Buy.com - BuyGolf.com: Agreement and Plan of Merger


                AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

                                 by and among

                                 BUY.COM INC.,

                       BGLF Acquisition Corporation and

                               BUYGOLF.COM INC.


 
 
                               TABLE OF CONTENTS
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ARTICLE I THE MERGER...............................................     2
     1.1    The Merger.............................................     2
     1.2    Closing; Effective Time................................     2
     1.3    Effect of the Merger...................................     2
     1.4    Certificate of Incorporation; Bylaws...................     2
     1.5    Directors and Officers.................................     2
     1.6    Effect on Capital Stock................................     2
     1.7    No Further Ownership Rights in BuyGolf Common Stock....     3
     1.8    Options to Purchase BuyGolf Common Stock...............     3
     1.9    Taking of Necessary Action; Further Action.............     4
     1.10   Surrender of Certificates..............................     4
     1.11   Consent to Merger; Waiver of Dissenters'Rights.........     5
     1.12   Lost, Stolen or Destroyed Certificates.................     5
     1.13   Minute Books, Stock Ledger and Other Corporate Records.     5
     1.14   Legends on BC Stock....................................     5

ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS......     6
     2.1    Organization, Good Standing and Qualification..........     6
     2.2    Capitalization; Voting Rights..........................     6
     2.3    Authority; No Violation................................     7
     2.4    Consents and Approvals.................................     8
     2.5    Financial Statements...................................     8
     2.6    Absence of Undisclosed Liabilities.....................     9
     2.7    Agreements; Action.....................................     9
     2.8    Obligations to Related Parties.........................     9
     2.9    Title to Properties and Assets; Liens, Etc.............    10
     2.10   Patents and Trademarks.................................    10
     2.11   Compliance with Other Instruments......................    10
     2.12   Litigation.............................................    11
     2.13   Tax Returns and Payments...............................    11
     2.14   Employees..............................................    11
     2.15   Nondisclosure and Developments Agreements..............    12
     2.16   Registration Rights....................................    12
     2.17   Compliance with Laws; Permits..........................    12
     2.18   Absence of Breaches or Defaults........................    12
     2.19   Brokers................................................    12
     2.20   No Misstatements.......................................    13
     2.21   Environmental and Safety Laws..........................    13
     2.22   Year 2000 Compliance...................................    13
     2.23   Securities Law Exemption...............................    13

ARTICLE III REPRESENTATIONS AND WARRANTIES OF BC AND MERGER
            SUB....................................................    14

 


 

 
     3.1    Organization, Good Standing and Qualification..........    14
     3.2    Capitalization; Voting Rights..........................    15
     3.3    Authority; No Violation................................    15
     3.4    Consents and Approvals.................................    16
     3.5    Financial Statements...................................    16
     3.6    Absence of Undisclosed Liabilities.....................    16
     3.7    Agreements; Action.....................................    16
     3.8    Obligations to Related Parties.........................    17
     3.9    Title to Properties and Assets; Liens, Etc.............    17
     3.10   Patents and Trademarks.................................    18
     3.11   Compliance with Other Instruments......................    18
     3.12   Litigation.............................................    18
     3.13   Tax Returns and Payments...............................    19
     3.14   Employees..............................................    19
     3.15   Nondisclosure and Developments Agreements..............    19
     3.16   Registration Rights....................................    19
     3.17   Compliance with Laws; Permits..........................    20
     3.18   Absence of Breaches or Defaults........................    20
     3.19   Brokers................................................    20
     3.20   No Misstatements.......................................    20
     3.21   Environmental and Safety Laws..........................    20
     3.22   Year 2000 Compliance...................................    21
     3.23   Tax-Free Organization..................................    21

ARTICLE IV ADDITIONAL AGREEMENTS...................................    21
     4.1    Information Statement; Restricted Securities...........    21
     4.2    Stockholder Approval...................................    22
     4.3    Access to Information..................................    22
     4.4    Expenses...............................................    23
     4.5    Public Disclosure......................................    23
     4.6    Approvals..............................................    23
     4.7    Notification of Certain Matters........................    23
     4.8    Additional Documents and Further Assurances............    23
     4.9    Maintenance of Business................................    24
     4.10   Conduct of Business....................................    24
     4.11   Confidentiality........................................    25
     4.12   "Market Stand-Off"Agreement............................    26
     4.13   BuyGolf's 1998 Stock Option Plan.......................    26
     4.14   Necessary Filings......................................    27

ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS OF BC AND
           MERGER SUB..............................................    27
     5.1    Certificates for BuyGolf Common Stock..................    27
     5.2    Representations and Warranties True....................    27
     5.3    Covenants Performed....................................    27
     5.4    Certificate............................................    27
     5.5    No Violations; No Actions..............................    27

ii 5.6 Proceedings and Documents.............................. 27 5.7 Delivery of Documents.................................. 28 5.8 Required Consents...................................... 28 5.9 Private Placement...................................... 28 5.10 Tax-Free Reorganization................................ 28 5.11 Limitation on Dissent.................................. 28 ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYGOLF AND THE STOCKHOLDERS........................................... 28 6.1 Representations and Warranties True.................... 28 6.2 Covenants Performed.................................... 28 6.3 Certificate............................................ 28 6.4 No Violations; No Actions.............................. 28 6.5 Proceedings and Documents.............................. 29 6.6 Delivery of Documents.................................. 29 6.7 Required Consents...................................... 29 ARTICLE VII CLOSING................................................ 29 7.1 Time and Place......................................... 29 7.2 Deliveries of the Stockholders......................... 29 7.3 Deliveries of BC....................................... 31 7.4 Certificate of Merger.................................. 32 ARTICLE VIII INDEMNIFICATION....................................... 32 8.1 Indemnification by the Stockholders.................... 32 8.2 Indemnification by BC, Merger Sub and Surviving Corporation............................................ 32 8.3 Indemnification Procedure for Claims................... 33 8.4 Defense by Indemnifying Party.......................... 33 8.5 Arbitration............................................ 34 8.6 Limits on Indemnification.............................. 34 ARTICLE IX GENERAL PROVISIONS...................................... 34 9.1 Survival of Representations, Warranties and Agreements. 34 9.2 Notices................................................ 35 9.3 Governing Law.......................................... 35 9.4 Severability........................................... 36 9.5 Assignment; Binding Effect; Benefit.................... 36 9.6 Headings............................................... 36 9.7 Entire Agreement....................................... 36 9.8 Counterparts........................................... 37 9.9 Waivers................................................ 37 9.10 Third Parties.......................................... 37 9.11 Publicity.............................................. 37 9.12 Schedules.............................................. 37
iii AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ----------------------------------------------- THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement") --------- is entered into as of October 25, 1999, by and among BUY.COM INC., a Delaware corporation ("BC"), BGLF Acquisition Corporation a Delaware corporation and -- wholly owned subsidiary of BC ("Merger Sub"), BuyGolf.com Inc., a Delaware ---------- corporation ("BuyGolf"), and each of BuyGolf's current stockholders listed on ------- Schedule A hereto (individually, a "Stockholder," collectively, the ---------- ----------- "Stockholders"). ------------ RECITALS A. The Boards of Directors of BC and BuyGolf believe it is in the best interest of their respective companies and the stockholders of their respective companies that BuyGolf and Merger Sub combine into a single company through the statutory merger of Merger Sub with and into BuyGolf (the "Merger") ------ and, in furtherance thereof, have approved the Merger. B. BuyGolf is a duly incorporated Delaware corporation; its authorized capital stock consists of: (i) 10,000,000 shares of common stock, $0.0001 par value, 8,367,166 of which are issued and outstanding; and (ii) 5,000,000 shares of preferred stock, $0.0001 par value, none of which are issued and outstanding (collectively, the outstanding shares of Common Stock shall be referred to as the "BuyGolf Common Stock"). -------------------- C. Pursuant to the Merger, among other things, all BuyGolf Common Stock owned by the Stockholders, as set forth on Schedule A hereto, shall be ---------- converted into the right to receive shares of BC Common Stock, $.0001 par value ("BC Stock"), at the rate set forth herein. -------- D. There are currently outstanding options to purchase 449,000 shares of Common Stock of BuyGolf (the "Outstanding Options"), and all of the Outstanding Options are owned by the optionholders as set forth on Schedule B ---------- attached hereto. E. BC shall assume the Outstanding Options to purchase shares of BuyGolf Common Stock. F. BuyGolf, BC and Merger Sub desire to make certain representations and warranties and other agreements in connection with the Merger. G. BC, Merger Sub and BuyGolf intend that the Merger shall constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code, and in furtherance thereof intend that this Agreement shall be a "Plan of Reorganization" within the meaning of Sections 354(a) and 361(a) of the Internal Revenue Code. NOW, THEREFORE, in consideration of the covenants and representations set forth herein, and for other good and valuable consideration, the parties agree as follows: 1 ARTICLE I THE MERGER ---------- 1.1 The Merger. At the Effective Time (as defined in Section 1.2) ---------- and subject to and upon the terms and conditions of this Agreement, Merger Sub shall be merged with and into BuyGolf, the separate corporate existence of Merger Sub shall cease and BuyGolf shall continue as the surviving corporation. BuyGolf as the surviving corporation after the Merger is hereinafter sometimes referred to as the "Surviving Corporation." --------------------- 1.2 Closing; Effective Time. The closing of the transactions ----------------------- contemplated hereby (the "Closing") shall take place as soon as practicable ------- after the satisfaction or waiver of each of the conditions set forth in Articles V and VI hereof or at such other time as the parties hereto agree (the "Closing Date"). The Closing shall take place at the offices of Brobeck, ------------ Phleger & Harrison LLP, 38 Technology Drive, Irvine, California 92618, or at such other location as the parties hereto agree. In connection with the Closing, the parties hereto shall cause the Merger to be consummated by properly executing and filing the Certificate of Merger in the form attached hereto as Exhibit A (the "Certificate of Merger") with the Delaware Secretary of State in --------- --------------------- accordance with the applicable provisions of the Delaware General Corporation Law (the "Delaware Law"). The Merger shall become effective upon the filing of ------------ the Certificate of Merger with the Delaware Secretary of State (the time of such filing being the "Effective Time"). -------------- 1.3 Effect of the Merger. At the Effective Time, the effect of the -------------------- Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of Delaware Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of BuyGolf and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of BuyGolf and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation. 1.4 Certificate of Incorporation; Bylaws. ------------------------------------ (a) At the Effective Time, the Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by Delaware Law and such Certificate of Incorporation. (b) The Bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws of the Surviving Corporation until thereafter amended. 1.5 Directors and Officers. At the Effective Time, the directors and ---------------------- officers of the Merger Sub shall become the directors and officers of the Surviving Corporation, until their respective successors are duly elected or appointed and qualified. 1.6 Effect on Capital Stock. By virtue of the Merger and without any ----------------------- action on the part of Merger Sub, BuyGolf or the holders of any of the following securities: (a) Conversion of BuyGolf Common Stock. At the Effective Time, ---------------------------------- each share of BuyGolf Common Stock issued and outstanding immediately prior to the Effective Time (other than the Outstanding Options) will be canceled and extinguished and will be 2 converted automatically into the right to receive 0.520 validly issued, fully paid and non-assessable shares of BC Stock (the "Exchange Ratio"). -------------- (b) Assumption of Outstanding Options. At the Effective Time, --------------------------------- BuyGolf's 1998 Stock Option Plan (the "BuyGolf Stock Option Plan") and all Outstanding Options to purchase BuyGolf Common Stock then outstanding under the BuyGolf Stock Option Plan shall be assumed by BC in accordance with Sections 1.8 and 4.13 of this Agreement. Pursuant to this assumption of the Outstanding Options, each optionholder of the Company shall after the Closing hold an option to purchase the number of shares of the BC's Common Stock set forth opposite such optionholder's name on Schedule B. Each optionholder shall enter into an ---------- Option Assumption Agreement which shall govern the assumption of options by BC. (c) Cancellation of BC-Owned and BuyGolf-Owned Stock. Each ------------------------------------------------ share of BuyGolf Common Stock owned by BC or BuyGolf or any subsidiary of BC or BuyGolf immediately prior to the Effective Time shall be automatically canceled and extinguished without any conversion thereof and without any further action on the part of BC, Merger Sub or BuyGolf. (d) Capital Stock of Merger Sub. At the Effective Time, each --------------------------- share of Common Stock, $.0001 par value, of Merger Sub ("Merger Sub Common Stock") issued and outstanding immediately prior to the ----------------------- Effective Time shall be converted into and exchanged for one validly issued, fully paid and nonassessable share of Common Stock of the Surviving Corporation. Each stock certificate of Merger Sub evidencing ownership of any such shares shall evidence ownership of such shares of capital stock of the Surviving Corporation. (e) Adjustments to Exchange Ratio. The Exchange Ratio shall be ----------------------------- adjusted to reflect fully the effect of any stock split, reverse split, stock dividend (including any dividend or distribution of securities convertible into BC Stock or BuyGolf Common Stock), reorganization, recapitalization or other like change with respect to BC Stock or BuyGolf Common Stock occurring after the date hereof and prior to the Effective Time. (f) Fractional Shares. No fraction of a share of BC Stock will ----------------- be issued in the Merger and the number of shares of BC Stock issuable to a Stockholder hereunder shall be rounded upward to the nearest whole share of BC Stock. 1.7 No Further Ownership Rights in BuyGolf Common Stock. All shares --------------------------------------------------- of BC Stock issued upon the surrender for exchange of shares of BuyGolf Common Stock in accordance with the terms hereof shall be deemed to have been issued in full satisfaction of all rights pertaining to such shares of BuyGolf Common Stock, and there shall be no further registration of transfers on the records of the Surviving Corporation of shares of BuyGolf Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates (as defined below) are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article I. 1.8 Options to Purchase BuyGolf Common Stock. At the Effective Time, ---------------------------------------- each option granted by BuyGolf to purchase shares of BuyGolf Common Stock (each, a "BuyGolf Stock Option") which is outstanding and unexercised immediately prior -------------------- to the Effective Time shall be assumed by BC and converted into an option to purchase shares of BC 3 Stock in such number and at such exercise price as provided below and otherwise having the same terms and conditions as in effect immediately prior to the Effective Time (except to the extent that such terms, conditions and restrictions may be altered in accordance with their terms as a result of the Merger): (a) the number of shares of BC Stock to be subject to the new option shall be equal to the product of (i) the number of shares of BuyGolf Common Stock subject to the original option and (ii) the Exchange Ratio; (b) the exercise price per share of BC Stock under the new option shall be equal to the quotient of (i) the exercise price per share of BuyGolf Common Stock under the original option divided by (ii) the Exchange Ratio; and (c) upon each exercise of options by a holder thereof, the aggregate number of shares of BC Stock deliverable upon such exercise shall be rounded down, if necessary, to the nearest whole share and the aggregate exercise price shall be rounded up, if necessary, to the nearest cent. The adjustments provided herein with respect to any options which are "incentive --------- stock options" (as defined in Section 422 of the Code) shall be effected in a ------------- manner consistent with the requirements of Section 424(a) of the Code. 1.9 Taking of Necessary Action; Further Action. If, at any time after ------------------------------------------ the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Corporation with full right, title and possession to all assets, property, rights, privileges, powers and franchises of BuyGolf and Merger Sub, the officers and directors of BuyGolf and Merger Sub are fully authorized in the name of their respective corporations or otherwise to take, and will take, all such lawful and necessary action, so long as such action is not inconsistent with this Agreement. 1.10 Surrender of Certificates. ------------------------- (a) Exchange Procedures. Promptly after the Effective Time, each ------------------- holder of record of a certificate or certificates ("Certificates") which ------------ immediately prior to the Effective Time represented outstanding shares of BuyGolf Common Stock, whose shares were converted into the right to receive shares of BC Stock, shall surrender such Certificates (duly endorsed in favor of BC or accompanied by stock powers duly executed in favor of and in a form reasonably acceptable to BC and its counsel, free from any charge, lien, encumbrance or adverse claim of any kind whatsoever) in exchange for certificates representing shares of BC Stock (and cash in lieu of fractional shares). Upon surrender of a Certificate for cancellation to BC, the holder of such Certificate shall be entitled to receive in exchange therefor a certificate representing the number of whole shares of BC Stock which such holder has the right to receive pursuant to Section 1.6 of this Agreement, and the Certificate so surrendered shall forthwith be canceled. Until so surrendered, each outstanding Certificate that, prior to the Effective Time, represented shares of BuyGolf Common Stock will be deemed from and after the Effective Time, for all corporate purposes, other than the payment of dividends, to evidence the ownership of the number of full shares of BC Stock into which such shares of BuyGolf Common Stock shall have been so converted in accordance with Article I hereof. 4 (b) Distributions With Respect to Unexchanged Shares. No ------------------------------------------------ dividends or other distributions with respect to BC Stock with a record date after the Effective Time will be paid to the holder of any unsurrendered Certificate with respect to the shares of BC Stock represented thereby until the holder of record of such Certificate shall surrender such Certificate. Subject to applicable law, following surrender of any such Certificate, there shall be paid to the record holder of the certificates representing whole shares of BC Stock issued in exchange therefor, without interest, at the time of such surrender, the amount of any such dividends or other distributions with a record date after the Effective Time theretofore payable (but for the provisions of this Section 1.10(b)) with respect to such shares of BC Stock. (c) Transfers of Ownership. If any certificate for shares of BC ---------------------- Stock is to be issued in a name other than that in which the Certificate surrendered in exchange therefor is registered, it will be a condition of the issuance thereof that the Certificate so surrendered will be properly endorsed and otherwise in proper form for transfer and that the person requesting such exchange will have paid to BC or any agent designated by it any transfer or other taxes required by reason of the issuance of a certificate for shares of BC Stock in any name other than that of the registered holder of the Certificate surrendered, or established to the satisfaction of BC or any agent designated by it that such tax has been paid or is not payable. (d) No Liability. Notwithstanding anything to the contrary in ------------ this Section 1.10, neither the Surviving Corporation nor any party hereto shall be liable to any person for any amount properly paid to a public official pursuant to any applicable abandoned property, escheat or similar law. 1.11 Consent to Merger; Waiver of Dissenters' Rights. By their ----------------------------------------------- execution of this Agreement, each Stockholder (a) consents to the Merger and to the taking of stockholder action to approve the Merger without a meeting; (b) acknowledges that he or it is aware of his or its right to dissent to the Merger and demand payment for shares of BuyGolf Common Stock in accordance with Delaware Law; and (c) waives such rights to dissent and demand payment with respect to the Merger. 1.12 Lost, Stolen or Destroyed Certificates. In the event any -------------------------------------- Certificates shall have been lost, stolen or destroyed, BC shall issue in exchange for such lost, stolen or destroyed Certificates, upon the making of an affidavit of that fact by the holder thereof, such shares of BC Stock as may be required pursuant to Section 1.6; provided, however, that BC may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against BC or the Surviving Corporation or with respect to the Certificates alleged to have been lost, stolen or destroyed. 1.13 Minute Books, Stock Ledger and Other Corporate Records. At the ------------------------------------------------------ Closing, BuyGolf shall deliver to BC, in addition to those items set forth in Section 7.2, the minute books, stock ledger and other corporate records of BuyGolf. 1.14 Legends on BC Stock. In addition to any other legend that may be ------------------- required by federal or state securities laws, each certificate for BC Stock that is issued hereunder shall bear a legend in substantially the following form: 5 "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO SUCH SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH OFFER, SALE, TRANSFER, PLEDGE OR HYPOTHECATION IS IN FULL COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, OR UNLESS SOLD IN COMPLIANCE WITH RULE 144 UNDER SUCH ACT." ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS -------------------------------------------------- Except as set forth on the Disclosure Schedule delivered to BC, which has been executed by an officer of BuyGolf on behalf of the Stockholders (the "BuyGolf Disclosure Schedule"), each of the Stockholders jointly and severally --------------------------- represent and warrant to BC as follows: 2.1 Organization, Good Standing and Qualification. BuyGolf is a --------------------------------------------- corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. BuyGolf has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement and to carry out the provisions of this Agreement, and to carry on its business as presently conducted and as presently proposed to be conducted. BuyGolf is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) make such qualifications necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on BuyGolf or its business. BuyGolf owns no equity securities of any other corporation, limited partnership or similar entity. BuyGolf is not a participant in any joint venture, partnership or similar arrangement. BuyGolf has made available to BC true, correct and complete copies of BuyGolf's Certificate of Incorporation and Bylaws, each as amended to date and presently in effect. 2.2 Capitalization; Voting Rights. ----------------------------- (a) The authorized capital stock of BuyGolf, immediately prior to the Closing, will consist of (a) 10,000,000 shares of Common Stock, 8,367,166 of which are issued and outstanding, 499,000 shares of which are currently reserved for issuance pursuant to outstanding option agreements, and 401,000 of which will be reserved in the future for issuance to key employees, consultants and others affiliated with BuyGolf pursuant to stock grant, stock purchase and/or option plans or any other stock incentive program, arrangement or agreement approved by BuyGolf's Board of Directors and (b) 5,000,000 shares of Preferred Stock (the "Preferred Stock"), none of which are issued and --------------- outstanding. All issued and outstanding shares of BuyGolf's Common Stock (i) have been duly authorized and validly issued, (ii) are fully paid 6 and nonassessable, (iii) are free of liens and encumbrances created by BuyGolf and (iv) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. The rights, preferences, privileges and restrictions of the BuyGolf Common Stock are as stated in BuyGolf's Certificate of Incorporation. Except for BuyGolf's Outstanding Options, there are no outstanding options, warrants, puts, calls, rights (including conversion or preemptive rights and rights of first refusal), or agreements of any kind for the purchase or acquisition from BuyGolf of any of its securities or other restrictions on the incidents of ownership or transfer created by statute, the charter documents of BuyGolf or any agreement to which BuyGolf is a party or by which it is bound. There are no amounts owed to any person by BuyGolf as a result of any repurchase or redemption by BuyGolf of its Common Stock. (b) Stockholders own all the BuyGolf Common Stock free and clear of all liens, encumbrances, rights, charges and assessments of every nature and no shares of BuyGolf Common Stock are subject to any restriction on transferability. Stockholders have not granted any option, warrant or right to purchase or acquire any of the BuyGolf Common Stock nor have Stockholders entered into any contract, agreement, commitment, understanding or arrangement relating to the BuyGolf Common Stock, or by which Stockholders are or may be bound or obligated to transfer or dispose of any of the BuyGolf Common Stock. No Stockholder has been married since formation of BuyGolf except to the persons signing Spousal Consents to this Agreement, a form of which is attached hereto as Exhibit B. --------- (c) Stockholders shall transfer to BC hereunder good and marketable legal and beneficial title to the BuyGolf Common Stock, free and clear of all liens, encumbrances, rights, charges and assessments of any nature whatsoever. (d) There are no outstanding proxies, stockholders' agreements, voting trusts or other agreements of any kind whatsoever restricting, controlling, directing or otherwise affecting the voting of the BuyGolf Common Stock. 2.3 Authority; No Violation. ----------------------- (a) BuyGolf has full 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 and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of BuyGolf. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly approved by stockholders representing one hundred percent of the outstanding shares of BuyGolf's capital stock. No other corporate proceeding on the part of BuyGolf is necessary to approve this Agreement and to consummate the transactions contemplated hereby. This Agreement and all other agreements and documents to be entered into in connection herewith have been duly and validly executed and delivered by BuyGolf and each of the Stockholders and (assuming due authorization, execution and delivery by BC) constitute valid and binding obligations of BuyGolf and each of the Stockholders, enforceable against BuyGolf and each of the Stockholders in accordance with their respective terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. 7 (b) Stockholders have the power and authority to enter into this Agreement and to perform their obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by the Stockholders and constitutes a legal, valid and binding obligation of the Stockholders, enforceable against the Stockholders in accordance with the terms hereof. (c) Neither the execution and delivery of this Agreement by BuyGolf and each of the Stockholders, nor the consummation by BuyGolf and each of the Stockholders of the transactions contemplated hereby, nor compliance by BuyGolf and each of the Stockholders with any of the terms or provisions hereof, will (i) violate any provision of the Certificate of Incorporation or Bylaws of BuyGolf, or (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to BuyGolf or any of the Stockholders or any of their respective properties or assets, or (iii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the properties or assets of BuyGolf or any of the Stockholders under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which BuyGolf or any of the Stockholders is a party, or by which BuyGolf or any of the Stockholders or any of their respective properties or assets may be bound or affected. 2.4 Consents and Approvals. No consents or approvals, orders or ---------------------- authorizations of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality (each a "Governmental Entity") or with any third party are necessary with respect to ------------------- BuyGolf or any of the Stockholders in connection with (1) the execution and delivery of this Agreement and (2) the consummation of the Merger and the other transactions contemplated hereby. 2.5 Financial Statements. BuyGolf has delivered true and correct -------------------- copies of its audited balance sheet as of December 31, 1998 and audited statements of operations, stockholders equity and cash flows for the one month period from inception and ended December 31, 1998 and the unaudited balance sheet ("Balance Sheet") as of June 30, 1999 (the "Balance Sheet Date") and the ------------- ------------------ unaudited statements of operations, stockholders' equity and cash flows for the six-month period ended June 30, 1999 (collectively, the "Financial Statements"). -------------------- Such Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout ---- the periods indicated and with each other (in the case of Financial Statements, subject to normal year-end adjustments and the absence of footnote disclosures). The Financial Statements (a) are complete and correct in all material respects, (b) are in accordance with BuyGolf's books and records, and (c) fairly present the financial condition and operating results of BuyGolf as of the dates, and for the periods indicated therein. Since the Balance Sheet Date, there has not been any material adverse change in the business, operations or financial condition of BuyGolf. Except as disclosed in the Financial Statements, BuyGolf is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation. The books and records of BuyGolf have been, and are being, maintained in accordance with GAAP and any other applicable legal and accounting requirements. 8 2.6 Absence of Undisclosed Liabilities. BuyGolf has no material ---------------------------------- obligations or liabilities of any nature (matured or unmatured, fixed or contingent) other than (i) those set forth or adequately provided for in the Balance Sheet, (ii) those incurred in the ordinary course of business and not required to be set forth in the Balance Sheet under GAAP, (iii) those incurred in the ordinary course of business since the Balance Sheet Date and consistent with past practice, and (iv) those incurred in connection with the execution of this Agreement. 2.7 Agreements; Action. ------------------ (a) Except for agreements explicitly contemplated hereby, there are no agreements, understandings or proposed transactions between BuyGolf and any of its officers, directors, affiliates or any affiliate thereof. (b) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which BuyGolf is a party or to its knowledge by which it is bound which may involve (i) obligations (contingent or otherwise) of, or payments to, BuyGolf (other than obligations of, or payments to, BuyGolf arising in the ordinary course of business), or (ii) the license of any patent, copyright, trade secret or other proprietary right to or from BuyGolf (other than licenses arising from the purchase of "off the shelf" or other standard products), or (iii) provisions restricting or affecting the development, manufacture or distribution of BuyGolf's products or services, or (iv) indemnification by BuyGolf with respect to infringements of proprietary rights. (c) BuyGolf has not (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or any other liabilities (other than with respect to dividend obligations, distributions, indebtedness and other obligations incurred in the ordinary course of business or as disclosed in the Financial Statements), (iii) made any loans or advances to any person, other than ordinary advances for travel expenses, (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business, (v) entered into any material contract, other than in the ordinary course of business and as provided to BC, and there has not occurred any amendment, termination or default under any material contract to which BuyGolf is a party or by which it is bound, (vi) made any change in its accounting practices or made any revaluation of its assets, (vii) made any purchase or other acquisition of, sale, lease, disposition, or other transfer of, or mortgage, pledge or subjection to any material encumbrance or lien on any material asset, tangible or intangible, of BuyGolf, other than in the ordinary course of business, or (viii) made any sale, assignment, or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets, other than in the ordinary course of business. 2.8 Obligations to Related Parties. There are no obligations of ------------------------------ BuyGolf to officers, directors, stockholders, or employees of BuyGolf other than (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of BuyGolf and (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of BuyGolf). No officer, director or, to the best of BuyGolf's and the Stockholders knowledge, stockholder, or any member of their immediate families, are indebted to BuyGolf or have any direct or indirect ownership interest in any firm or corporation with 9 which BuyGolf is affiliated or with which BuyGolf has a business relationship, or any firm or corporation which competes with BuyGolf, except that officers, directors and/or stockholders of BuyGolf may own stock in publicly traded companies which may compete with BuyGolf. No such officer, director or stockholder, or any member of their immediate families is, directly or indirectly, interested in any material contract with BuyGolf (other than such contracts related to any such person's ownership of capital stock or other securities of BuyGolf). 2.9 Title to Properties and Assets; Liens, Etc. BuyGolf has good and ------------------------------ marketable title to its properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (i) those resulting from taxes which have not yet become delinquent, (ii) minor liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of BuyGolf and (iii) those that have otherwise arisen in the ordinary course of business. All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by BuyGolf are in good operating condition and repair and are reasonably fit and usable for the purposes for which they are being used. BuyGolf is in compliance with all material terms of each lease to which it is a party or is otherwise bound. 2.10 Patents and Trademarks. BuyGolf owns or possesses sufficient ---------------------- legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, information and other proprietary rights and processes necessary for its business as now conducted and as proposed to be conducted, without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is BuyGolf bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of "off the shelf" or standard products. BuyGolf has not received any communications alleging that BuyGolf has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. BuyGolf is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments or any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to BuyGolf's business by the employees of BuyGolf, nor the conduct of BuyGolf's business as proposed, will, to BuyGolf's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any employee is now obligated. BuyGolf does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by BuyGolf, except for inventions, trade secrets or proprietary information that have been assigned to BuyGolf. 2.11 Compliance with Other Instruments. BuyGolf is not in violation --------------------------------- or default of any term of its Certificate of Incorporation or Bylaws, or of any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order, writ or, to its knowledge, any statute, rule or regulation applicable to BuyGolf which, individually or in the aggregate, would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of BuyGolf. The execution, delivery, and performance of and compliance with this Agreement and the related 10 agreements, and the Merger pursuant hereto, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of BuyGolf or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to BuyGolf, its business or operations or any of its assets or properties. 2.12 Litigation. There is no action, suit, proceeding or ---------- investigation pending or to BuyGolf's knowledge currently threatened against BuyGolf that questions the validity of this Agreement, or the right of BuyGolf to enter into such agreement, or to consummate the transactions contemplated hereby, or which might result, either individually or in the aggregate, in any material adverse change in the assets, condition, affairs or prospects of BuyGolf, financially or otherwise, or any change in the current equity ownership of BuyGolf, nor is BuyGolf aware that there is any basis for the foregoing. The foregoing includes, without limitation, actions pending or threatened (or any basis therefor known to BuyGolf) involving the prior employment of any of BuyGolf's employees, their use in connection with BuyGolf's business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. BuyGolf is not a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by BuyGolf currently pending or which BuyGolf intends to initiate. 2.13 Tax Returns and Payments. BuyGolf has timely filed all tax ------------------------ returns (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and to BuyGolf's knowledge all other taxes due and payable by BuyGolf on or before the Closing have been paid or will be paid prior to the time they become delinquent. BuyGolf has not been advised (i) that any of its returns, federal, state or other, have been or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed judgment to its federal, state or other taxes. BuyGolf has no knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for. 2.14 Employees. BuyGolf has no collective bargaining agreements with --------- any of its employees. There is no labor union organizing activity pending or, to BuyGolf's knowledge, threatened with respect to BuyGolf. No employee has any agreement or contract, written or verbal, regarding his employment. To BuyGolf's knowledge, no employee of BuyGolf, nor any consultant with whom BuyGolf has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, BuyGolf because of the nature of the business to be conducted by BuyGolf; and to BuyGolf's knowledge the continued employment by BuyGolf of its present employees, and the performance of BuyGolf's contracts with its independent contractors, will not result in any such violation. BuyGolf has not received any notice alleging that any such violation has occurred. No employee of BuyGolf has been granted the right to continued employment by BuyGolf or to any material compensation following termination of employment with BuyGolf. BuyGolf is not aware that any officer or key employee, or that any group of key employees, intends to terminate their employment with BuyGolf, nor does BuyGolf have a present intention to terminate the employment of any officer, key employee or group of key employees. 11 2.15 Nondisclosure and Developments Agreements. Each current employee ----------------------------------------- and officer of BuyGolf has executed, or will execute prior to or at Closing, a Proprietary Information and Inventions Agreement in the form attached hereto as Exhibit C. To BuyGolf's knowledge, no current employee, officer or consultant of BuyGolf has excluded works or inventions made prior to his or her employment with BuyGolf from his or her assignment of inventions pursuant to such employee, officer or consultant's agreement. BuyGolf, after reasonable investigation, is not aware that any of its employees, officers or consultants is in violation thereof and BuyGolf will use its best efforts to prevent any such violation. 2.16 Registration Rights. BuyGolf is presently not under any ------------------- obligation, and has not granted any rights, to register any of BuyGolf's presently outstanding securities or any of its securities that may hereafter be issued. 2.17 Compliance with Laws; Permits. BuyGolf is not in violation of ----------------------------- any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of BuyGolf. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement and the sale and delivery of the BuyGolf Common Stock, or the other transactions to be consummated at the Closing, as contemplated in this Agreement. BuyGolf has all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which, individually or in the aggregate, could materially and adversely affect the business, properties, prospects or financial condition of BuyGolf and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted. 2.18 Absence of Breaches or Defaults. BuyGolf is not and, to the ------------------------------- knowledge of BuyGolf, no other party is, in default under, or in breach or violation of, any material contract and, to the knowledge of the Stockholders, no event has occurred which, with the giving of notice or passage of time or both would constitute a default under any such material contract. Other than contracts which have terminated or expired in accordance with their terms, each of BuyGolf's material contracts is valid, binding and enforceable in accordance with its terms (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered on a proceeding in equity or at law) and an implied covenant of good faith and fair dealing) and is in full force and effect, and assuming all consents required by the terms thereof or applicable law have been obtained, such contracts will continue to be valid, binding and enforceable in accordance with their respective terms and in full force and effect immediately following the consummation of the transactions contemplated hereby. No event has occurred which either entitles, or would, on notice or lapse of time or both, entitle the holder of any indebtedness for borrowed money affecting BuyGolf to accelerate, or which does accelerate, the maturity of any indebtedness affecting BuyGolf. 2.19 Brokers. Neither BuyGolf nor any of its officers or directors ------- has employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by this Agreement. 12 2.20 No Misstatements. Neither this Agreement, nor any other ---------------- document, certificate or written statement prepared by BuyGolf and/or the Stockholders and furnished to BC in connection herewith, contain any untrue statement of material fact or omits to state a material fact known to BuyGolf or any Stockholder necessary in order to make the statements contained herein and therein not misleading as of the date thereof or hereof. There is no fact known to any Stockholder, in a Stockholder's individual capacity or in a Stockholder's capacity as an officer and/or director of BuyGolf, which adversely affects the business or financial condition or operations of BuyGolf, which has not been set forth in this Agreement. 2.21 Environmental and Safety Laws. BuyGolf is not in violation of ----------------------------- any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. 2.22 Year 2000 Compliance. BuyGolf has reviewed the areas within its -------------------- business and operations which could be adversely affected by Year 2000 issues and evaluated the costs associated with modifying and testing its systems for the Year 2000. BuyGolf does not believe that the cost of Year 2000 compliance for its internal information systems will be material to BuyGolf or that it will have a material adverse effect on BuyGolf's business, financial condition or results of operations. 2.23 Securities Law Exemption. Each Stockholder as to itself severally and not jointly hereby represents and warrants to BC that: (a) Purchase Entirely for Own Account. This Agreement is made with each Stockholder in reliance upon such Stockholder's representation to BC, which by such execution of this Agreement such Stockholder hereby confirms, that the BC Stock will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that such Stockholder has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, each Stockholder further represents that such Stockholder does not have any contract, undertaking, agreement or arrangement with any third party to sell, transfer or grant participations to such third party or to any third person, with respect to any of the BC Stock . (b) Reliance Upon Stockholders' Representations. Each ------------------------------------------- Stockholder understands that the BC Stock is not registered under the Securities Act of 1933 (the "Securities Act") on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt from registration under the Securities Act pursuant to section 4(2) thereof and Regulation D promulgated thereunder, and that BC's reliance on such exemption is predicated on the Stockholder's representations set forth herein. (c) Receipt of Information. Each Stockholder believes he/she has received all the information necessary or appropriate for deciding whether to acquire the BC Stock. Each Stockholder further represents that it has had an opportunity to ask questions and receive answers from BC regarding the terms and conditions of the acquisition of BuyGolf and the business, properties, prospects and financial condition of BC and to obtain additional information (to the extent BC possessed such information or could acquire it without unreasonable effort or expense) necessary to verify the accuracy of any information furnished to 13 it or to which it had access. (d) Investment Experience. Each Stockholder acknowledges that his or --------------------- her investment in BC Stock involves a high degree of risk. Further, each Stockholder represents that he/she is experienced in evaluating and investing in securities of companies in the development stage and acknowledges that he/she is able to fend for himself/herself, can bear the economic risk of his/her investment, and has such knowledge and experience in financial or business matters that he/she is capable of evaluating the merits and risks of the investment in the BC Stock. (e) Accredited Investor. Each Stockholder is an "accredited ------------------- investor" within the meaning of SEC Rule 501 of Regulation D, as presently in effect. (f) Restricted Securities. Each Stockholder understands that the BC --------------------- Stock may not be sold, transferred, or otherwise disposed of without registration under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the BC Stock or an available exemption from registration under the Securities Act, the BC Stock must be held indefinitely. In particular, each Stockholder is aware that the BC Stock may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all of the conditions of that Rule are met. Among the conditions for use of Rule 144 is the availability of current information to the public about BC. Such information is not now available. ARTICLE III REPRESENTATIONS AND WARRANTIES OF BC AND MERGER SUB --------------------------------------------------- Except as set forth on the BC Disclosure Schedule attached hereto (the "BC -- Disclosure Schedule") BC and Merger Sub, jointly and severally, represent and ------------------- warrant to BuyGolf and the Stockholders as follows: 3.1 Organization, Good Standing and Qualification. Each of BC and Merger --------------------------------------------- Sub is a duly organized corporation, validly existing and in good standing under the laws of the State of Delaware. Prior to the date hereof, Merger Sub has not engaged in any activity other than the transactions contemplated by this Agreement. Each of BC and Merger Sub has all requisite corporate power and authority to own and operate its properties and assets, to execute and deliver this Agreement and to carry out the provisions of this Agreement, and to carry on its business as presently conducted and as presently proposed to be conducted. Each of BC and Merger Sub is duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions in which the nature of its activities and of its properties (both owned and leased) make such qualifications necessary, except for those jurisdictions in which failure to do so would not have a material adverse effect on BC, Merger Sub or their businesses. Neither BC nor Merger Sub owns equity securities of any other corporation, limited partnership or similar entity. Neither BC nor Merger Sub is a participant in any joint venture, partnership or similar arrangement. BC and Merger Sub have each made available to BuyGolf true, correct and complete copies of their Certificates of Incorporation and Bylaws, each as amended to date and presently in effect. 14 3.2 Capitalization; Voting Rights. The authorized capital stock of ----------------------------- BC, immediately prior to the Closing, will consist of (a) eight hundred fifty million (850,000,000) shares of Common Stock, one hundred forty-two million nine hundred twenty-two thousand eight hundred ten (142,922,810) shares of which are issued and outstanding, thirty million five hundred eighty-three thousand five hundred (30,583,500) shares of which are currently reserved for issuance pursuant to outstanding option agreements, and seven hundred eighty-eight thousand four hundred sixty (788,460) shares of which will be reserved in the future for issuance to key employees, consultants and others affiliated with BC pursuant to stock grant, stock purchase and/or option plans or any other stock incentive program, arrangement or agreement approved by BC's Board of Directors and (b) one hundred fifty million (150,000,000) shares of Preferred Stock (the "Preferred Stock") , 19,481,130 of which are designated Series A Convertible Participating Preferred Stock, all of which are issued and outstanding and 15,877,249 of which are designated Series B Convertible Participating Preferred Stock, all of which are issued and outstanding. The authorized capital stock of Merger Sub consists of one thousand (1,000) shares of common stock, $0.0001 par value, all of which are issued and outstanding and held by BC. All issued and outstanding shares of BC and Merger Sub capital stock (i) have been duly authorized and validly issued, (ii) are fully paid and nonassessable, (iii) are free of liens and encumbrances created by BC or Merger Sub and (iv) were issued in compliance with all applicable state and federal laws concerning the issuance of securities. Except as may be granted pursuant to this Agreement and except as set forth above, there are no outstanding options, warrants, puts, calls, rights (including conversion or preemptive rights and rights of first refusal), proxy or stockholder agreements, or agreements of any kind for the purchase or acquisition from BC or Merger Sub of any of their securities or other restrictions on the incidents of ownership or transfer created by statute, the charter documents of BC or Merger Sub or any agreement to which BC or Merger Sub is a party or by which they are bound. 3.3 Authority; No Violation. ----------------------- (a) Each of BC and Merger Sub has full 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 and the consummation of the transactions contemplated hereby have been duly and validly approved by the Board of Directors of BC. No other corporate proceedings on the part of BC or Merger Sub are necessary to approve this Agreement or to consummate the transactions contemplated hereby. This Agreement and all other agreements and documents to be entered into in connection herewith have been duly and validly executed and delivered by BC and Merger Sub, and (assuming due authorization, execution and delivery by BuyGolf) constitute valid and binding obligations of BC and Merger Sub, enforceable against BC and Merger Sub in accordance with their respective terms, except as enforcement may be limited by general principles of equity whether applied in a court of law or a court of equity and by bankruptcy, insolvency and similar laws affecting creditors' rights and remedies generally. (b) Neither the execution and delivery of this Agreement by BC or Merger Sub, nor the consummation by BC or Merger Sub of the transactions contemplated hereby, nor compliance by BC or Merger Sub with any of the terms or provisions hereof, will (i) violate any provision of the Certificate of Incorporation or Bylaws of BC or Merger Sub, or (ii) violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to BC or Merger Sub or any of its respective properties or assets, or 15 (iii) violate, conflict with, result in a breach of any provision of or the loss of any benefit under, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of or a right of termination or cancellation under, accelerate the performance required by, or result in the creation of any lien, pledge, security interest, charge or other encumbrance upon any of the properties or assets of BC or Merger Sub under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which BC or Merger Sub is a party, or by which BC or Merger Sub or any of their respective properties or assets may be bound or affected. 3.4 Consents and Approvals. No consents or approvals, orders or ---------------------- authorizations of or filings or registrations with any court, administrative agency or commission or other governmental authority or instrumentality or with any third party are necessary with respect to BC or Merger Sub in connection with (1) the execution and delivery of this Agreement and (2) the consummation of the Merger and the other transactions contemplated hereby. 3.5 Financial Statements. BC's unaudited balance sheet as of -------------------- December 31, 1998 and unaudited statements of operations and cash flows of BC for the 12-month period ended December 31, 1998 and BC's unaudited balance sheet as of June 30, 1999 (the Latest Balance Sheet") and unaudited statements of operations and cash flows of BC for the six-month period ending June 30, 1999 (the "BC Financial Statements") delivered to the Stockholders in connection with the investment contemplated hereby have been prepared in accordance with GAAP consistently applied (in the case of BC Financial Statements, subject to normal year-end adjustments and the absence of footnote disclosures) and fairly present in all material respects the financial position and the results of operations of BC for the periods covered thereby, and BC has no material liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) that are not either reflected or fully reserved against on the Latest Balance Sheet or incurred in the ordinary course of the business of BC subsequent to the date thereof. Since the date of the Latest Balance Sheet, there has not been any material adverse change in the business, operations, financial condition or business of BC. 3.6 Absence of Undisclosed Liabilities. Neither BC nor Merger ---------------------------------- Sub has any material obligations or liabilities of any nature (matured or unmatured, fixed or contingent) other than (i) those set forth or adequately provided for in the Balance Sheet, (ii) those incurred in the ordinary course of business and not required to be set forth in the Balance Sheet under GAAP, (iii) those incurred in the ordinary course of business since the Balance Sheet Date and consistent with past practice, and (iv) those incurred in connection with the execution of this Agreement. 3.7 Agreements; Action. ------------------ (a) Except for agreements explicitly contemplated hereby, there are no agreements, understandings or proposed transactions between BC and any of its officers, directors, affiliates or any affiliate thereof. (b) There are no agreements, understandings, instruments, contracts, proposed transactions, judgments, orders, writs or decrees to which BC or Merger Sub is a party or to its knowledge by which it is bound which may involve (i) obligations (contingent or otherwise) of, or payments to, BC or Merger Sub (other than obligations of, or payments to, BC 16 or Merger Sub arising in the ordinary course of business), or (ii) the license of any patent, copyright, trade secret or other proprietary right to or from BC or Merger Sub (other than licenses arising from the purchase of "off the shelf" or other standard products), or (iii) provisions restricting or affecting the development, manufacture or distribution of BC's or Merger Sub's products or services, or (iv) indemnification by BC or Merger Sub with respect to infringements of proprietary rights. (c) Neither BC nor Merger Sub has (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock, (ii) incurred any indebtedness for money borrowed or any other liabilities (other than with respect to dividend obligations, distributions, indebtedness and other obligations incurred in the ordinary course of business or as disclosed in the BC Financial Statements), (iii) made any loans or advances to any person, other than ordinary advances for travel expenses, (iv) sold, exchanged or otherwise disposed of any of its assets or rights, other than the sale of its inventory in the ordinary course of business, (v) entered into any material contract, other than in the ordinary course of business, and there has not occurred any amendment, termination or default under any material contract to which BC or Merger Sub is a party or by which it is bound, (vi) made any change in its accounting practices or made any revaluation of its assets, (vii) made any purchase or other acquisition of, sale, lease, disposition, or other transfer of, or mortgage, pledge or subjection to any material encumbrance or lien on any material asset, tangible or intangible, of BC or Merger Sub, other than in the ordinary course of business, or (viii) made any sale, assignment, or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets, other than in the ordinary course of business. 3.8 Obligations to Related Parties. There are no obligations of BC or ------------------------------ Merger Sub to its officers, directors, stockholders, or employees other than (a) for payment of salary for services rendered, (b) reimbursement for reasonable expenses incurred on behalf of BC or Merger Sub and (c) for other standard employee benefits made generally available to all employees (including stock option agreements outstanding under any stock option plan approved by the Board of Directors of BC). No officer, director or, to the best of BC's or Merger Sub's knowledge, stockholder, or any member of their immediate families, are indebted to BC or Merger Sub or have any direct or indirect ownership interest in any firm or corporation with which BC or Merger Sub is affiliated or with which BC or Merger Sub has a business relationship, or any firm or corporation which competes with BC or Merger Sub, except that officers, directors and/or stockholders of BC and Merger Sub may own stock in publicly traded companies which may compete with BC or Merger Sub. No such officer, director or stockholder, or any member of their immediate families is, directly or indirectly, interested in any material contract with BC or Merger Sub (other than such contracts related to any such person's ownership of capital stock or other securities of BC). 3.9 Title to Properties and Assets; Liens, Etc. Each of BC and Merger ------------------------------------------ Sub has good and marketable title to its properties and assets, and good title to its leasehold estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than (i) those resulting from taxes which have not yet become delinquent, (ii) minor liens and encumbrances which do not materially detract from the value of the property subject thereto or materially impair the operations of BC or Merger Sub and (iii) those that have otherwise arisen in the ordinary course of business. All facilities, machinery, equipment, fixtures, vehicles and other properties owned, leased or used by BC and Merger Sub are in good operating condition and 17 repair and are reasonably fit and usable for the purposes for which they are being used. BC and Merger Sub are in compliance with all material terms of each lease to which it is a party or is otherwise bound. 3.10 Patents and Trademarks. Each of BC and Merger Sub owns or ---------------------- possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, information and other proprietary rights and processes necessary for its business as now conducted and as proposed to be conducted, without any known infringement of the rights of others. There are no outstanding options, licenses or agreements of any kind relating to the foregoing, nor is BC or Merger Sub bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other person or entity other than such licenses or agreements arising from the purchase of "off the shelf" or standard products. BC has not received any communications alleging that BC or Merger Sub has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. BC is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments or any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with their duties to BC's business by the employees of BC, nor the conduct of BC's business as proposed, will, to BC's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any employee is now obligated. BC does not believe it is or will be necessary to utilize any inventions, trade secrets or proprietary information of any of its employees made prior to their employment by BC, except for inventions, trade secrets or proprietary information that have been assigned to BC. 3.11 Compliance with Other Instruments. Neither BC nor Merger Sub is --------------------------------- in violation or default of any term of its Certificate of Incorporation or Bylaws, or of any provision of any mortgage, indenture, contract, agreement, instrument or contract to which it is party or by which it is bound or of any judgment, decree, order, writ or, to its knowledge, any statute, rule or regulation applicable to BC or Merger Sub which, individually or in the aggregate, would materially and adversely affect the business, assets, liabilities, financial condition, operations or prospects of BC or Merger Sub. The execution, delivery, and performance of and compliance with this Agreement and the related agreements, and the issuance of the BC Stock pursuant hereto, will not, with or without the passage of time or giving of notice, result in any such material violation, or be in conflict with or constitute a default under any such term, or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of the properties or assets of BC or Merger Sub or the suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval applicable to BC or Merger Sub, its business or operations or any of its assets or properties. 3.12 Litigation. There is no action, suit, proceeding or ---------- investigation pending or to BC's or Merger Sub's knowledge currently threatened against BC or Merger Sub that questions the validity of this Agreement or the right of BC or Merger Sub to enter into such agreement, or to consummate the transactions contemplated hereby, or which might result, either individually or in the aggregate, in any material adverse change in the assets, condition, affairs or prospects of BC or Merger Sub, financially or otherwise, or any change in the current equity 18 ownership of BC or Merger Sub, nor is BC or Merger Sub aware that there is any basis for the foregoing. The foregoing includes, without limitation, actions pending or threatened (or any basis therefor known to BC or Merger Sub) involving the prior employment of any of BC's employees, their use in connection with BC's business of any information or techniques allegedly proprietary to any of their former employers, or their obligations under any agreements with prior employers. Neither BC nor Merger Sub is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by BC or Merger Sub currently pending or which BC or Merger Sub intends to initiate. 3.13 Tax Returns and Payments. BC has timely filed all tax returns ------------------------ (federal, state and local) required to be filed by it. All taxes shown to be due and payable on such returns, any assessments imposed, and to BC's knowledge all other taxes due and payable by BC on or before the Closing have been paid or will be paid prior to the time they become delinquent. BC has not been advised (i) that any of its returns, federal, state or other, have been or are being audited as of the date hereof, or (ii) of any deficiency in assessment or proposed judgment to its federal, state or other taxes. BC has no knowledge of any liability of any tax to be imposed upon its properties or assets as of the date of this Agreement that is not adequately provided for. 3.14 Employees. BC has no collective bargaining agreements with any --------- of its employees. There is no labor union organizing activity pending or, to BC's knowledge, threatened with respect to BC. No employee has any agreement or contract, written or verbal, regarding his employment. To BC's knowledge, no employee of BC, nor any consultant with whom BC has contracted, is in violation of any term of any employment contract, proprietary information agreement or any other agreement relating to the right of any such individual to be employed by, or to contract with, BC because of the nature of the business to be conducted by BC; and to BC's knowledge the continued employment by BC of its present employees, and the performance of BC's contracts with its independent contractors, will not result in any such violation. BC has not received any notice alleging that any such violation has occurred. No employee of BC has been granted the right to continued employment by BC or to any material compensation following termination of employment with BC. BC is not aware that any officer or key employee, or that any group of key employees, intends to terminate their employment with BC, nor does BC have a present intention to terminate the employment of any officer, key employee or group of key employees. 3.15 Nondisclosure and Developments Agreements. Each current employee ----------------------------------------- and officer of BC has executed, or will execute prior to or at Closing, an Employee Nondisclosure and Developments Agreement in the form attached hereto as Exhibit D. To BC's knowledge, no current employee, officer or consultant of --------- BC has excluded works or inventions made prior to his or her employment with BC from his or her assignment of inventions pursuant to such employee, officer or consultant's agreement. BC, after reasonable investigation, is not aware that any of its employees, officers or consultants is in violation thereof and BC will use its best efforts to prevent any such violation. 3.16 Registration Rights. BC is presently not under any obligation, ------------------- and has not granted any rights, to register any of BC's presently outstanding securities or any of its securities that may hereafter be issued. 19 3.17 Compliance with Laws; Permits. Neither BC nor Merger Sub is in ----------------------------- violation of any applicable statute, rule, regulation, order or restriction of any domestic or foreign government or any instrumentality or agency thereof in respect of the conduct of its business or the ownership of its properties which violation would materially and adversely affect its business, assets, liabilities, financial condition, operations or prospects. No governmental orders, permissions, consents, approvals or authorizations are required to be obtained and no registrations or declarations are required to be filed in connection with the execution and delivery of this Agreement and the offer, issuance, sale and delivery of the BC Stock, or the other transactions to be consummated at the Closing, as contemplated in this Agreement. BC and Merger Sub have all franchises, permits, licenses and any similar authority necessary for the conduct of its business as now being conducted by it, the lack of which, individually or in the aggregate, could materially and adversely affect the business, properties, prospects or financial condition of BC or Merger Sub and believes it can obtain, without undue burden or expense, any similar authority for the conduct of its business as planned to be conducted. 3.18 Absence of Breaches or Defaults. Neither BC nor Merger Sub is ------------------------------- and, to the knowledge of BC and Merger Sub, no other party is, in default under, or in breach or violation of, any material contract and no event has occurred which, with the giving of notice or passage of time or both would constitute a default under any such material contract. Other than contracts which have terminated or expired in accordance with their terms, each of BC's and Merger Sub's material contracts is valid, binding and enforceable in accordance with its terms (subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered on a proceeding in equity or at law) and an implied covenant of good faith and fair dealing) and is in full force and effect, and assuming all consents required by the terms thereof or applicable law have been obtained, such contracts will continue to be valid, binding and enforceable in accordance with their respective terms and in full force and effect immediately following the consummation of the transactions contemplated hereby. No event has occurred which either entitles, or would, on notice or lapse of time or both, entitle the holder of any indebtedness for borrowed money affecting BC or Merger Sub to accelerate, or which does accelerate, the maturity of any indebtedness affecting BC or Merger Sub. 3.19 Brokers. Neither BC nor any of its officers or directors has ------- employed any broker or finder or incurred any liability for any broker's fees, commissions or finder's fees in connection with any of the transactions contemplated by this Agreement. 3.20 No Misstatements. Neither this Agreement, nor any other ---------------- document, certificate or written statement prepared by BC or Merger Sub and furnished to BuyGolf in connection herewith, contain any untrue statement of material fact or omits to state a material fact known to BC necessary in order to make the statements contained herein and therein not misleading as of the date thereof or hereof. 3.21 Environmental and Safety Laws. BC is not in violation of any ----------------------------- applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. 20 3.22 Year 2000 Compliance. BC has reviewed the areas within its -------------------- business and operations which could be adversely affected by Year 2000 issues and evaluated the costs associated with modifying and testing its systems for the Year 2000. BC does not believe that the cost of Year 2000 compliance for its internal information systems will be material to BC or that it will have a material adverse effect on BC's business, financial condition or results of operations. 3.23 Tax-Free Organization. --------------------- (a) Prior to the Closing, all of the shares of capital stock of the Merger Sub are owned by BC. (b) BC has no current plan or intention to (i) reacquire any of the BC Stock issued in connection with the transactions contemplated by this Agreement such as would result in the BuyGolf stockholders not to satisfy the continuity of interest requirements of Treasury Regulation Section 1.368-1 and 1.368-1T; (ii) liquidate the Surviving Corporation; (iii) merge the Surviving Corporation with or into another entity; (iv) sell a number of shares of BuyGolf Common Stock which would cause BC to no longer have control of the Surviving Corporation within the meaning of Section 368(c) of the Code; (v) sell or otherwise dispose of its assets following the Closing, except in the ordinary course of business; or (vi) cause the Surviving Corporation to issue any additional stock or securities in amounts which would cause BC to no longer have control of the Surviving Corporation within the meaning of Section 368(c) of the Code. (c) Other than the five percent (5%) ownership interest in BuyGolf held by BC immediately prior to the Closing, BC has never owned any BuyGolf Common Stock. Neither Parent nor Merger Sub is an investment company subject to regulation under the Investment Company Act of 1940. ARTICLE IV ADDITIONAL AGREEMENTS --------------------- 4.1 Information Statement; Restricted Securities. -------------------------------------------- (a) BC and BuyGolf shall distribute the Information Statement for the stockholders of BuyGolf to approve this Agreement and the transactions contemplated hereby and thereby (the "Information Statement"). The Information Statement shall constitute a disclosure document for the offer and issuance of the shares of BC Stock to be received by the holders of BuyGolf Common Stock in the Merger. BC and BuyGolf shall each use reasonable commercial efforts to cause the Information Statement to comply with applicable federal and state securities laws requirements. Each of BC and BuyGolf agrees to provide promptly to the other such information concerning its business and financial statements and affairs as, in the reasonable judgment of the providing party or its counsel, may be required or appropriate for inclusion in the Information Statement, or in any amendments or supplements thereto, and to cause its counsel and auditors to cooperate with the other's counsel and auditors in the preparation of the Information Statement. BuyGolf will promptly advise BC, and BC will promptly advise BuyGolf, in writing if at any time prior to the Effective Time either BuyGolf or BC shall obtain knowledge of any facts that might make it necessary or appropriate to amend or 21 supplement the Information Statement in order to make the statements contained or incorporated by reference therein not misleading or to comply with applicable law. Anything to the contrary contained herein notwithstanding, BuyGolf shall not include in the Information Statement any information with respect to BC or its affiliates or associates, the form and content of which information shall not have been approved by BC prior to such inclusion. 4.2 Stockholder Approval. BuyGolf shall promptly after the date -------------------- hereof take all action necessary in accordance with Delaware Law and its Certificate of Incorporation and Bylaws to secure the written consent of its stockholders approving this Agreement and the transactions and ancillary agreements contemplated herein within five (5) days following the date of this Agreement. BuyGolf shall use all commercially reasonable efforts required to obtain from stockholders of BuyGolf executed actions by written consent approving the Merger. Any materials submitted to the stockholders of BuyGolf in connection with the solicitation of their approval of the Merger shall have been subject to prior review and comment by BC and shall include information regarding BuyGolf, the terms of the Merger and this Agreement, the unanimous recommendation of the Board of Directors of BuyGolf in favor of the Merger, this Agreement and the transactions contemplated hereby and such other documents (including but not limited to the Stockholder Certificate) in order to satisfy the requirements of Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder in connection with the issuance and sale of BC Stock in the Merger. 4.3 Access to Information. Between the date of this Agreement and the --------------------- earlier of the Effective Time or the termination of this Agreement, upon reasonable notice, BuyGolf and BC shall, during normal business hours, (i) give each other and their respective officers, employees, accountants, counsel, financing sources and other agents and representatives full access to their buildings, offices, and other facilities and to all their books and records, whether located on their premises or at another location; (ii) permit the other party to make such inspections as they may require; (iii) cause its officers to furnish the other party such financial, operating, technical and product data and other information with respect to the business and assets and properties of BuyGolf as they from time to time may request, including financial statements and schedules; (iv) allow each other the opportunity to interview their employees and other personnel and Affiliates (as defined below) with their prior written consent, which consent shall not be unreasonably withheld or delayed; and (v) assist and cooperate with BC and Merger Sub in the development of integration plans for implementation by BC and the Surviving Corporation following the Effective Time; provided, however, that no investigation pursuant to this Section 4.3 shall affect or be deemed to modify any representation or warranty made by BuyGolf and BC herein. Materials furnished to BC and BuyGolf pursuant to this Section 4.3 may be used by each party for strategic and integration planning purposes relating to accomplishing the transactions contemplated hereby. For purposes of this Agreement, "Affiliate" means, as --------- applied to any person or entity, (a) any other person or entity directly or indirectly controlling, controlled by or under common control with, that person or entity, (b) any other person or entity that owns or controls (i) 10% or more of any class of equity securities of that person or entity or any of its Affiliates or (ii) 10% or more of any class of equity securities (including any equity securities issuable upon the exercise of any option or convertible security) of that person or entity or any of its Affiliates, or (c) any director, partner, officer, manager, agent, employee or relative of such person or entity. For the purposes of this definition, "control" (including with correlative meanings, the terms "controlling", "controlled by", and "under common control with") as applied to any person or entity, means the possession, directly 22 or indirectly, of the power to direct or cause the direction of the management and policies of that person or entity, whether through ownership of voting securities or by contract or otherwise. 4.4 Expenses. Whether or not the Merger is consummated, all fees and -------- expenses incurred in connection with the Merger including all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties incurred by a party in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby, shall be the obligation of the respective party incurring such fees and expenses; provided that if the Merger is consummated, BC shall be responsible for the reasonable fees and expenses of Rutan & Tucker, not to exceed $20,000, incurred by BuyGolf in the negotiation and preparation of this Agreement and the consummation of the Merger. 4.5 Public Disclosure. Unless otherwise required by law (including ----------------- federal and state securities laws) prior to the Effective Time (in which case BC and BuyGolf shall have a prior opportunity to review and comment on the proposed disclosure), no disclosure (whether or not in response to any inquiry) of the existence of any subject matter of, or the terms and conditions of, this Agreement shall be made by any party hereto unless approved by BC and BuyGolf prior to release; provided, however, that such approval shall not be unreasonably withheld or delayed. 4.6 Approvals. BuyGolf shall use all commercially reasonable efforts --------- required to obtain all approvals from governmental or regulatory authorities or under any of the contracts or other agreements as may be required in connection with the Merger (all of such approvals are set forth in the BuyGolf Disclosure Schedule) so as to preserve all rights of and benefits to BuyGolf thereunder and BC shall provide BuyGolf with such assistance and information as is reasonably required to obtain such approvals. 4.7 Notification of Certain Matters. BuyGolf shall give prompt notice ------------------------------- to BC, and BC shall give prompt notice to BuyGolf, of (i) the occurrence or non- occurrence of any event, the occurrence or non-occurrence of which is likely to cause any representation or warranty of BuyGolf, BC or Merger Sub, respectively, contained in this Agreement to be untrue or inaccurate in any material respect at or prior to the Closing Date and (ii) any failure of BuyGolf, BC or Merger Sub, as the case may be, 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 4.7 shall not limit or otherwise affect any remedies available to the party receiving such notice. 4.8 Additional Documents and Further Assurances. Each party hereto, ------------------------------------------- at the request of the other party hereto, shall execute and deliver such other instruments and do and perform such other acts and things (including, but not limited to, all action reasonably necessary to seek and obtain any and all consents and approvals of any government or regulatory authority or person required in connection with the Merger; provided, however, that BC shall not be obligated to consent to any divestitures or operational limitations or activities in connection therewith and no party shall be obligated to make a payment of money as a condition to obtaining any such condition or approval) as may be necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby. 23 4.9 Maintenance of Business. From the date hereof until the Closing, ----------------------- each of the Stockholders and BuyGolf shall use its diligent, good faith efforts, to cause BuyGolf to carry on and preserve the business, goodwill and the relationships of BuyGolf with suppliers, employees, agents and others in substantially the same manner as they have been prior to the date hereof. In addition, from the date hereof until the Closing, BC shall use its diligent, good faith efforts to carry on and preserve the business, goodwill and the relationships of BC with suppliers, employees, agents and others in substantially the same manner as they have been prior to the date hereof. 4.10 Conduct of Business. ------------------- (a) From the date hereof until the Closing, except as expressly permitted hereby, BuyGolf shall not, and the Stockholders shall not permit BuyGolf to, without BC's prior express written consent: (i) incur any additional indebtedness, or guarantee any indebtedness or obligation of any other party, except in the ordinary course of business, and which amount BuyGolf agrees to repay immediately prior to the Closing; (ii) issue, redeem, pledge, sell or repurchase any capital stock of BuyGolf or securities convertible into its capital stock or grant or issue any options, warrants or rights to subscribe for its capital stock or securities convertible into its capital stock or commit to do any of the foregoing; (iii) enter into or terminate any material agreement or arrangement; (iv) increase the compensation or bonuses payable or to become payable to any officers, employees or agents of BuyGolf, or adopt or amend any employee benefit plan or arrangement; (v) enter into any employment contract or agreement with any existing or prospective employee which is not terminable at will; (vi) pay any obligation or liability, fixed or contingent, other than current liabilities or except as such payment becomes due; (vii) cancel, without full payment, any note, loan or other obligation owing to BuyGolf, or waive any rights of material value; (viii) acquire or dispose of any properties, assets or business except in the ordinary course of its business; (ix) create or suffer to be imposed any lien, mortgage, security interest or other charge on or against the properties or assets of BuyGolf, other than in the ordinary course of business consistent with BuyGolf's past practices, or the BuyGolf Common Stock; 24 (x) engage in any activities or transactions outside the ordinary course of BuyGolf's e-commerce business as conducted at the date hereof; (xi) make or adopt any change in the Charter or Bylaws of BuyGolf as in force and effect on the date hereof; (xii) declare or pay any dividends on or make any other distributions in respect of any shares of its capital stock; or (xiii) pay, agree to pay or make any accrual or arrangement for payment of any pension, retirement allowance or other employee benefit pursuant to any plan, agreement or arrangement to any officer, director or employee. (b) From the date hereof until the Closing, except as expressly permitted hereby, BuyGolf shall, and the Stockholders shall cause BuyGolf to, unless otherwise expressly consented to in writing by BC: (i) maintain the existing insurance policies of BuyGolf, unless comparable insurance is substituted therefor, and shall not take any action to terminate or modify those insurance policies; (ii) maintain the books and records of BuyGolf consistent with past practices and policies and in accordance with GAAP; (iii) maintain in good working condition, ordinary wear and tear excepted, and in compliance in all material respects with all applicable laws and regulations, all fixed assets owned, leased or operated, as the case may be, by BuyGolf; (iv) observe and perform, and remain in compliance with, all obligations of BuyGolf in agreements and contracts the breach or violation of which would have, individually or in the aggregate, a material adverse effect and not enter into any agreements or contracts which would require payments by BuyGolf of more than Fifty Thousand Dollars ($50,000) over any period of twelve (12) months, except for inventory purchased in the ordinary course of business and disclosed in advance to BC and customer contracts and purchase orders entered in the ordinary course of business consistent with BuyGolf's past practices; and (v) maintain compliance with the terms and conditions of all material contracts or licenses held by BuyGolf or under which it operates or conducts its business and use best efforts to maintain all such material contracts and licenses in full force and effect. 4.11 Confidentiality. Each party will cause its directors, affiliates, --------------- officers, employees or authorized representatives to hold in strict confidence, and not disclose to any third party, without prior written consent of the other party, all confidential information received by it in connection with the transactions contemplated hereby, except as may be required by applicable law or as otherwise contemplated herein. The parties acknowledge that BC and BuyGolf have previously executed a non-disclosure agreement dated August 2, 1999 (the 25 "Confidentiality Agreement"), which Confidentiality Agreement shall continue in full force and effect in accordance with its terms. 4.12 "Market Stand-Off" Agreement. Each Stockholder hereby --------------------------- agrees that, during the period of duration specified by BC and an underwriter of Common Stock or other securities of BC, it shall not, to the extent requested by BC and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any securities of BC held by it at any time during such period except Common Stock included in such registration; provided, however, that: (a) such market stand-off time period shall not exceed 180 days; (b) all officers and directors of BC enter into similar agreements. In order to enforce the foregoing covenant, BC may impose stop- transfer instructions with respect to any securities of BC held by any Stockholder or his transferee until the end of such period. If requested to do so by BC, each Stockholder shall execute an underwriter's letter in the customary form prior to the registration of BC's initial public offering. 4.13 BuyGolf's 1998 Stock Option Plan. At the Effective Time, -------------------------------- the BuyGolf Stock Option Plan and each outstanding option to purchase shares of BuyGolf Common Stock under such plan, whether vested or unvested, will be assumed by BC and any outstanding repurchase rights shall be assigned to BC. Section 4.13 of the BuyGolf Disclosure Schedule sets forth a true and complete list as of the date hereof of all holders of outstanding options under the BuyGolf Stock Option Plan including the number of shares of BuyGolf Common Stock subject to each such option, the date of grant of each such option, the exercise or vesting schedule, the exercise price per share and the term of each such option. On the Closing Date, BuyGolf shall deliver to BC an updated Section 4.13 of the BuyGolf Disclosure Schedule current as of such date. Each such option so assumed by BC under this Agreement shall continue to have, and be subject to, the same terms and conditions set forth in the BuyGolf Stock Option Plan immediately prior to the Effective Time, except that (i) such option will be exercisable for that number of whole shares of BC Stock equal to the product of the number of shares of BuyGolf Common Stock that were issuable upon exercise of such option immediately prior to the Effective Time multiplied by the Exchange Ratio and rounded down to the nearest whole number of shares of BC Stock, and (ii) the per share exercise price for the shares of BC Stock issuable upon exercise of such assumed option will be equal to the quotient determined by dividing the exercise price per share of BuyGolf Common Stock at which such option was exercisable immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent. Consistent with the terms of the BuyGolf Stock Option Plan and the documents governing the outstanding options under such plan, the Merger will not terminate any of the outstanding options under the BuyGolf Stock Option Plan or accelerate the exercisability or vesting of such options. It is the intention of the parties that the options so assumed by BC qualify following the Effective Time as incentive stock options as defined in Section 422 of the Code to the extent such options qualified as incentive stock options prior to the Effective Time. Within ten (10) business days after the Effective Time, BC will issue to each person who, immediately prior to the Effective Time was a holder of an outstanding option under the BuyGolf Stock Option Plan a 26 document in form and substance satisfactory to BuyGolf evidencing the foregoing assumption of such option by BC. 4.14 Necessary Filings. BC, Merger Sub, and each of the ----------------- Stockholders of BuyGolf shall use all commercially reasonable efforts to promptly make all necessary filings required by the Internal Revenue Code or otherwise and to take any reasonable actions to cause the Merger to be treated as a "tax-free" organization under the Internal Revenue Code. ARTICLE V CONDITIONS PRECEDENT TO ----------------------- OBLIGATIONS OF BC AND MERGER SUB -------------------------------- The obligation of each of BC and Merger Sub to consummate the transactions contemplated by this Agreement is subject to the satisfaction, at or before the Closing, of all the following conditions, unless waived in writing by BC: 5.1 Certificates for BuyGolf Common Stock. BC shall have ------------------------------------- received for cancellation in the Merger certificates for the BuyGolf Common Stock, which shall constitute all of the issued and outstanding capital stock of BuyGolf. 5.2 Representations and Warranties True. All representations and ----------------------------------- warranties of the Stockholders and BuyGolf in this Agreement or the Schedules and Exhibits hereto, or in any written statement or certificate that shall be delivered to BC by the Stockholders or BuyGolf under this Agreement, shall be true and correct on and as of the date made and as of the Closing Date as if made on the date thereof (except to the extent such representation or warranty relates to an earlier date). 5.3 Covenants Performed. The Stockholders and BuyGolf shall have ------------------- performed, satisfied, and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by the Stockholders and BuyGolf on or before the Closing Date. 5.4 Certificate. BC shall have received from the Stockholders a ----------- certificate signed by the President of BuyGolf, dated the Closing Date, certifying that the conditions specified in this Article V have been satisfied. 5.5 No Violations; No Actions. Consummation of the transactions ------------------------- contemplated by this Agreement shall not violate any order, decree or judgment of any court or governmental body having competent jurisdiction and no action or proceeding shall have been instituted or threatened by any person, entity or governmental agency which, in any such case, in the sole judgment of BC, has a reasonable probability of resulting in (i) the obtaining of material damages from BC or BuyGolf; (ii) an order, judgment or decree restraining, prohibiting or rendering unlawful the consummation of the transactions contemplated by this Agreement; or (iii) other relief in connection therewith. 5.6 Proceedings and Documents. All corporate and other ------------------------- proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be in form and substance reasonably satisfactory to BC and its 27 counsel, and BC shall have received all such counterpart originals or certified or other copies of such documents as it may reasonably request. 5.7 Delivery of Documents. shall have received all documents --------------------- and other items to be delivered by the Stockholders under Section 7.2. 5.8 Required Consents. All consents, approvals and waivers from ----------------- third parties and governmental authorities necessary to the transactions as contemplated by this Agreement. 5.9 Private Placement. The parties shall be reasonably ----------------- satisfied that the shares of BC Stock to be issued in connection with the Merger pursuant to Section 1.6(a) are issuable without registration pursuant to Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder. 5.10 Tax-Free Reorganization. The Merger will constitute a tax- ----------------------- free reorganization within the meaning of Section 368(a) of the Internal Revenue Code 5.11 Limitation on D issent. No holders of the outstanding ---------------------- shares of BuyGolf Common Stock shall have exercised, nor shall they have any continued right to exercise, appraisal, dissenters' or similar rights under applicable law with respect to their shares by virtue of the Merger. ARTICLE VI CONDITIONS PRECEDENT TO ----------------------- OBLIGATIONS OF BUYGOLF AND THE STOCKHOLDERS ------------------------------------------- The obligation of the Stockholders to consummate the transactions contemplated by this Agreement is subject to BC's and/or Merger Sub's satisfaction, at or before the Closing, of all the following conditions, unless waived in writing by a majority in interest of the Stockholders: 6.1 Representations and Warranties True. All representations ----------------------------------- and warranties by BC and Merger Sub in this Agreement or the Schedules and Exhibits hereto, or in any written statement or certificate that shall be delivered to the Stockholders by BC under this Agreement, shall be true and correct on and as of the date made and as of the Closing Date as if made on the date thereof (except to the extent such representation or warranty relates to an earlier date). 6.2 Covenants Performed. BC and Merger Sub shall have ------------------- performed, satisfied, and complied in all material respects with all covenants, agreements, and conditions required by this Agreement to be performed or complied with by BC and Merger Sub in all material respects on or before the Closing Date. 6.3 Certificate. The Stockholders shall have received from BC a ----------- certificate signed by the Chief Executive Officer of BC, dated the Closing Date, certifying that the conditions specified in this Article VI have been satisfied. 6.4 No Violations; No Actions. Consummation of the transactions ------------------------- contemplated by this Agreement shall not violate any order, decree or judgment of any court or governmental body having competent jurisdiction and no action or proceeding shall have been 28 instituted or threatened by any person, entity or governmental agency which, in any such case, in the sole judgment of the Stockholders, has a reasonable probability of resulting in (i) the obtaining of material damages from the Stockholders or BC, (ii) an order, judgment or decree restraining, prohibiting or rendering unlawful the consummation of the transactions contemplated by this Agreement, or (iii) other relief in connection therewith. 6.5 Proceedings and Documents. All corporate and other ------------------------- proceedings in connection with the transactions contemplated hereby and all documents and instruments incident to such transactions shall be in form and substance reasonably satisfactory to the Stockholders and their counsel, and the Stockholders shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. 6.6 Delivery of Documents. The Stockholders shall have received --------------------- all documents and other items to be delivered by BC under Section 7.3. 6.7 Required Consents. All consents, approvals and waivers from ----------------- third parties and governmental authorities necessary to consummate the transactions contemplated by this Agreement shall have been obtained. ARTICLE VII CLOSING ------- 7.1 Time and Place. The Closing shall occur at the time and -------------- place specified in Section 1.2 of this Agreement. 7.2 Deliveries of the Stockholders. At the Closing, the ------------------------------ Stockholders will execute and deliver or cause to be executed and delivered to BC: (a) Stock Certificates. Certificates representing the ------------------ BuyGolf Common Stock, presented to BC for conversion into BC Stock; (b) Corporate Documents. The Charter of BuyGolf, certified ------------------- by the Secretary of State of Delaware as of a recent date and the Bylaws of BuyGolf, certified by the Secretary of BuyGolf as in effect at the Closing; (c) Certificates of Good Standing. Certificates of Good ----------------------------- Standing, dated as of a recent date, with respect to BuyGolf, issued by the Secretary of State of California and Delaware; (d) The Stockholders' Certificate. A certificate from the ----------------------------- Stockholders, dated the Closing Date, containing the information required pursuant to Section 5.4; (e) Representations and Warranties; Performance. At the ------------------------------------------- Closing, Stockholders shall deliver to BC a certificate dated as of the Closing Date signed by the President of BuyGolf certifying (i) that each of the representations and warranties made by the Stockholders herein are true and correct in all material respects on the Closing Date with the same effect as though made on such date; (ii) that BuyGolf and the Stockholders have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by BuyGolf and the Stockholders prior to the Closing Date; and 29 (iii) that there has been no material adverse change since the Balance Sheet Date in the business, condition (financial or otherwise) or operations of BuyGolf or its assets; (f) Books and Records. At the Closing, the Stockholders ----------------- shall deliver to BC (i) the stock books, minute books, corporate seals and other corporate record-keeping documentation of BuyGolf; (ii) certificates representing all outstanding BuyGolf Common Stock, free of any restrictive legends, except for transfer restrictions which may be imposed by the Securities Act, all stock certificates to be duly endorsed and guaranteed for transfer to BC; (iii) such other instruments of transfer as in the opinion of BC's counsel shall be necessary or desirable to effectively vest in BC good and marketable title to the BuyGolf Common Stock; and (iv) all other opinions, instruments and documents contemplated by this Agreement; (g) Release of Claims. At the Closing, each Stockholder ----------------- and optionholder shall sign and deliver to BC a certificate of release ("Release") of all claims or rights of such Stockholder against BuyGolf, except ------- for claims or rights arising pursuant to the agreements and documents executed and delivered in connection with the transactions contemplated herein, in the form attached hereto as Exhibit E; --------- (h) Board and Stockholder Approval. At the Closing, ------------------------------ Stockholders shall deliver to BC evidence that this Agreement and the transactions contemplated hereby have been approved by BuyGolf's Board of Directors and, if such approval is required under applicable law, BuyGolf's Stockholders in form reasonably acceptable to BC's counsel; (i) Resignation of Directors and Officers. At the Closing, ------------------------------------- the directors and officers of BuyGolf in office immediately prior to the Closing shall resign as directors and officers of BuyGolf effective immediately following the Closing; (j) Termination of Employment Agreements. Prior to or at ------------------------------------ the Closing, BuyGolf shall have terminated the employment agreements and Stockholder agreements with John Gilles, Greg Van Ginkel, Arti Dua, Steve Jess, Bradley O'Hearne, Jack Souders, Lucy Wojskowicz, Miriam Price, Lori Stewart, Mark Brown, Jeffrey Allen, C. Keith Allen, Steve Davis, and Donald Harris; (k) Termination of Agreements with Ingram. Prior to or at ------------------------------------- the Closing, BuyGolf and Ingram Entertainment Holdings, Inc. shall have terminated that certain Common Stock Purchase Agreement, Voting Agreement and Registration Rights Agreement, each dated August 5, 1999. (l) Stock Restriction Agreement. A Stock Restriction --------------------------- Agreement, substantially in the form attached hereto as Exhibit F, shall have --------- been executed and delivered by the parties named therein; (m) Non-Competition Agreement. A Non-Competition Agreement, substantially in the form attached hereto as Exhibit G, shall have --------- been executed and delivered by the parties named therein; (n) Proceedings and Documents. All corporate and other ------------------------- proceedings in connection with the transactions contemplated at the Closing hereby, all documents and instruments incident to such transactions and all documents, instruments and proceedings related 30 to BuyGolf's business, technical and legal due diligence shall be reasonably satisfactory in substance and form to BC and its counsel, and BC and its counsel shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request; (o) Consents, Permits and Waivers. BuyGolf shall have ----------------------------- obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement; (p) Non-Disclosure Agreements. Non-disclosure agreements ------------------------- between Merger Sub, on the one hand, and any person who accepts employment with the Surviving Corporation as of the Closing on the other hand, substantially in the form of Exhibit H attached hereto; --------- (q) Option Assumption Agreements. An Option Assumption ---------------------------- Agreement, substantially in the form attached hereto as Exhibit I, shall have --------- been executed and delivered by each optionholder listed on Schedule B hereto; ---------- (r) Optionholder Questionnaire. An Optionholder -------------------------- Questionnaire, substantially in the form attached hereto as Exhibit J shall have --------- been completed, executed and delivered by each optionholder listed on Schedule B ---------- hereto; and (s) Other Documents. Such other documents and instruments --------------- as BC or its counsel reasonably shall deem necessary to consummate the transactions contemplated hereby. All documents delivered to BC shall be in form and substance reasonably satisfactory to BC and its counsel. 7.3 Deliveries of BC. At the Closing, BC and/or Merger Sub will ---------------- execute and deliver or cause to be executed and delivered to the Stockholders simultaneously with delivery of the items referred to in Section 7.2 above: (a) BC Stock. Certificates representing the BC Stock to -------- each Stockholder as set forth on Schedule A, issuable in accordance with Article ---------- I hereof; (b) Representations and Warranties; Performance. At the ------------------------------ Closing, BC shall deliver to Stockholders a certificate dated as of the Closing Date signed by the Chief Executive Officer of BC certifying (i) that each of the representations and warranties made by BC herein are true and correct in all material respects on the Closing Date with the same effect as though made on such date; and (ii) that BC has performed and complied with all agreements, covenants and conditions required by this Agreements to be performed and complied with by BC prior to the Closing Date; (c) Board Approval. At the Closing, BC shall deliver to -------------- Stockholders evidence that this Agreement and the transactions contemplated hereby shall have been approved by the BC's Board of Directors; 31 (d) Consents, Permits and Waivers. BC shall have obtained ----------------------------- any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by the Agreement; (e) Corporate Documents. The Amended and Restated ------------------- Certificate of Incorporation of BC and the Certificate of Incorporation of Merger Sub, certified by the Secretary of State of Delaware as of a recent date and the Bylaws of BC and Merger Sub, certified by the secretaries of BC and Merger Sub, respectively, as in effect at the Closing; and (f) Officer's Certificate. A certificate dated the Closing --------------------- Date containing the information required pursuant to Section 6.3. All documents delivered to the Stockholders shall be in form and substance reasonably satisfactory to the Stockholders and their counsel. 7.4 Certificate of Merger. At the Closing, the parties hereto --------------------- shall cause to filed the Certificate of Merger with the Delaware Secretary of State in accordance with the Delaware Law. ARTICLE VIII INDEMNIFICATION --------------- 8.1 Indemnification by the Stockholders. The Stockholders shall ----------------------------------- jointly and severally indemnify and hold harmless BC, Merger Sub and the Surviving Corporation and their respective officers, directors, employees, successors and assigns in respect of any and all claims, actions, suits or other proceedings and any and all losses, costs, expenses, liabilities, fines, penalties, interest, and damages, whether or not arising out of any claim, action, suit or other proceeding (and including reasonable counsel and accountants' fees and expenses and all other reasonable costs and expenses of investigation, defense or settlement of claims and amounts paid in settlement) incurred by, imposed on or borne by BC, Merger Sub, the Surviving Corporation or such other parties (collectively "Damages") resulting from the breach of any of ------- the representations or warranties made by the Stockholders or BuyGolf in this Agreement. Notwithstanding the foregoing, each Stockholder's liability for Damages shall be determined by, and shall not exceed, each Stockholder's percentage ownership of BuyGolf held by the Stockholders immediately prior to the Closing. For example, in the event Damages totaled $10,000,000, a Stockholder that owns ten percent (10%) of BuyGolf prior to the Closing shall be liable for no more than $1,000,000 of the Damages. 8.2 Indemnification by BC, Merger Sub and Surviving ----------------------------------------------- Corporation. Each of BC, Merger Sub and the Surviving Corporation, jointly and ----------- severally, shall indemnify and hold harmless the Stockholders, in respect of any and all claims, actions, suits or other proceedings and any and all losses, costs, expenses, liabilities, fines, penalties, interest, and damages, whether or not arising out of any claim, action, suit or other proceeding (and including reasonable counsel and accountants' fees and expenses and all other reasonable costs and expenses of investigation, defense or settlement of claims and amounts paid in settlement) incurred by, imposed on or borne by the Stockholders resulting from the breach of any of the representations, warranties or agreements made by BC and Merger Sub in this Agreement. 32 8.3 Indemnification Procedure for Claims. Whenever any claim ------------------------------------ shall arise for indemnification hereunder, the party entitled to indemnification (the "indemnified party") shall promptly notify in writing the other party or ----------------- parties (the "indemnifying party") of the claim and, when known, the facts ------------------ constituting the basis for such claim; provided, that the indemnified party's failure to give such written notice shall not affect any rights or remedies of an indemnified party hereunder with respect to indemnification for damages except to the extent that the indemnifying party is materially prejudiced thereby. In the event of any claim for indemnification hereunder resulting from or in connection with any claim or legal proceedings by a third party, the written notice to the indemnifying party shall specify, if known, the amount or an estimate of the amount of the liability arising therefrom. The indemnified party shall not settle or compromise any claim by a third party for which it is entitled to indemnification hereunder, without the prior written consent of the indemnifying party (which shall not be unreasonably withheld), unless suit shall have been instituted against it and the indemnifying party shall not have taken control of and conducted in a diligent manner the defense of such suit after notification thereof as provided in Section 8.4 of this Agreement. 8.4 Defense by Indemnifying Party. In connection with any claim ----------------------------- giving rise to indemnity hereunder or resulting from or arising out of any claim or legal proceeding by a person who is not a party to this Agreement, the indemnifying party at its sole cost and expense may, upon written notice to the indemnified party, assume the defense of any such claim or legal proceeding if it acknowledges to the indemnified party in writing its obligations to indemnify the indemnified party with respect to all elements of such claim, and thereafter diligently conducts the defense thereof with counsel reasonably acceptable to the indemnified party. If the indemnifying party acknowledges in writing as specified above that it shall assume the defense of any such action, then the indemnifying party shall keep the indemnified party informed with respect to the defense of such action and the indemnified party shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. If (A) the indemnifying party does not acknowledge in writing as specified above that it shall assume or fails to conduct in a diligent manner the defense of any such claim or litigation resulting therefrom, or (B) the indemnified party shall have reasonably concluded that there may be one or more legal defenses available to it which are different from, or, additional to those available to the indemnifying party or other indemnified parties with respect to such claim or litigation, then, (i) the indemnified party may defend against such claim or litigation, in such manner as it may deem appropriate, including, without limitation, settling such claim or litigation, after giving notice of the same to the indemnifying party, on such terms as the indemnified party may deem appropriate, and (ii) the indemnifying party shall be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. If the indemnifying party thereafter seeks to question the manner in which the indemnified party defended such third party claim or the amount or nature of any such settlement, the indemnifying party shall have the burden to prove by a preponderance of the evidence that the indemnified party did not defend or settle such third party claim in a reasonably prudent manner. Each party agrees to cooperate fully with the other, such cooperation to include, without limitation, attendance at depositions and the provisions of relevant documents as may be reasonably requested by the indemnifying party; provided, that the indemnifying party will hold the indemnified party harmless from all of its expenses, including reasonable attorneys' fees, incurred in connection with such cooperation by the indemnified party. 33 8.5 Arbitration. The rights of the indemnified party to ----------- indemnification and the estimated amount thereof, as set forth in the notice, shall be deemed objected to by the indemnifying party unless the indemnifying party notified the indemnified party in writing as specified in Section 8.4 above that the indemnifying party accepts and agrees with the right of the indemnified party to indemnification or that the indemnifying party elects to defend such claim. If the claim to indemnification is deemed objected to, the parties shall attempt to settle and compromise the same, or if unable to do so within sixty (60) days of receipt of the notice of the claim, such dispute shall be submitted to and resolved by prompt binding arbitration in a mutually agreed location or, absent agreement in Orange County, California, and any rights of indemnification established by reason of such settlement, compromise or arbitration shall promptly thereafter be paid and satisfied by the indemnifying party. Arbitration shall be final and binding according to the Commercial Arbitration Rules of the American Arbitration Association, and judgment upon the award rendered by the arbitrator(s) may be entered in any state or federal court in Orange County, California. 8.6 Limits on Indemnification. ------------------------- (a) Notwithstanding any provision of this Agreement to the contrary, the Stockholders shall have no obligation to indemnify any person entitled to indemnity under Section 8.1 unless the persons so entitled to indemnity thereunder have suffered Damages in an aggregate amount in excess of Twenty Five Thousand Dollars ($25,000) and then only to the extent of such excess and (ii) the Stockholders' liability under Section 8.1 shall in no event exceed Ten Million Dollars ($10,000,000); (b) Notwithstanding any provision of this Agreement to the contrary, BC shall have no obligation to indemnify any person entitled to indemnity under Section 8.2, (i) unless the persons so entitled to indemnity thereunder have suffered Damages in an aggregate amount in excess of Twenty Five Thousand Dollars ($25,000) and then only to the extent of such excess and (ii) BC's liability under Section 8.2 shall in no event exceed Ten Million Dollars ($10,000,000). ARTICLE IX GENERAL PROVISIONS ------------------ 9.1 Survival of Representations, Warranties and Agreements. All ------------------------------------------------------ representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Closing and shall terminate twenty-four (24) months after the Closing Date. No claim or action for indemnity pursuant to Sections 8.1 or 8.2 hereof shall be asserted or maintained by any party hereto after the second anniversary of the Closing Date, except for claims made in writing prior to such date and actions (whether constituted before or after such date) based on any claim made in writing prior to such date. Each party agrees that, except for the representations and warranties contained in this Agreement and BC Disclosure Schedule and the BuyGolf Disclosure Schedule, no party hereto has made any other representations and warranties, and each party hereby disclaims any other representations and warranties made by itself or any of its officers, directors, employees, agents, financial and legal advisors or other representatives, with respect to execution and delivery of this Agreement or the transactions contemplated herein, notwithstanding the delivery or 34 disclosure to any other party or any party's representatives of any documentation or other information with respect to any one or more of the foregoing. 9.2 Notices. All notices and other communications hereunder ------- shall be in writing and shall be deemed given if delivered personally, telecopied (with confirmation), mailed by registered or certified mail (return receipt requested) or delivered by an express courier (with confirmation) 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 BC, to: BUY.COM INC. 21 Brookline Aliso Viejo, California 92656 Attention: Gregory Hawkins with a copy to: Brobeck, Phleger & Harrison LLP 38 Technology Drive Irvine, California 92618 Attention: Bruce R. Hallett, Esq. and (b) if to BuyGolf, or the Stockholders, to: BuyGolf, Com Inc. 1705 South Coast Highway Laguna Beach, California 92651 Attention: Bradford W. Allen with a copy to: Rutan & Tucker 611 Anton Boulevard Suite 1400 Costa Mesa, California 92626 Attention: Natalie Sibbald Dundas, Esq. 9.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND ------------- CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE DIRECTING CALIFORNIA LAW) EXCEPT TO THE EXTENT MANDATORILY GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. BC AND EACH OF THE STOCKHOLDERS HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY CALIFORNIA STATE OR FEDERAL COURT SITTING IN ORANGE COUNTY, CALIFORNIA, IN ANY ACTION OR PROCEEDING ARISING OUT 35 OF OR RELATING TO THIS AGREEMENT, AND BUYER AND THE STOCKHOLDERS EACH HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CALIFORNIA STATE COURT OR SUCH FEDERAL COURT. BC AND THE STOCKHOLDERS EACH HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF. 9.4 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. 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 Merger may be consummated as originally contemplated to the fullest extent possible. 9.5 Assignment; Binding Effect; Benefit. 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 hereto. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective successors and permitted assigns any rights or remedies under or by reason of this Agreement. 9.6 Headings. The descriptive headings contained in this Agreement -------- are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 9.7 Entire Agreement. This Agreement (including the Exhibits, the BC ---------------- Disclosure Schedule and the BuyGolf Disclosure Schedule and other Schedules referenced herein) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings among the parties with respect thereto. No addition to or modification of any provision of this Agreement shall be binding upon any party hereto unless made in writing and signed by all parties hereto. 36 9.8 Counterparts. This Agreement may be executed in one or more ------------ counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Execution and delivery of this Agreement by exchange of facsimile copies bearing the facsimile signature of a party hereto shall constitute a valid and binding execution and delivery of this Agreement by such party. 9.9 Waivers. No waiver of any of the provisions of this Agreement ------- shall be deemed, or shall constitute, a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. 9.10 Third Parties. Nothing in this Agreement, whether express or ------------- implied, is intended to confer any rights or remedies under or by reason of this Agreement on any persons other than the parties to it and their respective successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third person to any party to this Agreement, nor shall any provision give any third persons any right of subrogation or action over against any party to this Agreement. 9.11 Publicity. None of the Stockholders or BuyGolf shall issue or --------- make, or cause to have issued or made, any press release or announcement concerning, or otherwise disclose to any third person, the terms of the transactions contemplated hereby (including the existence of the transactions contemplated hereby) without the advance approval in writing of the form and substance thereof by BC, unless otherwise required by applicable law, it being understood that the Stockholders and BuyGolf will use their best efforts not to disclose the terms or existence of the transaction prior to the Closing. Further, prior to and following the Closing none of the parties shall disclose the material terms of this Agreement to any third party other than a third party which must have such information in rendering financial, business, legal or tax advice to such party, as required by law or regulatory authority, or with the written consent (not, following the Closing, to be unreasonably withheld) of each other party hereto. 9.12 Schedules. All schedules, exhibits, appendices and documents --------- referred to in or attached to this Agreement are integral parts of this Agreement as if fully set forth herein, and all statements appearing therein shall be deemed disclosed for all purposes, and not only in connection with the specific representation to which they are explicitly referenced. [Signature page to follow] 37 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized, all as of the date first written above. BC: BUYGOLF: BUY.COM INC. BUYGOLF.COM INC. By:______________________________ By:_______________________________ Name: Gregory Hawkins Name: Bradford W. Allen Title: Chief Executive Officer Title: Chief Executive Officer STOCKHOLDERS: Bradford W. Allen Scott A. Blum By:______________________________ By:_______________________________ Thomas Monaco Joseph and April Kramer By:______________________________ By:_______________________________ Sinocorp Investment Ltd. Las Vegas Golf & Tennis, Inc. By:______________________________ By:_______________________________ Name: Name: Title: Title: Wait 1999 Long-Term Trust Ingram Entertainment Holdings Inc. By:______________________________ By:_______________________________ Name: Younghee Waite Name: Title: Trustee Title: SIGNATURE PAGE FOR AGREEMENT AND PLAN OF MERGER AND REORGANIZATION 38 SCHEDULE A SCHEDULE OF STOCKHOLDERS ------------------------
Aggregate BUY.COM Number of Shares to be Issued and Stockholder Shares of BuyGolf/1/ Delivered at Closing ------------------------------------ --------------------------- -------------------------- Bradford W. Allen 5,188,219 2,697,874 Thomas Monaco 200,000 104,000 Joseph and April Kramer 400,000 208,000 Sinocorp Investment Ltd. 400,000 208,000 Las Vegas Golf & Tennis, Inc. 540,000 280,800 Scott A. Blum 400,000 208,000 Younghee Wait, Trustee of the Wait 1999 400,000 208,000 Long-term Trust Ingram Entertainment Inc. 438,947 228,253 --------------------------- -------------------------- Total: 7,967,166 4,142,927 Exchange Ratio: 0.520
______________________ /1/ Buy.Com Inc. has a five percent (5%) ownership interest in BuyGolf prior to the Merger. SCHEDULE B SCHEDULE OF OPTIONHOLDERS ------------------------- Aggregate BUY.COM Options Number of to be Issued Upon the BuyGolf Shares Assumption and Replacement Optionholders Subject to Options of the BuyGolf Options ------------------------- ----------------------- ---------------------------- Don Harris 200,000 104,000 Keith Allen 160,000 83,200 Lucy Wojskowicz 20,000 10,400 Jack Souders 35,000 18,200 Steve Jess 40,000 20,800 Jeff Allen 25,000 13,000 Arti Dua 3,000 1,560 Miriam Price 3,000 1,560 Greg Van Ginkel 2,000 1,040 Lori Stewart 1,000 520 Mark Brown 10,000 5,200 ------------------------- ---------------------------- Total: 499,000 259,480 EXHIBITS -------- Exhibit A - Certificate of Merger Exhibit B - Form of Spousal Consent Exhibit C - Form of Proprietary Information and Inventions Agreement Exhibit D - Form of Employee Nondisclosure and Developments Agreement Exhibit E - Form of Release Agreement Exhibit F - Stock Restriction Agreement Exhibit G - Form of Non-Competition Agreement Exhibit H - Non-Disclosure Agreement Exhibit I - Form of Option Assumption Agreement Exhibit J - Form of Optionholder Questionnaire SPOUSAL CONSENT The undersigned, the spouse of Stockholder, acknowledges that he/she is familiar with the substance of the Agreement and Plan of Merger and Reorganization, dated the date hereof, between BuyGolf.com Inc., BUY.COM INC. and the Stockholders (the "Agreement") that his/her spouse has signed today. Without modifying any rights between himself/herself and his/her spouse, the undersigned hereby (i) agrees to be bound by the Agreement; (ii) agrees that his/her spouse may enter into the Agreement and consummate the transactions contemplated thereby; and (iii) agrees that his/her spouse may amend or modify the Agreement without further consent on his/her part. Dated: October ___, 1999 ___________________________________ Print Name:________________________ EX-3.1 4 AMENDED AND RESTATED CERTIFICATE OF BUY.COM EXHIBIT 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF BUY.COM INC. BUY.COM INC., a corporation organized and existing under the General Corporation Law of the State of Delaware DOES HEREBY CERTIFY: FIRST: The original Certificate of Incorporation of Buy Corp. was ----- filed with the Secretary of State of Delaware on August 3, 1998. SECOND: The Amended and Restated Certificate of Incorporation of ------ BUY.COM INC. in the form attached hereto as Exhibit A has been duly adopted in accordance with the provisions of Sections 245 and 242 of the General Corporation Law of the State of Delaware by the directors and stockholders of the Corporation. THIRD: The Amended and Restated Certificate of Incorporation so ----- adopted reads in full as set forth in Exhibit A attached hereto and is hereby incorporated herein by this reference. IN WITNESS WHEREOF, BUY.COM INC. has caused this Certificate to be signed this 2nd day of September, 1999. BUY.COM INC. By ____________________________ Murray Williams Secretary AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF BUY.COM INC. FIRST: The name of the corporation (hereinafter called the ----- "Corporation") is BUY.COM INC. SECOND: The address of the registered office of the Corporation in ------ the State of Delaware is 9 East Loockerman Street, City of Dover, County of Kent, and the name of the registered agent of the Corporation in the State of Delaware at such address is National Registered Agents, Inc. THIRD: The purpose of the Corporation is to engage in any lawful act ----- or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: ------ A. This Corporation is authorized to issue two classes of shares to be designated respectively Preferred Stock ("Preferred Stock") and Common Stock ("Common Stock"). The total number of shares of capital stock that the Corporation is authorized to issue is One Billion (1,000,000,000). The total number of shares of Preferred Stock this Corporation shall have authority to issue is One Hundred Fifty Million (150,000,000). The total number of shares of Common Stock this Corporation shall have authority to issue is Eight Hundred Fifty Million (850,000,000). The Preferred Stock shall have a par value of $.0001 per share and the Common Stock shall have a par value of $.0001 per share. The Preferred Stock shall be divided into series. The first series shall consist of Nineteen Million Four Hundred Eighty-One Thousand One Hundred Thirty (19,481,130) shares and is designated "Series A Convertible Participating Preferred Stock" and the second series shall consist of Fifteen Million Eight Hundred Seventy Seven Thousand Two Hundred Forty Nine (15,877,249) shares and is designated "Series B Convertible Participating Preferred Stock." The remaining shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the "Board of Directors") is expressly authorized to provide for the issue of all or any of the remaining shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter, for each such series, such voting powers, full or limited, or no voting powers, and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issue of such shares (a "Preferred Stock Designation") and as may be permitted by the General Corporation Law of the State of Delaware. The Board of Directors is also expressly authorized to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series, other than the Series A Convertible Participating Preferred Stock and the Series B Convertible Participating Preferred Stock, subsequent to the issue of shares of that 2 series. In case the number of shares of such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. B. The powers, preferences, rights, restrictions, and other matters relating to the Series A Convertible Participating Preferred Stock and the Series B Convertible Participating Preferred Stock are as follows: 1. Number of Shares. The series of Preferred Stock designated and known ---------------- as "Series A Convertible Participating Preferred Stock" shall consist of 19,481,130 shares and the series of Preferred Stock designated and known as "Series B Convertible Participating Preferred Stock" shall consist of 15,877,249 shares. 2. Voting. ------ 2A. General. Except as may be otherwise provided in these terms of ------- the Series A Convertible Participating Preferred Stock (the "Series A Stock") and the Series B Convertible Participating Preferred Stock (the "Series B Stock") or by law, the Series A Stock and the Series B Stock shall vote together with all other classes and series of stock of the Corporation as a single class on all actions to be taken by the stockholders of the Corporation, including but not limited to, actions amending the Certificate of Incorporation to increase the number of authorized shares of Common Stock. Each share of Series A Stock and Series B Stock shall entitle the holder thereof to such number of votes per share on each such action as shall equal the number of shares of Common Stock (including fractions of a share) into which each share of Series A Stock and Series B Stock is then convertible. 2B. Board Size. The Corporation shall not, without the written ---------- consent or affirmative vote of the holders of at least two-thirds of the then outstanding shares of Series A Stock and Series B Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) together as a single class, increase the maximum number of directors constituting the Board of Directors to a number in excess of nine (9). 2C. Board Seats. So long as ten percent (10%) of the Series A Stock ----------- and the Series B Stock remains outstanding, the holders of the Series A Stock, voting as a separate series, shall be entitled to elect one director of the Corporation and the holders of Series B Stock, voting as a separate series, shall be entitled to elect one director of the Corporation. The holders of the Common Stock, voting as a separate class, shall be entitled to elect one director of the Corporation. The holders of the Series A Stock, the Series B Stock and the Common Stock, voting together as a single class, shall be entitled to elect the remainder of the directors of the Corporation. At any meeting (or in a written consent in lieu thereof) held for the purpose of electing directors, (i) the presence in person or by proxy (or the written consent) of the holders of a majority of the total shares of the Series A Stock then outstanding shall constitute a quorum of the Series A Stock for the election of directors to be elected solely by the holders of the Series A Stock, (ii) the presence in person or by proxy (or the written consent) of the holders of a majority of the 3 total shares of the Series B Stock then outstanding shall constitute a quorum of the Series B stock for the election of directors to be elected solely by the holders of the Series B Stock, (iii) the presence in person or by proxy (or the written consent) of the holders of a majority of the total shares of Common Stock then outstanding shall constitute a quorum of the Common Stock for the election of directors to be elected solely by the holders of the Common Stock, and (iv) the presence in person or by proxy (or the written consent) of the holders of a majority of the total shares of Series A Stock, Series B Stock and Common Stock, voting as a single class on an as-if converted basis, then outstanding shall constitute a quorum of the Series A Stock, Series B Stock and Common Stock for the election of directors to be elected solely by the holders of Series A Stock, Series B Stock and Common Stock, voting as a single class. A vacancy in any directorship elected by the holders of the Series A Stock shall be filled only by vote or written consent of the holders of the Series A Stock; a vacancy in any directorship elected by the holders of the Series B Stock shall be filled only by vote or written consent of the holders of the Series B Stock; a vacancy in any directorship elected by the holders of the Common Stock shall be filled only by vote or written consent of the holders of the Common Stock; and a vacancy in the directorship elected jointly by the holders of the Series A Stock, the Series B Stock and the Common Stock shall be filled only by vote or written consent of the Series A Stock, the Series B Stock and the Common Stock as provided above. 3. Dividends. The holders of the Series A Stock and the Series B Stock --------- shall be entitled to receive, out of funds legally available therefor, when and if declared by the Board of Directors, quarterly dividends at the rate per annum of $0.0616 per share (the "Accruing Dividends"), appropriately adjusted, for stock splits, recapitalizations and the like subsequent to the date of this Amended and Restated Certificate of Incorporation. Accruing Dividends shall accrue from day to day, whether or not earned or declared, and shall be cumulative. 4. Liquidation. Upon any liquidation, dissolution or winding up of the ----------- Corporation resulting in aggregate proceeds of less than $340,000,000, whether voluntary or involuntary, the holders of the shares of Series A Stock and Series B Stock shall first be entitled, before any distribution or payment is made upon liquidation on any stock ranking junior to the Series A Stock and the Series B Stock, to be paid an amount equal to $1.0266 per share and $5.6685 per share, respectively, plus, in the case of each share, an amount equal to all Accruing Dividends unpaid thereon (whether or not declared) and any other dividends declared but unpaid thereon, computed to the date payment thereof is made available, such amount payable with respect to one share of Series A Stock and Series B Stock, respectively, being sometimes referred to as the "Series A Liquidation Preference Payment" or the "Series B Liquidation Preference Payment," as applicable, and with respect to all shares of Series A Stock or Series B Stock, being sometimes referred to as the "Series A Liquidation Preference Payments" and "Series B Liquidation Preference Payments," respectively. If upon such liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the assets to be distributed among the holders of Series A Stock and Series B Stock shall be insufficient to permit payment in full to the holders of Series A Stock and Series B Stock of the Series A Liquidation Preference Payments and the Series B Liquidation Preference Payments, respectively, then the entire assets of the Corporation to be so distributed shall be distributed ratably among the holders of Series A Stock and Series B Stock (with each share of Series A Stock and Series B Stock being deemed, for such purpose, to be equal to the number of shares of Common Stock (including fractions of a share) into which such share of Series A Stock or Series B Stock is convertible immediately prior to the close of business on the business day fixed for such distribution). Upon any such liquidation, dissolution or winding up of the Corporation, immediately after the holders of 4 Series A Stock and Series B Stock shall have been paid in full the Series A Liquidation Preference Payments and the Series B Liquidation Preference Payments, respectively, the remaining net assets of the Corporation available for distribution shall be distributed ratably among the holders of Series A Stock, Series B Stock and Common Stock (with each share of Series A Stock and Series B Stock being deemed, for such purpose, to be equal to the number of shares of Common Stock (including fractions of a share) into which such share of Series A Stock or Series B Stock is convertible immediately prior to the close of business on the business day fixed for such distribution). Written notice of such liquidation, dissolution or winding up, stating a payment date and the place where said payments shall be made, shall be delivered in person, mailed by certified or registered mail, return receipt requested, or sent by telecopier or telex, not less than 20 days prior to the payment date stated therein, to the holders of record of Series A Stock and Series B Stock, such notice to be addressed to each such holder at its address as shown by the records of the Corporation. The consolidation or merger of the Corporation into or with any other entity or entities which results in the exchange of outstanding shares of the Corporation for securities or other consideration issued or paid or caused to be issued or paid by any such entity or affiliate thereof (other than a merger to reincorporate the Corporation in a different jurisdiction), and the sale, lease, abandonment, transfer or other disposition by the Corporation of all or substantially all its assets, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of the provisions of this paragraph 4. For purposes hereof, the Common Stock shall rank junior to the Series A Stock and the Series B Stock in the event of liquidation. 5. Restrictions. So long as ten percent (10%) of the Series A Stock and ------------ the Series B Stock remains outstanding, except where the vote or written consent of the holders of a greater number of shares of the Corporation is required by law or by the Certificate of Incorporation, and in addition to any other vote required by law or the Certificate of Incorporation, without the approval of the holders of at least a majority of the then outstanding total shares of each of the Series A Stock and the Series B Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be), separately as series, the Corporation will not: 5A. Create or authorize the creation of any additional class or series of shares of stock unless the same ranks junior to the Series A Stock and the Series B Stock as to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, or increase the authorized amount of the Series A Stock or Series B Stock or increase the authorized amount of any additional class or series of shares of stock unless the same ranks junior to the Series A Stock and the Series B Stock as to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, or create or authorize any obligation or security convertible into shares of Series A Stock or Series B Stock or into shares of any other class or series of stock unless the same ranks junior to the Series A Stock and the Series B Stock as to the distribution of assets on the liquidation, dissolution or winding up of the Corporation, whether any such creation, authorization or increase shall be by means of amendment to the Certificate of Incorporation or by merger, consolidation or otherwise; 5B. Consent to any liquidation, dissolution or winding up of the Corporation or consolidate or merge into or with any other entity or entities or sell, lease, abandon, transfer or 5 otherwise dispose of all or substantially all its assets if the Corporation's valuation for purposes of such transaction is less than One Billion Dollars ($1,000,000,000); 5C. Amend, alter or repeal its Certificate of Incorporation or By-laws in a manner that would materially affect the Series A Stock or the Series B Stock; 5D. Purchase or set aside any sums for the purchase of, or pay any dividend or make any distribution on, any shares of stock other than the Series A Stock and the Series B Stock, except for dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and except for the purchase of shares of Common Stock from former employees of the Corporation who acquired such shares directly from the Corporation, if each such purchase is made pursuant to contractual rights held by the Corporation relating to the termination of employment of such former employee and the purchase price does not exceed the original issue price paid by such former employee to the Corporation for such shares; or 5E. Redeem or otherwise acquire any shares of Series A Stock or Series B Stock except as expressly authorized in paragraph 7 hereof or pursuant to a purchase offer made pro rata to all holders of the shares of Series A Stock and Series B Stock on the basis of the aggregate number of outstanding shares of Series A Stock and Series B Stock then held by each such holder. In addition, the consent of the holders of a majority of the outstanding Series B Stock, voting as a separate class, shall be required for: (i) any amendment or change of the rights, preferences or powers of the Series B Stock; (ii) any action that reclassifies any outstanding shares into shares having rights as to dividends or assets senior to or on a parity with the Series B Stock; (iii) any amendment of the Company's Certificate of Incorporation that modifies the rights of the Series B Stock in an adverse manner; (iv) any material change in the Corporation's line of business provided that expanding into new markets and new products and services categories or expanding into other e-commerce activities shall not be deemed a material change; (v) any agreement between the Corporation and any officer or director other than in the ordinary course of business; (vi) any issuance of debt in excess of $100,000,000 in the aggregate. In addition, the consent of the holders of a majority of the outstanding Series A Stock, voting as a separate class, shall be required for: (i) any amendment or change of the rights, preferences or powers of the Series A Stock; (ii) any action that reclassifies any outstanding shares into shares having rights as to dividends or assets senior to or on a parity with the Series A Stock; (iii) any amendment of the Company's Certificate of Incorporation that modifies the rights of the Series A Stock in an adverse manner. 6. Conversions. The holders of shares of Series A Stock and Series B ----------- Stock shall have the following conversion rights: 6A. Right to Convert. Subject to the terms and conditions of this ---------------- paragraph 6, the holder of any share or shares of Series A Stock or Series B Stock shall have the right, at its option at any time, to convert any such shares of Series A Stock or Series B Stock (except that 6 upon any liquidation of the Corporation the right of conversion shall terminate at the close of business on the business day fixed for payment of the amount distributable on the Series A Stock and Series B Stock) into such number of fully paid and nonassessable shares of Common Stock as is obtained by (i) multiplying, in the case of the Series A Stock, the number of shares of Series A Stock so to be converted by $1.0266 or, in the case of the Series B Stock, the number of shares of Series B Stock so to be converted by $5.6685 and (ii) dividing the result, in the case of the Series A Stock, by the conversion price of $1.0266 per share or, in the case of the Series B Stock, by the conversion price of $5.6685 or, in case an adjustment of either such conversion price has taken place pursuant to the further provisions of this paragraph 6, then by the conversion price as last adjusted and in effect at the date any share or shares of Series A Stock or Series B Stock are surrendered for conversion (such price, or such price as last adjusted, being referred to as the "Series A Conversion Price" or the "Series B Conversion Price" as applicable). Such rights of conversion shall be exercised by the holder thereof by giving written notice that the holder elects to convert a stated number of shares of Series A Stock and/or Series B Stock into Common Stock and by surrender of a certificate or certificates for the shares so to be converted to the Corporation at its principal office (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of the Series A Stock and the Series B Stock) at any time during its usual business hours on the date set forth in such notice, together with a statement of the name or names (with address) in which the certificate or certificates for shares of Common Stock shall be issued. 6B. Issuance of Certificates; Time Conversion Effected. Promptly after -------------------------------------------------- the receipt of the written notice referred to in subparagraph 6A and surrender of the certificate or certificates for the share or shares of Series A Stock and/or Series B Stock to be converted, the Corporation shall issue and deliver, or cause to be issued and delivered, to the holder, registered in such name or names as such holder may direct, a certificate or certificates for the number of whole shares of Common Stock issuable upon the conversion of such share or shares of Series A Stock and/or Series B Stock. To the extent permitted by law, such conversion shall be deemed to have been effected and the Series A Conversion Price and/or the Series B Conversion Price shall be determined as of the close of business on the date on which such written notice shall have been received by the Corporation and the certificate or certificates for such share or shares shall have been surrendered as aforesaid, and at such time the rights of the holder of such share or shares of Series A Stock and/or Series B Stock shall cease, and the person or persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such conversion shall be deemed to have become the holder or holders of record of the shares represented thereby. 6C. Fractional Shares; Dividends; Partial Conversion. No fractional ------------------------------------------------ shares shall be issued upon conversion of Series A Stock or Series B Stock into Common Stock, and no payment or adjustment shall be made upon any conversion on account of any cash dividends on the Common Stock issued upon such conversion. At the time of each conversion, the Corporation shall pay in cash an amount equal to all dividends, excluding Accruing Dividends, accrued and unpaid on the shares of Series A Stock and/or Series B Stock surrendered for conversion to the date upon which such conversion is deemed to take place as provided in subparagraph 6B. In case the number of shares of Series A Stock and/or Series B Stock represented by the certificate or certificates surrendered pursuant to subparagraph 6A exceeds the 7 number of shares converted, the Corporation shall, upon such conversion, execute and deliver to the holder, at the expense of the Corporation, a new certificate or certificates for the number of shares of Series A Stock and/or Series B Stock represented by the certificate or certificates surrendered which are not to be converted. If any fractional share of Common Stock would, except for the provisions of the first sentence of this subparagraph 6C, be delivered upon such conversion, the Corporation, in lieu of delivering such fractional share, shall pay to the holder surrendering the Series A Stock and/or the Series B Stock for conversion an amount in cash equal to the current market price of such fractional share as determined in good faith by the Board of Directors of the Corporation. 6D. Adjustment of Price Upon Issuance of Common Stock. Except as ------------------------------------------------- provided in subparagraph 6E, if and whenever the Corporation shall issue or sell, or is, in accordance with subparagraphs 6D(1) through 6D(7), deemed to have issued or sold, any shares of Common Stock for a consideration per share less than the Conversion Price with respect to any series of Preferred Stock in effect on the date of and immediately prior to such issuance or sale, then and in such event, the Conversion Price for such series of Preferred Stock shall be automatically reduced, concurrently with such issuance or sale, to the price determined by dividing (i) an amount equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such issuance or sale multiplied by the then existing Conversion Price for such series of Preferred Stock and (b) the consideration, if any, received by the Corporation upon such issuance or sale, by (ii) the total number of shares of Common Stock and Series A Stock or Series B Stock, as the case may be, outstanding immediately after such issuance or sale. For purposes of this subparagraph 6D, the following subparagraphs 6D(1) to 6D(7) shall also be applicable: 6D(1) Issuance of Rights or Options. In case at any time the ----------------------------- Corporation shall in any manner grant (whether directly or by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights or options being called "Options" and such convertible or exchangeable stock or securities being called "Convertible Securities") whether or not such Options or the right to convert or exchange any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon the exercise of such Options or upon the conversion or exchange of such Convertible Securities (determined by dividing (i) the total amount, if any, received or receivable by the Corporation as consideration for the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount of additional consideration, if any, payable upon the issue or sale of such Convertible Securities and upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the exercise of such 8 Options or upon the conversion or exchange of all such Convertible Securities issuable upon the exercise of such Options) shall be less than the Conversion Price of any series of Preferred Stock in effect immediately prior to the time of the granting of such Options, then the total maximum number of shares of Common Stock issuable upon the exercise of such Options or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon the exercise of such Options shall be deemed to have been issued for such price per share as of the date of granting of such Options or the issuance of such Convertible Securities and thereafter shall be deemed to be outstanding. Except as otherwise provided in subparagraph 6D(3), no adjustment of the Conversion Price of any series of Preferred Stock shall be made upon the actual issuance of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issue of such Common Stock upon conversion or exchange of such Convertible Securities. 6D(2) Issuance of Convertible Securities. In case the ---------------------------------- Corporation shall in any manner issue (whether directly or by assumption in a merger or otherwise) or sell any Convertible Securities, whether or not the rights to exchange or convert any such Convertible Securities are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange (determined by dividing (i) the total amount received or receivable by the Corporation as consideration for the issuance or sale of such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by (ii) the total maximum number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities) shall be less than the Conversion Price of any series of Preferred Stock in effect immediately prior to the time of such issue or sale, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all such Convertible Securities shall be deemed to have been issued for such price per share as of the date of the issue or sale of such Convertible Securities and thereafter shall be deemed to be outstanding, provided that (a) except as otherwise provided in subparagraph 6D(3), no adjustment of the Conversion Price of any series of Preferred Stock shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (b) if any such issuance or sale of such Convertible Securities is made upon exercise of any Options to purchase any such Convertible Securities for which adjustments of the Conversion Price of any Series of Preferred Stock have been or are to be made pursuant to other provisions of this subparagraph 6D, no further adjustment of the Conversion Price shall be made by reason of such issuance or sale. 6D(3) Change in Option Price or Conversion Rate. Upon the happening ----------------------------------------- of any of the following events, namely, if the purchase price provided for in any Option referred to in subparagraph 6D(1), the additional consideration, if any, payable upon the conversion or exchange of any Convertible Securities referred to in subparagraph 6D(1) or 6D(2), or the rate at which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are convertible into or exchangeable for Common Stock shall change at any time (including, but not limited to, changes under or by reason of provisions designed to protect against dilution), the Conversion Price of any series of Preferred Stock in effect at the time of such event shall forthwith be readjusted to the Conversion Price which would have been in effect at such time had such Options or Convertible Securitiesstill outstanding provided for such changed purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued or sold, but only if as a result of such adjustment the Conversion Price then in effect hereunder is thereby reduced; and on the termination of any such Option or any such right to convert or exchange such Convertible Securities, the 9 Conversion Price for such series of Preferred Stock then in effect hereunder shall forthwith be increased to the Conversion Price for such series of Preferred Sock which would have been in effect at the time of such termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination, never been issued. 6D(4) Stock Dividends. In case the Corporation shall declare a --------------- dividend or make any other distribution upon any stock of the Corporation payable in Common Stock (except for dividends or distributions upon the Common Stock), Options or Convertible Securities, any Common Stock, Options or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. 6D(5) Consideration for Stock. In case any shares of Common Stock, ----------------------- Options or Convertible Securities shall be issued or sold for cash, the consideration received therefor shall be deemed to be the amount received by the Corporation therefor, without deduction therefrom of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Corporation in connection therewith. In case any shares of Common Stock, Options or Convertible Securities shall be issued or sold for a consideration other than cash, the amount of the consideration other than cash received by the Corporation shall be deemed to be the fair value of such consideration as determined in good faith by the Board of Directors of the Corporation, without deduction of any expenses incurred or any underwriting commissions or concessions paid or allowed by the Corporation in connection therewith. In case any Options shall be issued in connection with the issue and sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined in good faith by the Board of Directors of the Corporation. 6D(6) Record Date. In case the Corporation shall take a record of ----------- the holders of its Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (ii) to subscribe for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issuance or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be. 6D(7) Treasury Shares. The number of shares of Common Stock --------------- outstanding at any given time shall not include shares owned or held by or for the account of the Corporation, and the disposition of any such shares shall be considered an issue or sale of Common Stock for the purpose of this subparagraph 6D. 6E. Certain Issues of Common Stock Excepted. Anything herein to the --------------------------------------- contrary notwithstanding, the Corporation shall not be required to make any adjustment of the Conversion Price of any series of Preferred Stock in the case of the issuance from and after the date of filing of these terms of the Series A Stock and the Series B Stock of (i) shares of Common Stock 10 issuable upon exercise of options granted to directors, officers, employees or consultants of the Corporation in connection with their service as directors of the Corporation, their employment by the Corporation or their retention as consultants by the Corporation, (ii) such number of shares of Common Stock which are repurchased by the Corporation from such persons after such date pursuant to contractual rights held by the Corporation and at repurchase prices not exceeding the respective original purchase prices paid by such persons to the Corporation therefor, (iii) Common Stock or Common Stock Equivalents issued as consideration in a merger, (iv) Common Stock or Common Stock Equivalents issued pursuant to an adjustment in the Conversion Price of the Series B Stock pursuant to Section 6P, (v) Common Stock or Common Stock Equivalents issued or issuable (I) in a public offering before or in connection with which all outstanding shares of Preferred Stock will be converted to Common Stock or (II) upon the exercise of warrants or rights granted to underwriters in connection with such a public offering, or (vi) Common Stock or Common Stock Equivalents issued to a potential or existing customer or supplier or other strategic relationship or issued in connection with a credit facility or equipment lease transaction, including without limitation, warrants previously issued to The Bank of Nova Scotia and United Air Lines, Inc. 6F. Subdivision or Combination of Common Stock. In case the Corporation ------------------------------------------ shall at any time subdivide (by any stock split, stock dividend or otherwise subsequent to the date of this Amended and Restated Certificate of Incorporation) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price of any series of Preferred Stock in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price of any series of Preferred Stock in effect immediately prior to such combination shall be proportionately increased. In the case of any such subdivision, no further adjustment shall be made pursuant to subparagraph 6D(4) by reason thereof. 6G. Reorganization or Reclassification. If any capital reorganization ---------------------------------- or reclassification of the capital stock of the Corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby each holder of a share or shares of Series A Stock and Series B Stock shall thereupon have the right to receive, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of such share or shares of Series A Stock and Series B Stock, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number of shares of such Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of such holder to the end that the provisions hereof (including without limitation provisions for adjustments of the Conversion Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights. 6H. Notice of Adjustment. Upon any adjustment of the Conversion Price, -------------------- then and in each such case the Corporation shall give written notice thereof, by delivery in person, 11 certified or registered mail, return receipt requested, telecopier or telex, addressed to each holder of shares of Series A Stock and Series B Stock at the address of such holder as shown on the books of the Corporation, which notice shall state the Conversion Price for each series of Preferred Stock resulting from such adjustment, setting forth in reasonable detail the method upon which such calculation is based. 6I. Other Notices. In case at any time: ------------- (1) the Corporation shall declare any dividend upon its Common Stock payable in cash or stock or make any other distribution to the holders of its Common Stock; (2) the Corporation shall offer for subscription pro rata to the --- ---- holders of its Common Stock any additional shares of stock of any class or other rights; (3) there shall be any capital reorganization or reclassification of the capital stock of the Corporation, or a consolidation or merger of the Corporation with or into another entity or entities, or a sale, lease, abandonment, transfer or other disposition of all or substantially all of the assets of the Corporation; or (4) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Corporation; then, in any one or more of said cases, the Corporation shall give, by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, addressed to each holder of any shares of Series A Stock and Series B Stock at the address of such holder as shown on the books of the Corporation, (a) at least 20 days' prior written notice of the date on which the books of the Corporation shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding up and (b) in the case of any such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding up, at least 20 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause (a) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Common Stock shall be entitled thereto and such notice in accordance with the foregoing clause (b) shall also specify the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, disposition, dissolution, liquidation or winding up, as the case may be. 6J. Stock to be Reserved. The Corporation will at all times reserve and -------------------- keep available out of its authorized Common Stock, solely for the purpose of issuance upon the conversion of Series A Stock and Series B Stock as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of Series A Stock and Series B Stock. The Corporation covenants that all shares of Common Stock which shall be so issued shall be duly and validly issued and fully paid and nonassessable and free from all taxes, liens and charges with respect to the issue thereof, and, without limiting the generality 12 of the foregoing, the Corporation covenants that it will from time to time take all such action as may be requisite to assure that the par value per share of the Common Stock is at all times equal to or less than the Conversion Price in effect at the time. The Corporation will take all such action as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation, or of any requirement of any national securities exchange or automated quotation system upon which the Common Stock may be listed. The Corporation will not take any action which results in any adjustment of the Conversion Price of any series of Preferred Stock if the total number of shares of Common Stock issued and issuable after such action upon conversion of the Series A Stock and Series B Stock would exceed the total number of shares of Common Stock then authorized by the Certificate of Incorporation. 6K. No Reissuance of Series A Stock or Series B Stock. Shares of Series ------------------------------------------------- A Stock and Series B Stock which are converted into shares of Common Stock as provided herein shall not be reissued. 6L. Issue Tax. The issuance of certificates for shares of Common Stock --------- upon conversion of Series A Stock and Series B Stock shall be made without charge to the holders thereof for any issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series A Stock and/or Series B Stock which is being converted. 6M. Closing of Books. The Corporation will at no time close its ---------------- transfer books against the transfer of any Series A Stock and/or Series B Stock or of any shares of Common Stock issued or issuable upon the conversion of any shares of Series A Stock or Series B Stock in any manner which interferes with the timely conversion of such Series A Stock and/or Series B Stock, except as may otherwise be required to comply with applicable securities laws. 6N. Definition of Common Stock. As used in this paragraph 6, the term -------------------------- "Common Stock" shall mean and include the Corporation's authorized Common Stock, par value $.0001 per share, as constituted on the date of filing of these terms of the Series A Stock and Series B Stock, and shall also include any capital stock of any class of the Corporation thereafter authorized which shall neither be limited to a fixed sum or percentage in respect of the rights of the holders thereof to participate in dividends nor entitled to a preference in the distribution of assets upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; provided that the shares of Common Stock receivable upon conversion of shares of Series A Stock and/or Series B Stock shall include only shares designated as Common Stock of the Corporation on the date of filing of this instrument, or in case of any reorganization or reclassification of the outstanding shares thereof, the stock, securities or assets provided for in subparagraph 6G. 6O. Mandatory Conversion. If at any time the Corporation shall effect a -------------------- firm commitment underwritten public offering ("IPO") of shares of Common Stock in which (i) the aggregate price paid for such shares by the public shall be at least $30,000,000 and (ii) the price paid by the public for such shares shall be at least $2.053 per share (appropriately adjusted to 13 reflect the occurrence of any event described in subparagraph 6F subsequent to the date of this Amended and Restated Certificate of Incorporation), then effective upon the closing of the sale of such shares by the Corporation pursuant to such public offering, all outstanding shares of Series A Stock and Series B Stock shall automatically convert to shares of Common Stock on the basis set forth in this paragraph 6. Holders of shares of Series A Stock and Series B Stock so converted may deliver to the Corporation at its principal office (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to such holders) during its usual business hours, the certificate or certificates for the shares so converted. As promptly as practicable thereafter, the Corporation shall issue and deliver to such holder a certificate or certificates for the number of whole shares of Common Stock to which such holder is entitled, together with any cash dividends and payment in lieu of fractional shares to which such holder may be entitled pursuant to subparagraph 6C. Until such time as a holder of shares of Series A Stock and/or Series B Stock shall surrender his or its certificates therefor as provided above, such certificates shall be deemed to represent the shares of Common Stock to which such holder shall be entitled upon the surrender thereof. 6P. Adjustment to Series B Stock Conversion Price Upon IPO. In the ------------------------------------------------------ event the Corporation consummates an IPO and the IPO Price Per Share is less than the Target Price, then the Series B Conversion Price in effect immediately prior to the IPO shall be adjusted according to the calculation below. In the event the IPO Price Per Share equals or exceeds the Target Price, no adjustment to the Series B Conversion Price shall occur under this Section 6P. This special one-time adjustment shall apply only to the Series B Conversion Price and shall not apply to the Series A Conversion Price. Notwithstanding anything contained herein to the contrary, in no event shall the Series B Conversion Price be adjusted below $2.8343 per share (as adjusted for subsequent stock splits, combinations, stock dividends and the like). Step 1: ------ Target Price - the IPO Price Per Share = Shortfall Step 2: ------ Shortfall = Alpha --------- Target Price Step 3: ------ Alpha x the Series B Issue Price = Beta Step 4: ------ The Series B Issue Price - Beta = New Series B Conversion Price Definitions: " Target Price" shall equal $7.0856 per share (as adjusted for subsequent stock splits, combinations, stock dividends and the like). 14 "Series B Issue Price" shall equal $5.6685 (as adjusted for subsequent stock splits, combinations, stock dividends and the like). "IPO Price Per Share" shall equal the initial public offering price per share at which the Corporation's Common Stock is first sold to the public pursuant to a Registration Statement on Form S-1 which has been declared effective by the Securities and Exchange Commission. 7. Redemption. The shares of Series A Stock and Series B Stock shall be ---------- redeemed as follows: 7A. Redemption. On August 18, 2003 (the "Series A Redemption Date"), ---------- the Corporation shall at the option of the holders of a majority of the outstanding Series A Stock, redeem all outstanding shares of Series A Stock. On September 2, 2004 (the "Series B Redemption Date"), the Corporation shall at the option of the holders of a majority of the outstanding Series B Stock, redeem all outstanding shares of Series B Stock. The Series A Redemption Date and the Series B Redemption Date shall each be referred to as a "Redemption Date." 7B. Redemption Price and Payment. The shares of Series A Stock to be ---------------------------- redeemed on the Series A Redemption Date shall be redeemed by paying for each share in cash an amount equal to $1.0266 per share plus, in the case of each share, an amount equal to all dividends, excluding Accruing Dividends, declared but unpaid thereon, computed to such Series A Redemption Date, such amount being referred to as a "Redemption Price" or more specifically the "Series A Redemption Price". Such payment shall be made in full on the Series A Redemption Date to the holders entitled thereto. The shares of Series B Stock to be redeemed on the Series B Redemption Date shall be redeemed by paying for each share in cash an amount equal to $5.6685 per share plus, in the case of each share, an amount equal to all dividends, excluding Accruing Dividends, declared but unpaid thereon, computed to such Series B Redemption Date, such amount being referred to as a "Redemption Price" or more specifically the "Series B Redemption Price". Such payment shall be made in full on the Series B Redemption Date to the holders entitled thereto. 7C. Redemption Mechanics. At least 20 but not more than 30 days prior -------------------- to any Redemption Date, written notice (the "Redemption Notice") shall be given by the Corporation by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, to each holder of record (at the close of business on the business day next preceding the day on which the Redemption Notice is given) of shares of Series A Stock or Series B Stock, as the case may be, notifying such holder of the redemption and specifying the Series A Redemption Price or Series B Redemption Price, the Series A Redemption Date or Series B Redemption Date, the number of shares of Series A Stock or Series B Stock to be redeemed from such holder (computed on a pro rata basis in accordance with the number of such shares held by all holders thereof) and the place where said Series A Redemption Price or Series B Redemption Price shall be payable. The Redemption Notice shall be addressed to each holder at his address as shown by the records of the Corporation. From and after the close of business on a Redemption Date, unless there shall have been a default in the payment of the applicable Redemption Price, all rights of holders of shares of Series A Stock or Series B Stock, as the case may be, (except the 15 right to receive the applicable Redemption Price) shall cease with respect to the shares redeemed on such Redemption Date, and such shares shall not thereafter be transferred on the books of the Corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of the Corporation legally available for redemption of shares of Series A Stock or Series B Stock on the applicable Redemption Date are insufficient to redeem the total number of shares of Series A Stock or Series B Stock to be redeemed on such Redemption Date, the holders of such shares shall share ratably in any funds legally available for redemption of such shares according to the respective amounts which would be payable to them if the full number of shares to be redeemed on such Redemption Date were actually redeemed. The shares of Series A Stock or Series B Stock not so redeemed shall remain outstanding and entitled to all rights and preferences provided herein. At any time thereafter when additional funds of the Corporation are legally available for the redemption of such shares of Series A Stock and/or Series B Stock, such funds will be used, at the end of the next succeeding fiscal quarter, to redeem the balance of such shares, or such portion thereof for which funds are then legally available, on the basis set forth above. 7D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares --------------------------------------------------- of Series A Stock and/or Series B Stock redeemed pursuant to this paragraph 7 or otherwise acquired by the Corporation in any manner whatsoever shall be cancelled and shall not under any circumstances be reissued; and the Corporation may from time to time take such appropriate corporate action as may be necessary to reduce accordingly the number of authorized shares of Series A Stock and/or Series B Stock. 8. Amendments. No provision of these terms of the Series A Stock and/or ---------- Series B Stock may be amended, modified or waived without the written consent or affirmative vote of the holders of at least a majority of the then outstanding total shares of each of the Series A Stock and the Series B Stock, voting as separate series. C. The powers, preferences, rights, restrictions, and other matters relating to the Common Stock are as follows: 1. Dividends. Subject to the rights of holders of all classes of stock --------- at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when, if and as declared by the Board of Directors, out of any assets of the Corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. 2. Liquidation. The liquidation rights of the holders of the Common ----------- Stock shall be as set forth in paragraph B4 above. 3. Voting. The holder of each share of Common Stock shall have the ------ right to one vote for each such share of Common Stock and shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the Corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. FIFTH: In furtherance and not in limitation of the powers conferred ----- by statute, the Board of Directors shall have the power, subject to the provisions of paragraphs B.5 of 16 Article FOURTH, both before and after receipt of any payment for any of the Corporation's capital stock, to adopt, amend, repeal or otherwise alter the Bylaws of the Corporation without any action on the part of the stockholders; provided, however, that the grant of such power to the Board of Directors shall not divest the stockholders of nor limit their power, subject to the provisions of paragraph C.5 of Article FOURTH, to adopt, amend, repeal or otherwise alter the Bylaws. SIXTH: Elections of directors need not be by written ballot unless ----- the Bylaws of the Corporation shall so provide. SEVENTH: The Corporation reserves the right to adopt, repeal, rescind ------- or amend in any respect any provisions contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by applicable law, and all rights conferred on stockholders herein are granted subject to this reservation. EIGHTH: A director of the Corporation shall, to the full extent ------ permitted by the Delaware General Corporation Law as it now exists or as it may hereafter be amended, not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Neither any amendment nor repeal of this Article EIGHTH, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation inconsistent with the Article EIGHTH, shall eliminate or reduce the effect of this Article EIGHTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article EIGHTH, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. NINTH. Meetings of stockholders may be held within or without the ----- State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. 17