\n 8.02. Regulatory Approvals……………………………………………………………………. 36
\n 8.03. Legal Conditions to Merger………………………………………………………………. 37
\n 8.04. Employee Matters……………………………………………………………………….. 37
\n 8.05. Extension of Credit; Cross Default……………………………………………………….. 37
\n 8.06. Director and Officer Indemnification; Liability Insurance…………………………………… 37
\n 8.07. Public Announcements……………………………………………………………………. 38
\n 8.08. Additional Agreements…………………………………………………………………… 38<\/p>\nARTICLE IX. CONDITIONS TO THE MERGER…………………………………………………………….. 38<\/p>\n
9.01. Conditions to Each Party’s Obligations to Effect the Merger…………………………………. 38
\n 9.02. Conditions to Obligations of the Buyer……………………………………………………. 39
\n 9.03. Conditions to Obligations of the Company………………………………………………….. 39<\/p>\n
ARTICLE X. TERMINATION, AMENDMENT AND WAIVER……………………………………………………… 40<\/p>\n
10.01. Termination……………………………………………………………………………. 40
\n 10.02. Effect of Termination; Expenses………………………………………………………….. 41
\n 10.03. Amendment……………………………………………………………………………… 42
\n 10.04. Waiver………………………………………………………………………………… 42<\/p>\n
ARTICLE XI. THE CLOSING………………………………………………………………………… 42<\/p>\n
11.01. Closing……………………………………………………………………………….. 42
\n 11.02. Deliveries At Closing…………………………………………………………………… 43<\/p>\n
ARTICLE XII. GENERAL PROVISIONS…………………………………………………………………. 43<\/p>\n
12.01. Alternative Structure…………………………………………………………………… 43
\n 12.02. Assignment of Right to Purchase………………………………………………………….. 43
\n 12.03. Survival of Representations, Warranties and Agreements……………………………………… 43
\n 12.04. Notices……………………………………………………………………………….. 43
\n 12.05. Severability…………………………………………………………………………… 45
\n 12.06. Entire Agreement……………………………………………………………………….. 45
\n 12.07. Assignment…………………………………………………………………………….. 45
\n 12.08. Parties in Interest…………………………………………………………………….. 45
\n 12.09. Specific Performance……………………………………………………………………. 45
\n 12.10. Governing Law………………………………………………………………………….. 45
\n 12.11. Headings………………………………………………………………………………. 46
\n 12.12. Interpretation…………………………………………………………………………. 46
\n 12.13. Counterparts…………………………………………………………………………… 46
\n<\/c><\/s><\/table>\n
-iii-<\/p>\n
Merger Agreement<\/p>\n
This Merger Agreement, dated as of September 4, 2001 (this “Agreement”), by
\nand among Fry’s Electronics, Inc., a California corporation (the “Buyer”), FCOP
\nAcquisition, Inc., a Delaware corporation and a wholly owned subsidiary of the
\nBuyer (the “Buyer Sub”), and Cyberian Outpost, Inc., a Delaware corporation (the
\n“Company”).<\/p>\n
WHEREAS, the Company and PC Connection, Inc., a Delaware corporation
\n(“PCC”), are parties to a Merger Agreement, dated as of May 29, 2001 (the “PCC
\nMerger Agreement”);<\/p>\n
WHEREAS, in connection with the execution of the PCC Merger Agreement, (i)
\nthe Company and PCC entered into a Stock Warrant Agreement, dated as of May 29,
\n2001 (the “Stock Warrant Agreement”); (ii) the Company and Merrimack Services
\nCorporation, a Delaware corporation and an affiliate of PCC (“MSC”), entered
\ninto a Credit and Supply Agreement, Security Agreement and related Working
\nCapital Promissory Note, each dated as of May 29, 2001 (the “Credit Agreement,”
\nthe “Security Agreement” and the “Note,” respectively); and (iii) certain
\nstockholders of the Company granted irrevocable proxies in favor of PCC with
\nrespect to the transactions contemplated by the PCC Merger Agreement (the
\n“Proxies” and, collectively with the Merger Agreement, the Stock Warrant
\nAgreement, the Credit Agreement, the Security Agreement and the Note, the “PCC
\nTransaction Documents”);<\/p>\n
WHEREAS, the Company desires to enter into a merger agreement with the
\nBuyer;<\/p>\n
WHEREAS, PCC is willing to terminate the PCC Transaction Documents and
\nconsent to the Company’s execution of this Agreement, subject to the terms and
\nconditions of a certain termination agreement of even date herewith to be
\nentered into by the Company, PCC, MSC and the Buyer;<\/p>\n
WHEREAS, the Boards of Directors of the Buyer, the Buyer Sub and the
\nCompany have determined that it is in the best interests of their respective
\ncompanies and their shareholders to enter into the Agreement and consummate the
\nbusiness combination transactions provided for herein, including the merger (the
\n“Merger”) of the Buyer Sub with and into the Company, subject to the terms and
\nconditions set forth herein;<\/p>\n
WHEREAS, the parties desire to make certain representations, warranties and
\nagreements in connection with the Merger and to prescribe certain conditions to
\nthe Merger; and<\/p>\n
WHEREAS, as a condition and inducement to the Buyer’s willingness to enter
\ninto this Agreement, Darryl Peck, President and Chief Executive Officer of the
\nCompany, is concurrently delivering to the Buyer an irrevocable proxy, in
\nsubstantially the form attached hereto as Exhibit A, pursuant to which among
\n ———
\nother things, Mr. Peck has designated the Buyer as his proxy to vote his shares
\nof Company Common Stock in favor of this Agreement and the transactions
\ncontemplated hereby.<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
\nand agreements herein contained, and intending to be legally bound hereby, the
\nBuyer and the Company agree as follows:<\/p>\n
ARTICLE I. Definitions<\/p>\n
1.01. Certain Definitions. For purposes of this Agreement, the following
\nterms shall have the meanings set forth below:<\/p>\n
(a) “Affiliate” of a specified person shall mean a person who
\ndirectly or indirectly through one or more intermediaries controls, is
\ncontrolled by, or is under common control with, such specified person,
\nincluding, without limitation, any partnership or joint venture in which the
\nperson (either alone, or through or together with any subsidiary) has, directly
\nor indirectly, an interest of 10% ownership or more.<\/p>\n
(b) “Agreement Documents” shall mean this Agreement and all
\nother agreements, certificates and instruments to be executed in connection with
\nor pursuant to this Agreement.<\/p>\n
(c) “Associates” shall have the meaning defined in Section
\n4.25(m).<\/p>\n
(d) “Business” shall mean the business of the Company, which is
\nacting as an Internet retailer of consumer and business technology and related
\nproducts, and offering eBusiness services including but not limited to end-to-
\nend e-commerce solutions, Web site design and hosting, product merchandising,
\nand order processing and fulfillment to other retailers.<\/p>\n
(e) “Business Vendors” shall have the meaning defined in Section
\n4.16.<\/p>\n
(f) “Business Day” shall mean any day on which banks are not
\nrequired or authorized to close in the City of Boston.<\/p>\n
(g) “Buyer Board” shall have the meaning defined in Section
\n5.02.<\/p>\n
(h) “Certificate” shall have the meaning defined in Section
\n3.02(a).<\/p>\n
(i) “Certificate of Merger” shall have the meaning defined in
\nSection 2.02.<\/p>\n
(j) “Closing” shall have the meaning defined in Section 2.02.<\/p>\n
(k) “Closing Date” shall have the meaning defined in Section
\n2.02.<\/p>\n
(l) “Code” shall mean the Internal Revenue Code of 1986, as
\namended.<\/p>\n
(m) “Company” shall mean Cyberian Outpost, Inc. or, after the
\nMerger, the Surviving Corporation.<\/p>\n
(n) “Company Board” shall have the meaning defined in Section
\n4.05.<\/p>\n
(o) “Company Common Stock” shall have the meaning defined in
\nSection 3.01.<\/p>\n
(p) “Company Disclosure Schedule” shall have the meaning defined
\nin the preamble to Article IV.<\/p>\n
-2-<\/p>\n
(q) “Company Equity Interest” shall refer to all Equity Interest in
\nthe Company at the time outstanding.<\/p>\n
(r) “Company Financial Statements” shall mean (i) the consolidated
\nbalance sheets of the Company and its subsidiaries as of February 28, 2000 and
\n2001 and the related consolidated statements of income, changes in shareholders’
\nequity and cash flows for the fiscal years ended February 28, 1999 through 2001,
\ninclusive, and the related notes and schedules, each of which has been audited
\nby KPMG LLP; and (ii) the consolidated balance sheets of the Tweeter Joint
\nVenture and its subsidiaries as of March 31, 2000 and 2001 and the related
\nconsolidated statements of income, changes in shareholders’ equity and cash
\nflows for the fiscal years ended March 31, 1999 through 2001, inclusive, and the
\nrelated notes and schedules, each of which has been audited by KPMG LLP.<\/p>\n
(s) “Company Insider” shall have the meaning defined in Section 4.37.<\/p>\n
(t) “Company Plans” shall have the meaning defined in Section 4.29.<\/p>\n
(u) “Company Reports” shall have the meaning defined in Section 4.14.<\/p>\n
(v) “Company Stock Option” shall have the meaning defined in Section
\n4.03(c).<\/p>\n
(w) “Company Stock Option Plans” shall have the meaning defined in
\nSection 4.03(b).<\/p>\n
(x) “Constituent Corporation” means the Surviving Corporation and the
\nBuyer Sub, collectively.<\/p>\n
(y) The term “control” (including the terms “controlled by” and
\n“under common control with”) shall mean the possession, directly or indirectly
\nor as trustee or executor, of the power to direct or cause the direction of the
\nmanagement and policies of a person, whether through the ownership of voting
\nsecurities, as trustee or executor, by contract or credit arrangement or
\notherwise.<\/p>\n
(z) “Currently Conducted,” when referring to the Business, shall
\ninclude the Business as it is now conducted or contractually committed to be
\nconducted.<\/p>\n
(aa) “DGCL” shall mean the Delaware General Corporation Law, as
\namended.<\/p>\n
(bb) “Deferred Intercompany Transaction” shall have the meaning set
\nforth in Treasury Regulation (S)1.1502-13.<\/p>\n
(cc) “Effective Time” shall have the meaning defined in Section 2.02.<\/p>\n
(dd) “Environmental Laws” means any federal, state or local law,
\nstatute, ordinance, rule, regulation, code, license, permit, authorization,
\napproval, consent, order, judgment, decree, injunction or agreement with any
\ngovernmental entity relating to (1) the protection, preservation or restoration
\nof the environment (including, without limitation, air, water vapor, surface
\nwater, groundwater, drinking water supply, surface soil, subsurface soil,<\/p>\n
-3-<\/p>\n
plant and animal life or any other natural resource), and\/or (2) the use,
\nstorage, recycling, treatment, generation, transportation, processing, handling,
\nlabeling, production, release or disposal of Materials of Environmental Concern.
\nThe term Environmental Law includes without limitation (1) the Comprehensive
\nEnvironmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
\n(S)9601, et seq; the Resource Conservation and Recovery Act, as amended, 42
\nU.S.C. (S)6901, et seq; the Clean Air Act, as amended, 42 U.S.C. (S)7401, et
\nseq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. (S)1251, et
\nseq; the Toxic Substances Control Act, as amended, 15 U.S.C. (S)9601, et seq;
\nthe Emergency Planning and Community Right to Know Act, 42 U.S.C. (S)1101, et
\nseq; the Safe Drinking Water Act, 42 U.S.C. (S)300f, et seq; and all comparable
\nstate and local laws, and (2) any common law (including without limitation
\ncommon law that may impose strict liability) that may impose liability or
\nobligations for injuries or damages due to, or threatened as a result of, the
\npresence of or exposure to any Materials of Environmental Concern. “Materials of
\nEnvironmental Concern” means pollutants, contaminants, wastes, toxic substances,
\npetroleum and petroleum products, and any other materials regulated under
\nEnvironmental Laws.<\/p>\n
(ee) “Equity Interest” in the case of a corporation shall mean its
\ncapital stock, and in the case of a limited liability company shall mean its
\nunits or other ownership interests.<\/p>\n
(ff) “Excess Loss Account” shall have the meaning set forth in
\nTreasury Regulation (S)1.1502-19.<\/p>\n
(gg) “Exchange Act” shall mean the Securities Exchange Act of 1934, as
\namended.<\/p>\n
(hh) “Expiration Date” shall have the meaning defined in Section
\n10.01(b).<\/p>\n
(ii) “Forbearance and Deferral Agreement” shall have the meaning
\ndefined in Section 4.43.<\/p>\n
(jj) “Governmental Entity” shall have the meaning defined in Section
\n4.07.<\/p>\n
(kk) “Intellectual Property” shall have the meaning defined in Section
\n4.38(a).<\/p>\n
(ll) “Latest Balance Sheet Date” shall have the meaning defined in
\nSection 4.13(b).<\/p>\n
(mm) “Latest Balance Sheets” shall have the meaning defined in Section
\n4.13(b).<\/p>\n
(nn) “Liabilities” shall have the meaning defined in Section 4.22.<\/p>\n
(oo) “Lien” shall mean any interest, consensual or otherwise, in
\nproperty, whether real, personal or mixed property or assets, tangible or
\nintangible, securing an obligation owed to, or a claim by a third Person, or
\notherwise evidencing an interest of a Person other than the owner of the
\nproperty, whether such interest is based on common law, statute or contract, and
\nincluding, but not limited to, any security interest, security title or lien
\narising from a mortgage, recordation of abstract of judgment, deed of trust,
\ndeed to secure debt, encumbrance, restriction, charge,<\/p>\n
-4-<\/p>\n
covenant, restriction, claim, exception, encroachment, easement, right of way,
\nlicense, permit, pledge, conditional sale, option trust (constructive or
\notherwise) or trust receipt or a lease, consignment or bailment for security
\npurposes and other title exceptions and encumbrances affecting the property.<\/p>\n
(pp) “Material Adverse Effect” shall mean any change or effect that
\nis materially adverse to the business, financial condition or results of
\noperations of a Party and its subsidiaries and Affiliates, taken as a whole,
\nexcept to the extent that such change or effect is attributable to or results
\nfrom (i) the direct effect of the public announcement or pendency of the
\ntransactions contemplated hereby on current or prospective customers or revenues
\nof a Party, or (ii) changes in general economic conditions or changes affecting
\nthe industry generally in which such Party operates. Without limiting the
\ngenerality of the foregoing, it shall be a “Material Adverse Effect” if a Party
\nfiles or becomes the subject of a bankruptcy proceeding, makes an assignment for
\nthe benefit of creditors, or has a receiver, trustee or conservator appointed
\nfor any substantial part of its assets or properties.<\/p>\n
(qq) “Material Contracts” shall have the meaning defined in Section
\n4.26.<\/p>\n
(rr) “Merger” shall have the meaning defined in the Preamble.<\/p>\n
(ss) “Merger Consideration” shall have the meaning defined in Section
\n3.01.<\/p>\n
(tt) “Merger Letter of Transmittal” shall have the meaning defined in
\nSection 3.03(b).<\/p>\n
(uu) “Organizational Documents” shall mean a corporation’s Articles
\nof Organization, Certificate of Incorporation, or equivalent organizational
\ndocuments or, in the case of a limited liability company, its Certificate of
\nFormation or Limited Liability Company Agreement.<\/p>\n
(vv) “Party” shall mean each of the Company, the Buyer and the Buyer
\nSub.<\/p>\n
(ww) “Paying Agent” shall have the meaning defined in Section
\n3.03(a).<\/p>\n
(xx) The term “person” shall mean an individual, corporation,
\npartnership, limited partnership, limited liability company, syndicate, person
\n(including, without limitation, a “person” as defined in Section 13(d)(3) of the
\nExchange Act), trust, association or entity or government, political
\nsubdivision, agency or instrumentality of a government.<\/p>\n
(yy) “Previously Disclosed” shall mean disclosed in a Company
\nDisclosure Schedule dated on or prior to the date hereof.<\/p>\n
(zz) “Proxy Statement” shall have the meaning defined in Section
\n4.41.<\/p>\n
(aaa) “Requisite Approvals” shall have the meaning defined in Section
\n9.01(c).<\/p>\n
(bbb) “Rights” shall mean warrants, options, rights, convertible
\nsecurities, stock appreciation rights and other arrangements or commitments
\nwhich obligate an entity to issue or <\/p>\n
-5-<\/p>\n
dispose of any of its capital stock or other ownership interests or which
\nprovide for compensation based on the equity appreciation of its capital stock.<\/p>\n
(ccc) “Secured Promissory Note” shall have the meaning defined in
\nSection 8.05.<\/p>\n
(ddd) “Securities Act” shall mean the Securities Act of 1933, as
\namended.<\/p>\n
(eee) “Securities Laws” shall mean the Securities Act; the Exchange
\nAct; the Investment the Company Act of 1940, as amended; the Investment Advisers
\nAct of 1940, as amended; the Trust Indenture Act of 1939, as amended; and the
\nrules and regulations of the SEC promulgated under each of said acts.<\/p>\n
(fff) “Special Meeting” shall have the meaning defined in Section
\n6.05.<\/p>\n
(ggg) The terms “subsidiary” or “subsidiaries” of the Buyer, the
\nCompany or any other person shall mean an Affiliate controlled by such person,
\ndirectly or indirectly, through one or more intermediaries, except as otherwise
\ndefined herein.<\/p>\n
(hhh) “Surviving Corporation” shall have the meaning defined in
\nSection 2.01.<\/p>\n
(iii) “Tax” shall mean any federal, state, local, or foreign income,
\ngross receipts, license, payroll, employment, excise, severance, stamp,
\noccupation, premium, windfall profits, environmental (including taxes under Code
\nsection 59A), customs duties, capital stock, franchise profits, withholding,
\nsocial security (or similar), unemployment, disability, real property, personal
\nproperty, sales, use, transfer, registration, value added, alternative or add-on
\nestimated, or other tax of any kind whatsoever, including any interest, penalty,
\nor addition thereto, whether disputed or not (including any interest in respect
\nof such penalty or addition).<\/p>\n
(jjj) “Tax Return” shall mean any return, declaration, report, claim
\nfor refund, or information return or statement, relating to Taxes, including any
\nschedule or attachment thereto, and including any amendment thereof.<\/p>\n
(kkk) “Tweeter Joint Venture” means Tweeter@outpost.com, LLC a joint
\nventure of Cyberian Outpost, Inc. and Tweeter Home Entertainment Group, Inc.<\/p>\n
(lll) “WARN Act” shall have the meaning defined in Section 4.31(b).<\/p>\n
ARTICLE II. The Merger<\/p>\n
2.01. The Merger. As promptly as practicable following the satisfaction or
\nwaiver of the conditions to the parties’ respective obligations hereunder, and
\nsubject to the terms and conditions of this Agreement, at the Effective Time (as
\ndefined in Section 2.02 hereof): (a) Buyer Sub shall be merged with and into the
\nCompany with the Company continuing as the surviving corporation (the “Surviving
\nCorporation”); and (b) the separate existence of Buyer Sub shall cease and all
\nof the rights, privileges, powers, franchises, properties, assets, liabilities
\nand obligations of Buyer Sub shall be vested in and assumed by the Surviving
\nCorporation.<\/p>\n
-6-<\/p>\n
2.02. Effective Time. The Merger shall be effected by the filing of a
\ncertificate of merger (the “Certificate of Merger”) with the Secretary of State
\nof the State of Delaware in accordance with Delaware law to become effective on
\nthe day of the closing (“Closing Date”) provided for in Article XI hereof (the
\n“Closing”). The term “Effective Time” shall mean the time on the Closing Date
\n(or a subsequent date not later than the opening of business on the next
\nBusiness Day) when the Merger becomes effective as set forth in the Certificate
\nof Merger.<\/p>\n
2.03. Certificate of Incorporation and By-laws of Surviving Corporation.
\nThe Certificate of Incorporation and By-laws of Buyer Sub immediately prior to
\nthe Effective Time shall be the Certificate of Incorporation and By-laws of the
\nSurviving Corporation, until thereafter amended as provided therein and by
\napplicable law.<\/p>\n
2.04. Directors and Officers of Surviving Corporation. The Directors and
\nofficers of Buyer Sub immediately prior to the Effective Time shall be the
\ninitial Directors and officers of Surviving Corporation, each to hold office in
\naccordance with the Certificate of Incorporation and By-laws of Surviving
\nCorporation, except that Darryl Peck and Christopher J. Walls shall be President
\nand Chief Executive Officer, and Vice President, Corporate Counsel,
\nrespectively, of the Surviving Corporation.<\/p>\n
2.05. Additional Actions. If, at any time after the Effective Time, the
\nConstituent Corporation shall consider or be advised that any further
\nassignments or assurances in law or any other acts are necessary or desirable
\n(a) to vest, perfect or confirm, of record or otherwise, in the Constituent
\nCorporation, title to and possession of any property or right of the Company
\nacquired or to be acquired by reason of, or as a result of, the Merger, or (b)
\notherwise to carry out the purposes of this Agreement, the Company and its
\nproper officers and directors shall be deemed to have granted to the Constituent
\nCorporation an irrevocable power of attorney to execute and deliver all such
\nproper deeds, assignments and assurances in law and to do all acts necessary or
\nproper to vest, perfect or confirm title to and possession of such property or
\nrights in the Constituent Corporation and otherwise to carry out the purposes of
\nthis Agreement; and the proper officers and directors of the Constituent
\nCorporation are fully authorized in the name of the Company or otherwise to take
\nany and all such action.<\/p>\n
2.06. Effects of the Merger. At and after the Effective Time, the Merger
\nshall have the effects set forth in Sections 259 through 261 of the DGCL.<\/p>\n
ARTICLE III. Conversion of Shares<\/p>\n
3.01. Conversion. At the Effective Time, each share of common stock, par
\nvalue $0.01 per share, of the Company (the “Company Common Stock”) issued and
\noutstanding immediately prior to the Effective Time (other than the Company
\nCommon Stock then owned by the Company, any Company subsidiary, the Buyer, or
\nany Buyer subsidiary), shall, by virtue of the Merger and without any action on
\nthe part of the holder thereof, be converted into the right to receive $0.25 in
\ncash (the “Merger Consideration”), payable to the holder thereof, without
\ninterest, upon the surrender of the Certificate formerly representing such
\nshare.<\/p>\n
-7-<\/p>\n
3.02. Conversion of Stock. <\/p>\n
(a) All the Company Common Stock converted into the right to
\nreceive the Merger Consideration pursuant to this Article III shall no longer be
\noutstanding and shall automatically be cancelled and shall cease to exist, and
\neach certificate (each a “Certificate”) previously representing any such shares
\nof the Company Common Stock shall thereafter represent the right to receive the
\nMerger Consideration into which the Company Common Stock represented by such
\nCertificate has been converted.<\/p>\n
(b) At the Effective Time, all shares of the Company Common
\nStock held in the treasury of the Company and all shares of the Company Common
\nStock owned by the Buyer or owned beneficially by any subsidiary of the Buyer
\nshall be cancelled and no cash, stock or other property shall be delivered in
\nexchange therefor.<\/p>\n
(c) The provisions of Section 3.01 are based on the assumption
\nthat there will be no more than 36,072,267 shares of Company Common Stock
\noutstanding or issuable upon the exercise of options or warrants or otherwise,
\nat the Effective Time. If there is any increase in this number as of the
\nEffective Time, the provisions of Section 3.01, including the Merger
\nConsideration, will be appropriately adjusted.<\/p>\n
3.03. Procedures for Exchange of the Company Common Stock for Merger
\nConsideration.<\/p>\n
(a) Prior to the Effective Time, the Buyer shall designate a
\nbank or trust company acceptable to the Company to act as paying agent in the
\nMerger (the “Paying Agent”). When and as needed, the Buyer shall provide the
\nPaying Agent with immediately available funds in an amount necessary to make the
\npayments contemplated by this Article III.<\/p>\n
(b) As soon as reasonably practicable after the Effective Time,
\nthe Paying Agent shall mail to each record holder of any Certificate whose
\nshares of Company Common Stock were converted into the right to receive the
\nMerger Consideration a letter of transmittal (which shall specify that delivery
\nshall be effected, and risk of loss and title to the Certificates shall pass,
\nonly upon proper delivery of the Certificates to the Paying Agent and shall be
\nin such form and have such other provisions as the Buyer or Buyer Sub may
\nreasonably specify) (the “Merger Letter of Transmittal”) and instructions for
\nuse in effecting the surrender of the Certificates in exchange for the Merger
\nConsideration. Upon surrender to the Paying Agent of a Certificate or
\nCertificates, together with such Merger Letter of Transmittal duly executed, and
\nany other required documents, the holder of such Certificate or Certificates
\nshall be entitled to receive in exchange therefor the Merger Consideration less
\nany applicable withholding taxes, and such Certificate or Certificates shall
\nforthwith be cancelled. No interest shall be paid or accrued for the benefit of
\nholders of the Certificates on the consideration payable upon the surrender of
\nthe Certificates. In the event any Certificate shall have been lost, stolen or
\ndestroyed, upon the making of an affidavit of that fact by the person claiming
\nsuch Certificate to be lost, stolen or destroyed and, if required by the Buyer,
\nthe posting by such person of a bond in such amount as the Buyer may direct as
\nindemnity against any claim that may be made against it with respect to<\/p>\n
-8-<\/p>\n
such Certificate, the Paying Agent will issue in exchange for such lost, stolen
\nor destroyed Certificate the Merger Consideration deliverable in respect
\nthereof. If payment is to be made to a person other than the person in whose
\nname the Certificate surrendered is registered, it shall be a condition of
\npayment that the Certificate so surrendered shall be properly endorsed or
\notherwise in proper form for transfer and that the person requesting such
\npayment shall pay to the Paying Agent any transfer or other taxes required by
\nreason of the payment to a person other than the registered holder of the
\nCertificate surrendered or establish to the satisfaction of the Surviving
\nCorporation that such tax has been paid or is not applicable.<\/p>\n
(c) At any time following twelve (12) months after the Effective Time,
\nthe Buyer (or, at the Buyer’s option, the Surviving Corporation) shall be
\nentitled to require the Paying Agent to deliver to it any funds (including any
\ninterest received with respect thereto) which have been made available to the
\nPaying Agent and which have not been disbursed to holders of Certificates, and
\nthereafter such holders shall be entitled to look to the Surviving Corporation
\n(subject to abandoned property, escheat or other similar laws) only as general
\ncreditors thereof with respect to the cash payable upon due surrender of their
\nCertificates. Notwithstanding the foregoing, none of the Buyer, the Buyer Sub
\nor the Paying Agent shall be liable to any holder of a Certificate for any
\nMerger Consideration delivered in respect of such Certificate to a public
\nofficial pursuant to any abandoned property, escheat or other similar law. The
\nSurviving Corporation shall pay all charges and expenses, including those of the
\nPaying Agent, in connection with the exchange of cash for shares of Company
\nCommon Stock. Until surrendered in accordance with the provisions of this
\nSection, each Certificate (other than Certificates representing shares of
\nCompany Common Stock held by the Buyer or any direct or indirect subsidiary of
\nthe Buyer, the Company or any of its subsidiaries) shall represent for all
\npurposes only the right to receive the Merger Consideration in cash multiplied
\nby the number of shares evidenced by such Certificate, without any interest
\ntheron.<\/p>\n
(d) From and after the Effective Time, there shall be no transfers on
\nthe stock transfer books of the Surviving Corporation of shares of Company
\nCommon Stock which were outstanding immediately prior to the Effective Time.
\nIf, after the Effective Time, Certificates formerly representing shares of
\nCompany Common Stock are presented to the Surviving Corporation or the Paying
\nAgent, they shall be cancelled and exchanged for the Merger Consideration as
\nprovided herein.<\/p>\n
3.04. Buyer Sub Common Stock. Each share of common stock of the Buyer Sub
\nissued and outstanding immediately prior to the Effective Time shall be
\nconverted into one share of common stock of the Surviving Corporation at the
\nEffective Time.<\/p>\n
ARTICLE IV.
\n Representations And Warranties of the Company<\/p>\n
Except as set forth in a specific section of the Disclosure Schedule
\npreviously delivered by the Company to the Buyer (the “Company Disclosure
\nSchedule”), the Company hereby represents and warrants to the Buyer as follows:<\/p>\n
-9-<\/p>\n
4.01. Organization and Qualification.<\/p>\n
(a) The Company is a corporation, duly organized, validly existing and
\nin good standing under the laws of the State of Delaware. The Company is
\nqualified to do business in Connecticut and Ohio. The Company has all requisite
\npower and authority to own, lease and operate its properties and to carry on its
\nbusiness as it is now being conducted and is duly qualified and in good standing
\nto do business in each jurisdiction in which the nature of the business
\nconducted by it or the ownership or leasing of its properties makes such
\nqualification necessary.<\/p>\n
(b) Outpost Holdings LLC (“Holdings Sub”), OutpostPro.com,
\nIncorporated (“CMP Sub”), Tweeter@Outpost.com, LLC (the “Tweeter Joint
\nVenture”), and Outpost Vendor Supply A (“Vendor Sub”) are the only direct
\nsubsidiaries of the Company. CMPExpress.com Internet Development Plc (“India
\nSub”) is a wholly owned subsidiary of CMP Sub. Holdings Sub, CMP Sub, Tweeter
\nJoint Venture, Vendor Sub and India Sub are, collectively, the “Company
\nSubsidiaries”. The Company owns 50% of the Equity Interest of the Tweeter Joint
\nVenture and all of the Equity Interest of CMP Sub, Holdings Sub and Vendor Sub.
\nOther than its interest in the Company Subsidiaries, the Company does not,
\ndirectly or indirectly, own any Equity Interest or other equity or similar
\ninterest in, or any interest convertible into or exchangeable or exercisable
\nfor, any equity or similar interest in, any corporation, limited liability
\ncompany, partnership, joint venture or other business association or entity.
\nWithout limiting the generality of the foregoing, the Company owns no Equity
\nInterest in Outpost Vendor Supply B, nor is Outpost Vendor Supply B a party to a
\ncontract with Wolf Camera.<\/p>\n
(c) Holdings Sub is a limited liability corporation duly organized,
\nvalidly existing and in good standing under the laws of the State of Delaware.
\nCMP Sub is a Pennsylvania corporation duly organized, validly existing and in
\ngood standing under the laws of the Commonwealth of Pennsylvania, and is
\nqualified to do business in New Jersey. The Tweeter Joint Venture is a limited
\nliability corporation duly organized, validly existing and in good standing
\nunder the laws of the State of Delaware. Vendor Sub is a Delaware corporation
\nduly organized, validly existing and in good standing under the laws of the
\nState of Delaware. India Sub is an Indian private liability corporation duly
\norganized, validly existing and in good standing under the laws of India. Each
\nCompany subsidiary (i) has full power and authority to own or lease all of its
\nproperties and assets and to carry on its business as now conducted, and (ii) is
\nduly licensed or qualified to do business and is in good standing in each
\njurisdiction in which its ownership or leasing of property or the conduct of its
\nbusiness requires such qualification.<\/p>\n
4.02. Organizational Documents; By-Laws; Corporate Records. The Company has
\nheretofore made available to the Buyer true, complete and correct copies of the
\nOrganizational Documents and the By-laws or equivalent organizational documents,
\nin each case as amended and restated to date, of the Company. Such
\nOrganizational Documents, By-laws and equivalent organizational documents are in
\nfull force and effect. The Company is not in violation of any provision of its
\nOrganizational Documents or equivalent organizational documents or of its By-<\/p>\n
-10-<\/p>\n
laws. The minute books of the Company, a copy of which has been made available
\nto the Buyer, contain in all material respects true and correct records of all
\nmeetings held during the period beginning on January 1, 1998 and ending on April
\n12, 2001 and true and complete records of all other corporate actions taken of
\nthe Company’s stockholders and board of directors (including committees of the
\nboard of directors) during such period.<\/p>\n
4.03. Capitalization of Company.<\/p>\n
(a) The authorized Equity Interest of the Company consists of fifty
\nmillion (50,000,000) shares of common stock, $0.01 par value per share, and ten
\nmillion (10,000,000) shares of Preferred Stock, $0.01 par value per share, of
\nwhich 31,693,545 shares of common stock and no shares of Preferred Stock are
\nissued and outstanding.<\/p>\n
(b) Except (i) for options to acquire not more than 4,022,015 shares
\nof Company Common Stock pursuant to stock options outstanding as of the date
\nhereof under the Company’s 1997 and 1998 Incentive Stock Plans and the Company’s
\nRestated 1998 Employee, Director and Consultant Stock Plan (the “Company Stock
\nOption Plans”), and (ii) as otherwise disclosed on Section 4.03 of the Company
\nDisclosure Schedule, there are no outstanding subscriptions, options, warrants,
\ncalls or other rights, agreements, arrangements or commitments of any character
\nrelating to the issued or unissued Equity Interest of the Company or obligating
\nthe Company to issue or sell any Equity Interests of, or other equity interests
\nor Rights in, the Company. There are no outstanding contractual obligations of
\nthe Company to repurchase, redeem or otherwise acquire any Equity Interests or
\nRights of, or other equity interests in, the Company or to provide funds to, or
\nmake any investment (in the form of a loan, capital contribution or otherwise)
\nin, the Company. All of the Company Equity Interests are duly authorized,
\nvalidly issued in compliance with all applicable laws, and are fully paid and
\nnonassessable and are free of preemptive or similar rights created by statute,
\nthe Organizational Documents of the Company, or any other agreement to which the
\nCompany is a party or bound.<\/p>\n
(c) A true and correct list of all outstanding options for the
\npurchase of Company Common Stock (“Company Stock Options”), including name of
\noptionee, number of shares, and option exercise price, is set forth on Section
\n4.03 of the Company Disclosure Schedule.<\/p>\n
(d) The Company Board has taken reasonable steps to ensure that all
\noutstanding Company Stock Options and all Company Stock Option Plans shall
\nterminate and be of no further force and effect not later than immediately prior
\nto the Effective Time.<\/p>\n
4.04. Ownership of Affiliates. The only Affiliates of the Company (each a
\n“Company Affiliate”) are set forth on Section 4.04 of the Company Disclosure
\nSchedule. The Company shall not be in violation of this Section 4.04 for not
\nlisting a person as an Affiliate if the Company believes in good faith that the
\nperson is not an Affiliate and if such person is not a director or officer of
\nthe Company and does not own greater than or equal to ten percent of the
\noutstanding capital stock of the Company. The Equity Interests of the Company
\nAffiliates that are known to the Company have been duly authorized and validly
\nissued, are fully paid and nonassessable and are directly or indirectly owned as
\nspecified in Section 4.04 of the Company Disclosure Schedule, free and clear of
\nall liens, claims, encumbrances, charges, pledges, restrictions or rights of
\nthird parties of any kind whatsoever. To the knowledge of the Company, <\/p>\n
-11-<\/p>\n
no Rights are authorized, issued or outstanding with respect to the Equity
\nInterests of any Company Affiliate and, to the knowledge of the Company, there
\nare no agreements, understandings or commitments relating to the rights of any
\nCompany Affiliate to vote or dispose of said Equity Interests.<\/p>\n
4.05. Authority. The Company has full corporate power and authority (other
\nthan the approval of the Company’s stockholders) (i) to execute and deliver all
\nAgreement Documents to be executed by the Company in connection with or pursuant
\nto this Agreement; (ii) to perform its obligations under the Agreement Documents
\nand (iii) to consummate the transactions contemplated by the Agreement
\nDocuments. The execution and delivery of the Agreement Documents, including,
\nwithout limitation, the irrevocable proxy granted by Darryl Peck to the Buyer
\nwith respect to Mr. Peck’s shares of Company Common Stock, and the consummation
\nof the transactions contemplated hereby or thereby, have been duly and validly
\napproved by unanimous vote of the Board of Directors or other governing body of
\nthe Company (the “Company Board”), including, without limitation, for all
\npurposes of and under Section 203 of the DGCL, and no other corporate
\nproceedings on the part of the Company (other than the approval of the Company’s
\nstockholders) are necessary to approve the Agreement Documents or to consummate
\nthe transactions contemplated hereby or thereby. The Agreement Documents have
\nbeen duly and validly executed and delivered by the Company and constitute valid
\nand binding obligations of the Company, enforceable against the Company in
\naccordance with their respective terms, except to the extent the enforcement
\nthereof may be limited by (A) bankruptcy, insolvency, reorganization, moratorium
\nor other similar law now or hereafter in effect relating to creditors’ rights
\ngenerally and (B) general principles of equity (regardless of whether
\nenforceability is considered in a proceeding in equity or at law).<\/p>\n
4.06. No Conflict.<\/p>\n
(a) Assuming the effectuation of all filings and registrations with,
\ntermination or expiration of any applicable waiting periods imposed by, and
\nreceipt of all required consents, approvals, authorizations or permits from,
\nGovernmental Entities, as well as approval of the Merger by the Company’s
\nstockholders, neither the execution, delivery and performance of the Agreement
\nDocuments by the Company, nor the consummation by the Company of the
\ntransactions contemplated hereby or thereby, nor compliance by the Company with
\nany of the terms or provisions hereof or thereof, will (i) conflict with,
\nviolate or result in a breach of any provision of the Organizational Documents
\nor By-laws of the Company, (ii) conflict with, violate or result in a breach of
\nany statute, code, ordinance, rule, regulation, order, writ, judgment,
\ninjunction or decree applicable to the Company, or by which any property or
\nasset of the Company is bound or affected, or (iii) except as set forth on
\nSection 4.06 of the Company Disclosure Schedule, conflict with, violate or
\nresult in a breach of any provisions of or the loss of any benefit under,
\nconstitute a default (or an event, which, with notice or lapse of time, or both,
\nwould constitute a default) under, or give to others any right of termination,
\namendment, acceleration or cancellation of, or result in the creation of a Lien,
\npledge, security interest, charge or other encumbrance on any property or asset
\nof the Company pursuant to any of the terms, conditions or provisions of any
\nnote, bond, mortgage, indenture, deed of trust, contract, agreement, lease,
\nlicense, permit, franchise or other instrument or obligation to which the
\nCompany is a party, or by which the Company is bound or affected.<\/p>\n
-12-<\/p>\n
(b) Neither the execution, delivery and performance of the Agreement
\nDocuments by the Company, nor the consummation by the Company of the
\ntransactions contemplated hereby or thereby, nor compliance by the Company with
\nany of the terms or provisions hereof or thereof, will result in the
\ncancellation or termination of, or give any party the right to cancel, modify or
\namend any agreement for the sale of materials, products, services or supplies or
\nqualification authorizing or permitting the Company to sell materials, products,
\nservices or supplies or qualification to any person.<\/p>\n
4.07. Consents and Approvals. The execution, delivery and performance of
\nthis Agreement by the Company does not require any consent, approval,
\nauthorization or permit of, or filing with or notification to, any court,
\nadministrative agency or commission or other governmental or regulatory
\nauthority or instrumentality, domestic or foreign (each a “Governmental Entity”)
\nor with any third party, except for (A) applicable requirements, if any, of
\nstate takeover laws, (B) filing and recordation of appropriate merger documents
\nas required by the laws of the State of Delaware; (C) compliance with applicable
\nrequirements, if any, of the Securities Act, the Exchange Act, state securities
\nlaws, the pre-Merger notification requirements of the Hart-Scott Rodino
\nAntitrust Improvements Act of 1976, as amended or Foreign Competition Laws, (D)
\nconsents of third parties disclosed on Section 4.25 of the Company Disclosure
\nSchedule, or (E) the approval of the Company’s stockholders. The Company is not
\naware of any reason why the approvals, consents and waivers referred to herein
\nshould not be obtained.<\/p>\n
4.08. Absence of Certain Payments. Neither the Company nor any director or
\nofficer, nor, to the knowledge of the Company, any agent, employee or other
\nperson associated with or acting on behalf of the Company has used any funds of
\nthe Company for unlawful contributions, gifts, entertainment or other unlawful
\nexpenses relating to political activity, or made any direct or indirect unlawful
\npayments to government officials or employees from corporate funds, or
\nestablished or maintained any unlawful or unrecorded funds, or violated any
\nprovisions of the Foreign Corrupt Practices Act of 1977 or any rules or
\nregulations promulgated thereunder.<\/p>\n
4.09. Compliance. Except as disclosed on Section 4.09 of the Company
\ndisclosure Schedule, the Company holds all material licenses, franchises,
\npermits and authorizations necessary for the lawful conduct of its business
\nunder and pursuant to, and has complied with and is not in conflict with, or in
\ndefault or violation of, (a) any statute, code, ordinance, law, rule,
\nregulation, order, writ, judgment, injunction or decree, published policies or
\nguidelines of any Governmental Entity, applicable to the Company or by which any
\nproperty or asset of the Company is bound or affected, or (b) any note, bond,
\nmortgage, indenture, deed of trust, contract, agreement, lease, license, permit,
\nfranchise or other instrument or obligation to which the Company is a party or
\nby which the Company or any property or asset of the Company is bound or
\naffected; and the Company does not know of, nor has it received notice of, any
\nmaterial violations of any of the above.<\/p>\n
4.10. Title to Assets. Except as set forth in Section 4.10(b) of the
\nCompany Disclosure Schedule, the Company has good and marketable title to all of
\nthe assets it purports to own (a complete list of which is set forth in Section
\n4.10(a) of the Company Disclosure Schedule), and owns all of such assets free
\nand clear of any Liabilities (as defined in Section 4.22) or Liens, other than
\n(i) statutory liens securing current taxes and other obligations that are not
\nyet <\/p>\n
-13-<\/p>\n
delinquent and (ii) minor imperfections of title and encumbrances that do not
\nmaterially detract from or interfere with the present use or value of such
\nproperties. The Company holds a valid leasehold interest in all of the leased
\nassets of the Company.<\/p>\n
4.11. Condition of Assets. All of the assets of the Company, including any
\nassets held under leases or licenses, are in good condition and repair, ordinary
\nwear and tear excepted, and are in good working order and have been properly and
\nregularly maintained.<\/p>\n
4.12. Sufficiency of Property and Assets to Conduct Business. The assets,
\nrights, personal property, permits and contracts of the Company to be
\ntransferred to the Buyer in connection with the Merger (a) constitute all the
\nproperties, assets and rights used in connection with the Business as Currently
\nConducted, and also (b) include all the assets, properties and rights necessary
\nfor the Buyer to conduct the Business in all material respects as Currently
\nConducted. The Company is not, and the Buyer will not be, restricted from
\ncarrying out the Business or any part thereof by any agreement, instrument,
\nindenture or court of arbitration decree.<\/p>\n
4.13. Financial Statements.<\/p>\n
(a) The Company has previously made available to the Buyer, for
\ncopying, originals of the Company Financial Statements, which are accompanied by
\nthe audit report of KPMG, LLP, independent public accountants for the Company.
\nThe Company Financial Statements referred to in this Section 4.13 (including the
\nrelated notes, where applicable) fairly present, and the financial statements
\nreferred to in Sections 6.02 and 6.03 hereof each will fairly present (subject,
\nin the case of unaudited statements, to audit adjustments normal in nature and
\namount and the addition of customary notes), the assets, liabilities, results of
\nthe operations and changes in stockholders’ equity and financial position of the
\nCompany and the Tweeter Joint Venture, as the case may be, for the respective
\nperiods or as of the respective dates therein set forth; the Company Financial
\nStatements (including the related notes, where applicable) have been prepared,
\nand the financial statements referred to in Sections 6.02 and 6.03 hereof will
\nbe prepared, in accordance with generally accepted accounting principles
\n(“GAAP”) consistently applied throughout and among the periods covered thereby,
\nexcept as indicated in the notes thereto. The audits of the Company and the
\nTweeter Joint Venture, as the case may be, have been conducted in all material
\nrespects in accordance with generally accepted auditing standards. The Company
\nFinancial Statements have been prepared from the books and records of the
\nCompany or the Tweeter Joint Venture, as the case may be, and the books and
\nrecords of the Company and the Tweeter Joint Venture, as the case may be, are
\ntrue and complete in all material respects and have been, and are being,
\nmaintained in all material respects in accordance with applicable legal and
\naccounting requirements.<\/p>\n
(b) The balance sheets of the Company as of February 28, 2001 and May
\n31, 2001 (the “Latest Balance Sheets”), including the notes thereto, make
\nadequate provision for all material liabilities and obligations of every nature
\n(whether accrued, absolute, contingent or otherwise and whether due or to become
\ndue) of the Company as of February 28, 2001 and May 31, 2001, respectively, and
\nexcept as and to the extent set forth on such balance sheets, the Company has no
\nmaterial liability or obligation of any nature (whether accrued, absolute,
\ncontingent or otherwise and whether due or to become due) which would be
\nrequired to be <\/p>\n
-14-<\/p>\n
reflected or disclosed on a balance sheet, or in the notes thereto, prepared in
\naccordance with GAAP. The Latest Balance Sheets have been prepared on a basis
\nconsistent with the accounting principles and practices used in preparing
\nprevious balance sheets provided to the Buyer. A true and correct copy of the
\nJuly 31, 2001 balance sheet is attached as Section 4.13(b) of the Company
\nDisclosure Schedule.<\/p>\n
(c) No facts or circumstances exist which would give the Company
\nreason to believe that a material liability or obligation that, in accordance
\nwith GAAP applied on a consistent basis, should have been reflected or disclosed
\non such balance sheets, was not so reflected or disclosed.<\/p>\n
4.14. Company Reports. The Company has filed all reports, registrations and
\nstatements, together with any amendments required to be made with respect
\nthereto, that were required to be filed, with (i) the Securities and Exchange
\nCommission (“SEC”) pursuant to the Securities Act or the Exchange Act, and (ii)
\nany applicable state securities authorities (all such reports and statements are
\ncollectively referred to herein as the “Company Reports”). As of their
\nrespective dates, no such Company Reports filed with the SEC contained any
\nuntrue statement of a material fact or omitted to state any material fact
\nrequired to be stated therein or necessary in order to make the statements
\ntherein, in light of the circumstances in which they were made, not misleading,
\nexcept that information filed as of a later date shall, from and after such
\nfiling, be deemed to modify information as of an earlier date.<\/p>\n
4.15. Inventory. All inventories reflected in the Latest Balance Sheets or
\nincluded in the assets of the Company are of good and merchantable quality and
\nare salable in the ordinary course of business (in the case of inventory held
\nfor sale) or currently usable (in the case of other inventory). The value of the
\ninventories reflected in the Latest Balance Sheets are stated in accordance with
\nGAAP applied on a consistent basis. Except as set forth on Section 4.15 of the
\nCompany Disclosure Schedule, the inventory contains no obsolete or outdated
\nitems.<\/p>\n
4.16. Relationship with Vendors, Manufacturers, and Resellers. The
\nCompany’s business relationship with vendors, manufacturers, and resellers
\n(“Business Vendors”) with whom it has business dealings are generally
\nsatisfactory. Section 4.16 of the Company Disclosure Schedule sets forth a list
\nof the one hundred (100) largest Business Vendors, based on sales from March 1,
\n2001 to the date hereof. The Company does not now have a material dispute with
\nany Business Vendor. Except as set forth on Section 4.16 of the Company
\nDisclosure Schedule, in the past two years the Company has not received any
\nwritten notice that indicates dissatisfaction with the Company’s performance of
\nits obligations to its Business Vendors. No notice has been received by the
\nCompany with respect to the possible termination or modification of any
\nrelationship with a Business Vendor, including but not limited to modifications
\nin co-op funds, rebates or marketing funds, and, except as set forth on Section
\n4.16 of the Company Disclosure Schedule, the Company has no reason to believe
\nthat any business or financial relationship with a Business Vendor is likely to
\nbe adversely affected by consummation of the Merger.<\/p>\n
4.17. Authorized Representative. Set forth on Section 4.17 of the Company
\nDisclosure Schedule is a complete list and description of the vendors and
\nmanufacturers for which the Company is an authorized representative (“Vendor
\nRelationships”). Except as disclosed in <\/p>\n
-15-<\/p>\n
Section 4.17 of the Company Disclosure Schedule, no notice has been received
\nwith respect to the possible termination or modification of any Vendor
\nRelationship and the Company has no reason to believe that any Vendor
\nRelationship will be adversely affected by consummation of the Merger.<\/p>\n
4.18. Return Policy; Warranty and Product Liability Claims.<\/p>\n
(a) Section 4.18 of the Company Disclosure Schedule contains a true
\nand complete description of the Company’s return policy for the business of the
\nCompany, including, without limitation, a description of the circumstances under
\nwhich cash or merchandise refunds are given or goods are repaired by the Company
\nor the original manufacturer.<\/p>\n
(b) Neither the Company nor any officer or director of the Company is
\nor has been a defendant in any product liability litigation relating to any
\nproduct sold by the Company, and no such litigation is or has been threatened.<\/p>\n
4.19. Customer Complaints. Set forth on Section 4.19 of the Company
\nDisclosure Schedule is a description of all customer complaints received by the
\nCompany over the past year, other than one-time, non-systemic complaints
\nreceived in the normal course of the Company’s business.<\/p>\n
4.20. Customer Lists. As of July 31, 2001, the Company had a total of
\napproximately 1.4 million customers of which approximately 800,000 have made
\npurchases in the last 12 months.<\/p>\n
4.21. Accounts Receivable; Accounts Payable.<\/p>\n
(a) All accounts receivable and vendor accounts receivable, reflected
\nin the Latest Balance Sheets or generated since the date of the Latest Balance
\nSheets (the “Latest Balance Sheet Date”), arose in the ordinary course of
\nbusiness and are fully collectible in the ordinary course of business, at the
\nface amount thereof less any reserve reflected in the Latest Balance Sheets, and
\nare not subject to counterclaim, setoff or other reduction. Set forth on Section
\n4.21(a) of the Company Disclosure Schedule is a true, correct and complete list,
\nincluding aging information, of all such accounts receivable and vendor accounts
\nreceivable as of the Latest Balance Sheet Date.<\/p>\n
(b) Set forth on Section 4.21(b) of the Company Disclosure Schedule is
\na true, correct and complete list, including aging information, of all of the
\nCompany’s accounts payable as of the Latest Balance Sheet Date.<\/p>\n
4.22. No Undisclosed Liabilities. The Company does not have any direct or
\nindirect debts, liabilities or obligations, including any liability for Taxes,
\nwhether known or unknown, absolute, accrued, contingent or otherwise
\n(“Liabilities”), except (a) Liabilities fully reflected in the Latest Balance
\nSheets and related financial statement notations; (b) accounts payable and
\nLiabilities incurred in the ordinary course of business and consistent with past
\npractice since the Latest Balance Sheet Date; (c) obligations to be performed in
\nthe ordinary course of business, consistent with past practice, under the
\nagreements, contracts, plans, leases, instruments, arrangements, licenses and
\ncommitments set forth in Attachment 4.25 to Section 4.25 of the <\/p>\n
-16-<\/p>\n
Company Disclosure Schedule or under agreements not required to be disclosed
\npursuant to Section 4.25 and (d) Liabilities disclosed in the Company Reports.
\nThe Company does not and will not have any obligations for severance costs,
\nvacation pay or sick leave associated with any employee of the Company in excess
\nof $10,000, other than as set forth on Section 4.24 of the Company Disclosure
\nSchedule and other than obligations that are satisfied prior to the Effective
\nTime. Except as disclosed on Section 4.22 of the Company Disclosure Schedule,
\nthe Company does not and will not have any obligations for warranty repair or
\nreplacement, or otherwise in connection with the sale of materials, products,
\nservices or supplies.<\/p>\n
4.23. Absence of Certain Changes or Events. Since February 28, 2001,
\nexcept as contemplated by this Agreement, the Company has conducted its business
\nonly in the ordinary course and in manners consistent with past practice and,
\nsince February 28, 2001, except as set forth in Section 4.23 of the Company
\nDisclosure Schedule, there has not been (a) either individually or in the
\naggregate, any Material Adverse Effect, (b) any material damage, destruction or
\nloss with respect to any property or asset of the Company, (c) any change by the
\nCompany in its accounting methods, principles or practices, other than changes
\nrequired by applicable law or GAAP or regulatory accounting as concurred in by
\nthe Company’s independent accountants, (d) any revaluation by the Company of any
\nasset, including, without limitation, any writing down of the value of inventory
\nor writing off of notes or accounts receivable, other than in the ordinary
\ncourse of business consistent with past practice, (e) any entry by the Company
\ninto any contract or commitment of more than $100,000, (f) any declaration,
\nsetting aside or payment of any dividend or distribution in respect of any
\nEquity Interest of the Company or any redemption, purchase or other acquisition
\nof any of its securities, (g) any increase in or establishment of any insurance,
\nseverance, retention, deferred compensation, pension, retirement, profit
\nsharing, stock option (including, without limitation, the granting of stock
\noptions, stock appreciation rights, performance awards, or restricted stock
\nawards), stock purchase or other employee benefit plan, or the taking of any
\nother material action not in the ordinary course of business with respect to the
\ncompensation or employment of directors, officers or employees of the Company,
\n(h) any strike, work stoppage, slowdown or other labor disturbance, (i) any
\nmaterial election made by the Company for federal or state income tax purposes,
\n(j) any material liability or obligation of any nature (whether accrued,
\nabsolute, contingent or otherwise and whether due or to become due), including,
\nwithout limiting the generality of the foregoing, liabilities as guarantor under
\nany guarantees or liabilities for taxes, other than in the ordinary course of
\nbusiness consistent with past practice, (k) any forgiveness or cancellation of
\nany material indebtedness or material contractual obligation, (l) any mortgage,
\npledge, lien or lease of any assets, tangible or intangible, of the Company with
\na value in excess of $25,000 in the aggregate, (m) any acquisition or
\ndisposition of any assets or properties (not including inventory acquired or
\ndisposed of in the ordinary course of business consistent with past practice)
\nhaving a value in excess of $100,000, or any contract for any such acquisition
\nor disposition entered into, or (n) any lease of real or personal property
\nentered into, other than in the ordinary course of business consistent with past
\npractice.<\/p>\n
4.24. No Bonuses or Other Payments to Employees, Directors, Officers.
\nSince February 28, 2001, except as disclosed on Section 4.24 of the Company
\nDisclosure Schedule, the Company has not (a) paid or agreed to pay any bonus or
\nany other increase in the compensation payable or to become payable, or (b)
\ngranted or agreed to grant any bonus, severance, retention<\/p>\n
-17-<\/p>\n
or termination pay, or entered into any contract or arrangement to grant any
\nbonus, severance, retention or termination pay, to any director, officer or
\nemployee of the Company.<\/p>\n
4.25. Agreements, Contracts and Commitments. Except as disclosed in
\nSection 4.25 of the Company Disclosure Schedule, the Company is not a party to:<\/p>\n
(a) any bonus, deferred compensation, pension, severance, profit-
\nsharing, stock option, employee stock purchase or retirement plan, contract or
\narrangement or other employee benefit plan or other arrangement covering the
\nCompany’s employees;<\/p>\n
(b) any employment agreement with any of the Company’s employees that
\ncontains any severance pay liabilities or obligations;<\/p>\n
(c) any agreement for personal services or employment with any of the
\nCompany’s employees that is not terminable on 30 days’ (or less) notice by the
\nCompany without penalty or obligation to make payments related to such
\ntermination;<\/p>\n
(d) any agreement of guarantee or indemnification in an amount that
\nis material to the Company;<\/p>\n
(e) any agreement or commitment containing a covenant limiting or
\npurporting to limit the freedom of the Company to compete with any person in any
\ngeographic area or to engage in any line of business;<\/p>\n
(f) any lease to which the Company is a party as lessor or lessee
\nthat (x) provides for future payments of $10,000 or more, or (y) is material to
\nthe conduct of the business of the Company;<\/p>\n
(g) any joint venture agreement or profit-sharing agreement;<\/p>\n
(h) except for trade indebtedness incurred in the ordinary course of
\nbusiness, any loan or credit agreements providing for the extension of credit to
\nthe Company or any instrument evidencing or related in any way to indebtedness
\nincurred in the acquisition of companies or other entities or indebtedness for
\nborrowed money by way of direct loan, sale of debt securities, purchase money
\nobligation, conditional sale, guarantee, or otherwise that individually is in
\nthe amount of $5,000 or more;<\/p>\n
(i) any license agreement, either as licensor or licensee, or
\ndistributor, dealer, franchise, manufacturer’s representative, sales agency or
\nother similar agreement or commitment;<\/p>\n
(j) any agreement or arrangement for the assignment, sale or other
\ntransfer by the Company of any agreement or lease (or right to payment
\nthereunder) by which it leases materials, products or other property to a third
\nparty;<\/p>\n
(k) any contract or agreement that provides any discount other than
\npursuant to the Company’s standard discount terms;<\/p>\n
-18-<\/p>\n
(l) any agreement or commitment for the acquisition, construction or
\nsale of fixed assets owned or to be owned by the Company;<\/p>\n
(m) any current agreement or commitment, not elsewhere specifically
\ndisclosed pursuant to this Agreement, to which present or former directors,
\nofficers or Affiliates of the Company or any of their “Associates” (as defined
\nin the rules and regulations promulgated under the Securities Act) are parties;<\/p>\n
(n) any agreement or arrangement for the sale of any of the assets,
\nproperties or rights of the Company (other than in the ordinary course of
\nbusiness) or for the grant of any preferential rights to purchase any of its
\nassets, properties or rights or any material agreement that requires the consent
\nof any third party to the transfer and assignment of any of its assets,
\nproperties or rights;<\/p>\n
(o) any contract providing for the payment of a commission or other
\nfee calculated as or by reference to the volume of web traffic or a percentage
\nof the profits or revenues of the Company or of any business segment of the
\nCompany;<\/p>\n
(p) any contract or agreement not described above involving the
\npayment or receipt by the Company of more than $25,000, or, in the case of
\ncontracts involving payments by the Company, which cannot be terminated by it on
\n30 days’ notice without penalty, cost or liability; or<\/p>\n
(q) any contract or agreement not described above that is material to
\nthe business, operations, assets, financial condition, results of operations,
\nproperties or prospects of the Company, including without limitation, agreements
\nrelating to web site development and operations; marketing, promotion, affiliate
\nand advertising, including search engine referrals and Internet private
\nlabeling; fulfillment operations; and telephone, credit card and freight carrier
\nservices.<\/p>\n
4.26. Contracts in Full Force and Effect. Except as set forth on Schedule
\n4.26 of the Company Disclosure Schedule, all agreements, contracts, plans,
\nleases, instruments, arrangements, licenses and commitments set forth on
\nAttachment 4.25 to Section 4.25 of the Company Disclosure Schedule are valid and
\nin full force and effect, and those designated with an “M” on Attachment 4.25 to
\nSection 4.25 of the Company Disclosure Schedule are Material Contracts. For the
\npurposes of this Agreement, “Material Contracts” are those agreements,
\ncontracts, plans, leases, instruments, arrangements, licenses or commitments the
\nbreach, termination or loss of performance of which could reasonably be expected
\nto have, either individually or in the aggregate, a Material Adverse Effect.
\nExcept as set forth on Schedule 4.26 of the Company Disclosure Schedule, the
\nCompany has not, nor to the knowledge of the Company has any other party
\nthereto, breached any provision of, or defaulted under the terms of, nor are
\nthere any facts or circumstances (including, without limitation, the proposed
\nconsummation of the transactions contemplated hereby) that would reasonably
\nindicate that the Company will or may be in such breach or default under, any
\nsuch contract, agreement, instrument, arrangement, commitment, plan, lease or
\nlicense. Except as set forth on Schedule 4.26 of the Company Disclosure
\nSchedule, no notice has been received by the Company with respect to the
\npossible termination or modification of any Material Contract, and the Company<\/p>\n
-19-<\/p>\n
has no reason to believe that any business or financial relationship with any
\nparty to a Material Contract is likely to be adversely affected by consummation
\nof the Merger. Section 4.25 of the Company Disclosure Schedule correctly
\nidentifies each such contract the provisions of which would be limited or
\notherwise adversely affected by this Agreement or the consummation of the Merger
\nand each such contract that requires the consent of a third party in order to
\nhave such contract remain in full force and effect after consummation of the
\nMerger. The Company has made available to the Buyer a true, correct and complete
\ncopy of each contract listed on Attachment 4.25 to Section 4.25 of the Company
\nDisclosure Schedule, including all amendments thereto.<\/p>\n
4.27. Environmental Liability. There is no litigation or other proceeding
\nseeking to impose, or that could reasonably result in the imposition on the
\nCompany of, any liability arising under any of the Environmental Laws, pending
\nor, to the knowledge of the Company, threatened or unasserted but considered
\nprobable of assertion and which if asserted would have at least a reasonable
\nprobability of an unfavorable outcome against the Company; there is no reason
\nfor any such potential litigation that would impose any such liability; and the
\nCompany is not subject to any agreement, order, judgment, decree, or memorandum
\nby or with any court, Governmental Entity, regulatory authority or agency, or
\nthird party imposing any such liability.<\/p>\n
4.28. Absence of Litigation. Except as set forth in Section 4.28 of the
\nCompany Disclosure Schedule, the Company is not a party to any, and there are no
\npending, or to the knowledge of the Company, threatened, legal, administrative,
\narbitral or other material claims, actions, proceedings or investigations of any
\nnature, against the Company or any property or asset of the Company, before any
\ncourt, arbitrator or administrative, governmental or regulatory authority or
\nbody, domestic or foreign, and no facts or circumstances have come to the
\nattention of the Company which could cause it to believe that a material claim,
\naction, proceeding or investigation against or affecting the Company could
\nreasonably be expected to occur. Neither the Company nor any property or asset
\nof the Company is subject to any order, writ, judgment, injunction, decree,
\ndetermination or award which restricts the Company’s ability to conduct business
\nin any area in which it presently does business or which has or could reasonably
\nbe expected to have, either individually or in the aggregate, a Material Adverse
\nEffect.<\/p>\n
4.29. Employee Benefit Programs. Section 4.29 of the Company Disclosure
\nSchedule contains a true, correct and complete list of all pension, profit
\nsharing, retirement, deferred compensation, welfare, insurance, disability,
\nbonus, vacation pay, severance pay and other similar plans, programs or
\nagreements, and every material personnel policy, whether reduced to writing or
\nnot, relating to any persons employed by the Company and maintained at any time
\nby the Company or by any other member of a controlled group of corporations,
\ngroup of trades or businesses under common control or affiliated service group
\nwhich includes the Company (defined in accordance with Section 414(b), (c) and
\n(m) of the Code) (each, an “ERISA Affiliate”) (collectively, the “Company
\nPlans”). The Company has made available to the Buyer true, correct and complete
\ncopies of all the Company Plans that have been reduced to writing, together with
\nall documents establishing or constituting any related trust, annuity contract,
\ninsurance contract or other funding instrument, and summaries of those that have
\nnot been reduced to writing. With respect to any “defined benefit plan,” as
\ndefined in Section 3(35) of ERISA, the Company has made available a copy of the
\nlatest annual actuarial report, and with respect to all the Company Plans the
\nlatest Forms 5500. Except as to benefits provided in <\/p>\n
-20-<\/p>\n
accordance with each of the Company Plans, neither the Company nor any Affiliate
\nhas any obligation or other employee benefit plan liability under applicable
\nlaw; nor has the Company or any Affiliate ever been obligated to contribute to
\nany “multiemployer plan,” as defined in Section 3(37) of ERISA.<\/p>\n
4.30. Employees. Section 4.30 of the Company Disclosure Schedule lists
\neach employee or consultant of the Company, as well as each employee’s and
\nconsultant’s date of hire, title, department, leave status, current salary\/rate
\nof compensation, current bonus eligibility, date of last review and salary\/bonus
\nincrease, accrued vacation, retention or severance eligibility and accrued sick
\ntime and for each of 2001 year to date and 2000 each employee’s or consultant’s
\nsalary, bonus, commissions and total compensation paid. No such employee or
\nconsultant has given the officers or the human resources department of the
\nCompany any notice of his\/her specific plan to terminate his\/her employment
\nrelation on a date prior to the Effective Time. All employees of the Company are
\nin good standing under the Company’s employment policies and manuals.<\/p>\n
4.31. Labor Matters. <\/p>\n
(a) No work stoppage involving the Company is pending or, to the
\nknowledge of the Company, threatened. The Company is not involved in, nor, to
\nthe knowledge of the Company, is the Company threatened with or affected by, any
\ndispute, arbitration, lawsuit or administrative proceeding relating to labor or
\nemployment matters which might reasonably be expected to interfere in any
\nmaterial respect with the business activities of the Company. No employee of
\nthe Company is represented by any labor union, and no labor union is attempting
\nto organize employees of the Company.<\/p>\n
(b) The Company has not implemented and does not intend to implement a
\n“plant closing” or a “mass layoff” within the meaning of the Worker Adjustment
\nand Retraining Notification Act (“WARN Act”), 29 U.S.C. (S)2101 et seq., or any
\nsimilar state law or regulation.<\/p>\n
4.32. Real Property and Leases.<\/p>\n
(a) The Company does not own any real property.<\/p>\n
(b) The Company has received no notice of violation of any applicable
\nzoning regulation, ordinance or other law, order, regulation or requirement
\nrelating to the Company’s properties.<\/p>\n
(c) All leases of real property leased for the use or benefit of the
\nCompany to which the Company is a party, and all amendments and modifications
\nthereto, are in full force and effect, and there exists no default under any
\nsuch lease by the Company, nor, to the knowledge of the Company, has any event
\noccurred which with notice or lapse of time or both would constitute a material
\ndefault thereunder by the Company.<\/p>\n
(d) Section 4.32 of the Company Disclosure Schedule sets forth a
\ndescription (including the street address) of all real property leased by the
\nCompany. No premises other than such leased properties are used in the
\nBusiness.<\/p>\n
-21-<\/p>\n
4.33. Taxes and Tax Returns. Except as disclosed in Section 4.33 of the
\nCompany Disclosure Schedule, the Company represents to the Buyer as follows:<\/p>\n
(a) Each of the Company and its subsidiaries has filed all Tax Returns
\nthat it was required to file, and prior to the Closing Date will have filed all
\nTax Returns for the fiscal year ended February 28, 2001 (“2001 Tax Returns”),
\nwhether or not such 2001 Tax returns are or have become due as of the Closing
\nDate. All such Tax Returns were (or will be) correct and complete in all
\nrespects. All Taxes owed by any of the Company and its subsidiaries (whether or
\nnot shown on any Tax Return) have been paid, including all Taxes shown on the
\n2001 Tax Returns. Neither the Company nor any of its subsidiaries is currently
\nthe beneficiary of any extension of time within which to file any Tax Return.
\nNo claim has ever been made by an authority in a jurisdiction where the Company
\nand its subsidiaries do not file Tax Returns asserting that the Company or a
\nsubsidiary is or may be subject to taxation by that jurisdiction. There are no
\nLiens on any of the assets of the Company or its subsidiaries that arose in
\nconnection with any failure (or alleged failure) to pay any Tax.<\/p>\n
(b) Each of the Company and its subsidiaries has withheld and paid all
\nTaxes required to have been withheld and paid in connection with amounts paid or
\nowing to any employee, independent contractor, creditor, stockholder, or other
\nthird party.<\/p>\n
(c) No director or officer (or employee responsible for Tax matters)
\nof the Company and its subsidiaries expects any authority to assess any
\nadditional Taxes for any period for which Tax Returns have been filed. There is
\nno dispute or claim concerning any Tax Liability of the Company or its
\nsubsidiaries either (A) claimed or raised by any authority in writing or (B) as
\nto which the directors or officers (or employee responsible for Tax matters) of
\nthe Company and its subsidiaries have knowledge based upon personal contact with
\nany agent of such authority. Section 4.33 of the Company Disclosure Schedule
\nlists all federal, state, local, and foreign income Tax Returns filed with
\nrespect to any of the Company and its subsidiaries for taxable periods ended on
\nor after February 28, 1998, indicates those Tax Returns that have been audited,
\nand indicates those Tax Returns that currently are the subject of audit. The
\nCompany has delivered to the Buyer correct and complete copies of all federal
\nincome Tax Returns, examination reports, and statement of deficiencies assessed
\nagainst or agreed to by the Company or any of its subsidiaries since February
\n28, 1998.<\/p>\n
(d) None of the Company and its subsidiaries has waived any statute of
\nlimitations in respect of Taxes or agreed to any extension of time with respect
\nto a Tax assessment or deficiency.<\/p>\n
(e) None of the Company and its subsidiaries has filed a consent under
\nCode section 341(f) concerning collapsible corporations. None of the Company
\nand its subsidiaries has made any payment, is obligated to make any payment, or
\nis a party to any agreement that under certain circumstances could obligate it
\nto make any payments that will not be deductible under Code section 280G or Code
\nsection 162(m). None of the Company and its subsidiaries has been a United
\nStates real property holding corporation within the meaning of Code section
\n897(c)(2) during the applicable period specified in Code section
\n897(c)(1)(A)(ii). None of the Company and its subsidiaries is a party to any
\nTax allocation or sharing agreement. None of the Company and its subsidiaries
\n(i) has been a member of an affiliated, combined, consolidated or <\/p>\n
-22-<\/p>\n
unitary Tax group for purposes of filing any Tax Return, other than, for
\npurposes of filing consolidated U.S. federal income tax returns, a group the
\ncommon parent of which was the Company or (ii) has any Liability for the Taxes
\nof any Person under Treasury Regulation section 1.1502-6 (or any similar
\nprovision of state, local, or foreign law), as a transferee or successor, by
\ncontract or otherwise.<\/p>\n
(f) Section 4.33 of the Company Disclosure Schedule sets forth the
\nfollowing information with respect to each of the Company and its subsidiaries
\nas of the most recent practicable date (as well as on an estimated pro forma
\nbasis as of the Closing Date giving effect to the consummation of the
\ntransactions contemplated hereby): (A) the basis of the Company or subsidiary in
\nits assets; (B) the basis of the stockholder(s) of the subsidiary in its stock
\n(or the amount of any Excess Loss Account); (C) the amount of any net operating
\nloss, net capital loss, unused investment or other credit, unused foreign tax,
\nor excess charitable contribution allocable to the Company or subsidiary, and
\nthe date on which such amounts arose; and (D) the amount of any Deferred
\nIntercompany Transaction.<\/p>\n
(g) The unpaid Taxes of the Company and its subsidiaries (i) did not,
\nas of the Latest Balance Sheet Date, exceed the reserve for Tax Liability
\n(rather than any reserve for deferred Taxes established to reflect timing
\ndifferences between book and Tax income) set forth on the face of the Latest
\nBalance Sheets (rather than in any notes thereto) and (ii) do not exceed that
\nreserve as adjusted for the passage of time through the Closing Date in
\naccordance with the past custom and practice of the Company and its subsidiaries
\nin filing its Tax Returns.<\/p>\n
(h) None of the Company and its subsidiaries will be required to
\ninclude any item of income in, or exclude any item of deduction from, taxable
\nincome for any taxable period (or portion thereof) ending after the Closing Date
\nas a result of any (A) change in method of accounting for a taxable period
\nending on or prior to the Closing Date under Code section 481(c) (or any
\ncorresponding or similar provision of state, local or foreign income Tax law);
\n(B) “closing agreement” as described in Code section 7121 (or any corresponding
\nor similar provision of state, local or foreign income Tax law) executed on or
\nprior to the Closing Date; (C) Deferred Intercompany Transaction or Excess Loss
\nAccount; (D) installment sale or open transaction disposition made on or prior
\nto the Closing Date; or (E) prepaid amount received on or prior to the Closing
\nDate.<\/p>\n
(i) The Company has not experienced an “ownership change” described in
\nsection 382 of the Code.<\/p>\n
(j) Each of CMP Sub and Vendor Sub has always participated in the
\nfiling of a consolidated federal income tax return with the Company as common
\nparent.<\/p>\n
(k) For federal income tax purposes, Holdings Sub has since its
\nformation been treated as a disregarded entity.<\/p>\n
(l) For federal income tax purposes, the Tweeter Joint Venture has
\nsince its formation been treated as a partnership. As of July 31, 2001, the
\namount of the Company’s capital account in the Tweeter Joint Venture was
\n$3,330,372. The Company has a 50% percent interest in the profits, and a 50%
\npercent interest in the losses, of the Tweeter Joint Venture.<\/p>\n
-23-<\/p>\n
4.34. Insurance. The Company has made available to the Buyer true and
\ncomplete copies of all material policies of insurance of the Company currently
\nin effect. All of the policies relating to insurance maintained by the Company
\nwith respect to its material properties and the conduct of its business in any
\nmaterial respect (or any comparable policies entered into as a replacement
\ntherefor) are in full force and effect and the Company has not received any
\nnotice of cancellation with respect thereto. All life insurance policies on the
\nlives of any of the current and former officers of the Company which are
\nmaintained by the Company or which are otherwise included as assets on the books
\nof the Company (i) are, or will be at the Effective Time, owned by the Company,
\nfree and clear of any claims thereon by the officers or members of their
\nfamilies, except with respect to the death benefits thereunder, as to which the
\nCompany agrees that there will not be an amendment prior to the Effective Time
\nwithout the consent of the Buyer, and (ii) are accounted for properly as assets
\non the books of the Company, as applicable, in accordance with GAAP in all
\nmaterial respects. The Company does not have any material liability for unpaid
\npremiums or premium adjustments not properly reflected on the Company Financial
\nStatements delivered to the Buyer hereunder.<\/p>\n
4.35. State Takeover Laws. The Company Board has approved the transactions
\ncontemplated by this Agreement, including the grant by Mr. Peck to the Buyer of
\nan irrevocable proxy with respect to his shares of Company Common Stock, and
\ntaken all other requisite action such that the provisions of the laws of the
\nDGCL and any provisions of the Company’s Organizational Documents relating to
\nspecial voting requirements for certain business combinations will not apply to
\nthis Agreement or any of the transactions contemplated hereby or thereby.<\/p>\n
4.36. Competing Interests. None of the Company or any director or officer
\nof the Company, or, to the knowledge of the Company, any agent or employee of
\nthe Company, or any Affiliate or immediate family member of any of the foregoing
\n(a) owns, directly or indirectly, an interest in any entity that is a
\ncompetitor, customer or supplier of the Company or that otherwise has material
\nbusiness dealings with the Company or (b) is a party to, or otherwise has any
\ndirect or indirect interest opposed to the Company under, any Material Contract
\nor other business relationship or arrangement material to the Company, provided
\nthat the foregoing will not apply to any investment in publicly traded
\nsecurities constituting less than 3% of the outstanding securities in such
\nclass. Neither the Company, nor any director or officer of the Company, nor, to
\nthe knowledge of the Company, any agent or employee of the Company, is a party
\nto any non-competition, non-solicitation, exclusivity or other similar agreement
\nthat would in any way restrict the business or activities of the Company or the
\nBuyer.<\/p>\n
4.37. Interests of Company Insiders. Except as set forth in Section 4.37
\nof the Company Disclosure Schedule, no director, officer, agent or employee of
\nthe Company, or any Affiliate or immediate family member (each, a “Company
\nInsider”) of any of the foregoing, (a) has any interest in any property, real or
\npersonal, tangible or intangible, including Intellectual Property used in or
\npertaining to the business of the Company, except for the normal rights of a
\nshareholder, and except for rights under existing employee benefit plans or (b)
\nis owed any money by or owes any money to the Company.<\/p>\n
-24-<\/p>\n
4.38. Intellectual Property.<\/p>\n
(a) For purposes of this Agreement, “Intellectual Property” means all
\n(i) patents, copyrights and copyrightable works, trademarks, service marks,
\ntrade names, service names, brand names, logos, trade dress, Internet domain
\nnames and all goodwill symbolized thereby and appurtenant thereto; (ii) trade
\nsecrets, inventions, technology, know-how, proprietary information, research
\nmaterial, specifications, surveys, designs, drawings and processes; (iii)
\nartwork, photographs, editorial copy and materials, formats and designs,
\nincluding, without limitation, all content currently or previously displayed
\nthrough Internet sites owned or operated by the Company; (iv) customer, partner,
\nprospect and marketing lists, market research data, sales data and traffic and
\nuser data; (v) registrations, applications, recordings, common law rights,
\n“moral” rights of authors, licenses (to or from the Company) and other
\nagreements relating to any of the foregoing; (vi) rights to obtain renewals,
\nreissues, extensions, continuations, divisions or equivalent extensions of legal
\nprotection pertaining to the foregoing; and (vii) claims, causes of action or
\nother rights at law or in equity arising out of or relating to any infringement,
\nmisappropriation, distortion, dilution or other unauthorized use or conduct in
\nderogation of the foregoing occurring prior to the Closing.<\/p>\n
(b) Section 4.38(b) of the Company Disclosure Schedule lists all
\npending and registered patents, copyrights, trademarks and service marks owned
\nby the Company or a Company subsidiary.<\/p>\n
(c) The Company or a Company subsidiary owns or otherwise has the
\nright to use pursuant to Material Contracts (or standard form “shrink wrap”
\nlicense agreements for software regularly available in retail sales) all
\nIntellectual Property used by the Company or a Company subsidiary in connection
\nwith or necessary to the operation of the Business, without infringing on the
\nrights of any person. The Company is not obligated to pay any royalty or other
\nconsideration to any person in connection with the use of any such Intellectual
\nProperty.<\/p>\n
(d) Except as set forth in Section 4.38(d) of the Company Disclosure
\nSchedule, no claim has been asserted against the Company to the effect that the
\nuse of any Intellectual Property by the Company infringes the rights of any
\nperson. To the knowledge of the Company, no other person is currently
\ninfringing upon the rights of the Company with respect to the Intellectual
\nProperty.<\/p>\n
(e) The Intellectual Property owned by the Company or a Company
\nsubsidiary or which the Company or a Company subsidiary otherwise has the right
\nto use as of the Closing Date is sufficient as of the Closing Date for the uses
\nof the Business as Currently Conducted. The Company or a Company subsidiary has
\nobtained all licenses and consents and has paid all royalties necessary to
\nenable the Buyer to continue using the Intellectual Property after the Closing
\nin the manner it is currently being used or has been committed to be used.<\/p>\n
4.39. Company Software.<\/p>\n
(a) Section 4.39 of the Company Disclosure Schedule sets forth a true
\nand complete list of all software programs, systems and applications (A)
\ndesigned or developed or <\/p>\n
-25-<\/p>\n
under development by employees of the Company or by consultants on the Company’s
\nbehalf, including all documentation therefor (the “Owned Software”) or (B)
\nlicensed by the Company from any third party or constituting “off-the-shelf”
\nsoftware (the “Licensed Software”), in each case that is manufactured or used by
\nthe Company in the operation of its business (collectively, the “Software”) and,
\nin the case of Licensed Software, Section 4.39 of the Company Disclosure
\nSchedule identifies each license agreement with respect thereto.<\/p>\n
(b) All of the Owned Software are original works of authorship and are
\nprotected by the copyright laws of the United States. The Company owns all
\nright, title and interest in and to the Owned Software, and all copyrights
\nthereto, free and clear of all Liens, claims, encumbrances, charges, pledges,
\nrestrictions or rights of third parties of any kind whatsoever (“Encumbrances”),
\nand has not sold, assigned, licensed, distributed or in any other way disposed
\nof or subjected the Owned Software to any Encumbrance. None of the Owned
\nSoftware incorporates, is based on or is a derivative work of any third party
\ncode that is subject to the terms of a public source license or otherwise
\nimposes conditions on the terms and conditions under which the Owned Software
\nmay be used or distributed. To the knowledge of the Company, no other person is
\ncurrently infringing upon the rights of the Company with respect to the Owned
\nSoftware. No claim has been asserted against the Company to the effect that the
\nuse of any Owned Software by the Company infringes the rights of any person.<\/p>\n
(c) The Licensed Software is validly held and used by the Company and
\nmay be used by the Company pursuant to the applicable license agreement with
\nrespect thereto without the consent of, notice to, or payment of any royalty or
\nany other fee to any third party and is fully and freely utilizable by the Buyer
\nwithout the consent of, notice to or payment of any royalty to any third party.
\nAll of the Company’s computer hardware has validly licensed software installed
\ntherein and the Company’s use thereof does not conflict with or violate any such
\nlicense. No claim has been asserted against the Company to the effect that the
\nuse of any Licensed Software by the Company infringes the rights of any person.<\/p>\n
(d) To the knowledge of the Company, the Software is free from any
\nsignificant software defect, is free from any programming, documentation error
\nor virus (“Bugs”) not consistent with commercially reasonable industry standards
\nacceptable for such Bugs, operates and runs in a reasonable and efficient
\nbusiness manner, conforms to the specifications thereof, and, with respect to
\nthe Owned Software, the applications can be compiled from their associated
\nsource code without undue burden.<\/p>\n
(e) The Company has not altered its data, or any Software or
\nsupporting software that may in turn damage the integrity of the data, whether
\nstored in electronic, optical or magnetic or other form. The Company has made
\navailable to the Buyer all documentation in its possession relating to the use,
\nmaintenance and operation of the Software, all of which is true and accurate in
\nall material respects (to the Company’s knowledge, with respect to the Licensed
\nSoftware).<\/p>\n
(f) The Software owned or licensed by the Company as of the Closing
\nDate is sufficient as of the Closing Date for the uses of the Business as it is
\nCurrently Conducted.<\/p>\n
-26-<\/p>\n
4.40. Investment Banker. Except as set forth in Section 4.40 of the
\nCompany Disclosure Schedule, no broker, finder or investment banker, is entitled
\nto any brokerage, finder’s or other fee or commission in connection with the
\ntransactions contemplated by this Agreement based upon arrangements made by or
\non behalf of the Company. Details of the amount payable to the investment banker
\nare set forth in such Section 4.40 of the Company Disclosure Schedule.<\/p>\n
4.41. Company Information. If any Proxy Statement is required for the
\nconsummation of the Merger under applicable laws, such statement shall comply in
\nall material respects with applicable Securities Laws, and shall not at the time
\nit is mailed or at the time of the Special Meeting (defined in Section 6.05)
\ncontain any untrue statement of a material fact or omit to state any material
\nfact required to be stated therein or necessary to make the statements therein,
\nin light of the circumstances under which they were made, not misleading;
\nprovided, that no representation or warranty is being made by the Company with
\nrespect to any information with respect to the Buyer or its Affiliates supplied
\nby the Buyer or any Affiliate of the Buyer to the Company specifically for
\ninclusion in the Proxy Statement. The letter to stockholders, notice of meeting,
\nproxy statement and form of proxy, or any information statement, as the case may
\nbe, to be distributed to stockholders in connection with the Merger, or any
\nschedules required to be filed with the SEC in connection therewith, are
\ncollectively referred to herein as the “Proxy Statement”. As soon as practicable
\nafter the date hereof, the Company shall prepare and file any other filings
\nrequired under the Securities Laws or any other federal or state securities,
\ntakeover or Blue Sky laws relating to this Agreement and the transactions
\ncontemplated by this Agreement, including the Merger.<\/p>\n
4.42. Disclosure. No representation or warranty contained in this
\nAgreement, and no statement contained in any schedule, certificate, list or
\nother writing furnished to the Buyer pursuant to the provisions hereof, contains
\nor will contain any untrue statement of a material fact or omits or will omit to
\nstate a material fact necessary in order to make the statements herein or
\ntherein, in light of the circumstances in which they are made, not misleading.
\nNo information believed by the Company to be material to the Merger and which is
\nnecessary to make the representations and warranties herein contained, taken as
\na whole, not misleading, has been withheld from, or has not been delivered in
\nwriting to, the Buyer.<\/p>\n
4.43. Forbearance and Deferral Agreements. Section 4.43 of the Company
\nDisclosure Schedule sets forth the following information with respect to each
\ncreditor of the Company who, as of the date hereof, has entered into a
\nForbearance and Deferral Agreement, a form of which agreement is set forth on
\nAttachment 4.43 to Section 4.43 of the Company Disclosure Schedule (a
\n“Forbearance and Deferral Agreement”): (A) the name of such creditor, and (B)
\nthe dollar amount subject to such Forbearance and Deferral Agreement.<\/p>\n
ARTICLE V. Representations And Warranties Of Buyer<\/p>\n
The Buyer hereby represents and warrants to the Company that:<\/p>\n
5.01. Corporate Organization. The Buyer is a corporation, duly organized,
\nvalidly existing and in good standing under the laws of the State of California.
\nThe Buyer has the requisite power and authority and all necessary governmental
\napprovals to own, lease and operate all of its properties and assets and to
\ncarry on its business as it is now being conducted,<\/p>\n
-27-<\/p>\n
and is duly licensed or qualified to do business and is in good standing in each
\njurisdiction where the nature of the business conducted by it or the character
\nor location of the properties and assets owned, leased or operated by it makes
\nsuch licensing or qualification necessary.<\/p>\n
5.02. Authority. The Buyer has full corporate power and authority to
\nexecute and deliver this Agreement and to consummate the transactions
\ncontemplated hereby. The execution and delivery of this Agreement and the
\nconsummation of the transactions contemplated hereby have been duly and validly
\napproved by the Board of Directors of the Buyer (the “Buyer Board”). This
\nAgreement has been duly and validly executed and delivered by the Buyer and
\nconstitutes a valid and binding obligation of the Buyer, enforceable against the
\nBuyer in accordance with its terms.<\/p>\n
5.03. No Conflict. Neither the execution, delivery and performance of this
\nAgreement by the Buyer, nor the consummation by the Buyer of the transactions
\ncontemplated hereby, nor compliance by the Buyer with any of the terms or
\nprovisions hereof, will (i) conflict with, violate or result in a breach of any
\nprovision of the Organizational Documents or By-laws of the Buyer, or (ii)
\nconflict with, violate or result in a breach of any statute, code, ordinance,
\nrule, regulation, order, writ, judgment, injunction or decree applicable to the
\nBuyer, or by which any property or asset of the Buyer is bound.<\/p>\n
5.04. Consents and Approvals. The execution, delivery and performance of
\nthis Agreement by the Buyer does not require any consent, approval,
\nauthorization or permit of, or filing with or notification to any Governmental
\nEntity or with any third party, except for (A) applicable requirements, if any,
\nof state takeover laws, (B) filing and recordation of appropriate merger
\ndocuments as required by the laws of the State of Delaware; and (C) compliance
\nwith applicable requirements, if any, of the Securities Act, the Exchange Act,
\nstate securities laws, the pre-Merger notification requirements of the Hart-
\nScott Rodino Antitrust Improvements Act of 1976, as amended or Foreign
\nCompetition Laws. The Buyer is not aware of any reason why the approvals,
\nconsents and waivers referred to herein should not be obtained.<\/p>\n
5.05. Funds. The Buyer has the funds necessary and sufficient to
\nconsummate the Merger and pay the Merger Consideration in accordance with the
\nterms of this Agreement.<\/p>\n
5.06. Buyer Information. The information relating to the Buyer to be
\ncontained in the Proxy Statement (as contemplated by Section 8.01) or any other
\nstatement or application filed with any governmental body in connection with the
\nMerger and the other transactions contemplated by this Agreement will not
\ncontain as of the date of such Proxy Statement or filing any untrue statement of
\na material fact or omit to state a material fact necessary to make such
\ninformation not misleading. Notwithstanding the foregoing, the Buyer makes and
\nwill make no representation or warranty with respect to any information supplied
\nby the Company or any Affiliate of the Company which is contained in any of the
\nforegoing documents.<\/p>\n
5.07. Buyer Sub.<\/p>\n
(a) Buyer Sub is a corporation, duly organized, validly existing
\nand in good standing under the laws of Delaware, all of the outstanding capital
\nstock of which is, or will be prior to the Effective Time, owned directly or
\nindirectly by the Buyer free and clear of any Lien,<\/p>\n
-28-<\/p>\n
charge or other encumbrance. From and after its incorporation, Buyer Sub has not
\nand will not engage in any activities other than in connection with or as
\ncontemplated by this Agreement.<\/p>\n
(b) Buyer Sub has all corporate power and authority to
\nconsummate the transactions contemplated hereunder and carry out all of its
\nobligations with respect to such transactions. The consummation of the
\ntransactions contemplated hereby has been, or will have been prior to the
\nClosing, duly and validly authorized by all necessary corporate action in
\nrespect thereof on the part of Buyer Sub.<\/p>\n
5.08. Disclosure. No representation or warranty contained in this
\nAgreement contains or will contain any untrue statement of a material fact or
\nomits or will omit to state a material fact necessary in order to make the
\nstatements herein, in light of the circumstances in which they are made, not
\nmisleading.<\/p>\n
ARTICLE VI. Covenants of the Company<\/p>\n
6.01. Conduct of Business Pending the Merger.<\/p>\n
(a) The Company covenants and agrees that, except as
\ncontemplated by this Agreement, between the date of this Agreement and the
\nEffective Time, unless the Buyer shall otherwise agree in writing, the Business
\nof the Company shall be conducted only in the Company, and the Company shall not
\ntake any action, except in the usual, regular and ordinary course of business
\nand the Company will generally conduct its business in substantially the same
\nway as heretofore conducted, and without limiting the foregoing, the Company
\nwill continue to operate in the same geographic markets serving the same market
\nsegments. The Company shall use its reasonable best efforts to preserve
\nsubstantially intact the business organization of the Company, to keep available
\nthe present services of the officers, employees and consultants of the Company
\nand to preserve the current relationships and goodwill of the Company with
\ncustomers, suppliers and other persons with which the Company has business
\nrelationships. Without limiting the generality of the foregoing, the Company
\nshall:<\/p>\n
(i) maintain in full force and effect all contracts of
\n insurance and indemnity specified in any Company Disclosure Schedule
\n hereto;<\/p>\n
(ii) repair and maintain all of its tangible properties and
\n assets in accordance with its usual and ordinary repair and maintenance
\n standards;<\/p>\n
(iii) continue to apply in full the same rigorous credit
\n review process used by the Company prior to the Closing in determining the
\n extent to which it will extend credit to customers or potential customers
\n in the ordinary course of business;<\/p>\n
(iv) notify the Buyer of any material emergency or other
\n material change in the operation of its business or properties and of any
\n governmental complaints, investigations or hearings (or communications
\n indicating that the same may be contemplated).<\/p>\n
(b) By way of amplification and not limitation of clause (a)
\nabove, the Company shall not between the date of this Agreement and the
\nEffective Time, directly or indirectly do, or<\/p>\n
-29-<\/p>\n
publicly announce an intention to do, any of the following without the prior
\nwritten consent of the Buyer through one of its authorized representatives
\n(which representatives shall be each of its Chief Executive Officer, President
\nand Chief Financial Officer):<\/p>\n
(i) amend or otherwise change its Organizational Documents or
\n By-laws or equivalent organizational documents;<\/p>\n
(ii) issue, deliver, sell, pledge, dispose of, grant,
\n encumber, or authorize the issuance, delivery, sale, pledge, disposition,
\n grant or encumbrance of, any Equity Interests of the Company, or any
\n options, warrants, convertible securities or other rights of any kind to
\n acquire any such Equity Interests, or any other ownership interest, of the
\n Company, or enter into any agreement with respect to any of the foregoing,
\n other than upon exercise of the Company Stock Options;<\/p>\n
(iii) make any distribution (by way of dividend or otherwise)
\n with respect to its Equity Interests;<\/p>\n
(iv) split, combine or reclassify any of its Equity Interests
\n or issue or authorize or propose the issuance of any other securities in
\n respect of, in lieu of or in substitution for its Equity Interests;<\/p>\n
(v) repurchase, redeem or otherwise acquire any Equity
\n Interests of the Company, or any securities convertible into or exercisable
\n for any of the Equity Interests of the Company;<\/p>\n
(vi) enter into any new line of business or materially expand
\n the business currently conducted by the Company;<\/p>\n
(vii) acquire or agree to acquire, by merging or consolidating
\n with, or by purchasing an equity interest in or a portion of the assets of,
\n or by any other manner, any business or any corporation, partnership, other
\n business organization or any division thereof or any material amount of
\n assets;<\/p>\n
(viii) incur any indebtedness for borrowed money, increase the
\n aggregate amounts owed under the Company’s existing credit facilities or
\n issue any debt securities or assume, guarantee or endorse, or otherwise as
\n an accommodation become responsible for, the obligations of any individual,
\n corporation or other entity, or make any loan or advance;<\/p>\n
(ix) lower or otherwise alter its credit card fraud review
\n process;<\/p>\n
(x) authorize any capital expenditures of more than $10,000
\n in the aggregate (other than expenditures listed in Section 6.01(b)(x) of
\n the Company Disclosure Schedule and previously approved by the Buyer);<\/p>\n
(xi) (A) (x) adopt, amend, renew or terminate any plan or any
\n agreement, arrangement, or policy between the Company and one or more of
\n its current or former directors, officers or employees, or (y) increase in
\n any manner the compensation or fringe<\/p>\n
-30-<\/p>\n
benefits of any director, officer or employee or pay any benefit not
\n required by any plan or agreement as in effect as of the date hereof
\n (including, without limitation, the granting of stock options, stock
\n appreciation rights, restricted stock, restricted stock units or
\n performance units or shares); or (B) enter into, modify or renew any
\n employment, severance or other agreement with any director, officer or
\n employee of the Company, or establish, adopt, enter into or amend any
\n collective bargaining, bonus, profit sharing, thrift, compensation, stock
\n option, restricted stock, pension, retirement, deferred compensation,
\n employment, termination, severance, retention or other plan, agreement,
\n trust, fund, policy or arrangement providing for any benefit to any
\n director, officer or employee;<\/p>\n
(xii) pay any bonus or any compensation other than base
\n compensation, except for payments of bonuses and other incentive
\n compensation to sales personnel pursuant to and consistent with the written
\n sales incentive plan which has been provided to and approved by the Buyer;<\/p>\n
(xiii) take any action with respect to accounting methods,
\n principles or practices, other than changes required by applicable law or
\n GAAP or regulatory accounting as concurred in by the Company’s independent
\n accountants;<\/p>\n
(xiv) make any Tax election or settle or compromise any
\n federal, state, local or foreign tax liability;<\/p>\n
(xv) pay, discharge or satisfy any claim, liability or
\n obligation, other than the payment, discharge or satisfaction, in the
\n ordinary course of business and consistent with past practice;<\/p>\n
(xvi) sell, lease, encumber, assign or otherwise dispose of, or
\n agree to sell, lease, encumber, assign or otherwise dispose of, any of its
\n material assets, properties or other rights or agreements;<\/p>\n
(xvii) take any action that is intended or reasonably can be
\n expected to result in any of its representations and warranties set forth
\n in this Agreement being or becoming untrue in any material respect, or any
\n of the conditions to the consummation of the Merger and the other
\n transactions contemplated by this Agreement set forth in Article IX not
\n being satisfied in any material respect, or in any material violation of
\n any provision of this Agreement;<\/p>\n
(xviii) enter into or renew, amend or terminate, or give notice
\n of a proposed renewal, amendment or termination of or make any commitment
\n with respect to, (A) any contract, agreement or lease for office space or
\n operations space to which the Company is a party or by which the Company or
\n its properties is bound; (B) any lease, contract or agreement other than in
\n the ordinary course of business consistent with past practice including
\n renewals of leases to existing tenants of the Company ; (C) regardless of
\n whether consistent with past practices, any lease, contract, agreement or
\n commitment involving an aggregate payment by or to the Company of more than
\n $10,000 or requiring<\/p>\n
-31-<\/p>\n
performance by the Company of any obligations at any time more than one
\n year after the time of execution;<\/p>\n
(xix) enter into an agreement, contract, or commitment that,
\n if entered into prior to the date hereof, would be required to be listed on
\n a Schedule delivered to the Buyer pursuant to the terms of this Agreement,
\n including without limitation, any arrangement or contract with respect to
\n web site development or operations; marketing, promotion, affiliate and
\n advertising, including search engine referrals and Internet private
\n labeling; fulfillment operations; or telephone, credit card or freight
\n carrier services;<\/p>\n
(xx) amend, terminate or change in any material respect any
\n lease, contract, undertaking, arrangement or other commitment listed in any
\n Section of the Company Disclosure Schedule (including without limitation
\n its arrangements and contracts with respect to web site development and
\n operations; marketing, promotion, affiliate and advertising, including
\n search engine referrals and Internet private labeling; fulfillment
\n operations; and telephone, credit card or freight carrier services) or
\n knowingly do any act or omit to do any act, or permit an act or omission to
\n act, that will cause a breach of any such lease, contract, undertaking,
\n arrangement or other commitment;<\/p>\n
(xxi) change its pricing policies or its policies with respect
\n to freight rates charged to customers;<\/p>\n
(xxii) enter into any transaction with a Company Insider; or<\/p>\n
(xxiii) agree to do any of the foregoing.<\/p>\n
6.02. Current Information. During the period from the date of this
\nAgreement to the Effective Time, the Company will cause one or more of its
\nrepresentatives to confer with representatives of the Buyer and report the
\ngeneral status of its ongoing operations at such times as the Buyer may
\nreasonably request. The Buyer will cooperate with the Company to establish a
\nregular communications process designed to minimize disruption to the Company’s
\nongoing operations. The Company will promptly notify the Buyer of any material
\nchange in the normal course of its business or in the operation of its
\nproperties and, to the extent permitted by applicable law, of any governmental
\ncomplaints, investigations or hearings (or communications indicating that the
\nsame may be contemplated), or the institution or the threat of material
\nlitigation involving the Company. The Company will also provide the Buyer such
\ninformation with respect to such events as the Buyer may reasonably request from
\ntime to time. As soon as reasonably available, but in no event more than 45 days
\nafter the end of each fiscal quarter ending after the date of this Agreement
\n(other than the last quarter of each fiscal year), the Company will deliver to
\nthe Buyer its quarterly report on Form 10-Q under the Exchange Act, and, as soon
\nas reasonably available, but in no event more than 90 days after the end of each
\nfiscal year, the Company will deliver to the Buyer its Annual Report on Form 10-
\nK. The Company will deliver to the Buyer all Current Reports on Form 8-K at or
\nbefore the time such reports are filed with the SEC. Within 15 days after the
\nend of each month, the Company will deliver to the Buyer a consolidated balance
\nsheet and a consolidated statement of operations, without related notes, for
\nsuch month. The Company will provide the Buyer with an updated list<\/p>\n
-32-<\/p>\n
promptly upon any change to the Company’s list of authorized signatories for
\nbank accounts and safe deposit boxes.<\/p>\n
6.03. Other Financial Information.<\/p>\n
(a) Promptly upon receipt thereof, the Company will furnish to the
\nBuyer copies of each annual, interim or special audit of the books of the
\nCompany and the Company’s Affiliates made by its independent accountants and
\ncopies of all internal control reports submitted to the Company by such
\naccountants in connection with each annual, interim or special audit of the
\nbooks of Company and the Company’s Affiliates made by such accountants.<\/p>\n
(b) As soon as practicable, the Company will furnish to the Buyer
\ncopies of all such financial statements and reports as it shall send to its
\nstockholders, the SEC or any other regulatory authority, except as legally
\nprohibited thereby.<\/p>\n
(c) Company will furnish to the Buyer, on a daily basis, a copy of the
\ndaily operations report it furnishes to its senior management as well as cash
\nflow status and projections, and will provide the Buyer with password access to
\noutpostreports.com.<\/p>\n
(d) Company will deliver to the Buyer a closing balance sheet updating
\nthe Latest Balance Sheets to a date not more than two days before the Closing,
\nincluding a detailed schedule of inventory, accounts receivable and accounts
\npayable, with aging information.<\/p>\n
(e) With reasonable promptness, the Company will furnish to the Buyer
\nsuch additional financial data as the Buyer may reasonably request.<\/p>\n
6.04. Access to Information.<\/p>\n
(a) Upon reasonable notice and subject to applicable laws relating to
\nthe exchange of information, the Company shall afford to the officers,
\nemployees, accountants, counsel and other representatives of the Buyer, access,
\nduring normal business hours during the period prior to the Effective Time, to
\nall its properties, books, contracts, commitments and records and, during such
\nperiod, the Company shall make available to the Buyer all other information
\nconcerning its business, properties and personnel as the Buyer may reasonably
\nrequest (other than information which the Company is not permitted to disclose
\nunder applicable law). The Buyer will cooperate with the Company to establish a
\nregular information dissemination process designed to minimize disruption to the
\nCompany’s ongoing operations. The Company shall not be required to provide
\naccess to or to disclose information where such access or disclosure would
\njeopardize the attorney-client privilege of the institution in possession or
\ncontrol of such information or contravene any law, rule, regulation, order,
\njudgment, decree, fiduciary duty or binding agreement entered into prior to the
\ndate of this Agreement. The parties hereto will make appropriate substitute
\ndisclosure arrangements under circumstances in which the restrictions of the
\npreceding sentence apply.<\/p>\n
(b) All information furnished by the Company to the Buyer or its
\nrepresentatives pursuant hereto shall be treated as the sole property of the
\nCompany and, if the Merger shall not occur, the Buyer and its representatives
\nshall return to the Company or destroy all of such written information and all
\ndocuments, notes, summaries or other materials containing, reflecting or<\/p>\n
-33-<\/p>\n
referring to, or derived from, such information. The Buyer shall, and shall use
\nits reasonable efforts to cause its representatives to, keep confidential all
\nsuch information, and shall not directly or indirectly use such information for
\nany competitive or other commercial purpose. The obligation to keep such
\ninformation confidential shall continue from the date the proposed Merger is
\nabandoned and shall not apply to (i) any information which (x) was already in
\nthe Buyer’s possession prior to the disclosure thereof by the Company; (y) was
\nthen generally known to the public; or (z) was disclosed to the Buyer by a third
\nparty not bound by an obligation of confidentiality or (ii) disclosures made as
\nrequired by law. It is further agreed that, if in the absence of a protective
\norder or the receipt of a waiver hereunder the Buyer is nonetheless, in the
\nopinion of its counsel, compelled to disclose information concerning the Company
\nto any tribunal or governmental body or agency or else stand liable for contempt
\nor suffer other censure or penalty, the Buyer may disclose such information to
\nsuch tribunal or governmental body or agency without liability hereunder.<\/p>\n
(c) No investigation by any of the parties or their respective
\nrepresentatives shall affect the representations and warranties of the other
\nparties set forth herein or any condition to the obligations of the parties
\nhereto.<\/p>\n
6.05. Approval of Company’s Stockholders. The Company will take all
\nreasonable steps necessary to duly call, give notice of, solicit proxies for,
\nconvene and hold a special meeting (the “Special Meeting”) of its stockholders
\nas soon as practicable for the purpose of approving this Agreement and the
\ntransactions contemplated hereby. The date of the Special Meeting shall occur as
\nsoon as practicable following the mailing of the Proxy Statement, but not later
\nthan 35 days after the Proxy Statement is first mailed to the Company’s
\nstockholders. The Company Board will recommend to the Company’s stockholders the
\napproval of this Agreement and the transactions contemplated hereby and will use
\nall reasonable efforts to obtain, as promptly as practicable, the necessary
\napprovals by the Company’s stockholders of this Agreement and the transactions
\ncontemplated hereby; provided, however, nothing contained herein shall prohibit
\nthe Company Board from failing to make such a recommendation or modifying or
\nwithdrawing its recommendation, if the Company Board shall have concluded in
\ngood faith with the advice of counsel that such action is required to prevent
\nthe Company Board from breaching its fiduciary duties to the stockholders of
\nCompany.<\/p>\n
6.06. Failure to Fulfill Conditions. In the event that Company determines
\nthat a condition to its obligation to complete the Merger cannot be fulfilled
\nand that it will not waive that condition, it will promptly notify the Buyer.<\/p>\n
6.07. Reasonable Best Efforts. Subject to the terms and conditions herein
\nprovided, the Company agrees to use its reasonable best efforts to take, or
\ncause to be taken, all corporate or other action and to do, or cause to be done,
\nall things necessary, proper or advisable under applicable laws and regulations
\nto consummate and make effective the transactions contemplated by this
\nAgreement.<\/p>\n
6.08. Update of Disclosure Schedules. From time to time prior to the
\nEffective Time, the Company will promptly supplement or amend the Company
\nDisclosure Schedule to reflect any matter which, if existing, occurring or known
\nat the date of this Agreement, would have been required to be set forth or
\ndescribed in the Company Disclosure Schedule or which is necessary <\/p>\n
-34-<\/p>\n
to correct any information in the Company Disclosure Schedule which has been
\nrendered inaccurate thereby. No supplement or amendment to the Company
\nDisclosure Schedule shall have any effect for the purpose of determining
\nsatisfaction of the conditions set forth in Section 9.02(a) hereof or the
\ncompliance by the Company with the covenants set forth in Article VI and Article
\nVIII hereof.<\/p>\n
6.09. No Solicitation. The Company shall not, directly or indirectly,
\nthrough any officer, director, agent or otherwise, solicit, initiate or
\nencourage the submission of any proposal or offer from any person relating to
\nany acquisition or purchase of any Equity Interests in the Company or all or
\n(other than in the ordinary course of business) any material portion of the
\nassets of the Company or any business combination with the Company, or, except
\nto the extent legally required in the discharge of their fiduciary duties,
\nrecommend or endorse, or participate in any negotiations regarding, or furnish
\nto any other person any information with respect to, or otherwise cooperate in
\nany way with, or assist or participate in, facilitate, any effort or attempt by
\nany other person to do or seek any of the foregoing. The Company shall
\nimmediately cease and cause to be terminated all existing discussions or
\nnegotiations with any parties conducted heretofore with respect to any of the
\nforegoing. The Company shall immediately notify the Buyer if any such proposal
\nor offer, or any inquiry or contact with any person with respect thereto, is
\nmade and shall, in any such notice to the Buyer, indicate in reasonable detail
\nthe terms and conditions of such proposal, offer, inquiry or contact and include
\nwith such notice and description the identity of the person making the proposal,
\noffer, inquiry or contact and any written materials received by the Company
\nregarding any proposal, offer, inquiry or contact. The Company agrees to provide
\ncopies of all correspondence (electronic or otherwise) with any person regarding
\nany proposal, offer, inquiry or contact and also agrees not to release any third
\nparty from, or waive any provision of, any confidentiality or standstill
\nagreement to which such the Company is a party.<\/p>\n
ARTICLE VII. Covenants of Buyer<\/p>\n
7.01. Conduct of Business Pending the Merger. During the period from the
\ndate of this Agreement and continuing until the Effective Time, the Buyer shall
\nnot, and shall not permit any of its subsidiaries to, take any action that is
\nintended or which reasonably can be expected to result in any of its
\nrepresentations and warranties set forth in this Agreement being untrue in any
\nmaterial respect, or in any of the conditions to the Merger or other
\ntransactions contemplated in this Agreement as set forth in Article IX not being
\nsatisfied in any material respect, or in a material violation of any provision
\nof this Agreement, except, in every case, as may be required by applicable law;
\nprovided that nothing herein contained shall preclude the Buyer from taking any
\naction Previously Disclosed.<\/p>\n
7.02. Failure to Fulfill Conditions. In the event that the Buyer
\ndetermines that a condition to its obligation to complete the Merger cannot be
\nfulfilled and that it will not waive that condition, it will notify the Company
\nwithin five days after it determines that it will not waive the condition.<\/p>\n
7.03. Reasonable Best Efforts. Subject to the terms and conditions herein
\nprovided, the Buyer agrees to use its reasonable best efforts to take, or cause
\nto be taken, all corporate or other action and to do, or cause to be done, all
\nthings necessary, proper or advisable under applicable <\/p>\n
-35-<\/p>\n
laws and regulations to consummate and make effective the transactions
\ncontemplated by this Agreement.<\/p>\n
ARTICLE VIII. Regulatory and Other Matters<\/p>\n
8.01. Certain Filings, Consents and Arrangements. The Buyer, the Buyer Sub
\nand the Company will use their reasonable best efforts and cooperate with one
\nanother (i) in promptly determining whether any filings are required to be made
\nor consents, approvals, permits or authorizations are required to be obtained
\n(or, which if not obtained, would result in an event of default, termination or
\nacceleration of any agreement) under any United States or foreign law or
\nregulation or from any governmental authorities or third parties, including
\nparties to loan agreements, in connection with the transactions contemplated by
\nthis Agreement, including the Merger, (ii) in promptly making any such filings,
\nfurnishing information required in connection therewith and in timely seeking to
\nobtain any such consents, approvals, permits or authorizations, and (iii) in the
\npreparation of the Proxy Statement and any other statements satisfying all
\napplicable requirements of applicable state securities and other laws, and of
\nthe Securities Act and the Exchange Act, and the rules and regulations
\nthereunder. Within 15 days of the date hereof, the Company shall cause the Proxy
\nStatement to be filed with the SEC, and, as promptly as practicable after such
\nfiling, shall cause the Proxy Statement to me mailed to its stockholders. The
\nCompany and the Buyer shall each promptly notify the other if at any time it
\nbecomes aware that the Proxy Statement contains any untrue statement of a
\nmaterial fact or omits to state a material fact required to be stated therein or
\nnecessary to make the statements contained therein, in light of the
\ncircumstances under which they were made, not misleading. In such event, the
\nCompany and the Buyer shall cooperate in the preparation of a supplement or
\namendment to the Proxy Statement which corrects such misstatements or omissions,
\nand shall cause the same to be filed with the SEC and distributed to
\nstockholders of the Company.<\/p>\n
8.02. Regulatory Approvals. Each of the Company and the Buyer will
\ncooperate with the other and use all reasonable efforts to prepare all necessary
\ndocumentation, to effect all necessary filings and to obtain all necessary
\npermits, consents, approvals and authorizations of all third parties and
\nGovernmental Entities necessary to consummate the transactions contemplated by
\nthis Agreement, including without limitation the Merger. The Company and the
\nBuyer will furnish each other and each other’s counsel with all information
\nconcerning themselves, their subsidiaries, directors, officers and stockholders
\nand such other matters as may be necessary or advisable in connection with the
\nProxy Statement and any application, petition or any other statement or
\napplication made by or on behalf of the Company or the Buyer to any Governmental
\nEntity in connection with the Merger and the other transactions contemplated by
\nthis Agreement. The Company and the Buyer shall have the right to review and
\ncomment on in advance all information which appears in any filing made in
\nconnection with the transactions contemplated by this Agreement with any
\nGovernmental Entity, including, without limitation, the Proxy Statement. In
\naddition, the Company and the Buyer shall each furnish to the other a final copy
\nof each such filing made in connection with the transactions contemplated by
\nthis Agreement with any Governmental Entity. Each of the Buyer and the Company
\nrepresents and warrants to the other that it is not aware of any reason why the
\napprovals, consents and waivers of Governmental Entities referred to herein and
\nin Section 4.07 and Section 5.04 should not be obtained.<\/p>\n
-36-<\/p>\n
8.03. Legal Conditions to Merger. Each of the Buyer and the Company shall,
\nand shall cause each of its subsidiaries to, use its reasonable best efforts (a)
\nto take, or cause to be taken, all actions necessary, proper or advisable to
\ncomply promptly with all legal requirements which may be imposed on such party
\nor its subsidiaries with respect to the Merger and, subject to the conditions
\nset forth in Article IX hereof, to consummate the transactions contemplated by
\nthis Agreement and (b) to obtain (and to cooperate with the other party to
\nobtain) any consent, authorization, order or approval of, or any exemption by,
\nany Governmental Entity and any other third party which is required to be
\nobtained by the Company or the Buyer or any of their respective subsidiaries in
\nconnection with the Merger and the other transactions contemplated by this
\nAgreement.<\/p>\n
8.04. Employee Matters.<\/p>\n
(a) Existing Employment Agreements. Following the Merger, the Buyer
\nshall, or shall cause the Surviving Corporation to, honor in accordance with
\ntheir terms the employment agreements which the Buyer has expressly agreed to
\nhonor.<\/p>\n
(b) Parachute Payments. Notwithstanding anything to the contrary
\ncontained in this Agreement, in no event shall the Company take any action or
\nmake any payments that would result, either individually or in the aggregate, in
\nthe payment of an “excess parachute payment” within the meaning of Section 280G
\nof the Code or that would result, either individually or in the aggregate, in
\npayments that would be nondeductible pursuant to Section 162(m) of the Code.<\/p>\n
8.05. Extension of Credit; Cross Default. Simultaneously with the
\nexecution of this Agreement, the Company and the Buyer have entered into an
\narrangement under which the Buyer will provide the Company up to $13 million in
\nfinancing (the “Secured Promissory Note”). All obligations of the Company under
\nthe Secured Promissory Note will be secured by all the assets of the Company
\npursuant to a Collateral Assignment and Security Agreement of even date
\nherewith. Any material breach by the Company of its obligations under the
\nSecured Promissory Note or the Collateral Assignment and Security Agreement
\nshall also be deemed to be a material breach of this Agreement.<\/p>\n
8.06. Director and Officer Indemnification; Liability Insurance.<\/p>\n
(a) The Buyer hereby confirms that the indemnification obligations of
\nthe Company to its directors and officers set forth in the Company’s Certificate
\nof Incorporation and By-laws and as provided by Delaware law, in each case as in
\neffect on the date of this Agreement, will not be extinguished by virtue of the
\nMerger.<\/p>\n
(b) For a period of six (6) years after the Effective Time, the Buyer
\nwill maintain in effect and not cancel the “tail” insurance obtained by the
\nCompany prior to the Closing for the benefit of the persons who served as
\ndirectors or officers of the Company before the Effective Time and relating to
\nliabilities and claims (and related expenses) made against them resulting from
\ntheir service as such prior to the Effective Time. The Company will pay no more
\nthan an aggregate of $325,000 for such insurance for the full six year period of
\ncoverage, and will consult with the Buyer prior to purchasing such insurance.<\/p>\n
-37-<\/p>\n
(c) This Section 8.06 shall be construed as an agreement as to which
\nthe directors and officers of the Company are intended to be third party
\nbeneficiaries and shall be enforceable by such persons and their heirs and
\nrepresentatives.<\/p>\n
8.07. Public Announcements. So long as this Agreement is in effect,
\nneither the Buyer nor the Company (nor any Affiliate of either) shall issue or
\ncause the publication of any press release or other public announcement with
\nrespect to, or otherwise make any public statement concerning, the transactions
\ncontemplated by this Agreement without the consent of the other party, which
\nconsent shall not be unreasonably withheld.<\/p>\n
8.08. Additional Agreements. In case at any time after the Effective Time
\nany further action is necessary or desirable to carry out the purposes of this
\nAgreement, or to vest the Buyer with full title to all properties, assets,
\nrights, approvals, immunities and franchises of any of the parties to the
\nMerger, the proper officers and directors of each party to this Agreement and
\ntheir respective subsidiaries shall take all such necessary action as may be
\nreasonably requested by the Buyer.<\/p>\n
ARTICLE IX. Conditions To The Merger<\/p>\n
9.01. Conditions to Each Party’s Obligations to Effect the Merger. The
\nrespective obligation of each party to effect the Merger shall be subject to the
\nsatisfaction at or prior to the Effective Time of the following conditions:<\/p>\n
(a) Stockholder Approval. This Agreement and the transactions
\ncontemplated hereby shall have been approved in accordance with applicable law
\nand Nasdaq National Market System policy by the requisite vote of the
\nstockholders of the Company.<\/p>\n
(b) No Orders, Injunctions or Restraints; Illegality. No order,
\ninjunction or decree (whether temporary, preliminary or permanent) issued by any
\nfederal or state governmental authority or other agency or commission or federal
\nor state court of competent jurisdiction or other legal restraint or prohibition
\n(an “Injunction”) preventing the consummation of the Merger or any of the other
\ntransactions contemplated by this Agreement shall be in effect and no proceeding
\ninitiated by any Governmental Entity seeking an Injunction shall be pending. No
\nstatute, rule, regulation, order, injunction or decree (whether temporary,
\npreliminary or permanent) shall have been enacted, entered, promulgated or
\nenforced by any federal or state governmental authority or other agency or
\ncommission or federal or state court of competent jurisdiction, which prohibits,
\nrestricts or makes illegal the consummation of the Merger or any of the other
\ntransactions contemplated by this Agreement.<\/p>\n
(c) Filings and Approvals. All filings with and notifications to, and
\nall approvals and authorizations of, third parties (including, without
\nlimitation, Governmental Entities and authorities) required for the consummation
\nof the transactions contemplated by this Agreement shall have been made or
\nobtained and all such approvals and authorizations (the “Requisite Approvals”)
\nobtained shall be effective and shall not have been suspended, revoked or stayed
\nby action of any Governmental Entity or authority.<\/p>\n
-38-<\/p>\n
9.02. Conditions to Obligations of the Buyer. The obligation of the Buyer
\nto effect the Merger is also subject to the satisfaction of or waiver by the
\nBuyer at or prior to the Effective Time of the following conditions:<\/p>\n
(a) Representations and Warranties. Each of the representations and
\nwarranties of the Company in this Agreement which is qualified as to materiality
\nshall be true and correct and each such representation or warranty that is not
\nso qualified shall be true and correct in all material respects, in each case as
\nof the date of this Agreement, as applicable, and (except to the extent such
\nrepresentations and warranties speak as of an earlier date) as of the Closing
\nDate. The Buyer shall have received a certificate signed by the Chief Executive
\nOfficer, Vice President, Finance and Administration, and Vice President,
\nCorporate Counsel, of the Company to such effect dated as of the Closing Date.<\/p>\n
(b) Agreements and Covenants. As of the Closing Date, the Company
\nshall have performed in all material respects all obligations and complied in
\nall material respects with all agreements or covenants of the Company to be
\nperformed or complied with by it at or prior to the Closing Date under this
\nAgreement, and the Buyer shall have received a certificate to such effect signed
\nby the Chief Executive Officer, Vice President, Finance and Administration, and
\nVice President, Corporate Counsel, of the Company dated as of the Closing Date.<\/p>\n
(c) No Material Adverse Change. There shall have been no Material
\nAdverse Effect with respect to the Company since the Latest Balance Sheet Date.<\/p>\n
(d) No Burdensome Condition. None of the Requisite Approvals shall
\nimpose any term, condition or restriction upon the Buyer or any of its
\nsubsidiaries that the Buyer reasonably determines would materially impair the
\nvalue of the Company to the Buyer or be materially burdensome.<\/p>\n
(e) No Parachute Payments. The Company shall not have taken any
\naction or made any payments that would not be permitted pursuant to Section
\n8.04(b).<\/p>\n
(f) Termination of Company Stock Options. The Company shall have
\nprovided evidence reasonably satisfactory to the Buyer that all of the
\noutstanding Company Stock Options have been terminated.<\/p>\n
(g) Indian Subsidiary. The Company shall have delivered evidence that
\nit has terminated the operations of its Indian subsidiary without cost or
\nliability to the Company, the Surviving Corporation or the Buyer in excess of
\n$50,000.<\/p>\n
(h) Conversion of Payables. Creditors of the Company owed an
\naggregate of at least $7 million among those set forth on Section 9.02(h) of the
\nCompany Disclosure Schedule shall have entered into a Forbearance and Deferral
\nAgreement with the Company as to all amounts due or to become due thereto from
\nthe Company. Said Forbearance and Deferral Agreements shall be in full force
\nand effect as of immediately prior to the Effective Time.<\/p>\n
9.03. Conditions to Obligations of the Company. The obligations of the
\nCompany to effect the Merger are also subject to the following conditions:<\/p>\n
-39-<\/p>\n
(a) Representations and Warranties. Each of the representations and
\nwarranties of the Buyer in this Agreement which is qualified as to materiality
\nshall be true and correct and each such representation or warranty that is not
\nso qualified shall be true and correct in all material respects, in each case as
\nof the date of this Agreement, as applicable, and (except to the extent such
\nrepresentations and warranties speak as of an earlier date) as of the Closing
\nDate. The Company shall have received a certificate signed by the Chief
\nExecutive Officer, President or Executive Vice President of the Buyer to such
\neffect dated as of the Closing Date.<\/p>\n
(b) Agreements and Covenants. As of the Closing Date, the Buyer shall
\nhave performed in all material respects all obligations and complied in all
\nmaterial respects with all agreements or covenants of the Buyer to be performed
\nor complied with by it at or prior to the Closing Date under this Agreement, and
\nthe Company shall have received a certificate to such effect signed by the Chief
\nExecutive Officer, President or Executive Vice President of the Buyer dated as
\nof the Closing Date.<\/p>\n
ARTICLE X. Termination, Amendment And Waiver<\/p>\n
10.01. Termination. This Agreement may be terminated and the Merger and the
\nother transactions contemplated by this Agreement may be abandoned at any time
\nprior to the Effective Time, notwithstanding any requisite approval and adoption
\nof this Agreement and the transactions contemplated in this Agreement by the
\nstockholders of the Company:<\/p>\n
(a) by mutual written consent duly authorized by the Boards of
\nDirectors or other governing body of the Buyer and the Company;<\/p>\n
(b) by either the Buyer or the Company if (i) the Effective Time shall
\nnot have occurred on or before December 31, 2001 or such later date as the
\nparties may have agreed upon in writing (the “Expiration Date”); provided,
\nhowever, that the right to terminate this Agreement under this Section 10.01(b)
\nshall not be available to any party whose failure to fulfill any material
\nobligation under this Agreement has been the cause of, or resulted in, the
\nfailure of the Effective Time to occur on or before such date;<\/p>\n
(c) by either the Buyer or the Company (i) ninety days after the date
\non which any request or application for a regulatory approval required to
\nconsummate the Merger shall have been denied or withdrawn at the request or
\nrecommendation of the Governmental Entity which must grant such requisite
\nregulatory approval, unless within the ninety day period following such denial
\nor withdrawal a petition for rehearing or an amended application has been filed
\nwith such Governmental Entity; provided, however, that no party shall have the
\nright to terminate this Agreement pursuant to this Section 10.01(c) (i) if such
\ndenial or request or recommendation for withdrawal shall be due to the failure
\nof the party seeking to terminate this Agreement to perform or observe the
\ncovenants and agreements of such party set forth herein or (ii) if any court of
\ncompetent jurisdiction or other governmental authority shall have issued an
\norder, decree, ruling or taken any other action restraining, enjoining or
\notherwise prohibiting the Merger and such order, decree, ruling or other action
\nshall have become final and nonappealable;<\/p>\n
-40-<\/p>\n
(d) by either the Company or the Buyer if the stockholders of the
\nCompany shall have voted at the Special Meeting on the transactions contemplated
\nby this Agreement and such vote shall not have been sufficient to approve such
\ntransactions;<\/p>\n
(e) by either the Buyer or the Company (provided that the terminating
\nparty is not then in material breach of any representation, warranty, covenant
\nor other agreement contained herein) if there shall have been a material breach
\nof any of the representations or warranties set forth in this Agreement on the
\npart of the other party (for purposes of this Section 10.01(e), a material
\nbreach shall be deemed to be a breach which has, either individually or in the
\naggregate, a Material Adverse Effect on the party making such representations or
\nwarranties (provided, that no effect shall be given to any qualification
\nrelating to materiality or a Material Adverse Effect in such representations and
\nwarranties) or which materially adversely affects consummation of the Merger);<\/p>\n
(f) by either the Buyer or the Company (provided, that the terminating
\nparty is not then in material breach of any representation, warranty, covenant
\nor other agreement contained herein) if there shall have been a material failure
\nto perform or comply with any of the covenants or agreements set forth in this
\nAgreement on the part of the other party; or<\/p>\n
(g) by the Buyer if the Company Board fails to recommend to the
\nCompany’s stockholders the approval of this Agreement and the transactions
\ncontemplated hereby or modifies or withdraws such recommendation in a manner
\nadverse to the Buyer.<\/p>\n
10.02. Effect of Termination; Expenses.<\/p>\n
(a) In the event of the termination of this Agreement pursuant to
\nSection 10.01, this Agreement shall forthwith become void (except as set forth
\nin Section 12.03), and there shall be no liability on the part of any party
\nhereto, except (i) each party shall remain liable in any action at law or
\notherwise for any liabilities or damages arising out of its gross negligence or
\nwillful breach of any provision of this Agreement, or (ii) as otherwise provided
\nin this Section 10.02.<\/p>\n
(b) If this Agreement is terminated (A) by the Buyer or the Company
\npursuant to Section 10.01(d) because of a failure to obtain the required
\napproval of the Company’s stockholders after a Takeover Proposal shall have been
\npublicly disclosed or made known to the Company or after any person shall have
\npublicly disclosed or made known to the Company an intention (whether or not
\nconditional) to make a Takeover Proposal, (B) by the Buyer pursuant to Section
\n10.01(e) or 10.01(f) if the breach giving rise to such termination was willful,
\nor (C) by the Buyer pursuant to Section 10.01(g), then, in any such case, within
\none Business Day following any such termination, the Company shall pay to the
\nBuyer a termination fee of $250,000 and reimburse the Buyer for its reasonable
\nout-of-pocket expenses incurred by it in connection with this Agreement and the<\/p>\n
-41-<\/p>\n
transaction contemplated hereby (including fees and expenses of legal, financial
\nand accounting advisors). If this Agreement is terminated by the Company
\npursuant to Sections 10.01(e) or 10.01(f) if the breach giving rise to such
\ntermination was willful, then, in any such case within one Business Day
\nfollowing such termination, the Buyer shall pay to the Company a termination fee
\nof $250,000 and reimburse the Company for its reasonable out-of-pocket expenses
\nincurred by it in connection with this Agreement and the transaction
\ncontemplated hereby (including fees and expenses of legal, financial and
\naccounting advisors which shall not include any expenses incurred as a result of
\nthe negotiation, performance or termination of the PCC Transaction Documents, or
\nthe agreements and transactions contemplated thereby.) As used in this
\nAgreement, “Takeover Proposal” shall mean any tender or exchange offer, proposal
\nfor a merger, consolidation or other business combination involving the Company
\nor any of its Subsidiaries or any proposal or offer to acquire in any manner a
\nsubstantial equity interest in, or a substantial portion of the assets of, the
\nCompany or its Subsidiaries, other than the transactions contemplated or
\npermitted by this Agreement.<\/p>\n
(c) Notwithstanding anything in this Agreement to the contrary, (i)
\nthe entitlement to the fees specified in Section 10.02(b) hereof shall be the
\nsole and exclusive remedy of the Parties hereto with respect to any breach of
\nthis Agreement by another Party and (ii) nothing in this Section 10.02 shall
\ndelay, impair or prejudice the right of the Buyer to the repayment by the
\nCompany of any amounts owed under the Secured Promissory Note in accordance with
\nthe terms thereof and Section 8.5 hereof.<\/p>\n
(d) Except as otherwise provided in this Section 10.02, all costs and
\nexpenses incurred in connection with this Agreement and the transactions
\ncontemplated hereby and thereby shall be paid by the party incurring such
\nexpenses, whether or not any of the transactions contemplated by this Agreement
\nare consummated.<\/p>\n
(e) In no event shall any officer, agent or director of the Company,
\nany Company subsidiary, the Buyer or any Buyer Subsidiary, be personally liable
\nhereunder for any breach or default by any party in any of its representations,
\nwarranties, covenants and obligations hereunder unless any such breach or
\ndefault was caused by the gross negligence or willful misconduct of such
\nofficer, agent or director.<\/p>\n
10.03. Amendment. This Agreement may be amended by the parties hereto by
\naction taken by or on behalf of their respective Boards of Directors or other
\ngoverning body at any time prior to the Effective Time. This Agreement may not
\nbe amended except by an instrument in writing signed by the parties hereto.<\/p>\n
10.04. Waiver. At any time prior to the Effective Time, any party hereto
\nmay (i) extend the time for the performance of any obligation or other act of
\nany other party hereto, (ii) waive any inaccuracy in the representations and
\nwarranties contained herein or in any document delivered pursuant hereto and
\n(iii) waive compliance with any of the agreements or conditions contained
\nherein. Any such extension or waiver shall be valid if set forth in an
\ninstrument in writing signed by the party or parties to be bound thereby, but
\nsuch extension or waiver or failure to insist on strict compliance with an
\nobligation, covenant, agreement or condition shall not operate as a waiver of,
\nor estoppel with respect to, any subsequent or other failure.<\/p>\n
ARTICLE XI. The Closing<\/p>\n
11.01. Closing. Subject to the provisions of Article IX and Article X
\nthereof, the Closing of the transactions contemplated hereby shall take place at
\nthe offices of Simpson Thatcher & Bartlett, 3330 Hillview Ave., Palo Alto,
\nCalifornia at 10:00 a.m. California time on a <\/p>\n
-42-<\/p>\n
date specified by the Buyer at least five business days prior to such date. The
\nClosing Date shall be as soon as practicable after the last required approval
\nfor the Merger has been obtained and the last of all required waiting periods
\nunder such approvals have expired, or at such other place, date or time as the
\nBuyer and the Company may mutually agree upon.<\/p>\n
11.02. Deliveries At Closing. At the Closing the Company shall deliver to
\nthe Buyer the opinions, certificates, and other closing documents and
\ninstruments required to be delivered under Article IX hereof.<\/p>\n
ARTICLE XII. General Provisions<\/p>\n
12.01. Alternative Structure. Notwithstanding anything to the contrary
\ncontained in this Agreement, prior to the Effective Time, the Buyer shall be
\nentitled to revise the structure of the Merger and the other transactions
\ncontemplated hereby and thereby, provided that (i) there are no material adverse
\nfederal or state income tax consequences to the Company as a result of the
\nmodification; (ii) there are no material adverse changes to the benefits and
\nother arrangements provided to or on behalf of the Company’s directors, officers
\nand other employees; and (iii) such modification will not be likely to delay
\nmaterially or jeopardize receipt of any required regulatory approvals or other
\nconsents and approvals relating to the consummation of the Merger. This
\nAgreement and any related documents shall be appropriately amended in order to
\nreflect any such revised structure.<\/p>\n
12.02. Assignment of Right to Purchase. The Buyer shall have the right to
\nassign the right to consummate the Merger under this Agreement to a subsidiary
\nof the Buyer, provided, however, that the Buyer shall remain liable for payment
\nof the Purchase Price.<\/p>\n
12.03. Survival of Representations, Warranties and Agreements. All of the
\nrepresentations and warranties of the parties contained in this Agreement (or in
\nany document delivered or to be delivered pursuant to this Agreement or in
\nconnection with the Closing) shall expire on, and be terminated and extinguished
\nat, the Effective Time other than covenants that by their terms are to be
\nperformed after the Effective Time (including without limitation the covenants
\nset forth in Sections 6.04(b) and 10.02 hereof), provided that no such
\nrepresentations, warranties or covenants shall be deemed to be terminated or
\nextinguished so as to deprive the Buyer, the Buyer Sub or the Company (or any
\ndirector, officer or controlling person thereof) of any defense at law or in
\nequity which otherwise would be available against the claims of any person,
\nincluding, without limitation, any shareholder or former shareholder of either
\nthe Buyer or the Company.<\/p>\n
12.04. Notices. All notices, requests, claims, demands and other
\ncommunications hereunder shall be in writing and shall be given (and shall be
\ndeemed to have been duly given upon receipt) by delivery in person, by cable,
\ntelecopy, telegram or telex or by registered or certified mail (postage prepaid,
\nreturn receipt requested) to the respective parties at the following addresses
\n(or at such other address for a party as shall be specified in a notice given in
\naccordance with this Section 12.04):<\/p>\n
-43-<\/p>\n
if to the Buyer:<\/p>\n
Fry’s Electronics, Inc.
\n 600 East Brokaw Road
\n San Jose, California 95112
\n Facsimile: (408) 487-4741
\n Attention: Executive Vice President<\/p>\n
with a required copy to:<\/p>\n
Simpson Thacher & Bartlett
\n 3330 Hillview Ave.
\n Palo Alto, California 94304
\n Facsimile: (818) 755-7000
\n Attention: Richard Capelouto, Esq.
\n Daniel Clivner, Esq.<\/p>\n
if to the Buyer Sub:<\/p>\n
c\/o Fry’s Electronics, Inc.
\n 600 East Brokaw Road
\n San Jose, California 95112
\n Facsimile: (408) 487-4741
\n Attention: Secretary<\/p>\n
with a required copy to:<\/p>\n
Simpson Thacher & Bartlett
\n 3330 Hillview Ave.
\n Palo Alto, California 94304
\n Facsimile: (818) 755-7000
\n Attention: Richard Capelouto, Esq.
\n Daniel Clivner, Esq.<\/p>\n
if to the Company:<\/p>\n
Cyberian Outpost, Inc.
\n 25 North Main Street
\n Kent, Connecticut 06757
\n Facsimile: (860) 927-8665
\n Attention: President and CEO<\/p>\n
-44-<\/p>\n
with a required copy to:<\/p>\n
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo
\n One Financial Center
\n Boston, MA 02111
\n Facsimile: (617) 542-2241
\n Attention: R. Mark Chamberlin, Esq.
\n Michael L. Fantozzi, Esq.<\/p>\n
12.05. Severability. If any term or other provision of this Agreement is
\ninvalid, illegal or incapable of being enforced by any rule of law, or public
\npolicy, all other conditions and provisions of this Agreement shall nevertheless
\nremain in full force and effect so long as the economic or legal substance of
\nthe transactions contemplated by this Agreement is not affected in any manner
\nadverse to any party. Upon such determination that any term or other provision
\nis invalid, illegal or incapable of being enforced, the parties hereto shall
\nnegotiate in good faith to modify this Agreement so as to effect the original
\nintent of the parties as closely as possible in a mutually acceptable manner in
\norder that the transactions contemplated by this Agreement be consummated as
\noriginally contemplated to the fullest extent possible.<\/p>\n
12.06. Entire Agreement. This Agreement (including the Company Disclosure
\nSchedules and Exhibits hereto) constitutes the entire agreement among the
\nparties with respect to the subject matter hereof and supersedes all prior
\nagreements and undertakings, both written and oral, among the parties, or any of
\nthem.<\/p>\n
12.07. Assignment. Except as provided in Section 12.02, neither this
\nAgreement nor any of the rights, interests or obligations hereunder shall be
\nassigned by any of the parties hereto (whether by operation of law or otherwise)
\nwithout the prior written consent of the other party. Subject to the preceding
\nsentence, this Agreement will be binding upon, inure to the benefit of and be
\nenforceable by the parties and their respective successors and assigns.<\/p>\n
12.08. Parties in Interest. This Agreement shall be binding upon and inure
\nsolely to the benefit of each party hereto, and nothing in this Agreement,
\nexpress or implied, is intended to or shall confer upon any other person any
\nright, benefit or remedy of any nature whatsoever under or by reason of this
\nAgreement.<\/p>\n
12.09. Specific Performance. The parties hereto agree that irreparable
\ndamage would occur in the event that the provisions contained in this Agreement
\nare not performed in accordance with its specific terms or are otherwise
\nbreached. It is accordingly agreed that the parties shall be entitled to an
\ninjunction or injunctions to prevent breaches of this Agreement and to enforce
\nspecifically the terms and provisions thereof in any court of the United States
\nor any state having jurisdiction, this being in addition to any other remedy to
\nwhich they are entitled at law or in equity.<\/p>\n
12.10. Governing Law. This Agreement shall be governed by, and construed in
\naccordance with, the laws of the State of Delaware applicable to contracts
\nexecuted in and to be <\/p>\n
-45-<\/p>\n
performed in that State. All actions and proceedings arising out of or relating
\nto this Agreement shall be heard and determined in any state or federal court
\nsitting in the State of Delaware.<\/p>\n
12.11. Headings. The table of contents and the descriptive headings
\ncontained in this Agreement are included for convenience of reference only and
\nshall not affect in any way the meaning or interpretation of this Agreement.<\/p>\n
12.12. Interpretation. When a reference is made in this Agreement to
\nSections, Exhibits, Annexes or Schedules, such reference shall be to a Section
\nof or Exhibit, Annex or Schedule to this Agreement unless otherwise indicated.
\nWhenever the words “include,” “includes” or “including” are used in this
\nAgreement, they shall be deemed to be followed by the words “without
\nlimitation.” The phrases “the date of this Agreement,” “the date hereof” and
\nterms of similar import, unless the context otherwise requires, shall be deemed
\nto be September 4, 2001.<\/p>\n
12.13. Counterparts. This Agreement may be executed (including by
\nfacsimile) in one or more counterparts, and by the different parties hereto in
\nseparate counterparts, each of which when executed shall be deemed to be an
\noriginal but all of which taken together shall constitute one and the same
\nagreement.<\/p>\n
* * * * *<\/p>\n
-46-<\/p>\n
IN WITNESS WHEREOF, the Buyer and the Company have caused this Agreement to
\nbe executed as a sealed instrument as of the date first written above by their
\nrespective officers thereunto duly authorized.<\/p>\n
The Buyer:<\/p>\n
Fry’s Electronics, Inc.<\/p>\n
By: \/s\/ Kathryn J. Kolder
\n ———————<\/p>\n
Name: Kathryn J. Kolder<\/p>\n
Title: Executive Vice-President<\/p>\n
The Company:<\/p>\n
Cyberian Outpost, Inc.<\/p>\n
By: \/s\/ Darryl Peck
\n —————<\/p>\n
Name: Darryl Peck<\/p>\n
Title: President & CEO<\/p>\n
Buyer Sub:<\/p>\n
FCOP Acquisition, Inc.<\/p>\n
By: \/s\/ Kathryn J. Kolder
\n ———————<\/p>\n
Name: Kathryn J. Kolder<\/p>\n
Title: Executive Vice-President<\/p>\n
-47-<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7254],"corporate_contracts_industries":[9497],"corporate_contracts_types":[9622,9626],"class_list":["post-43470","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-cyberian-outpost-inc","corporate_contracts_industries-retail__electronics","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43470","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43470"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43470"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43470"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43470"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}