMBER OF SHARES ARE TENDERED PURSUANT TO THE OFFER AND NOT WITHDRAWN AT THE APPLICABLE EXPIRATION DATE OF THE OFFER). -------------- IMPORTANT Any shareholder who desires to tender all or any portion of such shareholder's Shares (as defined herein) should either (i) complete and sign the Letter of Transmittal (or facsimile thereof) in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary and either deliver the certificates for such Shares to the Depositary or tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 3 or (ii) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for such shareholder. Any shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such person to tender their Shares. Any shareholder who desires to tender Shares and whose certificates representing such Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective locations and telephone numbers set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent, or the Dealer Manager, or to brokers, dealers, commercial banks or trust companies. A shareholder also may contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. -------------- The Dealer Manager for the Offer is: GREENHILL & CO., LLC -------------- January 15, 1999 TABLE OF CONTENTS
Page ---- INTRODUCTION............................................................. 1 THE OFFER................................................................ 3 1. Terms of Offer....................................................... 3 2. Acceptance for Payment and Payment................................... 5 3. Procedure for Tendering Shares....................................... 6 4. Withdrawal Rights.................................................... 8 5. Certain Federal Income Tax Consequences.............................. 9 6. Price Range of the Shares; Dividends on the Shares................... 9 7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations....................... 10 8. Certain Information Concerning the Company........................... 10 9. Certain Information Concerning Parent and the Purchaser.............. 13 10. Source and Amount of Funds........................................... 15 11. Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements....................... 15 12. Plans for the Company; Other Matters................................. 28 13. Dividends and Distributions.......................................... 30 14. Conditions of the Offer.............................................. 30 15. Certain Legal Matters................................................ 32 16. Fees and Expenses.................................................... 34 17. Miscellaneous........................................................ 35
Schedule I--Directors and Executive Officers of Compaq Interests, Inc. and Compaq Computer Corporation. To the Holders of Common Stock of Shopping.com: INTRODUCTION Compaq Interests, Inc., a Delaware corporation (the "Purchaser") and an indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation ("Parent"), hereby offers to purchase all issued and outstanding shares of common stock ("Common Stock"), no par value (the "Shares"), of Shopping.com, a California corporation (the "Company"), at a price of $19.00 per Share, or any higher price paid in the Offer, net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the sale of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses incurred in connection with the Offer of Greenhill & Co., LLC, which is acting as the Dealer Manager (the "Dealer Manager"), Corporate Investor Communications, Inc., which is acting as the Information Agent (the "Information Agent"), and U.S. Stock Transfer Corporation, which is acting as the Depositary (the "Depositary"). The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer, that number of shares of Common Stock which represents, when added to the Shares then owned by the Purchaser, at least ninety percent (90%) of the Shares outstanding on the date of purchase (the "Minimum Condition"). See Section 14. The Company has informed the Purchaser that, as of January 11, 1999, there were (i) 8,140,793 shares of Common Stock issued and outstanding, (ii) outstanding options to purchase an aggregate of 2,743,325 shares of Common Stock under the Company's stock plans, and (iii) 4,212,238 Shares reserved for issuance pursuant to outstanding warrants of the Company. The Merger Agreement (as defined below) provides, among other things, that the Company will not, without the prior written consent of Parent, issue any additional Shares (except on the exercise of outstanding options and other rights and securities). Based on the foregoing, the Purchaser believes that the Minimum Condition will be satisfied if 7,326,714 shares of Common Stock are validly tendered and not withdrawn prior to the expiration of the Offer. As a condition and inducement to Parent's entering into the Merger Agreement and incurring the liabilities therein, certain shareholders of the Company (each, a "Shareholder"), who together share voting power and dispositive power with respect to an aggregate of 1,405,475 Shares outstanding and options and warrants exercisable for 2,705,001 shares, concurrently with the execution and delivery of the Merger Agreement entered into Shareholder Agreements (the "Shareholder Agreements"), dated January 11, 1999, with Parent. Pursuant to the Shareholder Agreements, the Shareholders have agreed, among other things, to tender the Shares held by them in the Offer, and to grant Parent a proxy with respect to the voting of such Shares in favor of the Merger with respect to such Shares upon the terms and subject to the conditions set forth therein. The Shareholders have also agreed, if requested by Parent, to exercise options and warrants held by them and to tender the Shares received upon such exercise in the Offer. See Section 11. As a condition and further inducement to Parent to enter into the Merger Agreement and incurring the liabilities therein, concurrently with the execution and delivery of the Merger Agreement, the Purchaser and the Company entered into a Stock Option Agreement, dated January 11, 1999 (the "Option Agreement"), pursuant to which, among other things, the Company has granted the Purchaser an option to purchase certain newly issued shares of Common Stock, subject to certain conditions. See Section 11. The Offer is being made pursuant to an Agreement and Plan of Merger, dated January 11, 1999 (the "Merger Agreement"), by and between Parent and the Company pursuant to which, as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions to the Merger (as defined below), the Purchaser will be merged with and into the Company and the separate corporate existence of the Purchaser will thereupon cease. The merger, as effected pursuant to the immediately preceding sentence, is referred to herein as the "Merger," and the Company as the surviving corporation of the Merger is sometimes herein referred to as the "Surviving Corporation." At the effective time of the Merger (the "Effective Time"), each share of Common Stock then outstanding (other than Shares held by Parent, the Purchaser or any other 1 wholly owned subsidiary of Parent and Shares held by shareholders who properly perfect their dissenters' rights under California law) will be canceled and retired and converted into the right to receive $19.00 per Share, net to the seller in cash or any higher price per share of Common Stock paid in the Offer (such price, being referred to herein as the "Offer Price"), in cash payable to the holder thereof without interest (the "Merger Consideration"). The Merger Agreement is more fully described in Section 11. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER AGREEMENT, THE OFFER, THE MERGER AND THE OPTION AGREEMENT IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER. Trautman Kramer & Company, the Company's financial advisor ("Trautman Kramer"), has delivered to the Company's Board of Directors its written opinion (the "Fairness Opinion"), dated January 11, 1999, to the effect that, as of such date, the consideration to be received by the holders of shares of Common Stock (other than Parent, the Purchaser and any affiliate thereof) pursuant to the Offer and under the terms of the Merger Agreement, is fair from a financial point of view, to such holders. Such opinion is set forth in full as an exhibit to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") that is being mailed to shareholders of the Company. The Merger Agreement provides that the initial scheduled expiration date of the Offer shall be twenty (20) business days after the date the Offer is commenced (the "Initial Expiration Date"). If as of the Initial Expiration Date all conditions to the Offer shall not have been satisfied or waived, the Merger Agreement provides that the Purchaser may, and may continue to extend the expiration date of the Offer from time to time. In addition, in the event the Minimum Condition is not satisfied on the Initial Expiration Date pursuant to the Offer, the Purchaser may waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to such number of Shares that, when added to the Shares then owned by the Purchaser, will equal 49.9999% of the Shares then outstanding (the "Revised Minimum Number"), and, if a greater number of shares is tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (the "Revised Minimum Number Proration") (it being understood that the Purchaser may, but shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the applicable expiration date of the Offer). In addition, the Merger Agreement provides that the Purchaser shall, on the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and purchase, as soon as permitted under the terms of the Offer, all Shares validly tendered and not withdrawn prior to the expiration of the Offer. The Offer will not remain open following the time Shares are accepted for payment. Consummation of the Merger is conditioned upon, among other things, the approval and adoption by the requisite vote of shareholders of the Company of the Merger Agreement, if required by applicable law in order to consummate the Merger. See Section 11. Under the California General Corporation Law (the "GCL"), if the Purchaser acquires, pursuant to the Offer, the Option Agreement or otherwise, at least 90% of the Shares then outstanding, the Purchaser will be able to approve the Merger Agreement and the transactions contemplated thereby, including the Merger, without a vote of the shareholders. In such event, Parent and the Company have agreed in the Merger Agreement to take, subject to the satisfaction of the conditions set forth in the Merger Agreement, all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the acceptance and payment for Shares by the Purchaser pursuant to the Offer without a meeting of the shareholders, in accordance with Section 1110 of the GCL. If, however, the Purchaser does not acquire at least 90% of the then outstanding Shares on the date of purchase, pursuant to the Offer, the Option Agreement or otherwise and the Purchaser instead waives the Minimum Condition and amends the Offer to reduce the number of Shares subject to the Offer to the Revised Minimum Number of Shares, the Purchaser would own upon consummation of the Offer 49.9999% of the Shares then outstanding, and would thereafter solicit the approval of the Merger and the Merger Agreement by a vote of the shareholders of the Company. Under such circumstances, a significantly longer period of time will be required to effect the Merger. See Sections 11 and 12. 2 Under the GCL, the Merger may not be accomplished for cash paid to the shareholders if the Purchaser or Parent owns, directly or indirectly, more than 50% but less than 90% of the then outstanding Shares unless either all the shareholders consent or the Commissioner of Corporations of the State of California approves, after a hearing, the terms and conditions of the Merger and the fairness thereof. Accordingly, concurrently with the execution of the Merger Agreement, and as an inducement to Parent to enter into the Merger Agreement, the Company entered into the Option Agreement with Parent. Pursuant to the Option Agreement, the Company granted to the Purchaser an irrevocable option (the "Stock Option") to purchase up to the number of Shares (the "Option Shares") that, when added to the number of Shares owned by the Purchaser and its affiliates immediately following consummation of the Offer, would constitute 90% of the Shares then outstanding at a cash purchase price per Option Share equal to the Offer Price (the "Option Price") subject to the terms and conditions set forth in the Option Agreement, including, without limitation, that the number of Shares to be issued under the Stock Option shall not exceed the number of authorized Shares available for issuance. If the Stock Option is exercised by the Purchaser (resulting in the Purchaser owning 90% or more of the outstanding Shares), the Purchaser will be able to effect a short-form Merger under the GCL, subject to the terms and conditions of the Merger Agreement. The Purchaser is required to effect a short-form Merger as soon as practicable if it is able to do so under the GCL. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE OFFER 1. Terms of the Offer. Upon the terms and subject to the conditions of the Offer, and subject to reduction in the number of Shares subject to the Offer to a number equal to the Revised Minimum Number (the "Revised Minimum Number Proration"), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 4 of this Offer to Purchase. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Friday, February 12, 1999, unless and until the Purchaser, in accordance with the terms of the Merger Agreement, shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Offer is conditioned upon, among other things, the satisfaction of the Minimum Condition, and the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act"). See Section 14. If such conditions are not satisfied prior to the Expiration Date, the Purchaser reserves the right (but shall not be obligated) to (i) decline to purchase any of the Shares tendered and terminate the Offer, subject to the terms of the Merger Agreement, (ii) waive any of the conditions to the Offer, to the extent permitted by applicable law and the provisions of the Merger Agreement, and, subject to complying with applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), purchase all Shares validly tendered, (iii) subject to the terms of the Merger Agreement, extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain the Shares which will have been tendered during the period or periods for which the Offer is open or extended or (iv) amend the Offer. Subject to the terms of the Merger Agreement, the Purchaser may from time to time, (i) extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) amend the Offer by giving oral or written notice of such amendment to the Depositary. Any extension, amendment or termination of the Offer will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) 3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Without limiting the obligation of the Purchaser under such Rule or the manner in which the Purchaser may choose to make any public announcement, the Purchaser currently intends to make announcements by issuing a press release to the Dow Jones News Service. Under no circumstances will interest be paid on the Offer Price to be paid by the Purchaser for the Shares, regardless of any extension of the Offer or any delay in making such payment. The Merger Agreement provides that, except as described below, the Purchaser will not, without the prior written consent of the Company, (i) decrease the Offer Price or change the form of consideration payable in the Offer, (ii) decrease the number of Shares sought (except as set forth below), (iii) impose additional conditions to the Offer other than those described in Section 14, (iv) amend any condition of the Offer described in Section 14, (v) extend the Initial Expiration Date, provided, however, that if on the Initial Expiration Date of the Offer, all conditions to the Offer shall not have been satisfied or waived, the Purchaser may elect to extend the Expiration Date from time to time until a date not later than May 15, 1999, or (vi) amend any other term of the Offer in any manner adverse to the holders of Shares without the written consent of the Company. Notwithstanding the foregoing, in the event that less than 90% of the Shares then outstanding are tendered pursuant to the Offer on the Initial Expiration Date pursuant to the Offer, the Purchaser may elect to extend the Offer and may waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to such number of Shares equal to the Revised Minimum Number, and, if a greater number of shares are tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that the Purchaser may, but shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the applicable expiration date of the Offer). If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its purchase of or payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to withdrawal rights as described in Section 4. However, the ability of the Purchaser to delay the payment for Shares which the Purchaser has accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of the Offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer, the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In a public release, the Commission has stated that in its view an offer must remain open for a minimum period of time following a material change in the terms of the Offer and that waiver of a material condition, such as the Minimum Condition, is a material change in the terms of the Offer. The release states that an offer should remain open for a minimum of five business days from the date a material change is first published, sent or given to security holders and that, if material changes are made with respect to information not materially less significant than the offer price and the number of shares being sought, a minimum of ten business days may be required to allow adequate dissemination and investor response. The requirement to extend the Offer will not apply to the extent that the number of business days remaining between the occurrence of the change and the then-scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such amendment. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. 4 The Company has provided the Purchaser with the Company's shareholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the shareholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. Acceptance for Payment and Payment. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), and subject to the Revised Minimum Number Proration, the Purchaser will accept for payment and will pay, promptly after the Expiration Date, for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 4. All determinations concerning the satisfaction of such terms and conditions will be within the Purchaser's discretion, which determinations will be final and binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including, without limitation, the HSR Act. Any such delays will be effected in compliance with Rule 14e-l(c) under the Exchange Act (relating to a bidder's obligation to pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of such bidder's offer). In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely Book-Entry Confirmation (as defined below) with respect thereto), (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined below), and (iii) any other documents required by the Letter of Transmittal. The per share consideration paid to any holder of Common Stock pursuant to the Offer will be the highest per Share consideration paid to any other holder of such shares pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering shareholders. Under no circumstances will interest be paid on the purchase price to be paid by the Purchaser for the Shares, regardless of any extension of the Offer or any delay in making such payment. If the Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (including such rights as are set forth in Sections 1 and 14) (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 4. If any tendered Shares are not purchased pursuant to the Offer for any reason, certificates for any such Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined below) pursuant to the procedures set forth in Section 3, such Shares will be credited to an account maintained at the Book- Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or in part, to Parent or to any affiliate of Parent, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5 3. Procedure for Tendering Shares. Valid Tender. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined below), and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer set forth below (and a Book-Entry Confirmation (as defined below) received by the Depositary), in each case, prior to the Expiration Date or (ii) the tendering shareholder must comply with the guaranteed delivery procedures set forth below. The Depositary will establish an account with respect to the Shares at The Depositary Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Shares by causing the Book- Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedure for such transfer. However, although delivery of Shares may be effected through book- entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." Delivery of documents to the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures does not constitute delivery to the Depositary. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. The method of delivery of Shares, the Letter of Transmittal and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the election and risk of the tendering shareholder. Shares will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book Entry Transfer Facility's systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made, or certificates 6 for Shares not tendered or not accepted for payment are to be returned, to a person other than the registered holder of the certificates surrendered, then the tendered certificates for such Shares must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instruction 5 to the Letter of Transmittal. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such shareholder's tender may be effected if all the following conditions are met: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange (the "NYSE") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering shareholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. Under no circumstances will interest be paid on the purchase price to be paid by the Purchaser for the Shares, regardless of any extension of the Offer or any delay in making such payment. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering shareholder and the Purchaser upon the terms and subject to the conditions of the Offer. Appointment. By executing the Letter of Transmittal as set forth above, the tendering shareholder will irrevocably appoint designees of the Purchaser, and each of them, as such shareholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares. All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such shareholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such shareholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given by such shareholder (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights, 7 including, without limitation, in respect of any annual, special or adjourned meeting of the Company's shareholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other related securities or rights, including voting at any meeting of shareholders. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or the acceptance for payment of, or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, in its sole discretion, subject to the provisions of the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, the Depositary, the Information Agent, the Company or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Subject to the terms of the Merger Agreement, the Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Backup Withholding. Under the "backup withholding" provisions of federal income tax law, unless a tendering registered holder, or his assignee (in either case, the "Payee"), satisfies the conditions described in Instruction 9 of the Letter of Transmittal or is otherwise exempt, the cash payable as a result of the Offer may be subject to backup withholding tax at a rate 31% of the gross proceeds. To prevent backup withholding, each Payee should complete and sign the Substitute Form W-9 provided in the Letter of Transmittal. See Instruction 9 of the Letter of Transmittal. 4. Withdrawal Rights. Except as otherwise provided in this Section 4, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after March 15, 1999. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 3 any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent, or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 8 5. Certain Federal Income Tax Consequences. The receipt of cash for Shares pursuant to the Offer (or the Merger) will be a taxable transaction for U.S. federal income tax law purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. The tax consequences of such receipt pursuant to the Offer (or the Merger) may vary depending upon, among other things, the particular circumstances of the shareholder. In general, a shareholder who receives cash for Shares pursuant to the Offer (or the Merger) will recognize gain or loss for U.S. federal income tax purposes equal to the difference between the amount of cash received in exchange for the Shares sold and such shareholder's adjusted tax basis in such Shares. Provided that the Shares constitute capital assets in the hands of the shareholder, such gain or loss will be capital gain or loss and will be long- term capital gain or loss if the holding period for such Shares exceeds one year. Gain or loss will be calculated separately for each block of Shares (i.e., Shares acquired at the same time and price) sold pursuant to the Offer (or the Merger). The deduction of capital losses is subject to certain limitations. A shareholder that tenders Shares may be subject to backup withholding at a rate of 31% unless such shareholder provides a correct TIN and certifies that such shareholder is not subject to backup withholding, or unless an exemption applies. See "Backup Withholding" under Section 3 herein, and Instruction 9 and "Important Tax Information" in the Letter of Transmittal. The U.S. federal income tax discussion set forth above is included for general information only and is based upon present law. Shareholders are urged to consult their tax advisors with respect to the specific tax consequences of the Offer (or the Merger) to them, including the application and effect of the alternative minimum tax, and state, local and foreign tax laws. In addition, the discussion set forth above may not apply to particular categories of shareholders, including, for example, individuals who are not citizens or residents of the United States, foreign corporations, life insurance companies, tax-exempt organizations, financial institutions, and holders who acquired Shares pursuant to the exercise of employee stock options or otherwise as compensation. 6. Price Range of the Shares; Dividends on the Shares. The shares of Common Stock are traded in the over-the-counter market under the symbol "IBUY". The following table sets forth, for each of the calendar quarters indicated, the high and low reported sales price per share of Common Stock based on published financial sources. The Company did not declare or pay any cash dividends during any of the periods indicated in the table below. In addition, under the terms of the Merger Agreement, the Company is not permitted to declare or pay dividends with respect to the shares without the prior written consent of Parent.
Common Stock ------------------ High Low -------- --------- 1997 Fourth Quarter (from inception on November 26, 1997)... $11 7/64 $ 8 1/2 1998 First Quarter.......................................... $39 $10 55/64 Second Quarter......................................... 34 1/2 10 Third Quarter.......................................... 25 1/2 0 61/64 Fourth Quarter......................................... 15 1/16 1 1/4 1999 First Quarter (through January 12, 1999)............... $20 $11 1/32
On January 8, 1999, the last full trading day prior to the public announcement of the execution of the Merger Agreement by the Company and Parent, the last reported sales price of the Shares in over-the-counter market was $13 3/16 per share of Common Stock. On January 14, 1999, the last full trading day prior to the commencement of the Offer, the last reported sales price of the Shares in over-the-counter market was $18 9/16 per share of Common Stock. Shareholders are urged to obtain a current market quotation for the Shares. 9 7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange Act Registration; Margin Regulations. Market for the Shares. The purchase of Shares by the Purchaser pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and will reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. Stock Listing. The Common Stock is traded in over-the-counter market. The extent of the public market for the Shares and the availability of quotations depends upon such factors as the number of shareholders and/or the aggregate market value of the Shares at any time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or lesser than the Offer Price. The Company has represented that, as of January 11, 1999, 8,140,793 Shares were issued and outstanding. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission if the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act, assuming there are no other securities of the Company subject to registration, would substantially reduce the information required to be furnished by the Company to its shareholders and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement pursuant to Section 14(a) in connection with shareholders' meetings and the related requirement of furnishing an annual report to shareholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Company. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. The Purchaser may seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If the Exchange Act registration of the Shares is not terminated prior to the Merger, then the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. Margin Regulations. Since the Shares are currently traded in the over-the- counter market, they are not "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"). 8. Certain Information Concerning the Company. General. The information concerning the Company contained in this Offer to Purchase, including that set forth below under the caption "Selected Financial Information," has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Neither Parent nor the Purchaser assumes responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Parent or the Purchaser. The Company is an Internet-based electronic retailer. The Company is a California corporation with its principal executive offices at 2101 East Coast Highway, Garden Level, Corona Del Mar, California 92625. The telephone number of the Company at such offices is (949) 640-4393. 10 Selected Financial Information. Set forth below is certain selected consolidated financial information with respect to the Company, excerpted or derived from the Company's Annual Report on Form 10-KSB for the fiscal year ended January 31, 1998, filed with the Commission pursuant to the Exchange Act. More comprehensive financial information is included in such report and in other documents filed by the Company with the Commission. The following summary is qualified in its entirety by reference to such report and other documents and all of the financial information (including any related notes) contained therein. Such report and other documents may be inspected and copies may be obtained from the Commission in the manner set forth below. SHOPPING.COM SELECTED CONSOLIDATED FINANCIAL INFORMATION (in thousands of dollars, except per share data)
Fiscal Year Ended January 31 ---------------------- 1998 1997 ----------- --------- Operating Data: Net sales........................................... $ 850,724 $ -- Operating income (loss)............................. $(4,970,869) $(201,697) Net earnings (loss)................................. $(5,522,029) $(201,697) Net earnings (loss) per share....................... $ (3.05) $ (0.16) Balance Sheet Data (at end of period):(1) Total assets........................................ $ 8,444,732 $ -- Total liabilities................................... $ 1,864,496 -- Shareholders' equity................................ $ 6,580,236 --
- - -------- (1) The Company completed its initial public offering on November 25, 1997, and therefore balance sheet data as of January 31, 1997 has been omitted from this table. Approximately 1,405,475 of the outstanding Shares, in the aggregate, and options and warrants exercisable for 2,730,001 Shares are held by the Shareholders, who have agreed, among other things, to tender, or cause to be tendered, all Shares owned by them pursuant to the Offer. The Shareholders also have granted to Parent a proxy to vote the Shares owned by them in favor of the Merger (which proxy will terminate in the event that the Purchaser waives the Minimum Condition and accepts for payment the Revised Number of Shares). See Section 11. Certain Company Projections. To the knowledge of Parent and the Purchaser, the Company does not as a matter of course, make public forecasts as to its future financial performance. However, in connection with the discussions concerning the Offer and the Merger, the Company furnished Parent with financial projections contained in the Company's 1998 and 1999 operating budgets prepared by management for management's 1998 and 1999 operating plan. The financial projections contained therein are based on numerous assumptions concerning revenue growth in all product and customer areas, and increases in sales and marketing and general administrative expenses. The Company's projections for fiscal year ended January 31, 1999 anticipated net sales of approximately $16.9 million and $179.5 million for fiscal year ended January 31, 2000. The Company's 1998 and 1999 operating budgets and the financial projections contained therein were prepared for the limited purpose of managing the operating plan of the Company for fiscal years 1998 and 1999. They do not reflect recent developments that have occurred since they were prepared, such as the Offer and the Merger. This reference to the projections is provided solely because such projections have been provided to the Purchaser and none of the Purchaser, Parent, the Company or any of their respective affiliates or representatives believes that such projections should be relied upon. 11 THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS. THESE FORWARD-LOOKING STATEMENTS (AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE COMPANY HAS ADVISED THE PURCHASER AND PARENT THAT ITS INTERNAL FINANCIAL FORECASTS (UPON WHICH THE PROJECTIONS PROVIDED TO PARENT WERE BASED IN PART) ARE, IN GENERAL, PREPARED SOLELY FOR INTERNAL USE AND CAPITAL BUDGETING AND OTHER MANAGEMENT DECISIONS, AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS SUSCEPTIBLE TO INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENTS. THE PROJECTIONS ALSO REFLECT NUMEROUS ASSUMPTIONS (NOT ALL OF WHICH WERE PROVIDED TO PARENT), ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY PARENT OR THE PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF PARENT, THE PURCHASER, THE COMPANY OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT, THE PURCHASER, THE COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE, OR MAKES ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE PROJECTIONS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. IT IS EXPECTED THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS, AND ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE PROJECTED. Available Information. The Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's shareholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such information should be obtainable by mail, upon payment of the Commission's customary charges, by writing to the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information relating to the Company that have been filed via the EDGAR System. Such material should also be available for inspection at the offices of the NASDAQ National Market, located at 20 Broad Street, New York, New York 10005. 12 9. Certain Information Concerning Parent and the Purchaser. Parent. Parent, a Delaware corporation, is a worldwide information technology company and is the largest global supplier of personal computers. The Purchaser is a Delaware entity newly formed at the direction of Parent for the purpose of effecting the Offer and the Merger. Parent owns, indirectly, all of the outstanding capital stock of the Purchaser. It is not anticipated that, prior to the consummation of the Offer, the Purchaser will have any significant assets or liabilities or will engage in any activities other than those incident to the Offer and the Merger. The offices of Parent and Purchaser are located at 20555 State Highway 249, Houston, Texas 77070. For certain information concerning the executive officers and directors, as the case may be, of the Purchaser and Parent, see Schedule I. Pursuant to the Option Agreement and the Shareholder Agreements, Parent and the Purchaser may be deemed to beneficially own 14,014,120 shares of Common Stock constituting approximately 56.1% of the total number of shares of Common Stock after giving effect to the exercise of all outstanding options and warrants (including the Option pursuant to the Option Agreement). See Section 11. Each of the Purchaser and Parent disclaims beneficial ownership of such shares. Except as set forth in this Offer to Purchase, none of the Purchaser, Parent, or, to the best knowledge of the Purchaser or Parent, any of the persons listed on Schedule I, or any associate or majority-owned subsidiary of any of the foregoing, beneficially owns or has a right to acquire any Shares, and none of the Purchaser, Parent, or, to the best knowledge of the Purchaser or Parent, any of the persons or entities referred to above, nor any of the respective executive officers, directors or subsidiaries of any of the foregoing, has effected any transaction in Shares during the past 60 days. Except as set forth in this Offer to Purchase, none of the Purchaser, Parent, or, to the best knowledge of the Purchaser and Parent, any of the persons listed on Schedule I, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, none of the Purchaser, Parent, or any of their respective affiliates, or, to the best knowledge of the Purchaser and Parent, any of the persons listed on Schedule I, has had, since January 1, 1994, any business relationships or transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except as set forth in this Offer to Purchase, since January 1, 1994, there have been no contacts, negotiations or transactions between the Purchaser or Parent, any of their respective affiliates or, to the best knowledge of the Purchaser or Parent, any of the persons listed on Schedule I, and the Company or its affiliates concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. Set forth below is certain selected historical financial information with respect to Parent excerpted or derived from financial information contained in Parent's Annual Reports on Form 10-K for the years ended December 31, 1997, 1996, 1995, 1994 and 1993, respectively, and Parent's Quarterly Reports on Form 10-Q for the three months ended March 31, 1998, June 30, 1998 and September 30, 1998. More comprehensive financial information is included in such reports and other documents filed by Parent with the Commission, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below. 13 COMPAQ COMPUTER CORPORATION SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA (in millions, except per share data) (unaudited)
Nine months ended September 30, Year ended December 31, ------------------ -------------------------------------- 1998 1997 1997 1996 1995 1994 1993 -------- -------- ------- ------- ------- ------- ------ Historical Consolidated Statement of Income data: Revenue................. $ 20,310 $ 17,261 $24,584 $20,009 $16,675 $12,605 $8,873 Income (loss) before provision for income taxes(1)(2)(3)(4)...... (3,594) 1,805 2,758 1,883 1,326 1,353 161 Net income (loss)(1)(2)(3)(4)..... (3,501) 1,188 1,855 1,318 893 988 19 Earnings (loss) per common share: Basic................. $ (2.21) $ 0.79 $ 1.23 $ 0.90 $ 0.62 $ 0.70 $ 0.01 Diluted............... $ (2.21) $ 0.76 $ 1.19 $ 0.87 $ 0.60 $ 0.68 $ 0.01 Shares used in computing earnings (loss) per common share: Basic................. 1,585 1,502 1,505 1,472 1,442 1,405 1,348 Diluted............... 1,585 1,557 1,564 1,516 1,492 1,463 1,388 Cash dividends declared per common share(5).... $ 0.045 $ 0.015 September 30, December 31, ------------------ -------------------------------------- 1998 1997 1997 1996 1995 1994 1993 -------- -------- ------- ------- ------- ------- ------ Historical Consolidated Balance Sheet data: Current assets.......... $ 14,770 $ 11,906 $12,017 $10,089 $ 7,462 $ 6,037 $4,142 Total assets............ 21,647 14,343 14,631 12,331 9,637 7,862 5,752 Current liabilities..... 10,356 5,516 5,202 4,741 3,356 2,739 2,098 Non-current liabilities............ 852 300 300 300 Stockholders' equity.... 10,439 8,568 9,429 7,290 5,757 4,644 3,468
- - -------- (1) Includes charges in 1998 in connection with the acquisition of Digital Equipment Corporation and the closing of certain Compaq facilities. These charges include $3.2 billion for the write-off of purchased in-process technology and $393 million for restructuring charges related to Compaq employee separations and elimination of certain Compaq facilities. (2) Includes a $208 million and a $241 million non-recurring, non-tax deductible charge for purchased in-process technology in connection with acquisitions in 1997 and 1995, respectively. (3) Includes Tandem Computers Incorporated restructuring charge of $258 million in 1993. (4) Includes a Tandem Computers Incorporated loss from discontinued operations of $222 million in 1993. (5) Compaq Computer Corporation announced an increase in its quarterly cash dividends from $0.015 to $0.02 per common share payable on January 20, 1999, to shareholders of record on December 31, 1998. Parent is subject to the informational requirements of the Exchange Act and in accordance therewith files periodic reports and other information with the Commission relating to its business, financial condition and other matters. Such reports and other information are available for inspection and copying at the offices of the Commission in the same manner as set forth with respect to the Company in Section 8. 14 10. Source and Amount of Funds. The total amount of funds required by the Purchaser to purchase all outstanding Shares and Shares issuable upon the exercise of all outstanding options and warrants to purchase Shares, pursuant to the Offer and to pay fees and expenses related to the Offer and the Merger is estimated to be approximately $250 million. The Purchaser plans to obtain all funds needed for the Offer and the Merger through a capital contribution that will be made by Parent to the Purchaser. For such capital contribution, Parent plans to use funds it has available in its cash accounts. The Purchaser has not conditioned the Offer on obtaining financing. 11. Background of the Offer; Purpose of the Offer and the Merger; The Merger Agreement and Certain Other Agreements. The following description was prepared by the Purchaser and the Company. Information about the Company was provided by the Company, and neither the Purchaser nor Parent takes any responsibility for the accuracy or completeness of any information regarding meetings or discussions in which Parent or its representatives did not participate. Background of the Offer. On December 14, 1998, Mr. Harold F. Enright, a Vice President of one of Parent's subsidiaries, contacted Mr. Robert McNulty, former president and chief executive officer of the Company, to inquire as to the Company's interest in discussing a potential alliance. At the meeting of representatives of Parent and the Company held on December 14, 1998, Mr. McNulty and other representatives of the Company apprised representatives of Parent of the Company's business and recent historical performance, including matters relating to the Company's technology, merchant relationships, competitive position in the industry and prospects. Mr. Enright indicated that Parent was reviewing a number of other potential opportunities, but that Parent would consider engaging in further discussions regarding a potential alliance with the Company. Concurrently with the foregoing preliminary discussions with the Company, Parent determined to retain a financial adviser to assist Parent's management and board of directors in the analysis of potential strategic opportunities in the electronic commerce industry. Representatives of Parent contacted representatives of Greenhill & Co., LLC ("Greenhill"), which was formally retained as of December 22, 1998. Over the course of the next several days, Greenhill held discussions with Parent to review the opportunities available to Parent. On December 20, 1998, following various internal management meetings and discussions with Greenhill, Parent determined to pursue further discussions with the Company. Mr. Ward communicated Parent's decision to further pursue discussions with the Company, and he held a meeting at the Company's offices in Corona Del Mar to further understand the Company's business. On December 21, 1998, following the return of representatives of Parent to their offices in Houston and internal management meetings held on that day, Parent determined to proceed with further due diligence review of the Company. Mr. Ward telephoned Mr. Denny to communicate Parent's intention and to further explore whether there was a basis for a business combination of the two companies. During that telephone conversation, Mr. Denny encouraged representatives of Parent to visit again with Company management at the Company's headquarters in Corona Del Mar to conduct further diligence. Over the course of December 22 and 23, 1998, Parent conducted its diligence review of the Company along with representatives of Greenhill, representatives of Skadden, Arps, Slate, Meagher & Flom LLP, legal counsel to Parent and other advisors. During this review, Parent's representatives held discussions with members of the Company's senior management relating to the Company's management and technology, and financial and legal matters. At the conclusion of these meetings, Mr. Ward indicated to Mr. Denny that Parent would contact the Company following the Christmas and New Year's holidays to inform the Company whether Parent would consider proceeding with further discussions regarding a possible acquisition. On January 4, 1999, following internal senior management meetings, management of Parent determined to continue its discussions with the Company. On January 6, the board of directors of Parent held a special meeting 15 to review, with the advice and assistance of representatives of Greenhill and other advisors, the proposed acquisition of the Company. Following discussion of the business, technology, management and prospects of the Company, the board of directors of Parent authorized its management to pursue a transaction with the Company within specified parameters. Following the meeting of the board of directors of Parent, Mr. Ward telephoned Mr. Denny to inform him of the board's decision and to pursue further discussions. At meetings held on January 9, 1999 and attended by Mr. Ward, representatives of Greenhill and representatives of the Company, the parties discussed general business terms of a possible transaction, including a proposed transaction structure. Mr. Denny informed representatives of Parent that, after having apprised the Company's board of directors of the preliminary discussions with Parent, he had been given authority to proceed with discussion of transaction terms with Parent. Following price discussions between the parties, Mr. Ward informed Mr. Denny that Parent was willing to move forward to negotiate a transaction only if definitive agreements between the parties could be executed prior to the open of the business day on Monday, January 11, 1999, and that Parent was willing to proceed with a per share price based on an enterprise value of the Company that Parent determined to be approximately $220 million. Mr. Denny conveyed Parent's proposal to the Company's board of directors, which after deliberation during the evening on January 9, 1999, determined to proceed with the transaction on those terms. Mr. Denny then communicated the board's decision to Mr. Ward. Over the course of the day and evening of January 10, 1999 and prior to the opening of business on January 11, 1999, representatives of the parties exchanged drafts of the definitive agreements, discussed and negotiated the terms of the Merger Agreement, the Shareholder Agreements and the Option Agreement. In the early morning on January 11, 1999, the Company's board of directors held a special meeting to consider the terms of the Merger Agreement, the Offer, the Merger, the Option Agreement and the transactions contemplated thereby. At that meeting, the Company's board of directors reviewed the terms of the Merger Agreement, the Offer, the Merger, the Option Agreement, and the transactions contemplated thereby with the Company's management, its counsel and the Company's financial advisor, Trautman Kramer & Company ("Trautman Kramer"). At the conclusion of their presentation, representatives of Trautman Kramer delivered their oral opinion (which was subsequently confirmed in writing) to the Company's board of directors that, as of such date, the consideration to be received by the shareholders of the Company pursuant to the Offer and the Merger is fair to such shareholders, from a financial point of view. Immediately following the conclusion of the Company's board of directors meeting, the parties executed the Merger Agreement, the Shareholder Agreements and the Option Agreement. Parent and the Company issued a press release announcing the transactions shortly before the opening of the New York Stock Exchange on January 11, 1999. Purpose of the Offer and the Merger. The purpose of the Offer, the Merger and the Merger Agreement is to enable Parent to acquire control of, and the entire equity interest in, the Company. The Offer is being made pursuant to the Merger Agreement and is intended to increase the likelihood that the Merger will be effected. The purpose of the Merger is to acquire all outstanding Shares not purchased pursuant to the Offer. The transaction is structured as a merger in order to ensure the acquisition by Parent of all the outstanding Shares. If the Merger is consummated, Parent's common equity interest in the Company would increase to 100% and Parent would be entitled to all benefits resulting from that interest. These benefits include complete management with regard to the future conduct of the Company's business and any increase in its value. Similarly, Parent will also bear the risk of any losses incurred in the operation of the Company and any decrease in the value of the Company. 16 Shareholders of the Company who sell their Shares in the Offer will cease to have any equity interest in the Company and to participate in its earnings and any future growth. If the Merger is consummated, the shareholders will no longer have an equity interest in the Company and instead will have only the right to receive cash consideration pursuant to the Merger Agreement or to exercise statutory appraisal rights under the GCL, if available. See Section 12. Similarly, the shareholders of the Company will not bear the risk of any decrease in the value of the Company after selling their Shares in the Offer or the subsequent Merger. The primary benefits of the Offer and the Merger to the shareholders of the Company are that such shareholders are being afforded an opportunity to sell all of their Shares for cash at a price which represents a premium of approximately 44.1% over the closing market price of the Common Stock on the last full trading day prior to the public announcement that the Company and Parent executed the Merger Agreement, and a more substantial premium over recent historical trading prices. Merger Agreement The following is a summary of certain provisions of the Merger Agreement. The summary is qualified in its entirety by reference to the Merger Agreement which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement may be examined and copies may be obtained at the places and in the manner set forth in Section 8 of this Offer to Purchase. Capitalized terms used in this Offer to Purchase and not otherwise defined shall have the meanings ascribed to such terms in the Merger Agreement. The Offer. The Merger Agreement provides that the Purchaser will commence the Offer and that, upon the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, the Purchaser will purchase all Shares validly tendered pursuant to the Offer. The Merger Agreement provides that, without the written consent of the Company, the Purchaser will not (i) decrease the Offer Price, (ii) decrease the number of Shares sought in the Offer (except as set forth below), (iii) impose additional conditions to the Offer, (iv) amend any condition to the Offer described in Section 14, (v) extend the Initial Expiration Date, provided, that if on the Initial Expiration Date of the Offer, all conditions to the Offer shall not have been satisfied or waived, the Purchaser, in its sole discretion, may elect to extend the Expiration Date from time to time, or (vi) amend any other term of the Offer in any manner adverse to any holders of Shares without the written consent of the Company. In the event the Minimum Condition is not satisfied on any scheduled Expiration Date, the Purchaser may either (i) extend the Offer or (ii) amend the Offer to provide that, in the event (X) the Minimum Condition is not satisfied at the next scheduled Expiration Date (without giving pro forma effect to the potential issuance of any Shares issuable upon exercise of the Option Agreement) and (Y) the number of Shares tendered pursuant to the Offer and not withdrawn as of such next scheduled Expiration Date is more than 50% of the then outstanding Shares, the Purchaser shall waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to a number of Shares that when added to the Shares then owned by the Purchaser will equal the Revised Minimum Number and, if a greater number of Shares is tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that the Purchaser may, but shall not in any event be required to, accept for payment, or pay for any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the applicable Expiration Date). In the event that the Purchaser purchases a number of Shares equal to the Revised Minimum Number, without the prior written consent of the Purchaser prior to the termination of the Merger Agreement, the Company shall take no action whatsoever to increase the number of Shares owned by the Purchaser in excess of the Revised Minimum Number. The Purchaser shall, on the terms and subject to the prior satisfaction or waiver of the conditions to the Offer, accept for payment and pay for Shares tendered as soon as legally permitted to do so under applicable law. The Merger. Following the consummation of the Offer, the Merger Agreement provides that, subject to the terms and conditions thereof, at the Effective Time the Purchaser shall be merged with and into the Company 17 and, as a result of the Merger, the separate corporate existence of the Purchaser shall cease and the Company shall continue as the surviving corporation (sometimes referred to as the "Surviving Corporation"). The respective obligations of Parent and the Purchaser, on the one hand, and the Company, on the other hand, to effect the Merger are subject to the satisfaction on or prior to the Closing Date (as defined in the Merger Agreement) of each of the following conditions: (i) the Purchaser shall have purchased or caused to be purchased, the Shares pursuant to the Offer, unless such failure to purchase is a result of a breach of the Purchaser's obligations under the Merger Agreement, (ii) the Merger Agreement shall have been approved and adopted by the requisite vote of the holders of Shares, to the extent required by the Company's Articles of Incorporation and the GCL, in order to consummate the Merger; (iii) no statute, rule, regulation or order shall have been enacted or promulgated by any United States governmental authority which prohibits the consummation of the Merger, and there shall be no order or injunction of a court of competent jurisdiction in effect preventing the consummation of the Merger and (iv) the applicable waiting period under the HSR Act shall have expired or been terminated. At the Effective Time of the Merger (i) each issued and outstanding Share (other than Shares that are owned by owned by Parent, the Purchaser or any Shares which are held by shareholders properly exercising dissenters' rights under the GCL) will be converted into the right to receive the Offer Price paid pursuant to the Offer and (ii) each issued and outstanding share of any class or series of common stock, par value $.01 per share, of the Purchaser will be converted into one share of common stock of the Surviving Corporation. The Company's Board of Directors. The Merger Agreement provides that promptly upon the purchase of and payment for any Shares by the Purchaser pursuant to the Offer, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company's Board of Directors as will give Parent representation on the Board of Directors equal to at least that number of directors which equals the product of the total number of directors on the Company's Board of Directors (after giving effect to the directors designated by Parent) multiplied by the percentage that the aggregate number of Shares beneficially owned by the Purchaser or any of its affiliates bears to the number of Shares outstanding. The Company shall promptly secure the resignations of such number of its incumbent directors as is necessary to enable Parent's designees to be elected to the Company's Board of Directors, provided that (i) in the event that Parent's designees are appointed or elected to the Company's Board of Directors, until the Effective Time the Company's Board of Directors will have at least two directors who are directors as of the date of the execution of the Merger Agreement and neither of whom is an officer of the Company nor a designee, shareholder, affiliate or associate (within the meaning of federal securities laws) of Parent (one or more of such directors, the "Independent Directors") and (ii) if no Independent Directors remain, the other directors will designate two persons to fill one of the vacancies who shall not be a shareholder, affiliate or associate of Parent or the Purchaser, such person so designated being deemed an Independent Director. The Company's obligation to appoint Parent's designees to the Company's Board of Directors is subject to compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Following the election of Parent's designees to the Company's Board of Directors and prior to the Effective Time, the affirmative vote of a majority of the Independent Directors shall be required to (i) amend or terminate the Merger Agreement on behalf of the Company, (ii) exercise or waive any of the Company's rights, benefits or remedies under the Merger Agreement or (iii) take any other action by the Company's Board of Directors under or in connection with the Merger Agreement which would materially and adversely affect the rights of the Company's shareholders other than Parent or the Purchaser, under the Merger Agreement; provided, further, that if there will be no such directors, such actions may be effected by the unanimous vote of the entire Board of Directors of the Company. Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will, if required by applicable law or the Company's Articles of Incorporation, in order to consummate the Merger, duly call, give notice of, convene and hold a special meeting of its shareholders as promptly as practicable following the acceptance for payment and purchase of Shares by the Purchaser pursuant to the Offer for the purpose of considering and taking 18 action upon the approval of the Merger and the adoption of the Merger Agreement. The Merger Agreement provides that the Company will, if required by applicable law in order to consummate the Merger, prepare and file with the Commission a preliminary proxy or information statement relating to the Merger and the Merger Agreement and use its best efforts (i) to obtain and furnish the information required to be included by the Commission in the Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made by the Commission with respect to the preliminary Proxy Statement and cause a definitive Proxy Statement to be mailed to its shareholders, provided that no amendment or supplement to the Proxy Statement will be made by the Company without consultation with Parent and its counsel and (ii) to obtain the necessary approvals of the Merger and the Merger Agreement by its shareholders. Subject to the terms of the Merger Agreement, the Company has agreed to include in the Proxy Statement the recommendation of the Company's Board of Directors that shareholders of the Company vote in favor of the approval of the Merger and the adoption of the Merger Agreement. The Merger Agreement provides that in the event that Parent or the Purchaser acquires at least 90% of outstanding shares of Common Stock, pursuant to the Offer or otherwise, Parent, the Purchaser and the Company will, at the request of Parent and subject to the terms of the Merger Agreement, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of shareholders of the Company, in accordance with Section 1110 of the GCL. Options. Pursuant to the Merger Agreement, at the Effective Time, each Company Option (as defined below), whether vested or unvested, shall be assumed by Parent and shall be converted into an option to acquire that number of shares of Parent Common Stock (as defined below) equal to (i) the number of Shares subject to the Company Option immediately prior to the Effective Time, multiplied by (ii) the Exchange Ratio (as defined below), rounded down to the nearest whole share, at a price per Parent Common Share equal to (A) the exercise price of the Company Option immediately prior to the Effective Time, divided by (B) the Exchange Ratio, rounded up to the nearest whole cent. Other than as described in the immediately preceding sentence, the Company Options shall be subject to the same terms and conditions as applicable immediately prior to the Effective Time. Parent shall take all action necessary for the Parent Common Shares to rank pari passu in all respects with all other Parent Common Shares then in issue and to be listed and issuable upon exercise of the Company Options to be freely tradeable on the New York Stock Exchange. The Company is required to take all necessary actions to provide that as of the Effective Time no holder of Company Options under the Stock Plans will have any right to receive shares of common stock of the Surviving Corporation upon exercise of any such Company Option. "Company Options" means those certain options to purchase Shares which have been granted by the Company under the Company's Stock Option Plan of 1997, as amended and the options identified in Schedule 2.4 to the Merger Agreement, and in each case, which are outstanding at the Effective Time. "Exchange Ratio" means the quotient of (x) the Offer Price multiplied by the average per share closing price of the Parent Common Stock as reported on the New York Stock Exchange on each of the ten trading days immediately preceding the Effective Time. Interim Operations; Covenants. Pursuant to the Merger Agreement, the Company has agreed that prior to the Effective Time, except as (i) expressly contemplated by the Merger Agreement, (ii) as set forth in Section 5.1 of the Disclosure Schedule, or (iii) as agreed in writing by Parent, after the date of the Merger Agreement, the business of the Company will be conducted in the ordinary course and consistent with past practice, and the Company will use its best efforts to preserve its business organization intact, keep available the services of its current officers and employees and maintain its existing relations with franchisees, customers, suppliers, creditors, business partners and others having business dealings with it, to the end that the goodwill and ongoing business of each of them shall be unimpaired at the Effective Time. In addition, the Company has agreed that it will not: (i) amend its articles of incorporation or by-laws or similar organizational documents; (ii) issue, sell, transfer, pledge, dispose of or encumber any shares of any class or series of (A) its capital stock or (B) indebtedness having general voting rights and debt convertible into securities having such rights (such indebtedness, "Voting 19 Debt"), or (C) securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of any class or series of its capital stock or any Voting Debt, other than Shares reserved for issuance on the date of the Merger Agreement pursuant to the exercise of Company Options outstanding on the date of the Merger Agreement; (iii) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to any shares of any class or series of its capital stock; (iv) split, combine or reclassify any shares of any class or series of its stock; (v) redeem, purchase or otherwise acquire directly or indirectly any shares of any class or series of its capital stock, or any instrument or security which consists of or includes a right to acquire such shares; (vi) incur or modify any indebtedness or other liability, other than in the ordinary and usual course of business and consistent with past practice; (vii) modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; (viii) incur or assume any long-term debt, or except in the ordinary course of business, incur or assume any short-term indebtedness in amounts not consistent with past practice; (ix) modify the terms of any indebtedness or other liability; (x) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other Person, except as described in the Disclosure Schedule as being in the ordinary course of business and consistent with past practice; (xi) make any loans, advances or capital contributions to, or investments in, any other; (xii) enter into any material commitment or transaction (including, but not limited to, any capital expenditure or purchase, sale or lease of assets or real estate); (xiii) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any assets other than in the ordinary and usual course of business and consistent with past practice; (xiv) except as otherwise specifically provided in the Merger Agreement or in the Schedule 14D-9, make any change in the compensation payable or to become payable to any of its officers, directors, employees, agents or consultants (other than normal recurring increases in wages to employees who are not officers or directors or Affiliates in the ordinary course of business consistent with past practice) or to Persons providing management services, or enter into or amend any employment, severance, consulting, termination or other agreement or employee benefit plan or make any loans to any of its officers, directors, employees, Affiliates, agents or consultants or make any change in its existing borrowing or lending arrangements for or on behalf of any of such Persons pursuant to an employee benefit plan or otherwise; (xv) except as otherwise specifically contemplated by the Merger Agreement or by the Schedule 14D-9 or as specifically set forth in the Disclosure Schedule, pay or make any accrual or arrangement for payment of any pension, retirement allowance or other employee benefit pursuant to any existing plan, agreement or arrangement to any officer, director, employee or Affiliate or pay or agree to pay or make any accrual or arrangement for payment to any officers, directors, employees or Affiliates of the Company of any amount relating to unused vacation days, except payments and accruals made in the ordinary course of business consistent with past practice; (xvi) adopt or pay, grant, issue, accelerate or accrue salary or other payments or benefits pursuant to any pension, profit- sharing, bonus, extra compensation, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or any employment or consulting agreement with or for the benefit of any director, officer, employee, agent or consultant, whether past or present; or amend in any material respect any such existing plan, agreement or arrangement in a manner inconsistent with the foregoing; (xvii) permit any insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent; (xviii) enter into any contract or transaction relating to the purchase of assets other than in the ordinary course of business consistent with prior practices; (xix) pay, repurchase, discharge or satisfy any of its claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company; (xx) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company (other than the Merger); (xxi) change any of the accounting methods used by it unless required by GAAP or make any material election relating to Taxes, change any material election relating to Taxes already made, adopt any material accounting method relating to Taxes, change any material accounting method relating to Taxes unless required by GAAP, enter into any closing agreement relating to Taxes, settle any claim or assessment relating to Taxes or consent to any claim or assessment relating to Taxes or any waiver of the statute of limitations for any such claim or 20 assessment; (xxii) take, or agree to commit to take, any action that would or is reasonably likely to result in any of the conditions to the Offer set forth in Annex A of the Merger Agreement or any of the conditions to the Merger set forth in Article VI of the Merger Agreement not being satisfied, or would make any representation or warranty of the Company contained in the Merger Agreement inaccurate in any respect at, or as of any time prior to, the Effective Time, or that would materially impair the ability of the Company, Parent, Purchaser or the holders of Shares to consummate the Offer or the Merger in accordance with the terms of the Merger Agreement or materially delay such consummation; and (xxiii) enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. Access; Confidentiality. Pursuant to the Merger Agreement, the Company has agreed to afford to the officers, employees, accountants, counsel, financing sources and other representatives of Parent, full access during the period prior to the time the persons designated by the Purchaser have been elected to, and shall constitute a majority of, the Company Board of Directors pursuant to the terms of the Merger Agreement (the "Appointment Date"), to all its properties, books, contracts, commitments and records, and, during such period, the Company has agreed to furnish promptly to the Parent (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of the federal securities laws and (b) all other information concerning its business, properties and personnel as Parent may reasonably request. Access includes the right to conduct such environmental studies as Parent, in its discretion, deems appropriate. After the Appointment Date, the Company has agreed to provide Parent and such persons as Parent shall designate with all such information, at any time as Parent shall request. Until the Appointment Date, unless otherwise required by law or in order to comply with disclosure requirements applicable to the Offer Documents or the Proxy Statement, Parent has agreed to hold any such information which is nonpublic in confidence in accordance with the provisions of a confidentiality agreement. Reasonable Best Efforts. Prior to the Closing, upon the terms and subject to the conditions of the Merger Agreement, Parent, Purchaser and the Company have agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable (subject to any applicable laws) to consummate and make effective the Merger and the other Transactions as promptly as practicable including, but not limited to (i) the preparation and filing of all forms, registrations and notices required to be filed to consummate the Merger and the other Transactions and the taking of such actions as are necessary to obtain any requisite approvals, consents, orders, exemptions or waivers by any third party or Governmental Entity, and (ii) the satisfaction of the other parties' conditions to Closing. In addition, each party to the Merger Agreement has agreed not to take any action after the date of the Merger Agreement that would reasonably be expected to materially delay the obtaining of, or result in not obtaining, any permission, approval or consent from any Governmental Entity necessary to be obtained prior to Closing. Notwithstanding the foregoing, or any other covenant contained in the Merger Agreement, in connection with the receipt of any necessary approvals under the HSR Act, the Company has agreed that it will not be entitled to divest or hold separate or otherwise take or commit to take any action that limits Parent's or Purchaser's freedom of action with respect of, or their ability to retain, the Company or any material portions thereof or any of the businesses, product lines, properties or assets of the Company, without Parent's prior written consent. Prior to the Closing, each party has agreed to promptly consult with the other parties to the Merger Agreement with respect to, provide any necessary information with respect to, and provide the other parties (or their respective counsel) with copies of, all filings made by such party with any Governmental Entity or any other information supplied by such party to a Governmental Entity in connection with the Merger Agreement, the Merger and the other Transactions. Each party to the Merger Agreement has agreed to promptly inform the other parties of any communication from any Governmental Entity regarding any of the Transactions. If any party to the Merger Agreement or Affiliate thereof receives a request for additional information or documentary material from any such Governmental Entity with respect to any of the Transactions, then such party has agreed to endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other parties, an appropriate response in compliance with such request. To the extent that transfers, 21 amendments or modifications of permits (including environmental permits) are required as a result of the execution of the Merger Agreement or consummation of any of the Transactions, the Company has agreed to use its best efforts to effect such transfers, amendments or modifications. Pursuant to the Merger Agreement, the Company and Parent have agreed to file as soon as practicable notifications under the HSR Act and respond as promptly as practicable to any inquiries received from the Federal Trade Commission and the Antitrust Division of the Department of Justice for additional information or documentation and respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other Governmental Entity in connection with antitrust matters. Concurrently with the filing of notifications under the HSR Act or as soon thereafter as practicable, each of the Company and Parent has agreed to request early termination of the HSR Act waiting period. Notwithstanding the foregoing, nothing in the Merger Agreement is to be deemed to require Parent or Purchaser to commence any litigation against any entity in order to facilitate the consummation of any of the Transactions or to defend against any litigation brought by any third party or Governmental Entity seeking to prevent the consummation of any of the Transactions. No Solicitation of Competing Transaction. Pursuant to the Merger Agreement, the Company and its Affiliates have agreed not to (and the Company will cause the officers, directors, employees, representatives and agents of the Company, and each Affiliate of the Company, including, but not limited to, investment bankers, attorneys and accountants, not to), directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information to, any Person or group (other than Parent, any of its Affiliates or representatives) concerning any Acquisition Proposal (as defined below), except that nothing contained in any provision of the Merger Agreement shall prohibit the Company or the Company's Board from (i) taking and disclosing to the Company's shareholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure to the Company's shareholders as, in the good faith judgment of the Board, after receiving advice from outside counsel, is required under applicable law, provided that the Company may not, except as provided for under the Merger Agreement, withdraw or modify, or propose to withdraw or modify, its position with respect to the Offer or the Merger or approve or recommend, or propose to approve or recommend any Acquisition Proposal, or enter into any agreement with respect to any Acquisition Proposal. After the date of the Merger Agreement, the Company will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. An "Acquisition Proposal" means any proposal or offer to acquire all or a substantial part of the business or properties of the Company or any capital stock of the Company, whether by merger, tender offer, exchange offer, sale of assets or similar transactions involving the Company, division or operating or principal business unit of the Company. Notwithstanding the foregoing, prior to the time of acceptance of Shares for payment pursuant to the Offer, the Company may furnish information concerning its business, properties or assets to any corporation, partnership, person or other entity or group pursuant to appropriate confidentiality agreements, and may negotiate and participate in discussions and negotiations with such entity or group concerning an Acquisition Proposal if: (i) such entity or group has on an unsolicited basis submitted a bona fide written proposal to the Company Board of Directors relating to any such transaction which the Board determines in good faith, represents a superior transaction to the Offer and the Merger and which is not subject to the receipt of any necessary financing; and (ii) in the opinion of the Company Board of Directors such action is required to discharge the Board's fiduciary duties to the Company's shareholders under applicable law, determined only after receipt of (A) a written opinion from the Company's investment banking firm that the Acquisition Proposal is superior, from a financial point of view, to the Offer and the Merger, and (B) a written opinion from independent legal counsel to the Company that the failure to provide such information or access or to engage in such discussions or negotiations would cause the Board of Directors to violate its fiduciary duties to the Company's shareholders under applicable law (an Acquisition Proposal meeting the foregoing criteria, a "Superior Proposal") . 22 Pursuant to the Merger Agreement, the Company has agreed to immediately notify Parent of the existence of any proposal, discussion, negotiation or inquiry received by the Company, and the Company has agreed to immediately communicate to Parent the terms of any proposal, discussion, negotiation or inquiry which it may receive (and will immediately provide to Parent copies of any written materials received by the Company in connection with such proposal, discussion, negotiation or inquiry) and the identity of the party making such proposal or inquiry or engaging in such discussion or negotiation. The Company has further agreed to promptly provide to Parent any non-public information concerning the Company provided to any other party which was not previously provided to Parent. Except as set forth in the following sentence, the Company Board of Directors and any committee thereof have agreed not to (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or recommendation by such Board of Directors or any such committee of the Offer, the Merger Agreement or the Merger, (ii) approve or recommend or propose to approve or recommend, any Acquisition Proposal or (iii) enter into any agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the time of acceptance for payment of Shares pursuant to the Offer, the Company Board of Directors may withdraw or modify its approval or recommendation of the Offer, the Merger Agreement or the Merger, approve or recommend a Superior Proposal, or enter into an agreement with respect to a Superior Proposal, in each case at any time after the fifth business day following Parent's receipt of written notice from the Company advising Parent that the Board of Directors has received a Superior Proposal which it intends to accept, specifying the material terms and conditions of such Superior Proposal, and identifying the person making such Superior Proposal, but only if the Company has caused its financial and legal advisors to negotiate with Parent to make such adjustments in the terms and conditions of the Merger Agreement as would enable the Company to proceed with the transactions contemplated therein on such adjusted terms. Publicity. The parties to the Merger Agreement have agreed that the initial press release with respect to the execution of the Merger Agreement shall be a joint press release acceptable to Parent and the Company. Thereafter, until the Appointment Date, or the date the Transactions are terminated or abandoned pursuant to Article VII of the Merger Agreement, the Company and Parent have agreed to, and will cause and each of their respective Affiliates to, issue or cause the publication of any press release or other announcement with respect to the Merger, the Merger Agreement or the other Transactions without prior consultation with the other party, except as may be required by law or by any listing agreement with a national securities exchange or trading market. Notification of Certain Matters. Pursuant to the Merger Agreement, the Company has agreed to give prompt notice to Parent of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would cause any representation or warranty contained in the Merger Agreement to be untrue or inaccurate in any material respect at or prior to the Effective Time, and (ii) any material failure of the Company to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under the Merger Agreement; provided, however, that the delivery of any notice pursuant to the Merger Agreement will not limit or otherwise affect the remedies available under the Merger Agreement to the party receiving such notice. Directors' and Officers' Insurance and Indemnification. Pursuant to the Merger Agreement, for six years after the Effective Time, the Surviving Corporation (or any successor to the Surviving Corporation) has agreed to indemnify, defend and hold harmless each present and former officer and director of the Company as of the date of the Merger Agreement and each person who became any of the foregoing prior to the Effective Time (each such person an "Indemnified Party") against all losses, claims, damages, liabilities, costs, fees and expenses, including reasonable fees and disbursements of counsel and judgments, fines, losses, claims, liabilities and amounts paid in settlement (provided that any such settlement is effected with the written consent of the Parent or the Surviving Corporation) arising out of actions or omissions occurring at or prior to the Effective Time to the full extent required under applicable California law, the terms of the Company's certificate of incorporation or the by-laws, as in effect at the date of the Merger Agreement; provided that, in the event any 23 claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until disposition of any and all such claims. Parent or the Surviving Corporation have agreed to maintain the Company's existing officers' and directors' liability insurance for a period of not less than three years after the Effective Time; provided, however, that the Parent may substitute therefor policies of substantially equivalent coverage and amounts containing terms no less favorable to such former directors or officers; provided, further, that in no event is the Company required to pay aggregate premiums for insurance under the Merger Agreement in excess of 150% of the aggregate premiums paid by the Company in 1998 on an annualized basis for such purpose; and provided, further, that if the Parent or the Surviving Corporation is unable to obtain the amount of insurance required by the Merger Agreement for such aggregate premium, Parent or the Surviving Corporation shall obtain as much insurance as can be obtained for an annual premium not in excess of 150% of the aggregate premiums paid by the Company in 1998 on an annualized basis for such purpose. State Takeover Laws. The Company has agreed, upon the request of the Purchaser, to take all commercially reasonable steps to assist in any challenge by the Purchaser to the validity or applicability to the transactions contemplated by the Merger Agreement and the Option Agreement, including the Offer and the Merger, and the Shareholder Agreements, of any state takeover law. Purchaser Compliance. Parent has agreed to cause Purchaser to comply with all of its obligations under or related to the Merger Agreement. Cooperation. If Parent and Purchaser have not consummated the Offer within 26 business days following the date of the Merger Agreement, Parent has agreed to cooperate with the Company to obtain financing for the Company's working capital requirements. Representations and Warranties. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to Parent and the Purchaser with respect to, among other things, its organization and qualification; capitalization; authority and corporate action relative to the Transactions; consents and approvals; public filings and financial statements; books and records; liabilities; accounts receivable; inventory; conduct of business; litigation, employee benefit plans; tax matters and government benefits; property title; plant and equipment; leases; environmental matters; bank accounts; intellectual property; employment matters; legal compliance; products liability; contractual matters; customers and suppliers; orders, commitments and returns; insurance matters; labor matters; consents; information contained in the Schedule 14D-9; information contained in the Proxy Statement; opinion of financial advisor; absence of questionable payments; personnel matters; insider interests; brokers or finders and full disclosure. Termination; Fees. The Transactions may be terminated or abandoned at any time prior to the Effective Time, whether before or after shareholder approval thereof: a. Subject to the terms and provisions of the Merger Agreement, by the mutual written consent of Parent and the Company; or b. By either of the Company or Parent if (i) the Offer shall have expired without any Shares being purchased pursuant thereto, or (ii) Purchaser has not accepted for payment any Shares pursuant to the Offer by May 15, 1999; provided, however, that the right to terminate the Merger Agreement pursuant to the terms thereof shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of Purchaser to purchase the Shares pursuant to the Offer on or prior to such date; or (iii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their reasonable efforts to lift), which permanently restrains, enjoins or otherwise prohibits the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree, ruling or other action shall have become final and non-appealable; or 24 c. By the Company (i) if Parent, Purchaser or any of their Affiliates shall have failed to commence the Offer on or prior to five business days following the date of the initial public announcement of the Offer; provided, that the Company may not terminate the Merger Agreement pursuant to its terms if the Company is at such time in material breach of its obligations under the Merger Agreement; (ii) in connection with entering into a definitive agreement as permitted by the provisions of the Merger Agreement, provided the Company has complied with all provisions thereof, including the notice provisions contained therein, and that the Company makes simultaneous payment to Parent of funds as required by the provisions of the Merger Agreement; or (iii) if Parent or Purchaser has breached in any material respect any of its respective representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach cannot be or has not been cured within 30 days after the giving of written notice by the Company to Parent or Purchaser, as applicable; or d. By Parent (i) if, due to an occurrence, not involving a breach by Parent or Purchaser of their obligations under the Merger Agreement, which makes it impossible to satisfy any of the conditions set forth in Annex A thereto, Parent, Purchaser, or any of their Affiliates shall have failed to commence the Offer on or prior to the fifth business day following the date of the initial public announcement of the Offer; (ii) if, prior to the purchase of Shares by Purchaser pursuant to the Offer, the Company Board of Directors has (A) withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger, (B) recommended an Acquisition Proposal, (C) executed an agreement in principle or definitive agreement relating to an Acquisition Proposal or similar business combination with a person or entity other than Parent, Purchaser or their Affiliates, or (D) exercised its rights pursuant to Merger Agreement with respect to an Acquisition Proposal, and, directly or through its representatives, continued discussions with any third party concerning an Acquisition Proposal for more than ten business days after the date of receipt of such Acquisition Proposal; (iii) if prior to the purchase of Shares pursuant to the Offer, the Company shall have breached any representation, warranty, covenant or other agreement contained in the Merger Agreement which (A) would give rise to the failure of a condition set forth in paragraph (f) or (g) of Annex A thereto, and (B) cannot be or has not been cured within 30 days after the giving of written notice to the Company; or (iv) if the Disclosure Schedule of the Company which is to be delivered to Parent pursuant to the Merger Agreement following the Execution Date reveals matters or information that are material and adverse to the Company and the Company shall not have disclosed such matters or information to Parent on or prior to the date of the Merger Agreement. In the event of the termination or abandonment of the Transactions by any party to the Merger Agreement pursuant to the terms of the Merger Agreement, written notice of such termination or abandonment must be given to the other party or parties specifying the provision of the Merger Agreement pursuant to which such termination or abandonment of the Transactions is made, and there will be no liability on the part of the Parent or the Company except (A) for fraud or for breach of the Merger Agreement prior to such termination or abandonment of the Transactions and (B) as specified under the Merger Agreement. Except as specifically provided to the contrary in the Merger Agreement, all costs and expenses incurred in connection with the Merger Agreement and the consummation of the Transactions shall be paid by the party incurring such expenses; provided; that if any legal action is instituted to enforce or interpret the terms of the Merger Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. If (i) the Company enters into an agreement which accepts or implements a Superior Proposal; (ii) either the Company or Parent terminates or abandons the Transactions pursuant to Section 7.1(b)(i) of the Merger Agreement and prior thereto there shall have been publicly announced another Acquisition Proposal; (iii) the Company has terminated or abandoned the Transactions pursuant to Section 7.1(c)(ii) of the Merger Agreement; or (iv) Parent has terminated or abandoned the Transactions pursuant to Section 7.1(d)(ii) or (iv) of the Merger Agreement, then the Company shall pay to Parent an amount equal to the Termination Fee of $9,000,000 plus 25 an amount equal to Parent's actual and reasonably documented out-of-pocket fees and expenses incurred by Parent and Purchaser in connection with the Offer, the Merger, the Merger Agreement and the consummation of the Transactions. The Termination Fee and Parent's good faith estimate of its expenses shall be paid in same day funds concurrently with the execution of an agreement referred to in section (i) above or any termination or abandonment referred to in subsections (ii), (iii) or (iv) above, whichever shall first occur, together with delivery of a written acknowledgment by the Company of its obligation to reimburse Parent for its actual expenses in excess of such estimated expense payment. Shareholder Agreements The following is a summary of certain provisions of the Shareholder Agreements, dated January 11, 1999 between Parent and the shareholders identified in such Shareholder Agreements. The following summary of the Shareholder Agreements does not purport to be complete and is qualified by reference to the text of the Shareholder Agreements, copies of which are filed as Exhibits (c)(2) through (c)(12) hereto and incorporated herein by reference. As a condition and inducement to Parent and the Purchaser to enter into the Merger Agreement and incurring the liabilities therein, certain shareholders of the Company (each a "Shareholder") who have voting power and dispositive power with respect to an aggregate of 1,405,475 Shares outstanding and options and warrants exercisable for 2,705,001 Shares as of January 11, 1999 concurrently with the execution and delivery of the Merger Agreement have entered into the Shareholder Agreements. The Shareholders are Robert McNulty, Paul Hill, Ed Bradley, Mark Winkler, Kristine Webster, John Markley, Frank Denny, Pat Demicco, Randy Read, Cyber Depot, a corporation wholly owned by Mr. McNulty, and Kipling Isle, a corporation wholly owned by Paul Hill. Pursuant to the Shareholder Agreements, each of the Shareholders has agreed to validly tender, in accordance with the terms of the Offer promptly, all Shares subject to the Shareholder Agreements. Each Shareholder agreed not to withdraw his Shares so tendered unless the Offer is terminated or expired. Each of the Shareholders has granted Parent an irrevocable proxy with respect to the voting of such Shares in favor of the Merger, which proxy will terminate in the event that the Purchaser waives the Minimum Condition and accepts for payment the Revised Number of Shares. Each of the Shareholders has agreed that, prior to the termination of the Shareholder Agreements pursuant to their terms, he or she will not (i) transfer, or consent to the transfer, of any or all of the Shares or any interest therein; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of the Shareholder's obligations under the Shareholder Agreements or the Merger Agreement. The Shareholder Agreements, and all rights and obligations of the parties thereto, shall terminate immediately upon the earlier of (i) six months following the termination of the Merger Agreement in accordance with its terms or (ii) the Effective Time. In addition, the Shareholder Agreement with each of Robert McNulty, Mark Winkler, Frank Denny and Pat Demicco provides for certain non-competition and non-disclosure restrictions. Pursuant to these provisions, each such shareholder is prohibited, for a period of eighteen months following the Effective Time, from: (a) engaging in any business or activity competitive in any material manner with the business of retail sales on or through the Internet (the "Business"); (b) meaningfully assisting any business or activity competitive in any material manner with the Business; (c) taking any action with respect to the Business to solicit or divert any business (or potential business) or clients or customers (or potential clients or potential customers) away from Parent or any Affiliate; (d) inducing customers, potential customers, clients, potential clients, suppliers, agents or other persons under contract or otherwise associated or doing business with respect to the Business with Parent or any Affiliate to terminate, reduce or alter any such association or business with respect to the Business with or from Parent or 26 any Affiliate; and (e) knowingly inducing any person in the employment of Parent or any Affiliate in the Business to (i) terminate such employment, (ii) with respect to the Business, interfere with the customers, suppliers, or clients of Parent or any Affiliate in any manner or the business of Parent or any Affiliate in any manner. In addition, each such shareholder agreed not to disclose to any person, or use or otherwise exploit for his or her own benefit or for the benefit of any person, other than Parent and/or its Affiliates, any confidential information or trade secrets (other than any of the foregoing which becomes public information without any breach of the Shareholder Agreement by such shareholder). Option Agreement The following is a summary of certain provisions of the Option Agreement, dated January 11, 1999 between Parent and the Company. The following summary of the Option Agreement does not purport to be complete and is qualified by reference to the text of the Option Agreement, a copy of which is filed as Exhibit (c)(13) hereto and incorporated herein by reference. Capitalized terms used in the following summary but not otherwise defined shall have the meanings described to them in the Option Agreement. Pursuant to the Option Agreement, the Company granted to the Purchaser the Stock Option to purchase the Option Shares at the Option Price, subject to the terms and conditions set forth in the Option Agreement; provided, however, that the Stock Option will not be exercisable if the number of shares subject thereto exceeds the number of authorized shares available for issuance. The Option Agreement provides that, subject to the conditions therein and any additional requirements of law, the Stock Option may be exercised by the Purchaser, in whole but not in part, at any one time after the occurrence of a Top-up Exercise Event (as defined below) and prior to the Termination Date (as defined below). For the purpose of the Option Agreement, a "Top-up Exercise Event" would occur upon the Purchaser's acceptance for payment pursuant to the Offer of shares of Common Stock constituting more than 50% but less than 90% of the shares of Common Stock then outstanding, and the Termination Date would occur upon the first to occur of any of the following: (i) the Effective Time; (ii) the date which is ten (10) business days after the occurrence of a Top-up Exercise Event; (iii) the termination of the Merger Agreement and (iv) the date on which the Purchaser waives the Minimum Condition and accepts for payment the Revised Minimum Number of Shares. Pursuant to the Option Agreement, the Company granted to Parent an irrevocable option (the "Topping Fee Option") to purchase, at the Offer Price, a number of shares of Common Stock (the "Topping Fee Option Shares") equal to the number of authorized shares of Common Stock available for issuance (as adjusted to reflect certain changes in the Company's capitalization occurring after the date of the Option Agreement). The Topping Fee Option expires on the earliest to occur of: (i) the Effective Time, and (ii) six (6) months after any termination of the Merger Agreement pursuant to Article VII thereof (the "Topping Fee Termination Date"); provided, however, that the Topping Fee Option shall not expire if the Parent has given notice that it wishes to exercise all or any part of the Topping Fee Option prior to the Topping Fee Termination Date. The Option Agreement provides that, subject to the conditions therein and any additional requirements of law, the Topping Fee Option may be exercised by the Parent (or its designee), in whole or in part, if on or after the date of the Option Agreement: (a) any corporation, partnership, individual or other entity or "person" (other than Parent or any of its affiliates (a "Third Party"), shall have: (i) commenced a bona fide tender offer or exchange offer for any shares of Common Stock of the Company, the consummation of which would result in "beneficial ownership" (as defined under the Exchange Act) by such Third Party (together with all such Third Party's affiliates and "associates" (as such term is defined in the Exchange Act)) of 15% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); (ii) acquired beneficial ownership of shares of Common Stock of the Company which, when aggregated with any shares of Company Stock already owned by such Third Party, its affiliates and associates, would result in the aggregate beneficial ownership by such Third Party its affiliates and associates of 15% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis), provided, however, that "Third Party" for purposes of this clause (ii) shall not include any corporation, partnership, person or other entity or group which beneficially 27 owns more than 15% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis) as of the date of the Option Agreement and that does not, after the date thereof, increase such ownership percentage by more than an additional 1% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis); (iii) solicited "proxies" in a "solicitation" subject to the proxy rules under the Exchange Act or executed any written consent with respect to, or become a "participant" in, any "solicitation" (as such terms are defined in Regulation 14A under the Exchange Act), in each case with respect to the Common Stock of the Company; or (b) any of the events described in Section 7.1(d)(ii) or (d)(iii) of the Merger Agreement that would allow Parent to terminate the Merger Agreement has occurred (but without the necessity of Parent having terminated the Merger Agreement). The Option Agreement provides that the obligation of the Company to deliver Option Shares or Topping Fee Option Shares upon the exercise of the Stock Option or the Topping Fee Option, as the case may be, is subject to the following conditions: (i) all waiting periods, if any, under the HSR Act applicable to the issuance of the Option Shares shall have expired or have been terminated and (ii) there shall be no preliminary or permanent injunction or other final, non-appealable judgment by a court of competent jurisdiction preventing or prohibiting the exercise of the Stock Option or the delivery of the Option Shares in respect of such exercise. 12. Plans for the Company; Other Matters. Plans for the Company. In light of Parent's electronic commerce strategies as they may develop in the future, Parent intends to conduct a detailed review of the Company and its assets, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and will consider, subject to the terms of the Merger Agreement, what, if any, changes would be desirable in light of the circumstances which exist upon completion of the Offer. Such changes could include changes in the Company's business, corporate structure, certificate of incorporation, by-laws, capitalization, Board of Directors, management or dividend policy, although, except as disclosed in this Offer to Purchase, Parent has no current plans with respect to any of such matters. The Merger Agreement provides that, promptly upon the purchase of and payment for any Shares by the Purchaser pursuant to the Offer, and from time to time thereafter as Shares are acquired by the Purchaser, Parent has the right to designate such number of directors, rounded up to the next whole number, on the Company's Board of Directors as is equal to the product of the total number of directors on the Company's Board of Directors (giving effect to the directors designated by Parent) multiplied by the percentage that the number of Shares beneficially owned by the Purchaser or any affiliate of the Purchaser bears to the total number of Shares then outstanding. See Section 11. The Merger Agreement provides that the directors of the Purchaser and the officers of the Company at the Effective Time of the Merger will, from and after the Effective Time, be the initial directors and officers, respectively, of the Surviving Corporation. Except as disclosed in this Offer to Purchase, neither Parent nor the Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of operations, or sale or transfer of assets, involving the Company or any of its subsidiaries, or any material changes in the Company's corporate structure, business or composition of its management or personnel. Other Matters Shareholder Approval. Under the GCL, the approval of the Board of Directors of the Company and the affirmative vote of the holders of a majority of the outstanding Shares are required to adopt and approve the Merger Agreement and the transactions contemplated thereby. The Company has represented in the Merger Agreement that the execution and delivery of the Merger Agreement by the Company and the consummation by the Company of the transactions contemplated by the Merger Agreement, the Shareholder Agreements and the Option Agreement have been duly authorized by all necessary corporate action on the part of the Company, subject to the approval of the Merger by the Company's shareholders in accordance with the GCL. In addition, the Company has represented that the affirmative vote of the holders of a majority of the outstanding shares of Common Stock is the only vote of the holders of any class or series of the Company's capital stock which is necessary to approve the Merger Agreement and the transactions contemplated thereby, including the Merger. 28 Therefore, unless the Merger is consummated pursuant to the short-form merger provisions under the GCL described below (in which case no further corporate action by the shareholders of the Company will be required to complete the Merger), the only remaining required corporate action of the Company will be the approval of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the shares of Common Stock. The Merger Agreement provides that Parent will vote, or cause to be voted, all of the Shares then owned by Parent, the Purchaser or any of Parent's other subsidiaries and affiliates in favor of the approval of the Merger and the adoption of the Merger Agreement. In the event that the Minimum Condition is satisfied, the Purchaser will have sufficient voting power to cause the approval of the Merger Agreement and the transactions contemplated thereby without the affirmative vote of any other shareholders of the Company. Short-Form Merger. Section 1110 of the GCL provides that, if the parent corporation owns at least 90% of the outstanding shares of each class of the subsidiary corporation, the merger into the subsidiary corporation of the parent corporation may be effected by a resolution or plan of Merger adopted and approved by the board of directors of the parent corporation and the appropriate filings with the California Secretary of State, without any action or vote on the part of the shareholders of the subsidiary corporation (a "short-form merger"). Under the GCL, if the Purchaser acquires, pursuant to the Offer, the Stock Option or otherwise, at least 90% of the outstanding Shares, the Purchaser will be able to effect the Merger without a vote of the shareholders of the Company. In such event, Parent, the Purchaser and the Company have agreed in the Merger Agreement to take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of the Company's shareholders. Under the GCL, the Merger may not be accomplished for cash paid to the Company's shareholders if the Purchaser owns, directly or indirectly, more than 50% but less than 90% of the then outstanding Shares unless either all the shareholders consent or the Commissioner of Corporations of the State of California, approves, after a hearing, the terms and conditions of the Merger and the fairness thereof. If such shareholder consent or Commissioner of Corporations approval is not obtained, the GCL requires that the consideration received in the Merger consist only of non-redeemable common stock of Parent. The purpose of the Offer is to obtain 90% or more of the Shares and to enable Parent and the Purchaser to acquire all of the equity of the Company. In the event that less than 90% of the Shares then outstanding are tendered pursuant to the Offer on the Initial Expiration Date, the Purchaser is required to extend the Offer and may waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to the Revised Minimum Number and, if a greater number of Shares is tendered into the Offer and not withdrawn, purchase on a pro rata basis, the Revised Minimum Number of Shares (it being understood that the Purchaser may, but shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the applicable expiration date of the Offer). The Purchaser would thus own upon consummation of the Offer 49.9999% of the Shares then outstanding and would thereafter solicit the approval of the Merger and the Merger Agreement by a vote of the shareholders of the Company. The Purchaser is required to effect a short-form merger as soon as practicable if permitted to do so under the GCL. Dissenters' Rights. Holders of the Shares do not have dissenters' rights as a result of the Offer. However, if the Merger is consummated, holders of the Shares at the Effective Time, by complying with the provisions of Chapter 13 of the GCL, may have certain rights to dissent and to require the Company to purchase their Shares for cash at "fair market value." In general, holders of Shares will be entitled to exercise dissenters' rights under the GCL only if the holders of five percent or more of the outstanding Shares properly file demands for payment or if the Shares held by such holders are subject to any restriction on transfer imposed by the Company or any law or regulation ("Restricted Shares"). Accordingly, if any holder of Restricted Shares and, if the holders of five percent or more of the Shares properly file demands for payment, all other such holders who fully comply with all other applicable provisions of Chapter 13 of the GCL will be entitled to require the Company to purchase their Shares for cash at their fair market value if the Merger is consummated. In addition, if immediately prior to the Effective Time, the Shares are not listed on a national securities exchange or on the list of OTC margin stocks 29 issued by the Federal Reserve Board, holders of Shares may likewise exercise their dissenters' rights as to any or all of their Shares entitled to such rights. If the statutory procedures under the GCL relating to dissenters' rights were complied with, such rights could lead to a judicial determination of the fair market value of the Shares. The "fair market value" would be determined as of the day before the first announcement of the terms of the Merger, excluding any appreciation or depreciation in consequence of the Merger. The value so determined could be more or less than the Merger Consideration. THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY SHAREHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE APPLICABLE PROVISIONS OF THE GCL. The foregoing description of the GCL, including the descriptions of Chapter 13, is not necessarily complete and is qualified in its entirety by reference to the GCL. Rule 13e-3. The Merger would have to comply with any applicable Federal law operative at the time. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions; however, the Purchaser believes that Rule 13e-3 will not be applicable to the Merger because it is anticipated that the Merger will be effected within one year following the consummation of the Offer. If Rule 13e-3 were applicable to the Merger, it would require, among other things, that certain financial information concerning the Company, and certain information relating to the fairness of the proposed transaction and the consideration offered to minority shareholders in such a transaction, be filed with the Commission and disclosed to minority shareholders prior to consummation of the transaction. 13. Dividends and Distributions. The Merger Agreement provides that the Company shall not: (i) declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to its capital stock; (ii) issue, sell, pledge, dispose of or encumber any additional shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock of any class of the Company, other than Shares reserved for issuance on the date of the Merger Agreement pursuant to the exercise of Company Options (as defined in the Merger Agreement); or (iii) redeem, purchase or otherwise acquire any shares of any class or series of its capital stock. 14. Conditions of the Offer. Notwithstanding any other provisions of the Offer, the Purchaser is not required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered Shares unless the Minimum Condition has been satisfied; provided, however, that the Minimum Condition must be waived by the Purchaser and the Revised Minimum Number substituted therefor as contemplated, and to the extent required, by Section 1.1(d) of the Merger Agreement. Furthermore, notwithstanding any other provisions of the Offer, the Purchaser is not required to accept for payment or pay for any tendered Shares if, at the scheduled expiration date, (i) any applicable waiting period under the HSR Act has not expired or terminated prior to termination of the Offer, or (ii) any of the following events shall have occurred and be continuing: a. there shall be threatened or pending any suit, action or proceeding by any Governmental Entity (as defined in the Merger Agreement) (i) seeking to prohibit or impose any material limitations on Parent's or Purchaser's ownership or operation (or that of any of their respective subsidiaries or affiliates) of all or a material portion of their or the Company's businesses or assets, or to compel Parent or Purchaser or their respective subsidiaries and affiliates to dispose of or hold separate any material portion of the business or 30 assets of the Company or Parent and their respective subsidiaries, in each case taken as a whole, (ii) challenging the acquisition by Parent or Purchaser of any Shares under the Offer or pursuant to the Stock Option Agreement or the Shareholder Agreements, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Merger Agreement, the Stock Option Agreement or the Shareholder Agreements, or seeking to obtain from the Company, Parent or Purchaser any damages that are material in relation to the Company taken as a whole, (iii) seeking to impose material limitations on the ability of Purchaser, or rendering Purchaser unable, to accept for payment, pay for or purchase some or all of the Shares pursuant to the Offer and the Merger, (iv) seeking to impose material limitations on the ability of Purchaser or Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's shareholders, or (v) which otherwise is reasonably likely to have a material adverse affect on the financial condition, businesses, operations, properties (including intangible properties), results of operations, assets or prospects of the Company, or on the ability of the Company to consummate the Offer or the Merger, or to perform any of their obligations under the Merger Agreement or the Stock Option Agreement; or b. there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated, or deemed applicable to the Offer or the Merger or any other action shall be taken by any Governmental Entity, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph a. above; or c. there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange, in the Nasdaq National Market System, for a period in excess of three hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any United States governmental authority on the extension of credit by banks or other financial institutions, (v) any decline in either the Dow Jones Industrial Average or the Standard & Poor's Index of 500 Industrial Companies by an amount in excess of 15% measured from the close of business on the date of the Merger Agreement, (vi) a change in general financial bank or capital market conditions which materially or adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans, or (vii) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or d. there shall have occurred any material adverse change (or any development that, insofar as reasonably can be foreseen, is reasonably likely to result in any material adverse change) in the consolidated financial condition, businesses, operations, properties (including intangible properties), results of operations, assets or prospects of the Company, or in the ability of the Company to consummate the Offer or the Merger, or to perform any of their obligations under the Merger Agreement or the Stock Option Agreement; or e. the Company Board of Directors or any committee thereof (i) shall have withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger, (ii) shall have recommended the approval or acceptance of an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Purchaser or their affiliates, (iii) shall have executed an agreement in principle or definitive agreement relating to an Acquisition Proposal (as defined in the Merger Agreement) from, or similar business combination with, a person or entity other than Parent, Purchaser or their affiliates, or (iv) shall have exercised its rights pursuant to Section 5.5 of the Merger Agreement with respect to an Acquisition Proposal, and, directly or through its representatives, continued discussions with any third party concerning an Acquisition Proposal for more than ten business days after the date of receipt of such Acquisition Proposal; or 31 f. any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality shall not be true and correct and any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as of the date of the Merger Agreement and as of the scheduled expiration of the Offer; or g. the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement; or h. all consents necessary to the consummation of the Tender Offer or the Merger including, without limitation, consents from parties to loans, contracts, leases or other agreements, and consents from governmental agencies, whether federal, state or local, shall not have been obtained, other than consents the failure to obtain which would not have a material adverse effect on the Company; or i. the Merger Agreement shall have been terminated in accordance with its terms. The foregoing conditions are for the sole benefit of Parent and the Purchaser, may be asserted by Parent or the Purchaser regardless of the circumstances giving rise to such condition and may be waived by Parent or the Purchaser in whole or in part at any time and from time to time in the sole discretion of Parent or the Purchaser, subject in each case to the terms of the Merger Agreement. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition to the foregoing conditions, Parent may terminate the Merger Agreement and the Offer in the event that the Disclosure Schedule of the Company which is to be delivered to Parent pursuant to the Merger Agreement following the Execution Date reveals matters or information that are material and adverse to the Company and the Company shall not have disclosed such matters or information to Parent on or prior to the Execution Date. 15. Certain Legal Matters. Except as described in this Section 15, based on information provided by the Company, none of the Company, Purchaser or Parent is aware of any license or regulatory permit that appears to be material to the business of the Company that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by a domestic or foreign governmental, administrative or regulatory agency or authority that would be required for the acquisition and ownership of the Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and Parent presently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." While, except as otherwise described in this Offer to Purchase, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of or other substantial conditions complied with in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer, including conditions with respect to governmental actions. Section 1203 of the GCL. The Company is incorporated under the laws of the State of California. Section 1203 of the GCL provides that if a tender offer is made to some or all of a corporation's shareholders by an "interested party," an affirmative opinion in writing as to the fairness of the consideration to the shareholders of that corporation shall be delivered to the shareholders at the time that the tender offer is first made in writing to the shareholders. However, if the tender offer is commenced by publication and tender offer materials are subsequently mailed or otherwise distributed to the shareholders, the opinion may be omitted in that publication 32 if the opinion is included in the materials distributed to the shareholders. For purposes of Section 1203, the term "interested party" includes, among other things, a person who is a party to the transaction and (A) directly or indirectly controls the corporation that is the subject of the tender offer or proposal, (B) is, or is directly or indirectly controlled by, an officer or director of the subject corporation, or (C) is an entity in which a material financial interest is held by any director or executive officer of the subject corporation. While none of the Company, Parent or Purchaser believes that the Offer constitutes a transaction which falls within the provisions of Section 1203, an independent financial advisor, Trautman Kramer, has been retained by the Company, to provide a fairness opinion with respect to the Offer. State Takeover Laws. The Company's principal executive offices are located in, and the Company is incorporated under the laws of, the State of California, which currently has no takeover statute that would apply to the Offer or the Merger. However, there can be no assurances that California will not, prior to the completion of the Offer, adopt such a statute. Under the GCL, the Merger may not be accomplished for cash paid to the shareholders of the Company if the Purchaser or Parent owns directly or indirectly more than 50% but less than 90% of the then outstanding Shares unless either all of the shareholders of the Company consent or the Commissioner of Corporations of the State of California approves, after a hearing, the terms and conditions of the Merger and the fairness thereof. The purpose of the Offer is to obtain 90% or more of the Shares (on a fully diluted basis) and to enable Parent and the Purchaser to acquire control of the Company. In the event that less than 90% of the Shares then outstanding on a fully diluted basis are tendered pursuant to the Offer on the Initial Expiration Date, the Purchaser is required to extend the Offer and may waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to the Revised Minimum Number and, if a greater number of Shares is tendered into the Offer and not withdrawn, purchase on a pro rata basis, the Revised Minimum Number of Shares (it being understood that the Purchaser may, but shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the applicable expiration date of the Offer). In the event that the Purchaser acquires the Revised Minimum Number of Shares, it would have the ability to ensure approval of the Merger by the shareholders of the Company with the approval of a de minimis number of remaining outstanding Shares. A number of states have adopted laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, shareholders, principal executive offices or principal places of business, or whose business operations otherwise have substantial economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without the prior approval of the remaining shareholders. The state law before the Supreme Court was by its terms applicable only to corporations that had a substantial number of shareholders in the state and were incorporated there. The Company may conduct business in a number of states throughout the United States, some of which have enacted takeover laws. The Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or the Merger and has not complied with any such laws. Should any Person seek to apply any state takeover law, the Purchaser will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws are applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Purchaser might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, the Purchaser might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such case, the Purchaser may not be obligated to accept for payment, or pay for, any Share tendered pursuant to the Offer. See Section 14. 33 Antitrust. Under the HSR Act, and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. A Notification and Report Form with respect to the Offer is expected to be filed under the HSR Act on or about Wednesday, January 20, 1999, and if filed on such date, the waiting period with respect to the Offer under the HSR Act will expire at 11:59 p.m., New York City time, on Thursday, February 4, 1999. Before such time, however, either the FTC or the Antitrust Division may extend the waiting period by requesting additional information or material from the Purchaser. If such request is made, the waiting period will expire at 11:59 p.m., New York City time, on the tenth calendar day after the Purchaser has substantially complied with such request. Thereafter, the waiting period may be extended only by court order or with the Purchaser's consent. The FTC and the Antitrust Division frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's acquisition of Shares pursuant to the Offer and the Merger. At any time before or after the Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares acquired by the Purchaser or divestiture of substantial assets of Parent or its subsidiaries. Private parties, as well as state governments, may also bring legal action under the antitrust laws under certain circumstances. Based upon an examination of publicly available information relating to the businesses in which Parent and the Company are engaged, Parent and the Purchaser believe that the acquisition of Shares by the Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by the Purchaser on antitrust grounds will not be made or, if such a challenge is made, of the result. See Section 14 for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. 16. Fees and Expenses. Except as set forth below, neither Parent nor the Purchaser will pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Shares pursuant to the Offer. Greenhill & Co., LLC is acting as the Dealer Manager in connection with the Offer and is acting as financial advisor to Parent in connection with its effort to acquire the Company. In connection with the Offer, Parent has agreed to pay Greenhill & Co., LLC for its services a transaction fee paid by Parent upon completion of the Offer in the amount of approximately $1.9 million. Parent has also agreed, whether or not the Offer is consummated, to pay Greenhill & Co., LLC (in its capacity as Dealer Manager and financial advisor) for its reasonable out-of-pocket expenses, including the reasonable fees and expenses of its legal counsel, incurred in connection with its engagement, and to indemnify Greenhill & Co., LLC against certain liabilities and expenses in connection with their engagement. Greenhill & Co., LLC renders various investment banking and other advisory services to Parent and its affiliates and is expected to continue to render such services, for which it has received and will continue to receive customary compensation from Parent and its affiliates. The Purchaser has retained Corporate Investor Communications, Inc. to act as the Information Agent and U.S. Stock Transfer Company to act as the Depositary in connection with the Offer. Such firms each will receive reasonable and customary compensation for their services. The Purchaser has also agreed to reimburse each such firm for certain reasonable out-of-pocket expenses and to indemnify each such firm against certain liabilities in connection with their services, including certain liabilities under federal securities laws. The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent and the Dealer Manager) for making solicitations or recommendations in connection with the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding material to their customers. 34 17. Miscellaneous. The Offer is being made to all holders of Shares other than the Company. The Purchaser is not aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Purchaser becomes aware of any jurisdiction in which the making of the Offer would not be in compliance with applicable law, the Purchaser will make a good faith effort to comply with any such law. If, after such good faith effort, the Purchaser cannot comply with any such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or to make any representation on behalf of Parent or the Purchaser not contained herein or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. The Purchaser and Parent have filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the Commission and the New York Stock Exchange in the manner set forth in Section 9 of this Offer to Purchase (except that they will not be available at the regional offices of the Commission). Compaq Interests, Inc. January 15, 1999 35 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1.Directors and Executive Officers of Parent. The names, present principal occupation or employment, and material occupations, positions, offices or employments during the last five years of each director and executive officer of Compaq Computer Corporation ("Parent") are set forth below. Unless otherwise noted, the officers and directors have held the positions indicated below with Parent. The business address of each person listed below is 20555 State Highway 249, Houston, Texas 77070, and each person is a citizen of the United States.
Present Principal Occupation or Employment Position with the Parent Directors and Executive Officers and Five-Year Employment History -------------------------------- ----------------------------------- Lawrence T. Babbio, Jr.............. Director since 1995. Mr. Babbio, age 54, has served as President and Chief Operating Officer of Bell Atlantic Corporation since December 1998. In August 1997, he was elected President and Chief Operating Officer, Network Group, and Chairman of Global Wireless Group of Bell Atlantic. In 1995, he was elected Vice Chairman of Bell Atlantic. In 1994, he was elected Executive Vice President and Chief Operating Officer of Bell Atlantic. Mr. Babbio is also a director of Grupo Iusacell, S.A. de C.V. Andreas Barth....................... Mr. Barth, age 54, was elected Senior Vice President, Europe, Middle East and Africa, in December 1991. He joined Parent in February 1988 as Managing Director of Compaq Computer GmbH, Parent's German subsidiary, was appointed Vice President, Central Europe, in December 1990, and Vice President, Europe, in January 1991. Michael D. Capellas................. Mr. Capellas, age 44, was elected Senior Vice President, Information Management and Chief Information Officer in August 1998. Mr. Capellas was previously Senior Vice President and General Manager of Oracle's global energy sector. In addition, he spent 18 years with Schlumberger Limited in a variety of management positions, including serving as head of worldwide information services. Judith L. Craven.................... Director since 1998. Dr. Craven, age 53, served as president of the United Way of the Texas Gulf Coast from 1992 to October 1998. Prior to heading the United Way of the Texas Gulf Coast, Dr. Craven was vice president for multicultural affairs at the University of Texas Health Science Center at Houston; dean of the School of Allied Health Sciences at the University of Texas Health Science Center at Houston; director of public health for the City of Houston; chief of Family Health Service of the City of Houston; and chief of anesthesia at Riverside General Hospital. Dr. Craven serves on the boards of directors at A.H. Belo Corporation, Luby's Cafeterias, Inc., and SYSCO Corporation.
I-1 Frank P. Doyle...................... Director since 1998. Mr. Doyle, age 67, retired in December 1995 as an Executive Vice President of General Electric Company ("GE"). Mr. Doyle had been an Executive Vice President of GE and a member of its corporate executive office since July 1992. He is a director of the Paine Webber Group Inc., Roadway Express, Inc., and Educational Testing Service. Mr. Doyle served as a director of Digital Equipment Corporation from 1995 until he joined the Parent Board of Directors. Robert Ted Enloe, III............... Director since 1986. Mr. Enloe, age 60, has served as managing partner of Balquita Partners, Ltd., a real estate and securities investment firm, since 1996. From 1975 to 1986, he served as President, and, from 1992 to 1996, as Chief Executive Officer, of Liberte Investors. He was President of L&N Housing Corp. from 1981 to 1992 and a director of that entity, now known as LNH REIT, Inc., from 1981 to 1996. Mr. Enloe is also a director of Liberte Investors, Inc., Leggett & Platt, Inc., and Sixx Holdings, Incorporated. Hans W. Gutsch...................... Mr. Gutsch, age 55, was elected Senior Vice President, Human Resources and Environment in November 1994. Mr. Gutsch joined Parent in 1988 as Director, Human Resources, Europe and was appointed Vice President, Human Resources, Europe in June 1992, and Vice President, Human Resources and Environment, Europe, Middle East and Africa in January 1993. Michael D. Heil..................... Mr. Heil, age 51, was elected Senior Vice President, Worldwide Sales and Marketing, in June 1998. From September 1995 to June 1998, he served as Senior Vice President, Consumer Products Group. Prior to his arrival at Parent, he was President and General Manager of Los Angeles Cellular Telephone Company since May 1989. George H. Heilmeier................. Director since 1994. Dr. Heilmeier, age 62, is Chairman Emeritus of Bell Communications Research, Inc. (Bellcore). He served as Chairman and Chief Executive Officer of Bellcore from 1991 to 1997. He was Senior Vice President and Chief Technical Officer of Texas Instruments, Inc. from 1983 to 1991. He is a member of the Defense Science Board, the President's National Security Telecommunications Advisory Committee and the National Academy of Engineering. Dr. Heilmeier is also a director of TRW, Inc., MITRE Corporation, Automatic Data Processing, Inc. and Teletech Holdings. Peter N. Larson..................... Director since 1993. Mr. Larson, age 59, has served as Chairman and Chief Executive of Brunswick Corporation since April 1995. Before joining Brunswick, he was an executive officer of Johnson & Johnson where he served as Worldwide Chairman of the Consumer and Personal Care Group, and was a member of the Executive Committee and the Board of Directors. In addition to being a director of Brunswick, Mr. Larson is also a director of CIGNA Corp. and Coty, Inc.
I-2 Kenneth L. Lay...................... Director since 1987. Mr. Lay, age 56, has served as Chairman of the Board and Chief Executive Officer of Enron Corp., a diversified energy company, since February 1986. In addition to Enron Corp., he is a director of Eli Lilly & Company, Trust Company of the West, Enron Oil and Gas Company, and EOTT Energy Corp. Earl L. Mason....................... Mr. Mason, age 51, was elected Senior Vice President and Chief Financial Officer in June 1996. Prior to his arrival at Parent, he was Senior Vice President of Inland Steel Industries, Inc. ("ISI") since January 1995. From January 1994 to May 1996, he served as Chief Financial Officer and President of Inland International, Inc. He also served as Vice President of ISI from January 1994 to January 1995, and Vice President, Finance and Principal Financial Officer of ISI from June 1991 to January 1994. Thomas J. Perkins................... Director since 1997. Mr. Perkins, age 67, served as Chairman of the Board of Directors of Tandem Computers Incorporated from 1974 until 1997. He has been a General Partner of Kleiner Perkins Caufield & Byers, a private investment partnership, since 1972, and has served as either a general or limited partner of numerous funds formed by Kleiner Perkins Caufield & Byers. He is also a director of News Corporation and TriStrata Security. Enrico Pesatori..................... Mr. Pesatori, age 58, was elected Senior Vice President, Corporate Marketing in June 1998. He joined Parent in August 1997 when Tandem Computers Incorporated was acquired by Parent. At the time of that acquisition, Mr. Pesatori served as President of Tandem. Mr. Pesatori served as vice president and general manager of Digital Equipment Corporation's Computer Systems Division from 1993 to 1996. Gregory E. Petsch................... Mr. Petsch, age 48, was elected Senior Vice President, Manufacturing and Quality, in July 1993. He joined Parent in September 1983 as Director of Manufacturing Control and was named Vice President, CPU Manufacturing in May 1989 and Vice President, Manufacturing in November 1991. Eckhard Pfeiffer.................... Director since 1991. Mr. Pfeiffer, age 57, was appointed President and Chief Executive Officer and elected a director of Compaq in October 1991. He joined Parent in September 1983 as Vice President, Europe and was elected Senior Vice President, International Operations in January 1986, President, Europe and International Division in May 1989, and Executive Vice President and Chief Operating Officer in January 1991. He is also a director of Bell Atlantic Corporation and General Motors Corporation. John J. Rando....................... Mr. Rando, age 46, was elected Senior Vice President and General Manager, Service in June 1998 at the time of Compaq's acquisition of Digital Equipment Corporation. Prior to this, he served as Senior Vice President and General Manager, Digital Worldwide Services from 1996 to 1998, and as Vice President, Digital Multivendor Customer Services from 1993 to 1996.
I-3 Kenneth Roman....................... Director since 1991. Mr. Roman, age 68, served as Chairman and Chief Executive Officer of The Ogilvy Group (and from 1985 to 1989 as Chairman of Ogilvy & Mather Worldwide). He was Executive Vice President of American Express from 1989 to 1991. Mr. Roman is a director of Brunswick Corporation, Coty Inc., Nelson Communications, and PennCorp Financial Group, Inc. John T. Rose........................ Mr. Rose, age 53, was elected Senior Vice President, Enterprise Computing Group, in July 1996. He joined Parent as Senior Vice President, Desktop PC Division, in July 1993. Prior to his arrival at Parent, he was Vice President of Digital Equipment Corporation's Personal Computing Systems Business, which he established in 1985. Benjamin M. Rosen................... Director since 1982. Mr. Rosen, age 65, was appointed Chairman of the Board of Directors of Parent in 1983. Mr. Rosen is a director of Capstone Turbine Corp., a privately held technology company. He is also Vice Chairman of the Board of Trustees of the California Institute of Technology. Lucille S. Salhany.................. Director since 1996. Ms. Salhany, age 52, serves as President and Chief Executive Officer of J.H. Media Limited. She served as President and Chief Executive Officer of United Paramount Network from September 1994 until September 1997. From January 1993 to July 1994, she served as Chairman of FOX Broadcasting Company and also was a member of the Board of Directors of Fox Inc. Ms. Salhany is a director of American Media, Avid Technology, and Boston Restaurant Associates. Rodney W. Schrock................... Mr. Schrock, age 39, was elected Senior Vice President, Consumer Products Group, in June 1998, and was Vice President, Consumer Products Group from January 1998. He joined Parent in 1987 as Director of Compaq Systems Product Marketing and served as Director of Desktop business and Technology from 1993 until 1995. In 1995, he was named Vice President of the Presario PC Division. Thomas C. Siekman................... Mr. Siekman, age 56, was elected Senior Vice President, General Counsel & Secretary in June 1998 at the time of Compaq's acquisition of Digital Equipment Corporation. He was elected Vice President and General Counsel of Digital in 1993. Edward M. Straw..................... Mr. Straw, age 59, was elected Senior Vice President, Supply Chain Management in December 1998. Mr. Straw joined Parent from Ryder Integrated Logistics, Inc. where he served as President since June 1997. Prior to Ryder, Mr. Straw spent 35 years in the U.S. Navy, where he rose to the rank of Vice Admiral (three-star) and served four years as Director of the Defense Logistics Agency, the lead Department of Defense agency for the U.S. military's worldwide logistics support.
I-4 William D. Strecker................. Mr. Strecker, age 54, was elected Senior Vice President, Technology and Corporate Development, in June 1998, at the time of Parent's acquisition of Digital Equipment Corporation. He had been an executive officer of Digital since 1985, most recently serving as Vice President, Corporate Strategy and Technology and Chief Technical Officer. Michael J. Winkler.................. Mr. Winkler, age 53, was elected Senior Vice President, PC Products Group in November 1996. He joined Parent in November 1995 as Senior Vice President, Portable PC Division. Prior to his arrival at Parent, he was a Vice President and General Manager of the Computer Systems Division of Toshiba America Information Systems since October 1991.
2.Directors and Executive Officers of the Purchaser. The names, present principal occupation or employment, and material occupations, positions, offices or employments during the last five years of each director and executive officer of Compaq Interests, Inc. (the "Purchaser") are set forth below. Unless otherwise noted, the officers and directors have held the positions indicated below with the Purchaser. The business address of each person listed below is 20555 State Highway 249, Houston, Texas 77070, and, each person is a citizen of the United States.
Present Principal Occupation or Employment Position with the Parent Directors and Executive Officers and Five-Year Employment History -------------------------------- ----------------------------------- Linda S. Auwers..................... Secretary. Ms. Auwers, age 51, was appointed Vice President and Associate General Counsel of Parent in October 1997. She joined Parent in May 1988 as a corporate attorney and was appointed Vice President and Assistant General Counsel of Parent in May 1995. Earl L. Mason....................... Director and President. See biographical information for Mr. Mason set forth in Section 1 above. Ben K. Wells........................ Vice President and Treasurer. Mr. Wells, age 45, was elected Vice President & Corporate Controller of Parent in September 1997. Prior to this, he served as Assistant Treasurer of Parent from August 1993 until September 1997. He has served in various treasury functions for Parent since 1987.
I-5 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each shareholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary, at one of the addresses set forth below: The Depositary for the Offer is: U.S. Stock Transfer Corporation By Mail, Hand or Overnight Delivery: By Facsimile Transmission: 1745 Gardena Avenue (For Eligible Institutions Only) Glendale, California 91204 (818) 502-0674 Attention: Mark Cano Confirm Receipt of Facsimile by Telephone: (818) 502-1404 Questions and requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification on Substitute Form W-9 may be directed to the Information Agent at the locations and telephone numbers set forth below. Shareholders may also contact Greenhill & Co., LLC, Dealer Manager for the Offer, or their broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: Corporate Investor Communications, Inc. 111 Commerce Road Carlstadt, New Jersey 07072-2586 Banks and Brokers call (800) 346-7885 All others call Toll Free (888) 421-4808 The Dealer Manager for the Offer is: GREENHILL & CO., LLC 31 West 52nd Street, 16th Floor New York, New York 10019 (212) 408-0660 (Call Collect) or Call Toll Free (888) 504-7336 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL EXHIBIT (a)(2) LETTER OF TRANSMITTAL To Tender Shares of Common Stock of Shopping.com Pursuant to the Offer to Purchase Dated January 15, 1999 by Compaq Interests, Inc. an indirect wholly owned subsidiary of Compaq Computer Corporation THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 12, 1999 (THE "INITIAL EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: U.S. Stock Transfer Corporation By Mail, Hand or Overnight Delivery: By Facsimile Transmission: (For Eligible Institutions Only) 1745 Gardena Avenue (818) 502-0674 Glendale, California 91204 Attention: Mark Cano Confirm Receipt of Facsimile by Telephone: (818) 502-1404 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFORE AND COMPLETE THE SUBSTITUTE FORM W-9 PROVIDED BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. DESCRIPTION OF COMMON SHARES TENDERED - - -------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank, exactly as name(s) appear(s) Share Certificate(s) and Shares Tendered on Share Certificate(s)) (Attach additional list, if necessary) - - -------------------------------------------------------------------------------- Total Number of Shares Evidenced Number Share Certificate by Share of Shares Number(s)* Certificate(s)* Tendered** ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- ------------------------------------------------- Total Shares: - - --------------------------------------------------------------------------------
* Need not be completed by Shareholders delivering Shares by Book-Entry Transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by each Share Certificate delivered to the Depositary are being tendered hereby. See Instruction 4. This Letter of Transmittal is to be used either if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book-entry transfer to an account maintained by the Depositary at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Depository. Shareholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Shareholders" and other Shareholders are referred to herein as "Certificate Shareholders." Shareholders whose certificates evidencing Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other documents required hereby to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2. [_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY AT THE BOOK-ENTRY TRANSFER FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution: ______________________________________________ DTC Account Number: _________________________________________________________ Transaction Code Number: ____________________________________________________ [_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ____________________________________________ Window Ticket No. (if any): _________________________________________________ Date of Execution of Notice of Guaranteed Delivery: _________________________ Name of Institution which Guaranteed Delivery: ______________________________ DTC Account Number (if delivered by Book-Entry Transfer): ___________________ Transaction Code Number: ____________________________________________________ BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY [_] CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY WITH REPLACEMENT INSTRUCTIONS. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. Ladies and Gentlemen: The undersigned hereby tenders to Compaq Interests, Inc., a Delaware corporation (the "Offeror") and an indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation ("Parent"), the above-described shares of Common Stock, no par value (the "Shares"), pursuant to the Offeror's offer to purchase all outstanding Shares at a price of $19.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated January 15, 1999 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements hereto or thereto, constitute the "Offer"). The undersigned understands that the Offeror reserves the right to transfer or assign, in whole or in part from time to time, to any affiliate of Parent the right to purchase Shares tendered pursuant to the Offer. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), effective upon acceptance for payment of and payment for the Shares tendered herewith, the undersigned hereby sells, assigns and transfers to, or upon the order of the Offeror, all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities issued or issuable in respect thereof (collectively, "Distributions")) and irrevocably constitutes and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares and all Distributions, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by a Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Offeror, upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares and all Distributions for cancellation and transfer on the Company's books, and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares and all Distributions and that, when the same are accepted for payment by the Offeror, the Offeror will acquire good, marketable and unencumbered title thereto, free and clear of all liens, restrictions, claims, charges and encumbrances, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute any signature guarantees or additional documents deemed by the Depositary or the Offeror to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares and all Distributions. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Offeror any such Distributions issued to the undersigned, in respect of the tendered Shares, accompanied by documentation of transfer, and pending such remittance or appropriate assurance thereof, the Offeror shall be entitled to all rights and privileges as owner of any such Distributions and, subject to the terms of the Merger Agreement, may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Offeror, in its sole discretion. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Eckhard Pfeiffer, Earl L. Mason or Thomas C. Siekman and each of them, and any other designees of the Offeror, the attorneys and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's Shareholders or otherwise act (including pursuant to written consent) in such manner as each such attorney and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act with respect to, all the Shares tendered hereby which have been accepted for payment by the Offeror prior to the time any such vote or action is taken (and any and all Distributions issued or issuable in respect thereof) and with respect to which the undersigned is entitled to vote. This appointment is effective when, and only to the extent that, the Offeror accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy is coupled with an interest in the tendered Shares, is irrevocable and is granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior powers of attorney and proxies given by the undersigned at any time with respect to such Shares and no subsequent powers of attorney or proxies may be given by the undersigned (and, if given, will not be deemed effective). The Offeror reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Offeror's acceptance for payment of such Shares, the Offeror must be able to exercise full voting and other rights with respect to such Shares, including voting at any Shareholders meeting then scheduled. The undersigned understands that the valid tender of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase to Offeror and in the instructions hereto will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Offeror may not be required to accept for payment any of the tendered Shares. The Offeror's acceptance for payment of Shares pursuant to the Offer will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment, in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased, and/or any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of, and mail said check and/or any certificates to, the person or persons so indicated. In the case of a book- entry delivery of Shares, please credit the account maintained at the Book- Entry Transfer Facility with any Shares not accepted for payment. The undersigned recognizes that the Offeror has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered holder(s) thereof if the Offeror does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (See SPECIAL DELIVERY INSTRUCTIONS Instructions 1, 5, 6 and 7) (See Instructions 1, 5, 6 and 7) To be completed ONLY if the To be completed ONLY if the check for the purchase price of check for the purchase of Shares Shares or Share Certificates evi- purchased or Share Certificates dencing Shares not tendered or evidencing Shares not tendered or not purchased is to be issued in not purchased is to be mailed to the name of someone other than someone other than the under- the undersigned. signed, or to the undersigned at an address other than that shown under "Description of Shares Ten- dered." Issue check and/or certificate(s) to: Name _____________________________ Mail check and/or certificate(s) (Please Print) to: Address __________________________ Name _____________________________ (Please Print) __________________________________ (Include Zip Code) Address __________________________ __________________________________ __________________________________ (Tax Identification or Social (Include Zip Code) Security Number) (See Substitute Form W-9 on __________________________________ Reverse Side) IMPORTANT SHAREHOLDER(S): SIGN HERE (Please Complete Substitute Form W-9 on Reverse) _________________________________________ _________________________________________ Signature(s) of Holder(s) Dated: _____________________________________________________________________ (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificates or on a security position listing or by a person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): ___________________________________________________________________ ____________________________________________________________________________ Please Print Capacity: __________________________________________________________________ Please Provide Full Title Address: ___________________________________________________________________ Include Zip Code Telephone No.: _____________________________________________________________ Include Area Code Taxpayer Identification or Social Security Number: ____________________________________________________ See Substitute Form W-9 on Reverse Side GUARANTEE OF SIGNATURE(S) (If Required--See Instructions 1 and 5) SPACE BELOW IS FOR USE BY FINANCIAL INSTITUTIONS ONLY. FINANCIAL INSTITUTIONS: PLACE MEDALLION GUARANTEE IN SPACE PROVIDED BELOW. INSTRUCTIONS Forming Part of the Terms and Conditions of the Offer 1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each an "Eligible Institution," and collectively, "Eligible Institutions"). No signature guarantee is required on this Letter of Transmittal (i) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in this Letter of Transmittal, or (ii) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed by Shareholders either if Share Certificates are to be forwarded herewith or if a tender of Shares is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 3 of the Offer to Purchase. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and any other required documents, must be received by the Depositary at one of the Depositary's addresses set forth herein prior to the Expiration Date (as defined in the Offer to Purchase) and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer (and a Book Entry Confirmation received by the Depositary), in each case, prior to the Expiration Date, or (ii) the tendering Shareholder must comply with the guaranteed delivery procedure set forth below. Shareholders whose Share Certificates are not immediately available or who cannot complete the procedures for book-entry transfer on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, may tender their Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Offeror (or facsimile thereof), must be received by the Depositary prior to the Expiration Date, and (iii) the certificates for (or a Book-Entry Confirmation with respect to) such Shares, together with this properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. A "trading day" is any day on which the National Association of Securities Dealers Automated Quotation System, Inc. is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. The method of delivery of Share Certificates, this Letter of Transmittal and all other required documents, including delivery through a Book-Entry Transfer Facility, is at the election and risk of the tendering Shareholder. Share Certificates will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering Shareholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers and/or the number of Shares evidenced by such Share Certificates and the number of Shares tendered should be listed on a separate schedule attached hereto. 4. Partial Tenders. If fewer than all the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, new Share Certificate(s) for the remainder of the Shares that were evidenced by the Share Certificate(s) delivered to the Depositary herewith will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the box entitled "Special Delivery Instructions" on the reverse hereof, as soon as practicable after the expiration or termination of the Offer. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the Share Certificate(s) evidencing such shares without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of such Shares. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Offeror of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and tendered hereby, no endorsements of Share Certificates or separate stock powers are required unless payment or Share Certificates evidencing Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s), in which case the Share Certificate(s) evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificate(s). Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the shares tendered hereby, the certificates evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on such Share Certificates. Signatures on such Share Certificate(s) or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. 6. Stock Transfer Taxes. Except as set forth in this Instruction 6, the Offeror will pay, or cause to be paid, any stock transfer taxes with respect to the transfer and sale of Shares to it or its assignee pursuant to the Offer. If, however, payment of the purchase price of any Shares is to be made to, or if Share Certificates evidencing Shares not tendered or accepted for payment are to be issued in the name of, a person other than the registered holder(s), or if tendered Shares Certificates are registered in the name of a person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person or otherwise payable on the account of the transfer to such other person will be deducted from the purchase price of such Shares purchased, unless evidence satisfactory to the Offeror of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificates evidencing the Shares tendered hereby. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of and/or Shares Certificates not accepted for payment are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such Share Certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown in the box entitled "Description of Shares Tendered" on the reverse hereof, the appropriate boxes on the reverse side of this Letter of Transmittal should be completed. Any Shareholder tendering Shares by book- entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such Shareholder at a Book-Entry Transfer Facility from which such transfer was made. 8. Waiver of Conditions. Except as otherwise provided in the Offer to Purchase, the Offeror reserves the absolute right, in its sole discretion, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular Shareholder, whether or not similar defects or irregularities are waived in the case of other Shareholders. 9. Substitute Form W-9. The tendering Shareholder (or other payee) is required, unless an exemption applies, to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the Shareholder's social security or federal employer identification number, and with certain other information, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify under penalties of perjury, that such number is correct and that the Shareholder (or other payee) is not subject to backup withholding. If a tendering Shareholder is subject to backup withholding, he or she must cross out item (2) of the Certification Box on Substitute Form W-9 before signing such Form. Failure to furnish the correct TIN on the Substitute Form W-9 may subject the tendering Shareholder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and payments of cash to the tendering Shareholder (or other payee) pursuant to the Offer may be subject to backup withholding of 31%. If the tendering Shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all such payments for surrendered Shares thereafter until a TIN is provided to the Depositary. 10. Lost or Destroyed Certificates. If any Share Certificate(s) has (have) been lost or destroyed, the Shareholder should check the appropriate box on the reverse side of the Letter of Transmittal. The Company's stock transfer agent will then instruct such Shareholder as to the procedure to be followed in order to replace the Share Certificate(s). The Shareholder will have to post a surety bond of approximately 2% of the current market value of the stock. This Letter of Transmittal and related documents cannot be processed until procedures for replacing lost or destroyed Share Certificates have been followed. 11. Requests for Assistance or Additional Copies. Questions and requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at the locations and telephone numbers set forth below. IMPORTANT: This Letter of Transmittal (or a facsimile copy thereof), together with any required signature guarantees, or in the case of a book- entry transfer, an Agent's Message, and Share Certificates, or a Book-Entry Confirmation, for Shares and all other required documents must be received by the Depositary, or the Notice of Guaranteed Delivery (or a facsimile copy thereof) must be received by the Depositary, on or prior to the Expiration Date. IMPORTANT TAX INFORMATION Under federal income tax law, a Shareholder surrendering Shares must, unless an exemption applies, provide the Depositary (as payor) with his correct TIN on Substitute Form W-9 included in this Letter of Transmittal. If the Shareholder is an individual, his TIN is such Shareholder's social security number. If the correct TIN is not provided, the Shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments of cash to the tendering Shareholder (or other payee) pursuant to the Offer may be subject to backup withholding of 31% of all payments of the purchase price. Certain Shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. In order for an exempt foreign Shareholder to avoid backup withholding, such person should complete, sign and submit a Form W-8, Certificate of Foreign Status, signed under penalties of perjury, attesting to his or her exempt status. A Form W-8 can be obtained from the Depositary. Exempt Shareholders, other than foreign Shareholders, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payment made to payee. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. Purpose of Substitute Form W-9 To prevent backup withholding on payments that are made to a Shareholder with respect to Shares purchased pursuant to the Offer, the Shareholder is required to notify the Depositary of his correct TIN (or the TIN of any other payee) by completing the Substitute Form W-9 included in this Letter of Transmittal certifying (1) that the TIN provided on the Substitute Form W-9 is correct (or that such Shareholder is awaiting a TIN), and that (2) the Shareholder is not subject to backup withholding because (i) the Shareholder has not been notified by the Internal Revenue Service that the Shareholder is subject to backup withholding as a result of a failure to report all interest and dividends or (ii) the Internal Revenue Service has notified the Shareholder that the Shareholder is no longer subject to backup withholding. What Number to Give the Depositary The Shareholder is required to give the Depositary the TIN, generally the social security number or employer identification number, of the record holder of the Shares tendered hereby. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering Shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number, which appears in a separate box below the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all payments of the purchase price until a TIN is provided to the Depositary. PAYOR'S NAME: U.S. STOCK TRANSFER CORPORATION, AS DEPOSITARY - - ------------------------------------------------------------------------------- SUBSTITUTE PART I--Taxpayer Social security number Identification Number--For Form W-9 all accounts, enter your TIN in the box at right. OR ___________________ (For most individuals, this Department of the is your social security Treasury number. If you do not have Employer identification a TIN, see Obtaining a number (If awaiting TIN Internal Revenue Number in the enclosed write "Applied For") Service Guidelines.) Certify by signing and dating below. Note: If the account is in more than one name, see the chart in the enclosed Guidelines to determine which number to give the payer. Payer's Request for Taxpayer -------------------------------------------------------- Identification Number (TIN) PART II--For Payees Exempt from backup Withholding, see the enclosed Guidelines and complete as instructed therein. - - ------------------------------------------------------------------------------- Certification--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Num- ber (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. Certification Instructions--You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are not longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines.) - - ------------------------------------------------------------------------------- SIGNATURE _____________________________________ DATE _________________, 1999 NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under the penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. Signature ____________________________ Date _________________________________ Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Dealer Manager or the Information Agent at the locations and telephone numbers set forth below: The Information Agent for the Offer is: Corporate Investor Communications, Inc. 111 Commerce Road Carlstadt, New Jersey 07072 Banks and Brokers call (800) 346-7885 All others call Toll Free (888) 421-4808 The Dealer Manager for the Offer is: GREENHILL & CO., LLC 31 West 52nd Street, 16th Floor New York, New York 10019 (212) 408-0660 (Call Collect) or Call Toll Free (888) 504-7336 EX-99.(A)(3) 4 BROKER, DEALER LETTER EXHIBIT (a)(3) Offer to Purchase for Cash All Outstanding Shares of Common Stock of Shopping.com at $19.00 Net Per Share by Compaq Interests, Inc. an indirect wholly owned subsidiary of Compaq Computer Corporation THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 12, 1999 (THE "INITIAL EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. January 15, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Compaq Interests, Inc., a Delaware corporation (the "Offeror") an indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation ("Parent"), to act as Dealer Manager in connection with the Offeror's offer to purchase all outstanding shares (the "Shares") of common stock, no par value (the "Common Stock") of Shopping.com, a California corporation (the "Company"), at a price of $19.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offeror's Offer to Purchase, dated January 15, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") enclosed herewith. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of January 11, 1999, by and between Parent and the Company. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee we are enclosing copies of the following documents: 1. Offer to Purchase; 2. Letter of Transmittal to tender Shares for your use and for the information of your clients; 3. Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or time will not permit all required documents to reach the Depositary by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book- entry transfer cannot be completed on a timely basis; 4. A letter to Shareholders of the Company from Frank W. Denny, Chairman of the Board of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company; 5. A letter which may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to U.S. Stock Transfer Corporation (the "Depositary"). WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 12, 1999, UNLESS THE OFFER IS EXTENDED. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) the certificates evidencing such Shares or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility (as defined in the Offer to Purchase), (ii) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry delivery, and (iii) and any other documents required by the Letter of Transmittal. If holders of Shares wish to tender Shares, but cannot deliver such holders' certificates or other required documents, or cannot comply with the procedure for book-entry transfer, prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. Neither the Offeror nor the Parent will pay any fees or commissions to any broker, dealer or other person (other than Greenhill & Co., LLC (the "Dealer Manager")) and Corporate Investor Communications, Inc. (the "Information Agent") for soliciting tenders of Shares pursuant to the Offer. However, upon request, the Offeror will reimburse you for customary mailing and handling expenses incurred by you in forwarding any of the enclosed materials to your clients. The Offeror will pay or cause to be paid any stock transfer taxes payable with respect to the transfer of Shares to it, except as otherwise provided in the Letter of Transmittal. Any inquiries you may have with respect to the Offer should be addressed to the Information Agent or to the Dealer Manager, at the respective addresses and telephone numbers set forth on the back cover page of the Offer to Purchase. Additional copies of the enclosed material may be obtained from the Information Agent at the address and telephone number set forth on the back cover page of the Offer to Purchase. Very truly yours, GREENHILL & CO., LLC NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF THE PARENT, THE PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.(A)(4) 5 LETTER TO CLIENTS EXHIBIT (a)(4) Offer to Purchase for Cash All Outstanding Shares of Common Stock of Shopping.com at $19.00 Net Per Share by Compaq Interests, Inc. an indirect wholly owned subsidiary of Compaq Computer Corporation THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 12, 1999 (THE "INITIAL EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. January 15, 1999 To Our Clients: Enclosed for your consideration are an Offer to Purchase, dated January 15, 1999 (the "Offer to Purchase"), and a related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") relating to the offer by Compaq Interests, Inc., a Delaware corporation (the "Offeror") and an indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation ("Parent"), to purchase all outstanding shares (the "Shares") of common stock, no par value (the "Common Stock"), of Shopping.com, a California corporation (the "Company"), at a price of $19.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of January 11, 1999, by and between Parent and the Company (the "Merger Agreement"). Also enclosed is the Letter to Shareholders of the Company from Frank W. Denny, Chairman of the Board of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company. We are (or our nominee is) the holder of record of Shares held by us for your account. A tender of such Shares can be made only by us as the holder of record and pursuant to your instructions. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. Accordingly, we request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us (or our nominee) for your account, upon the terms and subject to the condition set forth in the Offer. Your attention is invited to the following: 1. The tender price is $19.00 per Share of Common Stock, net to the seller in cash, without interest. 2. The Offer is being made for all outstanding Shares, although under certain circumstances described in the Offer to Purchase the Offer may be amended such that the Offer will be for 49.9999% of the outstanding Shares. 3. The Board of Directors of the Company has unanimously determined that each of the Merger Agreement, the Offer and the Merger is fair to and in the best interests of the shareholders of the Company and recommends that the shareholders of the Company accept the Offer and tender their Shares to the Purchaser pursuant to the Offer. 1 4. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Friday, February 12, 1999, unless the Offer is extended. 5. Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by the Offeror pursuant to the Offer. However, U.S. Federal income tax backup withholding at a rate of 31% may be required, unless an exemption is provided or unless the required taxpayer identification information is provided. See Instruction 9 of the Letter of Transmittal. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the instruction form contained in this letter. An envelope in which to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified in your instructions. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and any supplements or amendments thereto, and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Offeror by Greenhill & Co., LLC or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 Instructions with Respect to the Offer to Purchase for Cash All Outstanding Shares of Common Stock of Shopping.com by Compaq Interests, Inc. an indirect wholly owned subsidiary of Compaq Computer Corporation The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated January 15, 1999, and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer") in connection with the offer by Compaq Interests, Inc., a Delaware corporation and an indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation, to purchase all outstanding shares (the "Shares") of common stock, no par value (the "Common Stock"), of Shopping.com, a California corporation. This will instruct you to tender the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Dated: ______, 1999 SIGN HERE _____________________________________ Number of Shares to be Tendered: _____________________________________ Signature(s) of Holder(s) ___ shares of Common Stock* Name(s) of Holder(s) _____________________________________ _____________________________________ Please Type or Print _____________________________________ Address _____________________________________ Zip Code _____________________________________ Area Code and Telephone Number _____________________________________ Taxpayer Identification or Social Security Number - - -------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. EX-99.(A)(5) 6 NOTICE OF GUARANTEED DELIVERY EXHIBIT (a)(5) NOTICE OF GUARANTEED DELIVERY for the Tender of Shares of Common Stock of Shopping.com Pursuant to the Offer to Purchase Dated January 15, 1999 to Compaq Interests, Inc. an indirect wholly owned subsidiary of Compaq Computer Corporation (Not to be Used for Signature Guarantees) This Notice of Guaranteed Delivery, or one substantially in the form hereof, must be used to accept the Offer (as defined below) if certificates evidencing shares (the "Shares") of common stock, no par value (the "Common Stock") of Shopping.com, a California corporation (the "Company"), are not immediately available or time will not permit all required documents to reach U.S. Stock Transfer Corporation, as Depositary (the "Depositary"), prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)) or the procedure for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary. See Section 3 of the Offer to Purchase. The Depositary for the Offer is: U.S. Stock Transfer Corporation By Mail, Hand or Overnight Delivery: By Facsimile Transmission: (For Eligible Institutions Only) 1745 Gardena Avenue (818) 502-0674 Glendale, California 91204 Attention: Mark Cano Confirm Receipt of Facsimile by Telephone: (818) 502-1404 Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above, and transmission of instructions via facsimile transmission other than as set forth above, will not constitute a valid delivery. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Shares may not be tendered pursuant to the Guaranteed Delivery Procedures. Ladies and Gentlemen: The undersigned hereby tenders to Compaq Interests, Inc., a Delaware corporation and an indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated January 15, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"), receipt of each of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedure described in Section 3 of the Offer to Purchase. PLEASE CHECK RELEVANT BOX BELOW Series and Certificate Nos. of Shares (if available): Common Stock, no par value Name(s) of Record Holder(s) Certificate Nos. __________________ ___________________________________ Number of Shares Tendered _________ ___________________________________ Please Type or Print ___________________________________ Address(es): ______________________ ___________________________________ Zip Code Area Code and Tel. No.: ___________ Signature(s): _____________________ Dated: ____________________________ DTC Account No.: ______________________ 2 GUARANTEE (Not to be used for the signature guarantee) The undersigned, an Eligible Institution (as defined in the Offer to Purchase), hereby guarantees delivery to the Depositary, at one of its addresses set forth above, certificates ("Share Certificates") evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depositary Trust Company, in each case with delivery of a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three days on which the National Association of Securities Dealers Automated Quotation System, Inc. is open for business after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal and Share Certificates to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. ___________________________________ ___________________________________ Name of Firm Authorized Signature ___________________________________ Title: ____________________________ Address Name: _____________________________ ___________________________________ Please Type or Print Zip Code Dated: _____________________ , 1999 ___________________________________ Area Code and Telephone No. DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.(A)(6) 7 W9 GUIDELINES EXHIBIT (a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.--Social Security numbers have nine digits separated by two hyphens, e.g., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen, e.g., 00-0000000. The table below will help determine the number to give the payer.
- - --------------------------------------------- Give the SOCIAL SECURITY For this type of account: number of-- - - --------------------------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner (joint account) of the account or, if combined funds, the first individual on the account(1) 3. Husband and wife (joint The actual owner account) of the account or, if joint funds, either person(1) 4. Custodian account of a The minor(2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if account) the minor is the only contributor, the minor(1) 6. Account in the name of The ward, minor, guardian or committee or incompetent for a designated ward, person(3) minor, or incompetent person 7.a. A revocable savings The grantor- trust account (in trustee(1) which grantor is also trustee) b. Any "trust" account The actual that is not a legal owner(1) or valid trust under State law 8. Sole proprietorship The owner(4) account - - --------------------------------------------- Give the EMPLOYER IDENTIFICATION For this type of account: number of-- - - --------------------------------------------- 9. A valid trust, estate, The legal entity or pension trust (do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(5) 10. Corporate account The corporation 11. Religious, charitable, The organization or educational organization account 12. Religious, charitable, The partnership or educational organization account 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public Department of entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - - ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. If the owner does not have an employer identification number, furnish the owner's social security number. (5) List first and circle the name of the legal trust, estate or pension trust. NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Page 2 Obtaining a Number If you do not have a taxpayer identification number or you do not know your number, obtain Form SS-5, Application for a Social Security Number Card (for resident individuals), Form SS-4, Application for an Employer Identification Number (for businesses and all other entities), Form W-7 for an International Taxpayer Identification Number (for alien individuals required to file U.S. tax returns), at an office of the Social Security Administration or the Internal Revenue Service. To complete Substitute Form W-9, if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part I, sign and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and will continue until you furnish your taxpayer identification number to the requester. Payees Exempt from Backup Withholding Penalties Payees specifically exempted from backup withholding on ALL payments include the following:* . A corporation. . A financial institution. . An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under section 403(b)(7). . The United States or any agency or instrumentality thereof. . A State, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof. . A foreign government or a political subdivision, agency or instrumentality thereof. . An international organization or any agency or instrumentality thereof. . A registered dealer in securities or commodities registered in the United States or a possession of the United States. . A real estate investment trust. . A common trust fund operated by a bank under section 584(a). . An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). . An entity registered at all times during the tax year under the Investment Company Act of 1940. . A foreign central bank of issue. Exempt payees described above should file a Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. - - ------- * Unless otherwise noted herein, all references below to section numbers or to regulations are references to the Internal Revenue Code and the regulation promulgated thereunder. Privacy Act Notices.--Section 6109 requires most recipients of dividends, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: . Payments to nonresident aliens subject to withholding under section 1441. . Payments to partnerships not engaged in a trade or business in the United States and which have at least one nonresident partner. . Payments of patronage dividends where the amount received is not paid in money. . Payments made by certain foreign organizations. . Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: . Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if (i) this interest is $600 or more, (ii) the interest is paid in the course of the payer's trade or business and (iii) you have not provided your correct taxpayer identification number to the payer. . Payments of tax-exempt interest (including exempt-interest dividends under section 852). . Payments described in section 6049(b)(5) to non-resident aliens. . Payments on tax-free covenant bonds under section 1451. . Payments made by certain foreign organizations. . Payments made to a nominee. Penalties (1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) Civil Penalty for False Statements With Respect to Withholding.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) Criminal Penalty for Falsifying Information.--If you falsify certifications or affirmations, you are subject to criminal penalties including fines and/or imprisonment. (4) Failure to Report Certain Dividend and Interest Payments.--If you fail to include any portion of an includible payment for interest, dividends or patronage dividends in gross income and such failure is due to negligence, a penalty of 20% is imposed on any portion of any underpayment attributable to the failure. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(7) 8 PRESS RELEASE DATED JANUARY 11, 1999 EXHIBIT (a)(7) Compaq Reaches Agreement to Acquire Shopping.com Strategic Move for AltaVista to Become a Leading Internet Transaction Site HOUSTON, January 11, 1999 - In a move designed to leverage the tremendous user traffic generated by its AltaVista Internet guide and its Internet PCs, Compaq Computer Corporation (NYSE: CPQ) today announced it has reached a definitive --------- agreement to acquire Shopping.com (OTC: IBUY), a leading online retailer which offers Internet shoppers a vast array of top brand-name consumer products. The increased traffic from AltaVista and Compaq Internet PCs will enable Shopping.com to grow faster and more efficiently than stand alone e-commerce companies. In turn, the increased knowledge gained from users' online purchasing interests will allow AltaVista to better organize content and information for its users. A wholly owned subsidiary of Compaq will promptly commence a tender offer to acquire all of the outstanding shares of Shopping.com for $19 per share in cash, representing an aggregate approximate purchase price of $220 million. The Board of Directors and management of Shopping.com have unanimously approved the acquisition and will recommend shareholder acceptance. "The Internet is fast becoming a transaction medium in addition to a content medium. Today, AltaVista becomes the first site to fully combine these two capabilities into one synergistic user experience," said Rod Schrock, Compaq Senior Vice President and Group General Manager, Consumer Products. "Our intent is to make AltaVista the leading guide for both information and e-commerce on the Internet." During the recent holiday season, AltaVista drove several million visits to the AltaVista Holiday shopping experience and its e-commerce partners. With the addition of Shopping.com capabilities, AltaVista can now directly complete e-commerce transactions and offer customers a seamless information and shopping experience. Compaq entered into a stockholder agreement with certain significant shareholders who, in the aggregate, are the holders of approximately 27 percent of the fully diluted shares of common stock of Shopping.com. The stockholder agreement provides for, among other things, the commitment of each of these shareholders to tender their respective shares into the tender offer. The closing of the transaction is subject to the satisfaction of various conditions including, but not limited to, Compaq receiving at least 90 percent of the issued and outstanding shares of common stock of Shopping.com and expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. AltaVista Leads the Industry AltaVista is the most powerful and useful guide to the Internet and is a forerunner in Web search technology. AltaVista continues to set new standards such as indexing the entire Internet as well as providing the AV Family Filter and AV Photo Finder search capabilities. Over the last several months, AltaVista has made extensive enhancements to make navigating the Internet relevant, fast and effective for Web users of all proficiency levels. The impact of these improvements has been noted by both customers and the press: . AltaVista was named one of "The Best Sites of '98" by ZDNet/Yahoo! Internet Life. . AltaVista is a nominee for the 1999 Webby Awards given by the International Academy of Digital Arts & Sciences (IADAS). . AltaVista received the highest marks in the Internet search industry for Cyber Dialogue, a leading authority in one-to-one marketing and online market research. . AltaVista has grown to become the ninth largest individual domain on the Internet, up from the eleventh position, as ranked by the firm Relevant Knowledge. For more information, visit AltaVista's flagship site located at http://www.altavista.com or http://www.av.com. ----------------------------------------- Shopping.com Unique Attributes Shopping.com has a state-of-the-art transaction capability that can best complement AltaVista's customer traffic potential while delivering a superior customer buying experience. Committed to offering one-stop shopping for products and services, Shopping.com: . Features 63 Warehouse Power Stores to Internet shoppers, providing a comprehensive selection of over two million name brand products backed by more than 1,000 merchandising partners . Offers the Maximizer frequent shopper program, where customers earn reward dollars on all purchases and services The simple "Shopping.com" name is easily recognizable and will aid in the development of the most powerful e-commerce brand in the industry. Shopping.com is available at http://www.shopping.com. Company Background Founded in 1982, Compaq Computer Corporation is a Fortune Global 100 company. Compaq is the second largest computer company in the world and the largest global supplier of personal computers. Compaq develops and markets hardware, software, solutions, and services, including industry-leading enterprise computing solutions, fault-tolerant business-critical solutions, networking and communication products, commercial desktop and portable products and consumer PCs. The company is an industry leader in environmentally friendly programs and business practices. Compaq products are sold and supported in more than 100 countries through a network of authorized Compaq marketing partners. Customer support and information about Compaq and its products are available at http://www.compaq.com. EX-99.(A)(8) 9 FORM OF SUMMARY ADVERTMENT, DATED JANUARY 15, 1999 EXHIBIT a(8) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase, dated January 15, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction or any administrative or judicial action pursuant thereto. In any jurisdictions where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser (as defined below) by Greenhill & Co., LLC (the "Dealer Manager") or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of Shopping.com at $19.00 Net Per Share by Compaq Interests, Inc. an indirect, wholly owned subsidiary of Compaq Computer Corporation Compaq Interests, Inc., a Delaware corporation (the "Purchaser") and an indirect, wholly owned subsidiary of Compaq Computer Corporation, a Delaware corporation ("Compaq"), is offering to purchase all of the issued and outstanding shares (the "Shares") of common stock, no par value (the "Common Stock"), of Shopping.com, a California corporation (the "Company"), for $19.00 per Share or any higher price paid in the Offer, net to the seller in cash (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser is offering to acquire all Shares as a first step in acquiring the entire equity interest in the Company. Following consummation of the Offer, the Purchaser intends to effect the merger described below. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 12, 1999 (THE "INITIAL EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED. The Offer is being made pursuant to an Agreement and Plan of Merger, dated January 11, 1999 (the "Merger Agreement"), by and between Compaq and the Company pursuant to which, as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions to the Merger (as defined below), the Purchaser will be merged with and into the Company and the separate corporate existence of the Purchaser will thereupon cease. The merger, as effected pursuant to the immediately preceding sentence, is referred to herein as the "Merger," and the Company as the surviving corporation of the Merger is sometimes herein referred to as the "Surviving Corporation." At the effective time of the Merger (the "Effective Time"), each share of Common Stock then outstanding (other than Shares held by Compaq or the Purchaser and Shares held by shareholders of the Company who perfect their dissenters' rights under California law) will be canceled and retired and converted into the right to receive the Offer Price, in cash payable to the holder thereof without interest. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER AGREEMENT, THE OFFER, THE MERGER, AND THE OPTION AGREEMENT (AS DEFINED BELOW) IS FAIR TO AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES TO THE PURCHASER PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, THAT NUMBER OF SHARES OF COMMON STOCK WHICH, WHEN ADDED TO THE SHARES THEN OWNED BY THE PURCHASER, REPRESENTS AT LEAST 90% OF THE SHARES OUTSTANDING ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"). The Purchaser will not be required to accept for payment or pay for any tendered Shares until the expiration of all applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Offer is also subject to other terms and conditions described in Section 14 of the Offer to Purchase. In the event that the Minimum Condition is not satisfied on the Initial Expiration Date pursuant to the Offer, the Purchaser may elect to extend the Offer and may waive, and in certain circumstances thereafter is required to waive, the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to such number of Shares that, when added to the Shares, then owned by the Purchaser, will equal 49.9999% of the Shares then outstanding (the "Revised Minimum Number") and, if a greater number of Shares is tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that the Purchaser may, but shall not in any event be required to accept for payment, or pay for, any Shares if less than the Revised Minimum Number of Shares is tendered pursuant to the Offer and not withdrawn at the applicable expiration date of the Offer). Concurrently with the execution and delivery of the Merger Agreement, Compaq and the Company entered into a Stock Option Agreement, dated January 11, 1999 (the "Option Agreement"), pursuant to which, upon the terms set forth therein, the Company granted to the Purchaser an irrevocable option (the "Stock Option") to purchase up to the number of Shares (the "Option Shares") that, when added to the number of shares owned by the Purchaser and its affiliates immediately following consummation of the Offer, would constitute 90% of the Shares then outstanding at a purchase price per Option Share equal to the Offer Price, subject to the terms and conditions set forth in the Option Agreement, including, without limitation, that the number of Shares to be issued under the Stock Option shall not exceed the number of authorized Shares available for issuance. As a condition and inducement to Compaq's entering into the Merger Agreement and incurring the liabilities therein, certain shareholders of the Company (the "Shareholders"), who have voting power and dispositive power with respect to an aggregate of 1,386,475 Shares outstanding and options and warrants exercisable for 2,730,001 Shares, concurrently with the execution and delivery of the Merger Agreement, entered into Shareholder Agreements, dated January 11, 1999 (the "Shareholder Agreements"), with Compaq. Pursuant to the Shareholder Agreements, the Shareholders have agreed, among other things, to tender the Shares held by them in the Offer, and to grant Compaq a proxy with respect to the voting of such Shares in favor of the Merger (which proxy will terminate in the event that the Purchaser waives the Minimum Condition and accepts for payment the Revised Minimum Number of Shares). For the purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as of and when the Purchaser gives oral or written notice to U.S. Stock Transfer Corporation (the "Depositary") of the Purchaser's acceptance for 2 payment of such Shares. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purposes of receiving payment from the Purchaser and transmitting payment to tendering shareholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect thereto), (ii) a Letter of Transmittal (or facsimile thereof), property completed and duly executed, with any required signature guarantees, or, in the case of book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and (iii) any other documents required by the Letter of Transmittal. The per share consideration paid to any holder of a Share pursuant to the Offer will be the highest per share consideration paid to any other holder of Shares pursuant to the Offer. Under no circumstances will interest be paid on the purchase price to be paid by the Purchaser for the tendered Shares, regardless of any extension of the Offer or any delay in making such payment. Except as otherwise provided in the Offer to Purchase, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date (as defined in the Offer to Purchase) and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after March 15, 1999, as described in Section 4 of the Offer to Purchase. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution (as defined in Section 3 of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be tendered again by following one of the procedures described in Section 3 of the Offer to Purchase any time prior to the Expiration Date. The term "Expiration Date" shall mean 12:00 midnight, New York City time, on Friday, February 12, 1999, unless and until the Purchaser, in accordance with the terms of the Offer, shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser, in its sole discretion, which determination will be final and binding. None of the Purchaser, Compaq, the Depositary, Corporate Investor Communications, Inc. (the "Information Agent"), the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Subject to the terms of the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and by making a public announcement of such extension by no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering shareholder to withdraw such shareholder's Shares. 3 The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Purchaser with the Company's shareholder lists and security position listing for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant documents will be mailed by the Purchaser to record holders of Shares, and will be furnished by the Purchaser to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder lists, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the Letter of Transmittal contain important information and should be read in their entirety before any decision is made with respect to the Offer. Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer documents may be directed to the Information Agent or the Dealer Manager, at the respective addresses and telephone numbers set forth below, and copies will be furnished at the Purchaser's expense. The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent, Depositary and Dealer Manager) for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: Corporate Investor Communications, Inc. 111 Commerce Road Carlstadt, New Jersey 07072-2586 Banks and Brokers call (800) 346-7885 All others call Toll Free (888) 421-4808 The Dealer Manager for the Offer is: GREENHILL & CO., LLC 31 West 52nd Street, 16th Floor New York, New York 10019 (212) 408-0660 (Call Collect) or Call Toll Free (888) 504-7336 January 15, 1999 4 EX-99.(A)(9) 10 FAIRNESS OPINION OF TRAUTMAN - JANUARY 11, 1999 EXHIBIT (A)(9) TRAUTMAN KRAMER & COMPANY INCORPORATED 500 FIFTH AVENUE NEW YORK, NEW YORK 10110 212-575-5500 . 800-895-4800 . FAX . 212-575-6589 WWW.TKCO.COM January 11, 1999 To The Board of Directors Shopping.com 2101 East Coast Highway Corona del Mar, CA 92625 We understand that all of the issued and outstanding common shares of Shopping.com, Inc. ("IBUY," "Cowboy Corporation" or the "Company") are to be acquired by Compaq Computer, Inc. ("CPQ," "Silver Acquisition Corporation" or "Compaq") for the consideration of not less than $19.00 per share in a all- cash transaction. Compaq will indirectly assume all liabilities, both existing and contingent and existing indebtedness at the close of the transaction, and the Company will become a wholly-owned subsidiary of Compaq. You have requested our written opinion (the "Opinion") as to the matters set forth below. This Opinion values the Company on a "take-out value" basis, giving effect to the Company's history, operating plan, infrastructure, existing financial condition and value ascribed to the domain name. For purposes of this Opinion "take-out value" shall be defined as the amount at which the Company would change hands between a willing buyer and a willing seller, each having reasonable knowledge of the relevant facts, neither being under any compulsion to act, in an arm's length transaction under present conditions for the sale of comparable business enterprises, as such conditions can be reasonably evaluated by Trautman Kramer & Company, Incorporated ("TKCO"). We have used the same valuation methodologies in determining take- out value for purposes of rendering this Opinion. The term "existing and contingent liabilities" shall mean the stated amount of all existing and contingent liabilities identified to us and valued by responsible officers of the Company, upon whom we have relied without independent verification; no other contingent liabilities will be considered. No representation is made herein, or directly or indirectly by the Opinion, as to any legal matter or as to sufficiency of said definitions for any purpose other than setting forth the scope of TKCO's Opinion hereunder. Notwithstanding the use of the defined terms "take-out value," we have not been engaged to identify prospective purchasers or to ascertain the actual prices at which and terms which the Company can currently be sold, and we know of no such efforts by others. Because the sale of any business enterprise involves numerous assumptions and uncertainties, not all of which can be quantified or ascertained prior to engaging in an actual selling effort, we express no opinion as to whether the Company would actually be sold for the amount we believe to be its fair value and present fair saleable value. Pursuant to the terms of an engagement letter dated January 11, 1999 by and between the Company and TKCO, the Company has agreed to compensate TKCO a $250,000 fee for rendering its opinion assuming a successful close to the transaction. In the event that the transaction does not occur, the fee will be reduced to $50,000. In addition, TKCO has acted as the Company's investment banker on prior occasions and received fees for those services. In connection with this Opinion, we have made such reviews, analyses and inquiries as we have deemed necessary and appropriate under the circumstances. Among other things, we have: 1. Reviewed the Company's audited financial statements for the fiscal years ended January 31, 1997 and 1998; 2. Reviewed certain Company interim financial information and interim projections for the 9 months ended October 30, 1998, which the Company's management has identified as the most current information available; 1 3. Reviewed the Company's most-recent Business Plan for its Internet retailing business and on-line auction site; 4. Held discussions with management of the Company to discuss the condition, future prospects, and projected operations and performance of the Company; 5. Reviewed the Company's financial projections dated July, 1998 for the fiscal years ended January 31, 1999 through 2002; 6. Reviewed the historical market prices and trading volume for the Company's publicly traded securities; 7. Reviewed other publicly available financial data for the Company and certain companies that we deem comparable to the Company, and other economic and financial matters related to the Company's business operation; 8. Conducted such other studies, analyses and investigations as we have deemed appropriate. We have relied upon and assumed, without independent verification, that the financial forecasts and projections provided to us have been reasonably prepared and reflect the best currently available estimates of the future financial results and condition of the Company, and that there has been no material adverse change in the assets, financial condition, business or prospects of the Company since the date of the most recent interim financial statement made available to us. We have not independently verified the accuracy and completeness of the information supplied to us with respect to the Company and do not assume any responsibility to it or for it. We have not made any physical inspection or independent appraisal of any of the properties or assets of the Company. Our opinion is necessarily based on business, economic, market and other conditions as they exist and can be evaluated by us at the date of this letter. Our analysis was performed at the request and solely for the benefit of the Board of Directors, and not to offer or provide advice to any other party. Our conclusion in connection therewith does not constitute a recommendation that any stockholder of IBUY vote to approve, ratify, disapprove or abstain from voting in connection with any action considered by the stockholders. Based upon and subject to the foregoing, it is our opinion that as of the date hereof, the Merger consideration to be received by common stockholders of IBUY in the transaction is fair, from a financial point of view, to the common stockholders of IBUY. Based on the foregoing, and in reliance thereon, it is our opinion as of the date of this letter that, assuming the Transaction is consummated as proposed, immediately after and giving effect to the Transaction: (a) the take-out value of the Company's operating business and its tangible and intangible assets approximates the value of the consideration now being offered by Compaq in the proposed transaction. This Opinion is furnished solely for your benefit and may not be relied upon by any other person without our express, prior written consent. This Opinion is delivered to each recipient subject to the conditions, scope of engagement, limitations and understandings set forth in this Opinion and our engagement letter dated January 11, 1999, and subject to the understanding that the obligations of TKCO in the Transaction are solely corporate obligations, and no officer, director, employee, agent, shareholder or controlling person of TKCO shall be subjected to any personal liability whatsoever to any person, nor will any such claim be asserted by or on behalf of you or your affiliates. TRAUTMAN KRAMER & COMPANY, INCORPORATED /s/ Gregory O. Trautman - - --------------------------------------- Gregory O. Trautman, CFA President 2 EX-99.(C)(1) 11 AGREEMENT AND PLAN OF MERGER, DATED JAN. 11, 1999 EXHIBIT (C)(1) AGREEMENT AND PLAN OF MERGER by and between COMPAQ COMPUTER CORPORATION and SHOPPING.COM dated as of January 11, 1999 TABLE OF CONTENTS
Page ---- ARTICLE I THE OFFER AND MERGER Section 1.1 The Offer....................................................... Page 2 --------- Section 1.2 Company Actions................................................. Page 4 --------------- Section 1.3 Directors....................................................... Page 5 --------- Section 1.4 The Merger...................................................... Page 7 ---------- Section 1.5 Effective Time.................................................. Page 7 -------------- Section 1.6 Closing......................................................... Page 8 ------- Section 1.7 Directors and Officers of the Surviving Corporation............. Page 8 --------------------------------------------------- Section 1.8 Subsequent Actions.............................................. Page 8 ------------------ Section 1.9 Shareholders' Meeting........................................... Page 8 --------------------- Section 1.10 Merger Without Meeting of Shareholders.......................... Page 9 --------------------------------------
ARTICLE II CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock..................................... Page 10 --------------------------- Section 2.2 Exchange of Certificates........................................ Page 10 ------------------------ Section 2.3 Dissenting Shares............................................... Page 12 ----------------- Section 2.4 Company Stock Option Plans...................................... Page 13 --------------------------
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1 Organization; Qualification.................................... Page 14 --------------------------- Section 3.2 Capitalization................................................. Page 14 -------------- Section 3.3 Authorization; Validity of Agreement; ------------------------------------- Company Action................................................. Page 15 -------------- Section 3.4 Board Approvals Regarding Transactions......................... Page 16 -------------------------------------- Section 3.5 Vote Required.................................................. Page 16 ------------- Section 3.6 Consents and Approvals; No Violations.......................... Page 16 ------------------------------------- Section 3.7 SEC Reports and Financial Statements........................... Page 17 ------------------------------------ Section 3.8 Books and Records.............................................. Page 17 ----------------- Section 3.9 No Undisclosed Liabilities..................................... Page 17 --------------------------
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Section 3.10 Accounts Receivable............................................ Page 18 ------------------- Section 3.11 Inventory...................................................... Page 18 --------- Section 3.12 Interim Operations............................................. Page 18 ------------------ Section 3.14 Litigation..................................................... Page 20 ---------- Section 3.15 Employee Benefit Plans......................................... Page 21 ---------------------- Section 3.16 Tax Matters; Government Benefits............................... Page 23 -------------------------------- Section 3.17 Title to Properties; Encumbrances.............................. Page 25 --------------------------------- Section 3.18 Plant and Equipment............................................ Page 25 ------------------- Section 3.19 Leases......................................................... Page 26 ------ Section 3.20 Environmental Laws............................................ Page 26 ------------------ Section 3.21 Bank Accounts................................................. Page 26 ------------- Section 3.22 Intellectual Property......................................... Page 27 --------------------- Section 3.23 Employment Matters............................................ Page 29 ------------------ Section 3.24 Compliance with Laws.......................................... Page 29 -------------------- Section 3.25 Products Liability............................................ Page 29 ------------------ Section 3.26 Contracts and Commitments..................................... Page 29 ------------------------- Section 3.27 Customers and Suppliers....................................... Page 31 ----------------------- Section 3.28 Orders, Commitments and Returns............................... Page 31 ------------------------------- Section 3.29 Insurance..................................................... Page 31 --------- Section 3.30 Labor Difficulties............................................ Page 32 ------------------ Section 3.31 Consents...................................................... Page 32 -------- Section 3.32 Information in Schedule 14D-9................................. Page 32 ----------------------------- Section 3.33 Information in Proxy Statement................................ Page 32 ------------------------------ Section 3.34 Opinion of Financial Advisor.................................. Page 33 ---------------------------- Section 3.35 Absence of Questionable Payments.............................. Page 33 -------------------------------- Section 3.36 Personnel..................................................... Page 33 --------- Section 3.37 Insider Interests............................................. Page 33 ----------------- Section 3.38 Brokers or Finders............................................ Page 34 ------------------ Section 3.39 Full Disclosure............................................... Page 34 ---------------
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Section 4.1 Organization.................................................... Page 34 ------------ Section 4.2 Authorization; Validity of Agreement; ------------------------------------- Necessary Action................................................ Page 34 ---------------- Section 4.3 Consents and Approvals; No Violations........................... Page 35 ------------------------------------- Section 4.4 Information in Offer Documents.................................. Page 35 ------------------------------
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Section 4.5 Information in Proxy Statement................................. Page 36 ------------------------------ Section 4.6 Share Ownership................................................ Page 36 --------------- Section 4.7 Purchaser's Operations......................................... Page 36 ---------------------- Section 4.8 Brokers or Finders............................................. Page 36 ------------------
ARTICLE V COVENANTS
Section 5.1 Interim Operations of the Company.............................. Page 36 --------------------------------- Section 5.2 Access; Confidentiality........................................ Page 39 ----------------------- Section 5.3 Reasonable Best Efforts........................................ Page 40 ----------------------- Section 5.4 Employee Benefits.............................................. Page 41 ----------------- Section 5.5 No Solicitation of Competing Transaction....................... Page 42 ---------------------------------------- Section 5.6 Publicity...................................................... Page 44 --------- Section 5.7 Notification of Certain Matters................................ Page 44 ------------------------------- Section 5.8 Directors' and Officers' Insurance and Indemnification......... Page 44 ------------------------------------------------------ Section 5.9 State Takeover Laws............................................ Page 45 ------------------- Section 5.10 Purchaser Compliance........................................... Page 45 --------------------
ARTICLE VI CONDITIONS Section 6.1 Conditions to Each Party's Obligation to ---------------------------------------- Effect the Merger.............................................. Page 45 ----------------- Section 6.2 Conditions to Parent's and Purchaser's Obligations -------------------------------------------------- to Effect the Merger........................................... Page 46 --------------------
ARTICLE VII TERMINATION
Section 7.1 Termination..................................................... Page 46 ----------- Section 7.2 Effect of Termination........................................... Page 48 ---------------------
ARTICLE VIII DEFINITIONS AND INTERPRETATION
Section 8.1 Definitions..................................................... Page 49 ----------- Section 8.2 Interpretation.................................................. Page 58 --------------
iii ARTICLE IX MISCELLANEOUS
Section 9.1 Fees and Expenses.............................................. Page 59 ----------------- Section 9.2 Amendment and Modification..................................... Page 60 -------------------------- Section 9.3 Non-Survival of Representations and Warranties................. Page 60 ---------------------------------------------- Section 9.4 Notices........................................................ Page 60 ------- Section 9.5 Counterparts................................................... Page 61 ------------ Section 9.6 Entire Agreement; No Third Party Beneficiaries................. Page 62 ---------------------------------------------- Section 9.7 Severability................................................... Page 62 ------------ Section 9.8 Governing Law.................................................. Page 62 ------------- Section 9.9 Enforcement.................................................... Page 62 ----------- Section 9.10 Time of Essence................................................ Page 62 --------------- Section 9.11 Extension; Waiver.............................................. Page 62 ---------------- Section 9.12 Assignment..................................................... Page 63 ----------
iv AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of January 11, 1999, by and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Shopping.com, a California corporation (the "Company"). Certain capitalized ------- terms used in this Agreement have the meanings ascribed to them in Article VIII, Section 8.1 hereof. WHEREAS, the Board of Directors of each of Parent and the Company has approved, and deems it advisable and in the best interests of its respective shareholders to consummate, the acquisition of the Company by Parent upon the terms and subject to the conditions set forth herein; WHEREAS, Parent intends promptly after the execution of this Agreement to form Purchaser in the state of Delaware; WHEREAS, in furtherance thereof, it is proposed that Purchaser make a cash tender offer to acquire all of the issued and outstanding shares of common stock, no par value, of the Company for $19.00 per share, net to the seller in cash; and WHEREAS, also in furtherance of such acquisition, the Board of Directors of each of Parent and the Company have approved this Agreement and the Merger following the Offer in accordance with the CGCL and upon the terms and subject to the conditions set forth herein; and WHEREAS, the Company Board of Directors has determined that the consideration to be paid for each Share in the Offer and the Merger is fair to the holders of such Shares and has resolved to recommend that the holders of such Shares accept the Offer and approve this Agreement and each of the Transactions upon the terms and subject to the conditions set forth herein; and WHEREAS, the Company and Parent desire to make certain representations, warranties, covenants and agreements in connection with the Offer and Merger; and WHEREAS, as a condition and inducement to Parent's entering into this Agreement and incurring the obligations set forth herein, each of the Major Sharehold- Page 1 ers, concurrently herewith, is entering into a Shareholder Agreement dated as of the date hereof, with Parent, substantially in the form of Exhibit A hereto, pursuant to which each of the Major Shareholders is agreeing, among other things, to tender the Shares held by each of them in the Offer and to grant Parent a proxy with respect to the voting of such Shares, all upon the terms and subject to the conditions set forth in the Shareholder Agreements; and WHEREAS, as a condition and inducement to Parent's entering into this Agreement and incurring the obligations set forth herein, the Company, concurrently herewith, is entering into a Stock Option Agreement, dated as of the date hereof, with Parent, substantially in the form of Exhibit B hereto, pursuant to which the Company is granting to Purchaser an option to purchase Shares, all upon the terms and subject to the conditions set forth in the Stock Option Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements set forth herein, intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I THE OFFER AND MERGER Section 1.1 The Offer. --------- (a) Provided that this Agreement shall not have been terminated in accordance with Section 7.1 and none of the events set forth in Annex A shall have occurred and be existing, as promptly as practicable (but in no event later than five business days after the public announcement of the execution of this Agreement), Purchaser shall commence (within the meaning of Rule 14d-2 promulgated under the Exchange Act) a cash tender offer to acquire all Shares at the Offer Price. Subject to Section 1.1(d) and the satisfaction of the Minimum Condition and the other conditions set forth in Annex A hereto, Purchaser shall use reasonable efforts to consummate the Offer in accordance with its terms and to accept for payment and pay for Shares tendered pursuant to the Offer as soon as Purchaser is legally permitted to do so under applicable law. The Offer shall be made by means of the Offer to Purchase and shall be subject to the Minimum Condition and the other conditions set forth in Annex A hereto, and shall reflect, as appropriate, the other terms set forth in this Agreement. Subject to Section 1.1(d), Purchaser shall not Page 2 amend or waive the Minimum Condition, decrease the Offer Price or decrease the number of Shares sought, or amend any other condition of the Offer in any manner adverse to the holders of the Shares without the written consent of the Company. If on the initial scheduled expiration date of the Offer, which shall be no earlier than twenty business days after the date the Offer is commenced, all conditions to the Offer will not have been satisfied or waived, Purchaser may, from time to time, in its sole discretion, extend the expiration date. In addition, Purchaser may increase the amount it offers to pay per Share in the Offer, and the Offer may be extended to the extent required by law in connection with such increase, in each case, without the consent of the Company. (b) As soon as practicable on the date the Offer is commenced, Parent and Purchaser shall file with the SEC a tender offer statement on Schedule 14D-1 with respect to the Offer. The Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a 1 form of letter of transmittal and summary advertisement. (c) Parent and Purchaser will take all steps necessary to cause the Offer Documents to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Parent and Purchaser, on the one hand, and the Company, on the other hand, will promptly correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect, and Purchaser will take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given the opportunity to review the initial Schedule 14D-1 before it is filed with the SEC. Parent and Purchaser will provide the Company and its counsel in writing with any comments or other communications, whether written or oral, Parent, Purchaser or their counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents, promptly after the receipt of such comments or other communications. (d) In the event the Minimum Condition is not satisfied on any scheduled expiration date of the Offer, Purchaser may either (i) extend the Offer pursuant to Section 1.1(a), or (ii) amend the Offer to provide that, in the event (A) the Minimum Condition is not satisfied at the next scheduled expiration date of the Offer (without giving pro forma effect to the potential issuance of any Shares issuable upon exercise of the Stock Option Agreement), and (B) the number of Page 3 Shares tendered pursuant to the Offer and not withdrawn as of such next scheduled expiration date is more than 50% of the then outstanding Shares, Purchaser shall waive the Minimum Condition and amend the Offer to reduce the number of Shares subject to the Offer to a number of Shares that when added to the Shares then owned by Purchaser will equal the Revised Minimum Number, and, if a greater number of Shares is tendered into the Offer and not withdrawn, purchase, on a pro rata basis, the Revised Minimum Number of Shares (it being understood that Purchaser may, but shall not in any event be required to accept for payment, and pay for, any Shares if less than the Revised Minimum Number of Shares are tendered pursuant to the Offer and not withdrawn at the applicable expiration date). Notwithstanding any other provision of this Agreement, in the event that Purchaser purchases a number of Shares equal to the Revised Minimum Number, without the prior written consent of the Purchaser prior to the termination of this Agreement, the Company shall take no action whatsoever to increase the number of Shares owned by the Purchaser in excess of the Revised Minimum Number. Section 1.2 Company Actions. --------------- (a) As soon as practicable on the date the Offer is commenced, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9, which shall, subject to the provisions of Section 5.5(b), contain the recommendation referred to in clause (iii) of Section 3.5 hereof. At the time the Offer Documents are first mailed to the shareholders of the Company, the Company shall mail or cause to be mailed to the shareholders of the Company such Schedule 14D-9 together with such Offer Documents. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be disseminated to holders of the Shares, as and to the extent required by applicable federal securities laws. Each of the Company, on the one hand, and Parent and Purchaser, on the other hand, agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false and misleading in any material respect and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given the opportunity to review the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide Parent, Purchaser and their counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments or other communications. Page 4 (b) In connection with the Offer, the Company will promptly furnish or cause to be furnished to Purchaser mailing labels, security position listings and any available listing, or computer file containing the names and addresses of all recordholders of the Shares as of a recent date, and shall furnish Purchaser with such additional information (including, but not limited to, lists of holders of the Shares, updated daily, and their addresses, mailing labels and lists of security positions) and assistance as Purchaser or its agents may reasonably request in communicating the Offer to the record and beneficial holders of the Shares. Except for such steps as are necessary to disseminate the Offer Documents, Parent and Purchaser shall hold in confidence the information contained in any of such labels and lists and the additional information referred to in the preceding sentence, will use such information only in connection with the Offer, and, if this Agreement is terminated, will upon request of the Company deliver or cause to be delivered to the Company all copies of such information then in its possession or the possession of its agents or representatives. Section 1.3 Directors. --------- (a) Parent shall be entitled to designate such number of directors, rounded up to the next whole number, of the Company as is equal to the product of the total number of directors on such Board of Directors (giving effect to the directors designated by Parent pursuant to this sentence) multiplied by the Board Fraction. The Directors so designated by Parent shall take office immediately after (i) the purchase of and payment for any Shares by Parent or any of its Subsidiaries as a result of which Parent owns beneficially at least that number of shares which satisfies the Minimum Condition or the Revised Minimum Number, as applicable, and (ii) compliance with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, whichever shall occur later. In furtherance thereof, the Company shall, upon request of the Parent, promptly either increase the size of its Board of Directors or secure the resignations of such number of its incumbent directors, or both, as is necessary to enable such designees of Parent to be so elected or appointed to the Company Board of Directors, and the Company shall take all actions available to the Company to cause such designees of Parent to be so elected or appointed at such time. At such time, the Company shall, if requested by Parent, also take all action necessary to cause persons designated by Parent to constitute the same Board Fraction of (i) each committee of the Company Board of Directors and (ii) each committee (or similar body) of each such board. Page 5 (b) The Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder in order to fulfill its obligations under Section 1.3(a), including mailing to shareholders, concurrently with mailing to shareholders the Schedule 14D-9, the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected or appointed to the Company Board of Directors immediately after the purchase of and payment for any Shares by Parent or any of its Subsidiaries as a result of which Parent own beneficially at least a majority of then outstanding Shares. Parent or Purchaser will supply the Company all information with respect to either of them and their nominees, officers, directors and Affiliates required to be disclosed by such Section 14(f) and Rule 14f-1. The provisions of this Section 1.3 are in addition to and shall not limit any rights which Purchaser, Parent or any of their Affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. (c) In the event that Parent's designees are elected or appointed to the Company Board of Directors, until the Effective Time, the Company Board of Directors shall have at least two directors who are Independent Directors, provided that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, any remaining Independent Directors (or Independent Director, if there be only one remaining) shall be entitled to designate persons to fill such vacancies who shall be deemed to be Independent Directors for purposes of this Agreement or, if no Independent Director then remains, the other directors shall designate two persons to fill such vacancies who shall not be shareholders, Affiliates or Associates of Parent or Purchaser, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Notwithstanding anything in this Agreement to the contrary, in the event that Parent's designees constitute a majority of the directors on the Company Board of Directors, the affirmative vote of a majority of the Independent Directors shall be required after the acceptance for payment of Shares pursuant to the Offer and prior to the Effective Time, to (a) amend or terminate this Agreement by the Company, (b) exercise or waive any of the Company's rights, benefits or remedies hereunder if such exercise or waiver materially and adversely affects holders of Shares other than Parent or Purchaser, or (c) take any other action under or in connection with this Agreement if such action materially and adversely affects holders of Shares other than Parent or Purchaser; provided, that if there shall be no such -------- directors, such actions may be effected by unanimous vote of the entire Company Board of Directors. Page 6 Section 1.4 The Merger. ---------- (a) Subject to the terms and conditions of this Agreement, at the Effective Time, the Company and Purchaser shall consummate a merger pursuant to which (a) Purchaser shall be merged with and into the Company and the separate corporate existence of Purchaser shall thereupon cease, (b) the Company shall be the successor or surviving corporation in the Merger and shall continue to be governed by the laws of the State of California, and (c) the separate corporate existence of the Company with all its rights, privileges, immunities, powers and franchises shall continue unaffected by the Merger, except as set forth in this Section 1.4. (b) As of the Effective Time of the Merger, the articles of incorporation of the Surviving Corporation shall be as set forth in Exhibit D-1 to this Agreement, and such articles of incorporation shall be the articles of incorporation of Surviving Corporation until thereafter amended as provided by law and such articles of incorporation of the Surviving Corporation. As of the Effective Time of the Merger, the by-laws of the Surviving Corporation shall as set forth in Exhibit D-2 to this Agreement, and such by-laws shall be the by- laws of the Surviving Corporation until thereafter amended as provided by law and such by-laws of the Surviving Corporation. Section 1.5 Effective Time. Upon the terms and subject to the -------------- conditions set forth in Article VI of this Agreement and the California Merger Agreement, the form of which is attached hereto as Exhibit C, the parties hereto shall file the California Merger Agreement with the Secretary of State of the State of California, whereupon Purchaser shall be merged with and into the Company in accordance with the applicable provisions of this Agreement and the CGCL. Concurrently with the filing of the California Merger Agreement with the Secretary of State of the State of California and upon the terms and subject to the conditions set forth in this Agreement, the parties hereto shall file a Certificate of Merger with the Secretary of State of Delaware in accordance with the relevant provisions of the DGCL. The parties hereto shall make all other filings, recordings or publications required by the CGCL and the DGCL in connection with the Merger. The Merger shall become effective at the time specified in the California Merger Agreement or the Certificate of Merger, as the case may be, which specified time shall be the same in each of the California Merger Agreement and the Certificate of Merger. Page 7 Section 1.6 Closing. The closing of the Merger shall take place at ------- 10:00 a.m. on a date to be agreed upon by the parties, and if such date is not agreed upon by the parties, the Closing shall occur on the business day after satisfaction or waiver of all of the conditions set forth in Article VI, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 525 University Avenue, Suite 220, Palo Alto, California 94301. Section 1.7 Directors and Officers of the Surviving Corporation. --------------------------------------------------- The directors and officers of the Company at the Effective Time shall, from and after the Effective Time, be the directors and officers of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the articles of incorporation and the by-laws of the Surviving Corporation. If, at the Effective Time, a vacancy shall exist on the Company Board of Directors or in any office of the Surviving Corporation, such vacancy may thereafter be filled in the manner provided by law. Section 1.8 Subsequent Actions. If at any time after the Effective ------------------ Time the Surviving Corporation will consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Purchaser acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either the Company or Purchaser, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. Section 1.9 Shareholders' Meeting. --------------------- (a) If required by applicable law in order to consummate the Merger, the Company, acting through its Board of Directors, shall, in accordance with applicable law: Page 8 (i) duly call, give notice of, convene and hold a Special Meeting of its shareholders as promptly as practicable following the acceptance for payment and purchase of Shares by Purchaser pursuant to the Offer for the purpose of considering and taking action upon the approval of the Merger and the adoption of this Agreement; (ii) prepare and file with the SEC a preliminary proxy or information statement relating to the Merger and this Agreement and use its best efforts to obtain and furnish the information required to be included by the SEC in the Proxy Statement (as hereinafter defined) and, after consultation with Parent, to respond promptly to any comments made by the SEC with respect to the preliminary proxy or information statement and cause a definitive proxy or information statement, including any amendment or supplement thereto to be mailed to its shareholders, provided that no amendment or supplement to such Proxy or information statement will be made by the Company without consultation with Parent and its counsel; (iii) include in the Proxy Statement the recommendation of the Board of Directors that shareholders of the Company vote in favor of the approval of the Merger and the adoption of this Agreement; (iv) use its best efforts to solicit from holders of Shares proxies in favor of the Merger and shall take all other action necessary or, in the reasonable opinion of Parent, advisable to secure any vote or consent of shareholders required under California law to effect the Merger. (b) Parent will provide the Company with the information concerning Parent and Purchaser required to be included in the Proxy Statement. Parent shall vote, or cause to be voted, all of the Shares then owned by it, Purchaser or any of its other Subsidiaries or Affiliates controlled by Parent in favor of the approval of the Merger and the approval and adoption of this Agreement. Section 1.10 Merger Without Meeting of Shareholders. -------------------------------------- Notwithstanding Section 1.9, in the event that Parent, Purchaser and any other Subsidiaries of Parent shall acquire in the aggregate a number of the outstanding shares of each class of capital stock of the Company, pursuant to the Offer or otherwise, sufficient to enable Purchaser or the Company to cause the Merger to become effective without a meeting of shareholders of the Company, the parties hereto shall, at the request of Parent and subject to Article VI, take all necessary and appropriate action to cause Page 9 the Merger to become effective as soon as practicable after such acquisition, without a meeting of shareholders of the Company, in accordance with Section 1110 of the CGCL. ARTICLE II CONVERSION OF SECURITIES Section 2.1 Conversion of Capital Stock. As of the Effective Time, --------------------------- by virtue of the Merger and without any further action on the part of the holders of any Shares or holders of Purchaser Common Stock: (a) Purchaser Common Stock. Each issued and outstanding share of ---------------------- Purchaser Common Stock shall be converted into and become one fully paid and nonassessable share of common stock of the Surviving Corporation. (b) Cancellation of Parent-Owned Stock. All Shares that are owned by ---------------------------------- Parent, Purchaser or any other wholly-owned Subsidiary of Parent shall be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Shares. Each issued and outstanding Share (other -------------------- than Shares to be cancelled in accordance with Section 2.1(b) and other than any Dissenting Shares) shall be converted into the right to receive the Offer Price, payable to the holder thereof, without interest, upon surrender of the certificate formerly representing such Share in the manner provided in Section 2.2. From and after the Effective Time, all such converted Shares shall no longer be outstanding and shall be deemed to be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall cease to have any rights with respect to such shares except the right to receive the Merger Consideration therefor, without interest, upon the surrender of such certificate in accordance with Section 2.2. Section 2.2 Exchange of Certificates. ------------------------ (a) Paying Agent. Parent shall designate a bank or trust company to ------------ act as agent for the holders of the Shares in connection with the Merger to receive in trust the funds to which holders of the Shares shall become entitled Page 10 pursuant to Section 2.1(c). At the Effective Time, Parent or Purchaser shall deposit, or cause to be deposited, with the Exchange Agent for the benefit of holders of Shares the aggregate consideration to which such holders shall be entitled at the Effective Time pursuant to Section 2.1(c). Such funds shall be invested as directed by Parent or the Surviving Corporation pending payment thereof by the Paying Agent to holders of the Shares. Earnings from such investments shall be the sole and exclusive property of Purchaser and the Surviving Corporation, and no part of such earnings shall accrue to the benefit of holders of Shares. (b) Exchange Procedures. As soon as reasonably practicable after the ------------------- Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate or Certificates, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in such form and have such other provisions not inconsistent with this Agreement as Parent may specify) and (ii) instructions for use in effecting the surrender of Certificates in exchange for payment of the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented by such Certificate, and the Certificate so surrendered shall forthwith be cancelled. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration in cash as contemplated by this Section 2.2. (c) Transfer Books; No Further Ownership Rights in the Shares. At the --------------------------------------------------------- Effective Time, the stock transfer books of the Company shall be closed, and thereafter there shall be no further registration of transfers of the Shares on the records of the Company. From and after the Effective Time, the holders of Certificates evidencing ownership of the Shares outstanding immediately prior to the Page 11 Effective Time shall cease to have any rights with respect to such Shares, except as otherwise provided for herein or by applicable law. (d) Termination of Fund; No Liability. At any time following six --------------------------------- months after the Effective Time, the Surviving Corporation shall be entitled to require the Paying Agent to deliver to it any funds (including any earnings received with respect thereto) which had been made available to the Paying Agent and which have not been disbursed to holders of Certificates, and thereafter such holders shall be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) and only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates, without any interest thereon. Notwithstanding the foregoing, neither the Surviving Corporation nor the Paying Agent shall be liable to any holder of a Certificate for Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. Section 2.3 Dissenting Shares. ----------------- (a) Notwithstanding any provision of this Agreement to the contrary, Dissenting Shares shall not be converted into or represent a right to receive cash pursuant to Section 2.1, but the holder thereof shall be entitled to only such rights as are granted by the CGCL. (b) Notwithstanding the provisions of Section 2.3(a), if any holder of Shares who demands appraisal of his Shares under the CGCL effectively withdraws or loses (through failure to perfect or otherwise) his right to appraisal, then as of the Effective Time or the occurrence of such event, whichever later occurs, such holder's Shares shall automatically be converted into and represent only the right to receive the Merger Consideration as provided in Section 2.1(c), without interest, upon surrender of the certificate or certificates representing such Shares pursuant to Section 2.2. (c) The Company shall give Parent (i) prompt notice of any written demands for appraisal or payment of the fair value of any Shares, withdrawals of such demands, and any other instruments served on the Company pursuant to the CGCL received by the Company, and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the CGCL. Except with the prior written consent of Parent, the Company shall not voluntarily Page 12 make any payment with respect to any demands for appraisal, settle or offer to settle any such demands. Section 2.4 Company Stock Option Plans. -------------------------- (a) At the Effective Time, each Company Option, whether vested or unvested, shall be assumed by Parent (and Parent shall take all action necessary under applicable law, to cause such result or equivalent result without disadvantage to the Company Option holders) and shall thereupon constitute an option to acquire that number of shares of Parent Common Stock equal to (i) the number of Shares subject to the Company Option immediately prior to the Effective Time, multiplied by (ii) the Exchange Ratio, rounded down to the nearest whole share, at a price per share of Parent Common Stock equal to (x) the exercise price of the Company Option immediately prior to the Effective Time, divided by (y) the Exchange Ratio, rounded up to the nearest whole cent. Other than as described in the immediately preceding sentence, the Company Options shall be subject to the same terms and conditions as applicable immediately prior to the Effective Time. As soon as reasonably practicable following the Effective Time, Parent shall deliver to each holder of a Company Option an appropriate notice setting forth the terms of such assumption. With respect to any Company Option that is an incentive stock option (within the meaning of Section 422 of the Code) immediately prior to the Effective Time, such assumption shall, to the extent reasonably practicable, conform to the requirements of Section 424(a) of the Code. Parent shall take all action necessary for the shares of Parent Common Stock to rank pari passu in all ---- ----- respects with all other shares of Parent Common Stock then in issue and to be listed and issuable upon exercise of the Company Options so that such Company Options shall be freely tradeable on the New York Stock Exchange. (b) Except as may be otherwise agreed to by Parent or Purchaser and the Company or as otherwise contemplated or required to effectuate this Section 2.4, the Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company shall be deleted as of the Effective Time. (c) The Company shall take all necessary actions to provide that as of the Effective Time no holder of Company Options under the Plans will have any right to receive shares of common stock of the Surviving Corporation upon exercise of any such Company Option. Page 13 (d) Notwithstanding anything in this Agreement to the contrary, a vote of a majority of the Independent Directors shall be required to amend this Section 2.4 in any manner adverse to the holders of Company Options described herein. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the Disclosure Schedule prepared and signed by the Company and to be delivered to Parent no later than 5:00 p.m., Pacific Standard Time on January 14, 1999, the Company represents and warrants to Parent and Purchaser that all of the statements contained in this Article III are true and correct as of the date of this Agreement (or, if made as of a specified date, as of such date), and will be true and correct as of the Closing Date as though made on the Closing Date. Each exception set forth in the Disclosure Schedule and each other response to this Agreement set forth in the Disclosure Schedule is identified by reference to, or has been grouped under a heading referring to, a specific individual section of this Agreement and, except as otherwise specifically stated with respect to such exception, relates only to such section. The disclosures in each section of the Disclosure Schedule relate only to the representations and warranties set forth in the Section of this Agreement to which such section of the Disclosure Schedule expressly relates and not to any other representation and warranty contained in this Agreement, except to the extent that one section of the Disclosure Schedule specifically refers to another section thereof. In the event of any inconsistency between statements in the body of this Agreement and statements in the Disclosure Schedule (excluding exceptions expressly set forth in the Disclosure Schedule with respect to a specifically identified representation or warranty), the statements in the body of this Agreement shall control. Section 3.1 Organization; Qualification. The Company (i) is a --------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of California; (ii) has full corporate power and authority to carry on its business as it is now being conducted and to own the properties and assets it now owns; and (iii) is duly qualified or licensed to do business as a foreign corporation in good standing in every jurisdiction in which the ownership of its properties or the conduct of its business requires such qualification. Page 14 Section 3.2 Capitalization. (a) The authorized capital stock of the -------------- Company consists of 25,000,000 Shares. As of the date hereof, (i) 8,140,793 Shares are issued and outstanding, (ii) no shares of Company Preferred Stock are issued and outstanding, (iii) pursuant to California law, no Shares are issued and held in the treasury of the Company, (iv) 2,743,325 Shares are reserved for issuance pursuant to outstanding Company Options, and (v) 4,212,238 Shares are reserved for issuance pursuant to outstanding warrants of the Company. All the outstanding shares of the Company's capital stock are, and all Shares which may be issued pursuant to the exercise of outstanding Company Options will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable. There is no Voting Debt of the Company issued and outstanding. Except as set forth above and except for the Transactions, as of the date hereof, (i) there are no shares of capital stock of the Company authorized, issued or outstanding; (ii) there are no existing options, warrants, calls, pre-emptive rights, subscriptions or other rights, agreements, arrangements or commitments of any character, relating to the issued or unissued capital stock of the Company, obligating the Company to issue, transfer or sell or cause to be issued, transferred or sold any shares of capital stock or Voting Debt of, or other equity interest in, the Company or securities convertible into or exchangeable for such shares or equity interests, or obligating the Company to grant, extend or enter into any such option, warrant, call, subscription or other right, agreement, arrangement or commitment and (iii) there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any Shares, or the capital stock of the Company or Affiliate of the Company or to provide funds to make any investment (in the form of a loan, capital contribution or otherwise) in any other entity. (b) There are no voting trusts or other agreements or understandings to which the Company is a party with respect to the voting of the capital stock of the Company. (c) Following the Effective Time, no holder of Company Options will have any right to receive shares of common stock of the Surviving Corporation upon exercise of Company Options. (d) No Indebtedness of the Company contains any restriction upon (i) the prepayment of any Indebtedness of the Company, (ii) the incurrence of Indebtedness by the Company, or (iii) the ability of the Company to grant any lien on the properties or assets of the Company. Page 15 Section 3.3 Authorization; Validity of Agreement; Company Action. ---------------------------------------------------- The Company has full corporate power and authority to execute and deliver this Agreement and the Stock Option Agreement, and to consummate the Transactions. The execution, delivery and performance by the Company of this Agreement and the consummation by it of the Transactions, have been duly authorized by the Company Board of Directors and, except for obtaining the approval of its shareholders as contemplated by Section 1.9, no other corporate action on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement or the Stock Option Agreement or the consummation by it of the Transactions. This Agreement and the Stock Option Agreement have been duly executed and delivered by the Company and, assuming due and valid authorization, execution and delivery thereof by Parent, this Agreement and the Stock Option Agreement are valid and binding obligations of the Company enforceable against the Company in accordance with their terms. Section 3.4 Board Approvals Regarding Transactions. The Company -------------------------------------- Board of Directors, at a meeting duly called and held or by unanimous written consent, has (i) unanimously determined that each of the Agreement, the Stock Option Agreement, the Offer and the Merger are fair to and in the best interests of the shareholders of the Company, (ii) approved the 1 Transactions, and (iii) resolved to recommend that the shareholders of the Company accept the Offer, tender their Shares to Purchaser pursuant to the Offer and approve and adopt this Agreement and the Merger, and none of the aforesaid actions by the Company Board of Directors has been amended, rescinded or modified. To the knowledge of the Company, no state takeover statute is applicable to the Merger or the other Transactions. Section 3.5 Vote Required. The affirmative vote of the holders of ------------- a bare majority of the outstanding Shares is the only vote of the holders of any class or series of the Company's capital stock necessary to approve the Merger. No vote of any class or series of the Company's capital stock is necessary to approve any of the Transactions other than the Merger. Section 3.6 Consents and Approvals; No Violations. Except for the ------------------------------------- filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, the HSR Act, state securities or blue sky laws, and the CGCL, none of the execution, delivery or performance of this Agreement by the Company, the consummation by the Company of the Transactions or compliance by the Company with any of the provisions hereof will (i) conflict with or result in any breach of any provision of the articles of incorporation, the by-laws or Page 16 similar organizational documents of the Company, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (iii) result in a violation or breach of, or constitute (with or without due notice or the passage of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any Company Agreement, or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or any of their properties or assets, excluding from the foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults which would not, individually or in the aggregate, have a material adverse effect on the Company. There are no third party consents or approvals required to be obtained under the Company Agreements prior to the consummation of the Transactions. Section 3.7 SEC Reports and Financial Statements. The Company has ------------------------------------ filed with the SEC, and has heretofore made available to Parent, true and complete copies of, the Company SEC Documents. As of their respective dates or, if amended, as of the date of the last such amendment filed prior to the date hereof, the Company SEC Documents, including, without limitation, any financial statements or schedules included therein (a) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder. The Financial Statements have been prepared from, and are in accordance with, the books and records of the Company, comply in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with GAAP applied on a consistent basis during the period involved (except as may be stated in the notes thereto) and fairly present the consolidated financial position and the results of operations and cash flows (and changes in financial position, if any) of the Company as of the times and for the periods referred to therein. Section 3.8 Books and Records. The books of account, minute books, ----------------- stock record books and other records of the Company are complete and correct in all material respects and have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Exchange Act, including the requirements relating to a system of internal accounting controls. The minute books of the Company contain accurate and complete records of all meetings held of, and corporate action taken by, the shareholders, the Company Board of Directors and committees of the Company Board of Directors, and no meeting of any of such shareholders, the Page 17 Company Board of Directors or such committees has been held for which minutes have not been prepared and are not contained in such minute books. Section 3.9 No Undisclosed Liabilities. Except (a) as disclosed in -------------------------- the Financial Statements, and (b) for liabilities and obligations (i) incurred in the ordinary course of business and consistent with past practice since the Balance Sheet Date pursuant to the terms of this Agreement, the Company has no liabilities or obligations of any nature, whether or not accrued, contingent or otherwise, that have, or would be reasonably likely to have, a material adverse effect on the Company. The reserves reflected in the Financial Statements are adequate, appropriate and reasonable and have been calculated in a consistent manner. Section 3.10 Accounts Receivable. All accounts receivable of the ------------------- Company, whether reflected in the Balance Sheet or otherwise, represent sales actually made in the ordinary course of business, and are current and collectible net of any reserves shown on the Balance Sheet. Subject to such reserve, each of the accounts receivable either has been collected in full or will be collected in full, without any set-off, within 120 days after the day on which it became due and payable. Section 3.11 Inventory. All of the inventories of the Company, --------- whether reflected in the Balance Sheet or otherwise, consist of a quality and quantity usable and salable in the ordinary and usual course of business, except for items of obsolete materials and materials of below-standard quality, all of which have been written off or written down on the Balance Sheet to fair market value or for which adequate reserves have been provided therein. All inventories not written off have been priced at the lower of average cost or market. The quantities of each type of inventory (whether raw materials, work- in-process, or finished goods) are not excessive, but are reasonable and warranted in the present circumstances of the Company. All work in process and finished goods inventory is free of any defect or other deficiency. Section 3.12 Interim Operations. Since the date of the Balance ------------------ Sheet, the business of the Company has been conducted only in the ordinary and usual course consistent with past practice. Since the date of the Balance Sheet, there have not been any material adverse changes in the financial condition, assets or results of operations of the Company. Since the date of the Balance Sheet, such assets have not been affected in any way as a result of flood, fire, explosion or other casualty (whether or not covered by insurance). The Company is not aware of any circumstances which may cause it to suffer any material adverse change in its business, operations or prospects. Page 18 Section 3.13 Absence of Certain Changes. Except as disclosed in -------------------------- the Company SEC Documents filed prior to the date hereof, since the date of the Balance Sheet, the Company has not: (a) suffered any material adverse change in its working capital, financial condition, assets, liabilities (absolute, accrued, contingent or otherwise), reserves, business, operations or prospects; (b) incurred any liabilities or obligations (absolute, accrued, contingent or otherwise) except non-material items incurred in the ordinary course of business and consistent with past practice, none of which exceeds $100,000 (counting obligations or liabilities arising from one transaction or a series of similar transactions, and all periodic installments or payments under any lease or other agreement providing for periodic installments or payments, as a single obligation or liability), or increased, or experienced any change in any assumptions underlying or methods of calculating, any bad debt, contingency or other reserves; (c) paid, discharged or satisfied any claim, liability or obligation (whether absolute, accrued, contingent or otherwise) other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities and obligations reflected or reserved against in the Balance Sheet or incurred in the ordinary course of business and consistent with past practice since the date of the Balance Sheet; (d) permitted or allowed any of its property or assets (real, personal or mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien, security interest, encumbrance, restriction or charge of any kind, except for liens for current taxes not yet due; (e) written down the value of any inventory (including write-downs by reason of shrinkage or mark-down) or written off as uncollectible any notes or accounts receivable, except for immaterial write-downs and write-offs in the ordinary course of business and consistent with past practice; (f) cancelled any debts or waived any claims or rights of substantial value; Page 19 (g) sold, transferred, or otherwise disposed of any of its properties or assets (real, personal or mixed, tangible or intangible), except in the ordinary course of business and consistent with past practice; (h) disposed of or permitted to lapse any rights to the use of any Intellectual Property, or disposed of or disclosed (except as necessary in the conduct of its business) to any person other than representatives of Parent any trade secret, formula, process, know-how or other Intellectual Property not theretofore a matter of public knowledge; (i) granted any general increase in the compensation of officers or employees (including any such increase pursuant to any bonus, pension, profitsharing or other plan or commitment) or any increase in the compensation payable or to become payable to any officer or employee, and no such increase is customary on a periodic basis or required by agreement or understanding; (j) made any single capital expenditure or commitment in excess of $10,000 for additions to property, plant, equipment or intangible capital assets or made aggregate capital expenditures and commitments in excess of $50,000 (on a consolidated basis) for additions to property, plant, equipment or intangible capital assets; (k) declared, paid or set aside for payment any dividend or other distribution in respect of its capital stock or redeemed, purchased or otherwise acquired, directly or indirectly, any shares of capital stock or other securities of the Company; (l) made any change in any method of accounting or accounting practice; (m) paid, loaned or advanced any amount to, or sold, transferred or leased any properties or assets (real, personal or mixed, tangible or intangible) to, or entered into any agreement or arrangement with, any of its officers or directors or any Affiliate or Associate of any of its officers or directors except for directors' fees, and compensation to officers at rates not exceeding the rates of compensation paid during the year ended January 31, 1998; or (n) agreed, whether in writing or otherwise, to take any action described in this section. Page 20 Section 3.14 Litigation. There is no action, suit, inquiry, ---------- proceeding or investigation by or before any court or governmental or other regulatory or administrative agency or commission pending or threatened against or involving the Company or which questions or challenges the validity of this Agreement or any action taken or to be taken by the Company pursuant to this Agreement or in connection with the Transactions; nor is there any valid basis for any such action, proceeding or investigation. The Company is not in default under or in violation of, nor is there any valid basis for any claim of default under or violation of, any contract, commitment or restriction to which it is a party or by which it is bound. The Company is not subject to any judgment, order or decree which may have an adverse effect on its business practices or on its ability to acquire any property or conduct its business in any area. Section 3.15 Employee Benefit Plans. ---------------------- (a) The Disclosure Schedule contains a true and complete list of each deferred compensation and each incentive compensation, stock purchase, stock option and other equity compensation plan, program, agreement or arrangement; each severance or termination pay, medical, surgical, hospitalization, life insurance and other "welfare" plan, fund or program (within the meaning of Section 3(1) of ERISA); each profit-sharing, stock bonus or other "pension" plan, fund or program (within the meaning of Section 3(2) of ERISA); each employment, termination or severance agreement; and each other employee benefit plan, fund, program, agreement or arrangement, in each case, that is sponsored, maintained or contributed to or required to be contributed to by the Company or by any ERISA Affiliate, or to which the Company or an ERISA Affiliate is party, whether written or oral, for the benefit of any employee or former employee of the Company. Neither the Company nor any ERISA Affiliate has any commitment or formal plan, whether legally binding or not, to create any additional employee benefit plan or modify or change any existing Plan that would affect any employee or former employee of the Company. (b) With respect to each of the Plans, the Company has heretofore delivered to Parent true and complete copies of each of the following documents, as applicable: (i) a copy of the Plan documents (including all amendments thereto) for each written Plan or a written description of any Plan that is not otherwise in writing; (ii) a copy of the annual report or Internal Revenue Service Form 5500 Series, if required under ERISA, with respect to each Plan for the last three Plan years ending prior to the date of this Agreement for which such a report was filed; (iii) a copy of the actuarial report, if required under ERISA, with respect to each Plan for the last three Plan years ending prior to the date of this Agreement; (iv) a copy of the most Page 21 recent Summary Plan Description ("SPD"), together with all Summaries of Material --- Modification issued with respect to such SPD, if required under ERISA, with respect to each Plan, and all other material employee communications relating to each Plan; (v) if the Plan is funded through a trust or any other funding vehicle, a copy of the trust or other funding agreement (including all amendments thereto) and the latest financial statements thereof, if any; (vi) all contracts relating to the Plans with respect to which the Company, and of its Subsidiaries or any ERISA Affiliate may have any liability, including insurance contracts, investment management agreements, subscription and participation agreements and record keeping agreements; and (vii) the most recent determination letter received from the IRS with respect to each Plan that is intended to be qualified under Section 401(a) of the Code. (c) No liability under Title IV or Section 302 of ERISA has been incurred by the Company or any ERISA Affiliate that has not been satisfied in full, and no condition exists that presents a material risk to the Company or any ERISA Affiliate of incurring any such liability, other than liability for premiums due the PBGC (which premiums have been paid when due). Insofar as the representation made in this Section 3.16(c) applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made with respect to any employee benefit plan, program, agreement or arrangement subject to Title IV of ERISA to which the Company or any ERISA Affiliate made, or was required to make, contributions during the five year period ending on the last day of the most recent plan year ended prior to the Closing Date. (d) The PBGC has not instituted proceedings to terminate any Title IV Plan and no condition exists that presents a material risk that such proceedings will be instituted. (e) With respect to each Title IV Plan, the present value of accrued benefits under such plan, based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such plan's actuary with respect to such plan did not exceed, as of its latest valuation date, then current value of the assets of such plan allocable to such accrued benefits. (f) No Title IV Plan or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of the last day of the most recent fiscal year of each Title IV Plan ended prior to the Closing Date. All contributions required to be made with respect to any Plan on or prior to the Closing Date have been timely made. Page 22 (g) No Title IV Plan is a "multi-employer pension plan," as defined in Section 3(37) of ERISA, nor is any Title IV Plan a plan described in Section 4063(a) of ERISA. Neither the Company nor any ERISA Affiliate has made or suffered a "complete withdrawal" or a "partial withdrawal," as such terms are respectively defined in Sections 4203 and 4205 of ERISA (or any liability resulting therefrom has been satisfied in full). (h) Neither the Company, any Plan, any trust created thereunder, nor any trustee or administrator thereof has engaged in a transaction in connection with which the Company, any Plan, any such trust, or any trustee or administrator thereof, or any party dealing with any Plan or any such trust could be subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code. (i) Each Plan has been operated and administered in all material respects in accordance with its terms and applicable law, including but not limited to ERISA and the Code. (j) Each Plan intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified, and the trusts maintained thereunder are exempt from taxation under Section 501(a) of the Code. Each Plan intended to satisfy the requirements of Section 501(c)(9) has satisfied such requirements. (k) No Plan provides medical, surgical, hospitalization, death or similar benefits (whether or not insured) for employees or former employees of the Company for periods extending beyond their retirement or other termination of service, other than (i) coverage mandated by applicable law, (ii) death benefits under any "pension plan," or (iii) benefits the full cost of which is borne by the current or former employee (or his beneficiary). (l) No amounts payable under the Plans will fail to be deductible for federal income tax purposes by virtue of Section 280G of the Code. (m) The consummation of the Transactions will not, either alone or in combination with another event, (i) entitle any current or former employee or officer of the Company or any ERISA Affiliate to severance pay, unemployment compensation or any other payment, except as expressly provided in this Agreement, or (ii) accelerate the time of payment or vesting, or increase the amount of compensation due any such employee or officer. Page 23 (n) There are no pending, threatened or anticipated claims by or on behalf of any Plan, by any employee or beneficiary covered under any such Plan, or otherwise involving any such Plan (other than routine claims for benefits). Section 3.16 Tax Matters; Government Benefits. -------------------------------- (a) The Company has duly and timely filed all Tax Returns that are required to be filed by it, and has duly paid in full or made adequate provision for the payment of all Taxes relating to all periods or portions thereof ending through the date hereof. All such Tax Returns are correct and complete in all material respects. Since the Balance Sheet Date, the Company has not incurred liability for any Taxes other than in the ordinary course of business. The Company has not received notice of any claim made by an authority in a jurisdiction where the Company does not file a Tax Return, that the Company is or may be subject to taxation by that jurisdiction. (b) The Company has not waived any statute of limitations in any jurisdiction in respect of Taxes or Tax Returns or agreed to any extension of time with respect to a Tax assessment or deficiency. The Company has not requested or been granted any extension of time within which to file any Tax Returns that have not since been filed. There are no Tax liens upon any of the assets of the Company except for liens for Taxes not yet due for which adequate reserves have been established. (c) No federal, state, local or foreign audits, examinations or other administrative proceedings have been commenced, are pending or are threatened with regard to any Taxes or Tax Returns of the Company. There is no dispute or claim concerning any Tax liability of the Company either claimed or raised by any taxing authority that has not been settled and fully paid. (d) The Company is not a party to any agreement, plan, contract or arrangement that could result, separately or in the aggregate, in a payment of any "excess parachute payments" within the meaning of Section 280G of the Code. (e) The Company has not filed a consent pursuant to Section 341(f) of the Code (or any predecessor provision) concerning collapsible corporations, or agreed to have Section 341(f)(2) of the Code apply to any disposition of a "subsection (f) asset" (as such term is defined in Section 341(f)(4) of the Code) owned by the Company. The Company has not agreed to make, or is required to make, any adjustment under Section 481(a) of the Code (or comparable provision under other laws) by reason of a change in accounting method or otherwise. Page 24 (f) No taxing authority is asserting or threatening to assert a claim against the Company under or as a result of Section 482 of the Code or any similar provision of state, local or foreign law. (g) The Company is not a party to any material tax sharing, tax indemnity or other similar agreement or arrangement with any entity. (h) The Company has not been a member of any affiliated group within the meaning of Section 1504(a) of the Code, or any similar affiliated or consolidated group for tax purposes under state, local or foreign law, or has any liability for Taxes of any person (other than the Company) under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law as a transferee or successor, by contract or otherwise. (i) The Company has complied in all respects with all applicable laws, rules and regulations relating to the payment and withholding of Taxes and have, within the time prescribed by law, withheld and paid over to the proper governmental authorities all amounts required to be withheld and paid over under all applicable laws. Section 3.17 Title to Properties; Encumbrances. The Company has --------------------------------- good, valid and marketable title to all the properties and assets which it purports to own (real, personal and mixed, tangible and intangible), including, without limitation, all the properties and assets reflected in the Balance Sheet, and all the properties and assets purchased by the Company since the date of the Balance Sheet, which subsequently acquired properties and assets (other than inventory) are listed in the Disclosure Schedule. All properties and assets reflected in the Balance Sheet have a fair market or realizable value at least equal to the value thereof as reflected therein, and all such properties and assets are free and clear of all mortgages, title defects or objections, liens, claims, charges, security interests or other encumbrances of any nature whatsoever including, without limitation, leases, chattel mortgages, conditional sales contracts, collateral security arrangements and other title or interest retention arrangements, and are not, in the case of real property, subject to any rights of way, building use restrictions, exceptions, variances, reservations or limitations of any nature whatsoever except, with respect to all such properties and assets, (a) liens shown on the Balance Sheet as securing specified liabilities or obligations and liens incurred in connection with the purchase of property and/or assets, if such purchase was effected after the date of the Balance Sheet, with respect to which no default exists; (b) minor imperfections of title, if any, none of which are substantial in amount, materially detract from the value Page 25 or impair the use of the property subject thereto, or impair the operations of the Company and which have arisen only in the ordinary course of business and consistent with past practice since the date of the Balance Sheet; and (c) liens for current taxes not yet due. The rights, properties and other assets presently owned, leased or licensed by the Company and described elsewhere in this Agreement include all rights, properties and other assets necessary to permit the Company to conduct its business in all material respects in the same manner as its business has been conducted prior to the date hereof. Section 3.18 Plant and Equipment. The plants, structures and ------------------- equipment of the Company are structurally sound with no known defects and are in good operating condition and repair and are adequate for the uses to which they are being put. None of such plants, structures or equipment are in need of maintenance or repairs except for ordinary, routine maintenance and repairs which are not material in nature or cost. The Company has not received notification that it is in violation of any applicable building, zoning, anti- pollution, health or other law, ordinance or regulation in respect of its plants or structures or their operations. Section 3.19 Leases. The Disclosure Schedule contains an accurate and ------ complete description of the terms of all leases pursuant to which the Company leases real or personal property. All such leases are valid, binding and enforceable in accordance with their terms, and are in full force and effect; there are no existing defaults by the Company thereunder; and no event of default has occurred which (whether with or without notice, lapse of time or the happening or occurrence of any other event) would constitute a default thereunder. Executed counterpart copies of all consents referred to in the preceding sentence will be delivered to Parent at the Closing. Section 3.20 Environmental Laws. Except as disclosed in the Company ------------------ SEC Documents (a) the Company is in compliance in all material respects with all Environmental Laws, including, but not limited to, compliance with any permits or other governmental authorizations or the terms and conditions thereof; (b) the Company has not received any communication or notice, whether from a governmental authority or otherwise, alleging any violation of or noncompliance with any Environmental Laws by the Company for which it is responsible, and there is no pending or, to the Company's knowledge, threatened Environmental Claim, except where such Environmental Claim would not have a material adverse effect on the Company; and (c) to the Company's knowledge, there are no past or present facts or circumstances that could form the basis of any Environmental Claim against the Company or against any person or entity whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of law, except where such Environmental Claim, if made, Page 26 would not have a material adverse effect on the Company. All permits and other governmental authorizations currently held or required to be held by the Company pursuant to any Environmental Laws are identified in the Disclosure Schedule. The Company has provided to Parent all assessments, reports, data, results of investigations or audits, and other information that is in the possession of or reasonably available to the Company regarding environmental matters pertaining to or the environmental condition of the business of the Company, or the compliance (or noncompliance) by the Company with any Environmental Laws. Section 3.21 Bank Accounts. The Disclosure Schedule sets forth the ------------- names and locations of all banks, trust companies, savings and loan associations and other financial institutions at which the Company maintains safe deposit boxes or accounts of any nature, and the names of all persons authorized to draw thereon, make withdrawals therefrom or have access thereto. At the Closing, the Company will deliver to Parent copies of all records, including all signature or authorization cards, pertaining to such bank accounts. Section 3.22 Intellectual Property. --------------------- (a) As used herein, the term "Intellectual Property" means all trademarks, service marks, trade names, Internet domain names, designs, logos, slogans and general intangibles of like nature, together with goodwill, registrations and applications relating to the foregoing; registered and unregistered patents, copyrights (including registrations and applications for any of the foregoing); computer programs, including any and all software implementations of algorithms, models and methodologies whether in source code or object code form, databases and compilations, including any and all data and collections of data, all documentation, including user manuals and training materials, related to any of the foregoing and the content and information contained on any Web site (collectively, "Software"); confidential information, technology, know-how, inventions, processes, formulae, algorithms, models and methodologies (such confidential items, collectively "Trade Secrets") held for use or used in the business of the Company as conducted as of the Closing Date or as presently contemplated to be conducted and any licenses to use any of the foregoing. (b) Section 3.22(b) of the Disclosure Schedule sets forth, for all Intellectual Property owned by the Company, a complete and accurate list, of all U.S. and foreign: (i) patents and patent applications; (ii) trademark and service mark registrations (including Internet domain name registrations), trademark and service mark Page 27 applications and material unregistered trademarks and service marks; and (iii) copyright registrations, copyright applications and material unregistered copyrights. (c) Section 3.22(c) of the Disclosure Schedule lists all contracts for material Software which is licensed, leased or otherwise used by the Company and all Software which is owned by the Company ("Proprietary Software"), and identifies which Software is owned, licensed, leased, or otherwise used, as the case may be. (d) Section 3.22(d) of the Disclosure Schedule sets forth a complete and accurate list of all agreements granting or obtaining any right to use or practice any rights under any Intellectual Property, to which the Company is a party or otherwise bound, as licensee or licensor thereunder, including, without limitation, license agreements, settlement agreements and covenants not to sue (collectively, the "License Agreements"). (e) Except as would not have a material adverse effect on the Company: (i) the Company owns or has the right to use all Intellectual Property, free and clear of all liens or other encumbrances; (ii) any Intellectual Property owned or used by the Company has been duly maintained, is valid and subsisting, in full force and effect and has not been cancelled, expired or abandoned; (iii) the Company has not received written notice from any third party regarding any actual or potential infringement by the Company of any intellectual property of such third party, and the Company has no knowledge of any basis for such a claim against the Company; (iv) the Company has not received written notice from any third party regarding any assertion or claim challenging the validity of any Intellectual Property owned or used by the Company and the Company has no knowledge of any basis for such a claim; (v) the Company has not licensed or sublicensed its rights in any Intellectual Property, or received or been granted any such rights, other than pursuant to the License Agreements; Page 28 (vi) no third party is misappropriating, infringing, diluting or violating any Intellectual Property owned by the Company; (vii) the License Agreements are valid and binding obligations of the Company, enforceable in accordance with their terms, and there exists no event or condition which will result in a violation or breach of, or constitute a default by the Company or, to the knowledge of the Company, the other party thereto, under any such License Agreement; (viii) the Company takes reasonable measures to protect the confidentiality of Trade Secrets (as defined hereinafter) including requiring third parties having access thereto to execute written nondisclosure agreements. No Trade Secret of the Company has been disclosed or authorized to be disclosed to any third party other than pursuant to a written nondisclosure agreement that adequately protects the Company's proprietary interests in and to such Trade Secrets; (ix) the consummation of the transactions contemplated hereby will not result in the loss or impairment of the Company rights to own or use any of the Intellectual Property, nor will such consummation require the consent of any third party in respect of any Intellectual Property; and (x) all Proprietary Software set forth in Section 3.22(c) of the Disclosure Schedule, was either developed (a) by employees of the Company within the scope of their employment; or (b) by independent contractors who have assigned all of their rights to the Company pursuant to written agreement. (f) Except as set forth in Section 3.23(f) of the Disclosure Schedule, neither the Company: (i) has granted to any third party any exclusive rights of any kind (including, without limitation, exclusivity with regard to categories of advertisers on any World Wide Web site, territorial exclusivity or exclusivity with respect to particular versions, implementations or translations of any of the Intellectual Property), nor has the Company granted any third party any right to market any of the Intellectual Property under any private label or "OEM" arrangements; (ii) has any outstanding sales or advertising contract, commitment or proposal (including, without limitation, insertion orders, slotting agreements or other agreements under which the Company has allowed third parties to Page 29 advertise on or otherwise be included in a World Wide Web site) that the Company currently expects to result in any loss to the Company upon completion or performance thereof; (iii) has any oral contracts or arrangements for the sale of advertising or any other product or service; or (iv) employs any employee, contractor or consultant who is in violation of any term of any written employment contract, patent disclosure agreement or any other written contract or agreement relating to the relationship of any such employee, consultant or contractor with the Company or, to the Company's knowledge, any other party because of the nature of the business conducted by the Company. (g) All Software and systems used by the Company are Year 2000 Compliant. As used herein, "Year 2000 Compliant" and "Year 2000 Compliance" mean for all dates and times, including, without limitation dates and times after December 31, 1999 and in the multi-century scenario, when used on a stand-alone system or in combination with other software or systems: (i) the application system functions and receives and processes dates and times correctly without abnormal results; (ii) all date related calculations are correct (including, without limitation, age calculations, duration calculations and scheduling calculations); (iii) all manipulations and comparisons of date-related data produce correct results for all valid date values within the scope of the application; (iv) there is no century ambiguity; (v) all reports and displays are sorted correctly; and (vi) leap years are accounted for and correctly identified (including, without limitation, that 2000 is recognized as a leap year). The Company has obtained written representations or assurances from each entity that (x) provides data of any type that includes date information or which is otherwise derived from, dependent on or related to date information ("Date Data") to the Company, (y) processes in any way Date Data for the Company or (z) otherwise provides any material product or service to the Company that is dependent on Year 2000 Compliance, that all of such entity's Date Data and related software and systems that are used for, or on behalf of, the Company are Year 2000 Compliant. Section 3.23 Employment Matters. To the Company's knowledge, no key ------------------ employee or group of employees has any plans to terminate their employment with the Company as a result of the Transactions or otherwise. The Company has not experienced any strikes, collective labor grievances, other collective bargaining disputes or Claims of unfair labor practices in the last five years. To the Company's knowledge, Page 30 there is no organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Company. Section 3.24 Compliance with Laws. The Company is in compliance with, -------------------- and have not violated any applicable law, rule or regulation of any United States federal, state, local, or foreign government or agency thereof which materially affects the business, properties or assets of the Company, and no notice, charge, claim, action or assertion has been received by the Company or has been filed, commenced or, to the Company's knowledge, threatened against the Company alleging any such violation, except for any matter otherwise covered by this sentence which does not have, individually or in the aggregate, a material adverse effect on the Company. All licenses, permits and approvals required under such laws, rules and regulations are in full force and effect except where the failure to be in full force and effect would not have a material adverse effect on the Company. Section 3.25 Products Liability. As of the date of this Agreement, ------------------ there is no claim, action, suit or proceeding pending before any Governmental Entity in which a Product is alleged to have a Defect; nor, to the knowledge of the Company, as of the date of this Agreement, is any such claim, action, suit or proceeding threatened or is there any valid basis for any such claim, action, suit or inquiry, proceeding. Section 3.26 Contracts and Commitments. ------------------------- (a) The Company has no agreements, contracts, commitments or restrictions which are material to its business, operations or prospects or which require the making of any charitable contribution; (b) No purchase contracts or commitments of the Company continue for a period of more than 12 months or are in excess of the normal, ordinary and usual requirements of business or at any excessive price; (c) There are no outstanding sales contracts, commitments or proposals of the Company which continue for a period of more than 12 months or will result in any loss to the Company upon completion or performance thereof, after allowance for direct distribution expenses, nor are there any outstanding contracts, bids or sales or service proposals quoting prices which will not result in a normal profit; (d) The Company has no outstanding contracts with officers, employees, agents, consultants, advisors, salesmen, sales representatives, distributors Page 31 or dealers that are not cancellable by it on notice of not longer than 30 days and without liability, penalty or premium, or any agreement or arrangement providing for the payment of any bonus or commission based on sales or earnings; (e) The Company has no employment agreements, or any other agreements that contain any severance or termination pay liabilities or obligations; (f) The Company has no collective bargaining or union contracts or agreements; (g) The Company is not in default, nor is there any basis for any valid claim of default, under any contract made or obligation owed by it; (h) The Company has no employee to whom it is paying compensation at the annual rate of more than $75,000 for services rendered; (i) The Company is not restricted by agreement from carrying on its business anywhere in the world; (j) The Company is not under any liability or obligation with respect to the return of inventory or merchandise in the possession of wholesalers, distributors, retailers or other customers; (k) The Company has no debt obligations for borrowed money, including guarantees of or agreements to acquire any such debt obligation of others; (l) The Company has no outstanding loans to any person; and (m) The Company has no powers of attorney outstanding or any obligations or liabilities (whether absolute, accrued, contingent or otherwise), as guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise in respect of the obligation of any person, corporation, partnership, joint venture, association, organization or other entity. Section 3.27 Customers and Suppliers. There has not been any material ----------------------- adverse change in the business relationship of the Company with any customer who accounted for more than 5% of the Company's sales (on a consolidated basis) during the period February 1, 1998 to October 31, 1998 or any supplier from whom the Company Page 32 purchased more than 5% of the goods or services (on a consolidated basis) which it purchased during the same period. Section 3.28 Orders, Commitments and Returns. As of the date of this ------------------------------- Agreement, the aggregate of all accepted and unfulfilled orders for the sale of merchandise entered into by the Company does not exceed $200,000. As of the date of this Agreement, there are no claims against the Company to return in excess of an aggregate of $25,000 of merchandise by reason of alleged overshipments, defective merchandise or otherwise, or of merchandise in the hands of customers under an understanding that such merchandise would be returnable. Section 3.29 Insurance. The Disclosure Schedule contains an accurate --------- and complete description of all material policies of fire, liability, workmen's compensation and other forms of insurance owned or held by the Company. All such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the date of the Closing have been paid, and no notice of cancellation or termination has been received with respect to any such policy. Such policies are sufficient for compliance with all requirements of law and of all agreements to which the Company is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage for the assets and operations of the Company, will remain in full force and effect through the respective dates set forth in the Disclosure Schedule without the payment of additional premiums; and will not in any way be affected by, or terminate or lapse by reason of, the Transactions. The Disclosure Schedule identifies all risks which the Company, its Board of Directors or officers have designated as being self insured. The Company has not been refused any insurance with respect to its assets or operations, nor has its coverage been limited, by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance during the last two years. Section 3.30 Labor Difficulties. (a) The Company is in compliance ------------------ with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and are not engaged in any unfair labor practice; (b) there is no unfair labor practice complaint against the Company pending before the National Labor Relations Board; (c) there is no labor strike, dispute, slowdown or stoppage actually pending or threatened against or affecting the Company; (d) no representation question exists respecting the employees of the Company; (e) no grievance nor any arbitration proceeding arising out of or under collective bargaining agreements is pending and no claim therefor exists; (f) no collective bargaining agreement which is binding on the Company restricts it from relocating or closing any Page 33 of their operations; and (g) the Company has not experienced any work stoppage or other labor difficulty since January 31, 1997. Section 3.31 Consents. Except as set forth in Section 3.6 hereof, no -------- consent of any person is necessary to the consummation of the Transactions, including, without limitation, consents from parties to loans, contracts, leases or other agreements, and consents from governmental agencies, whether federal, state or local. Section 3.32 Information in Schedule 14D-9. The information supplied ----------------------------- by the Company expressly for inclusion in the Offer Documents and the Schedule 14D-9 will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. The Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published or sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to statements made therein based on information furnished by Parent or Purchaser for inclusion in the Schedule 14D-9. Section 3.33 Information in Proxy Statement. The Proxy Statement, if ------------------------------ any, will not, at the date mailed to Company shareholders and at the time of the Special Meeting to be held in connection with the Merger, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to statements made therein based on information furnished by Parent or Purchaser for inclusion in the Proxy Statement. The Proxy Statement will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. Section 3.34 Opinion of Financial Advisor. The Company has received ---------------------------- the opinion of Trautman Kramer & Company dated the date hereof, to the effect that, as of such date, the consideration to be received in the Offer and the Merger by the Company's shareholders is fair to the Company's shareholders from a financial point of view, and the copy of such opinion included in the Disclosure Schedule is manually signed, accurate and complete. The Company has been authorized by Trautman Kramer Page 34 & Company to permit the inclusion of such opinion in its entirety in the Offer Documents and the Schedule 14D-9 and the Proxy Statement, so long as such inclusion is in form and substance reasonably satisfactory to Trautman Kramer & Company and its counsel. Section 3.35 Absence of Questionable Payments. Neither the Company -------------------------------- nor any director, officer, agent, employee or other person acting on behalf of the Company, has used any corporate or other funds for unlawful contributions, payments, gifts, or entertainment, or made any unlawful expenditures relating to political activity to government officials or others or established or maintained any unlawful or unrecorded funds in violation of Section 30A of the Securities Exchange Act. Neither the Company nor any current director, officer, agent, employee or other person acting on behalf of the Company, has accepted or received any unlawful contributions, payments, gifts, or expenditures. The Company is in compliance with the provisions of Section 13(b) of the Securities Exchange Act. Section 3.36 Personnel. The Disclosure Schedule sets forth a true and --------- complete list of: the names and current salaries of all directors and elected and appointed officers of each of the Company, the number of shares of the Company Stock owned beneficially or of record, or both, by each such person and the family relationships, if any, among such persons; the wage rates for non- salaried and non-executive salaried employees of the Company by classification, and all labor union contracts; and all group insurance programs in effect for employees of each of the Company. The Company is not in default with respect to any of its obligations referred to in the preceding sentence. Section 3.37 Insider Interests. No officer or director of the Company ----------------- has any material interest in any property, real or personal, tangible or intangible, including without limitation, inventions, patents, trademarks or trade names, used in or pertaining to the business of the Company. Section 3.38 Brokers or Finders. No agent, broker, investment banker, ------------------ financial advisor or other firm or person is or will be entitled to any brokers' or finder's fee or any other commission or similar fee in connection with any of the Transactions except for Trautman Kramer & Company. True and correct copies of all agreements between the Company and Trautman Kramer & Company, including, without limitation, any fee arrangements are included in the Disclosure Schedule. Section 3.39 Full Disclosure. The Company has not failed to disclose --------------- to Parent any facts material to the business, results of operations, assets, liabilities, Page 35 financial condition or prospects of the Company. No representation or warranty by the Company in this Agreement and no statement contained in any document (including, without limitation, financial statements and the Disclosure Schedule), certificate, or other writing furnished or to be furnished by the Company to Parent or any of its representatives pursuant to the provisions hereof or in connection with the Transactions, contains or will contain any untrue statement of material fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was made, in order to make the statements herein or therein not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent represents and warrants to the Company that: Section 4.1 Organization. Parent is a corporation duly organized, ------------ validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite corporate or other power and authority and all necessary governmental approvals to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power, authority, and governmental approvals would not have, individually or in the aggregate, a material adverse effect on Parent and its Subsidiaries, taken as a whole. Section 4.2 Authorization; Validity of Agreement; Necessary Action. ------------------------------------------------------ Parent has full corporate power and authority to execute and deliver this Agreement and to consummate the Transactions. The execution, delivery and performance by Parent of this Agreement and the Stock Option Agreement and the consummation of the Merger and the Transactions have been duly authorized by the Board of Directors of Parent, and no other corporate action on the part of Parent is necessary to authorize the execution and delivery by Parent of this Agreement or the Stock Option Agreement, or the consummation of the Transactions. Each of this Agreement and the Stock Option Agreement has been duly executed and delivered by Parent, and assuming due and valid authorization, execution and delivery hereof by the Company, is a valid and binding obligation of Parent, enforceable against Parent in accordance with its terms. Page 36 Section 4.3 Consents and Approvals; No Violations. Except for the ------------------------------------- filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Exchange Act, the HSR Act, state securities or blue sky laws, the New York Stock Exchange, and the CGCL, none of the execution, delivery or performance of this Agreement by Parent, the consummation by Parent of the Transactions or compliance by Parent with any of the provisions hereof will (i) conflict with or result in any breach of any provision of the respective articles of incorporation or by-laws or other similar organizational documents of Parent, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity, (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which Parent, or any of its Subsidiaries is a party or by which any of them or any of their respective properties or assets may be bound, or (iv) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Parent, any of its Subsidiaries or any of their properties or assets, excluding from the foregoing clauses (ii), (iii) and (iv) such violations, breaches or defaults which would not, individually or in the aggregate, have a material adverse effect on Parent and its Subsidiaries, taken as a whole. Section 4.4 Information in Offer Documents. The Offer Documents will ------------------------------ comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published or sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, except that no representation is made by Parent with respect to information furnished by the Company expressly for inclusion in the Offer Documents. Section 4.5 Information in Proxy Statement. None of the information ------------------------------ furnished by Parent expressly for inclusion in the Proxy Statement will, at the date mailed to shareholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not misleading. Page 37 Section 4.6 Share Ownership. None of Parent, or any of its --------------- respective Affiliates or Associates beneficially owns any Shares. Section 4.7 Purchaser's Operations. Purchaser shall be formed solely ---------------------- for the purpose of engaging in the Transactions and shall not engage in any business activities or conducted any operations other than in connection with the Transactions. Section 4.8 Brokers or Finders. Neither Parent nor any of its ------------------ Subsidiaries or its Affiliates has entered into any agreement or arrangement entitling any agent, broker, investment banker, financial advisor or other firm or person to any brokers' or finders' fee or any other commission or similar fee in connection with any of the Transactions, except Greenhill & Co., LLC whose fees and expenses will be paid by Parent in accordance with Parent's agreement with such firm. ARTICLE V COVENANTS Section 5.1 Interim Operations of the Company. The Company covenants --------------------------------- and agrees that prior to the Effective Time, except (i) as expressly contemplated by this Agreement, (ii) as set forth in Section 5.1 of the Disclosure Schedule, or (iii) as agreed in writing by Parent, after the date hereof: (a) the business of the Company shall be conducted only in the usual, regular and ordinary course and substantially in the same manner as heretofore conducted, and each of the Company shall use its best efforts to preserve its business organization intact, keep available the services of its current officers and employees and maintain its existing relations with franchisees, customers, suppliers, creditors, business partners and others having business dealings with it, to the end that the goodwill and ongoing business of each of them shall be unimpaired at the Effective Time; (b) the Company shall not: (i) amend its articles of incorporation or by-laws or similar organizational documents, (ii) issue, sell, transfer, pledge, dispose of or encumber any shares of any class or series of its capital stock or Voting Debt, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of any class or series of its capital stock or any Voting Debt, other than Shares reserved for issuance on the date hereof pursuant to the exercise of Company Options outstanding on the date hereof, (iii) Page 38 declare, set aside or pay any dividend or other distribution payable in cash, stock or property with respect to any shares of any class or series of its capital stock; (iv) split, combine or reclassify any shares of any class or series of its stock; or (v) redeem, purchase or otherwise acquire directly or indirectly any shares of any class or series of its capital stock, or any instrument or security which consists of or includes a right to acquire such shares; (c) the Company shall not: (i) incur or modify any indebtedness or other liability, other than in the ordinary and usual course of business and consistent with past practice; or (ii) modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; (d) the Company shall not: (i) incur or assume any long-term debt, or except in the ordinary course of business, incur or assume any short- term indebtedness in amounts not consistent with past practice; (ii) modify the terms of any indebtedness or other liability; (iii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except as described in the Disclosure Schedule as being in the ordinary course of business and consistent with past practice; (iv) make any loans, advances or capital contributions to, or investments in, any other; or (v) enter into any material commitment or transaction (including, but not limited to, any capital expenditure or purchase, sale or lease of assets or real estate); (e) the Company shall not transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any assets other than in the ordinary and usual course of business and consistent with past practice; or (f) except as otherwise specifically provided in this Agreement or in the Schedule 14D-9, make any change in the compensation payable or to become payable to any of its officers, directors, employees, agents or consultants (other than normal recurring increases in wages to employees who are not officers or directors or Affiliates in the ordinary course of business consistent with past practice) or to Persons providing management services, or enter into or amend any employment, severance, consulting, termination or other agreement or employee benefit plan or make any loans to any of its officers, directors, employees, Affiliates, agents or consultants or make any change in its existing borrowing or lending arrangements for or on behalf of any of such Persons pursuant to an employee benefit plan or otherwise; Page 39 (g) except as otherwise specifically contemplated by this Agreement or by the Schedule 14D-9 or as specifically set forth in the Disclosure Schedule, pay or make any accrual or arrangement for payment of any pension, retirement allowance or other employee benefit pursuant to any existing plan, agreement or arrangement to any officer, director, employee or Affiliate or pay or agree to pay or make any accrual or arrangement for payment to any officers, directors, employees or Affiliates of the Company of any amount relating to unused vacation days, except payments and accruals made in the ordinary course of business consistent with past practice; adopt or pay, grant, issue, accelerate or accrue salary or other payments or benefits pursuant to any pension, profit-sharing, bonus, extra compensation, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or any employment or consulting agreement with or for the benefit of any director, officer, employee, agent or consultant, whether past or present; or amend in any material respect any such existing plan, agreement or arrangement in a manner inconsistent with the foregoing; (h) the Company shall not permit any insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent; (i) the Company shall not enter into any contract or transaction relating to the purchase of assets other than in the ordinary course of business consistent with prior practices; (j) the Company shall not pay, repurchase, discharge or satisfy any of its claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company; (k) the Company will not adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company (other than the Merger); (l) the Company will not (i) change any of the accounting methods used by it unless required by GAAP or (ii) make any material election relating to Taxes, change any material election relating to Taxes already made, adopt any Page 40 material accounting method relating to Taxes, change any material accounting method relating to Taxes unless required by GAAP, enter into any closing agreement relating to Taxes, settle any claim or assessment relating to Taxes or consent to any claim or assessment relating to Taxes or any waiver of the statute of limitations for any such claim or assessment; (m) the Company will not take, or agree to commit to take, any action that would or is reasonably likely to result in any of the conditions to the Offer set forth in Annex A or any of the conditions to the Merger set forth in Article VI not being satisfied, or would make any representation or warranty of the Company contained herein inaccurate in any respect at, or as of any time prior to, the Effective Time, or that would materially impair the ability of the Company, Parent, Purchaser or the holders of Shares to consummate the Offer or the Merger in accordance with the terms hereof or materially delay such consummation; and (n) the Company will not enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing. Section 5.2 Access; Confidentiality. The Company shall (and shall ----------------------- cause each of its Subsidiaries to) afford to the officers, employees, accountants, counsel, financing sources and other representatives of Parent, full access during the period prior to the Appointment Date, to all its properties, books, contracts, commitments and records and, during such period, the Company shall (and shall cause each of its Subsidiaries to) furnish promptly to the Parent (a) a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of federal securities laws and (b) all other information concerning its business, properties and personnel as Parent may reasonably request. Access shall include the right to conduct such environmental studies as Parent, in its discretion, shall deem appropriate. After the Appointment Date, the Company shall provide Parent and such persons as Parent shall designate with all such information, at any time as Parent shall request. Until the Appointment Date, unless otherwise required by law or in order to comply with disclosure requirements applicable to the Offer Documents or the Proxy Statement, Parent will hold any such information which is nonpublic in confidence in accordance with the provisions of the Confidentiality Agreement. Section 5.3 Reasonable Best Efforts. ----------------------- Page 41 (a) Prior to the Closing, upon the terms and subject to the conditions of this Agreement, Parent, Purchaser and the Company agree to use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable (subject to any applicable laws) to consummate and make effective the Merger and the other Transactions as promptly as practicable including, but not limited to (i) the preparation and filing of all forms, registrations and notices required to be filed to consummate the Merger and the other Transactions and the taking of such actions as are necessary to obtain any requisite approvals, consents, orders, exemptions or waivers by any third party or Governmental Entity, and (ii) the satisfaction of the other parties' conditions to Closing. In addition, no party hereto shall take any action after the date hereof that would reasonably be expected to materially delay the obtaining of, or result in not obtaining, any permission, approval or consent from any Governmental Entity necessary to be obtained prior to Closing. Notwithstanding the foregoing, or any other covenant herein contained, in connection with the receipt of any necessary approvals under the HSR Act, the Company shall not be entitled to divest or hold separate or otherwise take or commit to take any action that limits Parent's or Purchaser's freedom of action with respect of, or their ability to retain, the Company or any material portions thereof or any of the businesses, product lines, properties or assets of the Company, without Parent's prior written consent. (b) Prior to the Closing, each party shall promptly consult with the other parties hereto with respect to, provide any necessary information with respect to, and provide the other parties (or their respective counsel) with copies of, all filings made by such party with any Governmental Entity or any other information supplied by such party to a Governmental Entity in connection with this Agreement, the Merger and the other Transactions. Each party hereto shall promptly inform the other of any communication from any Governmental Entity regarding any of the Transactions. If any party hereto or Affiliate thereof receives a request for additional information or documentary material from any such Governmental Entity with respect to any of the Transactions, then such party shall endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and after consultation with the other parties, an appropriate response in compliance with such request. To the extent that transfers, amendments or modifications of permits (including environmental permits) are required as a result of the execution of this Agreement or consummation of any of the Transactions, the Company shall use its best efforts to effect such transfers, amendments or modifications. Page 42 (c) The Company and Parent shall file as soon as practicable notifications under the HSR Act and respond as promptly as practicable to any inquiries received from the Federal Trade Commission and the Antitrust Division of the Department of Justice for additional information or documentation and respond as promptly as practicable to all inquiries and requests received from any State Attorney General or other Governmental Entity in connection with antitrust matters. Concurrently with the filing of notifications under the HSR Act or as soon thereafter as practicable, the Company and Parent shall each request early termination of the HSR Act waiting period. (d) Notwithstanding the foregoing, nothing in this Agreement shall be deemed to require Parent or Purchaser to commence any litigation against any entity in order to facilitate the consummation of any of the Transactions or to defend against any litigation brought by any third party or Governmental Entity seeking to prevent the consummation of any of the Transactions. Section 5.4 [Intentionally Omitted.] Section 5.5 No Solicitation of Competing Transaction. (a) Neither ---------------------------------------- the Company nor any Affiliate of the Company shall (and the Company shall cause the officers, directors, employees, representatives and agents of the Company, and each Affiliate of the Company, including, but not limited to, investment bankers, attorneys and accountants, not to), directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information to, any Person or group (other than Parent, any of its Affiliates or representatives) concerning any Acquisition Proposal, except that nothing contained in this Section 5.5 or any other provision hereof shall prohibit the Company or the Company's Board from (i) taking and disclosing to the Company's shareholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure to the Company's shareholders as, in the good faith judgment of the Board, after receiving advice from outside counsel, is required under applicable law, provided that the Company may not, except as permitted by Section 5.5(b), withdraw or modify, or propose to withdraw or modify, its position with respect to the Offer or the Merger or approve or recommend, or propose to approve or recommend any Acquisition Proposal, or enter into any agreement with respect to any Acquisition Proposal. Upon execution of this Agreement, the Company will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Notwithstanding the Page 43 foregoing, prior to the time of acceptance of Shares for payment pursuant to the Offer, the Company may furnish information concerning its business, properties or assets to any corporation, partnership, person or other entity or group pursuant to appropriate confidentiality agreements, and may negotiate and participate in discussions and negotiations with such entity or group concerning an Acquisition Proposal if: (x) such entity or group has on an unsolicited basis submitted a bona fide written proposal to the Company Board of Directors relating to any such transaction which the Board determines in good faith, represents a superior transaction to the Offer and the Merger and which is not subject to the receipt of any necessary financing; and (y) in the opinion of the Company Board of Directors such action is required to discharge the Board's fiduciary duties to the Company's shareholders under applicable law, determined only after receipt of: (i) a written opinion from the Company's investment banking firm that the Acquisition Proposal is superior, from a financial point of view, to the Offer and the Merger, and (ii) a written opinion from independent legal counsel to the Company that the failure to provide such information or access or to engage in such discussions or negotiations would cause the Board of Directors to violate its fiduciary duties to the Company's shareholders under applicable law. The Company will immediately notify Parent of the existence of any proposal, discussion, negotiation or inquiry received by the Company, and the Company will immediately communicate to Parent the terms of any proposal, discussion, negotiation or inquiry which it may receive (and will immediately provide to Parent copies of any written materials received by the Company in connection with such proposal, discussion, negotiation or inquiry) and the identity of the party making such proposal or inquiry or engaging in such discussion or negotiation. The Company will promptly provide to Parent any non-public information concerning the Company provided to any other party which was not previously provided to Parent. (b) Except as set forth below in this subsection (b), neither the Company Board of Directors nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or recommendation by such Board of Directors or any such committee of Page 44 the Offer, this Agreement or the Merger, (ii) approve or recommend or propose to approve or recommend, any Acquisition Proposal or (iii) enter into any agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the time of acceptance for payment of Shares pursuant to the Offer, the Company Board of Directors may withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger, approve or recommend a Superior Proposal, or enter into an agreement with respect to a Superior Proposal, in each case at any time after the fifth business day following Parent's receipt of written notice from the Company advising Parent that the Board of Directors has received a Superior Proposal which it intends to accept, specifying the material terms and conditions of such Superior Proposal, identifying the person making such Superior Proposal, but only if the Company shall have caused its financial and legal advisors to negotiate with Parent to make such adjustments in the terms and conditions of this Agreement as would enable the Company to proceed with the transactions contemplated herein on such adjusted terms. Section 5.6 Publicity. The initial press release with respect to the --------- execution of this Agreement shall be a joint press release acceptable to Parent and the Company. Thereafter, until the Appointment Date, or the date the Transactions are terminated or abandoned pursuant to Article VII, neither the Company, Parent nor any of their respective Affiliates shall issue or cause the publication of any press release or other announcement with respect to the Merger, this Agreement or the other Transactions without prior consultation with the other party, except as may be required by law or by any listing agreement with a national securities exchange or trading market. Section 5.7 Notification of Certain Matters. The Company shall give ------------------------------- prompt notice to Parent, of (i) the occurrence or non-occurrence of any event the occurrence or non-occurrence of which would cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Effective Time, and (ii) any material failure of the Company, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 5.8 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. Section 5.8 Directors' and Officers' Insurance and Indemnification. ------------------------------------------------------ (a) For six years after the Effective Time, the Surviving Corporation (or any successor to the Surviving Corporation) shall indemnify, defend and hold harmless each Indemnified Party against all losses, claims, damages, liabilities, costs, fees and expenses, including reasonable fees and disbursements of counsel and judgments, fines, Page 45 losses, claims, liabilities and amounts paid in settlement (provided that any such settlement is effected with the written consent of the Parent or the Surviving Corporation) arising out of actions or omissions occurring at or prior to the Effective Time to the full extent required under applicable California law, the terms of the Company's certificate of incorporation or the by-laws, as in effect at the date hereof; provided that, in the event any claim or claims are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until disposition of any and all such claims. (b) Parent or the Surviving Corporation shall maintain the Company's existing officers' and directors' liability insurance for a period of not less than three years after the Effective Time; provided, however, that the Parent -------- ------- may substitute therefor policies of substantially equivalent coverage and amounts containing terms no less favorable to such former directors or officers; provided, further, that in no event shall the Company be required to pay aggregate premiums for insurance under this Section 5.9(b) in excess of 150% of the aggregate premiums paid by the Company in 1998 on an annualized basis for such purpose; and provided, further, that if the Parent or the Surviving -------- ------- Corporation is unable to obtain the amount of insurance required by this Section 5.9(b) for such aggregate premium, Parent or the Surviving Corporation shall obtain as much insurance as can be obtained for an annual premium not in excess of 150% of the aggregate premiums paid by the Company in 1998 on an annualized basis for such purpose. Section 5.9 State Takeover Laws. The Company shall, upon the request ------------------- of the Purchaser, take all commercially reasonable steps to assist in any challenge by the Purchaser to the validity or applicability to the transactions contemplated by this Agreement and the Option Agreement, including the Offer and the Merger, and the Shareholder Agreements, of any state takeover law. Section 5.10 Purchaser Compliance. Parent shall cause Purchaser to -------------------- comply with all of its obligations under or related to this Agreement. Section 5.11 Cooperation. If Parent and Purchaser shall not have ----------- consummated the Offer within 26 business days following the date hereof, Parent shall cooperate with the Company to obtain financing for the Company's working capital requirements. Page 46 ARTICLE VI CONDITIONS Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. ----------------------------------------------------------- The respective obligation of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any and all of which may be waived in whole or in part by the Company, Parent or Purchaser, as the case may be, to the extent permitted by applicable law: (a) Shareholder Approval. The Merger and this Agreement shall have -------------------- been approved and adopted by the requisite vote of the holders of the Shares, to the extent required by the CGCL and the articles of incorporation of the Company; (b) Statutes; Court Orders. No statute, rule or regulation shall have ---------------------- been enacted or promulgated by any governmental authority which prohibits the consummation of the Merger; and there shall be no order or injunction of a court of competent jurisdiction in effect precluding consummation of the Merger; (c) Purchase of Shares in Offer. Parent, Purchaser or their --------------------------- Affiliates shall have purchased Shares pursuant to the Offer, except that this condition shall not apply if Parent, Purchaser or their Affiliates shall have failed to purchase Shares pursuant to the Offer in breach of their obligations under this Agreement; and (d) HSR Approval. The applicable waiting period under the HSR Act ------------ shall have expired or been terminated. Section 6.2 Conditions to Parent's and Purchaser's Obligations to ----------------------------------------------------- Effect the Merger. The obligations of Parent and Purchaser to consummate the - - ----------------- Merger shall be subject to the satisfaction on or prior to the Closing Date of each of the following conditions, any and all of which may be waived in whole or in part by the Parent and Purchaser, to the extent permitted by applicable law. (a) Compliance with Obligations. All actions contemplated by --------------------------- Section 2.4 shall have been taken; (b) Representations and Warranties. The representations and ------------------------------ warranties of the Company set forth in Article III shall be true in all material respects on the date of this Agreement and as of the Effective Time; and Page 47 (c) Covenants. The Company shall have complied in all material --------- respects with its obligations under the terms of this Agreement. ARTICLE VII TERMINATION Section 7.1 Termination. The Transactions may be terminated or ----------- abandoned at any time prior to the Effective Time, whether before or after shareholder approval thereof: (a) Subject to Section 1.3(c), by the mutual written consent of Parent and the Company; (b) By either of the Company or Parent: (i) if (x) the Offer shall have expired without any Shares being purchased pursuant thereto, or (y) Purchaser shall not have accepted for payment any Shares pursuant to the Offer by May 15, 1999; provided, however, that the -------- ------- right to terminate this Agreement under this Section 7.1(b)(i) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of Purchaser to purchase the Shares pursuant to the Offer on or prior to such date; or (ii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their reasonable efforts to lift), which permanently restrains, enjoins or otherwise prohibits the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree, ruling or other action shall have become final and non-appealable. (c) By the Company: (i) if Parent, Purchaser or any of their Affiliates shall have failed to commence the Offer on or prior to five business days following the date of the initial public announcement of the Offer; provided, that the Company may not terminate this Agreement pursuant to this Section 7.1(c)(i) if the Company is at such time in material breach of its obligations under this Agreement; Page 48 (ii) in connection with entering into a definitive agreement as permitted by Section 5.5(b), provided the Company has complied with all provisions thereof, including the notice provisions therein, and that the Company makes simultaneous payment to Parent of funds as required by Section 9.1(b); (iii) if Parent or Purchaser shall have breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in this Agreement, which breach cannot be or has not been cured within 30 days after the giving of written notice by the Company to Parent or Purchaser, as applicable. (d) By Parent: (i) if, due to an occurrence, not involving a breach by Parent or Purchaser of their obligations hereunder, which makes it impossible to satisfy any of the conditions set forth in Annex A hereto, Parent, Purchaser, or any of their Affiliates shall have failed to commence the Offer on or prior to the fifth business day following the date of the initial public announcement of the Offer; (ii) if, prior to the purchase of Shares by Purchaser pursuant to the Offer, the Company Board of Directors shall have (A) withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, this Agreement or the Merger, (B) recommended an Acquisition Proposal, (C) executed an agreement in principle or definitive agreement relating to an Acquisition Proposal or similar business combination with a person or entity other than Parent, Purchaser or their Affiliates, or (D) exercised its rights pursuant to Section 5.5 with respect to an Acquisition Proposal, and, directly or through its representatives, continued discussions with any third party concerning an Acquisition Proposal for more than ten business days after the date of receipt of such Acquisition Proposal; (iii) if prior to the purchase of Shares pursuant to the Offer, the Company shall have breached any representation, warranty, covenant or other agreement contained in this Agreement which (x) would give rise to the failure of a condition set forth in paragraph (f) or (g) of Annex A hereto, and (y) cannot be or has not been cured within 30 days after the giving of written notice to the Company; or (iv) if the Disclosure Schedule as delivered to Parent pursuant to Article III hereof shall reveal matters or information that are material and Page 49 adverse to the Company and the Company shall not have disclosed such matters or information to Parent on or prior to the date hereof. Section 7.2 Effect of Termination. In the event of the termination or --------------------- abandonment of the Transactions by any party hereto pursuant to the terms of this Agreement, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination or abandonment of the Transactions is made, and there shall be no liability on the part of the Parent or the Company except (A) for fraud or for breach of this Agreement prior to such termination or abandonment of the Transactions and (B) as set forth in Sections 5.2 and 9.1. ARTICLE VIII DEFINITIONS AND INTERPRETATION Section 8.1 Definitions. For all purposes of this Agreement, except ----------- as otherwise expressly provided or unless the context clearly requires otherwise: "Acquisition Proposal" shall mean any proposal or offer to acquire all or a substantial part of the business or properties of the Company or any capital stock of the Company, whether by merger, tender offer, exchange offer, sale of assets or similar transactions involving the Company, division or operating or principal business unit of the Company. "Affiliate" shall have the meaning set forth in Rule 12b-2 of the Exchange Act. "Agreement" or "this Agreement" shall mean this Agreement and Plan of Merger, together with the Exhibits and Appendices hereto and the Disclosure Schedule. "Appointment Date" shall mean the time the persons designated by Purchaser have been elected to, and shall constitute a majority of, the Company Board of Directors pursuant to Section 1.3. "Associate" shall have the meaning set forth in Rule 12b-2 of the Exchange Act. Page 50 "Balance Sheet" shall mean the most recent audited balance sheet of the Company and its consolidated subsidiaries included in the Financial Statements. "Balance Sheet Date" shall mean the date of the Balance Sheet. "Board Fraction" shall mean a fraction, the numerator of which shall be the number of Shares which Parent beneficially own at the time of calculation of the Board Fraction, and the denominator of which shall be the total number of Shares then outstanding. "California Merger Agreement" shall mean the Agreement of Merger by and among the Company, Purchaser and Parent, together with the related officers' certificates required by section 1103 of the CGCL. "Cash Amount" shall mean an amount of cash calculated in accordance with Section 2.4(a). "Certificate" shall mean a certificate which immediately prior to the Effective Time represented Shares which were converted pursuant to Section 2.1 into the right to receive the Merger Consideration. "CGCL" shall mean the California General Corporation Law. "Certificate of Merger" shall mean the Certificate of Merger referred to in Section 1.5 to be filed with the Secretary of State of the State of Delaware. "Closing" shall mean the closing referred to in Section 1.6. "Closing Date" shall mean the date on which the Closing occurs. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company" shall have the meaning set forth in the preamble hereto. "Company Agreement" shall mean any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company is a party or by which it or any of its properties or assets may be bound. Page 51 "Company Board of Directors" shall mean the board of directors of the Company. "Company Option" shall mean an option to purchase Shares which has been granted by the Company under the Company's Stock Option Plan of 1997, as amended and each option identified in Schedule 2.4, and in each case, which is outstanding at the Effective Time. "Company SEC Documents" shall mean each form, report, schedule, statement and other documents required to be filed by the Company since November 25, 1997 under the Exchange Act or the Securities Act, including any amendment to such document, whether or not such amendment is required to be so filed. "Company's knowledge" or "best knowledge of the Company" shall mean the knowledge that the directors and officers of the Company and the employees of the Company having responsibility for the particular subject matter at issue have or would possess after reasonable investigation and inquiry. "Confidentiality Agreement" shall mean a letter agreement dated on or about December 28, 1998 between the Company and Parent. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Defect" shall mean a defect or impurity of any kind, whether in design, manufacture, processing, or otherwise, including, without limitation, any dangerous propensity associated with any reasonably foreseeable use of a Product, or the failure to warn of the existence of any defect, impurity, or dangerous propensity. "DGCL" shall mean the Delaware General Corporation Law. "Disclosure Schedule" shall mean the disclosure schedule prepared and signed by the Company and delivered to Purchaser no later than the time and date set forth in Article III. "Dissenting Shares" shall mean any Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing, and who has demanded appraisal for such shares in accordance with Section 1300 of the CGCL, if such Section 1300 provides for appraisal rights for such Shares in the Merger. Page 52 "Effective Time" shall mean the date and time at which the California Merger Agreement and the Certificate of Merger referred to in Section 1.5 are duly filed with the Secretary of State of the State of California and the Secretary of State of the State of Delaware, respectively, or such other date and time as are specified in the California Merger Agreement and the Certificate of Merger as the date and time the Merger becomes effective. "Environmental Claim" shall mean any claim, action, investigation or notice by any person or entity alleging potential liability for investigatory, cleanup or governmental response costs, or natural resources or property damages, or personal injuries, attorney's fees or penalties relating to (i) the presence, or release into the environment, of any Materials of Environmental Concern at any location owned or operated by the Company, now or in the past, or (ii) any violation, or alleged violation, of any Environmental Law. "Environmental Law" shall mean each federal, state, local and foreign law and regulation relating to pollution, protection or preservation of human health or the environment including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata, and natural resources, and including, without limitation, each law and regulation relating to emissions, discharges, releases or threatened releases of Materials of Environmental Concern, or otherwise relating to the generation, storage, containment (whether above ground or underground), disposal, transport or handling of Materials of Environmental Concern, or the preservation of the environment or mitigation of adverse effects thereon and each law and regulation with regard to record keeping, notification, disclosure and reporting requirements respecting Materials of Environmental Concern. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" shall mean any trade or business, whether or not incorporated, that together with the Company would be deemed a "single employer" within the meaning of Section 4001(b) of ERISA. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exchange Ratio" shall mean the quotient of (x) the Offer Price and (y) the average per share closing price of the Parent Common Stock as reported on the Page 53 New York Stock Exchange on each of the ten trading days immediately preceding the Effective Time. "Financial Statements" shall mean the financial statements of the Company included in the Company SEC Documents. "GAAP" shall mean United States generally accepted accounting principles. "Governmental Entity" shall mean a court, arbitral tribunal, administrative agency or commission or other governmental or other regulatory authority or agency. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Indebtedness" shall mean (i) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (ii) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (iii) all obligations under financing leases, (iv) all obligations in respect of acceptances issued or created, (v) all liabilities secured by any lien on any property and (vi) all guarantee obligations. "Indemnified Party" shall mean each present and former officer and director of the Company , and each person who become any of the foregoing prior to the Effective Time. "Independent Directors" shall mean directors of the Company who are directors on the date hereof. "Major Shareholder" shall mean each of the shareholders identified in Annex I attached hereto. "Materials of Environmental Concern" shall mean pollutants, contaminants, toxic or hazardous substances, materials and wastes, petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, radon and lead or lead-based paints and materials. Page 54 "Merger" shall mean the merger of Purchaser into the Company referred to in Section 1.4. "Merger Consideration" shall mean an amount of cash equal to the Offer Price, which amount shall not include interest, regardless of when paid. "Minimum Condition" shall mean the condition that, pursuant to the Offer, there shall have been validly tendered and not withdrawn prior to the expiration of the Offer, not less than that number of Shares which, together with the Shares owned by Parent and Purchaser on the date hereof, constitutes at least 90% of the Shares issued and outstanding. "Offer" shall mean the cash tender offer to be made by Purchaser pursuant to Section 1.1 to acquire all of the issued and outstanding shares of common stock, no par value, of the Company at the Offer Price. "Offer Documents" shall mean the Offer to Purchase and a form of letter of transmittal and summary advertisement filed as exhibits to the Schedule 14D-1, together with any amendments and supplements thereto. "Offer Price" shall mean $19.00 per Share net to the seller in cash, or such increased amount, if any, as Purchaser may offer to pay as contemplated by Section 1.1(a). "Offer to Purchase" shall mean the offer to purchase included in the Schedule 14D-1 filed with the SEC pursuant to Section 1.1(b). "Parent" shall have the meaning set forth in the preamble hereto. "Parent Common Stock" shall mean shares of common stock of Parent. "Paying Agent" shall mean the bank or trust company designated by Parent to act as agent for the holders of the Shares pursuant to Section 2.2(a). "PBGC" shall mean the Pension Benefit Guaranty Corporation. "Person" shall mean a natural person, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Entity or other entity or organization. Page 55 "Plan" shall mean a plan, program, agreement, arrangement or program required to be included in the Disclosure Schedule pursuant to Section 3.15(a). "Product" shall mean any product designed, manufactured, shipped, sold, marketed, distributed and/or otherwise introduced into the stream of commerce by or on behalf of the Company, including, without limitation, any product sold in the United States by the Company as the distributor, agent, or pursuant to any other contractual relationship with a non-U.S. manufacturer. "Proxy Statement" shall mean the proxy statement to be filed by the Company with the SEC pursuant to Section 1.9(a)(ii), together with all amendments and supplements thereto and including the exhibits thereto. "Purchaser" shall mean an indirect, wholly-owned subsidiary of Parent to be formed as soon as practicable after the date hereof. "Purchaser Common Stock" shall mean common stock, par value $0.01 per share, of Purchaser. "Revised Minimum Number" shall mean that number of Shares that when added to the Shares then owned by the Purchaser would equal 49.9999% of the Shares then outstanding. "Schedule 14D-l" shall mean the Schedule 14D-1 filed by Purchaser with the SEC pursuant to Section 1.1(b), together with all amendments and supplements thereto and including the exhibits thereto. "Schedule 14D-9" shall mean the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company with the SEC pursuant to Section 1.2(a), together with all amendments and supplements thereto and including the exhibits thereto. "SEC" shall mean the United States Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended. "Shares" shall mean shares of common stock, no par value, issued by the Company. Page 56 "Shareholder Agreement" shall mean each agreement, dated as of the date hereof, among the Major Shareholders and Parent, pursuant to which each Major Shareholder has agreed, among other things, to tender the Shares held by such Major Shareholder in the Offer and to grant Parent a proxy with respect to the voting of such Shares upon the terms and subject to the conditions set forth therein. "Special Meeting" shall mean the special meeting of shareholders of the Company referred to in Section 1.9(a)(i). "Stock Option Agreement" shall mean a Stock Option Agreement, dated as of the date hereof, among the Company and Parent pursuant to which the Company has granted to Purchaser an option to purchase Shares. "Subsidiary" shall mean, with respect to any party, any corporation or other organization, whether incorporated or unincorporated, of which (a) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its Subsidiaries, or by such party and one or more of its Subsidiaries or (b) such party or any other Subsidiary of such party is a general partner (excluding any such partnership where such party or any Subsidiary of such party does not have a majority of the voting interest in such partnership). "Superior Proposal" shall mean an Acquisition Proposal which satisfies both subsection (x) and subsection (y) of Section 5.5(a). "Surviving Corporation" shall mean the successor or surviving corporation in the Merger. "Tax" or "Taxes" shall mean all taxes, charges, fees, duties, levies, penalties or other assessments imposed by any federal, state, local or foreign governmental authority, including, but not limited to, income, gross receipts, excise, property, sales, gain, use, license, custom duty, unemployment, capital stock, transfer, franchise, payroll, withholding, social security, minimum estimated, and other taxes, and shall include interest, penalties or additions attributable thereto; and "Tax Return" shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof. Page 57 "Termination Fee" shall mean the sum of $9,000,000. "Title IV Plan" shall mean a Plan that is subject to Section 302 or Title IV of ERISA or Section 412 of the Code. "Transactions" shall mean the transactions provided for or contemplated by this Agreement, the Stock Option Agreement and the Shareholder Agreement, including but not limited to the Offer and the Merger. "Voting Debt" shall mean indebtedness having general voting rights and debt convertible into securities having such rights. Section 8.2 Interpretation. -------------- (a) When a reference is made in this Agreement to a section or article, such reference shall be to a section or article of this Agreement unless otherwise clearly indicated to the contrary. (b) Whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "without limitation." (c) The words "hereof", "herein" and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement unless otherwise specified. (d) The plural of any defined term shall have a meaning correlative to such defined term, and words denoting any gender shall include all genders. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. (e) A reference to any party to this Agreement or any other agreement or document shall include such party's successors and permitted assigns. (f) A reference to any legislation or to any provision of any legislation shall include any modification or re-enactment thereof, any legislative Page 58 provision substituted therefor and all regulations and statutory instruments issued thereunder or pursuant thereto. (g) As used in this Agreement, any reference to any event, change or effect being material or having a material adverse effect on or with respect to any entity (or group of entities taken as a whole) means such event, change or effect is materially adverse to (i) the consolidated financial condition, businesses, operations, properties (including intangible properties), results of operations, assets or prospects of such entity as a whole (or, if used with respect thereto, of such group of entities taken as a whole), or (ii) the ability of such entity (or group) to consummate the Offer or the Merger, or to perform its obligations under this Agreement or the Stock Option Agreement. (h) The parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement. ARTICLE IX MISCELLANEOUS Section 9.1 Fees and Expenses. (a) Except as specifically provided to ----------------- the contrary in this Agreement, including Section 9.1(b), all costs and expenses incurred in connection with this Agreement and the consummation of the Transactions shall be paid by the party incurring such expenses; provided; that -------- if any legal action is instituted to enforce or interpret the terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. (b) If: (i) the Company shall enter into an agreement which accepts or implements a Superior Proposal; Page 59 (ii) either the Company or Parent terminates or abandons the Transactions pursuant to Section 7.1(b)(i) and prior thereto there shall have been publicly announced another Acquisition Proposal; (iii) the Company shall terminate or abandon the Transactions pursuant to Section 7.1(c)(ii); or (iv) Parent shall terminate or abandon the Transactions pursuant to Section 7.1(d)(ii) or (iii); then the Company shall pay to Parent an amount equal to the Termination Fee plus an amount equal to Parent's actual and reasonably documented out-of-pocket fees and expenses incurred by Parent and Purchaser in connection with the Offer, the Merger, this Agreement and the consummation of the Transactions. The Termination Fee and Parent's good faith estimate of its expenses shall be paid in same day funds concurrently with the execution of an agreement referred to in subsection (i) above or any termination or abandonment referred to in subsections (ii), (iii) or (iv) above, whichever shall first occur, together with delivery of a written acknowledgment by the Company of its obligation to reimburse Parent for its actual expenses in excess of such estimated expense payment. Section 9.2 Amendment and Modification. Subject to applicable law and -------------------------- Section 1.3, this Agreement may be amended, modified and supplemented in any and all respects, whether before or after any vote of the shareholders of the Company contemplated hereby, by written agreement of the parties hereto, by action taken by their respective Boards of Directors (which in the case of the Company shall include approvals as contemplated in Section 1.3(c)), at any time prior to the Closing Date with respect to any of the terms contained herein; provided, however, that after the approval of this Agreement by the shareholders - - -------- ------- of the Company, no such amendment, modification or supplement shall reduce the amount or change the form of the Merger Consideration. Section 9.3 Non-Survival of Representations and Warranties. None of ---------------------------------------------- the representations and warranties in this Agreement or in any schedule, instrument or other document delivered pursuant to this Agreement shall survive the Effective Time. The foregoing sentence shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. Section 9.4 Notices. All notices and other communications hereunder ------- shall be in writing and shall be deemed given if delivered personally, telecopied (which Page 60 is confirmed) or sent by an overnight courier service, such as Federal Express, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Attention: General Counsel Telephone No.: (281) 370-0670 Telecopy No.: (281) 927-8835 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Attention: Kenton J. King, Esq. Telephone: 650-470-4500 Telecopy: 650-470-4570 (b) if to the Company, to: Shopping.com 2101 East Coast Highway Garden Level Corona Del Mar, California 92625 Telephone No.: (949) 640-4393 Telecopy No.: (949) 640-4374 with a copy to: Mark V. Asdourian, Esq. 5 Park Plaza, Suite 1480 Irvine, California 92614 Telephone: (949) 862-0040 Telecopy: (949) 862-0039 Page 61 Section 9.5 Counterparts. This Agreement may be executed in two or ------------ more counterparts, each of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties. Section 9.6 Entire Agreement; No Third Party Beneficiaries. This ---------------------------------------------- Agreement, the Stock Option Agreement, the Shareholder Agreements, and the Confidentiality Agreement (including the documents and the instruments referred to herein and therein): (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof, and (b) except as provided in Sections 2.4 and 5.9 are not intended to confer upon any person other than the parties hereto and thereto any rights or remedies hereunder. Section 9.7 Severability. Any term or provision of this Agreement ------------ that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, void or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. Section 9.8 Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of California without giving effect to the principles of conflicts of law thereof. Section 9.9 Enforcement. The parties agree that irreparable damage ----------- would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement. Page 62 Section 9.10 Time of Essence. Each of the parties hereto hereby --------------- agrees that, with regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. Section 9.11 Extension; Waiver. At any time prior to the Effective ----------------- Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement, or (c) subject to the proviso of Section 9.2, waive compliance by the other parties with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. Section 9.12 Assignment. Neither this Agreement not any of the ---------- rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written content of the other parties, except that Purchaser may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to any direct or indirect wholly or majority owned Subsidiary or Affiliate of Parent. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. Page 63 IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason ___________________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer SHOPPING.COM By: /s/ Frank W. Denny ___________________________________ Name: Frank W. Denny Title: President and Chief Executive Officer Page 64 Annex A Certain Conditions of the Offer. Notwithstanding any other provisions of ------------------------------- the Offer, and in addition to (and not in limitation of) Purchaser's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Agreement), Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered Shares, and may terminate or amend the Offer as to any Shares not then paid for, if (i) the Minimum Condition has not been satisfied, (ii) any applicable waiting period under the HSR Act has not expired or terminated, or (iii) at any time on or after the date of the Agreement and before the time of payment for any such Shares, any of the following events shall occur or shall be determined by Purchaser to have occurred: (a) there shall be threatened or pending any suit, action or proceeding by any Governmental Entity (i) seeking to prohibit or impose any material limitations on Parent's or Purchaser's ownership or operation (or that of any of their respective Subsidiaries or Affiliates) of all or a material portion of their or the Company's businesses or assets, or to compel Parent or Purchaser or their respective Subsidiaries and Affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent and their respective Subsidiaries, in each case taken as a whole, (ii) challenging the acquisition by Parent or Purchaser of any Shares under the Offer or pursuant to the Stock Option Agreement or the Shareholders Agreement, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by this Agreement, the Stock Option Agreement or the Shareholder Agreements, or seeking to obtain from the Company, Parent or Purchaser any damages that are material in relation to the Company taken as a whole, (iii) seeking to impose material limitations on the ability of Purchaser, or rendering Purchaser unable, to accept for payment, pay for or purchase some or all of the Shares pursuant to the Offer and the Merger, (iv) seeking to impose material limitations on the ability of Purchaser or Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's shareholders, or (v) which otherwise is reasonably likely to have a material adverse affect on the financial condition, businesses, operations, properties (including intangible properties), results of operations, assets or prospects of the Company, or on the ability of the A-1 Company to consummate the Offer or the Merger, or to perform any of their obligations under this Agreement or the Stock Option Agreement; or (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Entity, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; or (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange, in the Nasdaq National Market System, for a period in excess of three hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any United States governmental authority on the extension of credit by banks or other financial institutions, (v) any decline in either the Dow Jones Industrial Average or the Standard & Poor's Index of 500 Industrial Companies by an amount in excess of 15% measured from the close of business on the date of this Agreement, (vi) a change in general financial bank or capital market conditions which materially or adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans, or (vii) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (d) there shall have occurred any material adverse change (or any development that, insofar as reasonably can be foreseen, is reasonably likely to result in any material adverse change) in the consolidated financial condition, businesses, operations, properties (including intangible properties), results of operations, assets or prospects of the Company, or in the ability of the Company to consummate the Offer or the Merger, or to perform any of their obligations under this Agreement or the Stock Option Agreement; or (e) the Company Board of Directors or any committee thereof (i) shall have withdrawn, modified or changed in a manner adverse to Parent or Purchaser its approval or recommendation of the Offer, this Agreement or the Merger, A-2 (ii) shall have recommended the approval or acceptance of an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Purchaser or their Affiliates, (iii) shall have executed an agreement in principle or definitive agreement relating to an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Purchaser or their Affiliates, or (iv) shall have exercised its rights pursuant to Section 5.5 of this Agreement with respect to an Acquisition Proposal, and, directly or through its representatives, continued discussions with any third party concerning an Acquisition Proposal for more than ten business days after the date of receipt of such Acquisition Proposal; or (f) any of the representations and warranties of the Company set forth in this Agreement that are qualified as to materiality shall not be true and correct and any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as of the date of this Agreement and as of the scheduled expiration of the Offer; or (g) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or covenant of the Company to be performed or complied with by it under this Agreement; or (h) all consents necessary to the consummation of the Tender Offer or the Merger including, without limitation, consents from parties to loans, contracts, leases or other agreements, and consents from governmental agencies, whether federal, state or local, shall not have been obtained, other than consents the failure to obtain which would not have a material adverse effect on the Company; (i) this Agreement shall have been terminated in accordance with its terms; which in the sole judgment of Parent or Purchaser, in any such case, and regardless of the circumstances (including any action or inaction by Parent or Purchaser) giving rise to such condition makes it inadvisable to proceed with the Offer and/or with such acceptance for payment of or payment for Shares. The foregoing conditions are for the sole benefit of Parent and Purchaser, may be waived by Parent or Purchaser, in whole or in part, at any time and from time to time in the sole discretion of Parent or Purchaser. The failure by Parent or Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any A-3 such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. A-4 Annex I Robert J. McNulty Cyber Depot Kipling Isle Paul Hill Ed Bradley Mark Winkler Kristine Webster John Markley Frank Denny Pat Demicco Randy Read I-1 EX-99.(C)(2) 12 SHAREHOLDER AGREEMENT / ROBERT MCNULTY EXHIBIT (c)(2) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Robert J. McNulty (in his individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set ------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS, the Company is engaged in the business of retail sales on or through the Internet (the "Business"); WHEREAS, the Shareholder is an officer of the Company and has knowledge of trade secrets, customer information and other confidential and proprietary information of the Company and, in order to protect the goodwill, trade secrets and other confidential and proprietary information of the Business, Parent has requested the Shareholder to enter into this Agreement; WHEREAS, as an officer of the Company with a significant equity interest therein, the Shareholder has a material economic interest in the consummation of the Offer and the Merger and, in order to induce Parent to enter into the Merger Agreement, Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. 2 (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. 4 SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that -------- ------- Sections 8 and 10 shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any 5 press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining such - - -------- ------- prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Non-Competition and Non-Disclosure. ---------------------------------- (a) Definitions. As used in this Section 13, terms defined in ------------ the preamble and recitals of this Agreement shall have the meanings set forth therein and the following terms shall have the meanings set forth below. (i) "Affiliate" shall mean, with respect to any person --------- or entity, the subsidiaries of such person or entity and any other person or entity which directly or indirectly controls, is controlled by or is under common control with such person or entity; (ii) "Business" shall have the meaning set forth in the -------- Recitals; (iii) "Confidential Information" shall mean all ------------------------ information respecting the business and activities of Parent and/or any Affiliate, including, without limitation, the clients, customers, suppliers, employees, consultants, computer or other files, projects, products, computer disks or other media, computer hardware or computer software programs, marketing plans, financial information, methodologies, know-how, processes, practices, approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies of Parent and/or any Affiliate thereof. Notwithstanding the immediately preceding sentence, Confidential Information shall not include (x) any information that is, or becomes, a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by the Shareholder of any portion of this Agreement or any other obligation the Shareholder owes to Parent and/or any Affiliate thereof) or (y) any business knowledge and experience of the type usually acquired by persons engaged in positions similar to the Shareholder's position as an officer of the Company, to the extent such knowledge and experience is not specific to Parent or any of its Affiliates and not proprietary to Parent or any of its Affiliates; (iv) "Effective Date" shall mean the date of the -------------- consummation of the Merger; 6 (v) "potential business" shall mean any current or ------------------ reasonably foreseeable material commercial activity or any current or reasonably foreseeable material commercial opportunities associated in any way with the Business; (vi) "potential client" or "potential customer" shall ---------------- ------------------ mean a person or entity that Parent, the Company or any of their Affiliates (i) as of the date hereof, is, or in the reasonably foreseeable future can reasonably be expected to be, soliciting (or has targeted for solicitation, or can reasonably be expected to be so targeting in the reasonably foreseeable future), and/or (ii) at any time or from time to time, within the 12-month period prior to the date hereof, has been soliciting, in the case of each of clause (i) or (ii) for or in respect of the Business; (viii) "Restricted Area" shall mean each county in the --------------- continental United States where the Business is conducted; (ix) "Term" shall mean the period commencing on the ---- Effective Date and ending on the date that is eighteen months following the Effective Time; and (x) "Trade Secrets" shall mean the whole or any portion ------------- or phase of any scientific or technical information, design, process, procedure, computer program, formula or improvement of Parent, the Company or any of their Affiliates that is valuable and not generally known to the competitors of Parent, the Company or any of their Affiliates, whether or not in written or tangible form. Notwithstanding the immediately preceding sentence, Trade Secrets shall not include (x) any information that is, or becomes, a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by Shareholder of this Agreement or any Affiliate thereof) or (y) any business knowledge and experience of the type usually acquired by persons engaged in positions similar to Shareholder's position as an officer of the Company, to the extent such knowledge and experience is not specific to Parent or any of its Affiliates and not proprietary to Parent or any of its Affiliates. (b) No Competitive Business. As an inducement for Parent to ------------------------ enter into the Merger Agreement, to agree to the Offer and to consummate the transactions contemplated by the Merger Agreement, Shareholder agrees that, during the Term (the "Specified Period"), at any time or for any reason, Shareholder shall not, anywhere in the Restricted Area, directly or indirectly (a) engage, without the prior express written consent of Parent, in any business or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 5% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, 7 corporate or representative capacity, or render any services or provide any advice to any business, activity, person or entity, if Shareholder knows or reasonably should know that such business, activity, service, person or entity, directly or indirectly, is similar to, or competes or is competitive in any material manner with, the Business as it is currently defined (the business of retail sales on or through the Internet), or (b) meaningfully assist, help or otherwise support, without the prior express written consent of Parent, any person, business, corporation, partnership or other entity or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 5% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, corporate or representative capacity, to create, commence or otherwise initiate, or to develop, enhance or otherwise further, any business or activity if Shareholder knows or reasonably should know that such business or activity, is similar to, or directly or indirectly competes or is competitive with, the Business. (c) No Interference with the Business. As an inducement for --------------------------------- Parent to enter into the Merger Agreement, to agree to the Offer and to consummate the transactions contemplated by the Merger Agreement, Shareholder agrees that for the Specified Period, at any time or for any reason, Shareholder shall not directly or indirectly (a) with respect to the Business, take any action to solicit or divert any business (or potential business) or clients or customers (or potential clients or potential customers) away from Parent or any Affiliate, (b) induce customers, potential customers, clients, potential clients, suppliers, agents or other persons under contract or otherwise associated or doing business with respect to the Business with Parent or any Affiliate to terminate, reduce or alter any such association or business with respect to the Business with or from Parent or any Affiliate, and/or (c) knowingly induce any person in the employment of Parent or any Affiliate in the Business to (i) terminate such employment, (ii) with respect to the Business, interfere with the customers, suppliers, or clients of Parent or any Affiliate in any manner or the business of Parent or any Affiliate in any manner. (d) No Disclosure of Proprietary Information. Shareholder ---------------------------------------- hereby agrees that he or she will not directly or indirectly disclose to any person, or use or otherwise exploit for his own benefit or for the benefit of any person, other than Parent and/or its Affiliates, any Confidential Information or Trade Secrets other than any of the foregoing which becomes public information without any breach of this Agreement by Shareholder. (e) Shareholder represents and warrants that the provisions of this Section 13 are reasonable and are necessary to protect the legitimate business interests of Parent and the Company. Shareholder represents and warrants that Shareholder has no right, title, interest or claim in, to or under any Trade Secrets, Confidential Information or other property (other than the Shares) that is the subject of the Merger Agreement. In consider- 8 ation for the mutual promises contained herein, Shareholder agrees and covenants that he or she will not request or otherwise pursue a determination that the provisions of this Section 13 are unenforceable as written. SECTION 14. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (c) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Robert J. McNulty (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel 9 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restric- 10 tions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party . (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 11 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer /s/ Robert J. McNulty _______________________________ Robert J. McNulty ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock Common Stock 1,022,474 Options 200,000 Warrants 317,500 EX-99.(C)(3) 13 SHAREHOLDER AGREEMENT / CYBER DEPOT Exhibit (c)(3) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Cyber Depot (the "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set ------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and in order to induce Parent to enter into the Merger Agreement, the Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. (d) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the 2 availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or under standing with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by Parent, -------------------------------- the Shareholder agrees to execute all documents and to take all actions 4 necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent that it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the 5 Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that Sections 8 and 10 -------- ------- shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): 6 (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Cyber Depot (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, 7 and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 8 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer CYBER DEPOT By: /s/ Robert J. McNulty _______________________________ Name: Robert J. McNulty Title: Chief Executive Officer 9 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock
Common Stock 250,000 Options 100,000 Warrants 0
10 EX-99.(C)(4) 14 SHAREHOLDER AGREEMENT / KIPLING ISLE EXHIBIT (C)(4) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Kipling Isle (the "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), warrants and options to purchase Common Stock (collectively, the - - ----- "Options") of Shopping.com, a California corporation (the "Company"), set forth - - -------- ------- on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and in order to induce Parent to enter into the Merger Agreement, the Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the 2 availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions 4 necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent that it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the 5 Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that Sections 8 and 10 -------- ------- shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): 6 (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Kipling Isle (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, 7 and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 8 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer KIPLING ISLE By: /s/ Paul Hill _______________________________ Name: Paul Hill Title: 9 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock Common Stock 66,667 Options 100,000 Warrants 33,334 10 EX-99.(C)(5) 15 SHAREHOLDER AGREEMENT / PAUL HILL EXHIBIT (c)(5) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Paul Hill (in his or her individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set ------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and in order to induce Parent to enter into the Merger Agreement, the Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the 2 availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by Parent, -------------------------------- the Shareholder agrees to execute all documents and to take all actions 4 necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent that it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the 5 Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that Sections 8 and 10 -------- ------- shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): 6 (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Paul Hill (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, 7 and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 8 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer /s/ Paul Hill __________________________________ Paul Hill 9 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock
Common Stock 0 Options 25,000 Warrants 0
10 EX-99.(C)(6) 16 SHAREHOLDER AGREEMENT / ED BRADLEY EXHIBIT (C)(6) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and Ed ------ Bradley (in his or her individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set -------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and in order to induce Parent to enter into the Merger Agreement, the Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. 1 (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the 2 availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions 4 necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent that it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the 5 Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that Sections 8 -------- ------- and 10 shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): 6 (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Ed Bradley (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, 7 and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 8 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer /s/ Ed Bradley _______________________________ Ed Bradley 9 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock
Common Stock 0 Options 125,000 Warrants 0
10 EX-99.(C)(7) 17 SHAREHOLDER AGREEMENT / MARK WINKLER EXHIBIT (c)(7) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Mark Winkler (in his or her individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set ------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS, the Company is engaged in the business of retail sales on or through the Internet (the "Business"); WHEREAS, the Shareholder is an officer of the Company and has knowledge of trade secrets, customer information and other confidential and proprietary information of the Company and, in order to protect the goodwill, trade secrets and other confidential and proprietary information of the Business, Parent has requested the Shareholder to enter into this Agreement; WHEREAS, as an officer of the Company with a significant equity interest therein, the Shareholder has a material economic interest in the consummation of the Offer and the Merger and, in order to induce Parent to enter into the Merger Agreement, Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. 2 (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time 4 of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for informa tion which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that -------- ------- Sections 8 and 10 shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. 5 SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Non-Competition and Non-Disclosure. ---------------------------------- (a) Definitions. As used in this Section 13, terms defined in ------------ the preamble and recitals of this Agreement shall have the meanings set forth therein and the following terms shall have the meanings set forth below. (i) "Affiliate" shall mean, with respect to any person --------- or entity, the subsidiaries of such person or entity and any other person or entity which directly or indirectly controls, is controlled by or is under common control with such person or entity; (ii) "Business" shall have the meaning set forth in the -------- Recitals; (iii) "Confidential Information" shall mean all ------------------------ information respecting the business and activities of Parent and/or any Affiliate, including, without limitation, the clients, customers, suppliers, employees, consultants, computer or other files, projects, products, computer disks or other media, computer hardware or computer software programs, marketing plans, financial information, methodologies, know-how, processes, practices, approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies of Parent and/or any Affiliate thereof. Notwithstanding the immediately preceding sentence, Confidential Information shall not include (x) any information that is, or becomes, a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by the Shareholder of any portion of this Agreement or any other obligation the Shareholder owes to Parent and/or any Affiliate thereof) or (y) any business knowledge and experience of the type usually acquired by persons engaged in positions similar to the Shareholder's position as an officer of the Company, to the extent such knowledge and experience is not specific to Parent or any of its Affiliates and not proprietary to Parent or any of its Affiliates; 6 (iv) "Effective Date" shall mean the date of the -------------- consummation of the Merger; (v) "potential business" shall mean any current or ------------------ reasonably foreseeable material commercial activity or any current or reasonably foreseeable material commercial opportunities associated in any way with the Business; (vi) "potential client" or "potential customer" shall ---------------- ------------------ mean a person or entity that Parent, the Company or any of their Affiliates (i) as of the date hereof, is, or in the reasonably foreseeable future can reasonably be expected to be, soliciting (or has targeted for solicitation, or can reasonably be expected to be so targeting in the reasonably foreseeable future), and/or (ii) at any time or from time to time, within the 12-month period prior to the date hereof, has been soliciting, in the case of each of clause (i) or (ii) for or in respect of the Business; (viii) "Restricted Area" shall mean each county in the --------------- continental United States where the Business is conducted; (ix) "Term" shall mean the period commencing on the ---- Effective Date and ending on the date that is eighteen months following the Effective Time; and (x) "Trade Secrets" shall mean the whole or any ------------- portion or phase of any scientific or technical information, design, process, procedure, computer program, formula or improvement of Parent, the Company or any of their Affiliates that is valuable and not generally known to the competitors of Parent, the Company or any of their Affiliates, whether or not in written or tangible form. Notwithstanding the immediately preceding sentence, Trade Secrets shall not include (x) any information that is, or becomes, a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by Shareholder of this Agreement or any Affiliate thereof) or (y) any business knowledge and experience of the type usually acquired by persons engaged in positions similar to Shareholder's position as an officer of the Company, to the extent such knowledge and experience is not specific to Parent or any of its Affiliates and not proprietary to Parent or any of its Affiliates. (b) No Competitive Business. As an inducement for Parent to ------------------------ enter into the Merger Agreement, to agree to the Offer and to consummate the transactions contemplated by the Merger Agreement, Shareholder agrees that, during the Term (the "Specified Period"), at any time or for any reason, Shareholder shall not, anywhere in the Restricted Area, directly or indirectly (a) engage, without the prior express written consent 7 of Parent, in any business or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 5% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, corporate or representative capacity, or render any services or provide any advice to any business, activity, person or entity, if Shareholder knows or reasonably should know that such business, activity, service, person or entity, directly or indirectly, is similar to, or competes or is competitive in any material manner with, the Business as it is currently defined (the business of retail sales on or through the Internet), or (b) meaningfully assist, help or otherwise support, without the prior express written consent of Parent, any person, business, corporation, partnership or other entity or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 5% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, corporate or representative capacity, to create, commence or otherwise initiate, or to develop, enhance or otherwise further, any business or activity if Shareholder knows or reasonably should know that such business or activity, is similar to, or directly or indirectly competes or is competitive with, the Business. (c) No Interference with the Business. As an inducement for ---------------------------------- Parent to enter into the Merger Agreement, to agree to the Offer and to consummate the transactions contemplated by the Merger Agreement, Shareholder agrees that for the Specified Period, at any time or for any reason, Shareholder shall not directly or indirectly (a) with respect to the Business, take any action to solicit or divert any business (or potential business) or clients or customers (or potential clients or potential customers) away from Parent or any Affiliate, (b) induce customers, potential customers, clients, potential clients, suppliers, agents or other persons under contract or otherwise associated or doing business with respect to the Business with Parent or any Affiliate to terminate, reduce or alter any such association or business with respect to the Business with or from Parent or any Affiliate, and/or (c) knowingly induce any person in the employment of Parent or any Affiliate in the Business to (i) terminate such employment, (ii) with respect to the Business, interfere with the customers, suppliers, or clients of Parent or any Affiliate in any manner or the business of Parent or any Affiliate in any manner. (d) No Disclosure of Proprietary Information. Shareholder ----------------------------------------- hereby agrees that he or she will not directly or indirectly disclose to any person, or use or otherwise exploit for his own benefit or for the benefit of any person, other than Parent and/or its Affiliates, any Confidential Information or Trade Secrets other than any of the foregoing which becomes public information without any breach of this Agreement by Shareholder. (e) Shareholder represents and warrants that the provisions of this Section 13 are reasonable and are necessary to protect the legitimate business interests of 8 Parent and the Company. Shareholder represents and warrants that Shareholder has no right, title, interest or claim in, to or under any Trade Secrets, Confidential Information or other property (other than the Shares) that is the subject of the Merger Agreement. In consideration for the mutual promises contained herein, Shareholder agrees and covenants that he or she will not request or otherwise pursue a determination that the provisions of this Section 13 are unenforceable as written. SECTION 14. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Mark Winkler (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel 9 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restric- 10 tions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 11 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer /s/ Mark Winkler _______________________________ Mark Winkler 12 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock Common Stock 25,000 Options 50,000 Warrants 0 13 EX-99.(C)(8) 18 SHAREHOLDER AGREEMENT / KRISTINE WEBSTER EXHIBIT (C)(8) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Kristine Webster (in his or her individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common Stock"), and/or warrants and/or options to purchase Common Stock (collectively, the "Options") of Shopping.com, a California corporation (the "Company"), set -------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and in order to induce Parent to enter into the Merger Agreement, the Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the 2 availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions 4 necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent that it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the 5 Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that -------- ------- Sections 8 and 10 shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): 6 (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Kristine Webster (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, 7 and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 8 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer /s/ Kristine Webster _______________________________ Kristine Webster 9 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock Common Stock 28,334 Options 50,000 Warrants 4,167 10 EX-99.(C)(9) 19 SHAREHOLDER AGREEMENT / JOHN MARKLEY EXHIBIT (C)(9) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ John Markley (in his or her individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set ------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and in order to induce Parent to enter into the Merger Agreement, the Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the 2 availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions 4 necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent that it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the 5 Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that Sections 8 and 10 -------- ------- shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): 6 (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: John Markley (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, 7 and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third-party beneficiary of the provisions of this Agreement. 8 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L.Mason Title: Senior Vice President and Chief Financial Officer /s/ John Markley _______________________________ John Markley 9 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock Common Stock 0 Options 275,000 Warrants 0 10 EX-99.(C)(10) 20 SHAREHOLDER AGREEMENT / FRANK DENNY EXHIBIT (C)(10) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Frank Denny (in his or her individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set ------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS, the Company is engaged in the business of retail sales on or through the Internet (the "Business"); WHEREAS, the Shareholder is an officer of the Company and has knowledge of trade secrets, customer information and other confidential and proprietary information of the Company and, in order to protect the goodwill, trade secrets and other confidential and proprietary information of the Business, Parent has requested the Shareholder to enter into this Agreement; WHEREAS, as an officer of the Company with a significant equity interest therein, the Shareholder has a material economic interest in the consummation of the Offer and the Merger and, in order to induce Parent to enter into the Merger Agreement, Share holder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: - - -------- 1 SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. 2 (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the share holders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time 4 of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that -------- ------- Sections 8 and 10 shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. 5 SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Non-Competition and Non-Disclosure. ---------------------------------- (a) Definitions. As used in this Section 13, terms defined in ----------- the preamble and recitals of this Agreement shall have the meanings set forth therein and the following terms shall have the meanings set forth below. (i) "Affiliate" shall mean, with respect to any person --------- or entity, the subsidiaries of such person or entity and any other person or entity which directly or indirectly controls, is controlled by or is under common control with such person or entity; (ii) "Business" shall have the meaning set forth in the -------- Recitals; (iii) "Confidential Information" shall mean all ------------------------ information respecting the business and activities of Parent and/or any Affiliate, including, without limitation, the clients, customers, suppliers, employees, consultants, computer or other files, projects, products, computer disks or other media, computer hardware or computer software programs, marketing plans, financial information, methodologies, know-how, processes, practices, approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies of Parent and/or any Affiliate thereof. Notwithstanding the immediately preceding sentence, Confidential Information shall not include (x) any information that is, or becomes, a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by the Shareholder of any portion of this Agreement or any other obligation the Shareholder owes to Parent and/or any Affiliate thereof) or (y) any business knowledge and experience of the type usually acquired by persons engaged in positions similar to the Shareholder's position as an officer of the Company, to the extent such knowledge and experience is not specific to Parent or any of its Affiliates and not proprietary to Parent or any of its Affiliates; 6 (iv) "Effective Date" shall mean the date of the -------------- consummation of the Merger; (v) "potential business" shall mean any current or ------------------ reasonably foreseeable material commercial activity or any current or reasonably foreseeable material commercial opportunities associated in any way with the Business; (vi) "potential client" or "potential customer" shall ---------------- ------------------ mean a person or entity that Parent, the Company or any of their Affiliates (i) as of the date hereof, is, or in the reasonably foreseeable future can reasonably be expected to be, soliciting (or has targeted for solicitation, or can reasonably be expected to be so targeting in the reasonably foreseeable future), and/or (ii) at any time or from time to time, within the 12-month period prior to the date hereof, has been soliciting, in the case of each of clause (i) or (ii) for or in respect of the Business; (viii) "Restricted Area" shall mean each county in the --------------- continental United States where the Business is conducted; (ix) "Term" shall mean the period commencing on the ---- Effective Date and ending on the date that is eighteen months following the Effective Time; and (x) "Trade Secrets" shall mean the whole or any ------------- portion or phase of any scientific or technical information, design, process, procedure, computer program, formula or improvement of Parent, the Company or any of their Affiliates that is valuable and not generally known to the competitors of Parent, the Company or any of their Affiliates, whether or not in written or tangible form. Notwithstanding the immediately preceding sentence, Trade Secrets shall not include (x) any information that is, or becomes, a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by Shareholder of this Agreement or any Affiliate thereof) or (y) any business knowledge and experience of the type usually acquired by persons engaged in positions similar to Shareholder's position as an officer of the Company, to the extent such knowledge and experience is not specific to Parent or any of its Affiliates and not proprietary to Parent or any of its Affiliates. (b) No Competitive Business. As an inducement for Parent to ----------------------- enter into the Merger Agreement, to agree to the Offer and to consummate the transactions contemplated by the Merger Agreement, Shareholder agrees that, during the Term (the "Specified Period"), at any time or for any reason, Shareholder shall not, anywhere in the Restricted Area, directly or indirectly (a) engage, without the prior express written consent 7 of Parent, in any business or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 5% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, corporate or representative capacity, or render any services or provide any advice to any business, activity, person or entity, if Shareholder knows or reasonably should know that such business, activity, service, person or entity, directly or indirectly, is similar to, or competes or is competitive in any material manner with, the Business as it is currently defined (the business of retail sales on or through the Internet), or (b) meaningfully assist, help or otherwise support, without the prior express written consent of Parent, any person, business, corporation, partnership or other entity or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 5% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, corporate or representative capacity, to create, commence or otherwise initiate, or to develop, enhance or otherwise further, any business or activity if Shareholder knows or reasonably should know that such business or activity, is similar to, or directly or indirectly competes or is competitive with, the Business. (c) No Interference with the Business. As an inducement for --------------------------------- Parent to enter into the Merger Agreement, to agree to the Offer and to consummate the transactions contemplated by the Merger Agreement, Shareholder agrees that for the Specified Period, at any time or for any reason, Shareholder shall not directly or indirectly (a) with respect to the Business, take any action to solicit or divert any business (or potential business) or clients or customers (or potential clients or potential customers) away from Parent or any Affiliate, (b) induce customers, potential customers, clients, potential clients, suppliers, agents or other persons under contract or otherwise associated or doing business with respect to the Business with Parent or any Affiliate to terminate, reduce or alter any such association or business with respect to the Business with or from Parent or any Affiliate, and/or (c) knowingly induce any person in the employment of Parent or any Affiliate in the Business to (i) terminate such employment, (ii) with respect to the Business, interfere with the customers, suppliers, or clients of Parent or any Affiliate in any manner or the business of Parent or any Affiliate in any manner. (d) No Disclosure of Proprietary Information. Shareholder ---------------------------------------- hereby agrees that he or she will not directly or indirectly disclose to any person, or use or otherwise exploit for his own benefit or for the benefit of any person, other than Parent and/or its Affiliates, any Confidential Information or Trade Secrets other than any of the foregoing which becomes public information without any breach of this Agreement by Shareholder. (e) Shareholder represents and warrants that the provisions of this Section 13 are reasonable and are necessary to protect the legitimate business interests of 8 Parent and the Company. Shareholder represents and warrants that Shareholder has no right, title, interest or claim in, to or under any Trade Secrets, Confidential Information or other property (other than the Shares) that is the subject of the Merger Agreement. In consider ation for the mutual promises contained herein, Shareholder agrees and covenants that he or she will not request or otherwise pursue a determination that the provisions of this Section 13 are unenforceable as written. SECTION 14. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Frank Denny (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel 9 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restric- 10 tions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 11 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer /s/ Frank Denny _______________________________ Frank Denny 12 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock
Common Stock 0 Options 1,175,000 Warrants 0
13 EX-99.(C)(11) 21 SHAREHOLDER AGREEMENT / PAT DEMICCO EXHIBIT (C)(11) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Pat Demicco (in his or her individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set ------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; WHEREAS, the Company is engaged in the business of retail sales on or through the Internet (the "Business"); WHEREAS, the Shareholder is an officer of the Company and has knowledge of trade secrets, customer information and other confidential and proprietary information of the Company and, in order to protect the goodwill, trade secrets and other confidential and proprietary information of the Business, Parent has requested the Shareholder to enter into this Agreement; WHEREAS, as an officer of the Company with a significant equity interest therein, the Shareholder has a material economic interest in the consummation of the Offer and the Merger and, in order to induce Parent to enter into the Merger Agreement, Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. 2 (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time 4 of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that -------- ------- Sections 8 and 10 shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. 5 SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Non-Competition and Non-Disclosure. ---------------------------------- (a) Definitions. As used in this Section 13, terms defined in ----------------- the preamble and recitals of this Agreement shall have the meanings set forth therein and the following terms shall have the meanings set forth below. (i) "Affiliate" shall mean, with respect to any person or entity, --------- the subsidiaries of such person or entity and any other person or entity which directly or indirectly controls, is controlled by or is under common control with such person or entity; (ii) "Business" shall have the meaning set forth in the -------- Recitals; (iii) "Confidential Information" shall mean all information ------------------------ respecting the business and activities of Parent and/or any Affiliate, including, without limitation, the clients, customers, suppliers, employees, consultants, computer or other files, projects, products, computer disks or other media, computer hardware or computer software programs, marketing plans, financial information, methodologies, know-how, processes, practices, approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies of Parent and/or any Affiliate thereof. Notwithstanding the immediately preceding sentence, Confidential Information shall not include (x) any information that is, or becomes, a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by the Shareholder of any portion of this Agree ment or any other obligation the Shareholder owes to Parent and/or any Affiliate thereof) or (y) any business knowledge and experience of the type usually acquired by persons engaged in positions similar to the Shareholder's position as an officer of the Company, to the extent such knowledge and experience is not specific to Parent or any of its Affiliates and not proprietary to Parent or any of its Affiliates; 6 (iv) "Effective Date" shall mean the date of the consummation of -------------- the Merger; (v) "potential business" shall mean any current or reasonably ------------------ foreseeable material commercial activity or any current or reasonably foreseeable material commercial opportunities associated in any way with the Business; (vi) "potential client" or "potential customer" shall mean a ---------------- ------------------ person or entity that Parent, the Company or any of their Affiliates (i) as of the date hereof, is, or in the reasonably foreseeable future can reasonably be expected to be, soliciting (or has targeted for solicitation, or can reasonably be expected to be so targeting in the reasonably foreseeable future), and/or (ii) at any time or from time to time, within the 12-month period prior to the date hereof, has been soliciting, in the case of each of clause (i) or (ii) for or in respect of the Business; (viii) "Restricted Area" shall mean each county in the --------------- continental United States where the Business is conducted; (ix) "Term" shall mean the period commencing on the Effective ---- Date and ending on the date that is eighteen months following the Effective Time; and (x) "Trade Secrets" shall mean the whole or any portion or phase ------------- of any scientific or technical information, design, process, procedure, computer program, formula or improvement of Parent, the Company or any of their Affiliates that is valuable and not generally known to the competitors of Parent, the Company or any of their Affiliates, whether or not in written or tangible form. Notwithstanding the immediately preceding sentence, Trade Secrets shall not include (x) any information that is, or becomes, a part of the public domain or generally available to the public (unless such availability occurs as a result of any breach by Shareholder of this Agreement or any Affiliate thereof) or (y) any business knowledge and experience of the type usually acquired by persons engaged in positions similar to Shareholder's position as an officer of the Company, to the extent such knowledge and experience is not specific to Parent or any of its Affiliates and not proprietary to Parent or any of its Affiliates. (b) No Competitive Business. As an inducement for Parent to ----------------------------- enter into the Merger Agreement, to agree to the Offer and to consummate the transactions contemplated by the Merger Agreement, Shareholder agrees that, during the Term (the "Specified Period"), at any time or for any reason, Shareholder shall not, anywhere in the Restricted Area, directly or indirectly (a) engage, without the prior express written consent 7 of Parent, in any business or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 5% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, corporate or representative capacity, or render any services or provide any advice to any business, activity, person or entity, if Shareholder knows or reasonably should know that such business, activity, service, person or entity, directly or indirectly, is similar to, or competes or is competitive in any material manner with, the Business as it is currently defined (the business of retail sales on or through the Internet), or (b) meaningfully assist, help or otherwise support, without the prior express written consent of Parent, any person, business, corporation, partnership or other entity or activity, whether as an employee, consultant, partner, principal, agent, representative, stockholder (except as a holder of less than 5% of the combined voting power of the outstanding stock of a publicly held company) or in any other individual, corporate or representative capacity, to create, commence or otherwise initiate, or to develop, enhance or otherwise further, any business or activity if Shareholder knows or reasonably should know that such business or activity, is similar to, or directly or indirectly competes or is competitive with, the Business. (c) No Interference with the Business. As an inducement for --------------------------------------- Parent to enter into the Merger Agreement, to agree to the Offer and to consummate the transactions contemplated by the Merger Agreement, Shareholder agrees that for the Specified Period, at any time or for any reason, Shareholder shall not directly or indirectly (a) with respect to the Business, take any action to solicit or divert any business (or potential business) or clients or customers (or potential clients or potential customers) away from Parent or any Affiliate, (b) induce customers, potential customers, clients, potential clients, suppliers, agents or other persons under contract or otherwise associated or doing business with respect to the Business with Parent or any Affiliate to terminate, reduce or alter any such association or business with respect to the Business with or from Parent or any Affiliate, and/or (c) knowingly induce any person in the employment of Parent or any Affiliate in the Business to (i) terminate such employment, (ii) with respect to the Business, interfere with the customers, suppliers, or clients of Parent or any Affiliate in any manner or the business of Parent or any Affiliate in any manner. (d) No Disclosure of Proprietary Information. Shareholder ----------------------------------------- hereby agrees that he or she will not directly or indirectly disclose to any person, or use or otherwise exploit for his own benefit or for the benefit of any person, other than Parent and/or its Affiliates, any Confidential Information or Trade Secrets other than any of the foregoing which becomes public information without any breach of this Agreement by Shareholder. (e) Shareholder represents and warrants that the provisions of this Section 13 are reasonable and are necessary to protect the legitimate business interests of 8 Parent and the Company. Shareholder represents and warrants that Shareholder has no right, title, interest or claim in, to or under any Trade Secrets, Confidential Information or other property (other than the Shares) that is the subject of the Merger Agreement. In consideration for the mutual promises contained herein, Shareholder agrees and covenants that he or she will not request or otherwise pursue a determination that the provisions of this Section 13 are unenforceable as written. SECTION 14. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Pat Demicco (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel 9 with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restric- 10 tions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third- party beneficiary of the provisions of this Agreement. 11 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer /s/ Pat Demicco _______________________________ Pat Demicco 12 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock Common Stock 0 Options 175,000 Warrants 0 13 EX-99.(C)(12) 22 SHAREHOLDER AGREEMENT / RANDY READ EXHIBIT (c)(12) SHAREHOLDER AGREEMENT SHAREHOLDER AGREEMENT (this "Agreement"), dated January 11, 1999, by --------- and among Compaq Computer Corporation, a Delaware Corporation ("Parent"), and ------ Randy Read (in his or her individual capacity, a "Shareholder"). ----------- WHEREAS, the Shareholder is, as of the date hereof, the record and beneficial owner of the shares of common stock, no par value (the "Common ------ Stock"), and/or warrants and/or options to purchase Common Stock (collectively, - - ----- the "Options") of Shopping.com, a California corporation (the "Company"), set ------- ------- forth on Annex I hereto; WHEREAS, Parent and the Company concurrently herewith are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger ------ Agreement"), which provides, among other things, for the acquisition of the - - --------- Company by Parent by means of a cash tender offer (the "Offer") for all of the ----- outstanding shares of Common Stock and for the subsequent merger (the "Merger") ------ of the Purchaser (as defined in the Merger Agreement) with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, and in order to induce Parent to enter into the Merger Agreement, the Shareholder has agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing and the execution and delivery by Parent of the Merger Agreement and the mutual representations, warranties, covenants and agreements set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: - - -------- SECTION 1. Representations and Warranties of the Shareholder. The ------------------------------------------------- Shareholder hereby represents and warrants to Parent as follows: (a) Such Shareholder is the record and beneficial owner of the shares of Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") and/or Options set forth opposite his name on Annex I to ------ this Agreement. 1 (b) Such Shareholder has the legal capacity to execute and deliver this Agreement and to consummate the transactions contemplated hereby. (c) This Agreement has been validly executed and delivered by such Shareholder and constitutes the legal, valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, and (ii) the availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (d) Neither the execution and delivery of this Agreement nor the consummation by such Shareholder of the transactions contemplated hereby will violate any other agreement to which such Shareholder is a party. (e) The Shares and/or Options and the certificates representing the Shares owned by such Shareholder are now and at all times during the term hereof will be held by such Shareholder, or by a nominee or custodian for the benefit of such Shareholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. SECTION 2. Representations and Warranties of Parent. Parent hereby ---------------------------------------- represents and warrants to the Shareholder as follows: (a) Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and Parent has all requisite corporate power and authority to execute and deliver this Agreement and to consum mate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. (b) This Agreement has been duly authorized, executed and delivered by Parent and constitutes the legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally and (ii) the 2 availability of the remedy of specific performance or injunctive or other forms of equitable relief may be subject to equitable defenses and would be subject to the discretion of the court before which any proceeding therefor may be brought. (c) Neither the execution and delivery of this Agreement nor the consummation by Parent of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent is a party or bound. The consummation by Parent of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to Parent, except for any necessary filing under the HSR Act or state takeover laws. SECTION 3. Purchase and Sale of the Shares. The Shareholder hereby ------------------------------- agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Shareholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Parent shall cause Purchaser to agree to purchase all the Shares so tendered at a price per Share equal to $19.00 per Share or any higher price that may be paid in the Offer; provided, however, that Purchaser's obligation to -------- ------- accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex A thereto. SECTION 4. Transfer of the Shares. Prior to the termination of this ---------------------- Agreement, except as otherwise provided herein, the Shareholder shall not: (i) transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares; (ii) enter into any contract, option or other agreement or under standing with respect to any transfer of any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares, or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Shareholder's obligations hereunder or the transactions contemplated hereby. 3 SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. ------------------------------------------------ (a) The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company; provided, however, that such irrevocable proxy shall be immediately -------- ------- revoked if, in accordance with Section 1.1(d) of the Merger Agreement, Purchaser waives the Minimum Condition (as defined in the Merger Agreement) and accepts for payment the Revised Minimum Number of Shares (as defined in the Merger Agreement). (b) The Shareholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Shareholder under this Agreement. Such Shareholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 705 of the California General Corporation Law. SECTION 6. Certain Events. In the event of any stock split, stock -------------- dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Common Stock or the acquisition of additional shares of Common Stock or other securities or rights of the Company by the Shareholder, the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of Common Stock or other securities or rights of the Company issued to or acquired by the Shareholder. SECTION 7. Exercise of Company Common Stock. If requested by -------------------------------- Parent, the Shareholder agrees to execute all documents and to take all actions 4 necessary to convert all Options to purchase shares of the Common Stock held by such shareholder into that number of shares of Common Stock equal to the net number of shares of Common Stock into which such Options would have been convertible at the election of the Shareholder for cash or pursuant to the cashless exercise procedure immediately prior to the Effective Time of the Merger. Parent will cooperate with the Shareholder and the Company to permit the cashless exercise of Options held by the Shareholder. SECTION 8. Certain Other Agreements. The Shareholder will notify ------------------------ Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with such Shareholder or its officers, directors, employees, investment bankers, attorneys, accountants or other agents, if any, in each case in connection with any Acquisition Proposal (as such terms is defined in the Merger Agreement) indicating, in connection with such notice, the name of the person making such Acquisition Proposal and the terms and conditions of any proposals or offers. The Shareholder agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. Such Shareholder agrees that it shall keep Parent informed, on a current basis, of the status and terms of any Acquisition Proposal. Such Shareholder agrees that it will not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal which constitutes or is reasonably likely to lead to any Acquisition Proposal, or (ii) in the event of an unsolicited written Acquisition Proposal, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information which has been previously publicly disseminated by the Company) relating to any Acquisition Proposal. The foregoing shall not apply to the extent that it is inconsistent with any of Shareholder's duties as a director and/or officer of the Company. SECTION 9. Further Assurances. The Shareholder shall, upon request ------------------ of Parent or the Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. SECTION 10. Termination. Subject to Section 5(a) hereof, this ----------- Agreement, and all rights and obligations of the parties hereunder, shall terminate immediately upon the earlier of (a) six months following the termination of the 5 Merger Agreement in accordance with its terms, or (b) the Effective Time (as defined in the Merger Agreement); provided, however, that Sections 8 and 10 -------- ------- shall survive any termination of this Agreement. SECTION 11. Expenses. All fees and expenses incurred by any one -------- party hereto shall be borne by the party incurring such fees and expenses; provided, that if any legal action is instituted to enforce or interpret the - - -------- terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. SECTION 12. Public Announcements. The Shareholder and Parent each -------------------- agree that it will not (and Parent agrees that it will cause the Purchaser to not) issue any press release or otherwise make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed; provided, however, that such disclosure can be made without obtaining -------- ------- such prior consent if (i) the disclosure is required by law, and (ii) the party making such disclosure has first used its best efforts to consult with the other party about the form and substance of such disclosure. SECTION 13. Miscellaneous. ------------- (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices and other communications hereunder shall be in writing and shall be deemed given upon (i) transmitter's confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery by a standard overnight carrier or when delivered by hand or (iii) the expiration of five business days after the day when mailed in the United States by certified or registered mail, postage prepaid, addressed at the following addresses (or at such other address for a party as shall be specified by like notice): 6 (A) if to the Shareholder, to: Shopping.com 2101 East Coast Highway, Garden Level Corona Del Mar, California 92625 Telephone: (949) 640-4393 Facsimile: (949) 640-4374 Attention: Randy Read (B) if to Parent or the Purchaser, to: Compaq Computer Corporation 20555 State Highway 249 Houston, Texas 77070 Telephone: (281) 370-0670 Facsimile: (281) 927-8835 Attention: General Counsel with a copy to: Skadden, Arps, Slate, Meagher & Flom LLP 525 University Avenue, Suite 220 Palo Alto, California 94301 Telephone: (650) 470-4500 Facsimile: (650) 470-4570 Attention: Kenton J. King, Esq. (c) The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (d) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall be considered one and the same agreement. (e) This Agreement (including the Merger Agreement and any other documents and instruments referred to herein) constitutes the entire agreement, 7 and supersedes all prior agreements and understandings, whether written and oral, among the parties hereto with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without giving effect to the principles of conflicts of laws thereof. (g) Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns, and the provisions of this Agreement are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) If any term, provision, covenant or restriction herein is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable or against its regulatory policy, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. (i) Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. (k) On its formation, the Purchaser shall be an intended third-party beneficiary of the provisions of this Agreement. 8 IN WITNESS WHEREOF, Parent and the Shareholder have caused this Agreement to be duly executed and delivered as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason _______________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer /s/ Randy Read _______________________________ Randy Read 9 ANNEX I Ownership of Common Stock, Warrants or Options to Purchase Common Stock Common Stock 0 Options 75,000 Warrants 0 10 EX-99.(C)(13) 23 STOCK OPTION AGREEMENT EXHIBIT (c)(13) STOCK OPTION AGREEMENT STOCK OPTION AGREEMENT, dated January 11, 1999 (this "Agreement"), by --------- and among Compaq Computer Corporation, a Delaware corporation ("Parent"), and ------ Shopping.com, a California corporation (the "Company"). ------- W I T N E S S E T H: WHEREAS, concurrently with the execution and delivery of this Agreement, Parent and the Company are entering into an Agreement and Plan of Merger (as such agreement may hereafter be amended from time to time, the "Merger Agreement"; capitalized terms used but not defined in this Agreement - - ----------------- shall have the meanings ascribed to them in the Merger Agreement), which provides, upon the terms and subject to the conditions thereof, for (i) the commencement by the Purchaser (as defined in the Merger Agreement) of a tender offer (the "Offer") to purchase all of the issued and outstanding shares of the ----- common stock, no par value, of the Company ("Common Stock") at the applicable ------------ Offer Price, and (ii) the subsequent merger of the Purchaser with and into the Company (the "Merger"), whereby each share of Common Stock, other than shares ------ owned directly or indirectly by Parent, the Purchaser or the Company and other than dissenting shares, will be converted into the right to receive in cash the Offer Price applicable thereto; and WHEREAS, as a condition to the willingness of Parent to enter into the Merger Agreement, Parent has required that the Company agree, and in order to induce Parent to enter into the Merger Agreement, the Company has agreed, to grant the Purchaser certain options to purchase shares of Common Stock of the Company, upon the terms and subject to the conditions of this Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and in the Merger Agreement, the parties hereto agree as follows: ARTICLE I THE OPTIONS SECTION 1.1. Grant of Top-Up Stock Option. Subject to the terms and ---------------------------- conditions set forth herein, the Company hereby grants to the Purchaser an irrevocable option (the "Top-Up Stock Option") to purchase that number of shares ------------------- of Common Stock (the "Top-Up Option Shares") equal to the number of shares of -------------------- Common Stock that, when added to the number of shares of Common Stock owned by the Purchaser and its affiliates immediately following consummation of the Offer, shall constitute 90% of the shares of Common Stock then outstanding on a fully diluted basis (assuming the issuance of the Top-Up Option Shares) at a purchase price per Top-Up Option Share equal to the Offer Price; provided, -------- however, that the Top-Up Stock Option shall not be - - ------- exercisable if the number of shares of Common Stock subject thereto exceeds the number of authorized shares of Common Stock available for issuance. The Company agrees to provide Parent and the Purchaser with information regarding the number of shares of Common Stock available for issuance on an ongoing basis. SECTION 1.2. Exercise of Top-Up Stock Option. (a) Subject to the ------------------------------- conditions set forth in Section 2.1 and any additional requirements of law, the Top-Up Stock Option may be exercised by the Purchaser, in whole, but not in part, at any one time after the occurrence of a Top-Up Exercise Event (as defined below) and prior to the Top-Up Termination Date (as defined below). (b) A "Top-Up Exercise Event" shall occur for purposes of this --------------------- Agreement upon the Purchaser's acceptance for payment pursuant to the Offer of shares of Common Stock constituting more than 50% but less than 90% of the shares of Common Stock then outstanding on a fully diluted basis. (c) Except as provided in the last sentence of this Section 1.2.(c), the "Top-Up Termination Date" shall occur for purposes of this Agreement upon ----------------------- the earliest to occur of: (i) the Effective Time; (ii) the date which is ten (10) business days after the occurrence of a Top-Exercise Event; (iii) the termination of the Merger Agreement; and (iv) the date on which the Purchaser waives the Minimum Condition and accepts for payment the Revised Minimum Number of Shares. Notwithstanding the occurrence of the Top-Up Termination Date, the Purchaser shall be entitled to purchase the Top-Up Option Shares if it has exercised the Top-Up Option in accordance with the terms hereof prior to such occurrence, and the occurrence of the Top-Up Termination Date shall not affect any rights hereunder which by their terms do not terminate or expire prior to or as of such date. (d) In the event the Purchaser wishes to exercise the Top-Up Stock Option, the Purchaser shall send to the Company a written notice (a "Top-Up ------ Exercise Notice," the date of which notice is referred to herein as the "Top-Up - - --------------- ------ Notice Date") specifying the denominations of the certificate or certificates - - ----------- evidencing the Top-Up Option Shares which the Purchaser wishes to receive, the place for the closing of the purchase and sale pursuant to the Top-Up Option (the "Top-Up Closing") and a date not earlier than three (3) business days nor -------------- later than ten (10) business days from the Top-Up Notice Date for the Top-Up Closing (the "Top-Up Closing Date"); provided, however, that (i) if the Top-Up ------------------- -------- ------- Closing cannot be consummated by reason of any applicable laws or orders, the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which such restriction on consummation has expired or been terminated, and (ii) without limiting the foregoing, if prior notification to or approval of any Governmental Entity is required in connection with such purchase, the Purchaser and the Company shall promptly file the required notice or application for approval and shall cooperate in the expeditious filing of such notice or application, and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which, as the case may be, (A) any required notification period has expired or been terminated, or (B) any required approval has been obtained, and in either event, any requisite -2- waiting period has expired or been terminated. The Company shall, within two (2) business days after receipt of the Top-Up Exercise Notice, deliver written notice to the Purchaser specifying the number of Top-Up Option Shares and the aggregate purchase price therefor. SECTION 1.3. Grant of Topping Fee Option. (a) The Company hereby --------------------------- grants to Parent an irrevocable option (the "Topping Fee Option") to purchase up ------------------ to a number of shares of Common Stock equal to the Topping Fee Option Number (as defined in Section 1.3(b)). The Topping Fee Option shall be exercisable in the manner set forth in Section 2.2 at a purchase price per share equal to the Offer Price (the "Exercise Price"). The Topping Fee Option granted pursuant to -------------- this Agreement shall expire on the earliest to occur of: (i) the Effective Time, and (ii) six (6) months after any termination of the Merger Agreement pursuant to Article VII thereof (the "Topping Fee Termination Date"); provided, however, ---------------------------- -------- ------- that the Topping Fee Option shall not expire if the Topping Fee Exercise Notice (as defined below) has been given by Parent prior to the Topping Fee Termination Date. (b) For purposes of this Agreement, the "Topping Fee Option Number" shall initially be that number of authorized shares of the Company's Common Stock available for issuance, and shall be adjusted hereafter to reflect changes in the Company's capitalization occurring after the date hereof in accordance with Section 1.5. SECTION 1.4. Exercise Of Topping Fee Option. At any time or from time ------------------------------ to time prior to the Topping Fee Termination Date, Parent (or its designee) may exercise the Topping Fee Option, in whole or in part, if on or after the date hereof: (a) any corporation, partnership, individual, trust, unincorporated association, or other entity or "person" (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than ------------ Parent or any of its "affiliates" (as defined in the Exchange Act) (a "Third ----- Party"), shall have: - - ----- (i) commenced a bona fide tender offer or exchange offer for any ---- ---- shares of Common Stock of the Company, the consummation of which would result in "beneficial ownership" (as defined under the Exchange Act) by such Third Party (together with all such Third Party's affiliates and "associates" (as such term is defined in the Exchange Act)) of 15% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); (ii) acquired beneficial ownership of shares of Common Stock of the Company which, when aggregated with any shares of Company Stock already owned by such Third Party, its affiliates and associates, would result in the aggregate beneficial ownership by such Third Party its affiliates and associates of 15% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis), provided, however, -------- ------- that "Third Party" for purposes of this clause (ii) shall not include any corporation, partnership, person or other entity or group which beneficially owns more than -3- 15% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis) as of the date hereof and that does not, after the date hereof, increase such ownership percentage by more than an additional 1% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis); (iii) solicited "proxies" in a "solicitation" subject to the proxy rules under the Exchange Act or executed any written consent with respect to, or become a "participant" in, any "solicitation" (as such terms are defined in Regulation 14A under the Exchange Act), in each case with respect to the Common Stock of the Company; or (b) any of the events described in Section 7.1(d)(ii) or (d)(iii) of the Merger Agreement that would allow Parent to terminate the Merger Agreement has occurred (but without the necessity of Parent having terminated the Merger Agreement). In the event that Parent wishes to exercise all or any part of the Topping Fee Option, Parent shall give written notice (the "Topping Fee Exercise -------------------- Notice," with the date of the Topping Fee Exercise Notice being referred to - - ------ herein as the "Topping Fee Notice Date") to the Company, specifying the number ----------------------- of shares of Common Stock of the Company it will purchase and a place and date (not earlier than three (3) nor later than ten (10) business days from the Topping Fee Notice Date) for closing such purchase (a "Topping Fee Closing"); ------------------- provided, however, that (i) if the Topping Fee Closing cannot be consummated by - - -------- ------- reason of any applicable laws or orders, the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which such restriction on consummation has expired or been terminated, and (ii) without limiting the foregoing, if prior notification to or approval of any Governmental Entity is required in connection with such purchase, Parent and the Company shall promptly file the required notice or application for approval and shall cooperate in the expeditious filing of such notice or application, and the period of time that otherwise would run pursuant to this sentence shall run instead from the date on which, as the case may be, (A) any required notification period has expired or been terminated, or (B) any required approval has been obtained, and in either event, any requisite waiting period has expired or been terminated. SECTION 1.5. Adjustments Upon Share Issuances, Changes in -------------------------------------------- Capitalization, etc. (a) In the event of any change in the Common Stock or in - - -------------------- the number of outstanding shares of Common Stock by reason of a stock dividend, split-up, recapitalization, combination, exchange of shares or similar transaction or any other change in the corporate or capital structure of the Company (including, without limitation, the declaration or payment of an extraordinary dividend of cash, securities or other property), the type and number of the shares to be issued by the Company upon exercise of the Topping Fee Option granted hereunder shall be adjusted appropriately, and proper provision shall be made in the agreements governing such transaction, so that Parent shall receive upon exercise of such Option the number and class of shares or other securities or property that Parent would have received with respect to the Common Stock if such Option had been exercised immediately prior to such event or the record date therefor, as applicable, and such Common Stock -4- had elected to the fullest extent it would have been permitted to elect, to receive such securities, cash or other property. (b) In the event that the Company shall enter into an agreement (i) to consolidate with or merge into any person, other than Parent or one of its subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Parent or one of its subsidiaries, to merge into the Company and the Company shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Company's Common Stock shall be changed into or exchanged for stock or other securities of the Company or any other person or cash or any other property, or the then outstanding shares of Company's Common Stock shall after such merger represent less than 50% of the outstanding shares and share equivalents of the surviving corporation, or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Parent or one of its subsidiaries, then, and in each such case, proper provision shall be made in the agreements governing such transaction so that Parent shall receive upon exercise of the Topping Fee Option granted hereunder the number and class of shares or other securities or property that Parent would have received with respect to the Common Stock if such Option had been exercised immediately prior to such transaction or the record date therefor, as applicable, and such Common Stock had elected to the fullest extent it would have been permitted to elect, to receive such securities, cash or other property. (c) The rights of Parent under this Section 1.5 shall be in addition to, and shall in no way limit, its rights against the Company for any breach of the Merger Agreement. (d) The provisions of this Agreement shall apply with appropriate adjustments to any securities for which the Topping Fee Option granted hereunder becomes exercisable pursuant to this Section 1.5. ARTICLE II CLOSING SECTION 2.1. Conditions to Closing. The obligation of the Company to --------------------- deliver any shares of Common Stock to Parent upon the exercise of the Top-Up Option or the Topping Fee Option, as applicable, is subject to the following conditions: (a) All waiting periods, if any, under the HSR Act applicable to the issuance of Common Stock pursuant to the Top-Up Option or the Topping Fee Option hereunder shall have expired or have been terminated; and (b) There shall be no preliminary or permanent injunction or other final, non-appealable judgment by a court of competent jurisdiction preventing or prohibiting the exercise of the Top-Up Option or the Topping Fee Option, as applicable, or the delivery of the shares of Common Stock in respect of any such exercise. -5- SECTION 2.2. Closing. (a) At any Top-Up Closing or Topping Fee ------- Closing, (i) the Company shall deliver to the Purchaser or Parent, as applicable, a certificate or certificates evidencing the applicable number of shares of Common Stock being purchased in proper form for transfer upon exercise of the Top-Up Option or the Topping Fee Option, as applicable, in the denominations designated by the Purchaser or Parent in the Top-Up Exercise Notice or the Topping Fee Exercise Notice, in each case as applicable, and, if the Topping Fee Option has been exercised in part, a new Topping Fee Option evidencing the rights of Parent to purchase the balance of the shares of Common Stock subject thereto, and (ii) the Purchaser or Parent shall purchase the shares of Common Stock from the Company at the Offer Price or the Exercise Price, as applicable. Payment by the Purchaser of the Offer Price or Parent of the Exercise Price may be made, at the option of the Purchaser or Parent, by delivery of (i) cash by wire transfer, or (ii) a promissory note, (adequately secured by collateral other than the Shares acquired), in form and substance reasonably satisfactory to the Company and in a principal face amount equal to the aggregate amount of the applicable purchase price, which promissory note shall bear interest at a rate equal to 6% per annum (or such level of interest rate that is adequate to prevent imputed income under applicable regulations) and shall be payable in full with accrued interest upon the earlier to occur of (i) five (5) business days after the applicable Closing hereunder, and (ii) two (2) business days following written demand given by the Company to the Purchaser or Parent at any time following the Effective Time. (b) The Company shall pay all expenses, and any and all federal, state and local taxes and other charges, that may be payable in connection with the preparation, issuance and delivery of stock certificates under this Section 2.2. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent (except as otherwise may be prohibited, restricted or limited by law or any rule or regulation of a regulatory entity) as follows: SECTION 3.1. Organization; Authority Relative to this Agreement. The -------------------------------------------------- Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California. The Company has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of the Company. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due and valid authorization, execution and delivery by Parent, constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and by general equitable principles. -6- SECTION 3.2. Authority to Issue Shares. The Company has taken all ------------------------- necessary corporate action to authorize and reserve and permit it to issue, and at all times from the date hereof through the Top-Up Termination Date and the Topping Fee Termination Date shall have reserved, the shares of Common Stock issuable pursuant to this Agreement. All of the shares of Common Stock issuable pursuant to this Agreement, upon their issuance and delivery in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable, will be delivered free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Purchaser's or Parent's, as applicable, voting rights, charges, adverse rights and other encumbrances of any nature whatsoever (other than this Agreement) and will not be subject to any preemptive rights. SECTION 3.3. No Conflict; Required Filings and Consents. (a) The ------------------------------------------ execution and delivery of this Agreement by the Company does not, and the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby will not, (i) conflict with or violate the articles of incorporation or bylaws of the Company, (ii) assuming that all consents and filings described in Section 3.3(b) have been obtained or made, conflict with or violate any law applicable to the Company or by which any property or asset of the Company is bound or affected, or (iii) result in any violation pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company is a party or by which the Company or any of its properties may be bound or affected. (b) No consent of, or filing with, any Governmental Entity is required by the Company in connection with the execution and delivery of this Agreement, the performance by the Company of its obligations hereunder or the consummation by the Company of the transactions contemplated hereby, except for (i) compliance with the HSR Act, and (ii) consents or filings the failure of which to be obtained or made would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby or the performance by the Company of any of its obligations hereunder. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Company as follows: SECTION 4.1. Organization; Authority Relative to this Agreement. -------------------------------------------------- Parent is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation. Parent has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Parent. This Agreement has been duly and validly executed and delivered by Parent and, assuming the due and valid authorization, -7- execution and delivery by the Company, constitutes a valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally, and by general equitable principles. SECTION 4.2. No Conflict; Required Filings and Consents. (a) The ------------------------------------------ execution and delivery of this Agreement by Parent do not, and the performance by Parent of its obligations hereunder and the consummation of the transactions contemplated hereby will not, (i) conflict with or violate the articles of incorporation or bylaws or equivalent organizational documents of Parent, (ii) assuming that all consents and filings described in Section 4.2(b) have been obtained or made, conflict with or violate any law applicable to Parent or by which any property or asset of Parent is bound or affected or (iii) result in any violation pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Parent is a party or by which Parent or any of its properties may be bound or affected. (b) No consent of, or filing with, any Governmental Entity is required by Parent in connection with the execution and delivery of this Agreement, the performance by Parent of any of its obligations hereunder or the consummation by Parent of the transactions contemplated hereby, except for (i) compliance with the HSR Act, and (ii) consents or filings the failure of which to be obtained or made would not, individually or in the aggregate, prevent or materially delay the consummation of the transactions contemplated hereby or the performance by Parent of any of its obligations hereunder. SECTION 4.3. Investment Intent. The purchase of shares of Common ----------------- Stock pursuant to this Agreement is for the account of the Purchaser or Parent, as applicable, for the purpose of investment and not with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations -------------- promulgated thereunder. ARTICLE V ADDITIONAL AGREEMENTS SECTION 5.1. Registration Rights; Listing of Shares. Upon the -------------------------------------- written request of Parent, the Company agrees to effect up to two registrations under the Securities Act and any applicable state securities laws covering any part or all of the Topping Fee Option (provided that only shares of Common Stock will be distributed to the public) and any part or all of the shares of Common Stock purchased pursuant to the Topping Fee Option, which registration shall be continued in effect for 90 days, unless, in the written opinion of counsel to the Company, addressed to Parent and reasonably satisfactory in form and substance to counsel for Parent, such registration is not required for the sale and distribution of such shares of Common Stock in the manner contemplated by Parent. The registration effected under this paragraph shall be effected at the Company's expense except for any underwriting commissions. If shares of Common Stock are offered in a firm -8- commitment underwriting, the Company will provide reasonable and customary indemnification to the underwriters. In the event of any demand for registration pursuant to this paragraph, the Company may delay the filing of the registration statement for a period of up to 90 days if, in the good faith judgment of the Board of Directors of the Company, such delay is necessary in order to avoid interference with a planned material transaction involving the Company. In the event the Company effects a registration of its Common Stock for its own account or for any other shareholder of the Company (other than on Form S-4 or Form S-8, or any successor or similar form), it shall allow Parent to participate in such registration; provided, however, that if the managing underwriters in such -------- ------- offering advise the Company in writing that in their opinion the number of shares of Common Stock requested to be included in such registration exceeds the number which can be sold in such offering, the Company will include the securities requested to be included therein pro rata among the holders --- ---- requesting to be included. SECTION 5.2. Restrictive Legends. Certificates evidencing the ------------------- shares of Common Stock to be delivered hereunder may include legends legally required including the legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF JANUARY 11, 1999, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER UPON REQUEST. It is understood and agreed that (i) the reference to the resale restrictions of the Securities Act and state securities or blue sky laws in the foregoing legend shall be removed by delivery of substitute certificate(s) without such reference if the Company or Parent, as the case may be, shall have delivered to the other party a copy of a letter from the staff of the Securities and Exchange Commission, or an opinion of counsel, in form and substance reasonably satisfactory to the other party, to the effect that such legend is not required for purposes of the Securities Act or such laws; (ii) the reference to the provisions of this Agreement in the foregoing legend shall be removed by delivery of substitute certificate(s) without such reference if the shares of Common Stock have been sold or transferred in compliance with the provisions of this Agreement and under circumstances that do not require the retention of such reference; and (iii) the legend shall be removed in its entirety if the conditions in the preceding clauses (i) and (ii) are both satisfied. In addition, such certificates shall bear any other legend as may be required by law. Certificates representing shares sold in a registered public offering pursuant to Section 5.1 shall not be required to bear the legend set forth in this Section 5.2. -9- SECTION 5.3. Certain Repurchases. (a) Upon written notice to the ------------------- Company by Parent (the "Repurchase Notice") at any time prior to the Topping Fee ----------------- Termination Date (the "Repurchase Period"), the Company and its successors in ----------------- interest shall repurchase from Parent all or any portion of (i) the Topping Fee Option, as specified by Parent, at the Option Repurchase Price set forth in Section 5.3(b)(i), or (ii) the shares of the Company's Common Stock purchased by Parent pursuant to the Topping Fee Option, as specified by Parent, at the Share Repurchase Price set forth in Section 5.3(b)(iii). (b) For purposes of this Section 5.3, the following definitions shall apply: (i) "Option Repurchase Price" shall mean (A) the difference between the ----------------------- Option Repurchase Market/Offer Price (as defined below) for shares of the Company's Common Stock as of the date of the applicable Repurchase Notice and the Exercise Price, multiplied by (B) the number of shares of the Company's Common Stock purchasable pursuant to the Topping Fee Option or the portion thereof covered by the applicable Repurchase Notice, but only if the Option Repurchase Market/Offer Price is greater than the Exercise Price; (ii) "Option ------ Repurchase Market/Offer Price" shall mean, as of any date, the higher of (A) the - - ----------------------------- highest price per share offered as of such date pursuant to any tender or exchange offer or other offer with respect to a business combination offer involving the Company or any of its material subsidiaries as the target party which was made prior to such date and not terminated or withdrawn as of such date, and (B) the Fair Market Value (as defined below) of the Company's Common Stock as of such date; (iii) "Share Repurchase Price" shall mean the product of ---------------------- (A) the sum of (1) the Exercise Price paid by Parent per share of the Company's Common Stock acquired pursuant to the Topping Fee Option, and (2) if the Share Repurchase Market/Offer Price (as defined below) is greater than the Exercise Price, the difference between the Share Repurchase Market/Offer Price and the Exercise Price, and (B) the number of shares of the Company's Common Stock to be repurchased pursuant to this Section 5.3; (iv) "Share Repurchase Market/Offer ----------------------------- Price" shall mean, as of any date, the higher of (A) the highest price per share - - ----- offered pursuant to a tender or exchange offer or other business combination offer involving the Company as the target party during the Repurchase Period prior to the delivery by Parent of a Repurchase Notice, and (B) the Fair Market Value (as defined below) of the Company's Common Stock as of such date; (v) "Fair Market Value" shall mean, with respect to any security, the per share - - ------------------ average of the last sale prices on The Nasdaq National Market (or such other national stock exchange or national market system as shall then be the primary trading market for such security) for the ten (10) trading days immediately preceding the applicable date. (c) In the event that Parent exercises its rights under this Section 5.3, the Company shall, within ten (10) business days thereafter, pay the required amount to Parent in immediately available funds, and Parent shall surrender to the Company the Topping Fee Option or any certificate or certificates evidencing the shares of the Company's Common Stock purchased by Parent pursuant thereto, and Parent shall warrant that it has sole beneficial ownership of the Topping Fee Option or such shares and that the Topping Fee Option or such shares are then free and clear of all claims, liens, charges, encumbrances and security interests of any nature whatsoever. -10- SECTION 5.4. Best Efforts. Subject to the terms and conditions of ------------ this Agreement, the Parent and the Company shall each use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Each party shall promptly consult with the other and provide any necessary information and material with respect to all filings made by such party with any governmental or regulatory authority in connection with this Agreement or the transactions contemplated hereby. SECTION 5.5. Further Assurances. The Company shall perform such ------------------ further acts and execute such further documents and instruments as may reasonably be required to vest in the Purchaser and Parent the power to carry out the provisions of this Agreement. If the Purchaser or Parent shall exercise any applicable Option granted hereunder, or any portion thereof, in accordance with the terms of this Agreement, the Company shall, without additional consideration, execute and deliver all such further documents and instruments and take all such further action as the Purchaser or Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement. SECTION 5.6. Survival. All of the representations, warranties and -------- covenants contained herein shall survive a Closing hereunder and shall be deemed to have been made as of the date hereof and as of the date of each Closing. ARTICLE VI MISCELLANEOUS SECTION 6.1. Amendment. This Agreement may not be amended except by --------- an instrument in writing signed by the parties hereto. SECTION 6.2. Waiver. Any party hereto may (a) extend the time for or ------ waive compliance with the performance of any obligation or other act of any other party hereto or (b) waive any inaccuracy in the representations and warranties contained herein or in any document delivered pursuant hereto. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. SECTION 6.3. Fees and Expenses. Subject to Section 2.2(b) and except ----------------- as provided in Section 9.1 of the Merger Agreement, all costs, fees and expenses incurred in connection with this Agreement shall be paid by the party incurring such expenses; provided, that if any legal action is instituted to enforce or -------- interpret the terms of this Agreement, the prevailing party in such action shall be entitled, in addition to any other relief to which the party is entitled, to reimbursement of its actual attorneys fees. -11- SECTION 6.4. Notices. All notices, requests, claims, demands and ------- other communications hereunder shall be in writing and shall be deemed given if delivered personally or sent by telecopy or by overnight courier (providing proof of delivery) to the respective parties at their addresses as specified in Section 9.4 of the Merger Agreement. SECTION 6.5. Severability. If any term or other provision of this ------------ Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner to the fullest extent permitted by applicable law in order that the transactions contemplated hereby may be consummated as originally contemplated to the fullest extent possible. SECTION 6.6. Assignment; Binding Effect; Benefit. Neither this ----------------------------------- Agreement nor any of the rights, interests or obligations hereunder shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties hereto without the prior written consent of the other parties, except that Parent or the Purchaser may assign, in its discretion, any or all of its rights, interests and obligations hereunder to any direct or indirect subsidiary of Parent (or, in the case of the Purchaser, to Parent), but no such assignment shall relieve Parent or the Purchaser of any of its respective obligations hereunder. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. SECTION 6.7. Governing Law. This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of California, without giving effect to the principles of conflicts of laws thereof. SECTION 6.8. Headings. The descriptive headings contained in this -------- Agreement are included for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 6.9. Counterparts. This Agreement may be executed and ------------ delivered (including by facsimile transmission) in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. -12- SECTION 6.10. Entire Agreement. This Agreement constitutes the ---------------- entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. SECTION 6.11. Specific Performance. Each of the parties hereto -------------------- acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law, and (ii) shall be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement. SECTION 6.12 Third-party beneficiary. On its formation, the ----------------------- Purchaser shall be an intended third-party beneficiary of the provisions of this Agreement. -13- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first written above. COMPAQ COMPUTER CORPORATION By: /s/ Earl L. Mason ________________________________ Name: Earl L. Mason Title: Senior Vice President and Chief Financial Officer SHOPPING.COM By: /s/ Frank W. Denny ________________________________ Name: Frank W. Denny Title: President and Chief Executive Officer -14- -----END PRIVACY-ENHANCED MESSAGE-----