Egghead Com Inc – ‘8-K’ for 2/17/00 – EX-1.01

On:  Wednesday, 2/23/00   ·   For:  2/17/00   ·   Accession #:  1032210-0-312   ·   File #s:  0-29184, 33-21472   ·   Correction:  This Filing was Deleted by the SEC on 3/9/00. ®

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Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         3     10K 
 2: EX-1.01     Common Stock Purchase Agreement                       39    178K 
 3: EX-99.01    Press Release Dated February 18, 2000                  2     10K 

EX-1.01   —   Common Stock Purchase Agreement
Exhibit Table of Contents

EX-1.01
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                                                                    EXHIBIT 1.01

COMMON STOCK PURCHASE AGREEMENT 

Dated as of February 17, 2000 

by and between  

EGGHEAD.COM, INC. 

and 

ACQUA WELLINGTON  
NORTH AMERICAN EQUITIES FUND, LTD.  

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TABLE OF CONTENTS 

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ARTICLE I      Definitions.....................................................   1 

 Section 1.1   Definitions.....................................................   1 

ARTICLE II     Purchase and Sale of Common Stock...............................   2 

 Section 2.1   Purchase and Sale of Stock......................................   2 
 Section 2.2   The Shares......................................................   3 
 Section 2.3   Registration Statement and Prospectus...........................   3 
 Section 2.4   Purchase Price and Closing......................................   3 

ARTICLE III    Representations and Warranties..................................   3 

 Section 3.1   Representation and Warranties of the Company....................   3 
 Section 3.2   Representation and Warranties of the Purchaser..................  10 

ARTICLE IV     Covenants.......................................................  12 

 Section 4.1   Securities......................................................  12 
 Section 4.2   Registration and Listing........................................  12 
 Section 4.3   Registration Statement..........................................  12 
 Section 4.4   Compliance with Laws............................................  12 
 Section 4.5   Keeping of Records and Books of Account.........................  13 
 Section 4.6   Reporting Requirements..........................................  13 
 Section 4.7   Other Financing Agreements......................................  13 
 Section 4.8   Non-public Information..........................................  14 
 Section 4.9   No Stop Orders..................................................  14 
 Section 4.10  Amendments to the Registration Statement........................  14 
 Section 4.11  Prospectus Delivery.............................................  14 

ARTICLE V      Conditions to Closing and Draw Downs............................  15 

 Section 5.1   Conditions Precedent to the Obligation of                            
               the Company to Sell the Shares..................................  15 
 Section 5.2   Conditions Precedent to the Obligation of the Purchaser to Close  16 
 Section 5.3   Conditions Precedent to the Obligation of the Purchaser              
               to Accept a Draw Down and Purchase the Shares...................  17 
ARTICLE VI     Draw Down Terms; Call Option....................................  17 

 Section 6.1   Drawn Down Terms................................................  17 


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ARTICLE VII    Termination..................................................... 20

 Section 7.1   Termination by Mutual Consent................................... 20
 Section 7.2   Other Termination............................................... 20
 Section 7.3   Effect of Termination........................................... 21

ARTICLE VIII   Indemnification................................................. 21

 Section 8.1   General Indemnity............................................... 21
 Section 8.2   Indemnification Procedures...................................... 22

ARTICLE IX     Miscellaneous................................................... 23

 Section 9.1   Fees and Expenses............................................... 23
 Section 9.2   Specific Enforcement, Consent to Jurisdiction................... 23
 Section 9.3   Entire Agreement; Amendment..................................... 24
 Section 9.4   Notices......................................................... 24
 Section 9.5   Waivers......................................................... 25
 Section 9.6   Headings........................................................ 25
 Section 9.7   Successors and Assigns.......................................... 25
 Section 9.8   Governing Law................................................... 26
 Section 9.9   Survival........................................................ 26
 Section 9.10  Counterparts.................................................... 26
 Section 9.11  Publicity....................................................... 26
 Section 9.12  Severability.................................................... 26
 Section 9.13  Further Assurances.............................................. 26


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COMMON STOCK PURCHASE AGREEMENT 

This COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated as of
February 17, 2000 by and between Egghead.com, Inc., a Delaware corporation (the 
"Company") and Acqua Wellington North American Equities Fund, Ltd., a company   
organized under the laws of the Commonwealth of The Bahamas (the "Purchaser").  

The parties hereto agree as follows:                                  

ARTICLE I 

Definitions 
Section 1.1  Definitions.                                   

      (a)  "Call Option" shall have the meaning assigned to such term in
Section 6.2 hereof.                                                             

     (b)  "Commission" shall have the meaning assigned to such term in
Section 2.3 hereof.                                                             

       (c)  "Commission Documents" shall have the meaning assigned to such
term in Section 3.1(f) hereof.                                                  

          (d)  "Commission Filings" means the Company's Form 10-K for the fiscal
year ended December 31, 1998, its Registration Statement on Form S-3 No. 333-   
91553, and all other filings made by the Company after the date hereof pursuant 
to the Securities Exchange Act of 1934.                                         

    (e)  "Draw Down" shall have the meaning assigned to such term in
Section 6.1(a) hereof.                                                          

        (f)  "Draw Down Amount" means the actual amount of a Draw Down up to
$30,000,000.                                                                    

          (g)  "Draw Down Discount Percentage" means (i) 95.75% if the Threshold
Price is equal to or exceeds $22.00; (ii) 95.2% if the Threshold Price is equal 
to or exceeds $18.00 but is less than $22.00; (iii) 94.8% if the Threshold Price
is equal to or exceeds $14.00 but is less than $18.00; and (iv) 94.4% if the    
Threshold Price is equal to or exceeds $10.00 but is less than $14.00.          

        (h)  "Draw Down Notice" shall have the meaning assigned to such term
in Section 6.1(j) hereof.                                                       

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        (i)  "Draw Down Pricing Period" shall mean a period of eighteen (18)
consecutive trading days starting with the first trading day specified in Draw  
Down Notice.                                                                    

        (j)  "Effective Date" shall mean the date the Registration Statement
is declared effective.                                                          

         (k)  "Material Adverse Effect" shall mean any effect on the business,
results of operations, prospects, assets or financial condition of the Company  
that is material and adverse to the Company and its subsidiaries, taken as a    
whole and/or any condition, circumstance, or situation that would prohibit the  
Company from entering into and performing any of its obligations under this     
Agreement in any material respect.                                              

(l)  "Material Change in Ownership" shall mean that, as of a
particular measurements date, the officers and directors of the Company shall   
beneficially own in the aggregate less than 2% of the outstanding Common Stock  
of the Company that those officers and directors beneficially own as of the date
hereof.                                                                         

       (m)  "Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration Statement, as supplemented from time to   
time pursuant to Rule 424(b) of the Securities Act of 1933, as amended (the     
"Securities Act").                                                              

          (n)  "Registration Statement" shall mean the registration statement on
Form S-3, Commission File Number 333-91553 under the Securities Act, filed with 
the Securities and Exchange Commission for the registration of the Shares, as   
such Registration Statement may be amended from time to time.                   

          (o)  "Settlement Date" shall have the meaning assigned to such term in
Section 6.1(d) hereof.                                                          

      (p)  "Shares" shall mean the shares of Common Stock of the Company
that may be purchased hereunder.                                                

       (q)  "Threshold Price" is the lowest VWAP at which the Company will
sell Shares during each Draw Down Pricing Period.                               

         (r)  "VWAP" shall mean the daily volume weighted average price (based
on a trading day from 9:30 a.m. to 4:00 p.m., E.S.T.) of the Company on NASDAQ  
(or any successor thereto) as reported by Bloomberg Financial LP using the AQR  
function.                                                                       

ARTICLE II  

Purchase and Sale of Common Stock 

      Section 2.1  Purchase and Sale of Stock.  Subject to the terms and
conditions of this Agreement, the Company shall issue and sell to the Purchaser 
and the Purchaser shall purchase from the Company up to $100,000,000 of the     
Company's common stock, $.001 par value per share (the "Common Stock"), based on
Draw Downs in accordance with Section 6.1                                       

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and a Call Option in accordance with Section 6.2. In no event shall the amount  
of Common Stock purchased by the Purchaser exceed $30,000,000 per Draw Down.    

         Section 2.2  The Shares.  The Company has authorized and has reserved
and covenants to continue to reserve, subject to Section 4.4(b) hereof, free of 
preemptive rights and other similar contractual rights of stockholders,         
5,000,000 shares of its Common Stock to cover the Shares to be issued in        
connection with all Draw Downs.                                                 

        Section 2.3  Registration Statement and Prospectus.  The Company has
prepared and filed with the Securities and Exchange Commission (the             
"Commission") in accordance with the provisions of the Securities Act, the      
Registration Statement, including a prospectus subject to completion relating to
the Shares. The Registration Statement was declared effective on February 3,    
2000.                                                                           

        Section 2.4  Purchase Price and Closing.  In consideration of and in
express reliance upon the representations, warranties, covenants, terms and     
conditions of this Agreement, the Company agrees to issue and sell to the       
Purchaser and the Purchaser, agrees to purchase from the Company, that number of
the Shares to be issued in connection with each Draw Down. The closing of the   
execution and delivery of this Agreement (the "Closing") shall take place at the
offices of Parker Chapin LLP, The Chrysler Building, 405 Lexington Avenue, New  
York, NY 10174 at 5:00 p.m. Eastern Time on (i) February 17, 2000, or (ii) such 
other time and place or on such date as the Purchaser and the Company may agree 
upon (the "Closing Date"). Each party shall deliver all documents, instruments  
and writings required to be delivered by such party pursuant to this Agreement  
at or prior to the Closing.                                                     

ARTICLE III 

Representations and Warranties

   Section 3.1  Representation and Warranties of the Company.  The
Company hereby makes the following representations and warranties to the        
Purchaser:                                                                      

 (a)  Organization, Good Standing and Power.  The Company is a
corporation duly incorporated, validly existing and in good standing under the  
laws of [Delaware] and has the requisite corporate power to own, lease and      
operate its properties and assets and to conduct its business as it is now being
conducted. As of the date hereof, the Company does not have any subsidiaries (as
defined in Section 3.1(g)) except as set forth in the Registration Statement and
in the Company's most recent Form 10-K, including the accompanying financial    
statements (the "Form 10-K"), or in the Company's most recent Form 10-Q (the    
"Form 10-Q"), or on Schedule 3.1(g) attached hereto. The Company and each such  
subsidiary is duly qualified to do business as a foreign corporation and is in  
good standing in every jurisdiction in which the nature of the business         
conducted or property owned by it makes such qualification necessary except for 
any jurisdiction in which the failure to be so qualified will not have a        
Material Adverse Effect.                                                        

     (b)  Authorization; Enforcement.  The Company has the requisite corporate
power and authority to enter into and perform this Agreement and to issue and   
sell the Shares in                                                              

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accordance with the terms hereof. The execution, delivery and performance of    
this Agreement by the Company and the consummation by it of the transactions    
contemplated hereby have been duly and validly authorized by all necessary      
corporate action, and, except as contemplated by Section 4.5(b), no further     
consent or authorization of the Company or its Board of Directors or            
stockholders is required. This Agreement has been duly executed and delivered by
the Company. This Agreement constitutes, or when executed and delivered shall   
constitute, a valid and binding obligation of the Company enforceable against   
the Company in accordance with its terms, except as such enforceability may be  
limited by applicable bankruptcy, insolvency, reorganization, moratorium,       
liquidation, conservatorship, receivership or similar laws relating to, or      
affecting generally the enforcement of, creditor's rights and remedies or by    
other equitable principles of general application.                              

         (c)  Capitalization.  The authorized capital stock of the Company and
the shares thereof issued and outstanding as of the date hereof are set forth in
the Registration Statement or on Schedule 3.1(c) attached hereto. All of the    
outstanding shares of the Company's Common Stock have been duly and validly     
authorized, and are fully paid and non-assessable. Except as set forth in this  
Agreement or as set forth in the Registration Statement, the Commission         
Documents, the Commission Filings or on Schedule 3.1(c) attached hereto, as of  
the date hereof, no shares of Common Stock are entitled to preemptive rights or 
registration rights and there are no outstanding options, warrants, scrip,      
rights to subscribe to, call or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital stock of the
Company. Furthermore, except as set forth in this Agreement, the Registration   
Statement, the Commission Documents or the Commission Filings or on Schedule    
3.1(c) attached hereto, as of the date hereof, there are no contracts,          
commitments, understandings, or arrangements by which the Company is or may     
become bound to issue additional shares of the capital stock of the Company or  
options, securities or rights convertible into shares of capital stock of the   
Company. Except for customary transfer restrictions contained in agreements     
entered into by the Company in order to sell restricted securities or as        
described in the Registration Statement, the Commission Documents or the        
Commission Filings, or on Schedule 3.1(c) attached hereto, as of the date       
hereof, the Company is not a party to any agreement granting registration rights
to any person with respect to any of its equity or debt securities. Except as   
set forth in the Registration Statement, the Commission Documents or the        
Commission Filings or on Schedule 3.1(c) attached hereto, as of the date hereof,
the Company is not a party to, and it has no knowledge of, any agreement        
restricting the voting or transfer of any shares of the capital stock of the    
Company. Except as set forth in the Registration Statement, the Commission      
Documents or the Commission Filings or on Schedule 3.1(c) attached hereto, the  
offer and sale of all capital stock, convertible securities, rights, warrants,  
or options of the Company issued prior to the Closing complied with all         
applicable federal and state securities laws, and no stockholder has a right of 
rescission or damages with respect thereto which would have a Material Adverse  
Effect. The Company has furnished or made available to the Purchaser true and   
correct copies of the Company's Certificate of Incorporation as in effect on the
date hereof (the "Articles"), and the Company's Bylaws as in effect on the date 
hereof (the "Bylaws").                                                          

         (d)  Issuance of Shares.  The Shares have been duly authorized by all
necessary corporate action and, when paid for or issued in accordance with the  
terms hereof, the Shares shall be validly issued and outstanding, fully paid and
non-assessable, and the Purchaser shall be entitled to all rights accorded to a 
holder of Common Stock.                                                         

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       (e)  No Conflicts.  Except as disclosed on Schedule 3.1(e) attached
hereto, the execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated therein do 
not (i) violate any provision of the Company's Articles or Bylaws, (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, mortgage,   
deed of trust, indenture, note, bond, license, lease agreement, instrument or   
obligation to which the Company is a party, (iii) create or impose a lien,      
charge or encumbrance on any property of the Company under any agreement or any 
commitment to which the Company is a party or by which the Company is bound or  
by which any of its respective properties or assets are bound, or (iv) result in
a violation of any federal, state, local or foreign statute, rule, regulation,  
order, judgment or decree (including federal and state securities laws and      
regulations) applicable to the Company or any of its subsidiaries or by which   
any property or asset of the Company or any of its subsidiaries are bound or    
affected, except, in all cases, for such conflicts, defaults, terminations,     
amendments, acceleration, cancellations and violations as would not,            
individually or in the aggregate, have a Material Adverse Effect. The Company is
not required under federal, state or local law, rule or regulation to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any 
of its obligations under this Agreement, or issue and sell the Shares in        
accordance with the terms hereof (other than any filings which may be required  
to be made by the Company with the Commission, or Nasdaq subsequent to the      
Closing, and, any registration statement which may be filed pursuant hereto);   
provided that, for purpose of the representation made in this sentence, the     
Company is assuming and relying upon the accuracy of the relevant               
representations and agreements of the Purchaser herein.                         

         (f)  Commission Documents, Financial Statements.  The Common Stock of
the Company is registered pursuant to Section 12(b) or 12(g) of the Securities  
Exchange Act of 1934, as amended (the "Exchange Act"), and, except as disclosed 
in the Registration Statement, or the Commission Documents or the Commission    
Filings or on Schedule 3.1(f) attached hereto, as of the date hereof, the       
Company has timely filed all reports, schedules, forms, statements and other    
documents required to be filed by it with the Commission pursuant to the        
reporting requirements of the Exchange Act, including material filed pursuant to
Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including      
filings incorporated by reference therein being referred to herein as the       
"Commission Documents"). The Company has delivered or made available to the     
Purchaser true and complete copies of the Commission Documents filed with the   
Commission since December 31, 1998 and prior to the Closing Date. The Company   
has not provided to the Purchaser any information which, according to applicable
law, rule or regulation, should have been disclosed publicly by the Company but 
which has not been so disclosed, other than with respect to the transactions    
contemplated by this Agreement. The Form 10-K for the year ended December 31,   
1998 complied in all material respects with the requirements of the Exchange Act
and the rules and regulations of the Commission promulgated thereunder and other
federal, state and local laws, rules and regulations applicable to such         
document, and, as of its date, such Form 10-K did not contain any untrue        
statement of a material fact or omit to state a material fact required to be    
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial     
statements of the Company included in the Commission Documents complied as to   
form in all material respects with applicable accounting requirements and the   
published rules and                                                             

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regulations of the Commission or other applicable rules and regulations with    
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis 
during the periods involved (except (i) as may be otherwise indicated in such   
financial statements or the notes thereto or (ii) in the case of unaudited      
interim statements, to the extent they may not include footnotes or may be      
condensed or summary statements), and fairly present in all material respects   
the financial position of the Company and its subsidiaries as of the dates      
thereof and the results of operations and cash flows for the periods then ended 
(subject, in the case of unaudited statements, to normal year-end audit         
adjustments).                                                                   

   (g)  Subsidiaries.  The Commission Documents or Schedule 3.1(g)
attached hereto set forth each subsidiary of the Company as of the date hereof, 
showing the jurisdiction of its incorporation or organization and showing the   
percentage of each person's ownership of the outstanding stock or other         
interests of such subsidiary. For the purposes of this Agreement, "subsidiary"  
shall mean any corporation or other entity of which at least a majority of the  
securities or other ownership interest having ordinary voting power (absolutely 
or contingently) for the election of directors or other persons performing      
similar functions are at the time owned directly or indirectly by the Company   
and/or any of its other subsidiaries. Except as set forth in the Commission     
Documents or the Commission Filings, none of such subsidiaries is a "significant
subsidiary" as defined in Regulation S-X.                                       

   (h)  No Material Adverse Change.  Since September 30, 1999, the
Company has not experienced or suffered any Material Adverse Effect.            

(i)  No Undisclosed Liabilities.  Except as disclosed in the
Commission Documents or the Commission Filings or on Schedule 3.1(i) attached   
hereto, neither the Company nor any of its subsidiaries has any liabilities,    
obligations, claims or losses (whether liquidated or unliquidated, secured or   
unsecured, absolute, accrued, contingent or otherwise) that would be required to
be disclosed on a balance sheet of the Company or any subsidiary (including the 
notes thereto) in conformity with GAAP and are not disclosed in the Commission  
Documents, other than those incurred in the ordinary course of the Company's or 
its subsidiaries' respective businesses since December 31, 1998 and which,      
individually or in the aggregate, do not or would not have a Material Adverse   
Effect.                                                                         

          (j)  No Undisclosed Events or Circumstances.  No event or circumstance
has occurred or exists with respect to the Company or its subsidiaries or their 
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or  
announcement by the Company but which has not been so publicly announced or     
disclosed and which, individually or in the aggregate, do not or would not have 
a Material Adverse Effect.                                                      

          (k)  Indebtedness.  Schedule 3.1(k) sets forth as of December 31, 1999
all outstanding secured and unsecured Indebtedness of the Company or any        
subsidiary, or for which the Company or any subsidiary has commitments. For the 
purposes of this Agreement, "Indebtedness" shall mean (a) any liabilities for   
borrowed money or amounts owed in excess of $250,000 (other than accounts       
payable and liabilities incurred in the ordinary course of business), (b) all   
guaranties, endorsements and other contingent obligations in respect of         

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Indebtedness of others, whether or not the same are or should be reflected in   
the Company's balance sheet (or the notes thereto), except guaranties by        
endorsement of negotiable instruments for deposit or collection or similar      
transactions in the ordinary course of business; and (c) the present value of   
any lease payments in excess of $100,000 due under leases required to be        
capitalized in accordance with GAAP. Neither the Company nor any subsidiary is  
in default with respect to any Indebtedness.                                    

       (l)  Title to Assets.  Each of the Company and the subsidiaries has
good and marketable title to all of its real and personal property reflected in 
the Commission Documents, free of any mortgages, pledges, charges, liens,       
security interests or other encumbrances, except for those indicated in the     
Commission Documents, the Commission Filings or on Schedule 3.1(l) attached     
hereto or such that could not reasonably be expected to cause a Material Adverse
Effect. All leases of the Company and each of its subsidiaries are valid and    
subsisting and in full force and effect in all material respects.               

         (m)  Actions Pending.  There is no action, suit, claim, investigation
or proceeding pending or, to the knowledge of the Company, threatened against   
the Company or any subsidiary which questions the validity of this Agreement or 
the transactions contemplated hereby or any action taken or to be taken pursuant
hereto or thereto. Except as set forth in the Commission Documents or the       
Commission Filings or on Schedule 3.1(m) attached hereto, there is no action,   
suit, claim, investigation or proceeding pending or, to the knowledge of the    
Company, threatened, against or involving the Company, any subsidiary or any of 
their respective properties or assets and which, if adversely determined, is    
reasonably likely to result in a Material Adverse Effect.                       

  (n)  Compliance with Law.  The business of the Company and the
subsidiaries has been and is presently being conducted in accordance with all   
applicable federal, state and local governmental laws, rules, regulations and   
ordinances, except as set forth in the Commission Documents or the Commission   
Filings or on Schedule 3.1(n) attached hereto or such that do not cause a       
Material Adverse Effect. The Company and each of its subsidiaries have all      
franchises, permits, licenses, consents and other governmental or regulatory    
authorizations and approvals necessary for the conduct of its business as now   
being conducted by it, except for such franchises, permits, licenses, consents  
and other governmental or regulatory authorizations and approvals, the failure  
to possess which, individually or in the aggregate, could not reasonably be     
expected to have a Material Adverse Effect.                                     

       (o)  Certain Fees.  Except as set forth on Schedule 3.1(o) attached
hereto, no brokers, finders or financial advisory fees or commissions will be   
payable by the Company or any subsidiary with respect to the transactions       
contemplated by this Agreement.                                                 

          (p)  Disclosure.  To the best of the Company's knowledge, neither this
Agreement or the Schedules hereto nor any other documents, certificates or      
instruments furnished to the Purchaser by or on behalf of the Company or any    
subsidiary in connection with the transactions contemplated by this Agreement   
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made herein or therein, in the light  
of the circumstances under which they were made herein or therein, not          
misleading.                                                                     

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       (q)  Operation of Business.  The Company or one of the subsidiaries
owns or possesses all patents, trademarks, service marks, trade names,          
copyrights, licenses and authorizations as set forth in the Commission Documents
or the Commission Filings or on Schedule 3.1(q) attached hereto and all rights  
with respect to the foregoing, which are necessary for the conduct of its       
business as now conducted without any conflict with the rights of others, except
to the extent set forth in the Commission Documents or that a Material Adverse  
Effect could not reasonably be expected to result from such conflict.           

(r)  Environmental Compliance.  Except as disclosed in the  
Commission Filings or on Schedule 3.1(r) attached hereto, the Company and each  
of its subsidiaries have obtained all material approvals, authorization,        
certificates, consents, licenses, orders and permits or other similar           
authorizations of all governmental authorities, or from any other person, that  
are required under any Environmental Laws. "Environmental Laws" shall mean all  
applicable laws relating to the protection of the environment including, without
limitation, all requirements pertaining to reporting, licensing, permitting,    
controlling, investigating or remediating emissions, discharges, releases or    
threatened releases of hazardous substances, chemical substances, pollutants,   
contaminants or toxic substances, materials or wastes, whether solid, liquid or 
gaseous in nature, into the air, surface water, groundwater or land, or relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of hazardous substances, chemical substances, pollutants, 
contaminants or toxic substances, material or wastes, whether solid, liquid or  
gaseous in nature. Except for such instances as would not individually or in the
aggregate have a Material Adverse Effect, to the best of the Company's          
knowledge, there are no past or present events, conditions, circumstances,      
incidents, actions or omissions relating to or in any way affecting the Company 
or its subsidiaries that violate or could reasonably be expected to violate any 
Environmental Law after the Closing or that could reasonably be expected to give
rise to any environmental liability, or otherwise form the basis of any claim,  
action, demand, suit, proceeding, hearing, study or investigation (i) under any 
Environmental Law, or (ii) based on or related to the manufacture, processing,  
distribution, use, treatment, storage (including without limitation underground 
storage tanks), disposal, transport or handling, or the emission, discharge,    
release or threatened release of any hazardous substance.                       

    (s)  Material Agreements.  Except as set forth in the Commission
Documents or on Schedule 3.1(s) attached hereto, neither the Company nor any    
subsidiary is a party to any written or oral contract, instrument, agreement,   
commitment, obligation, plan or arrangement, a copy of which would be required  
to be filed with the Commission as an exhibit to a registration statement on    
Form S-3 (collectively, "Material Agreements") if the Company or any subsidiary 
were registering securities under the Securities Act. The Company and each of   
its subsidiaries has in all material respects performed all the obligations     
required to be performed by them to date under the foregoing agreements, have   
received no notice of default and, to the best of the Company's knowledge are   
not in default under any Material Agreement now in effect, the result of which  
could reasonably be expected to cause a Material Adverse Effect.                

  (t)  Transactions with Affiliates.  Except as set forth in the
Commission Documents or the Commission Filings or on Schedule 3.1(t) attached   
hereto, there are no loans, leases, agreements, contracts, royalty agreements,  
management contracts or arrangements or other continuing transactions exceeding 
$100,000 between (a) the Company, any subsidiary or any of their respective     
customers (excluding agreements related to the purchase or lease of the         

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Company's products) or suppliers on the one hand, and (b) on the other hand, any
officer or director of the Company, or any of its subsidiaries, or any person   
who would be covered by Item 404(a) of Regulation S-K or any corporation or     
other entity controlled by such officer or director.                            

 (u)  Securities Act of 1933.  The Company has complied in all
material respects with all applicable federal and state securities laws in      
connection with the offer, issuance and sale of the Shares hereunder.           

       (i)  Each Prospectus included as part of the Registration
Statement as originally filed or as part of any amendment or
          supplement thereto, or filed pursuant to Rule 424 under the Securities
 Act, complied when so filed in all material respects with the
       provisions of the Securities Act. The Commission has not issued any
order preventing or suspending the use of any Prospectus.   

             (ii) The Company meets the requirements for the use of Form S-3
       under the Securities Act. The Registration Statement in the form in
         which it became effective and also in such form as it may be when any
        post-effective amendment thereto became effective and the Prospectus
          and any supplement or amendment thereto when filed with the Commission
        under Rule 424(b) under the Securities Act, complied in all material
         respects with the provisions of the Securities Act and did not at any
        such times contain an untrue statement of a material fact or omit to
       state a material fact required to be stated therein or necessary to
      make the statements therein (in the case of the Prospectus, in the
          light of the circumstances under which they were made) not misleading,
  except that this representation and warranty does not apply to
     statements in or omissions from the Registration Statement or the
       Prospectus made in reliance upon and in conformity with information
          relating to the Purchaser furnished to the Company in writing by or on
  behalf of the Purchaser through you expressly for use therein.

      (iii)  The Company has not distributed and, prior to the
   completion of the sale of the Shares to the Purchaser, will not
          distribute any offering material in connection with the offer and sale
          of the Shares other than the Registration Statement, the Prospectus or
other materials, if any, permitted by the Securities Act.   

       (v)  Employees.  As of the date hereof, neither the Company nor any
subsidiary has any collective bargaining arrangements or agreements covering any
of its employees, except as set forth in the Commission Documents or the        
Commission Filings or on Schedule 3.1(v) attached hereto. As of the date hereof,
except as set forth in the Commission Documents or the Commission Filings or on 
Schedule 3.1(v) attached hereto, neither the Company nor any subsidiary has any 
employment contract, agreement regarding proprietary information, noncompetition
agreement, nonsolicitation agreement, confidentiality agreement, or any other   
similar contract or restrictive covenant, relating to the right of any officer, 
employee or consultant to be employed or engaged by the Company or such         
subsidiary. As of the date hereof, since December 31, 1998, except as disclosed 
in the Registration Statement, the Commission Documents, the Commission Filings 
or Schedule 3.1(v), no officer, consultant or key employee of the Company or any
subsidiary whose termination, either individually or in the aggregate, could    
reasonably be expected to have a Material Adverse Effect, has terminated or, to 
the                                                                             
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knowledge of the Company, has any present intention of terminating his or her   
employment or engagement with the Company or any subsidiary.                    

        (w)  Use of Proceeds.  The proceeds from the sale of the Shares will
be used by the Company and its subsidiaries for the purposes set forth in the   
Prospectus under "Use of Proceeds".                                             

      (x)  Public Utility Holding Company Act and Investment Company Act
Status. The Company is not a "holding company" or a "public utility company" as 
such terms are defined in the Public Utility Holding Company Act of 1935, as    
amended. The Company is not, and as a result of and immediately upon Closing    
will not be, an "investment company" or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended. 

(y)  ERISA.  No liability to the Pension Benefit Guaranty   
Corporation has been incurred with respect to any Plan by the Company or any of 
its subsidiaries which is or would have a Material Adverse Effect. The execution
and delivery of this Agreement and the issue and sale of the Shares will not    
involve any transaction which is subject to the prohibitions of Section 406 of  
ERISA or in connection with which a tax could be imposed pursuant to Section    
4975 of the Internal Revenue Code of 1986, as amended, provided that, if any of 
the Purchaser, or any person or entity that owns a beneficial interest in any of
the Purchaser, is an "employee pension benefit plan" (within the meaning of     
Section 3(2) of ERISA) with respect to which the Company is a "party in         
interest" (within the meaning of Section 3(14) of ERISA), the requirements of   
Sections 407(d)(5) and 408(e) of ERISA, if applicable, are met. As used in this 
Section 2.1(ac), the term "Plan" shall mean an "employee pension benefit plan"  
(as defined in Section 3 of ERISA) which is or has been established or          
maintained, or to which contributions are or have been made, by the Company or  
any subsidiary or by any trade or business, whether or not incorporated, which, 
together with the Company or any subsidiary, is under common control, as        
described in Section 414(b) or (c) of the Code.                                 

      (z)  Acknowledgment Regarding Purchaser's Purchase of Shares.  The
Company acknowledges and agrees that the Purchaser is acting solely in the      
capacity of arm's length purchaser with respect to this Agreement and the       
transactions contemplated hereunder. The Company further acknowledges that the  
Purchaser is not acting as a financial advisor or fiduciary of the Company (or  
in any similar capacity) with respect to this Agreement and the transactions    
contemplated hereunder and any advice given by the Purchaser or any of its      
representatives or agents in connection with this Agreement and the transactions
contemplated hereunder is merely incidental to the Purchaser's purchase of the  
Shares.                                                                         

     Section 3.2  Representation and Warranties of the Purchaser.  The
Purchaser hereby makes the following representations and warranties to the      
Company:                                                                        

        (a)  Organization and Standing of the Purchaser.  The Purchaser is a
limited liability company duly organized, validly existing and in good standing 
under the laws of the Commonwealth of The Bahamas.                              

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  (b)  Authorization and Power.  The Purchaser has the requisite
corporate power and authority to enter into and perform this Agreement and to   
purchase the Shares in accordance with the terms hereof. The execution, delivery
and performance of this Agreement by Purchaser and the consummation by it of the
transactions contemplated hereby have been duly authorized by all necessary     
corporate action, and no further consent or authorization of the Purchaser, its 
Board of Directors or stockholders is required. This Agreement constitutes, or  
when executed and delivered shall constitute, a valid and binding obligation of 
the Purchaser enforceable against the Purchaser in accordance with its terms,   
except as such enforceability may be limited by applicable bankruptcy,          
insolvency, reorganization, moratorium, liquidation, conservatorship,           
receivership, or similar laws relating to, or affecting generally the           
enforcement of, creditor's rights and remedies or by other equitable principles 
of general application.                                                         

       (c)  No Conflicts.  The execution, delivery and performance of this
Agreement and the consummation by the Purchaser of the transactions contemplated
hereby and thereby or relating hereto do not and will not (i) result in a       
violation of such Purchaser's charter documents or bylaws or (ii) conflict with,
or constitute a default (or an event which with notice or lapse of time or both 
would become a default) under, or give to others any rights of termination,     
amendment, acceleration or cancellation of any material agreement, mortgage,    
deed of trust, indenture, note, bond, license, lease agreement, instrument or   
obligation to which the Purchaser is a party, (iii) create or impose or lien,   
charge or encumbrance on any property of the Purchaser under any agreement or   
any commitment to which the Purchaser is party or by which the Purchaser is on  
or by which any of its respective properties or assets are bound or (iv) result 
in a violation of any law, rule or regulation, or any order, judgment or decree 
of any court or governmental agency applicable to the Purchaser or its          
properties, except for such conflicts, defaults and violations as would not,    
individually or in the aggregate, prohibit or otherwise interfere with the      
ability of the Purchaser to enter into and perform its obligations under this   
Agreement in any material respect. The Purchaser is not required to obtain any  
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or perform any 
of its obligations under this Agreement or to purchase the Shares in accordance 
with the terms hereof, provided that for purposes of the representation made in 
this sentence, the Purchaser is assuming and relying upon the accuracy of the   
relevant representations and agreements of the Company herein.                  

        (d)  Information.  The Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations  
of the Company and materials relating to the offer and sale of the Shares which 
have been requested by the Purchaser. The Purchaser and its advisors, if any,   
have been afforded the opportunity to ask questions of the Company. The         
Purchaser has sought such accounting, legal and tax advice as it has considered 
necessary to make an informed investment decision with respect to its           
acquisition of the Shares. Purchaser understands that it (and not the Company)  
shall be responsible for its own tax liabilities that may arise as a result of  
this investment or the transactions contemplated by this Agreement.             

        (e)  No Shorting.  The Purchaser has the right to sell shares of the
Company's Common Stock equal in number to the number of the Shares required     
pursuant to this Agreement to be purchased during the Draw Down Pricing Period. 
The Purchaser covenants, however, that prior to and during the term of the Draw 
Down Pricing Period, neither the Purchaser nor any of                           

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its affiliates nor any entity managed by the Purchaser will ever be in a net    
short position with respect to shares of the Common Stock of the Company in any 
accounts directly or indirectly managed by the Purchaser or any affiliate of the
Purchaser or any entity managed by the Purchaser.                               

ARTICLE IV  

Covenants 

  The Company covenants with the Purchaser as follows, which covenants are
for the benefit of the Purchaser and its permitted assignees (as defined        
herein).                                                                        

         Section 4.1  Securities.  The Company shall notify the Commission and
Nasdaq, if applicable, in accordance with their rules and regulations, of the   
transactions contemplated by this Agreement, and shall take all other necessary 
action and proceedings as may be required and permitted by applicable law, rule 
and regulation, for the legal and valid issuance of the Shares to the Purchaser 
or subsequent holders.                                                          

     Section 4.2  Registration and Listing.  The Company will take all
action necessary to cause its Common Stock to continue to be registered under   
Sections 12(b) or 12(g) of the Exchange Act, will comply in all respects with   
its reporting and filing obligations under the Exchange Act, and will not take  
any action or file any document (whether or not permitted by the Securities Act 
or the rules promulgated thereunder) to terminate or suspend such registration  
or to terminate or suspend its reporting and filing obligations under the       
Exchange Act or Securities Act, except as permitted herein. The Company will    
take all action necessary to continue the listing or trading of its Common Stock
and the listing of the Shares purchased by Purchaser hereunder on the NASDAQ or 
any relevant market or system, if applicable, and will comply in all respects   
with the Company's reporting, filing and other obligations under the bylaws or  
rules of the NASD or any relevant market or system.                             

       Section 4.3  Registration Statement.  Before the Purchaser shall be
obligated to accept a Draw Down request from the Company, the Company shall have
caused a sufficient number of shares of Common Stock to be registered to cover  
the Shares to be issued in connection with this Agreement.                      

Section 4.4  Compliance with Laws.                          

       (a)  The Company shall comply, and cause each subsidiary to comply,
with all applicable laws, rules, regulations and orders, noncompliance with     
which could reasonably be expected to have a Material Adverse Effect.           

     (b)  The Company will not be obligated to issue and the Purchaser
will not be obligated to purchase any shares of the Company's Common Stock which
would result in the issuance under this Agreement of Shares representing more   
than nineteen and nine-tenths percent (19.9%) of the issued and outstanding     
shares of the Company's Common Stock.                                           

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      Section 4.5  Keeping of Records and Books of Account.  The Company
shall keep and cause each subsidiary to keep adequate records and books of      
account, in which complete entries will be made in accordance with GAAP         
consistently applied, reflecting all financial transactions of the Company and  
its subsidiaries, and in which, for each fiscal year, all proper reserves for   
depreciation, depletion, obsolescence, amortization, taxes, bad debts and other 
purposes in connection with its business shall be made.                         

         Section 4.6  Reporting Requirements.  Upon request, the Company shall
furnish the following to the Purchaser so long as such Purchaser shall be       
obligated hereunder to purchase Shares:                                         

         (a)  Quarterly Reports filed with the Commission on Form 10-Q as soon
as available, and in any event within 45 days after the end of each of the first
three fiscal quarters of the Company; and                                       

      (b)  Annual Reports filed with the Commission on Form 10-K as soon
as available, and in any event within 90 days after the end of each fiscal year 
of the Company.                                                                 

Section 4.7  Other Financing Agreements.                    

               The Company is restricted from entering into any agreement with a
third party, the principal purpose of which is to secure debt or equity         
financing for the Company ("Other Financing") without the prior consent of the  
Purchaser, which consent will not be unreasonably withheld or delayed, or       
without terminating its agreement with the Purchaser, except that the Company   
may (i) enter into any loan, credit or lease facility with a bank or financing  
institution, (ii) establish an employee stock option plan or agreement or       
finance the acquisition of other companies, equipment, technologies or lines of 
business and/or (iii) issue shares of Common Stock in connection with the       
Company's current option plans and agreements or stock purchase plans and       
agreements and, currently outstanding warrants, and (iv) issue its debt or      
equity securities to one or more companies the principal business of which is   
not the investment in the securities of other entities, or to Softbank, Paul    
Allen, Idealab or any entity affiliated with any such person, or to any person  
or entity specifically identified by the board of directors of the Company as a 
strategic partner of the Company, or in connection with the acquisition of other
companies, equipment, technologies or lines of business (each a "Permitted      
Transaction").  If the Purchaser consents to the Company entering into an Other 
Financing, the Purchaser shall have the option, which option shall be exercised 
within ten (10) calendar days of its consent, to purchase all or a portion of   
the Other Financing on the same, absolute terms and conditions contemplated     
therein.  If the Purchaser does not exercise its purchase option, the Company   
shall have the right to close the Other Financing on the scheduled closing date 
with a third party; provided that all of the terms and conditions of such       
closing are substantially the same as those provided to the Purchaser.          

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        Section 4.8  Non-public Information.  Neither the Company nor any of
its officers or agents shall disclose any material non-public information about 
the Company to the Purchaser.                                                   

       Section 4.9  No Stop Orders.  The Company will advise the Purchaser
promptly and, if requested by the Purchaser, will confirm such advice in        
writing: (i) of its receipt of notice of any request by the Commission for      
amendment of or a supplement to the Registration Statement, any Prospectus or   
for additional information; (ii) of its receipt of notice of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration   
Statement or of the suspension of qualification of the Shares for offering or   
sale in any jurisdiction or the initiation of any proceeding for such purpose;  
and (iii) of its becoming aware of the happening of any event, which makes any  
statement of a material fact made in the Registration Statement or the          
Prospectus (as then amended or supplemented) untrue or which requires the making
of any additions to or changes in the Registration Statement or the Prospectus  
(as then amended or supplemented) in order to state a material fact required by 
the Securities Act or the regulations thereunder to be stated therein or        
necessary in order to make the statements therein not misleading, or of the     
necessity to amend or supplement the Prospectus (as then amended or             
supplemented) to comply with the Securities Act or any other law. If at any time
the Commission shall issue any stop order suspending the effectiveness of the   
Registration Statement, the Company will make commercially reasonable efforts to
obtain the withdrawal of such order at the earliest possible time.              

        Section 4.10  Amendments to the Registration Statement.  The Company
will not (i) file any amendment to the Registration Statement or make any       
amendment or supplement to the Prospectus of which the Purchaser shall not      
previously have been advised or to which the Purchaser shall reasonably object  
after being so advised or (ii) so long as, in the reasonable opinion of counsel 
for the Purchaser, a Prospectus is required to be delivered in connection with  
sales by any Purchaser or dealer, file any information, documents or reports    
pursuant to the Exchange Act without delivering a copy of such information,     
documents or reports to the Purchaser promptly following such filing.           

  Section 4.11  Prospectus Delivery.  Prior to the execution and
delivery of this Agreement, the Company will deliver to the Purchaser, without  
charge, in such quantities as reasonably requested by the Purchaser, copies of  
each form of Prospectus. As soon after the execution and delivery of this       
Agreement as possible and thereafter from time to time for such period as in the
opinion of counsel for the Purchasers a prospectus is required by the Securities
Act to be delivered in connection with sales by the Purchaser, the Company will 
expeditiously deliver to the Purchaser, without charge, as many copies of the   
Prospectus (and of any amendment or supplement thereto) as the Purchaser may    
reasonably request. The Company consents to the use of the Prospectus (and of   
any amendment or supplement thereto) in accordance with the provisions of the   
Securities Act and with the securities or Blue Sky laws of the jurisdictions in 
which the Shares may be sold by the Purchaser, in connection with the offering  
and sale of the Shares and for such period of time thereafter as the Prospectus 
is required by the Securities Act to be delivered in connection with sales of   
the Shares. If during such period of time any event shall occur that in the     
judgment of the Company or in the opinion of counsel for the Purchaser is       
required to be set forth in the Prospectus (as then amended or                  
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supplemented) or should be set forth therein in order to make the statements    
therein, in the light of the circumstances under which they were made, not      
misleading, or if it is necessary to supplement or amend the Prospectus to      
comply with the Securities Act or any other law, the Company will forthwith     
prepare and, subject to the provisions of Section 4.10 above, file with the     
Commission an appropriate supplement or amendment thereto, and will             
expeditiously furnish to the Purchaser a reasonable number of copies thereof.   

ARTICLE V 

Conditions to Closing and Draw Downs  

         Section 5.1  Conditions Precedent to the Obligation of the Company to
Close this Agreement and to Sell the Shares. The obligation hereunder of the    
Company to issue and sell the Shares to the Purchaser is subject to the         
satisfaction or waiver, at or before each Draw Down, of each of the conditions  
set forth below. These conditions are for the Company's sole benefit and may be 
waived by the Company at any time in its sole discretion.                       

         (a)  Accuracy of the Purchaser's Representations and Warranties.  The
representations and warranties of the Purchaser shall be true and correct in all
material respects as of the date when made and as of the date of each Draw Down 
request (the "Draw Down Exercise Date") as though made at that time, except for 
representations and warranties that are expressly made as of a particular date. 

      (b)  Effective Registration Statement.  The Registration Statement
registering the offer and sale of the Shares shall have been declared effective 
by the Commission and shall have been amended or supplemented, as required, to  
disclose the sale of the Shares prior to each Settlement Date, as applicable.   

(c)  Performance by the Purchaser.  The Purchaser shall have
performed, satisfied and complied in all material respects with all covenants,  
agreements and conditions required by this Agreement to be performed, satisfied 
or complied with by the Purchaser at or prior to each Settlement Date.          

         (d)  No Injunction.  No statute, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or endorsed  
by any court or governmental authority of competent jurisdiction which prohibits
the consummation of any of the transactions contemplated by this Agreement.     

         (e)  No Suspension, Etc.  Trading in the Company's Common Stock shall
not be suspended by the Commission or the NASD (except for any suspension of    
trading of limited duration agreed to by the Company, which suspension shall be 
terminated prior to Closing), and, at any time prior to each Draw Down request, 
trading in securities generally as reported on NASDAQ shall not have been       
suspended or limited, or minimum prices shall not have been established on      
securities whose trades are reported by American Stock Exchange, or on the New  
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States or New York State authorities, nor shall there have occurred  
any material outbreak or escalation of hostilities or other national or         
international calamity or crisis of such magnitude in                           
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its effect on, or any material adverse change in any financial market which, in 
each case, in the judgment of the Company, makes it impracticable or inadvisable
to issue the Shares.                                                            

     (f)  No Proceedings or Litigation.  No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,  
and no investigation by any governmental authority shall have been threatened,  
against the Company or any subsidiary, or any of the officers, directors or     
affiliates of the Company or any subsidiary seeking to restrain, prevent or     
change the transactions contemplated by this Agreement, or seeking damages in   
connection with such transactions.                                              

        Section 5.2  Conditions Precedent to the Obligation of the Purchaser
to Close this Agreement. The obligation hereunder of the Purchaser to enter this
Agreement is subject to the satisfaction or waiver, at or before the Closing, of
each of the conditions set forth below. These conditions are for the Purchaser's
sole benefit and may be waived by the Purchaser at any time in its sole         
discretion.                                                                     

       (a)  Performance by the Company.  The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements  
and conditions required by this Agreement to be performed, satisfied or complied
with by the Company at or prior to the Closing.                                 

         (b)  No Suspension, Etc.  Trading in the Company's Common Stock shall
not be suspended by the Commission or the NASD (except for any suspension of    
trading of limited duration agreed to by the Company, which suspension shall be 
terminated prior to Closing), and, at any time prior to the Closing, trading in 
securities generally as reported on NASDAQ shall not have been suspended or     
limited, or minimum prices shall not have been established on securities whose  
trades are reported by the American Stock Exchange, or on the New York Stock    
Exchange, nor shall a banking moratorium have been declared either by the United
States or New York State authorities, nor shall there have occurred any material
outbreak or escalation of hostilities or other national or international        
calamity or crisis of such magnitude in its effect on, or any material adverse  
change in any financial market which, in each case, in the judgment of the      
Purchaser, makes it impracticable or inadvisable to purchase the Shares.        

       (c)  No Injunction.  No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or   
endorsed by any court or governmental authority of competent jurisdiction which 
prohibits the consummation of any of the transactions contemplated by this      
Agreement.                                                                      

     (d)  No Proceedings or Litigation.  No action, suit or proceeding
before any arbitrator or any governmental authority shall have been commenced,  
and no investigation by any governmental authority shall have been threatened,  
against the Company or any subsidiary, or any of the officers, directors or     
affiliates of the Company or any subsidiary seeking to restrain, prevent or     
change the transactions contemplated by this Agreement, or seeking damages in   
connection with such transactions.                                              

      (e)  Opinion of Counsel, Etc.  At the Closing, the Purchaser shall
have received an opinion of counsel to the Company, dated the date of Closing,  
in the form of Exhibit A hereto,                                                
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and such other certificates and documents as the Purchaser or its counsel shall 
reasonably require incident to the Closing.                                     

        Section 5.3  Conditions Precedent to the Obligation of the Purchaser
to Accept a Draw Down and Purchase the Shares. The obligation hereunder of the  
Purchaser to accept a Draw Down request and to acquire and pay for the Shares is
subject to the satisfaction or waiver, at or before each Draw Down Exercise     
Date, of each of the conditions set forth below. The conditions are for the     
Purchaser's sole benefit and may be waived by the Purchaser at any time in its  
sole discretion.                                                                

        (a)  Accuracy of the Company's Representations and Warranties.  Each
of the representations and warranties of the Company shall be true and correct  
in all material respects as of the date when made and as of the Draw Down       
Exercise Date as though made at that time (except for representations and       
warranties that speak as of a particular date).                                 

      (b)  Effective Registration Statement.  The Registration Statement
registering the Shares shall have been declared effective by the Commission and 
shall have been amended or supplemented, as required, to disclose the sale of   
the Shares prior to the Closing Date or each Settlement Date, as applicable.    

       (c)  No Suspension. Trading in the Company's Common Stock shall not
have been suspended by the Commission or the NASD (except for any suspension of 
trading of limited duration agreed to by the Company, which suspension shall be 
terminated prior to each Draw Down request), and, at any time prior to such     
request, trading in securities generally as reported by the American Stock      
Exchange shall not have been suspended or limited, or minimum prices shall not  
have been established on securities whose trades are reported by the American   
Stock Exchange.                                                                 

   (d)  Material Adverse Effect; Material Change in Ownership.  No
Material Adverse Effect and no Material Change in Ownership shall have occurred.

ARTICLE VI  

Draw Down Terms; Call Option  

      Section 6.1  Drawn Down Terms.  Subject to the satisfaction of the
conditions set forth in this Agreement, the parties agree as follows:           

    (a)  The Company, may, in its sole discretion, issue a Draw Down
Notice with respect to up to (i) $30,000,000 if the Threshold Price is equal to 
or exceeds $22.00; (ii) $25,000,000 if the Threshold Price is equal to or       
exceeds $18.00 but is less than $22.00; (iii) $20,000,000 if the Threshold Price
is equal to or exceeds $14.00 but is less than $18.00; and (iv) up to           
$15,000,000 if the Threshold Price is equal to or exceeds $10.00 but is less    
than $14.00 (a "Draw Down") during any Draw Down Pricing Period, which Draw Down
the Purchaser will be obligated to accept. Prior to issuing any Draw Down       
Notice, the Company shall have Shares representing at least the Draw Down Amount
registered under the Registration Statement.                                    

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       (b)  The number of Shares to be issued in connection with each Draw
Down shall be equal to the sum of the quotients (for each trading day of the    
Draw Down Pricing Period for which the VWAP equals or exceeds the Threshold     
Price) of (x) 1/18th of the Draw Down Amount divided by (y) the applicable Draw 
Down Discount Percentage multiplied by the VWAP for such day.                   

      (c)  Only one Draw Down shall be allowed in each Draw Down Pricing
Period. Each Draw Down Pricing Period shall consist of two periods of nine      
consecutive trading days (each, a "Settlement Period").                         

        (d)  The number of Shares purchased by the Purchaser with respect to
each Draw Down shall be determined on a daily basis during each Draw Down       
Pricing Period and settled on the second business day following the end of each 
Settlement Period (the "Settlement Date").                                      

       (e)  There shall be a minimum of five (5) trading days between Draw
Downs.                                                                          

    (f)  There shall be a maximum of seven (7) Draw Downs during the
term of this Agreement.                                                         

        (g)  Each Draw Down will expire on the last trading day of each Draw
Down Pricing Period.                                                            

      (h)  For each trading day during the Draw Down Pricing Period that
the VWAP is at or above the Threshold Price, one-eighteenth (1/18th) of the Draw
Down Amount shall be allocated to purchase Shares at a price equal to the       
product of (x) the Draw Down Discount Percentage times (y) the VWAP for such    
day. For each trading day during the Draw Down Pricing Period that the VWAP is  
less than the Threshold Price, the Purchaser may elect in its sole discretion to
allocate 1/18th of the Draw Down Amount to purchase Shares at the end of such   
Draw Down Pricing Period at a price equal to the product of (A) the Draw Down   
Discount Percentage times (B) the Threshold Price. At no time shall the         
Threshold Price be set below $10.00 unless agreed upon by the Company and the   
Purchaser. If trading in the Company's Common Stock is suspended for any reason 
for more than three (3) hours in any trading day, at the Purchaser's option, the
price of the Common Stock shall be deemed to be below the Threshold Price for   
that trading day.                                                               

(i)  The Company must inform the Purchaser via facsimile    
transmission as to the Draw Down Amount the Company wishes to exercise before   
commencement of trading on the first trading day of the Draw Down Pricing Period
(the "Draw Down Notice"). In addition to the Draw Down Amount, the Company shall
set the Threshold Price with each Draw Down Notice and shall designate the first
trading day of the Draw Down Pricing Period.                                    

      (j)  On each Settlement Date, the Company shall deliver the Shares
purchased by the Purchaser to the Purchaser or to The Depositary Trust Company  
("DTC") on the Purchaser's behalf via DWAC. The Company shall cause such Shares 
to be credited to the DTC account designated by the Purchaser upon receipt by   
the Company of payment for the Draw Down into an account designated by the      
Company by wire transfer of immediately available funds; provided that the      
Shares are received by the Purchaser no later than 1:00 p.m. EST or next day    
available funds if the Shares are received thereafter. The delivery of the      
shares of Common Stock                                                          
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into the Purchaser's DTC account in exchange for payment therefor shall be      
referred to herein as "Settlement". The Purchaser shall coordinate Settlement   
with the Company through DTC.                                                   

     (k)  If during any Draw Down Pricing Period, the Company with the
consent of the Purchaser shall issue any shares of Common Stock (other than     
shares of Common Stock issued under this Agreement or in connection with a      
Permitted Transaction), the Purchaser may in its sole discretion (i) purchase up
to the number of shares of Common Stock so issued, at the price and on such     
terms as the Company issued such shares of Common Stock during such Draw Down   
Pricing Period, (ii) purchase up to the Draw Down Amount of shares of Common    
Stock at the applicable Draw Down Discount Percentage times the VWAP for such   
Draw Down Pricing Period, or (iii) elect not to purchase any Shares during such 
Draw Down Pricing Period. The Purchaser shall notify the Company of its election
of the business day preceding the Settlement Date.                              

          (l)  If during any thirty day period, the VWAP for the Common Stock is
less than $10.00 for five (5) or more consecutive trading days, the Company     
shall notify the Purchaser if it desires to secure additional financing and the 
Company and the Purchaser shall negotiate the possible terms of such financing. 
If the Company and the Purchaser cannot agree on the terms of such additional   
financing, the Company may secure additional debt or equity financing from a    
third party.  If such third party offers to purchase securities from the Company
on terms the Company finds acceptable, the Company shall notify the Purchaser of
such offer and the Purchaser may within ten (10) days following such notice     
elect to purchase securities from the Company on the same terms and in up to the
same amounts as the third party.  If the Purchaser does not participate in such 
additional financing, the Company shall have the right to close such additional 
financing with a third party on the scheduled closing date, provided that all of
the terms and closing conditions of such closing are substantially the same as  
those provided to the Purchaser. Whether or not the Purchaser participates in   
such additional financing, if the Company closes the third party financing the  
Purchaser in its sole discretion may (i) purchase any Shares then required to be
purchased under Section 6.1 for the applicable Draw Down Pricing Period, or (ii)
elect not to purchase any Shares during the then-current Draw Down Pricing      
Period.                                                                         

    (m)  If on the Settlement Date, the Company fails to deliver the
Shares to be purchased by the Purchaser, and such failure continues for ten (10)
trading days, the Company shall pay in cash or restricted shares of Common      
Stock, at the option of the Purchaser, as liquidated damages and not as a       
penalty to the Purchaser an amount equal to two percent (2%) of the Draw Down   
Amount for the initial thirty (30) days and each additional thirty (30) day     
period thereafter until such failure has been cured, which shall be pro rated   
for such periods less than thirty (30) days (the "Periodic Amount"). Cash       
payments to be made pursuant to this clause (l) shall be due and payable        
immediately upon demand in immediately available cash funds. Certificates       
evidencing the restricted shares of Common Stock shall be delivered immediately 
upon demand. The parties agree that the Periodic Amount represents a reasonable 
estimate on the part of the parties, as of the date of this Agreement, of the   
amount of damages that may be incurred by the Purchaser if the Company fails to 
deliver the Shares on the Settlement Date. If the Purchaser elects to receive   
shares of Common Stock instead of cash, the Purchaser shall have the right to   
demand registration once within twelve (12) months of the date of issuance of   
such                                                                            
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shares of Common Stock and piggyback registration rights if the Company         
files a separate registration statement.                                        

Section 6.2  Call Option.                                   

     (a)  The Purchaser shall have the right to exercise multiple call
options to purchase shares representing up to a maximum aggregate amount of     
$10,000,000 (a "Call Option") during the first Draw Down Pricing Period.        

        (b)  The number of shares of Common Stock to be issued in connection
with the Call Option shall be equal to the amount of the Call Option identified 
in the notice thereof (the "Call Option Notice") divided by a price equal to the
applicable Draw Down Discount Percentage times the VWAP (the "Call Option       
Discount Price") for the Common Stock on the day the Purchaser issues its Call  
Option Notice, which price shall not be less than the Threshold Price.          

   (c)  The Call Option shall be settled on each of the Settlement
Dates during the first Draw Down Pricing Period (with respect to half of the    
Shares subject thereto on each of the Settlement Dates).                        

       (d)  The Threshold Price designated by the Company in its Draw Down
Notice shall apply to the Call Option.                                          

     (e)  For the Call Option that the Purchaser exercises pursuant to
this Section, the Purchaser must issue via facsimile a Call Option Notice to the
Company no later than 5:00 p.m. (California time) on the day such Call Option is
exercised. If the Purchaser does not exercise a Call Option by 5:00 p.m.        
(California time) on the last day of the first Draw Down Pricing Period, the    
Purchaser's Call Options with respect to that Draw Down Pricing Period shall    
terminate.                                                                      

ARTICLE VII 

Termination 

 Section 7.1  Termination by Mutual Consent.  The term of this
Agreement shall be nine (9) months from the Effective Date. This Agreement may  
be terminated at any time by mutual consent of the parties.                     

     Section 7.2  Other Termination.  The Purchaser may terminate this
Agreement upon (x) one (1) day's notice if the Company issues convertible       
debentures or enters an equity financing facility as set forth in Section 4.7   
without the Purchaser's prior written consent, or (y) one (1) day's notice if an
event resulting in a Material Adverse Effect or a Material Change of Control in 
Ownership has occurred. The Company may terminate this Agreement upon one (1)   
day's notice if (i) the Purchaser breaches any agreement hereunder and such     
breach shall continue unremedied for a period of five (5) trading days after the
Purchaser has received written notice from the Company that such breach shall   
have occurred or (ii) a Change of Control has occurred. For purposes of this    
Section, a "Change of Control" of the Company shall be deemed                   

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to have occurred at such time as (a) any person is or becomes the "beneficial   
owner" (as defined in Rule 13d-3 under the Exchange Act, directly or indirectly,
of securities of the Company representing in excess of fifty (50%) percent or   
more of the combined voting power of the Company's outstanding securities       
ordinarily having the right to vote at elections of directors, trustees or      
managers; or (b) individuals who constitute the incumbent board of directors    
cease for any reason to constitute at least a majority thereof, provided that   
any person becoming a director subsequent to the date hereof whose election or  
nomination for election by the Company's shareholders was approved by a vote of 
at least a majority of the directors comprising the incumbent board of          
directors, shall be, for purposes of this clause (b), considered as though he   
were a member of the incumbent board of directors; or (c) a sale by the Company 
of all or substantially all of its assets.                                      

       Section 7.3  Effect of Termination.  In the event of termination by
the Company or the Purchaser, written notice thereof shall forthwith be given to
the other party and the transactions contemplated by this Agreement shall be    
terminated without further action by either party. If this Agreement is         
terminated as provided in Section 7.1 or 7.2 herein, this Agreement shall become
void and of no further force and effect, except as provided in Section 9.10.    
Nothing in this Section 7.3 shall be deemed to release the Company or the       
Purchaser from any liability for any breach under this Agreement, or to impair  
the rights of the Company and the Purchaser to compel specific performance by   
the other party of its obligations under this Agreement.                        

ARTICLE VIII  

Indemnification 

Section 8.1  General Indemnity.                             

        (a)  Indemnification by the Company.  The Company will indemnify and
hold harmless the Purchaser and each person, if any, who controls the Purchaser 
within the meaning of Section 15 of the Securities Act or Section 20(a) of the  
Exchange Act from and against any losses, claims, damages, liabilities and      
expenses (including reasonable costs of defense and investigation and all       
attorney's fees) to which the Purchaser and each person, if any, who controls   
the Purchaser may become subject, under the Securities Act or otherwise, insofar
as such losses, claims, damages, liabilities and expenses (or actions in respect
thereof) arise out of or are based upon, (i) any untrue statement or alleged    
untrue statement of a material fact contained, or incorporated by reference, in 
the Registration Statement or the Prospectus relating to the shares being sold  
to the Purchaser, or any amendment or supplement to it, or (ii) the omission or 
alleged omission to state in that Registration Statement or any document        
incorporated by reference in the Registration Statement, a material fact        
required to be stated therein or necessary to make the statements therein not   
misleading.                                                                     

   The Company will reimburse the Purchaser and each such controlling person
promptly upon demand for any legal or other costs or expenses reasonably        
incurred by or the controlling person in investigating, defending against, or   
preparing to defend against any such claim, action, suit or proceeding, except  
that the Company will not be liable to the extent a claim or action             

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which results in a loss, claim, damage, liability or expense arises out of, or  
is based upon, an untrue statement, alleged untrue statement, omission or       
alleged omission, included in the Registration Statement or any Prospectus in   
reliance upon, and in conformity with, written information furnished by the     
Purchase to the Company for inclusion in the Registration Statement or          
Prospectus.                                                                     

        (b)  Indemnification by the Purchaser.  The Purchaser will indemnify
and hold harmless the Company, each of its directors and officers, and each     
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act from and against any        
expenses (including reasonable costs of defense and investigation and all       
attorneys fees) to which the Purchaser and each person, if any, who controls the
Purchaser may become subject, under the Securities Act or otherwise, insofar as 
such losses, claims, damages, liabilities and expenses (or actions in respect   
thereof) arise out of or are based upon, (i) any untrue statement or alleged    
untrue statement of a material fact contained in any Prospectus or (ii) the     
omission or alleged omission to state in the Registration Statement or any      
Prospectus a material fact required to be stated therein or necessary to make   
the statements therein not misleading, to the extent, but only to the extent,   
the untrue statement, alleged untrue statement, omission or alleged omission was
made in reliance upon, and in conformity with, written information furnished by 
the Purchaser to the Company for inclusion in the Registration Statement or     
Prospectus, and the Purchaser will reimburse the Company and each such director,
officer or controlling person promptly upon demand for any legal or other costs 
or expenses reasonably incurred by the Company or the other person in           
investigating, defending against, or preparing to defend against any such claim,
action, suit or proceeding.                                                     

     Section 8.2  Indemnification Procedures.  Promptly after a person
receives notice of a claim or the commencement of an action for which the person
intends to seek indemnification under paragraph (a) or (b) of Section 8.1, the  
person will notify the indemnifying party in writing of the claim or            
commencement of the action, suit or proceeding, but failure to notify the       
indemnifying party will not relieve the indemnifying party from liability under 
paragraph (a) or (b) of Section 8.1, except to the extent it has been materially
prejudiced by the failure to give notice. The indemnifying party will be        
entitled to participate in the defense of any claim, action, suit or proceeding 
as to which indemnification is being sought, and if the indemnifying party      
acknowledges in writing the obligation to indemnify the party against whom the  
claim or action is brought, the indemnifying party may (but will not be required
to) assume the defense against the claim, action, suit or proceeding with       
counsel satisfactory to it. After an indemnifying party notifies an indemnified 
party that the indemnifying party wishes to assume the defense of a claim,      
action, suit or proceeding the indemnifying party will not be liable for any    
legal or other expenses incurred by the indemnified party in connection with the
defense against the claim, action, suit or proceeding except that if, in the    
opinion of counsel to the indemnifying party, one or more of the indemnified    
parties should be separately represented in connection with a claim, action,    
suit or proceeding the indemnifying party will pay the reasonable fees and      
expenses of one separate counsel for the indemnified parties. Each indemnified  
party, as a condition to receiving indemnification as provided in Paragraph (a) 
or (b) or Section 8.1, will cooperate in all reasonable respects with the       
indemnifying party in the defense of any action or claim as to which            
indemnification is sought. No indemnifying party will be liable for any         
settlement of any action effected without its prior written consent. No         
indemnifying party will, without the prior written consent of the indemnified   
party, effect any settlement of a pending or                                    

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threatened action with respect which an indemnified party is, or is informed    
that it may be, made a party and for which it would be entitled to              
indemnification, unless the settlement includes an unconditional release of the 
indemnified party from all liability and claims which are the subject matter of 
the pending or threatened action.                                               

     If for any reason the indemnification provided for in this Agreement is not
available to, or is not sufficient to hold harmless, an indemnified party in    
respect of any loss or liability referred to in paragraph (a) or (b) of Section 
8.1, each indemnifying party will, in lieu of indemnifying the indemnified      
party, contribute to the amount paid or payable by the indemnified party,       
contribute to the amount paid or payable by the indemnified party as a result of
the loss or liability, (i) in the proportion which is appropriate to reflect the
relative benefits received by the indemnifying party on the one hand and by the 
indemnified party on the other from the sale of stock which is the subject of   
the claim, action, suit or proceeding which resulted in the loss or liability or
(ii) if that allocation is not permitted by applicable law, in such proportion  
as is appropriate to reflect not only the relative benefits of the sale of      
stock, but also the relative fault of the indemnifying party and the indemnified
party with respect to the statements or omissions which are the subject of the  
claim, action, suit or proceeding that resulted in the loss or liability, as    
well as any other relevant equitable considerations.                            

ARTICLE IX  

Miscellaneous 

Section 9.1  Fees and Expenses.  The Company shall pay all  
reasonable fees and expenses related to the transactions contemplated by this   
Agreement; provided, that the Company shall pay, at the Closing, all reasonable 
attorneys fees and expenses (exclusive of disbursements and out-of-pocket       
expenses and reasonably itemized) incurred by the Purchaser up to $40,000 in    
connection with the preparation, negotiation, execution and delivery of this    
Agreement. In addition, the Company shall pay all reasonable fees and expenses  
incurred by the Purchaser in connection with any amendments, modifications or   
waivers of this Agreement or incurred in connection with the enforcement of this
Agreement, including, without limitation, all reasonable attorneys fees and     
expenses. The Company shall pay all stamp or other similar taxes and duties     
levied in connection with issuance of the Shares pursuant hereto.               

Section 9.2  Specific Enforcement, Consent to Jurisdiction. 

 (a)  The Company and the Purchaser acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this  
Agreement were not performed in accordance with their specific terms or were    
otherwise breached. It is accordingly agreed that the parties shall be entitled 
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement and to enforce specifically the terms and provisions hereof or   
thereof, this being in addition to any other remedy to which any of them may be 
entitled by law or equity.                                                      

     (b)  Each of the Company and the Purchaser (i) hereby irrevocably
submits to the jurisdiction of the United States District Court and other courts
of the United States sitting in the                                             
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State of New York for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement and (ii) hereby waives, and agrees not to      
assert in any such suit, action or proceeding, any claim that it is not         
personally subject to the jurisdiction of such court, that the suit, action or  
proceeding is brought in an inconvenient forum or that the venue of the suit,   
action or proceeding is improper. Each of the Company and the Purchaser consents
to process being served in any such suit, action or proceeding by mailing a copy
thereof to such party at the address in effect for notices to it under this     
Agreement and agrees that such service shall constitute good and sufficient     
service of process and notice thereof. Nothing in this Section shall affect or  
limit any right to serve process in any other manner permitted by law.          

          Section 9.3  Entire Agreement; Amendment.  This Agreement contains the
entire understanding of the parties with respect to the matters covered hereby  
and, except as specifically set forth herein, neither the Company nor the       
Purchaser makes any representations, warranty, covenant or undertaking with     
respect to such matters. No provision of this Agreement may be waived or amended
other than by a written instrument signed by the party against whom enforcement 
of any such amendment or waiver is sought.                                      

       Section 9.4  Notices.  Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing   
and shall be effective (a) upon hand delivery, by telex (with correct answer    
back received), telecopy or facsimile at the address or number designated below 
(if delivered on a business day during normal business hours where such notice  
is to be received), or the first business day following such delivery (if       
delivered other than on a business day during normal business hours where such  
notice is to be received) or (b) on the second business day following the date  
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The        
addresses for such communications shall be:                                     

                                                                [Download Table]
                                                                           
If to the Company:      Egghead.com, Inc.                                  
                        1350 Willow Road                                   
                        Menlo Park, CA  94025                              
                        Tel. No.: 650.470.2400                             
                        Fax No.: 650.473.6990                              
                        Attention: John Labbett                            

With copies to:         Fenwick & West LLP                                 
                        Two Palo Alto Square                               
                        Paso Alto, CA  94306                               
                        Tel. No.: 650.494.0600                             
                        Fax No.: 650.494.1417                              
                        Attention: Horace Nash                             

If to the Purchaser:    Acqua Wellington North American Equities Fund, Ltd.
                        c/o Mees Pierson Fund Services (Bahamas) Ltd.      
                        Montague Sterling Centre                           
                        East Bay Street, P. O. Box SS-6238                 

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                                                                [Download Table]
                                                             
                        Nassau, Bahamas                      
                        Tel. No.:  (242) 394-2700            
                        Fax No.:  (242) 394-9667             
                        Attention:  Anthony L.M. Inder Rieden

With copies to:         Parker Chapin LLP                    
                        The Chrysler Building                
                        405 Lexington Avenue                 
                        New York, New York  10174            
                        Tel. No.:  (212) 704-6000            
                        Fax No.:  (212) 704-6288             
                        Attention: Christopher S. Auguste    

  Any party hereto may from time to time change its address for notices by
giving at least ten (10) days written notice of such changed address to the     
other party hereto.                                                             

        Section 9.5  Waivers.  No waiver by either party of any default with
respect to any provision, condition or requirement of this Agreement shall be   
deemed to be a continuing waiver in the future or a waiver of any other         
provisions, condition or requirement hereof, nor shall any delay or omission of 
any party to exercise any right hereunder in any manner impair the exercise of  
any such right accruing to it thereafter.                                       

        Section 9.6  Headings.  The article, section and subsection headings
in this Agreement are for convenience only and shall not constitute a part of   
this Agreement for any other purpose and shall not be deemed to limit or affect 
any of the provisions hereof.                                                   

      Section 9.7  Successors and Assigns.  The Purchaser may not assign
this Agreement to any person without the prior consent of the Company, which    
consent will not be unreasonably withheld. This Agreement shall be binding upon 
and inure to the benefit of the parties and their successors and assigns. The   
parties hereto may not amend this Agreement or any rights or obligations        
hereunder without the prior written consent of the Company and each Purchaser to
be affected by the amendment. After Closing, the assignment by a party to this  
Agreement of any rights hereunder shall not affect the obligations of such party
under this Agreement.                                                           

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        Section 9.8  Governing Law.  This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to the choice of law provisions.                                  

     Section 9.9  Survival.  The representations and warranties of the
Company and the Purchaser contained in Article III and the covenants contained  
in Article IV shall survive the execution and delivery hereof and the Closing   
until the termination of this Agreement, and the agreements and covenants set   
forth in Article VIII of this Agreement shall survive the execution and delivery
hereof and the Closing hereunder. Section 9.14 shall survive the termination of 
this Agreement.                                                                 

      Section 9.10  Counterparts.  This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and shall become effective when counterparts have been signed by
each party and delivered to the other parties hereto, it being understood that  
all parties need not sign the same counterpart. In the event any signature is   
delivered by facsimile transmission, the party using such means of delivery     
shall cause four additional executed signature pages to be physically delivered 
to the other parties within five days of the execution and delivery hereof.     

       Section 9.11  Publicity.  Prior to the Closing, neither the Company
nor the Purchaser shall issue any press release or otherwise make any public    
statement or announcement with respect to this Agreement or the transactions    
contemplated hereby or the existence of this Agreement. In the event the Company
is required by law, based upon an opinion of the Company's counsel, to issue a  
press release or otherwise make a public statement or announcement with respect 
to this Agreement prior to the Closing, the Company shall consult with the      
Purchaser on the form and substance of such press release. Promptly after the   
Closing, the Company may issue a press release or otherwise make a public       
statement or announcement with respect to this Agreement or the transactions    
contemplated hereby or the existence of this Agreement; provided, that prior to 
issuing any such press release, making any such public statement or             
announcement, the Company obtains the prior consent of the Purchaser, which     
consent shall not be unreasonably withheld or delayed.                          

      Section 9.12   Severability.  The provisions of this Agreement are
severable and, in the event that any court of competent jurisdiction shall      
determine that any one or more of the provisions or part of the provisions      
contained in this Agreement shall, for any reason, be held to be invalid,       
illegal or unenforceable in any respect, such invalidity, illegality or         
unenforceability shall not affect any other provision or part of a provision of 
this Agreement, and this Agreement shall be reformed and construed as if such   
invalid or illegal or unenforceable provision, or part of such provision, had   
never been contained herein, so that such provisions would be valid, legal and  
enforceable to the maximum extent possible.                                     

      Section 9.13  Further Assurances.  From and after the date of this
Agreement, upon the request of the Purchaser or the Company, each of the Company
and the Purchaser shall execute and deliver such instrument, documents and other
writings as may be reasonably necessary or desirable to confirm and carry out   
and to effectuate fully the intent and purposes of this Agreement.              

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    Section 9.14  Confidentiality.  Purchaser agrees to maintain the
confidentiality of all information about the Company received from any officer, 
employee or agent of the Company, until such time as that confidential          
information is released to the public generally other than as a result of any   
disclosure by Purchaser.                                                        

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 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorize officer as of the date first above  
written.                                                                        

EGGHEAD.COM, INC. 

     By: /s/ John E. Labbett
                    --------------------------------
   Name: John E. Labbett
                 Title: Executive Vice President and
     Chief Financial Officer

    ACQUA WELLINGTON NORTH
          AMERICAN EQUITIES FUND, LTD.

           By: Anthony L.M. Inder Reiden
                    --------------------------------
             Name: Anthony L.M. Inder Reiden
Title: Director   

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EXHIBIT A TO THE  
COMMON STOCK PURCHASE AGREEMENT 
OPINION OF COUNSEL  

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February 17, 2000 

Acqua Wellington North American Equities Fund, Ltd.                             
c/o Mees Pierson Fund Services (Bahamas) Ltd.                                   
Montague Sterling Centre                                                        
East Bay Street, P.O. Box SS-6238                                               
Nassau, Bahamas                                                                 

Re:  Egghead.com, Inc.                                                

Ladies and Gentlemen:                                                           

     This opinion is furnished to you pursuant to Section 5.2(e) of that certain
Common Stock Purchase Agreement (the "Purchase Agreement"), dated February 17,  
2000, between Egghead.com, Inc., a Delaware corporation formerly known as       
OnSale, Inc. (the "Company") and Acqua Wellington North American Equities Fund, 
Ltd., a company organized under the laws of the Commonwealth of The Bahamas (the
"Purchaser").  We have acted as counsel for the Company in connection with the  
issuance and sale to the Purchaser of an aggregate of up to 5,000,000 shares of 
common stock, par value $0.001 per share, of the Company (the "Shares").        

    We advise you that we have participated in the preparation of that certain
registration statement on Form S-3 (Registration No. 333-91553) (the "Initial   
Registration Statement") filed with the Securities and Exchange Commission (the 
"Commission"), which Initial Registration Statement became effective on February
3, 2000 (such Initial Registration Statement, including all exhibits thereto and
including the information contained in the form of final prospectus filed with  
the Commission pursuant to Rule 424(b) under the Securities Act of 1933, as     
amended (the "Securities Act"), and deemed by virtue of Rule 430A under the     
Securities Act to be part of the Registration Statement at the time it was      
declared effective, being hereinafter collectively referred to as the           
"Registration Statement," and the final prospectus in the form first filed      
pursuant to Rule 424(b) under the Securities Act being hereinafter referred to  
as the "Prospectus"). Except as otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in the Purchase Agreement.      

 To render this opinion, we have examined originals, certified copies or
other copies identified to us as being true copies of originals of the          
following, which we believe to be all those necessary for us to examine in order
to render the opinions set forth herein. We have not examined any documents     
other than those referred to below.                                             

(1)  the executed Purchase Agreement;                       

    (2)  a copy of the Company's Amended and Restated Certificate of
             Incorporation, as filed with the Delaware Secretary of State on
     November 19, 1999 (the "Certificate of Incorporation");

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      (3)  a copy of the Company's First Amended and Restated Bylaws, as
adopted on September 10, 1999 (the "Bylaws");     

         (4)  the resolutions adopted by the Company's Board of Directors (the
               "Board") on November 15, 1999 and by the Finance Committee of the
      Board on February 15, 2000, relating to the transactions
contemplated by the Purchase Agreement;           

     (5)  the stock records for the Company that is has provided to us
               (consisting of a certificate from the transfer agent of even date
       herewith verifying the number of the Company's issued and
           outstanding shares of capital stock as of the date hereof and
           summary reports from the Company confirming the number of the
              Company's issued and outstanding shares of capital stock and the
             number of options and any other rights to acquire shares of the
        Company's capital stock outstanding as of the date hereof)
(collectively, the "Stock Records");              

   (6)  copies provided to us by the Company of the agreements and
     instruments listed in Part II, Item 21 of the Company's
            registration statement on Form S-4 (File No. 333-87377), filed
        with the Commission on September 17, 1999, as subsequently
             amended on September 22, 1999, which agreements and instruments
       have been identified to us by the Company as all material
               agreements and instruments binding on the Company and required to
          be filed in connection with such registration statement (the
"Material Agreements");                           

(7)  the form of share certificate to represent the Shares; 

        (8)  a certificate of good standing of the Company from the Delaware
            Secretary of State dated February 15, 2000, verifying the good
standing of the Company with that agency;         

        (9)  a Certificate of Status Foreign Corporation from the California
       Secretary of State dated February 15, 2000, verifying the
               Company's qualification to do business in California and the good
standing of the Company with that agency;         

         (10) a tax status certificate from the California Franchise Tax Board
             dated February 15, 2000, verifying the tax good standing of the
Company with that agency;                         

        (11) a Certificate of Existence/Authorization from the office of the
              Washington Secretary of State dated February 15, 2000, verifying
   the good standing of the Subsidiary with that agency;

     (12) a Certificate of Existence/Authorization from the Washington
            Secretary of State dated February 16, 2000, verifying the good
standing of the Company with that agency;         

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         (13) facsimile notice as of the date hereof from the Company's filing
       agent, to the effect that the information provided in the
         respective certificates or letter referred to in items 8-12
         continues to be accurate as of such date (together with the
    certificates and letter referred to in items 8-12, the
"Governmental Certificates");                     

       (14) certificate of Registrar and Transfer Agent dated February 16,
               2000 executed and delivered by Equiserve LLC (the "Transfer Agent
Certificate");                                    

          (15) the other certificates and documents delivered by or on behalf of
            the Company, the Company's transfer agent and the Purchaser at
               the Closing (collectively with item 14, the "Closing Documents");
and                                               

         (16) a certificate addressed to us and dated the date hereof executed
 by the Company containing certain factual and other
representations (the "Management Certificate").   

In our examination of documents for purposes of this opinion, we have 
assumed, and express no opinion as to, the genuineness of all signatures on     
original documents, the authenticity of all documents submitted to us as        
originals, the conformity to originals of all documents submitted to us as      
copies, the lack of any undisclosed termination, modification, waiver or        
amendment to any document reviewed by us, the legal competence or capacity of   
all natural persons executing the same and, except with respect to due          
authorization, execution and delivery of the Purchase Agreement by the Company, 
the due authorization, execution and delivery of all documents where due        
authorization, execution and delivery are prerequisites to the effectiveness    
thereof.                                                                        

    In order to render this opinion, we have examined such questions of law as
we deem advisable under the circumstances.  As to questions of fact, we have    
relied solely upon: (a) our examination of the documents referred to above, and 
we have assumed the current accuracy and completeness of the information        
obtained from public officials and records included in the documents referred to
above; (b) the representations and warranties of the Company set forth in the   
Purchase Agreement and the Closing Documents; (c) the representations and       
warranties made by representatives of the Company to us including, without      
limitation, those set forth in the Management Certificate; and (d) our actual   
knowledge. We have not considered parole evidence in connection with any of the 
agreements and instruments reviewed by us in connection with this opinion. We   
have made no attempt to verify the accuracy of any of such information,         
representations or warranties or to determine the existence or non-existence of 
any factual matters, nor, except as set forth above, have we searched any docket
or other records of any court, tribunal, agency or similar authority or any     
other record of any governmental agency or third party.   However, we are not   
aware of any facts that would lead us to believe that any of the opinions       
expressed herein are not accurate.                                              

As used in this opinion, the phrases "to our knowledge," "our actual  
knowledge," "known to us" or "we are not aware of" or words of similar import   
refer only to the actual knowledge of the attorneys currently in this firm who  
have rendered legal services to the Company in connection with the Registration 
Statement and the Purchase Agreement and mean that, while                       

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such attorneys have not been informed by the Company that the matters stated are
factually incorrect, we have made no investigation of such matters other than   
our examination of the documents referred to in this letter. No inference as to 
our knowledge of any matters bearing on the accuracy of any such statement      
should be drawn from the fact of our representation of the Company.             

Where statements in this opinion are qualified by the term "material,"
those statements involve judgments and opinions as to the materiality or lack of
materiality of any matter to the Company or its business, assets or financial   
condition that are entirely those of the Company and its officers, after having 
been advised by us as to the legal effect and consequences of such matters;     
however, such opinions and judgments are not known to us to be incorrect.       

For the purposes of this opinion, we have also assumed that: (a) the  
Purchaser has all requisite power and authority for, and has taken all          
corporate, partnership or other action necessary for, the Purchaser's due       
authorization, execution and delivery of the Purchase Agreement and all other   
related documents signed by or on behalf of the Purchaser in connection         
therewith, and for the performance by the Purchaser of all its obligations under
all such documents; (b) the Purchaser has fully performed all other obligations 
that it is to perform at or before the Closing; and (c) the Purchase Agreement  
constitutes a legal, valid and binding obligation of the Purchaser enforceable  
against the Purchaser in accordance with its terms.                             

 This letter is qualified by and is subject to, and we render no opinion
with respect to: (a) compliance or noncompliance with applicable non-United     
States, foreign and state statutes, rules and regulations concerning the        
issuance and sale of securities; (b) compliance by the Company or the Purchaser 
with any state or foreign "blue sky" laws, statutes, rules and regulations in   
connection with the issuance and sale of the Shares pursuant to the Purchase    
Agreement; (c) the Bylaws, rules and regulations of the National Association of 
Securities Dealers, Inc. with respect to the underwriting terms and arrangements
in connection with the offering of the Shares pursuant to the Purchase          
Agreement; or (d) the enforceability of provisions relating to indemnity or     
contribution for liabilities arising under the Securities Act. We render no     
opinion as to compliance or non-compliance with anti-fraud provisions of        
applicable state or federal laws, statutes, rules and regulations concerning the
issuance or sale of securities.                                                 

   This opinion is qualified by, and is subject to, and we render no opinion
with respect to, general limitations and exceptions applicable to all contracts,
including, without limitation:                                                  

 (a)  the effect of bankruptcy, insolvency, reorganization, arrangement,
        moratorium, fraudulent conveyance and other similar laws relating to
or affecting the rights of creditors generally;             

 (b)  the effect of general principles of equity and similar principles,
including, without limitation, concepts of public policy and
 unconscionability and the possible unavailability of specific
          performance, injunctive relief or other equitable remedies, regardless
  of whether considered in a proceeding in equity or at law; and

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    (c)  the effect of laws regarding unconscionability and of court decisions
      indicating that certain covenants and provisions of agreements are
      unenforceable where (i) the breach of such covenants or provisions
         imposes restrictions or burdens upon the other party and it cannot be
        demonstrated that the enforcement of such restrictions or burdens is
   reasonably necessary for the protection of the party seeking to
        enforce such provisions or (ii) the enforcement of such covenants or
         provisions under the circumstances would violate the implied covenant
of good faith and fair dealing.                             

    In connection with the opinions expressed in paragraph 1 below, insofar as
they relate to the valid existence or good standing or qualification as a       
foreign corporation of the Company and the Subsidiary, we have relied solely on 
the Management Certificate and the Governmental Certificates referred to in the 
third paragraph of this letter.                                                 

In connection with the opinion expressed in paragraph 3 below, we have
assumed that no changes in any facts or laws as of the date of this opinion set 
forth above will have occurred as of the date of settlement of each Draw Down,  
other than that as of such date the Purchaser has paid the purchase price in    
full for the shares being purchased, and otherwise complied with all of its     
obligations under the Purchase Agreement.                                       

   In connection with the opinions expressed in paragraphs 3 and 4 below, we
have examined the Certificate of Incorporation, the Bylaws, the Stock Records,  
the Transfer Agent Certificate and the contents of the Company's minute books.  
The Company has represented to us, and we have assumed, that these records      
accurately identify and describe all issuances of shares of the Company's       
capital stock and of any options, warrants or other rights to purchase such     
capital stock; however, we are not aware of any facts that would cause us to    
believe that any of the opinions expressed in paragraphs 3 and 4 are not        
accurate.                                                                       

   In connection with the opinions expressed in paragraphs 4, 6 and 7 below,
we have not conducted any special investigation of statutes, rules, regulations 
or orders and our opinion is limited to such California, Delaware General       
Corporate Law and United States orders, statutes, rules or regulations as in our
experience are of general application to transactions of the sort contemplated  
by the Purchase Agreement.                                                      

    We are admitted to practice law in the State of California, and we express
no opinion herein with respect to the application or effect of the laws of any  
jurisdiction other than the existing laws of: (a) the State of California; (b)  
the Delaware General Corporation Law set forth in statutory compilations without
reference to case law or secondary sources; and (c) the existing federal        
securities laws of the United States of America. Additionally, we disclaim any  
opinion as to the application of any law of any city, county or other local     
subdivision or other local governmental authority of the State of California. To
the extent that any of the documents reviewed by us in connection with this     
opinion are governed by the laws of any jurisdiction other than the State of    
California, such as the Purchase Agreement, our opinion relating to those       
documents is based solely upon the apparent meaning of the language without     
regard to interpretation or construction that might be indicated by the laws    
governing those agreements and instruments.                                     

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We also call your attention to the fact that under various reports    
published by committees of the State Bar of California, certain assumptions,    
qualifications and exceptions are implicit in opinions of lawyers.  Although we 
have expressly set forth some assumptions, qualifications and exceptions herein,
we are not limiting or omitting any others set forth in the various reports or  
otherwise deemed standard practice for lawyers in California.                   

Based upon the foregoing, and subject to the assumptions,   
qualifications and exceptions referred to herein, it is our opinion that:       

        1.  The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware. The Company has   
the requisite corporate power to own and operate its properties and assets, and 
to carry on its business as presently conducted. The Company and EO Corporation,
a Washington corporation and wholly-owned subsidiary of the Company (the        
"Subsidiary"), are each duly qualified to do business as foreign corporations   
and are in good standing in every jurisdiction in which the nature of the       
business conducted or property owned by each makes such qualification necessary,
except for any jurisdiction in which the failure to be so qualified will not    
have a Material Adverse Effect.                                                 

      2.  The Company has the requisite corporate power and authority to
enter into and perform its obligations under the Purchase Agreement and to issue
and sell the Shares. The execution, delivery and performance of the Purchase    
Agreement by the Company and the consummation by it of the transactions         
contemplated thereby have been duly authorized by all necessary corporate action
and no further consent or authorization of the Company, the Board or the        
Company's stockholders is required. The Purchase Agreement has been duly        
executed and delivered, and constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms. The   
Shares are not subject to preemptive rights under the Certificate of            
Incorporation or Bylaws.                                                        

     3.  The Shares, when duly countersigned by the Company's transfer
agent and registrar, and delivered to you against payment in full as provided in
the Purchase Agreement, will be duly and validly issued, fully paid and         
nonassessable.                                                                  

          4.  The execution, delivery and performance of and compliance with the
terms of the Purchase Agreement and the issuance of the Shares do not: (a)      
violate any provision of the Certificate of Incorporation or Bylaws; (b)        
conflict with, or constitute a default (or an event which with notice or lapse  
of time or both would become a default) under, or give to others any rights of  
termination, amendment, acceleration or cancellation of, any agreement,         
mortgage, deed of trust, indenture, note, bond, license, lease agreement or     
instrument to which the Company is a party that is filed or incorporated by     
reference as an exhibit to the Registration Statement; or (c) create or impose a
lien, charge or encumbrance on any property of the Company under any agreement  
to which the Company is a party or by which the Company is bound or by which any
of its respective properties or assets are bound that is filed or incorporated  
by reference as an exhibit to the Registration Statement, provided that we      
express no opinion with respect to the compliance by the Company with financial 
covenants, financial ratios and similar matters; except, in all cases other than
violations pursuant to clause (a) above,                                        

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for such conflicts, defaults, terminations, amendments, acceleration,           
cancellations and violations as would not, individually or in the aggregate,    
have a Material Adverse Effect.                                                 

        5.  To our knowledge, there is no action, suit, claim, investigation
or proceeding pending or threatened against the Company or the Subsidiary which 
questions the validity of the Purchase Agreement or the transactions            
contemplated hereby or any action taken or to be taken pursuant to the          
Agreement. To our knowledge, there is no action, suit, claim, investigation or  
proceeding pending or threatened against or involving the Company or the        
Subsidiary or any of their respective properties or assets which, if adversely  
determined, is reasonably likely to result in a Material Adverse Effect.        

6.  No consent, approval or authorization of or designation,
declaration or filing with any Delaware state or United States federal          
governmental authority on the part of the Company is required in connection with
the valid execution and delivery of the Purchase Agreement, or the offer, sale  
or issuance of the Shares or the consummation of any other transaction          
contemplated by the Purchase Agreement (other than the registration of the offer
and sale by the Company of the Shares under the Securities Act, and such        
consents, approvals, authorizations, registrations or qualifications as may be  
required under the Exchange Act, applicable state securities laws and the Nasdaq
National Market).                                                               

    7.  Based solely upon oral representations from the Staff of the
Commission, the Registration Statement was declared effective under the         
Securities Act as of 5:00 p.m. Eastern Standard Time on February 3, 2000, and to
our knowledge no stop order suspending the effectiveness of the Registration    
Statement has been issued and to our knowledge no proceedings for that purpose  
have been instituted or are threatened, pending or contemplated.                

   8.  The Company is not, and as a result of and immediately upon
Closing will not be, an "investment company" or a company "controlled" by an    
"investment company," within the meaning of the Investment Company Act of 1940, 
as amended.                                                                     

This opinion is intended solely for the use of the Purchaser for the  
purpose of the transactions provided for in the Purchase Agreement and is not to
be relied upon by the Purchaser for any other purpose or to be made available to
or relied upon for any other purpose by any other person or entity, whether or  
not named in the Purchase Agreement, without our prior written consent. We      
assume no obligation to advise you of any fact, circumstance, event or change in
the law or the facts that may hereafter be brought to our attention, whether or 
not they would affect or modify the opinions expressed herein.                  

                         Very truly yours,

                          FENWICK & WEST LLP

                              By: /s/ Horace L. Nash
                                         -------------------------
                                         Horace L. Nash, a partner

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘8-K’ Filing		Date		First		Last			Other Filings
Deleted on:		3/9/00
Filed on:		2/23/00
For Period End:		2/17/00		1		33
		2/16/00		34		35
		2/15/00		34
		2/3/00		6		39
		12/31/99		9
		11/19/99		33
		11/15/99		34					DEFA14A
		9/30/99		9
		9/22/99		34
		9/17/99		34
		9/10/99		34
		12/31/98		4		12
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