-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FgW1ROTHluoQS0wrx8qJiUzYVZd0DrUo0DjP1VXkwkL3i+yhLt25KDS6LSp2nBcF 1wuVS61Khwrp/XvB6LcFLA== 0001047469-99-035661.txt : 19990915 0001047469-99-035661.hdr.sgml : 19990915 ACCESSION NUMBER: 0001047469-99-035661 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19990914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOURCINGLINK NET INC CENTRAL INDEX KEY: 0000825517 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 980132465 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-87051 FILM NUMBER: 99711054 BUSINESS ADDRESS: STREET 1: 650 CASTRO STREET SUITE 210 STREET 2: C/O RICHARD S LANE ESQ CITY: MOUNTAIN VIEW STATE: CA ZIP: 94041 BUSINESS PHONE: 6509661214 MAIL ADDRESS: STREET 1: 650 CASTRO ST STREET 2: STE 210 CITY: MOUNTAIN VIEW STATE: CA ZIP: 94041 FORMER COMPANY: FORMER CONFORMED NAME: QCS NET CORP DATE OF NAME CHANGE: 19990621 FORMER COMPANY: FORMER CONFORMED NAME: QCS CORP DATE OF NAME CHANGE: 19941216 FORMER COMPANY: FORMER CONFORMED NAME: PARKWAY CAPITAL CORP DATE OF NAME CHANGE: 19920703 S-3 1 FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 14, 1999 REGISTRATION NO. 333 - - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- SOURCINGLINK.NET, INC. (Exact name of registrant as specified in charter) DELAWARE 98-0132465 (State or other jurisdiction (I.R.S. Employer of Identification incorporation or organization) No.)
-------------------------- 650 CASTRO STREET, SUITE 210, MOUNTAIN VIEW, CALIFORNIA 94041 (650) 966-1214 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) -------------------------- SEAN M. MALOY SOURCINGLINK.NET, INC. 650 CASTRO STREET, SUITE 210 MOUNTAIN VIEW, CALIFORNIA 94041 (650) 966-1214 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- COPIES TO: BRUCE FEUCHTER, ESQ. JEFFREY B. COYNE, ESQ. CHRISTINE A. MILLER, ESQ. STRADLING YOCCA CARLSON & RAUTH, A PROFESSIONAL CORPORATION 660 NEWPORT CENTER DRIVE, SUITE 1600, NEWPORT BEACH, CALIFORNIA 92660 (949) 725-4000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / -------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF OF SECURITIES TO BE REGISTERED REGISTERED SHARE (1) PRICE REGISTRATION FEE Common Stock ($.001 par value) 1,250,064 shares $7.50 $9,375,480 $2,606
(1) The offering price is estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(c), using the average of the high and low prices reported by the Bulletin Board Market managed by Nasdaq for the Common Stock on September 13, 1999, which was approximately $7.50 per share. -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRELIMINARY PROSPECTUS 1,250,064 SHARES [LOGO] SOURCINGLINK.NET, INC. COMMON STOCK ---------------- This prospectus relates to the offer and sale of up to 1,250,064 shares of our common stock which are held by some of our current stockholders. The prices at which such stockholders may sell the shares in this offering will be determined by the prevailing market price for the shares or in negotiated transactions. We will not receive any of the proceeds from the sale of the shares. Our common stock is traded on the Nasdaq National Market under the symbol SNET. On September 13, 1999, the last reported sale price of our common stock was $7.38 per share. SEE "RISK FACTORS" BEGINNING ON PAGE 4 TO READ ABOUT THE RISKS YOU SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROSPECTUS IS , 1999. TABLE OF CONTENTS
PAGE Where You Can Find Additional Information.................................................................. 2 The Company................................................................................................ 3 Risk Factors............................................................................................... 4 Incorporation of Certain Documents by Reference............................................................ 13 Material Changes........................................................................................... 14 Use of Proceeds............................................................................................ 14 Selling Stockholders....................................................................................... 15 Plan of Distribution....................................................................................... 16 Legal Matters.............................................................................................. 17 Experts.................................................................................................... 17 Indemnification of Directors and Officers.................................................................. 17
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING STOCKHOLDERS OR ANY UNDERWRITERS, BROKERS OR AGENTS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES BY ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER, SOLICITATION OR SALE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed with the SEC a registration statement on Form S-3 with respect to the common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules which are part of the registration statement. For further information with respect to SourcingLink.net and the common stock, reference is made to the registration statement and the exhibits and schedules thereto. You may read and copy any document we file at the SEC's public reference room in Washington, DC. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Our SEC filings are also available to the public from the SEC's website at http://www.sec.gov. We are subject to the information and periodic reporting requirements of the Securities Exchange Act and, in accordance therewith, will continue to file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the SEC's public reference rooms, our website and the SEC's website referred to above. Information on our website does not constitute a part of this prospectus. 2 THE COMPANY We have developed an Internet-based turnkey solution for business-to-business eCommerce that enables retailers to organize, automate and significantly reduce the cost of their preorder merchandise sourcing activities by connecting directly with their retail merchandise suppliers around the globe. As opposed to traditional Electronic Data Interchange, or EDI, providers who largely address the post-order process, our solution is primarily focused on the preorder merchandise sourcing process. To date, communications between retailers and merchandise suppliers for preorder merchandise sourcing have largely been carried out through paper-based systems, telephone calls, faxes, courier services or travel and personal visits. This traditional process is time consuming, expensive, inefficient, error prone, labor intensive and results in low productivity for both the retailer and merchandise supplier. Our solution, which uses proprietary software to link and manage the data and oral communications between the retailer and merchandise supplier, organizes and automates the preorder merchandise sourcing function over the Internet. In addition, the Company's solution can also provide traditional EDI capabilities. To date, our eCommerce solution has been adopted by PETsMART (the largest specialty retailer of pet food and supplies in the United States) and Promodes (a leading European operator of hypermarkets), both of whom are in the early stage of rolling out our solution to their merchandise suppliers. In addition, Carrefour (the fifth largest retailer in the world), a longstanding customer of our desktop solution, will convert to our eCommerce solution. Customers who are using our solution have experienced significant reduction in costs and improvement in productivity relating to the sourcing activity. Our eCommerce solution is also being evaluated for adoption by Mars Music Company (a rapidly growing U.S.-based specialty retailer of musical instruments and supplies) and ASDA (a leading operator of hypermarkets in the United Kingdom). We are also in discussions with numerous other retailers regarding pilot evaluations of our preorder merchandise sourcing solution. We have designed our pricing structure to offer merchandise suppliers, as well as retailers, what we believe is a compelling value. The up-front cost to implement our solution is limited to connectivity to the Internet, mapping and forms specifications, creation of electronic catalogs and training. Thereafter, under our new pricing structure which was implemented on April 1, 1999, each merchandise supplier pays a fixed monthly fee of $95.00 or a fixed annual fee of $950.00 regardless of the number of retailers they are connected to or the number of transactions they process. As a result, we believe the ability of retailers and merchandise suppliers to leverage the SourcingLink.net solution is significant. To cost-effectively provide our customers with global support, SourcingLink.net entered into a strategic alliance with IBM Global Network which includes co-marketing and worldwide infrastructure and connectivity support. As a partner in IBM's e-commerce solutions we receive active promotion of our preorder merchandise sourcing solution, use of the IBM logo on all our marketing material, including our website, and participation with IBM at its e-commerce trade show booths. In addition, IBM houses our servers in its secure data management center and provides global help desk and on-site customer support. We believe our solution has significant benefits for retailers and merchandise suppliers including (1) low implementation and maintenance costs; (2) increased productivity and lower costs of doing business; (3) more effective buying decisions; (4) increased retailer and merchandise supplier connectivity; and (5) enhanced revenue opportunities. Our objective is to become the leading provider of Internet solutions to manage the sourcing and procurement of merchandise for retailers and their merchandise suppliers. Key elements of our strategy include: (1) leveraging our global presence; (2) developing our sales and marketing infrastructure; (3) focusing our sales and marketing efforts on retailers; (4) offering our merchandise suppliers a compelling price/value relationship; and (5) adopting leading edge technology and service. 3 Our company was founded in 1993 in France by Marcel van Heesewijk, our Chairman, to develop desktop software that would enable retailers to manage their preorder merchandise sourcing activities over a private network. By the end of 1994, we had successfully developed a proprietary desktop software solution that enabled retailer to transact sourcing activities over a private network. In 1997, we recognized that the Internet would become the standard for business-to-business eCommerce. We began to web-enable our proprietary software to substantially reduce the connectivity cost and enable broader distribution of our solution. During 1998, we completed this development effort and pilot tested our Internet solution with PETsMART and Promodes. Based upon the successful completion of these pilots, we believe we have successfully transitioned from a proprietary desktop software solution to a secure Internet-based communications system, and are well positioned to benefit from first-to-market advantages. To further our objectives, we recently strengthened our management team by hiring Sean Maloy as our President and Chief Executive Officer, Gary Davidson as our Chief Financial Officer, Mark Simonsen as our Chief Technology Officer and Steve Pulver as our Vice President of Sales and Services. We believe we are now poised to implement our strategic plan to achieve significant growth. We are located at 650 Castro Street, Suite 210, Mountain View, CA 94041, telephone (650) 966-1214. Our principal website is located at www.sourcinglink.net. Information contained on our website does not constitute part of this Prospectus. RISK FACTORS THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE MAKING AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY, TOGETHER WITH ALL OF THE OTHER INFORMATION SET FORTH OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. RISKS RELATED TO OUR BUSINESS WE ARE AN EARLY-STAGE COMPANY. OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS. We were founded in 1993 and have a limited operating history. Our limited operating history makes the evaluation of our future prospects difficult or impossible. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new, unproven and rapidly evolving markets. To address these risks, we must, among other things, continue to upgrade our technology, commercialize products incorporating such technology, continue to attract, retain and motivate qualified persons and respond to competitive developments. Since competition for experienced information technology personnel is intense, we cannot be certain that we will be able to attract such required personnel. There can be no assurance that we will be successful in addressing such risks. If we do not successfully address these risks, our business will be seriously harmed. The growth of our quarterly revenues is especially subject to fluctuation because it depends on the adoption of our solution by a small number of relatively large retailers , who then strongly encourage their merchandise suppliers to subscribe to our solution. As a result, the growth of our quarterly revenue may be effected if we are unable to complete one or more substantial retailer rollouts in any given quarter. Therefore, if we do not attract a sufficient number of retailers who adopt our solution in a particular quarter, our revenues in future periods could be lower than expected. 4 THE MARKET FOR OUR SOLUTION IS AT AN EARLY STAGE. WE NEED A CRITICAL MASS OF RETAILERS AND THEIR MERCHANDISE SUPPLIERS TO IMPLEMENT AND USE OUR SOLUTION. The market for Internet-based supply chain management solutions and services is at an early stage of development. Our success depends on a significant number of large retailers implementing our solution and requiring their merchandise suppliers to subscribe to our solution. The implementation of our solution by major retailers and their merchandise suppliers is controlled by multiple parties in the retail organization. In many cases, these organizations must change established business practices and conduct business in new ways. Our ability to attract additional customers for our solution will depend on leveraging our existing customers as reference accounts. As of July 31, 1999, only three retailers had adopted our solution and approximately 480 merchandise suppliers had subscribed to our Internet solution. Accordingly, our solution may not achieve significant market acceptance. Unless a critical mass of retailers and their merchandise suppliers implement our solution, our solution may not achieve widespread market acceptance and our business would be seriously harmed. WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR LOSSES IN THE FUTURE. We incurred net losses of $2.8 million in fiscal 1998 and $1.5 million in fiscal 1999. Fiscal 1999 is a nine month accounting period. As of March 31, 1999, we had an accumulated deficit of approximately $14.4 million. The report of our independent accountants accompanying our consolidated financial statements notes that our recurring operating losses raise substantial doubt about our ability to continue as a going concern, however, note 2 to our consolidated financial statements described management's plan in regard to these matters. On August 9, 1999, we completed a private offering of equity securities for $8.1 million. We expect to derive substantially all of our revenues for the foreseeable future from subscription fees for our solution, which is based on an unproven business model. Although these revenues have grown slightly in the most recent quarter, we may not be able to sustain growth in the future necessary to achieve profitability. In fact, we may not have any revenue growth, and our revenues could decline. Moreover, we expect to incur significant sales and marketing, product development, and general and administrative expenses. As a result, we expect to incur significant losses for the foreseeable future. OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT. IF WE FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS OR INVESTORS, THE MARKET PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY. Our quarterly operating results have varied significantly in the past and will likely vary significantly in the future. We believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicators of future performance. Our operating results could fall below the expectations of securities analysts or investors in some future quarter or quarters. Our failure to meet these expectations would likely adversely affect the market price of our Common Stock. Our quarterly operating results may vary depending on a number of factors, including: - Demand for our solution and services; - Actions taken by our competitors, including new product introductions and enhancements; - Delays or reductions in spending for, or the implementation of, supply chain management solutions by our potential customers as companies attempt to stabilize their computer systems prior to January 1, 2000 in order to reduce the risk of computer system problems associated with the Year 2000; - Ability to scale our network and operations infrastructure; 5 - Ability to develop, introduce and market new solutions and enhancements to our existing solution on a timely basis; - Changes in our pricing policies or those of our competitors; - Ability to expand our sales and marketing operations, including hiring additional sales personnel; - Size and timing of sales of our solution and services; - Success in maintaining and enhancing existing relationships and developing new relationships with strategic partners; - Ability to control costs; - Technological changes in our markets; - Deferrals of customer subscriptions in anticipation of new enhancements or features of our solution; - Customer budget cycles and changes in these budget cycles; and - General economic factors. We plan to increase our operating expenses substantially to expand our sales and marketing operations, fund greater levels of product development, increase general and administrative support, develop new partnerships, increase our professional services and support capabilities and improve our operational and financial systems. If our revenues do not increase along with these expenses, our business, operating results and financial condition could be seriously harmed and net losses in a given quarter could be even larger than expected. In addition, because our expense levels are relatively fixed in the near term and are based in part on expectations of our future revenues, any decline in our revenues to a level that is below our expectations would have a disproportionately adverse impact on our operating results. WE EXPECT TO DEPEND ON OUR SOLUTION FOR SUBSTANTIALLY ALL OF OUR REVENUES FOR THE FORESEEABLE FUTURE. Our solution and related services accounted for substantially all of our revenues in fiscal 1999. We anticipate that revenues from our solution and related services will continue to constitute substantially all of our revenues for the foreseeable future. Consequently, a decline in the price of, or demand for, our solution, or its failure to achieve broad market acceptance, would seriously harm our business. IMPLEMENTATION OF OUR SOLUTION BY LARGE RETAILERS IS TIME CONSUMING. WE FREQUENTLY EXPERIENCE LONG SALES AND IMPLEMENTATION CYCLES. Our supply chain management solution is an enterprise-wide solution that must be deployed with many users within a large retailer's sourcing organization. Its adoption by large retailers is characterized by long sales cycles beginning with pilot studies and concluding with retailers strongly encouraging their merchandise suppliers to subscribe to our solution. In many cases, our customers must change established business practices and conduct business in new ways. In addition, they must generally consider a wide range of other issues before committing to purchase our product, including product benefits, integration, interoperability with existing computer systems, scalability, functionality, security and reliability. As a result, we must educate potential customers on the use and benefits of our solution. It frequently takes several months to finalize a retailer commitment to adopt our solution and the commitment must often be approved by a number of management levels within the customer organization. The implementation of our solution requires a commitment of resources by our customers and third-party and professional services organizations. Delay of these commitments may adversely affect our financial results of any particular quarter. 6 WE CURRENTLY DEPEND ON IBM FOR MARKETING OF OUR SOLUTION AND FOR THE MANAGEMENT AND SECURITY OF OUR NETWORK INFRASTRUCTURE. We have an alliance with IBM for co-marketing and customer support. We are currently dependent on IBM for most of our marketing and support activities. Therefore, IBM's decisions and performance with respect to these matters have a material impact on our ability to market our solution. While we are currently negotiating new agreements to cover our relationship, and our future plans call for us to take over a substantial portion of our sales and marketing activities, we may not be able to do so effectively. IBM is under no contractual obligation to continue to market our solution. A decision by IBM to cease or reduce substantially its marketing efforts would have an immediate and material adverse effect on our financial condition and results of operations. There can be no assurance that, in such an event, we would succeed in alternative sales methods. In addition, we depend on IBM Global Network, or IGN, for certain services relating to our infrastructure, including maintenance of communications lines and management of network data centers. IGN may terminate its performance of these services for us at any time. If IGN were to terminate these services, we would have to obtain them from another service provider or perform them ourselves. There can be no assurance that we would be able to obtain or perform these services on a timely or cost-effective basis. If we were able to obtain such services from a third party, we would be entirely dependent on them to manage and maintain our network infrastructure and to provide security for it. WE FACE INTENSE COMPETITION. IF WE ARE UNABLE TO COMPETE SUCCESSFULLY, OUR BUSINESS WILL BE SERIOUSLY HARMED. The market for business-to-business eCommerce solutions in general, and supply chain management solutions in particular, is extremely competitive, evolving and characterized by continuous rapid development of technology. Competition to capture business users is intense and is expected to increase dramatically in the future, which will likely result in price reductions, reduced profit margins and a decrease in our market share, which could have a serious adverse impact on our business. Indirect competitors are traditional VAN solution providers that have extended their VAN connections over the Internet and new Internet companies that are focused on trading exchanges that allow merchandise buyers and sellers to access each other on channels within existing portals. Companies which offer EDI over VANs include General Electric Information Services, Sterling Commerce, Harbinger Corporation, QRS Inc. and IBM. Companies which offer exchange solutions include VerticalNet, Wiznet (E.C. Portal), Commerce One, Netscape, Ariba.com and Cyber Merchants Exchange, Inc. Some of these companies have longer operating histories, significantly greater financial, technical, marketing and other resources than us, significantly greater name recognition and a larger installed base of customers. In addition, many of our competitors have well-established relationships with our current and potential customers and have extensive knowledge of our industry. One or more of these companies may develop and add preorder merchandise sourcing capabilities to their existing product offerings, giving them a more comprehensive solution than our solution, which could adversely affect our business. We expect that additional established and emerging companies will seek to enter our market as it continues to develop and expand. We may not be able to compete successfully against future competitors, especially those with significantly greater financial, marketing, service, support, technical and other resources. WE DEPEND ON THE INTRODUCTION OF NEW VERSIONS OF OUR PROPRIETARY SOLUTION AND ON ENHANCING THE FUNCTIONALITY AND SERVICES OFFERED BY OUR SOLUTION. If we are unable to develop new software or enhancements to our existing solution on a timely and cost-effective basis, or if new software or enhancements do not achieve market acceptance, our business 7 would be seriously harmed. The life cycle of our solution is difficult to predict because the market for our solution is new and emerging, and is characterized by rapid technological change, changing customer needs and evolving industry standards. The introduction of services employing new technologies and emerging industry standards could render our existing solution obsolete and unmarketable. To be successful, our solution must keep pace with technological developments and emerging industry standards, address the ever-changing and increasingly sophisticated needs of our customers and achieve market acceptance. In developing new features of our solution, we may: - Fail to develop and market features that respond to technological changes or evolving industry standards in a timely or cost-effective manner; - Encounter products, capabilities or technologies developed by others that render our solution obsolete or noncompetitive or that shorten the life cycles of our existing solution; - Experience difficulties that could delay or prevent the successful development, introduction and marketing of these new features; or - Fail to develop new features that adequately meet the requirements of the marketplace or achieve market acceptance. OUR SOFTWARE MAY CONTAIN ERRORS OR DEFECTS. Our software is complex and, accordingly, may contain undetected errors or failures when first introduced. This may result in loss of, or delay in, market acceptance of our solution. We have in the past discovered programming errors in our new releases after their introduction. We have experienced delays in release and customer frustration during the period required to correct these errors. We may discover errors in the future, including Year 2000 errors and additional scalability limitations, in new versions after release. WE DEPEND ON OUR KEY PERSONNEL. Our future performance depends on the continued service of our senior management, product development and sales personnel, in particular Marcel van Heesewijk, our Chairman, and Sean Maloy, our President and Chief Executive Officer. The loss of the services of one or more of our key personnel could seriously harm our business. Our future success also depends on our continuing ability to attract, hire, train and retain a substantial number of highly skilled managerial, technical, sales, marketing and customer support personnel. We are particularly dependent on hiring additional personnel to increase our direct sales and product development organizations. In addition, new hires frequently require extensive training before they achieve desired levels of productivity. Competition for qualified personnel is intense, and we may fail to retain our key employees or to attract or retain other highly qualified personnel. PROTECTION OF OUR INTELLECTUAL PROPERTY MAY NOT BE ADEQUATE. We depend on our ability to develop and maintain the proprietary aspects of our solution. To protect our proprietary technology, we rely primarily on a combination of contractual provisions, confidentiality procedures, trade secrets, and patent, copyright and trademark laws. We do not sell our software and we require our customers to enter into user agreements, which impose restrictions on their ability to utilize the software. In addition, we seek to avoid disclosure of our trade secrets, including but not limited to, requiring those persons with access to our proprietary information to execute confidentiality agreements with us and restricting access to our source code. We 8 seek to protect our software, documentation and other written materials under trade secret and copyright laws, which afford only limited protection. We cannot assure you that any of our proprietary rights with respect to our solution will be viable or of value in the future because the validity, enforceability and type of protection of proprietary rights in Internet-related industries are uncertain and still evolving. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our solution or obtain and use information that we regard as proprietary. Policing unauthorized use of our solution is difficult, and while we are unable to determine the extent to which unauthorized use exists, it can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop similar technology, duplicate our solution or our other intellectual property. There has been a substantial amount of litigation in the Internet industry regarding intellectual property rights. It is possible that in the future, third parties may claim that we or our current or potential future solutions infringe their intellectual property. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause delays in the introduction of new versions or features or require us to enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously harm our business. We must now, and may in the future have to, license or otherwise obtain access to intellectual property of third parties. For example, we are currently dependent on licenses of IBM's Lotus Domino software for our solution, and may in the future be dependent on developers' licenses from enterprise resource planning, database and other system software merchandise suppliers in order to ensure compliance of our solution with their systems. We may not be able to obtain any required third party intellectual property in the future. IN ORDER TO MANAGE OUR GROWTH AND EXPANSION, WE WILL NEED TO IMPROVE AND IMPLEMENT NEW SYSTEMS, PROCEDURES AND CONTROLS. We currently plan to hire a significant number of employees and to expand the geographic scope of our customer base and operations. This expansion will result in substantial demands on our management resources. Our ability to compete effectively and to manage future expansion of our operations, if any, will require us to continue to improve our financial and management controls, reporting systems and procedures on a timely basis, and expand, train and manage our employee work force. We may encounter difficulties in transitioning to new management information software systems and our personnel, systems, procedures and controls may be inadequate to support our future operations. OUR BUSINESS IS SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. We market our solution to retailers worldwide, and historically have derived a significant portion of our revenues from international sales. As such, we are subject to a number of risks associated with international business activities. These risks generally include: - Seasonal fluctuations in purchasing patterns; - Unexpected changes in regulatory requirements; - Tariffs, export controls and other trade barriers; - Longer accounts receivable payment cycles and difficulties in collecting accounts receivable; 9 - Difficulties in managing and staffing international operations; - Potentially adverse tax consequences, including restrictions on the repatriation of earnings; - The burdens of complying with a wide variety of foreign laws; - The risks related to global economic turbulence and adverse economic circumstances; - Political instability; and - Currency exchange rate fluctuations. OUR BUSINESS COULD BE AFFECTED BY YEAR 2000 ISSUES. The risks posed by Year 2000 issues could adversely affect our business in a number of significant ways. Although we believe that our internally developed systems and technology are Year 2000 compliant, our information technology systems nevertheless could be substantially impaired or cease to operate due to Year 2000 problems. Additionally, we rely on information technology supplied by third parties, and our participating sellers also are heavily dependent on information technology systems and on their own third-party merchandise supplier systems. Year 2000 problems experienced by us or any of these third parties could materially adversely affect our business. Additionally, the Internet could face serious disruptions arising from the Year 2000 problem. Many of our customers and potential customers have implemented policies that prohibit or strongly discourage making changes or additions to their internal computer systems until after January 1, 2000. We will experience lower net revenues if potential customers who might otherwise subscribe to our solution delay such subscriptions until after January 1, 2000 due to the risk of Year 2000 issues. If our potential customers delay subscribing to our solution in anticipation of the Year 2000 problem, our business would be seriously harmed. We cannot guarantee that any of our participating retailers or merchandise suppliers will be Year 2000 compliant in a timely manner, or that there will not be significant interoperability problems among information technology systems. We also cannot guarantee that retailers and merchandise suppliers will be able to use our solution without serious disruptions arising from the Year 2000 problem. Given the pervasive nature of the Year 2000 problem, we cannot guarantee that disruptions in other industries and market segments will not adversely affect our business. Moreover, the costs related to Year 2000 compliance, which thus far have not been material, could ultimately be significant. In the event that we experience disruptions as a result of the Year 2000 problem, our business could be seriously harmed. OUR BUSINESS COULD BE AFFECTED AS A RESULT OF ANY FUTURE ACQUISITIONS. In order to remain competitive, we may find it necessary to acquire additional businesses, products or technologies. If we identify an appropriate acquisition candidate, we may not be able to negotiate the terms of the acquisition successfully, finance the acquisition, or integrate the acquired business, products or technologies into our existing business and operations. Further, completing a potential acquisition and integrating an acquired business will cause significant diversions of management time and resources. If we consummate one or more significant acquisitions in which the consideration consists of stock or other securities, your equity could be significantly diluted. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash, including proceeds of this Offering, to consummate any acquisition. Acquisition financing may not be available on favorable terms, or at all. In addition, we may be required to amortize significant amounts of goodwill and other intangible assets in connection with future acquisitions, which would seriously harm our business. 10 RISKS RELATED TO THE INTERNET INDUSTRY WE DEPEND ON INCREASING USE OF THE INTERNET AND ON THE GROWTH OF ECOMMERCE. IF THE USE OF THE INTERNET AND ECOMMERCE DO NOT GROW AS ANTICIPATED, OUR BUSINESS WILL BE SERIOUSLY HARMED. Our success depends on the increased acceptance and use of the Internet as a medium of commerce on a global basis. Rapid growth in the use of the Internet is a recent phenomenon. As a result, acceptance and use may not continue to develop at historical rates and a sufficiently broad base of business customers may not adopt or continue to use the Internet as a medium of commerce. Demand and market acceptance for recently introduced services and products over the Internet are subject to a high level of uncertainty, and there exist few proven services and products. Our business would be seriously harmed if: - Use of the Internet, the web and other online services does not continue to increase or increases more slowly than expected; - The infrastructure for the Internet, the web and other online services does not effectively support expansion that may occur; or - The Internet, the web and other online services do not create a viable commercial marketplace, inhibiting the development of eCommerce and reducing the need for our solution. CAPACITY CONSTRAINTS MAY RESTRICT THE USE OF THE INTERNET AS A COMMERCIAL MARKETPLACE. The Internet may not be accepted as a viable long-term commercial marketplace for a number of reasons. These include: - Potentially inadequate development of the necessary communication and network infrastructure; - Delayed development of enabling technologies and performance improvements; - Delays in the development or adoption of new standards and protocols; and - Increased governmental regulation. SECURITY RISKS AND CONCERNS MAY DETER THE USE OF THE INTERNET FOR CONDUCTING ECOMMERCE. A significant barrier to eCommerce and communications is the secure transmission of confidential information over public networks. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could result in compromises or breaches of our security systems or those of other web sites to protect proprietary information. If any well-publicized compromises of security were to occur, it could have the effect of substantially reducing the use of the web for commerce and communications. Anyone who circumvents our security measures could misappropriate proprietary information or cause interruptions in our services or operations. The Internet is a public network, and data is sent over this network from many sources. In the past, computer viruses, software programs that disable or impair computers, have been distributed and have rapidly spread over the Internet. Computer viruses could be introduced into our systems or those of our customers or merchandise suppliers, which could disrupt our network or make it inaccessible to customers or merchandise suppliers. We may be required to expend significant capital and other resources to protect against the threat of security breaches or to alleviate problems caused by breaches. To the extent that our activities may involve the storage and transmission of proprietary information, such as credit card numbers, security breaches could expose us to a risk of loss or litigation and possible liability. Our security measures may be inadequate to prevent security breaches, and our business would be harmed if we do not prevent them. 11 OUR SOFTWARE SOLUTION MAY EXPERIENCE DELAYS AS A RESULT OF HIGH VOLUMES OF TRAFFIC. Our solution is currently operating on a limited basis. Our software may not be fully scalable, if the volume of traffic on the website for our solution significantly increases, our solution may experience slower response times or other problems. In addition, users will depend on Internet Service Providers, telecommunications companies and the efficient operation of their computer networks and other computer equipment for access to our solution. Each of these has experienced significant outages in the past and could experience outages, delays and other difficulties due to system failures unrelated to our systems. Any delays in response time or performance problems could cause users of our solution to perceive this service as not functioning properly and therefore cause them to use other methods to manage their sourcing and procurement activities. Even if the Internet infrastructure is adequately developed and maintained, we may incur substantial expenditures in order to adapt our solution to changing Internet technologies. Such additional expenses could severely harm our financial results. INCREASING GOVERNMENT REGULATION COULD LIMIT THE MARKET FOR, OR IMPOSE SALES AND OTHER TAXES ON THE SALE OF OUR SOLUTION AND SERVICES. As eCommerce evolves, we expect that federal, state or foreign agencies will adopt regulations covering issues such as user privacy, pricing, content and quality of products and services. It is possible that legislation could expose companies involved in eCommerce to liability, which could limit the growth of eCommerce generally. Legislation could dampen the growth in Internet usage and decrease its acceptance as a communications and commercial medium. If enacted, these laws, rules or regulations could limit the market for our solution and services. We do not collect sales or other similar taxes in respect of registration and subscription fees for the use of our solution. However, one or more states or countries may seek to impose use tax on companies like us. Legislation limiting the ability of the states to impose taxes on Internet-based transactions has been adopted by the U.S. Congress. This legislation could contain a limited time period in which this tax moratorium will apply. In the event that the tax moratorium is imposed for a limited time period, legislation could be renewed at the end of this period. Failure to enact or renew this legislation could allow various states to impose taxes on eCommerce, and the imposition of these taxes could seriously harm our business. OTHER RISKS OUR STOCK PRICE MAY BE VOLATILE. An active public market for our Common Stock may not develop or be sustained. The market price of the Common Stock may fluctuate significantly in response to the following factors, some of which are beyond our control: - Variations in our quarterly operating results; - Changes in securities analysts' estimates of our financial performance; - Changes in market valuations of similar companies; - Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; - Loss of a major customer or strategic partner; - Additions or departures of key personnel; and - Fluctuations in stock market price and volume, which are particularly common among highly volatile securities of software and Internet-based companies. 12 WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED STOCK PRICE VOLATILITY. In the past, securities class action litigation has often been brought against a company following periods of volatility in the market price of its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and divert management's attention and resources. OUR STOCK PRICE COULD BE AFFECTED BY SHARES BECOMING AVAILABLE FOR SALE. Sales of a substantial number of shares of Common Stock in the public market could depress the market price of the Common Stock and could impair our ability to raise capital through the sale of additional equity securities. WE HAVE IMPLEMENTED CERTAIN ANTI-TAKEOVER PROVISIONS. Provisions of our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS CONTROL THE COMPANY. Our executive officers, directors and principal stockholders beneficially own, in the aggregate, approximately 36% of our outstanding voting stock. As a result, these stockholders will be able to exercise substantial control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could have the effect of delaying or preventing a change of control of SourcingLink.net. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS. Some of the statements under "Company," "Risk Factors," and elsewhere in this Prospectus constitute forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform these statements to actual results. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" the information we file with the SEC, which means that we can disclose important information to you by referring to those documents. We incorporate by reference the documents listed below and any additional documents filed by us with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering of securities is terminated. The information we incorporate by reference is part of this prospectus, and any later information we file with the SEC will automatically update and supercede this information. 13 The documents we incorporate by reference are: 1. Our Transition Report on Form 10-KSB for the transition period from July 1, 1998 to March 31, 1999; 2. Our Quarterly Report on Form 10-QSB for the quarter ended June 30, 1999; 3. Our Proxy Statement, dated June 18, 1999; 4. The description of our capital stock contained in our registration statement on Form 8-A; 5. Our Current Report on Form 8-K, filed with the Commission on June 28, 1999; 6. Our Current Report on Form 8-K, filed with the Commission on July 30, 1999; 7. All other reports filed by us pursuant to Section 13(a) or 15(d) of the Exchange Act since March 31, 1999. You may request a copy of these filings, at no cost, by writing or calling us at SourcingLink.net, Inc., Attention: Gary Davidson, 650 Castro Street, Suite 210, Mountain View, California 94041, telephone number (650) 966-1214. MATERIAL CHANGES RECENT STOCKHOLDERS MEETING Our stockholders recently approved all of the following items at our 1999 Annual Meeting of the Stockholders on July 20, 1999: (1) election of five nominees to serve as directors until the next annual meeting of stockholders or until their successors are elected and have qualified; (2) ratification of the adoption of our 1999 Stock Option Plan which authorizes the grant of options to purchase up to 1,000,000 shares of common stock; (3) ratification of the adoption of our Employee Stock Purchase Plan which authorizes the sale of up to 500,000 shares of common stock; (4) amendment and restatement of our Certificate of Incorporation which effected changes to our Certificate of Incorporation by: (a) changing our name to SourcingLink.net, Inc., (b) increasing the number of authorized shares of common stock to 60,000,000 shares, (c) increasing the number of authorized shares of preferred stock to 15,000,000 shares, which provides for 10,000,000 shares of blank check preferred stock, and (d) providing for other technical and clarifying amendments; and (5) approval of a Certificate of Amendment which has since been filed effecting a 1-for-4 reverse stock split. COMPLETION OF ISSUANCE OF COMMON STOCK On August 9, 1999, we completed a private offering of 5,031,875 shares of our common stock, (1,257,971 shares on a split-adjusted basis) at an offering price per share of $1.60 ($6.40 on a split-adjusted basis). Gross proceeds from the offering were $8,051,000 and net proceeds were $7,300,000. In connection with the offering, we issued 201,275 warrants to purchase common stock (50,319 warrants on a split-adjusted basis) at $1.60 per share ($6.40 on a split-adjusted basis) to our Placement Agent, Needham & Company, Inc. LISTING ON NASDAQ NATIONAL MARKET We have recently applied for listing on Nasdaq's National Market under the trading symbol SNET. USE OF PROCEEDS The proceeds from the sale of each selling stockholder's common stock will belong to the selling stockholders. We will not receive any proceeds from those sales. 14 SELLING STOCKHOLDERS We issued 5,031,875 shares of common stock to the selling stockholders on August 9, 1999, in a private offering. We effected a 1-for-4 reverse stock split on August 26, 1999 and therefore the shares sold in our private offering are now equal to 1,257,971 shares of common stock. In connection with the private offering, we agreed to file this registration statement with the SEC to register substantially all the shares purchased by the selling stockholders for resale by them, and to keep the registration statement effective until August 9, 2000. The following table sets forth the following information as of August 9, 1999: - names of the selling stockholders; - number of shares of common stock beneficially owned by each selling stockholder; - number of shares each selling stockholder may offer to sell; and - number of shares of common stock beneficially owned by each selling stockholder upon completion of this offering, assuming all of the offered shares are sold. Other than as set forth in the footnotes to the table below, none of the selling stockholders has, or during the past three years has had, any position, office or other material relationship with us or any of our predecessors or affiliates. As of August 9, 1999, we had 28,139,837 shares of common stock outstanding. For purposes of computing the number and percentage of shares beneficially owned by each selling stockholder as of August 9, 1999, only shares which such stockholder has the right to acquire on or before October 8, 1999 are deemed outstanding, but are not deemed outstanding for the purpose of computing the percentage ownership of any other selling stockholder.
SHARES OWNED AFTER OFFERING SHARES PRIOR SHARES ------------------------ NAME TO OFFERING OFFERED NUMBER PERCENT - ------------------------------------------------------------------- ------------ ---------- --------- ------------- Seligman New Technologies Fund, Inc. .............................. 421,875 421,875 0 0 c/o J&W Seligman Co. 100 Park Avenue New York, New York 10017 Seligman Investment Opportunities (Master) ........................ 46,875 46,875 0 0 Fund-NTV Portfolio c/o J&W Seligman Co. 100 Park Avenue New York, New York 10017 Wallington Investments Ltd.(1) .................................... 239,584 156,250 83,334 * c/o Nomina Financial Services, Ltd. Waldmanstrasse 8 P.O. Box 319 CH-8024 Zurich Switzerland Oakwood Holdings Ltd.(2) .......................................... 240,134 156,250 83,884 * c/o Nomina Financial Services, Ltd. Waldmanstrasse 8 P.O. Box 319 CH-8024 Zurich Switzerland
15
SHARES OWNED AFTER OFFERING SHARES PRIOR SHARES ------------------------ NAME TO OFFERING OFFERED NUMBER PERCENT - ------------------------------------------------------------------- ------------ ---------- --------- ------------- Manasa Corporation ................................................ 46,875 46,875 0 0 c/o V. & J. Saad P.O. Box 165726 Achrafieh, Beirut, Lebanon UT Technology Partners LDC ........................................ 62,500 62,500 0 0 c/o Unterberg Tobin Capital 10 East 50th Street New York, New York 10022 UT Capital Partners International LDC ............................. 15,625 15,625 0 0 c/o Unterberg Tobin Capital 10 East 50th Street New York, New York 10022 Cazenove Nominees Limited(3) ...................................... 62,500 37,500 25,000 * 12 Tokenhouse Yard London EC2R 7AN England Arnhold and S. Bleichroeder, Inc. ................................. 156,250 156,250 0 0 1345 Avenue of the Americas New York, New York 10105 Needham & Company, Inc.(4) ........................................ 104,438 104,438 0 0 445 Park Avenue New York, New York 10022 Needham Emerging Growth Partners, L.P.(5) ......................... 39,063 39,063 0 0 445 Park Avenue New York, New York 10022 Lord Gavron ....................................................... 6,563 6,563 0 0 c/o Mercury Asset Management Ltd. 33 King William Street London EC4R 9AS England Totals:.......................................................... 1,250,064 1,250,064 192,218 *
- ------------------------ * Less than 1% (1) Represents 83,334 shares owned prior to the August 9, 1999 private offering. The 83,334 shares are not being registered. (2) Represents 83,884 shares owned prior to the August 9, 1999 private offering. The 83,884 shares are not being registered. (3) Represents 25,000 shares owned prior to the August 9, 1999 private offering. The 25,000 shares are not being registered. (4) Needham & Company, Inc. served as our placement agent for our recent private offering of common stock and continues to serve as our placement agent for the issuance of additional shares. (5) Needham Emerging Growth Partners, L.P. is an affiliate of Needham & Company, Inc. - ------------------------ 16 PLAN OF DISTRIBUTION All or a portion of the common stock offered by this prospectus may be offered for sale from time to time on the Nasdaq National Market or on one or more exchanges, or otherwise at prices and terms then obtainable, or in negotiated transactions. The distribution of these securities may be effected in one or more transactions that may take place on the over-the-counter market, including, among others, ordinary brokerage transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling stockholders. We will not receive any part of the proceeds from the sale of common stock. The selling stockholders and intermediaries through whom such securities are sold may be deemed "underwriters" within the meaning of the Securities Act, in which event commissions received by such intermediary may be deemed to be underwriting commissions under the Securities Act. We will pay all expenses of the registration of securities covered by this prospectus. The selling stockholders will pay any applicable underwriters' commissions and expenses, brokerage fees or transfer taxes. LEGAL MATTERS The validity of the shares of common stock offered by the prospectus will be passed by Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California. EXPERTS The consolidated financial statements incorporated in this prospectus by reference to the Transition Report on Form 10-KSB for the transition period ended as of March 31, 1999, have been incorporated in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting, which report includes an explanatory paragraph appearing therein. INDEMNIFICATION OF DIRECTORS AND OFFICERS Our Certificate of Incorporation provides that to the fullest extent permitted by Delaware law, a director will not be liable for monetary damages for breach of the director's fiduciary duty of care to SourcingLink.net and our stockholders. This provision in the Certificate of Incorporation does not eliminate a director's fiduciary duty of care, and, in appropriate circumstances, equitable remedies such as an injunction or other forms of non-monetary relief would remain available under Delaware law. Each director will continue to be subject to liability for (i) breach of the director's duty of loyalty to SourcingLink.net or our stockholders for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, (ii) acts or omissions that the director believes to be contrary to the best interests of SourcingLink.net or our stockholders, (iii) any transaction from which the director derives an improper personal benefit, (iv) acts or omissions involving reckless disregard for the director's duty to SourcingLink.net or our stockholders when the director was aware or should have been aware of the risk of serious injury to SourcingLink.net or our stockholders, (v) acts or omissions that constitute an unexpected pattern of inattention that amounts to an abdication of the director's duty to SourcingLink.net or our stockholders, (vi) improper transactions between a director and SourcingLink.net, and (vii) improper distributions and loans to directors and officers. This provision does not affect a director's responsibilities under any laws, such as the federal securities laws or state or federal environmental laws. In addition, our Bylaws provide that we will indemnify our directors and executive officers and may indemnify our other officers, employees and other agents to the fullest extent permitted by Delaware law. We are also empowered under our Bylaws to enter into indemnification contracts with 17 our directors and officers and to purchase insurance on behalf of any person whom we are required or permitted to indemnify. We have entered into agreements with our directors and executive officers, which requires us to indemnify them to the fullest extent permitted by law against certain losses they may incur in legal proceedings arising in connection with their services to SourcingLink.net. Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling SourcingLink.net pursuant to the foregoing provisions or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. 18 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1,250,064 SHARES [LOGO] SOURCINGLINK.NET, INC. COMMON STOCK --------------------- PROSPECTUS --------------------- _________ __, 1999 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following sets forth the costs and expenses payable by us, in connection with the offering of the shares of Common Stock pursuant to this registration statement:
Securities and Exchange Commission Fee............................................. $ 2,606 Accounting Fees and Expenses....................................................... $ 1,200* Legal Fees and Expenses............................................................ $ 10,000* Miscellaneous Expenses............................................................. $ 2,100* --------- Total............................................................................ $ 15,906 --------- ---------
- ------------------------ * Estimated ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS (a) As permitted by Delaware law, our certificate of incorporation eliminates the liability of directors to us or our stockholders for monetary damages for breach of fiduciary duty as directors, except to the extent otherwise required by Delaware law. (b) Our certificate of incorporation provides that we will indemnify each person who was or is made a party to any proceeding by reason of the fact that such person is or was a director or officer of the company against all expense, liability and loss reasonably incurred or suffered by such person in connection therewith to the fullest extent authorized by Delaware law. Our bylaws provide for a similar indemnity to our directors and officers to the fullest extent authorized by Delaware law. (c) Our certificate of incorporation also gives us the ability to enter into indemnification agreements with each of our directors and officers. We have entered into indemnification agreements with certain of our directors and officers, which provide for the indemnification of our directors or officers against any and all expenses, judgments, fines, penalties and amounts paid in settlement, to the fullest extent permitted by law. ITEM 16. EXHIBITS
4.1 Form of Stock Purchase Agreement dated as of August 6, 1999 among SourcingLink.net, Inc., and those certain stockholders all of whom are the Selling Stockholders hereto. 5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation. 23.1 Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation (included in Exhibit 5). 23.2 Consent of PricewaterhouseCoopers LLP 24 Power of Attorney (included on the signature page to the Registration Statement--see pages II-4 and II-5).
ITEM 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; II-1 (ii) reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) include any additional or changed material information on the plan of distribution. (2) That, for the purpose of determining any liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newport Beach, State of California, on the 13th day of September 1999. SOURCINGLINK.NET, INC. By: /s/ SEAN M. MALOY ----------------------------------------- Sean M. Maloy, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR
POWER OF ATTORNEY We, the undersigned directors and officers of SourcingLink.net, Inc. do hereby constitute and appoint Sean Maloy our true and lawful attorney and agent, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney and agent may deem necessary or advisable to enable said corporation to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission in connection with this Registration Statement, including specifically, but without limitation, power and authority to sign for us or any of us in our names and in the capacities indicated below, any and all amendments (including post-effective amendments) hereto or any related registration statement that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended; and we do hereby ratify and confirm all that the said attorney and agent shall do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- Chief Executive Officer, /s/ SEAN M. MALOY President and Director - ------------------------------ (Principal Executive September 13, 1999 Sean M. Maloy Officer) /s/ MARCEL VAN HEESEWIJK - ------------------------------ Chairman of the Board, September 13, 1999 Marcel Van Heesewijk Secretary and Director Vice President--Finance /s/ GARY DAVIDSON and Chief Financial - ------------------------------ Officer (Principal September 13, 1999 Gary Davidson Financial Officer)
II-3
SIGNATURE TITLE DATE - ------------------------------ -------------------------- ------------------- /s/ LOUIS DELMONICO - ------------------------------ Director September 13, 1999 Louis Delmonico - ------------------------------ Director September , 1999 Johan Vunderink /s/ MATTHEUS WEGBRANS - ------------------------------ Director September 13, 1999 Mattheus Wegbrans
II-4 EXHIBIT INDEX
EXHIBIT SEQUENTIAL PAGE NUMBER DESCRIPTION NUMBER - ----------- -------------------------------------------------------------------------------------------- --------------- 4.1 Form of Stock Purchase Agreement dated as of August 6, 1999 among SourcingLink.net, Inc., and those certain stockholders all of whom are the Selling Stockholders hereto. 26 5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation. 47 23.1 Consent of Stradling Yocca Carlson & Rauth, a Professional Corporation (included in Exhibit 5). 23.2 Consent of PricewaterhouseCoopers LLP 48 24 Power of Attorney (included on the signature page to the Registration Statement-- see pages II-4 and II-5).
EX-4.1 2 EXHIBIT 4.1 SOURCINGLINK.NET, INC. STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 9th day of August, 1999, by and between SourcingLink.net, Inc., a Delaware corporation (the "Company"), and ("Investor"), with reference to the following facts: A. This Agreement is one of a number of stock purchase agreements (the "Purchase Agreements") pursuant to which certain investors, including Investor (collectively, the "Investors") are purchasing, in the aggregate, 1,687,500 shares of the Company's Common Stock, $.001 par value (the "Common Stock"), as more particularly set forth on EXHIBIT A hereto (the "Financing"). B. The Company and Investor wish to enter into this Agreement to set forth the terms of Investor's purchase of Common Stock from the Company pursuant to the Financing. NOW THEREFORE, BE IT RESOLVED, that the parties hereto, intending to be legally bound, hereby agree as follows: 1. PURCHASE AND SALE OF COMMON STOCK. 1.1 SALE AND ISSUANCE OF COMMON STOCK. Subject to the terms and conditions of this Agreement, Investor agrees to purchase, and the Company agrees to sell and issue to Investor at the Closing (as defined in Section 1.2(a) below), shares of the Company's Common Stock for the purchase price of $1.60 per share. The shares of Common Stock issued to Investor pursuant to this Agreement shall hereinafter be referred to as the "Shares." 1.2 CLOSING. (a) Subject to the satisfaction or waiver of the conditions set forth in Sections 4 and 5 hereof, the purchase and sale of the Shares shall take place at the offices of Stradling Yocca Carlson & Rauth, a Professional Corporation, 660 Newport Center Drive, Suite 1600, Newport Beach, California, at 10:00 a.m., on August 9, 1999, or at such other time and place as the Company and Investor mutually agree upon, either orally or in writing (which time and place are designated as the "Closing"). (b) Subject to the terms of this Agreement, at the Closing, the Company shall deliver to Investor a certificate representing the Shares against payment of the purchase price therefor by wire transfer of funds pursuant to the wire transfer instructions attached hereto as EXHIBIT B. 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to Investor as follows: 2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority: (i) to own and operate its properties and -1- assets; (ii) carry on its business as now conducted and as presently proposed to be conducted; execute and deliver this Agreement and (iii) issue and sell the Shares and to carry out the provisions of this Agreement. The Company is duly qualified and authorized to transact business and is in good standing as a foreign corporation in each jurisdiction where the nature of its activities and of its properties makes such qualification necessary, except where failure to so qualify would not have a material adverse effect upon the Company. 2.2 CAPITALIZATION. The authorized capital stock of the Company consists of 60,000,000 shares of Common Stock, $.001 par value, and 15,000,000 shares of Preferred Stock, $.001 par value, of which 5,000,000 are designated as Series A Preferred Stock. Immediately prior to the Closing, there will be issued and outstanding 23,010,874 shares of Common Stock and 3,330,586 shares of Series A Preferred Stock. Immediately following the Closing all issued and outstanding shares of the Company's capital stock (a) will have been duly authorized, validly issued, fully paid and non-assessable and (b) will have been issued in compliance in all material respects with federal and state securities laws. The Company has reserved 3,330,586 shares of Common Stock for issuance upon the conversion of the Series A Preferred Stock, and has reserved an aggregate of 5,700,000 shares for issuance pursuant to the Company's 1999 Stock Incentive Plan, 1997 Stock Option Plan and 1995 Stock Option Plan, of which 3,763,000 shares are subject to currently outstanding options. The Company has also reserved 500,000 shares of Common Stock for issuance pursuant to the Company's 1999 Employee Stock Purchase Plan, none of which have been issued. The Company also has warrants to purchase 3,378,641 shares of Common Stock outstanding as of the date hereof. The Company intends to effect a one-for-four reverse stock split shortly after the Closing. Except as described in this Section 2.2, in the SEC Filings (as defined in Section 2.28 below) or in the Private Placement Memorandum, there are no outstanding options, warrants, rights (including conversion or preemptive rights and rights of first refusal or similar rights) or agreements, orally or in writing, for the purchase or acquisition from the Company of any shares of its capital stock. Except as disclosed in the SEC Filings or in the Private Placement Memorandum, the Company is not a party or subject to any agreement or understanding, and to the Company's knowledge there is no agreement or understanding between any person and/or entities, which affects or relates to the voting or giving of written consents with respect to any security or by a director of the Company. The Company has no obligation, contingent or otherwise, to redeem or repurchase any equity securities or any security that is a combination of debt and equity (collectively, "EQUITY SECURITIES"). 2.3 AUTHORIZATION. All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the performance of the Company's obligations hereunder and the authorization, issuance, sale and delivery of the Shares has been taken or will be taken prior to the Closing. This Agreement when executed and delivered by the Company, shall constitute a valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, or (iii) to the extent the indemnification provisions in Section 6.4 below may be limited by applicable federal or state securities law. -2- 2.4 SUBSIDIARIES. Except for the Company's wholly-owned subsidiary, QCS Development Company, S.A., the Company does not currently own or control, directly or indirectly, any interest in any other corporation, association, or other business entity. 2.5 VALID ISSUANCE OF THE SHARES; COMPLIANCE WITH SECURITIES LAWS. The sale of the Shares is not subject to any preemptive right or rights of first refusal that have not been waived and, when issued, sold and delivered in compliance with the provisions of this Agreement and the Certificate of Incorporation, the Shares will be duly and validly issued, fully paid and nonassessable and will be free of any liens, encumbrances, and restrictions on transfer other than restrictions on transfer under this Agreement and applicable state and federal securities laws. Assuming the accuracy of the representations and warranties of the Investors set forth in this Agreement and the other Purchase Agreements, the offer, sale and issuance of the Shares as contemplated by this Agreement are exempt from the registration requirements of the Securities Act, and have been registered or qualified (or are exempt from registration or qualification) under the registration, permit, or qualification requirements under all applicable state securities laws. 2.6 GOVERNMENTAL CONSENTS. All consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with, any federal, state or local governmental authority, required on the part of the Company in connection with the valid execution and delivery of this Agreement, the offer, sale or issuance of the Shares, or the consummation of any other transaction contemplated hereby have been obtained, or will be effective at the Closing, except for notices required or permitted to be filed with certain state and federal securities commissions after the Closing, which notices will be filed on a timely basis. 2.7 LITIGATION. There is no action, suit, proceeding or investigation pending or, to the Company's knowledge, currently threatened against the Company or any of its subsidiaries that questions the validity of this Agreement or the right of the Company to enter into it, or to consummate the transactions contemplated hereby, or that might result, either individually or in the aggregate, in any material adverse changes in the assets, condition or affairs of the Company, financially or otherwise, or any change in the current equity ownership of the Company, nor is the Company aware that there is any basis for the foregoing. The foregoing includes, without limitation, actions pending or to the Company's knowledge threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company's employees, their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers. Neither the Company nor any of its subsidiaries is a party or subject to the provisions of any order, writ, injunction, judgment or decree of any court or government agency or instrumentality. There is no action, suit, proceeding or investigation by the Company or any of its subsidiaries currently pending or which the Company or any of its subsidiaries intends to initiate. 2.8 INTELLECTUAL PROPERTY. The Company owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and proprietary rights and processes necessary for its business without any conflict with, or infringement of, the rights of others. The Company has not granted any options, licenses or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes used in its business, except limited licenses to IBM and its customers pursuant to its agreements with such persons. The Company has not received any communications alleging that the Company has violated or, by conducting its -3- business, would violate any of the patents, trademarks, service marks, trade names, copyrights, trade secrets or other proprietary rights or processes of any other person or entity. The Company is not aware that any of its employees is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interest of the Company or that would conflict with the Company's business. To the Company's knowledge, neither the execution or delivery of this Agreement, nor, the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as proposed, will conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant or instrument under which any such employee is now obligated. The Company does not believe it is or will be necessary to use any inventions of any of its employees (or persons it currently intends to hire) made prior to their employment by the Company. 2.9 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation or default of any provisions of its Certificate of Incorporation, Bylaws or of any instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound or, to its knowledge, of any provision of federal or state statute, rule or regulation applicable to the Company. The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby or thereby will not (i) result in any such violation or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision, instrument, judgment, order, writ, decree or contract or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or (ii) require the Company to obtain any consent, approval or action of, make any filing with, or give any notice to any person as a result or under the terms of, or relieve any third party of any obligation to the Company under any such provision, instrument, judgment, order, writ, decree or contract, other than the waiver of certain rights of first refusal and registration rights by the holders of the Company's Series A Preferred Stock, which have been or will be obtained prior to the Closing. The Company has avoided every condition, and has not performed any act, the occurrence of which would result in the Company's loss of any material right granted under any license, distribution agreement or other agreement. 2.10 AGREEMENTS; ACTION. (a) Except as disclosed in the SEC Filings or in the Private Placement Memorandum, there are no (i) agreements, understandings or proposed transactions between the Company and any of its officers, directors, affiliates, or any affiliate thereof, or (ii) agreements (whether written or oral and including all amendments thereto) to which the Company is a party or by which the Company or any of its assets is bound that are material to the Company (collectively, "MATERIAL AGREEMENTS"). (b) Each Material Agreement is in full force and effect and is valid, binding and enforceable in accordance with its terms as to the Company and, to the knowledge of the Company, as to each other party thereto; (ii) there exists no material breach or material default (or event that with notice or lapse of time would constitute a material breach or material default) on the part of the Company or, to the knowledge of the Company, on the part of any other party under any Material Agreement; (iii) the Company has not received a written notice of termination or default under any Material Agreement; and (iv) as of the date of this Agreement, no party to an agreement under which the Company acquired a substantial portion of its assets has asserted any claim for indemnification under such agreement. -4- (c) The Company has not engaged in the past three (3) months in any substantive discussion (i) with any representative of any corporation or corporations regarding the merger of the Company with or into any such corporation or corporations, (ii) with any representative of any corporation, partnership, association or other business entity or any individual regarding the sale, conveyance or disposition of all or substantially all of the assets of the Company or a transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company would be disposed of, or (iii) regarding any other form of liquidation, dissolution or winding up of the Company. 2.11 NO CONFLICT OF INTEREST. The Company is not indebted, directly or indirectly, to any of its officers or directors or to their respective spouses or children, in any amount whatsoever other than in connection with expenses or advances of expenses incurred in the ordinary course of business or relocation expenses of employees. None of the Company's officers or directors, or any members of their immediate families, are, directly or indirectly, indebted to the Company (other than in connection with purchases of the Company's stock) or to the Company's knowledge have any direct or indirect ownership interest in any firm or corporation with which the Company is affiliated or with which the Company has a business relationship, or any firm or corporation which competes with the Company except that officers, directors and/or stockholders of the Company may own stock in (but not exceeding two percent of the outstanding capital stock of) any publicly traded company that may compete with the Company. None of the Company's officers or directors or any members of their immediate families are, directly or indirectly, interested in any material contract with the Company. The Company is not a guarantor or indemnitor of any indebtedness of any other person, firm or corporation. 2.12 RIGHTS OF REGISTRATION AND VOTING RIGHTS. Except as contemplated in this Agreement or as disclosed in the SEC Filings or in the Private Placement Memorandum, the Company has not granted or agreed to grant any registration rights, including piggyback rights, to any person or entity. To the Company's knowledge, no stockholder of the Company has entered into any agreements with respect to the voting of capital shares of the Company. 2.13 TITLE TO PROPERTY AND ASSETS. The Company owns its property and assets free and clear of all mortgages, liens, loans and encumbrances, except such encumbrances and liens which arise in the ordinary course of business and do not materially impair the Company's ownership or use of such property or assets. With respect to the property and assets it leases, the Company is in compliance with all material terms of such leases and, to its knowledge, holds a valid leasehold interest free of any liens, claims or encumbrances. 2.14 FINANCIAL STATEMENTS. The financial statements (including balance sheet and statement of operations) of the Company contained in the SEC Filings and the Private Placement Memorandum (collectively, the "FINANCIAL STATEMENTS") were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated, and fairly present the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject to normal year-end audit adjustments. Except as set forth in the Financial Statements or in the Private Placement Memorandum, the Company has no material liabilities, contingent or otherwise, other than (i) liabilities incurred in the ordinary course of business subsequent to March 31, 1999 and (ii) obligations incurred in the ordinary course of business and not required under generally accepted accounting principles to be reflected in the Financial Statements, -5- which, in both cases, individually or in the aggregate are not material to the financial condition or operating results of the Company. 2.15 CHANGES. Since March 31, 1999, except as disclosed in the SEC Filings or the Private Placement Memorandum (provided that such exception shall not apply to subsections (a), (e), (h) or (m) of this Section, or to subsection (n) as it applies to such subsections), there has not been: (a) any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except for operating losses consistent with past results and except for changes in the ordinary course of business that have not been, in the aggregate, materially adverse; (b) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the business, properties, prospects, or financial condition of the Company; (c) any waiver or compromise by the Company of a valuable right or of a material debt owed to it; (d) any satisfaction or discharge of any lien, claim, or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and that is not material to the business, properties, prospects or financial condition of the Company; (e) any material change to a material contract or agreement by which the Company or any of its assets is bound or subject, except for the pending amendments to the Company's agreements with IBM Corp., as described on page 45 of the Private Placement Memorandum; (f) any material change in any compensation arrangement or agreement with any employee, officer, director or stockholder; (g) any sale, assignment or transfer of any patents, trademarks, copyrights, trade secrets or other intangible assets; (h) any material resignation or termination of employment of any officer or key employee of the Company; and the Company is not aware of any impending resignation or termination of employment of any such officer or key employee; (i) any material mortgage, pledge, transfer of a security interest in, or lien, created by the Company, with respect to any of its material properties or assets, except liens for taxes not yet due or payable; (j) any loans or guarantees made by the Company to or for the benefit of its employees, officers or directors, or any members of their immediate families, other than travel advances and other advances made in the ordinary course of its business; -6- (k) any declaration, setting aside or payment or other distribution in respect to any of the Company's capital stock, or any direct or indirect redemption, purchase, or other acquisition of any of such stock by the Company; (l) any declaration or payment of any dividend or other distribution of the assets of the Company; (m) to the Company's knowledge, any other event or condition of any character that might materially and adversely affect the business, properties, prospects or financial condition of the Company; or (n) any arrangement or commitment by the Company to do any of the things described in this Section 2.15. 2.16 EMPLOYEE BENEFIT PLANS. Except as disclosed in the SEC Filings or in the Private Placement Memorandum, the Company does not have any Employee Benefit Plan as defined in the Employee Retirement Income Security Act of 1974. 2.17 TAX RETURNS AND PAYMENTS. The Company has filed all tax returns and reports as required by law. These returns and reports are true and correct in all material respects. The Company has paid all taxes and other assessments due. 2.18 INSURANCE. The Company has in full force and effect fire and casualty insurance policies, with extended coverage, sufficient in amount (subject to reasonable deductibles) to allow it to replace any of its tangible properties that might be damaged or destroyed. 2.19 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or subject to (and none of its assets or properties is bound by or subject to) any written or oral, express or implied, contract, commitment or arrangement with any labor union, and no labor union has requested or, to the knowledge of the Company, has sought to represent any of the employees, representatives or agents of the Company. There is no strike or other labor dispute involving the Company pending, or to the knowledge of the Company threatened, which could have a material adverse effect on the assets, properties, financial condition, operating results, or business of the Company, nor is the Company aware of any labor organization activity involving its employees. Except as disclosed in the SEC Filings or the Private Placement Memorandum, the employment of each officer and employee of the Company is terminable at the will of the Company. To its knowledge, the Company has complied in all material respects with all applicable state and federal equal employment opportunity laws and with other laws related to employment. 2.20 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENTS. Each employee, consultant and officer of the Company has executed an agreement with the Company regarding confidentiality and proprietary information substantially in the form or forms delivered to the counsel for the Investors. The Company is not aware that any of its employees or consultants is in violation thereof, and the Company will use its best efforts to prevent any such violation. 2.21 PERMITS. The Company and each of its subsidiaries has all franchises, permits, licenses and any similar authority necessary for the conduct of its business, the lack of which could materially and adversely affect the business, properties, prospect;, or financial condition of the -7- Company. The Company is not in default in any material respect under any of such franchises, permits, licenses or other similar authority. 2.22 CORPORATE DOCUMENTS. The Certificate of Incorporation and Bylaws of the Company are in the form provided to Investor. The copy of the minute books of the Company made available to the Investor contains minutes of all meetings of directors and stockholders and all actions by written consent without a meeting by the directors and stockholders since the date of incorporation (except for those meetings for which minutes have not yet been drafted, in which cases agendas have been made available) and reflects all actions by the directors (and any committee of directors) and stockholders with respect to all transactions referred to in such minutes accurately in all material respects. The stock transfer ledgers and other similar records of the Company as made available to the Investors prior to the execution of this Agreement accurately reflect all record transfers prior to the execution of this Agreement in the capital stock of the Company. 2.23 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of any applicable statute, law or regulation relating to the environment or occupational health and safety, and to its knowledge, no material expenditures are or will be required in order to comply with any such existing statute, law or regulation. 2.24 OFFERING. Subject in part to the truth and accuracy of the representations and warranties of the Investors set forth in the Purchase Agreements, the offer, sale and issuance of the Shares as contemplated by this Agreement are exempt from the registration requirements of the Securities Act and any applicable state securities laws, and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the loss of such exemption. 2.25 INVESTMENT COMPANY. The Company is not an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended (the "1940 Act"). 2.26 YEAR 2000. To the Company's knowledge, after reasonable inquiry, all of the Company's software products, devices and programs will operate prior to, during and after the calendar year 2000 A.D. without material error relating to date data that represents or references different centuries or more than one century other than such errors which have not had nor would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Company's business as presently conducted or as proposed to be conducted. 2.27 PRIVATE PLACEMENT MEMORANDUM. The Confidential Private Placement Memorandum dated June 14, 1999 (the "Private Placement Memorandum") previously delivered to Investor has been prepared in good faith by the Company and does not contain any untrue statement of a material fact nor does it omit to state any material fact necessary to make the statements made therein not misleading, it being understood that such Private Placement Memorandum was prepared in connection with a Preferred Stock financing, rather than the Financing. With respect to projections distributed concurrently with the Private Placement Memorandum, the Company represents only that such projections were prepared in good faith and that the Company believes there is a reasonable basis for such projections. 2.28 SEC FILINGS. The Company's Annual Report on Form 10-KSB for the transition period from July 1, 1998 to March 31, 1999 filed with the Securities and Exchange -8- Commission (the "SEC") on June 21, 1999, and the Company's definitive proxy materials filed with the SEC on June 17, 1999, including all exhibits to such filings (collectively, the "SEC Filings") as of the respective dates of filing, were accurate and complete in all material respects and complied in all material respects with the rules, regulations and interpretations of the SEC. 2.29 FULL DISCLOSURE. The Company has provided Investor with all the information that Investor has requested for deciding whether to purchase the Shares. Neither this Agreement nor the representations and warranties contained herein, nor any other written statements or certificates made or delivered in connection herewith, when read together, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. 3. REPRESENTATIONS AND WARRANTIES OF INVESTOR. Investor hereby represents and warrants to the Company as follows: 3.1 LEGAL POWER. Investor has the power and authority to enter into this Agreement, to purchase the Shares hereunder and to carry out and perform its obligations under the terms of this Agreement. 3.2 DUE EXECUTION. This Agreement has been duly authorized, executed and delivered by Investor, and, upon due execution and delivery by the Company, this Agreement will be a valid and binding obligation of Investor, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies, or (iii) to the extent the indemnification provisions in Section 6.4 below may be limited by applicable federal or state securities law. 3.3 INFORMATION. Investor represents that Investor has had the opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the Shares and the business, properties, prospects and financial condition of the Company. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 2 of this Agreement or the right of Investor to rely thereon. Investor represents that, in making its investment decision with respect to the Shares, it has relied solely upon information supplied by the Company and its own investigation of such information and other material as it deemed relevant to such investment decision, and Investor has not relied upon any information or representation of any third party, including specifically Needham & Company ("Needham") and its officers, directors, employees and agents, in making such investment decision. 3.4 INVESTMENT REPRESENTATIONS. (a) Investor is acquiring the Shares for its own account, not as nominee or agent, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). (b) Investor understands that (i) the Shares have not been registered under the Securities Act by reason of a specific exemption therefrom, that the securities are "restricted -9- securities" and the Investor must hold the Shares indefinitely, and that it must, therefore, bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration; (ii) each certificate representing the Shares will be endorsed with the following legend: "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "1933 ACT") AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT COVERING SUCH SECURITIES OR IF THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE 1933 ACT." and (iii) the Company will instruct any transfer agent not to register the transfer of any of the Shares unless the conditions specified in the foregoing legend are satisfied; provided, however, that no such opinion of counsel shall be necessary if the sale, transfer or assignment is made either (A) pursuant to SEC Rule 144 and the Investor provides the Company with evidence reasonably satisfactory to the Company and its counsel that the proposed transaction satisfies the requirements of Rule 144, or (B) by means of a distribution from a partnership, limited liability company or other entity to its beneficial owners. The Company agrees to remove the foregoing legend from any securities if the requirements of SEC Rule 144(k) (or any successor rule or regulation) apply with respect to such securities and the Company and its counsel are provided with reasonably satisfactory evidence that the requirements of Rule 144(k) apply. (c) Investor has not been offered the Shares by any form of advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or any seminar or meeting whose attendees have been invited by such media. (d) Investor is a "qualified institutional buyer" within the meaning of SEC Rule 144A, as presently in effect. (e) Investor has such knowledge and experience in financial and business matters that the undersigned is capable of evaluating the merits and risks of acquisition of the Shares and of making an informed investment decision with respect thereto. (f) Investor's principal address is as set forth on the signature page hereto, and it does not reside in any state of the United States other than the state specified in its address on the signature page. (g) Investor has read and understands the matters under the heading "Risk Factors" in the Private Placement Memorandum, and understands that an investment in the Shares is -10- speculative and involves a high degree of risk of loss of all or part of Investor's investment therein. Investor understands that various statements contained in the Private Placement Memorandum and the projections delivered concurrently therewith are "forward looking statements" that involve risk and uncertainty, and has read and understands the cautionary language with respect thereto set forth on pages 16 and 17 of the Private Placement Memorandum and on page 1 of such projections. (h) Investor understands that the foregoing representations and warranties are to be relied upon by the Company as a basis for exemption of the sale of the Shares from the applicable registration or qualification requirements under the Securities Act, under the securities laws of all applicable states and for other purposes. In the event any of such representations and warranties become inaccurate or untrue prior to the Closing, the Investor will promptly notify the Company. 4. CONDITIONS OF THE INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of Investor under subsection 1.1 of this Agreement are subject to the fulfillment on or before the Closing, of each of the following conditions, the waiver of which shall not be effective against any Investor who does not consent in writing thereto: 4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company contained in Section 2 shall be true and correct in all material respects on and as of the Closing with the same force and effect as though such representations and warranties had been made on and as of the Closing. 4.2 PERFORMANCE OF OBLIGATIONS. The Company shall have performed and complied with all agreements, obligations and conditions contained herein that are required to be performed or complied with by it on or prior to the Closing. 4.3 COMPLIANCE CERTIFICATE. The Company shall deliver to Investor at the Closing a Certificate, executed by the President and Chief Executive Officer of the Company, certifying that the conditions specified in subsections 4.1, 4.2, and 4.4 through 4.6 have been fulfilled. 4.4 CONSENTS; QUALIFICATIONS. The Company shall have obtained any and all consents, permits and waivers necessary or appropriate for consummation of the transactions contemplated by this Agreement. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with and prior to the lawful issuance and sale of the Shares pursuant to this Agreement shall have been duly obtained and shall be effective as of the Closing. 4.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents and instruments incident thereto shall be reasonably satisfactory in form and substance to Investor, which shall have received all such counterpart original and certified or other copies of such documents as they may reasonably request. 4.6 OPINION OF COMPANY COUNSEL. Investor shall have received from Stradling Yocca Carlson & Rauth, counsel for the Company, an opinion, dated the date of the Closing and addressed to the Investors, in a form mutually agreed upon by counsel for the Company and counsel to -11- Needham & Company, Inc., the Company's placement agent, covering matters generally addressed in legal opinions given in connection with institutional private placement transactions. 5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of the Company to Investor under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions by Investor: 5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of Investor contained in Section 3 hereof shall be true and correct in all material respects on and as of the Closing with the same force and effect as though such representations and warranties had been made on and as of the Closing. 5.2 QUALIFICATIONS. All authorizations, approvals or permits, if any, of any governmental authority or regulatory body of the United States or of any state that are required in connection with and prior to the lawful issuance and sale of the Shares pursuant to this Agreement shall be duly obtained and shall be effective as of the Closing. 5.3 PERFORMANCE. All covenants, agreements and conditions contained in this Agreement to be performed by Investor on or prior to the Closing shall have been performed or complied with in all material respects. 6. REGISTRATION OF SHARES. 6.1 REQUIRED REGISTRATION. Within forty-five (45) days following the Closing, the Company shall prepare and file with the SEC a registration statement on Form S-3 under the Securities Act, covering all of the shares of Common Stock issued to the Investors in the Financing (the "Registrable Stock"), and shall use its best efforts to cause such registration statement to become effective as expeditiously as possible and to remain effective until the earlier to occur of the date (a) the Registrable Stock covered thereby has been sold, or (b) twelve (12) months following the Closing. Notwithstanding the foregoing, if the Company is or becomes ineligible to use Form S-3, the Company shall promptly prepare and file such registration statement on Form SB-2 or, if unavailable, Form S-1. 6.2 REGISTRATION PROCEDURES. When the Company effects the registration of the Registrable Stock under the Securities Act pursuant to Section 6.1 hereof, the Company will, at its expense, as expeditiously as possible: (a) In accordance with the Securities Act and the rules and regulations of the Commission, prepare and file with the SEC a registration statement with respect to such securities and use its best efforts to cause such registration statement to become and remain effective for the period described in Section 6.1, and prepare and file with the SEC such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective for such period and such registration statement and prospectus accurate and complete for such period; (b) Furnish to Investor such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and any supplement thereto and such -12- other documents as Investor may reasonably request in order to facilitate the public offering and sale of such securities; (c) Use its best efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such jurisdictions as Investor may reasonably request within twenty (20) days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of process or to qualify to do business as a foreign corporation in any jurisdiction where it is not so qualified; (d) Notify Investor, promptly after it shall receive notice thereof, of the date and time when such registration statement and each post-effective amendment thereto has become effective or a supplement to any prospectus forming a part of such registration statement has been filed; (e) Notify Investor promptly of any request by the SEC for the amending or supplementing of such registration statement or prospectus or for additional information; (f) Prepare and promptly file with the SEC, and promptly notify Investor of the need for, and filing of, such amendments or supplements to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Securities Act, any event has occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (g) In case Investor is required to deliver a prospectus at a time when the prospectus then in circulation is not in compliance with the Securities Act or the rules and regulations of the SEC, prepare promptly upon request such amendments or supplements to such registration statement and such prospectus as may be necessary in order for such prospectus to comply with the requirements of the Securities Act and such rules and regulations; (h) Advise Investor, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued; and (i) Deliver to Investor, as promptly as practicable after filing with the SEC, any document which is incorporated by reference in the registration statement. 6.3 EXPENSES. With respect to any registration effected pursuant to Section 6.1 hereof, the Company agrees to bear all fees, costs and expenses of and incidental to such registration and the public offering in connection therewith. The fees, costs and expenses of registration to be borne as provided in this Section 6.3 shall include, without limitation, all registration, filing and NASD fees, exchange listing fees, printing expenses, fees and disbursements of counsel and accountants for the Company and one counsel for all Investors including shares in such registration (not to exceed $15,000), and all legal fees and disbursements and other expenses of complying with state securities or -13- blue sky laws of any jurisdictions in which the securities to be offered are to be registered or qualified. Any selling expenses, including discounts and commissions, shall be the responsibility of Investor. 6.4 INDEMNIFICATION. (a) The Company will indemnify and hold harmless Investor and any person who controls Investor within the meaning of the Securities Act, and any officer, director, employee, agent, partner or affiliate of Investor, from and against, and will reimburse Investor and each such controlling person, officer, director, employee, agent, partner and affiliate with respect to, any and all claims, actions, demands, losses, damages, liabilities, costs and expenses to which Investor or any such controlling person or any such officer, director, employee, agent, partner or affiliate may become subject under the Securities Act or otherwise, insofar as such claims, actions, demands, losses, damages, liabilities, costs or expenses arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such claim, action, demand, loss, damage, liability, cost or expense is caused by an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity in all material respects with information furnished to the Company in writing by Investor or such controlling person or such officer, director, employee, agent, partner or affiliate in writing specifically for use in the preparation thereof. (b) Investor will indemnify and hold harmless the Company, and any person who controls the Company within the meaning of the Securities Act, from and against, and will reimburse the Company and such controlling persons with respect to, any and all losses, damages, liabilities, costs or expenses to which the Company or such controlling person may become subject under the Securities Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or are caused by the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in conformity in all material respects with information furnished by Investor to the Company in writing specifically for use in the preparation thereof. Notwithstanding the foregoing, the liability of Investor pursuant to this subsection (b) shall be limited to an amount equal to the net per share sale price multiplied by the number of shares of Registrable Stock sold by Investor pursuant to the registration statement which gives rise to such obligation to indemnify (less the aggregate amount of any damages which Investor has otherwise been required to pay in respect of such losses, damages, liabilities, costs or expenses or any substantially similar losses, damages, liabilities, costs or expenses arising from the sale of such Registrable Stock). (c) Promptly after receipt by a party indemnified pursuant to the provisions of paragraph (a) or (b) of this Section 6.4 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions, such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of paragraph (a) or (b), notify the -14- indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 6.4 and shall not relieve the indemnifying party from liability under this Section 6.4 except to the extent that such indemnifying party is materially prejudiced by such omission. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of such paragraph (a) or (b) for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided however that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. No indemnifying party shall be liable to an indemnified party for any settlement of any action or claim without the consent of the indemnifying party which consent shall not be unreasonably withheld. No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a complete and unconditional release from all liability in respect to such claim or litigation. (d) If the indemnification provided for in subsection (a) or (b) of this Section 6.4 is held by a court of competent jurisdiction to be unavailable to a party to be indemnified with respect to any claims, actions, demands, losses, damages, liabilities, costs or expenses referred to therein, then each indemnifying party under any such subsection, in lieu of indemnifying such indemnified party thereunder, hereby agrees to contribute to the amount paid or payable by such indemnified party as a result of such claims, actions, demands, losses, damages, liabilities, costs or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such claims, actions, demands, losses, damages, liabilities, costs or expenses, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Investor and the Company agree that it would not be just or equitable if contribution pursuant to this Subsection 6.4(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in the preceding two sentences. Notwithstanding the other provisions of this Section 6.4(d), the amount Investor shall be obligated to contribute pursuant to this subsection (d) shall be limited to an amount equal to the net per share sale price multiplied by the number of shares of Registrable Stock sold by Investor pursuant to the registration statement which gives rise to such obligation to contribute (less the aggregate amount of any damages which Investor has otherwise been required to pay in respect of such claim, action, demand, loss, damage, liability, cost or expense or any substantially similar claim, action, demand, loss, damage, liability, cost or expense arising from the sale of such Registrable Stock). No person -15- guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution hereunder from any person who was not guilty of such fraudulent misrepresentation. 6.5 REPORTING REQUIREMENTS UNDER THE EXCHANGE ACT. The Company shall timely file such information, documents and reports as the SEC may require or prescribe under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company acknowledges and agrees that the purposes of the requirements contained in this Section 6.5 are (a) to enable Investor to comply with the current public information requirement contained in paragraph (c) of Rule 144 should Investor ever wish to dispose of any of the Registrable Stock without registration under the Securities Act in reliance upon Rule 144 (or any other similar exemptive provision) and (b) to qualify the Company for the use of registration statements on Form S-3. 6.6 INVESTOR INFORMATION. The Company may require Investor to furnish the Company such information with respect to Investor and the distribution of the Registrable Stock as the Company may from time to time reasonably request in writing as shall be required by law or by the SEC in connection therewith. 6.7 NASDAQ LISTING. The Company shall, as soon as practicable following the first date it is eligible for listing on the Nasdaq Stock Market, prepare and file an application for such listing and use commercially reasonable efforts to obtain such listing as soon as practicable. 7. OTHER COVENANTS OF THE COMPANY 7.1 REMUNERATION TO SHAREHOLDERS. The Company shall not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise to any Investor or other shareholder of the Company as consideration for or as an inducement to entering into by any Investor or other shareholder of the Company of any waiver or amendment of any of the terms and provisions of this Agreement or the Certificate of Incorporation which affects Investor's rights, unless such remuneration is concurrently paid, on the same terms, ratably to Investor provided Investor grants such waiver or agrees to such amendment, as applicable. 7.2 INVESTMENT COMPANY STATUS. The Company shall not become an "investment company" or a company "controlled" by an "investment company", within the meaning of the 1940 Act. In the event the Company breaches the foregoing, the Company shall forthwith notify the Investors and shall take immediate corrective action to remedy such breach. 8. MISCELLANEOUS. 8.1 ENTIRE AGREEMENT. This Agreement, the Exhibits hereto, and the documents referred to herein constitute the full and entire understanding and agreement between the parties and no party shall be liable or bound to any to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. 8.2 SURVIVAL OF WARRANTIES; INDEMNIFICATION. Unless otherwise set forth in this Agreement, the warranties, representations and agreements of the Company and the Investor contained herein shall survive the execution and delivery of this Agreement and the Closing and shall in no way -16- be affected by any investigation of the subject matter thereof made by or on behalf of Investor or the Company. 8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties (including permitted transferees of any Shares sold hereunder). Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 8.4 GOVERNING LAW; JURISDICTION AND VENUE; ATTORNEY'S FEES. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed by and construed under the laws of the State of California without reference to principles of conflicts of laws. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's and expert witness fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 8.5 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. 8.6 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. 8.7 NOTICES. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery, delivery by nationally recognized overnight courier or five days after deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to the party to be notified (a) if to the Company, at 650 Castro Street, Suite 210, Mountain View, California 94041, or (b) if to Investor, at the address indicated for Investor on Exhibit A hereto, or at such address as such party may designate by ten days advance written notice to the other party. 8.8 FINDERS' FEES. Investor agrees to indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders' fee to any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which Investor or any of its officers, partners, employees or representatives is responsible. The Company agrees to indemnify and hold harmless Investor from any liability for any commission or compensation in the nature of a finders' fee to any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees or representatives is responsible. The Company and the Investor each acknowledge and agree that Needham is entitled to the compensation payable by the Company with respect to the purchase of the Shares as set forth in the Private Placement Memorandum and that Needham has not acted as an "underwriter," as that term is defined in the Securities Act, with respect to the Shares. -17- 8.9 EXPENSES. Irrespective of whether the Closing is effected, subject to the provisions of Section 6, the Company and Investor shall each pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement. 8.10 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investor. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each holder of any securities purchased under this Agreement that are then outstanding (including securities into which such securities have been converted), each future holder of such securities (unless such securities are sold in a public offering), and the Company. 8.11 SEVERABILITY. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and the balance of the Agreement shall be enforceable in accordance with its terms. 8.12 INFORMATION CONFIDENTIAL. Investor acknowledges that the information received by it pursuant hereto is confidential and for Investor's use only, and it will refrain from using such information or reproducing, disclosing, or disseminating such information to any other person other than (i) Investor's board of directors, investment advisers, attorneys, accountants, consultants and other professionals to the extent necessary to obtain their services in connection with Investor's investment in the Company, provided that such persons agree to hold such information confidential as provided in this section, (ii) to any prospective Investor of any shares of the Company owned by Investor as long as such prospective Investor agrees in writing to be bound by the confidentiality provisions as provided in this section, (iii) to any of Investor's affiliates, provided that such affiliates agree to hold such information confidential as provided in this section, or (iv) as required by applicable law or regulation, regulatory body, stock exchange, court or administrative order, or any listing or trading agreement concerning Investor or the Company. -18- IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. COMPANY: SOURCINGLINK.NET, INC. By: /s/ Sean M. Maloy ----------------------------------------- Sean Maloy, Chief Executive Officer and President INVESTOR: By: ----------------------------------------- Printed Name: ------------------------------- Title: -------------------------------------- -19- EXHIBIT A INVESTORS
NUMBER OF PURCHASE PRICE NAME AND ADDRESS SHARES ($) - ----------------------------------------- ------------- -------------- Seligman New Technologies Fund, Inc. 1,687,500 $2,700,000 c/o J&W Seligman Co. 100 Park Avenue New York, New York 10017 Seligman Investment Opportunities (Master) 187,500 300,000 Fund-NTV Portfolio c/o J&W Seligman Co. 100 Park Avenue New York, New York 10017 Wallington Investments Ltd. 625,000 1,000,000 c/o Nomina Financial Services, Ltd. Waldmanstrasse 8 P.O. Box 319 CH-8024 Zurich Switzerland Oakwood Holdings Ltd. 625,000 1,000,000 c/o Nomina Financial Services, Ltd. Waldmanstrasse 8 P.O. Box 319 CH-8024 Zurich Switzerland Manasa Corporation 187,500 300,000 c/o V. & J. Saad P.O. Box 165726 Achrafieh, Beirut, Lebanon UT Technology Partners LDC 250,000 400,000 c/o Unterberg Tobin Capital 10 East 50th Street New York, New York 10022 UT Capital Partners International LDC 62,500 100,000 c/o Unterberg Tobin Capital 10 East 50th Street New York, New York 10022 Cazenove Nominees Limited 150,000 240,000 12 Tokenhouse Yard London EC2R 7AN England Arnhold and S. Bleichroeder, Inc. 625,000 1,000,000 1345 Avenue of the Americas New York, New York 10105 Needham & Company, Inc. 417,750 668,400 445 Park Avenue New York, New York 10022 Needham Growth Fund 156,250 250,000 445 Park Avenue New York, New York 10022 Lord Gavron 26,250 42,000 c/o Mercury Asset Management Ltd. 33 King William Street London EC4R 9AS England Sean Maloy 31,625 50,600 10065 Rue Chantemar San Diego, CA 92131 ------------- -------------- TOTALS 5,031,875 $8,051,000 ------------- -------------- ------------- --------------
-2- EX-5.1 3 EXHIBIT 5.1 EXHIBIT 5.1 September 13, 1999 SourcingLink.net, Inc. 650 Castro Street, Suite 210 Mountain View, CA 94041 RE: REGISTRATION STATEMENT ON FORM S-3 Ladies and Gentlemen: At your request, we have examined the form of Registration Statement on Form S-3 (the "Registration Statement") being filed by SourcingLink.net,Inc., a Delaware corporation (the "Company"), with the Securities and Exchange Commission in connection with the registration under the Securities Act of 1933, as amended, of an aggregate of 1,250,064 shares of the Company's common stock, $0.001 par value ("Common Stock") which were issued to the stockholders in connection with a private offering of such shares completed on August 9, 1999. The shares of Common Stock may be offered for resale from time to time by and for the account of the Selling Stockholders of the Company as named in the Registration Statement. We have reviewed the corporate action of the Company in connection with this matter and have examined such documents, corporate records and other instruments as we have deemed necessary for the purposes of this opinion. Based on the foregoing, it is our opinion that 1,250,064 shares of Common Stock covered by the Registration Statement have been duly authorized and validly issued, and are fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement. Very truly yours, STRADLING YOCCA CARLSON & RAUTH /s/ STRADLING YOCCA CARLSON & RAUTH EX-23.2 4 EXHIBIT 23.2 Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report dated May 21, 1999 relating to the consolidated financial statements, which appears in the 1999 Annual Report of SourcingLink.net, Inc. (formerly QCS.net Corporation), which is incorporated by reference in SourcingLink.net, Inc.'s (QCS.net Corporation) Transition Report on Form 10-KSB for the transition period from July 1, 1998 to March 31, 1999. We also consent to the incorporation by reference of our report dated May 21, 1999 relating to the financial statement schedule, which appears in such Transition Report on Form 10-KSB. /s/ PriceWaterhouseCoopers LLP San Jose, California September 13, 1999 -----END PRIVACY-ENHANCED MESSAGE-----