<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1997
REGISTRATION NO. 333-24341
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT
NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PEAPOD, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7389 36-4118175
(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
1033 UNIVERSITY PLACE
EVANSTON, ILLINOIS 60201
(847) 492-8900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN C. WALDEN
EXECUTIVE VICE PRESIDENT
FINANCE AND BUSINESS DEVELOPMENT
PEAPOD, INC.
1033 UNIVERSITY PLACE
EVANSTON, ILLINOIS 60201
(847) 492-8900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
JOHN J. SABL PHILIP J. NIEHOFF
SIDLEY & AUSTIN MAYER BROWN & PLATT
ONE FIRST NATIONAL PLAZA 190 S. LASALLE ST.
CHICAGO, ILLINOIS 60603 CHICAGO, ILLINOIS 60603
(312) 853-7567 (312) 701-7843
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 9, 1997
PROSPECTUS
3,600,000 SHARES
LOGO
COMMON STOCK
--------
All of the shares of common stock (the "Common Stock") offered hereby are
being sold by Peapod, Inc. (the "Company").
Prior to this Offering, there has not been a public market for the Common
Stock of the Company. It is currently estimated that the initial public
offering price will be between $13.00 and $15.00 per share. See "Underwriting"
for information relating to the factors considered in determining the initial
public offering price. The Common Stock has been approved for quotation on The
Nasdaq National Market under the symbol "PPOD", subject to official issuance.
--------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................ $ $ $
- ------------------------------------------------------------------------------------------
Total(3)......................... $ $ $
- ------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $1,200,000.
(3) Certain stockholders of the Company (the "Selling Stockholders") have
granted the Underwriters a 30-day option to purchase up to an aggregate of
540,000 additional shares of Common Stock solely to cover over-allotments,
if any. See "Underwriting." If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions, and Proceeds to
Selling Stockholders will be $ , $ and $ ,
respectively.
--------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if received and accepted by
them and subject to certain conditions. It is expected that certificates for
the shares of Common Stock offered hereby will be available for delivery on or
about , 1997, at the office of Smith Barney Inc., 333 West 34th
Street, New York, New York 10001.
--------
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
J.P. MORGAN & CO.
, 1997
<PAGE>
Caption: By attracting loyal consumers through its compelling online shopping
system and personalized service, Peapod opens a valuable new sales channel to
its grocery retail partners and constructs a national online network designed
to offer superior interactive media and research services to consumer goods
companies.
Peapod logo.
Computer screen with grocery aisles.
Caption: FOR THE CONSUMER, Peapod provides "Smart Shopping for Busy People"
through a user-friendly, highly functional virtual supermarket and
personalized shopping, delivery or pick-up, and customer services.
Retailer logos, displayed on map of U.S.
Caption: FOR THE RETAILER, Peapod provides its online sales channel, which
is designed to enable the retailer to gain incremental revenues and profits
by capturing an increased share of the grocery purchases of existing
customers and by attracting new loyal customers.
(i) Computer screen with cereal choices and electronic coupon and (ii)
computer screen with electronic coupon for orange juice.
Caption: FOR THE CONSUMER GOODS COMPANY, Peapod provides a forum for
targeted interactive advertising and promotion and extensive product
research by linking together members from multiple markets into a national
online network and collecting substantial data regarding members'
attitudes, purchasing behavior and demographics.
Caption: Powerful Shopping Software.
Peapod computer screen in Chicago market.
Caption: Peapod shoppers have online access to over 20,000 grocery, drug
and general merchandise items through Peapod's relationships with leading
retailers in each market.
Peapod computer screen with grocery aisles.
Caption: Peapod members can shop by browsing aisles, using one or more
personal shopping lists, or conducting word searches based on brand or
product category.
Peapod computer screen with cereal choices and electronic coupon.
Caption: Through Peapod's interactive marketing services, marketers are
precisely targeting advertising and promotional programs in innovative
ways, and generating behavioral research data that would be difficult to
otherwise obtain.
Peapod computer screen with nutritional information for a cereal product.
Caption: Peapod members can quickly sort items in any product category by a
wide variety of variables, such as pricing information, sale items, kosher
and nutritional content.
Peapod computer screen with payment methods.
Caption: Prior to submitting an order, a Peapod member reviews their order,
issues personalized shopping or delivery instructions, and selects a
payment method and a convenient delivery or pick-up time.
Peapod logo.
Caption: Smart Shopping for Busy People(R).
Photo of customer at computer.
Caption: Peapod members can shop around-the-clock with access from home or
the office via direct dial-up or the Internet.
Photo of Peapod Shopper picking produce.
Caption: Peapod in-store shoppers pick each individual order to the
specifications provided by the Peapod member. Members may provide item-by-
item shopping instructions on issues such as how fine their coffee should
be ground, how ripe the bananas should be and what to do if an item is
unavailable.
Photos of (i) delivery person in front of van delivering groceries to home of
customer and (ii) grocery order being loaded into pick-up customer's vehicle.
Caption: Peapod members can have their groceries delivered right to their
door or they can drive by a convenient Peapod pick-up site to receive their
order.
Photo of member service representatives.
Caption: Peapod's member center provides members with technical assistance
and other support, seven days per week to respond quickly to any and all
service issues.
Caption: Superior Customer Service
The Company has U.S. registrations for the "Peapod" service mark and the
"Smart Shopping for Busy People" slogan. All other trademarks or service marks
appearing in this Prospectus are trademarks or service marks of the respective
companies that utilize them.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVERALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS, AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Except as otherwise noted, all information in
this Prospectus assumes no exercise of the Underwriters' over-allotment option.
See "Underwriting." In addition, except as otherwise noted, all information in
this Prospectus gives effect to the Conversion (as defined below). The Company
is a successor to a business originally founded in 1989 as a Delaware
corporation and operated since 1992 through an Illinois limited partnership
("Peapod LP") . The original Delaware corporation ("Old Peapod" or the "General
Partner") had served as the general partner of Peapod LP. In December 1996, the
Company was incorporated in Delaware. In a conversion (the "Conversion") that
was effected on May 31, 1997 (i) all of the equity interests in Peapod LP were
transferred to the Company in exchange for 12,656,417 shares of Common Stock,
(ii) Peapod LP was dissolved, (iii) all of the assets and liabilities of Peapod
LP were transferred to the Company and (iv) outstanding options and warrants
for equity interests in Peapod LP were converted into options and warrants for
shares of Common Stock. The transfer of the assets and liabilities of Peapod LP
to the Company will be recorded by the Company at the historical carrying
values of Peapod LP. As used in this Prospectus, references to "Peapod" or the
"Company" prior to the Conversion means Peapod LP and its predecessor, and
thereafter, Peapod, Inc.
THE COMPANY
Peapod(R) is the leading interactive, online grocery shopping and delivery
company and a provider of targeted media and research services. Founded in
1989, Peapod believes it is the only company currently providing an integrated,
comprehensive service designed to address the distinct needs of online
consumers, grocery retailers and consumer goods companies. By attracting loyal
consumers through its compelling online shopping system and personalized
service, Peapod opens a valuable new sales channel to its grocery retail
partners and constructs a national online network designed to offer superior
interactive media and research services to consumer goods companies. Peapod's
proprietary technology, which has been developed and refined through the
Company's operating experience, provides the Company a competitive advantage in
serving the complex needs of consumers, retailers and consumer goods companies.
For the consumer, Peapod provides "Smart Shopping for Busy People(R)" through
a user-friendly, highly functional virtual supermarket and personalized
shopping, delivery or pick-up, and customer services. With Peapod, members are
able to avoid the hassles typically associated with grocery shopping and enjoy
a more pleasant and productive shopping experience. Members can choose among a
variety of shopping methods, access up-to-date product and pricing information
and sort items in any product category by a wide variety of nutritional and
other variables.
For the retailer, Peapod provides its online sales channel, which is designed
to enable the retailer to gain incremental revenues and profits by capturing an
increased share of the grocery purchases of existing customers and by
attracting new loyal customers. Peapod's systems link with those of the
retailer, which allow it to create multiple, customized online stores that
conform to local merchandising, pricing and promotional strategies. Peapod's
systems and employees also provide constant feedback to retailers on out-of-
stock inventory and the quality of perishable items. Moreover, Peapod's
interactive marketing capabilities allow the retailer to experiment with
creative merchandising and promotions and execute local marketing strategies.
For the consumer goods company, Peapod provides a forum for targeted
interactive advertising and promotion and extensive product research by linking
together members from multiple markets into a national online network and
collecting substantial data regarding members' attitudes, purchasing behavior
and demographics. In addition, Peapod's growing membership base, of which
approximately three-quarters are upper middle class consumers and approximately
three-quarters are women, has an attractive demographic profile which is
difficult to reach through other direct-response media channels.
3
<PAGE>
The Company's objective is to substantially expand its online grocery
shopping channel in the United States and to be a preferred venue for national
and local online marketing programs and research for consumers goods companies.
The Company's growth strategies include the following:
. Build Peapod Brand Identity and Awareness. The Company intends to build
brand identity through the functionality, quality, convenience and value of
the services it offers. Peapod also intends to aggressively market its
services, through promotions and advertising, as a means to further
establish brand name recognition.
. Provide a Superior Member Experience. The Company is committed to providing
its members with a superior experience in all aspects of its services. The
Peapod solution provides members with user-friendly, highly-functional and
cost-effective shopping tools, convenient delivery and pick-up services and
a host of customer support and other services designed to ensure member
satisfaction.
. Expand Into New Geographic Markets and Further Penetrate Existing Markets.
The Company plans to increase revenues and realize economies by aggressively
expanding into new metropolitan markets and increasing penetration in
existing markets. The Company believes that it can achieve competitive
advantages in its various markets as the first mover to build a substantial
online membership base and operating scale.
. Build Interactive Marketing Services; Leverage Database. Peapod has
pioneered, in partnership with consumer goods companies, innovative
interactive marketing services consisting of advertising, promotion and
market research services. Peapod intends to continue using the combination
of its database and online shopping channel to create new services tailored
to its interactive marketing clients.
. Work with Retail Partners in Evolving Retail Model. Peapod has developed a
range of technical, management and fulfillment services which can be adapted
to meet a retail partner's needs and Peapod's marketing strategies. The
Company has begun assisting its retail partners in expanding their role in
the fulfillment of member orders. Peapod also is working closely with its
retail partners in evolving the product distribution and order fulfillment
model in order to reduce costs, improve quality and enhance scaleability. In
addition, Peapod has initiated efforts to license its technology to
retailers on an international basis and in select U.S. markets.
. Leverage Peapod's Membership and Technology into Other Online Services. The
Company recently entered into agreements with retailers to offer an online
wine store and an online gift and specialty products center. Peapod intends
to create additional online stores by establishing relationships with non-
grocery retailers to offer services and products that appeal to Peapod's
membership base. These offerings are expected to enhance Peapod's member
data profiles and expand the interactive marketing services opportunities
available to the Company. The Company further intends to make its broader
"Smart Shopping For Busy People" service accessible on a national basis via
the Internet.
As of March 31, 1997, Peapod had 43,200 members, an increase of 246% since
January 1996. Peapod currently offers its online grocery service in eight
metropolitan markets (Chicago, San Francisco/San Jose, Columbus, Boston,
Houston, Atlanta, Dallas and Austin), six of which have opened since September
1996. Most recently the Company opened in Atlanta in March 1997 and in Dallas
and Austin in May 1997. As of March 31, 1997, Peapod's service areas
encompassed approximately 5,057,000 households, or approximately 5% of U.S.
households. The Company's current retail partners include three of the five
largest national supermarket chains.
Peapod commenced offering interactive marketing services in late 1995 and
currently has agreements to provide interactive marketing services to a number
of national consumer goods companies, including Anheuser-Busch, Incorporated,
Bristol-Myers Squibb Company, Frito-Lay, Inc., The Gillette Company (USA) Inc.,
Helene Curtis, Inc., The J.M. Smucker Company, Kellogg Company, Kraft Foods,
Inc., Nestle U.S.A., Inc., Novus Services, Inc. (Discover Card), Ore-Ida Foods,
Inc., Ralston Purina Company and Tropicana Products, Inc. Customers for the
Company's research products have included ConAgra, Inc., Johnson & Johnson, and
Procter & Gamble Co.
4
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock Offered by the Company.............................. 3,600,000 shares
Common Stock to be Outstanding Immediately After the Offering(1). 16,271,517 shares
Use of Proceeds.................................................. For expansion into new
geographic markets and
further penetration of
existing markets, and
for additional working
capital and other gen-
eral corporate purposes,
including the develop-
ment of new products and
services. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol........................... PPOD
</TABLE>
- --------
(1) Excludes (i) 1,825,662 shares of Common Stock reserved for issuance upon
the exercise of 1,760,946 outstanding options and 64,716 warrants, (ii)
810,000 shares of Common Stock reserved for issuance pursuant to stock
options being granted as of the consummation of the Offering and (iii)
1,729,054 additional shares of Common Stock reserved for issuance under the
Company's 1997 Long-Term Incentive Plan. See "Management--Stock Plans."
Peapod, Inc. was incorporated in Delaware in December 1996 and is the
successor to a business founded in 1989. Its principal place of business is
located at 1033 University Place, Evanston, Illinois 60201, and its telephone
number is (847) 492-8900. The Company's home page is located on the Internet's
World Wide Web (the "Web") at http://www.peapod.com.
5
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -------------------
1992(1) 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:(2)
Revenues:(3)
Grocery sales, net of
returns.............. $ 1,186 $ 2,893 $ 6,745 $ 12,731 $ 22,015 $ 4,984 $ 9,216
Interactive marketing
services............. -- -- -- 163 1,069 194 425
Member and retailer
services............. 307 812 1,601 3,049 6,088 1,156 3,063
------- ------- ------- -------- ---------- ------- ----------
Total revenues........ 1,493 3,705 8,346 15,943 29,172 6,334 12,704
Groceries sold, net of
returns................ (1,186) (2,893) (6,745) (12,731) (22,015) (4,984) (9,216)
Other costs and
expenses............... (1,335) (2,463) (5,918) (9,796) (17,187) (3,126) (6,555)
------- ------- ------- -------- ---------- ------- ----------
Operating loss.......... (1,028) (1,651) (4,317) (6,584) (10,030) (1,776) (3,067)
Net loss................ (1,042) (1,676) (4,347) (6,592) (9,566) (1,777) (2,947)
Pro forma net loss per
share(4)............... $ (0.75) $ (0.23)
Shares used to compute
pro forma net loss per
share(4)............... 12,788,250 12,788,250
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------------------------------------- ---------------
1992 1993 1994 1995 1996 1997
-------- ---------- ---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:(2)
Markets(5).............. 1 2 2 2 4 6
Members(6).............. 1,200 3,000 7,900 12,500 33,300 43,200
Orders (for the period
ended)................. 12,000(1) 28,600 70,300 124,100 201,100 84,800
Households in service
area(7)................. 524,500 1,083,400 1,917,000 2,204,200 3,581,000 5,057,000
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-------------------------------------
ACTUAL(2) PRO FORMA(8) AS ADJUSTED(9)
--------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 9,343 $ 9,343 $55,015
Working capital............... 4,372 4,372 50,044
Total assets.................. 13,919 13,919 59,591
Long-term obligations......... 710 710 710
Total owners' equity.......... 6,034 6,034 51,706
</TABLE>
- -------
(1) Peapod LP was formed on June 1, 1992 at which time substantially all of the
assets, liabilities and operations of Old Peapod were transferred to Peapod
LP. Prior to the transfer, the operations of the Company were conducted by
Old Peapod, which subsequently served as the general partner of Peapod LP.
In order to present comparative statement of operations data and orders for
fiscal year 1992, the results of operations of Old Peapod from January 1,
1992 through May 31, 1992 have been combined with the results of operations
of Peapod LP from June 1, 1992 through December 31, 1992.
(2) Represents the financial and operating information of Peapod LP, the
predecessor entity to the Company. Prior to the Conversion, the Company had
not begun significant operations. Prior to the consummation of the
Offering, the assets, liabilities and operations of Peapod LP were
transferred to the Company.
(3) Groceries sold, net of returns, represent the actual costs of groceries
purchased and charged to members. Interactive marketing services include
fees from advertising, promotions and research. Member and retailer
services include fees from members and retail partners related to the
Company's online services and grocery and delivery operations.
(4) Reflects the Conversion and options and warrants assumed outstanding under
Securities and Exchange Commission Staff Accounting Bulletin No. 83, as
discussed in Note 5 of Notes to Financial Statements beginning on page F-6.
(5) Represents the number of metropolitan markets served.
(6) Represents the number of households and businesses subscribing to the
Peapod services.
(7) Represents the number of households in areas that can be served from
Peapod's existing fulfillment centers (i.e., the facilities at which member
orders are shopped and packed for delivery or pick-up).
(8) Represents the pro forma balance sheet data assuming the Conversion
occurred as of March 31, 1997.
(9) Adjusted to give effect to the sale of 3,600,000 shares of Common Stock
offered by the Company hereby as of March 31, 1997 at an assumed initial
public offering price of $14.00 per share and the application of the
estimated net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
6
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, prospective
investors should carefully consider the following factors in evaluating an
investment in the shares of Common Stock offered hereby. All statements, trend
analysis and other information contained in this Prospectus relative to
markets for the Company's products and trends in the Company's operations or
financial results, as well as other statements including words such as
"anticipate," "believe," "plan," "estimate," "expect" and "intend" and other
similar expressions, constitute forward-looking statements. These forward-
looking statements are subject to business and economic risks, including but
not limited to those discussed in "Risk Factors," and actual results may
differ materially from those contemplated by forward-looking statements.
DEVELOPING MARKET; FUTURE RELIANCE ON THE INTERNET
The market for online commerce is rapidly evolving. As is typical for new
and rapidly evolving industries, demand and market acceptance for recently
introduced services and products in online commerce are subject to a high
level of uncertainty. The Company's success will depend to a substantial
extent on the willingness of consumers to increase their use of online
services as a method to buy groceries and other products and services, the
acceptance by advertisers and retailers of the Company's online service as a
significant means to market and sell its products and services, and the use by
such companies of data and research compiled by the Company. Moreover, the
Company's growth will depend, in part, on the extent to which an increasing
number of consumers own or have access to personal computers or other systems
that can access online services or the Internet.
Although most of the Company's members currently access Peapod's service
through the Company's proprietary dial-up network, the percentage of members
who access Peapod's service through the Internet is expected to grow
substantially. The Internet has experienced, and is expected to continue to
experience, substantial growth in the number of users and amount of traffic,
resulting in some cases in substantial delays for users. The Internet could
lose its viability due to delays in the development or adoption of new
standards and protocols to handle increased levels of Internet activity, or
due to increased governmental regulation. There can be no assurance that the
infrastructure (e.g., reliable network backbone) or complementary services
(e.g., secure transaction processing) necessary to make the Internet a viable
commercial marketplace will develop, or, if developed, that the Internet will
become a viable commercial marketplace for products and services such as those
offered, or to be offered, by the Company through the Internet. If the
necessary infrastructure or complementary services are not developed, or if
the Internet does not become a viable commercial marketplace, the Company's
business, results of operations or financial condition could be materially and
adversely affected. See "Business."
SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company may experience significant fluctuations in future quarterly
operating results from a number of factors, including (i) the timing and
nature of expansion efforts in both new and existing markets, (ii) the
introduction of new products or services and the market response to those
introductions, (iii) the timing and nature of sales transactions for
interactive marketing and other products and services, (iv) relationships with
retailers, (v) seasonal trends, (vi) changes in pricing policies or service
offerings, (vii) changes in the level of marketing and other operating
expenses to support future growth, (viii) competitive factors and (ix) general
economic conditions. Consequently, quarterly revenues and operating results
may fluctuate significantly, and the Company believes that period-to-period
comparisons of results will not necessarily be meaningful and should not be
relied upon as an indication of future performance. Furthermore, due to the
foregoing factors, among others, it is likely that the Company's future
quarterly operating results from time to time may not meet the expectations of
research analysts or investors, which may have an adverse effect on the price
of the Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
LIMITED OPERATING HISTORY; LOSSES
The Company has a limited operating history and has incurred losses since
its inception. Although it was founded in 1989, most of the Company's growth
has occurred since September 1995. Given the substantial development,
marketing and other expenditures relating to the Company's planned expansion
program, among
7
<PAGE>
other factors, the Company expects to have losses for the foreseeable future.
To operate profitably, the Company must accomplish some of the following
objectives: (i) increase grocery sales volume by adding new members, retaining
existing members and increasing member usage, (ii) successfully acquire market
share in interactive marketing services, (iii) develop and realize additional
revenue sources, such as additional transactional, advertising and
informational services and licensing and (iv) reduce costs of fulfillment.
There can be no assurance that the Company will be successful in meeting these
objectives or that the Company will be able to achieve or sustain
profitability.
MANAGEMENT OF GROWTH
The Company's recent growth has placed, and is expected to continue to
place, a significant strain on the Company's managerial, operational,
technical and financial resources. As of March 31, 1997, the Company had 225
full-time and 1,075 part-time employees, as compared to 90 full-time and 450
part-time employees at December 31, 1995. During this period, the number of
the Company's members grew from 12,500 to 43,200. The Company expects
operating expenses and staffing levels to increase substantially in the future
as the Company expands into new markets and increases penetration in existing
markets. To manage its growth, the Company must expand its operational and
technical capabilities, increase, train and manage its employee base and
manage multiple relationships with various retailers and other third parties.
There can be no assurance that the Company will be able to manage its
expanding operations effectively. Any failure of the Company to implement
effective management and operating systems, add resources on a cost-effective
basis or effectively manage the Company's expansion could have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview" and "Business--Growth Strategies."
RISK OF SYSTEMS DISRUPTION
The Company's information and other systems, including its proprietary dial-
up network, could be vulnerable to, among other factors, disruptions caused by
system failures, power losses, communication problems or natural disasters. In
addition, the Company's services may be vulnerable to break-ins and similar
disruptive problems. Further, weaknesses in communications media, such as the
Internet, may compromise the security of confidential electronic information
exchanged with members. Disruptions of service or security breaches could
cause losses to the Company, reduce member satisfaction in the Company's
services or otherwise have a material adverse effect on the Company's
business, results of operations or financial condition. To date, the Company
has not experienced material disruptions of services or security breaches.
However, there can be no assurance that such problems will not occur in the
future. See "--Developing Market; Future Reliance on the Internet" and
"Business--Technology."
DEPENDENCE ON RETAIL PARTNERS
The Company's grocery operations are dependent on the retailers in each of
the metropolitan markets the Company serves. These retail partners provide not
only the products sold by the Company, but also, in certain cases, many of the
fulfillment services (i.e., shopping, packing and delivering member orders)
necessary to serve the Company's members. Consequently, factors affecting its
retail partners, such as labor disputes or supply problems, could have a
material adverse effect on the Company's business, results of operations or
financial condition.
A substantial part of the marketing efforts for the Company's grocery
services are conducted through cooperative marketing efforts with most of the
Company's retail partners. Peapod typically enters into agreements with its
retail partners that specify levels of cooperative marketing support to
Peapod. The extent and effectiveness of these cooperative marketing efforts in
a given metropolitan market are important to the Company's success in that
market. If cooperative marketing efforts are not effective to acquire or
retain members, the Company's business, results of operations or financial
condition could be materially and adversely affected.
8
<PAGE>
To date, the Company has entered into exclusive agreements with a single
grocery retailer in each of its metropolitan markets with terms of up to five
years. However, a number of these agreements can be terminated earlier by
either party. The termination or expiration of agreements with one or more
retail partners and the failure to replace any such retail relationship on a
timely basis and on terms satisfactory to the Company, could have a material
adverse effect on the Company's business, results of operations or financial
condition. Furthermore, the Company's expansion into new metropolitan markets
for grocery services and the expansion of product offerings to include non-
grocery items is dependent on the establishment of acceptable agreements with
additional retailers. The Company's Chicago market, serviced through its
relationship with Jewel Food Stores ("Jewel/Osco"), accounted for
approximately two-thirds of the Company's revenues in 1996 and approximately
one-half of the Company's revenues for the first quarter of 1997. The
Company's current agreement with Jewel/Osco expires in 2000 but is terminable
by the retailer upon short notice. There can be no assurance that the Company
will be able to maintain satisfactory relationships with its retail partners.
See "Business--Peapod Services--Grocery Retailer Alliances."
RELIANCE ON KEY PERSONNEL; ABILITY TO ATTRACT AND RETAIN QUALIFIED PERSONNEL
The Company's success will depend upon the efforts and abilities of its
senior management and key employees, including its executive officers.
Furthermore, the Company's future success will depend on the ability of the
Company's management to retain key managers and employ additional qualified
senior managers. The loss of any of the Company's key employees, or the
failure to attract or retain additional qualified personnel, could have a
material adverse effect on the Company's business, results of operations or
financial condition. See "Management."
The Company's operations require that it attract, train and retain
substantial numbers of new personnel. Certain metropolitan markets served by
the Company have tight labor markets. In addition, the Company employs a large
number of part-time employees to perform fulfillment services, which employees
generally have a high rate of turnover. The Company's software and service
development efforts also require highly-trained employees. If the Company were
unable to recruit or retain a sufficient number of qualified employees, or the
costs of compensation or employee benefits were to increase substantially, the
Company's business, results of operations or financial condition could be
materially and adversely affected. See "Business--Peapod Services" and "--
Employees."
COMPETITION
The traditional grocery retailing market is extremely competitive. The
Company competes with a number of providers of grocery products and services,
including traditional grocery retailers, other interactive or Internet-based
grocery providers, and providers that fulfill orders obtained via telephone or
facsimile. The Company also competes with many other companies that implement
advertising, promotions and research programs for consumer goods companies.
Many of the Company's competitors are larger and have substantially greater
resources than the Company. In addition, the Company believes that this
competition will intensify as more grocery retailers, online marketing
services and information services companies offer competitive services. See
"Business--Competition."
The Company also competes to retain members once they have registered for
Peapod's services. Generally, online subscriber attrition rates, or the rates
at which subscribers cancel an online service, are high. The Company
aggressively markets its service to reduce member attrition and increase
member usage. See "Business--Growth Strategies" and "--Marketing and
Promotion." However, there can be no assurance that these marketing
initiatives will be successful. High rates of member attrition could have a
material adverse effect on the Company's business, results of operations or
financial condition. The Company's average annual member retention rates
(computed by averaging annual retention rates as of the end of each month) for
1995 and 1996 were 62% and 66%, respectively. This retention data is based on
a limited operating history and reflects primarily experience in the Chicago
market as well as a variety of promotion and pricing policies. This historical
data is not necessarily indicative of future retention rates. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation."
9
<PAGE>
DEPENDENCE ON INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company's success and ability to compete are dependent upon its
proprietary systems and technology. The Company relies on trademark, trade
secret and copyright laws to protect its proprietary rights. The Company has
no patents. The Company has U.S. registrations for the "Peapod" service mark
and associated logos and for Peapod's "Smart Shopping for Busy People" slogan.
The Company also has registered copyrights, or has applied for copyright
registration, for certain of its proprietary software, its Web site and
certain marketing materials. Despite the Company's efforts to protect its
proprietary rights, unauthorized parties may attempt to copy aspects of the
Company's services or to obtain and use information that the Company regards
as proprietary. Policing unauthorized use of the Company's proprietary rights
is difficult. In addition, litigation may be necessary in the future to
enforce or protect the Company's intellectual property rights or to defend
against claims of infringement or invalidity. Misappropriation of the
Company's intellectual property or potential litigation could have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Business--Intellectual Property and Other Proprietary Rights."
RAPID TECHNOLOGICAL CHANGE; RISKS ASSOCIATED WITH NEW PRODUCTS AND SERVICES
Online commerce is characterized by rapidly changing technology. The
Company's software and systems require continual improvement in order to meet
the demand by the Company's customers for new features and capabilities. The
Company's future success will depend upon its ability to introduce new
products and services and to add new features and enhancements that keep pace
with technological and market developments. The development of new services
and products and the enhancement of existing services and products entails
significant technical risks. There can be no assurance that the Company will
be successful in (i) maintaining and improving its software and systems, (ii)
effectively using new technologies, (iii) adapting its services and products
to emerging industry standards or (iv) developing, introducing and marketing
service and product enhancements or new services and products. Furthermore
there can be no assurance that the Company will not experience difficulties
that could delay or prevent the successful development, introduction or
marketing of these services and products, or that its new service and product
enhancements will adequately meet the requirements of the marketplace and
achieve market acceptance. If the Company is unable, for technical or other
reasons, to develop and introduce new services and products or enhancements of
existing services and products in a timely manner in response to changing
market conditions or customer requirements, or if new services and products do
not achieve market acceptance, the Company's business, results of operations
or financial condition could be materially and adversely affected. See
"Business--Technology."
REGULATION; PRIVACY ISSUES
The online services industry is new and rapidly changing, and federal and
state regulation relating to the Internet and online services is evolving. The
Company is aware of certain industry requests of the Federal Communications
Commission (the "FCC") to review the impact of Internet usage on U.S.
telecommunications service providers, in particular, the generally lower cost
structure for data transmission versus voice transmission. FCC regulatory
review and rulemaking could result in new regulation of the Internet and
online industry, changes in current rules governing telecommunications or
both. In turn, this could result in increased telecommunications costs for the
Internet and online industry. These or other regulatory initiatives could have
a material adverse effect on the Company's business, results of operation or
financial condition.
There has been a growing concern about privacy and the collection,
distribution and use of information about individuals, and the Company is
subject to various federal and state regulations concerning such activities.
Although the Company's compliance with such federal and state regulations has
not had a material adverse effect on the Company, no assurance can be given
that additional federal or state laws or regulations (including antitrust and
consumer privacy laws) will not be enacted or applied to the Company or
certain of its customers, in particular, users of interactive marketing
services. Any such guidelines, laws or regulations could adversely affect the
ability of the Company or its clients to collect, distribute or use consumer
information, or could otherwise have a material adverse effect on the
Company's business, results of operations or financial condition. The Company
has adopted policies to address certain privacy concerns, including
restricting access to its database, limiting the type of information that the
Company provides to third parties, requiring each employee to sign a
10
<PAGE>
nondisclosure and confidentiality agreement, and implementing data security
systems at the Company's data center. Additionally, pursuant to the terms of
the Company's membership agreement, each member consents to the Company's use
of the data generated by members on an aggregate basis. However, there can be
no assurance that such policies and arrangements will be effective, and to the
extent that they are not effective, the Company's business, results of
operations or financial condition could be materially and adversely affected.
NEED FOR ADDITIONAL CAPITAL
The Company may need to procure additional financing over time, the amount
and timing of which will depend on a number of factors including the pace of
expansion of the Company's markets and customer base, services offered and
development efforts and the cash flow generated by its operations. The Company
cannot predict the extent to which it will require additional financing. There
can be no assurance regarding the availability or terms of additional
financing the Company may be able to procure over time. Any future debt
financing or issuance of preferred stock by the Company would be senior to the
rights of the holders of Common Stock, and any future issuance of Common Stock
would result in the dilution of the then existing stockholders' proportionate
equity interests in the Company.
ANTI-TAKEOVER EFFECT OF CHARTER AND STATUTORY PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and Restated By-Laws and certain sections of the Delaware General Corporation
Law, including those which authorize the Company's Board of Directors to issue
shares of preferred stock and to establish the voting rights, preferences and
other terms thereof without further action by stockholders, may be deemed to
have an anti-takeover effect and may discourage takeover attempts not first
approved by the Board of Directors (including takeovers which some
stockholders may deem to be in their best interests). These provisions could
delay or frustrate the removal of incumbent directors or the assumption of
control by an acquirer, even if such removal or assumption of control would be
beneficial to stockholders. These provisions also could discourage or make
more difficult a merger, tender offer or proxy contest, even if such events
would be beneficial to the interest of stockholders. Such provisions include,
among other things (i) a classified Board of Directors serving staggered
three-year terms, (ii) the elimination of stockholder voting by consent, (iii)
a provision providing that only the President or Board of Directors may call
special meetings of stockholders, (iv) the removal of directors without cause
only by the holders of at least 75% of the shares entitled to vote, (v) a
provision permitting the Board of Directors to take into account factors in
addition to potential economic benefits to stockholders and (vi) certain
advance notice requirements for stockholder proposals and nominations for
election to the Board of Directors. The Company will be subject to Section 203
of the Delaware General Corporation Law which, in general, imposes
restrictions upon certain acquirers (including their affiliates and
associates) of 15% or more of the Company's Common Stock.
In addition, the Board of Directors plans to adopt a stockholders rights
plan prior to the consummation of the Offering which may discourage or prevent
takeover attempts not first approved by the Board of Directors (including
takeovers which certain stockholders may deem to be in their best interests).
See "Description of Capital Stock--Delaware Law and Certain Charter and By-Law
Provisions" and "--Rights."
OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
After consummation of the Offering, Mr. Andrew Parkinson and Mr. Thomas
Parkinson, two of the Company's senior executive officers, together with an
affiliated company, will beneficially own approximately 20.3% of the
outstanding shares of Common Stock and, together with other executive officers
and directors, will beneficially own approximately 26.8% of the outstanding
shares of Common Stock. By virtue of such holdings and if, and to the extent,
such stockholders act in concert (although no agreement or arrangement exists
requiring them to do so), such stockholders will have substantial influence
over the election of directors and other matters, including the outcome of
certain fundamental corporate transactions (such as certain mergers and sales
of assets) requiring stockholder approval. There is no cumulative voting for
the election of directors or other matters. See "Stock Ownership."
11
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public market
after the Offering could adversely affect the market price of Common Stock. In
addition to the 3.6 million shares of Common Stock offered hereby,
substantially all of the remaining approximately 12.7 million shares of the
Common Stock owned by current stockholders of the Company (based upon certain
assumptions) will be eligible for sale in the public market 90 days after the
Offering. However, holders of approximately 11.8 million shares of Common
Stock, including all executive officers, directors and certain stockholders
who will hold shares of Common Stock after the Offering, have agreed not to
publicly offer, sell or otherwise dispose of any shares of Common Stock owned
by them for 180 days from the date of this Prospectus without the consent of
Smith Barney Inc. Smith Barney Inc. may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
such lock-up agreements. Upon the later of the expiration of such agreements
or such dates, pursuant to Rule 144 under the Securities Act of 1933, as
amended (the "Securities Act"), such stockholders may sell such shares without
registration, subject to certain limitations, including limitations on volume
of sales. If such stockholders should sell or otherwise dispose of a
substantial amount of Common Stock in the public market, the prevailing market
price for the Common Stock could be adversely affected. See "Shares Eligible
for Future Sale."
ABSENCE OF A PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active market will develop upon
consummation of the Offering. The offering price of the Common Stock will be
determined by negotiations among the Company, the Selling Stockholders and
representatives of the Underwriters, and may not be indicative of the market
price of the Common Stock after the Offering. See "Underwriting" for a
description of the factors considered in determining the initial public
offering price of the Common Stock. The trading price of the Common Stock also
could be subject to significant fluctuations in response to variations in
quarterly operating results, the gain or loss of significant contracts,
changes in management or new products or services offered by the Company or
its competitors, general trends in the industry, changes in financial
estimates by research analysts and other events or factors. In addition, the
stock market has experienced price and volume fluctuations which have
particularly affected the market price of many companies in similar industries
and which often have been unrelated to the operating performance of these
companies. These market fluctuations may adversely affect the market price of
the Common Stock.
DILUTION
Purchasers of the Common Stock in the Offering will incur an immediate
substantial dilution in the net tangible book value per share of Common Stock.
Based on an assumed initial public offering price of $14.00 per share, as of
March 31, 1997 such dilution, on a pro forma basis, would have been $10.84 per
share. See "Dilution."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,600,000 shares of
Common Stock offered by the Company are estimated to be approximately $45.7
million, assuming an initial public offering price of $14.00 and after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by the Company. The Company expects to use more than one-half
of such proceeds (i.e., more than $22.9 million) for expansion into new
geographic markets and more than 15% of such proceeds (i.e., more than $6.9
million) for further penetration in existing markets, with the remainder being
used for additional working capital purposes, including the development of new
products and services, and other general corporate purposes. Pending such
uses, the net proceeds will be invested in investment grade, interest-bearing
securities.
In the event the Underwriters exercise the over-allotment option, the
Company will not receive any proceeds from the sale of Common Stock sold by
the Selling Stockholders.
DIVIDEND POLICY
The Company has not paid cash dividends on its Common Stock. The Company
does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. Any payment of cash dividends in the future will depend
upon the financial condition, capital requirements and earnings of the
Company, limitations on dividend payments pursuant to the terms of debt
agreements and such other factors as the Board of Directors may deem relevant.
CAPITALIZATION
The following table sets forth the current obligations under capital lease
and capitalization of the Company as of March 31, 1997 (i) on a pro forma
basis to give effect to the Conversion and (ii) as adjusted to reflect the
issuance and sale of 3,600,000 shares of Common Stock offered by the Company
at an assumed initial public offering price of $14.00 per share, less
estimated underwriting discounts and commissions and offering expenses payable
by the Company, and the application of the estimated net proceeds therefrom.
See "Use of Proceeds." This table should be read in conjunction with the
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------
PRO FORMA AS ADJUSTED
--------- -----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Current obligations under capital lease.................. $ 350 $ 350
====== =======
Obligations under capital lease, less current
obligations............................................. $ 360 $ 360
Owners' equity:
Preferred Stock, $.01 par value (5,000,000 shares
authorized; no shares issued or outstanding).......... -- --
Common Stock, $.01 par value (50,000,000 shares
authorized; 12,615,892 shares issued and outstanding,
pro forma; 16,230,892 shares issued and outstanding,
as adjusted)(1)....................................... 126 162
Additional paid-in capital............................. 5,909 51,545
Accumulated deficit.................................... (1) (1)
------ -------
Total owners' equity................................. 6,034 51,706
------ -------
Total capitalization................................. $6,394 $52,066
====== =======
</TABLE>
- --------
(1) Excludes (i) 1,866,287 shares of Common Stock reserved for issuance upon
the exercise of 1,798,446 outstanding options and 67,841 warrants, (ii)
810,000 shares of Common Stock reserved for issuance pursuant to stock
options being granted as of the consummation of the Offering and (iii)
1,729,054 additional shares of Common Stock reserved for issuance under
the Company's 1997 Long-Term Incentive Plan. See "Management--Stock
Plans."
13
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1997,
after giving effect to the Conversion, was $5,588,000, or approximately $0.44
per share of Common Stock. Pro forma net tangible book value per share of
Common Stock is equal to the Company's total pro forma tangible assets less
total liabilities, divided by the total number of shares of Common Stock
outstanding assuming the consummation of the Conversion. After giving effect
to the sale of the 3,600,000 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $14.00 per share, after
deducting the estimated underwriting discounts and commissions and offering
expenses payable by the Company, the pro forma as adjusted net tangible book
value of the Company at such date would have been approximately $51,260,000 or
approximately $3.16 per share. This represents an immediate increase in net
tangible book value of $2.72 per share to existing stockholders and an
immediate dilution of $10.84 per share to new purchasers of shares in the
Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $14.00
Pro forma net tangible book value per share of Common
Stock before the Offering ............................... $0.44
Increase per share attributable to new investors.......... 2.72
-----
Pro forma as adjusted net tangible book value per share of
Common Stock after the Offering............................ 3.16
------
Dilution per share to new investors......................... $10.84
======
</TABLE>
The following table summarizes as of March 31, 1997, on a pro forma as
adjusted basis after giving effect to the Conversion and the Offering, the
difference between existing stockholders and new investors with respect to the
number of shares of Common Stock purchased from the Company, the total cash
consideration paid to the Company, and the average price per share paid by
existing stockholders and by the purchasers of the shares offered by the
Company hereby (at an assumed initial public offering price of $14.00 per
share):
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ ------------------- PER
NUMBER(1) PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 12,630,892 77.8% $32,553,932 39.2% $ 2.58
New investors................ 3,600,000 22.2 50,400,000 60.8 14.00
---------- ----- ----------- -----
Total...................... 16,230,892 100.0% $82,953,932 100.0% $ 5.11
========== ===== =========== ===== ======
</TABLE>
- --------
(1) Excludes (i) 1,866,287 shares of Common Stock reserved for issuance upon
the exercise of 1,798,446 outstanding options and 67,841 warrants at a
weighted average exercise price of $3.15, (ii) 810,000 shares of Common
Stock reserved for issuance pursuant to stock options being granted as of
the consummation of the Offering and (iii) 1,729,054 additional shares of
Common Stock reserved for issuance under the Company's 1997 Long-Term
Incentive Plan. See "Management--Stock Plans." Because a number of options
and warrants were previously granted with an exercise price below the
initial public offering price, the exercise of such options will result in
further dilution to new investors.
14
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected statement of operations and balance sheet data set forth below
have been derived from the historical financial statements of Peapod LP. The
historical financial statements of Peapod LP as of December 31, 1995 and 1996
and for the years ended December 31, 1994, 1995 and 1996 have been audited by
KPMG Peat Marwick LLP, independent certified public accountants, whose report
thereon appears elsewhere in this Prospectus. The statement of operations and
balance sheet data set forth below as of December 31, 1992 and 1993, as well
as the balance sheet data as of December 31, 1994, have been derived from
Peapod LP's unaudited internal financial statements and reflect all
adjustments which management considers necessary for a fair and consistent
presentation of the results of operations for those periods. The selected
financial and operating data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------------ -------------------
1992(1) 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:(2)
Revenues:(3)
Grocery sales, net of
returns.............. $ 1,186 $ 2,893 $ 6,745 $ 12,731 $ 22,015 $ 4,984 $ 9,216
Interactive marketing
services............. -- -- -- 163 1,069 194 425
Member and retailer
services............. 307 812 1,601 3,049 6,088 1,156 3,063
------- ------- ------- -------- ---------- ------- ----------
Total revenues........ 1,493 3,705 8,346 15,943 29,172 6,334 12,704
Groceries sold, net of
returns................ (1,186) (2,893) (6,745) (12,731) (22,015) (4,984) (9,216)
Other costs and
expenses............... (1,335) (2,463) (5,918) (9,796) (17,187) (3,126) (6,555)
------- ------- ------- -------- ---------- ------- ----------
Operating loss.......... (1,028) (1,651) (4,317) (6,584) (10,030) (1,776) (3,067)
Net loss................ (1,042) (1,676) (4,347) (6,592) (9,566) (1,777) (2,947)
Pro forma net loss per
share(4)............... $ (0.75) $ (0.23)
Shares used to compute
pro forma
net loss per share(4).. 12,788,250 12,788,250
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, MARCH 31,
------------------------------------------------------- ----------
1992 1993 1994 1995 1996 1997
-------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:(2)
Markets(5).............. 1 2 2 2 4 6
Members(6).............. 1,200 3,000 7,900 12,500 33,300 43,200
Orders (for the period
ended)................. 12,000(1) 28,600 70,300 124,100 201,100 84,800
Households in service
area(7)................ 524,500 1,083,400 1,917,000 2,204,200 3,581,000 5,057,000
BALANCE SHEET DATA:(2)
Cash and cash
equivalents............ $ 230 $ 644 $ 2,254 $ 2,466 $ 13,039 $ 9,343
Working capital
(deficit).............. (349) 175 902 438 7,356 4,372
Total assets............ 905 1,556 3,465 4,531 16,528 13,919
Long-term obligations... 168 239 327 532 672 710
Total owners' equity.... 71 559 1,435 1,413 8,403 6,034
</TABLE>
- -------
(1) Peapod LP was formed on June 1, 1992 at which time substantially all of
the assets, liabilities and operations of Old Peapod were transferred to
Peapod LP. Prior to the transfer, the operations of the Company were
conducted by Old Peapod, which subsequently served as the general partner
of Peapod LP. In order to present comparative statement of operations data
and orders for fiscal year 1992, the results of operations of Old Peapod
from January 1, 1992 through May 31, 1992 have been combined with the
results of operations of Peapod LP from June 1, 1992 through December 31,
1992.
(2) Represents the financial and operating information of Peapod LP, the
predecessor entity to the Company. Prior to the Conversion, the Company
had not begun significant operations. Prior to the consummation of the
Offering, the assets, liabilities and operations of Peapod LP were
transferred to the Company.
(3) Groceries sold, net of returns, represent the actual costs of groceries
purchased and charged to members. Interactive marketing services include
fees from advertising, promotions and research. Member and retailer
services include fees from members and retail partners related to the
Company's online services and grocery and delivery operations.
(4) Reflects the Conversion and options and warrants assumed outstanding under
Securities and Exchange Commission Staff Accounting Bulletin No. 83, as
discussed in Note 5 of Notes to Financial Statements beginning on page F-
6.
(5) Represents the number of metropolitan markets served.
(6) Represents the number of households and businesses subscribing to the
Peapod services.
(7) Represents the number of households in areas that can be served from
Peapod's existing fulfillment centers (i.e., the facilities at which
member orders are shopped and packed for delivery or pick-up).
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus. All statements, trend analysis and other information contained in
this Prospectus relative to markets for the Company's products and trends in
the Company's operations or financial results, as well as other statements
including words such as "anticipate," "believe," "plan," "estimate," "expect"
and "intend" and other similar expressions, constitute forward-looking
statements. These forward-looking statements are subject to business and
economic risks, including but not limited to those discussed in "Risk
Factors," and actual results may differ materially from those contemplated by
the forward-looking statements.
OVERVIEW
Peapod is the leading interactive, online grocery shopping and delivery
company and a provider of targeted media and research services. Peapod
believes it is the only company currently providing an integrated,
comprehensive service designed to address the distinct needs of online
consumers, grocery retailers and consumer goods companies. By attracting loyal
consumers through its compelling online shopping system and personalized
service, Peapod opens a valuable new sales channel to its grocery retail
partners and constructs a national network designed to offer superior
interactive marketing services to consumer goods companies. Peapod's
proprietary technology, which has been developed and refined through the
Company's operating experience, provides the Company a competitive advantage
in serving the complex needs of consumers, retailers and consumer goods
companies.
History of Growth. Peapod was founded in 1989, and since that time has
pioneered the online grocery shopping industry. In 1990, Peapod introduced its
first version of online shopping software and began serving members in a
suburban Chicago test market out of a single fulfillment center (i.e.,
facility where member orders are shopped and packed for delivery or pick-up).
From 1990 through 1992, the Company concentrated on enhancing its software and
developing efficient operating processes. In 1993, the Company began a gradual
expansion of its Chicago service area and commenced operations in the San
Francisco area. Thereafter, the Company (i) further enhanced its software and
refined its operating processes to support the multi-area operations, (ii)
strengthened its retailer relationships, (iii) raised additional capital from
the sale of private equity to support its growth and (iv) expanded its Chicago
and San Francisco service areas. In September 1995, the Company released an
improved three-tier software architecture, which included Version 4.0 of its
end-user shopping software and allowed the Company to begin selling and
executing its interactive marketing services. See "Business--Technology."
Coinciding with this release, the Company commenced, in cooperation with its
Chicago retail partner, its first broad-based media campaign in the Chicago
market, incorporating radio and newspaper advertising. During 1995, Peapod's
net membership grew by 4,600, of which 4,300 joined in the fourth quarter.
During the first half of 1996, membership continued to grow. The Company
commenced an aggressive geographic expansion program, beginning operations in
Columbus and Boston in September 1996, further expanding its service areas in
Chicago and San Francisco/San Jose and entering into agreements to open in
Houston, Atlanta, Dallas and Austin in 1997. Due to ongoing marketing efforts
and late 1996 geographic expansion, Peapod's membership expanded from 12,500
to 33,300 in 1996. The Company's average annual member retention rates
(computed by averaging annual retention rates as of the end of each month) for
1995 and 1996 were 62% and 66%, respectively. This retention data is based on
a limited operating history and reflects primarily experience in the Chicago
market as well as a variety of promotion and pricing policies. This historical
data is not necessarily indicative of future retention rates.
Components of Revenues. The Company generally receives monthly membership
fees from members. In addition, members generally pay a fixed fee per order
plus a percentage of the dollar value of each grocery order. The member pays
for all groceries at the time of delivery or pick-up by check, credit card or
electronic debit from the member's checking account. Additional surcharges are
applicable for processed film or prescription pick-up, last minute orders or
PinPoint delivery times, which mandate delivery within a shorter delivery
window
16
<PAGE>
than standard delivery times. Grocery retailers pay the Company both fixed and
variable fees. Variable fees, paid on a monthly basis, are calculated as a
percentage of total monthly grocery sales. Grocery retailers also provide the
Company with a variety of management fees, based on geographic expansion and
levels of exclusivity. The Company's fees from members and retailers vary by
market and may change over time. See "Business--Growth Strategies," and "--
Peapod Services."
The Company commenced offering interactive marketing services in late 1995
and currently has agreements to provide interactive marketing services to a
number of national consumer goods and service companies, including Anheuser-
Busch, Incorporated, Bristol-Myers Squibb Company, Frito-Lay, Inc., The
Gillette Company (USA) Inc., Helene Curtis, Inc., The J. M. Smucker Company,
Kellogg Company, Kraft Foods, Inc., Nestle U.S.A., Inc., Novus Services, Inc.
(Discover Card), Ore-Ida Foods, Inc., Ralston Purina Company and Tropicana
Products, Inc. To date, substantially all of Peapod's interactive marketing
sales have been made through sponsorship agreements under which the Company
provides a variety of bundled interactive marketing products and services. The
Company has a relationship with a national marketing research organization to
develop and market custom and syndicated research applications. Customers for
the Company's research products have included ConAgra, Inc., Johnson & Johnson
and Procter & Gamble Co. See "Business--Peapod Services--Interactive Marketing
Services."
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain operating
data derived from the statements of operations of the Company expressed as a
percentage of total revenues for such periods:
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES
-------------------------------------
QUARTERS
YEARS ENDED ENDED MARCH
DECEMBER 31, 31,
--------------------- -------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenues:
Grocery sales, net of returns........ 80.8 % 79.9 % 75.5 % 78.7 % 72.5 %
Interactive marketing services....... -- 1.0 3.7 3.1 3.4
Member and retailer services......... 19.2 19.1 20.8 18.2 24.1
----- ----- ----- ----- -----
Total revenues....................... 100.0 100.0 100.0 100.0 100.0
Costs and expenses:
Groceries sold, net of returns....... 80.8 79.9 75.5 78.7 72.5
Grocery operations................... 39.1 32.4 27.9 24.5 30.7
General and administrative........... 17.6 11.0 10.0 7.7 6.5
Marketing and selling................ 6.8 9.6 13.7 9.6 9.7
System development and maintenance... 3.9 6.1 5.1 5.6 3.0
Depreciation and amortization........ 3.5 2.3 2.2 1.9 1.7
----- ----- ----- ----- -----
Total costs and expenses............. 151.7 141.3 134.4 128.0 124.1
----- ----- ----- ----- -----
Operating loss......................... (51.7) (41.3) (34.4) (28.0) (24.1)
Other income (expense)................. (0.4) -- 1.6 -- 0.9
----- ----- ----- ----- -----
Net loss............................... (52.1)% (41.3)% (32.8)% (28.0)% (23.2)%
===== ===== ===== ===== =====
</TABLE>
FIRST QUARTER OF 1997 COMPARED TO FIRST QUARTER OF 1996
Grocery sales, net of returns. Grocery sales, net of returns, which are the
actual costs of groceries purchased by members, increased by 84.9% from
$4,984,000 in the quarter ended March 31, 1996 to $9,216,000 in the quarter
ended March 31, 1997. This increase was principally due to an 83.1% increase
in the number of orders and a 1.0% increase in the size of the average grocery
order. The total number of orders increased from 46,300 in the quarter ended
March 31, 1996 to 84,800 in the quarter ended March 31, 1997. Total membership
at March 31, 1996 and 1997 was 15,200 and 43,200, respectively. Increases in
the Company's membership base resulted largely from the introduction of the
Peapod service in 4 new markets, Columbus, Boston, Houston and Atlanta, as
well as increased penetration in the Chicago and San Francisco/San Jose
markets.
17
<PAGE>
Interactive marketing services. Revenues from interactive marketing services
include fees paid by consumer goods companies for interactive advertising,
promotion and research services. Fees from such services increased by 118.7%
from $194,000 in the quarter ended March 31, 1996 to $425,000 in the quarter
ended March 31, 1997.
Member and retailer services. Member and retailer services include
subscription, service and other fees paid by members and retail partners
related to Peapod's online shopping and delivery operations. Fees from such
services increased 165.0% from $1,156,000 in the quarter ended March 31, 1996
to $3,063,000 in the quarter ended March 31, 1997. This increase is
attributable to (i) additional fees paid by new and existing retailers, (ii)
higher grocery volumes and orders quantities and (iii) the increasing size of
the Company's membership base.
Groceries sold, net of returns. The Company purchases groceries for its
account on behalf of its members. The actual cost of groceries are
subsequently charged to the member. Groceries sold, net of returns increased
from $4,984,000 in the quarter ended March 31, 1996 to $9,216,000 in the
quarter ended March 31, 1997 commensurate with the increase in grocery sales,
net of returns.
Grocery operations. Grocery operations expenses include (i) the direct costs
relating to the shopping, packing and delivery of member orders, (ii) salaries
and overhead expenses of each fulfillment center, (iii) salaries and overhead
expenses for each metropolitan market and (iv) salaries and overhead expenses
for certain centralized field support functions such as training, database
merchandising and customer support. Grocery operations expenses increased
151.2%, from $1,554,000 in the quarter ended March 31, 1996 to $3,903,000 in
the quarter ended March 1997. The increase is attributable to (i) the direct
costs of shopping, packing and delivering member orders, (ii) salaries and
overhead expenses of new fulfillment centers, (iii) salaries and overhead
expenses for four new markets, (iv) salaries and overhead expenses for
customer support functions, and (v) new training and human resource functions
created to assist in the rapid opening of new markets and new fulfillment
stores.
At March 31, 1997, Peapod fulfilled member orders from 41 fulfillment
centers across six metropolitan markets compared to 14 fulfillment centers
across two metropolitan markets at March 31, 1996. Two metropolitan markets
and 14 fulfillment centers were added in the quarter ended March 31, 1997
compared to no new metropolitan markets or fulfillment centers in the quarter
ended March 31, 1996.
General and administrative. General and administrative expenses, which
include corporate staff, accounting and human resource functions, increased
69.5% from $488,000 in the quarter ended March 31, 1996 to $827,000 in the
quarter ended March 31, 1997. The increase resulted primarily from an increase
in corporate staff to support the Company's growth and expenses relating to
the planned relocation of the Company's headquarters.
Marketing and selling. Marketing and selling expenses include the cost of
member acquisition and retention marketing, such as radio advertising and
direct mail, as well as certain costs relating to interactive marketing
services. The Company expenses all such costs as incurred. Marketing and
selling expenses increased by 102.4% from $611,000 in the quarter ended March
31, 1996 to $1,236,000 in the quarter ended March 31, 1997. The increase in
marketing and selling is attributable to (i) increased marketing spending to
support four market openings and expansion of the service areas in existing
markets, (ii) the cost of member acquisition marketing programs in existing
markets and (iii) additional marketing personnel to support the growth in
membership and interactive marketing services.
System development and maintenance. System development and maintenance
expenses, which include new product development as well as the maintenance and
enhancement of existing systems, increased 5.9% from $355,000 in the quarter
ended March 31, 1996 to $376,000 in the quarter ended March 31, 1997. This
increase resulted from higher staffing and associated expenses to support the
Company's growth. In 1996, Peapod began work on version 5.0 of its end-user
software. In the quarter ended March 31, 1997, the Company capitalized
$151,000 of these development costs compared to no capitalized development
costs in the quarter ended March 31, 1996.
Depreciation and amortization. Depreciation and amortization increased 79.8%
from $118,000 in the quarter ended March 31, 1996 to $212,000 in the quarter
ended March 31, 1997. This increase is the result of equipment added to
support new members, new fulfillment centers and new employees.
18
<PAGE>
Other income (expense). Other income (expense) includes interest paid on
subordinated debentures, notes payable and capital leases and interest earned
on cash balances. Interest expense decreased from $20,000 in the quarter ended
March 31, 1996 to $15,000 in the quarter ended March 31, 1997. Interest income
increased from $19,000 in the quarter ended March 31, 1996 to $135,000 in the
quarter ended March 31, 1997, resulting from the investment of proceeds from
the issuance of equity in 1996.
1996 COMPARED TO 1995
Grocery sales, net of returns. Grocery sales, net of returns increased 72.9%
from $12,731,000 in 1995 to $22,015,000 in 1996. This increase was principally
due to a 62.0% increase in the number of orders and a 6.8% increase in the
size of the average grocery order. The total number of orders increased from
124,100 in 1995 to 201,100 in 1996. Total membership at December 31, 1995 and
1996 was 12,500 and 33,300, respectively. Increases in the Company's
membership base resulted largely from increased penetration and geographic
coverage in Chicago and San Francisco/San Jose and the introduction of the
Peapod service in two new markets, Columbus and Boston.
Interactive marketing services. Revenues from interactive marketing
services, which the Company commenced providing in late 1995, increased from
$163,000 in 1995 to $1,069,000 in 1996.
Member and retailer services. Revenues from member and retailer services
increased 99.6% from $3,049,000 in 1995 to $6,088,000 in 1996. This increase
was primarily due to (i) higher grocery volumes and order quantities, (ii)
higher contractual fees paid by retail partners, including those related to
the introduction of the Peapod service in Columbus and Boston and (iii) the
increasing size of the Company's membership base.
Groceries sold, net of returns. Groceries sold, net of returns increased
from $12,731,000 in 1995 to $22,015,000 in 1996 commensurate with the increase
in grocery sales, net of returns.
Grocery operations. Grocery operations expenses increased 57.5% from
$5,168,000 in 1995 to $8,141,000 in 1996. The increase resulted largely from
the 62.0% increase in the number of orders and the increased number of
fulfillment centers. Grocery operations expenses as a percent of total
revenues declined from 32.4% in 1995 to 27.9% in 1996, reflecting labor
efficiencies and the favorable effect increased volume has on overhead costs.
At December 31, 1996, Peapod fulfilled member orders from 27 fulfillment
centers compared to 14 such centers at the end of 1995. In 1996, ten
fulfillment centers were added in two new markets, Columbus and Boston, and
three additional centers were added in Peapod's existing markets, Chicago and
San Francisco/San Jose.
General and administrative. General and administrative expenses increased
65.7% from $1,762,000 in 1995 to $2,919,000 in 1996. This increase reflected
(i) the hiring of additional administrative personnel to support member,
fulfillment center and market growth, (ii) the hiring in the fourth quarter of
1996 personnel to oversee product introductions and (iii) a one-time severance
charge of $400,000 in the third quarter of 1996. General and administrative
costs decreased from 11.0% of revenues in 1995 to 10.0% of revenues in 1996.
Marketing and selling. Marketing and selling expenses increased by 159.9%
from $1,533,000 in 1995 to $3,984,000 in 1996. The increase in marketing and
selling expenses was attributable to (i) broad-based member acquisition
marketing programs that were initiated in September 1995, (ii) increased
marketing spending to support two new market openings in the third and fourth
quarters and expanded geographic coverage in the Chicago and San Francisco/San
Jose markets and (iii) increased staff to support the increase in interactive
marketing services.
System development and maintenance. System development and maintenance
expenses increased 54.7% from $964,000 in 1995 to $1,492,000 in 1996. This
increase resulted primarily from higher staffing and associated expenses
required to support the Company's growth. System development and maintenance
decreased from 6.1% of revenues in 1995 to 5.1% of revenues in 1996. In 1996,
Peapod began work on Version 5.0 of its end-user software. In 1996, the
Company capitalized $148,000 of these development expenses.
19
<PAGE>
Depreciation and amortization. Depreciation and amortization increased 76.2%
from $370,000 in 1995 to $651,000 in 1996. This increase resulted from
computer and other equipment added to support the Company's growth.
Other income (expense). Interest expense increased from $68,000 in 1995 to
$72,000 in 1996. This increase in expense was more than offset by an increase
in interest income resulting from the investment of proceeds from the issuance
of equity in 1996. Interest income increased from $61,000 in 1995 to $537,000
in 1996.
1995 COMPARED TO 1994
Grocery sales, net of returns. Grocery sales, net of returns increased 88.7%
from $6,745,000 in 1994 to $12,731,000 in 1995. This increase was principally
due to a 76.6% increase in the number of orders and a 6.9% increase in the
size of the average grocery order. The total number of orders increased from
70,300 in 1994 to 124,100 in 1995. Total membership at December 31, 1994 and
1995 was 7,900 and 12,500, respectively. Increases in the Company's membership
base resulted largely from broad-based marketing which commenced in September
1995, and, to a lesser extent, the increase in geographic coverage in Chicago.
Interactive marketing services. The Company began providing interactive
marketing services in late 1995. Revenues derived from such services amounted
to $163,000.
Member and retailer services. Revenues from member and retailer services
increased 90.4% from $1,601,000 in 1994 to $3,049,000 in 1995. This increase
was due primarily to higher grocery volumes and order quantities and higher
contribution from the Company's retail partner in Chicago.
Groceries sold, net of returns. Groceries sold, net of returns increased
from $6,745,000 in 1994 to $12,731,000 in 1995 commensurate with the increase
in grocery sales, net of returns.
Grocery operations. Grocery operations expenses increased 58.4% from
$3,263,000 in 1994 to $5,168,000 in 1995. The increase resulted largely from
(i) the 88.7% increase in grocery sales, (ii) the impact that six fulfillment
centers opened in 1994 had on 1995 results and (iii) the addition of two
fulfillment centers in September 1995. Grocery operations expenses as a
percent of total revenues declined from 39.1% in 1994 to 32.4% in 1995,
reflecting labor efficiencies and the favorable effect increased volume had on
overhead costs.
General and administrative. General and administrative expenses increased
20.3% from $1,465,000 in 1994 to $1,762,000 in 1995. The increase resulted
primarily from an increase in corporate staff to support the Company's growth.
Marketing and selling. Marketing and selling expenses increased 168.2% from
$572,000 in 1994 to $1,533,000 in 1995. The increase in marketing and selling
expenses was attributable to aggressive member acquisition programs beginning
in September 1995, including significant media advertising, packaging and
distribution costs of the Company's Version 4.0 end-user software and
additional marketing personnel. The Company also began incurring expenses
relating to interactive marketing services in 1995.
System development and maintenance. System development and maintenance
expenses increased 193.4% from $329,000 in 1994 to $964,000 in 1995. This
increase resulted largely from the increase in employees to maintain and
improve current systems and develop the Version 4.0 end-user software.
Depreciation and amortization. Depreciation and amortization increased 27.3%
from $290,000 in 1994 to $370,000 in 1995. This increase resulted from
computer and other equipment added to support the Company's growth.
Other income (expense). Interest expense increased from $57,000 in 1994 to
$68,000 in 1995. This increase in expense was partially offset by an increase
in interest income resulting from the investment of proceeds from the issuance
of equity in 1995. Interest income increased from $26,000 in 1994 to $61,000
in 1995.
20
<PAGE>
QUARTERLY RESULTS AND SEASONALITY
The following table sets forth certain unaudited quarterly financial
information for the nine quarters ended March 31, 1997. In the opinion of
management, this information has been prepared on the same basis as the
audited financial statements appearing elsewhere in this Prospectus, and all
necessary adjustments, consisting only of normal recurring adjustments, have
been included in the amounts stated below to present fairly the unaudited
quarterly results when read in conjunction with the financial statements and
related notes thereto appearing elsewhere in this Prospectus. The operating
results for any quarter are not necessarily indicative of the operating
results for any future period.
<TABLE>
<CAPTION>
QUARTER
1995 QUARTER ENDED 1996 QUARTER ENDED ENDED
------------------------------------ ----------------------------------- MAR. 31,
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 1997
------- ------- -------- -------- ------- ------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Grocery sales, net of
returns............... $ 3,167 $ 2,971 $ 2,800 $ 3,793 $ 4,984 $ 5,025 $ 4,818 $ 7,188 $ 9,216
Interactive marketing
services.............. -- -- -- 163 194 207 284 384 425
Member and retailer
services.............. 696 685 790 878 1,156 1,190 1,803 1,939 3,063
------- ------- ------- -------- ------- ------- ------- ------- -------
Total revenues......... 3,863 3,656 3,590 4,834 6,334 6,422 6,905 9,511 12,704
Costs and expenses:
Groceries sold, net of
returns............... 3,167 2,971 2,800 3,793 4,984 5,025 4,818 7,188 9,216
Grocery operations..... 1,163 1,174 1,254 1,577 1,554 1,660 2,038 2,889 3,903
General and
administrative........ 385 330 477 570 488 574 1,071 786 827
Marketing and selling.. 211 276 365 681 611 923 809 1,641 1,237
System development and
maintenance........... 171 217 249 327 355 334 455 348 376
Depreciation and
amortization.......... 55 77 105 132 118 150 174 209 212
------- ------- ------- -------- ------- ------- ------- ------- -------
Total costs and
expenses.............. 5,152 5,045 5,250 7,080 8,110 8,666 9,365 13,061 15,771
------- ------- ------- -------- ------- ------- ------- ------- -------
Operating loss.......... $(1,289) $(1,389) $(1,660) $( 2,246) $(1,776) $(2,244) $(2,460) $(3,550) $(3,067)
======= ======= ======= ======== ======= ======= ======= ======= =======
Markets (at end of
quarter)............... 2 2 2 2 2 2 4 4 6
Members (at end of
quarter)............... 8,000 7,700 8,200 12,500 15,200 17,700 21,200 33,300 43,200
Orders.................. 31,800 29,300 27,200 35,800 46,300 45,500 43,700 65,600 84,800
</TABLE>
The Company has found that orders increase in times of adverse weather
conditions. As a result, the Company has historically generated higher
revenues in the fourth and first quarters in its colder climate markets.
Conversely, members tend to reduce orders in the summer months largely as a
result of vacation schedules and better weather. For these reasons, the
Company's marketing efforts tend to be concentrated during the fourth and
first quarters. The Company believes that the impact of this seasonality has
been mitigated to some extent by the Company's rapid expansion.
Certain expenses relating to the expansion into new markets and the addition
of new fulfillment centers generally precede revenues relating to such
expansion. For example, grocery operations expenses increased substantially in
the third and fourth quarters of 1996 as operations commenced in two new
markets and in 13 new fulfillment centers. Grocery operations expenses also
increased in the first quarter of 1997 as the Company commenced operations in
two new markets and 14 new fulfillment centers. However, only a portion of the
contractual fees from retail partners are recognized at the time new markets
are opened. Most of the increase in member and retailer services revenues from
both the second to the third quarter of 1996, and from the fourth quarter of
1996 to the first quarter of 1997, is attributable to such fees.
The Company may experience significant fluctuations in future quarterly
operating results from a number of factors, including (i) the timing and
nature of expansion efforts in both new and existing markets, (ii) the
introduction of new products or services and the market response to those
introductions, (iii) the timing and nature of sales transactions for
interactive marketing and other products and services, (iv) relationships with
retailers, (v) seasonal trends, (vi) changes in pricing policies or service
offerings, (vii) changes in the level of marketing and other operating
expenses to support future growth, (viii) competitive factors and (ix) general
economic conditions. Consequently, quarterly revenues and operating results
may fluctuate significantly, and the Company believes that period-to-period
comparisons of results will not necessarily be meaningful and should not be
relied upon as an indication of future performance.
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operating activities increased to $3,359,000 in the first
quarter of 1997 compared to $836,000 in the first quarter of 1996. This
increase was primarily attributable to net loss from operations and changes in
the timing of the Company's receivables and payables from certain retailers.
Cash used in operating activities decreased from $5,472,000 in 1995 to
$4,503,000 in 1996. Cash used in operating activities was primarily
attributable to the net loss from operations, partially offset by increases in
current liabilities and deferred service fees. The Company receives payment
from members at the time of delivery and generally pays its retail partners on
15 day terms. In addition, the Company generally receives payment for
interactive marketing services and certain retailer fees in advance of
providing the related services. As of March 31, 1997, the Company had
$9,343,000 in cash and cash equivalents. The Company uses its working capital
to fund ongoing operations, marketing programs and geographic expansion and to
further develop its products and services.
In 1995 and 1996, the Company sold equity to strategic and other private
equity investors which generated net cash proceeds of $22,866,000. In
addition, the Company has from time to time entered into capital lease
agreements for certain technology equipment. The Company believes that the net
proceeds from the Offering, along with current cash and cash equivalents, will
be sufficient to fund its working capital and capital expenditure requirements
for at least the next 12 months. The Company may need to procure additional
financing over time, the amount and timing of which will depend on a number of
factors, including the pace of expansion of the Company's membership base,
services offered, development efforts and the cash flow generated by its
operations. The Company does not have any commitments for additional
financing. See "Risk Factors--Need for Additional Capital."
The Company believes that inflation has not had a material effect on its
results of operations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share"
("EPS"). Implementation of SFAS No. 128 is required for the periods ending
after December 15, 1997. The standard establishes new methods for computing
and presenting EPS and replaces the presentation of primary and fully-diluted
EPS with basic and diluted EPS. The new methods under this standard are not
expected to have a significant impact on the Company's EPS amounts.
22
<PAGE>
BUSINESS
THE COMPANY
Peapod is the leading interactive, online grocery shopping and delivery
company and a provider of targeted media and research services. Founded in
1989, Peapod believes it is the only company currently providing an
integrated, comprehensive service designed to address the distinct needs of
online consumers, grocery retailers and consumer goods companies. Peapod's
"Smart Shopping for Busy People" solution provides consumers with time savings
and convenience through a user-friendly, highly functional virtual
supermarket, and personalized shopping, delivery and customer services. By
establishing a relationship with the Company, grocery retailers gain access to
Peapod's online sales channel. This channel is designed to enable the retailer
to gain incremental revenues and profits by capturing an increased share of
the purchases of existing customers and by attracting new loyal customers.
Peapod provides consumer goods companies with a forum for targeted interactive
advertising, high-impact electronic couponing and extensive product research
by linking together members from multiple markets into a national online
network and collecting substantial data regarding members' motives, purchasing
behavior and demographics.
Peapod's proprietary technology is central to its business model. Peapod's
sophisticated customer interface enables its members to shop at home or at
work in a personalized manner with the benefit of more extensive product and
price information than is otherwise practically available. In addition,
Peapod's systems efficiently link with its retail partners' systems, providing
real-time pricing and promotional information to its members. Peapod has
designed its fulfillment management applications on the basis of many years of
picking, packing and delivering grocery orders to incorporate operating
methods that are cost-efficient and ensure high quality. Peapod's database
creates extensive member profiles by collecting data from multiple sources,
including online shopping behavior, purchase histories, online attitudinal
surveys and demographic data that it may purchase from other parties. On the
basis of this data, Peapod's proprietary targeting engine delivers customized,
one-to-one advertising and promotions.
The Company believes that its proprietary technology and operating
experience provide it several competitive advantages. Peapod's technology
integrates the complex requirements of online shopping, grocery retailing and
fulfillment, and interactive marketing, which enables Peapod to derive revenue
from consumers, grocery retailers and consumer goods companies. The Company's
technology and operating processes for shopping, packing and delivering
products, as well as its customer support capabilities, have been refined over
its years of experience to be efficient and ensure high levels of customer
service. The Company believes that it can gain first-mover advantages by
quickly expanding its metropolitan markets and service areas, aggressively
increasing membership and order volume and building operating scale.
Peapod's success to date is built upon the high-quality and personalized
service of its "Smart Shopping for Busy People" solution. Peapod's membership
base has more than tripled since January 1, 1996. As of March 31, 1997, Peapod
had 43,200 members and offered its online grocery service in six metropolitan
markets: Chicago, San Francisco/San Jose, Columbus, Boston, Houston and
Atlanta. Peapod opened in Dallas and Austin in May 1997.
INDUSTRY TRENDS
Interactive grocery services is an emerging business category that
represents the convergence of three significant industries: online commerce,
grocery retailing and interactive marketing services.
Online Commerce. In recent years, a growing number of users have conducted
an increasing amount of commerce over new interactive media, including online
services offered via proprietary networks and the Internet. International Data
Corporation ("IDC") estimates that the number of U.S. households subscribing
to proprietary and Internet online services will grow from over 14 million in
1996 to over 42 million in 2000. IDC estimates that the total value of goods
purchased over the Web grew from $318 million in 1995 to an annualized run
rate of $5.4 billion in December 1996, and is expected to reach $95 billion by
the year 2000. The emergence of these new interactive media is driving the
development and adoption of content and commerce applications that offer
convenience and value to consumers, as well as unique, cost-effective
marketing opportunities to businesses.
23
<PAGE>
Grocery Retailing. The U.S. retail supermarket business represented
approximately $311.7 billion in revenues in 1995, according to Progressive
Grocer's 1996 Marketing Guidebook. Recent sales growth in the industry has
only slightly exceeded inflation, while competition is intense and margins
continue to be narrow. At the same time, consumers are increasingly time
constrained and searching for conveniences to make their daily living easier.
A 1995 survey by Andersen Consulting suggests that approximately 30% of
consumers would pay a service fee for information, electronic ordering, such
as by computer, fax or phone, and grocery delivery services.
As a result of these factors, supermarket operators are searching for
innovative ways to differentiate their stores through additional consumer
services, while at the same time seeking opportunities to enhance their
profits. Many such operators are implementing or beginning to experiment with
online shopping and home delivery. A survey of supermarket operators cited in
a September 1995 Supermarket Business estimated that supermarket home shopping
sales are minuscule, but would represent approximately 5.5% of total grocery
sales by the year 2000. However, many grocery retailers recognize that
creating an online grocery shopping and delivery service lies outside their
traditional expertise.
Marketing Services. The Company believes that national advertising
expenditures by consumer packaged goods companies in 1995 were approximately
$14 billion. IDC estimates that interactive advertising spending will grow
from $280 million in 1996 to $2.3 billion by the year 2000. The Company
believes that services that are able to target consumers with personalized
advertising, and offer precise feedback on the impact of advertising, will
have a competitive advantage in the interactive advertising market.
According to NCH Promotional Services, companies spent approximately $6.5
billion in 1994 on free-standing insert ("FSI") coupon programs. Coupon
promotion programs are an important means for consumer goods companies to
generate additional demand for their products, but these coupon programs are
expensive with a substantial portion of the expenditures consisting of
distribution and handling costs. Furthermore, coupons reach the consumer
through a variety of channels and generally not at the time the consumer is
shopping. Due to the largely anonymous nature of coupon programs, it is
difficult to target their use and measure their effectiveness.
The total market for information and research regarding consumer goods was
estimated to generate approximately $4.5 billion in revenues in 1995,
according to The Veronis, Suhler & Associates Communications Industry
Forecast. Consumer packaged goods manufacturers have historically gathered
much of their market information regarding consumer purchase behavior from
scanner data. Because scanner data generally captures only product movement
without association with particular purchasers, it has limited utility as a
tool for measuring consumer purchase intent or as a basis for targeted
marketing. Many retailers have implemented loyalty card programs. However,
such programs capture varying degrees of information about particular
purchasers and products. Because of the lack of uniform practices, consumer
goods companies generally find it impractical to utilize such information for
national promotional programs.
THE PEAPOD SOLUTION
By attracting loyal consumers through its compelling online shopping system
and high-quality, personalized service, Peapod opens a valuable new sales
channel to its grocery retail partners and constructs a national online
network in order to offer superior interactive media and research services to
consumer goods companies.
For the consumer, Peapod provides "Smart Shopping for Busy People" through a
user-friendly, highly functional virtual supermarket and personalized
shopping, delivery and customer services. With Peapod, members are able to
avoid the hassles typically associated with grocery shopping. Rather than
driving to the store and waiting in check-out lines, members shop at any time
of the day or night with their personal computers, and schedule delivery or
pick-up at a convenient time. In addition, members can choose among a variety
of shopping methods, including browsing the aisles, conducting word or
category searches, and using personal lists of frequently-purchased items. In
order to enable the consumer to shop "smarter" and more efficiently, Peapod
makes available, at the member's fingertips, up-to-date product information,
including product availability,
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pricing and promotions, and keeps a running online tally of the member's bill.
In addition, Peapod's database contains detailed nutritional information on
grocery products. As a result, members can sort items in any product category
by a wide variety of variables, such as pricing information, sale items,
kosher and nutritional content (e.g., fat, calories, cholesterol and sodium).
Peapod provides further service to its members in the form of electronic and
telephonic member support and technical assistance and honors "The Peapod
Promise," a guarantee of superior service and satisfaction with each order.
See "--Peapod Services--Consumer Services."
For the retailer, Peapod provides its online sales channel, which is
designed to enable retailers to increase incremental revenues and profits by
capturing an increased share of the grocery purchases of existing customers
and by attracting new loyal customers. For example, in Chicago, the Company
believes that a majority of the grocery revenue generated by Peapod is
incremental to Jewel/Osco. The Company believes that the average order size is
five to six times the average in-store order size. Although members may not,
in the aggregate, be purchasing more consumer goods for their households,
Peapod believes that they purchase household and other goods from Peapod's
retail partners that they historically had purchased elsewhere. The Company
believes that retailers are also attracted to Peapod because of the retailer's
prospects for generating revenue growth without large investments in real
estate. In addition, Peapod's systems and employees provide constant feedback
to retailers on out-of-stock inventory and the quality of perishable items.
Moreover, Peapod's interactive marketing capabilities allow the retailer to
experiment with creative merchandising and promotions and execute local
marketing strategies. See "--Peapod Services--Grocery Retailer Alliances."
For the consumer goods company, Peapod provides a forum for targeted
interactive advertising, electronic couponing and extensive product research
by linking together members from multiple markets into a national online
network and collecting substantial data regarding members' attitudes,
purchasing behavior and demographics. Peapod's systems capture exposures,
mouse clicks, redemptions and sales and can report that information to
consumer goods companies for complete reporting of the impact of a marketing
program. In addition, Peapod's growing membership base has an attractive
demographic profile which is difficult to reach through other direct-response
media channels. Approximately three-quarters of Peapod's members are upper
middle class and approximately three-quarters are women. By contrast, Cyber-
Atlas recently estimated that women comprised 32% of Internet users in 1996.
See "--Peapod Services--Interactive Marketing Services."
As of March 31, 1997, Peapod offered its online grocery service in six
metropolitan markets, and conducted delivery operations from 41 fulfillment
centers covering 5,057,000 households, or approximately 5% of U.S. households.
As of such date, Peapod's service areas encompassed approximately 1,607,000
households in Chicago, 851,000 households in San Francisco/San Jose, 389,000
households in Columbus, 1,224,000 households in Boston, 907,000 households in
Houston and 79,000 households in Atlanta. Peapod opened in Dallas and Austin
in May 1997, and has significantly increased its Atlanta service area.
GROWTH STRATEGIES
The Company's objective is to substantially expand its online grocery
shopping channel in the United States and to be a preferred venue for national
and local online marketing programs and research for consumers goods
companies. The Company's growth strategies include the following:
Build Peapod Brand Identity and Awareness. The Company intends to build
brand identity through the functionality, quality, convenience and value of
the services it offers. Peapod also intends to aggressively market its
services, through promotions and advertising, as a means to further establish
brand name recognition.
Provide a Superior Member Experience. The Company is committed to providing
its members with a superior experience in all aspects of its services. The
Company's "Smart Shopping for Busy People" solution provides members with
user-friendly, highly-functional and cost-effective shopping tools, convenient
delivery and pick-up services with "The Peapod Promise" of superior service
and satisfaction, and a host of customer support and other services designed
to ensure member satisfaction. This enables Peapod to attract new members,
retain existing members, increase member usage, and increase its share of
members' household purchases.
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To better serve consumers, Peapod gathers consumer preference information on
individuals. As Peapod learns more about its members from this information
over time, it plans to develop more personalized services to individual
members to enhance member loyalty.
Expand into New Geographic Markets and Further Penetrate Existing Markets.
The Company plans to increase revenues and realize economies of scale by
aggressively expanding into new metropolitan markets and increasing
penetration in existing markets. From January 1, 1996 through March 31, 1997,
Peapod more than tripled its membership base to 43,200 by further penetrating
its existing markets. In addition, beginning in September 1996, the Company
opened five new markets in Columbus, Boston, Houston, Atlanta and Dallas, and
expects to open in Austin in June 1997. When determining new markets in which
to expand, the Company considers numerous factors, including size, population
density, prevalence of personal computer users, demographic composition,
market conditions, the availability of a major, high-quality grocery retailer,
as well as other general economic factors. Peapod currently intends to focus
primarily on the top 40 metropolitan markets in the United States. The Company
believes that it can achieve competitive advantages in its various markets as
the first mover to build a substantial online membership base and operating
scale. To take advantage of economies in fulfillment and advertising, Peapod
plans to penetrate its markets quickly by opening multiple fulfillment centers
in each of its new metropolitan markets.
Peapod believes that substantial opportunities also exist to increase
membership and orders in existing markets. In late 1995, Peapod initiated its
first major marketing program, which included radio and newspaper advertising.
Since that time, Peapod's Chicago membership base has increased 236% and its
order volume has increased 161%. The Company has expanded this marketing
program into other markets and is currently testing television advertising in
Chicago.
Build Interactive Marketing Services; Leverage Database. Peapod has
pioneered, in partnership with consumer goods companies, innovative
interactive marketing services consisting of advertising, promotion and market
research services. Peapod intends to continue using the combination of its
database and online shopping channel to create new products and services
tailored to its interactive marketing clients. As Peapod's membership
increases, the Company believes that consumer goods companies will
increasingly view Peapod's interactive membership services as a powerful
advertising venue as well as a valuable, cost-effective research tool. The
Company has a relationship with The M/A/R/C Group, a national marketing
research organization, to develop and market custom and syndicated research
applications to bring the value-added research benefits of Peapod to consumer
goods companies.
Work with Retail Partners in Evolving Retail Model. Peapod has developed a
range of technical, management and fulfillment services which can be adapted
to meet a retail partner's needs and Peapod's marketing strategies. The
Company has begun assisting its retail partners in expanding their role in the
fulfillment of member orders. For example, under Peapod's fulfillment partners
program in Houston, the shopping, packing, and delivery services for members
are provided by employees of the retail partner. Peapod has initiated efforts
to license its technology to retailers on an international basis and in select
U.S. markets.
Peapod also intends to work closely with its retail partners in evolving the
product distribution and order fulfillment model in order to reduce costs,
improve quality and enhance volume scalability. For example, Peapod currently
is developing hand-held scanning technology for the order picking and packing
functions and is working with its retail partners to develop specialized
distribution centers to lower distribution channel costs and to improve
profitability and quality of distribution for its retail partners. Future cost
savings may enable Peapod to lower charges to members, thereby further
increasing the attractiveness of the Peapod service to new and existing
customers.
Leverage Peapod's Membership and Technology into Other Online Services. The
Company intends to create additional online stores by establishing
relationships with non-grocery retailers to offer services and products that
appeal to Peapod's membership base, support its "Smart Shopping for Busy
People" solution and offer Peapod meaningful co-marketing and other revenue
opportunities. These offerings are expected to enhance
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Peapod's member data profiles and expand the interactive marketing services
opportunities available to the Company. In addition, Peapod believes that its
systems, including the end-user interface and database engines, are the most
advanced systems available for high-volume, online shopping transactions.
Peapod believes that its general expertise, in conjunction with the attractive
demographic profile of its membership base, may be valuable in a variety of
online shopping contexts. Peapod recently entered into contracts with
Geerlings & Wade, Inc., a national direct marketer of premium wines, and
Firefly Greetings, L.L.C., a provider of personal greeting cards and other
specialty products. Under these contracts, Peapod will create online stores
through which its members can shop utilizing customized versions of the Peapod
shopping application. These companies have agreed to pay Peapod development,
management and transactional fees. The Company has commenced development work
with respect to these online store projects and plans to introduce these new
services in connection with the release of the next version of the Peapod
software. See "Technology--Proprietary Consumer Software." The Company further
intends to make its broader "Smart Shopping for Busy People" service
accessible on a national basis via the Internet.
PEAPOD SERVICES
Consumer Services
Peapod's "Smart Shopping for Busy People" solution provides consumers with
time savings and convenience through its user-friendly, highly functional and
information-rich virtual supermarket and personalized shopping, delivery and
customer services. Peapod's online programming allows members to shop any time
of day or night, schedule delivery or pick-up and submit their orders
electronically. Members register for Peapod online via software downloaded
directly from Peapod's Web site (http://www.peapod.com) or obtained on a free
installation diskette available through direct mail or upon telephone request
(1-800-5-Peapod).
Peapod is accessible through a proprietary dial-up network or the Internet.
Its shopping system is highly functional, offering members a variety of
shopping methods and productivity tools to create a shopping experience based
on each member's personal preferences. Peapod members can shop by browsing
aisles (moving logically from general product category to individual items),
using one or more personal lists (containing compilations of frequently-
purchased goods which can quickly be reviewed and considered for purchase), or
conducting word searches based on brand or product category (which is
particularly helpful for coupon redemption or purchasing recipe ingredients).
Through the use of these tools, members can place desired items into a
"virtual" shopping basket. In addition, members can provide personal shopping
instructions on any individual item, such as ripeness of fruit or substitution
preferences for out-of-stock items, or send comments or questions to Peapod,
the grocery retailer or a specific consumer goods company.
The Peapod "Smart Shopping" software also contains information and functions
which the Company believes improve the quality of the shopping experience.
Members can sort items in any product category by a wide variety of variables,
such as pricing information, sale items, kosher and nutritional content (e.g.,
fat, calories, cholesterol and sodium). The Company maintains pricing and
merchandising links with its retail partners, which enable prices, sales and
promotions to be updated on a real-time basis to reflect accurate information
from the member's local fulfillment center. Peapod's user interface easily
accommodates a variety of media displays, such as electronic coupons and
information modules, which support cost-savings and "smart shopping." The
Company believes that its customer interface provides the most functional
interactive online shopping service currently available.
Prior to submitting an order, a member selects a payment method and a
convenient delivery time period. Peapod carefully manages the number of
deliveries in each period to avoid service problems that could result from
over-scheduling. Peapod centrally collects each order and electronically
transmits it to the location where the order is filled. To streamline the
picking process, orders are organized according to the layouts in each
fulfillment center. Shopping specialists collect the ordered goods, including
fresh produce selected by specially-trained produce shoppers, and meat, fish
and delicatessen items that are custom selected by the retailer's own experts.
Shopping specialists also provide a quality check on prices and discounts, and
review personal
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instructions specified by the member, including substitution preferences for
out-of-stock items. Packers organize and store goods prior to delivery, and a
driver delivers the goods, ensures customer satisfaction and collects non-
electronic payment and paper coupons. Drivers use their own vehicles or vans
leased by Peapod.
Although Peapod shops, packs and delivers the majority of its orders, the
Company is actively developing a range of service options that meet the
varying needs of its members. For example, the Company has recently begun to
offer in its Houston market a "drive-through pick-up" option which reduces the
cost to members and creates additional scheduling flexibility by allowing
members to pick up their own orders. The Company plans to incorporate this
option in existing and future markets.
The Company makes "The Peapod Promise," the guarantee of superior service
and satisfaction with each order, to all members. Peapod monitors member
satisfaction through the continuous, closed-loop communication and
accountability designed into its program. Peapod believes that it is able to
provide superior, personalized service by monitoring member orders, from sign-
on and order placement through delivery and payment, and by providing numerous
points of electronic, telephonic and personal communication to its members
throughout the process. Peapod also believes that providing high-quality
technical support and customer service is an important element of the value it
provides to its members. Accordingly, Peapod offers members free technical
support and toll-free customer service seven days per week.
To increase the efficiency and quality of the consumer services its offers,
Peapod has developed a detailed set of field operating standards and
procedures. The Company supports these standards and procedures through
extensive employee training and incentive programs. The Company has carefully
prepared and documented its employee training programs, and developed
incentive plans to provide employees with recognition for consistently
superior performance at each level of its operations. "Peapod University" is
the Company's training program for all fulfillment personnel of the Company
and certain of its retail partners. Shoppers, packers, drivers and managers
undergo hours of formal training, and a separate program is conducted for
produce shoppers to provide expertise in ensuring produce quality and
freshness.
Peapod's typical members are females between the ages of 30 and 54,
households with children, dual income households and other busy people. The
income levels of Peapod's membership base cover a wide range, with a median
income exceeding $60,000 per year. The average Peapod order is $110 which the
Company believes is five to six times the in-store average. Since 1995, the
Company has retained two-thirds of its members on an annual basis. This
retention data is based on a limited operating history and reflects primarily
experience in the Chicago market as well as a variety of promotion and pricing
policies. This historical data is not necessarily indicative of future
retention rates.
As of March 31, 1997, Peapod had 43,200 members and offered its online
grocery service in six markets: Chicago, San Francisco/San Jose, Columbus,
Boston, Houston and Atlanta. Peapod opened in Dallas and Austin in May 1997.
Grocery Retailer Alliances
Peapod's ability to offer online shopping and delivery services to consumers
depends on its product sourcing, fulfillment and marketing arrangements with
grocery retail partners. Peapod enters into a contract with a single major
supermarket chain in each of its metropolitan markets. Peapod strives to
choose retail partners that have a reputation for high-quality and the ability
to support aggressive marketing efforts for the service. The Company's current
retail partners include three of the five largest national supermarket chains.
Its retail partners are: in Chicago, Jewel/Osco (a division of American Stores
Company); in San Francisco/San Jose, Safeway, Inc.; in Columbus, The Kroger
Company; in Boston, The Stop & Shop Supermarket Company; in Houston, Dallas
and Austin, Randalls Food & Drug Inc.; and in Atlanta, Brunos, Inc.
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Peapod strives to be the solution of choice for online shopping and
fulfillment services by offering varying levels of service and support
depending on the particular grocery retailer's needs. In all cases, Peapod
provides its online shopping systems, including the application and the system
hosting and network management services necessary to operate the service. The
Company also implements its proprietary merchandising link which allows
retailers to electronically transmit to Peapod, on a real-time basis, product
and pricing changes. Peapod's proprietary database of over 40,000 products,
including product descriptions and detailed nutritional information
incorporates the retailers' branded or regional products. Peapod further
offers its management expertise, operating processes and systems relative to
fulfillment operations. These operations are complex due to high transaction
volumes, a large part-time workforce and the requirements for high levels of
customer service. Peapod further provides retailers with transaction
processing, electronic billing, collection services and customer service for
the online consumer. Retailers also benefit substantially from Peapod's
expertise in the marketing strategies and programs that are effective in
acquiring and retaining online grocery shopping members and from the
centralized call center that Peapod operates to provide member support and
technical assistance. Peapod believes that it is able to offer grocery
retailers a superior online shopping channel at a total cost that is
significantly less than would be required for a retailer attempting to develop
and manage its own service.
Peapod currently offers retailers several flexible programs. For example,
Peapod offers its most comprehensive services under its full service program,
which Peapod currently operates for its retail partners in the Chicago, San
Francisco/San Jose, Columbus, Boston and Atlanta markets. Under this program,
Peapod employees perform complete fulfillment services, including shopping,
packing and delivering groceries. Peapod's retail partners provide access to
their retail stores within a particular metropolitan area for use as
fulfillment centers. Each fulfillment center serves members within its
immediate vicinity. In the partners fulfillment program, which Peapod
currently operates in its Houston, Dallas and Austin markets, the shopping,
packing and delivery services for members are provided by the retailer's
employees, who are recruited, trained and managed by Peapod field management
staff. The Company also expects that it will make available to select
retailers, through its Split Pea Software division, a non-exclusive licensing
and system management program. Under this program, Peapod would provide
software, hosting and network management services, while the retailer would
manage, under a private label, the marketing, fulfillment, transaction
processing and customer service components. Peapod anticipates that the
differing requirements of grocery retailers will require it to continue to be
flexible in its service offerings.
Under its retail agreements, the Company's retail partners generally pay the
Company various fixed and transaction-based fees and provide annual marketing
support to the Company which is used to advertise and promote the Peapod
service. A number of these agreements are terminable prior to expiration by
either party with short notice, but in some cases the retail partner must pay
a substantial termination fee to Peapod. Jewel/Osco was the Company's original
retail partner and served as a test fulfillment center in 1990. Peapod's
Chicago market, serviced through the Company's agreement with Jewel/Osco,
accounted for approximately two-thirds of the Company's revenues in 1996 and
approximately one-half of its revenues in the first quarter of 1997. Due to
the addition of four new retailers since September 1996 and the Company's
planned expansion, the Company expects the percentage of revenues derived from
the Chicago market to decline.
Interactive Marketing Services
Peapod's software is designed to easily accommodate a variety of media and
promotional events, and is supported by a database containing extensive
information about the shopping behavior and preferences of its members that
the Company believes is not readily available from other sources. This has
enabled Peapod to pioneer, in partnership with consumer goods companies,
innovative interactive marketing services that consist of advertising,
promotion and market research services. The Company commenced offering
interactive marketing services in late 1995 and currently has agreements to
provide interactive marketing services to a number of national consumer goods
and service companies, including Anheuser-Busch, Incorporated, Bristol-Myers
Squibb Company, Frito-Lay, Inc., The Gillette Company (USA) Inc., Helene
Curtis, Inc., Kellogg Company, Kraft Foods, Inc., Nestle U.S.A., Inc., Novus
Services, Inc. (Discover Card), Ore-Ida Foods, Inc., Ralston Purina
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Company, The J.M. Smucker Company and Tropicana Products, Inc. Consumer goods
companies and other users of interactive marketing services are attracted by
the appealing demographic profile of Peapod's membership base and the
capabilities of Peapod's integrated database and medium. Peapod offers a
medium that can reach this captive audience more directly and that the Company
believes will increase in value as Peapod's membership base expands.
Peapod's database and membership profile, in conjunction with its
proprietary targeting engine, enable it to deliver highly-targeted, one-to-one
advertising and promotion, such as electronic couponing, as well as conduct
cost-effective, high-quality marketing research. See "--Technology." Peapod's
systems provide total accountability for every marketing event executed on the
Peapod system so that exposures, mouse clicks, redemptions and sales are all
captured for complete reporting of the impact of a marketing program. The
accurate and comprehensive marketing feedback is a valuable tool for consumer
goods companies for pre-testing and refining marketing programs for execution
in more traditional media.
The Company can also provide consumer goods companies with improved research
and data products. Peapod believes that the nature of its database, which
maintains extensive and detailed data tied to individual purchasers, enables
it to provide improved research and data products without the high cost of
traditional research. Additionally, Peapod's captive audience allows the
Company to create and maintain highly-targeted research panels at a cost the
Company believes to be substantially lower than the consumer panels of current
research firms.
The following are examples of interactive marketing services provided by
Peapod:
Banner Advertising. The standard Peapod advertising unit is a banner or
half-banner ad that runs in the product's home screen and other high-traffic
areas. Because the banner ad includes a direct link to the brand's online
shelf location or information module, a member can quickly purchase the
advertiser's product.
Enhanced Content Advertising. Peapod's flexible format allows additional
content in the form of an information module to be added to more fully
explain, in an exciting interactive format, the many uses of an advertiser's
products. For example, a major national consumer goods manufacturer sponsors
an interactive recipe planning module that promotes usage of the sponsor's
brand ingredients and allows automatic addition of these ingredients to the
member's "virtual" shopping basket. A Peapod member can review a menu of time-
saving topics, select and view a list of recipes, examine individual recipes
containing the sponsor's products and then quickly purchase those products as
part of the member's grocery order. Through this program, the sponsor is able
to provide helpful information to consumers at the time purchase decisions are
being made. In addition, the sponsor can test which recipes are viewed by
members and which ones result in incremental sales.
Electronic Couponing. Peapod's database and membership profile enable it to
deliver highly-targeted, one-to-one promotion programs such as electronic
coupons. These programs can be offered to all users or targeted to specific
members, such as consumers of competing products. Furthermore, the electronic
coupons eliminate much of the printing, distribution and expense normally
associated with paper coupons.
Stimulus-Response Testing. Through Peapod's stimulus-response testing, a
consumer goods company can accurately target communication and promotion
programs, such as those described above, in innovative ways, thereby
generating research data that would be difficult to otherwise obtain. Stimuli
(i.e., incentives) can be delivered online with subsequent purchase behavior
among test and control households tracked to calculate a return on investment
for the sponsor's program. Through such a program, a consumer goods company
can discover, among other things, how much incentive is needed to draw
customers away from the competition and which tactics can maintain or increase
purchases of the brand by current customers. Consumer goods companies can use
this methodology to test alternative coupon events and tie-in promotions
(e.g., offering a free jar of jelly with the purchase of several loaves of
bread) as well as point-of-sale, direct mail and FSI promotion programs, and
new product concepts. For example, sponsors have tested the impact of
delivering an everyday-low-price
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message exclusively to consumers planning on buying competitive brands. In
another example, a sponsor experimented with innovative media placements. This
sponsor created a virtual display including an electronic coupon program for a
personal care product in the high-traffic Peapod produce aisle, a placement
that would have been difficult to implement in a traditional retail
environment. This placement led to a substantial increase in use of this
product by Peapod members.
Information Research Services. The Company has a relationship with The
M/A/R/C Group, a national marketing research organization, to develop and
market custom and syndicated research applications to bring the value-added
research benefits of Peapod to consumer goods companies. Customers for such
research products include ConAgra, Inc., Johnson & Johnson and Procter &
Gamble Co. A custom online survey tool has recently been developed that the
Company believes will allow qualitative, attitudinal insights from highly-
targeted consumer groups to be gathered quickly and efficiently, and linked to
data on shopping behavior.
The Company is also developing, in conjuction with The M/A/R/C Group,
syndicated research tools by utilizing Peapod's membership pool. The first
such report is entitled Online vs. In-Line and identifies the characteristics
and motives of online shoppers. Peapod believes that the nature of its
database, which maintains extensive and detailed data tied to individual
purchasers, enables it to provide improved research and data products without
the cost of scanning and demographic research. Additionally, Peapod's
membership base allows the Company to create and maintain highly-targeted
research panels at a cost the Company believes to be substantially lower than
the consumer panels of current research firms.
To date, substantially all of Peapod's interactive marketing sales have been
made through sponsorship agreements under which the Company provides a variety
of bundled interactive marketing products and services. In 1997, the Company
began offering individual interactive marketing services such as banner ads
and electronic coupon programs on a shorter-term basis, in a manner more
similar to typical advertising and promotion programs.
TECHNOLOGY
Proprietary Consumer Software. Peapod's consumer software is based upon a
three-tiered architecture, which positions Peapod at the forefront of Internet
computing. The first tier, the client layer, resides on the member's computer.
The client layer utilizes instructions from the application server in order to
create the user's interface, run the application, and return input to the
Peapod server. The remaining tiers, the application and the database, are
centrally maintained and manage all of the logic and data associated with the
Peapod application, including members' personalized shopping lists.
Peapod believes that there are many advantages of its proprietary "thin
client" architecture. First, Peapod believes that its overall application
performance is strong relative to other consumer network applications with
comparable levels of interactivity. A key factor in the performance of a
network application is the utilization of the generally narrow bandwidth
connection between the consumer's computer and the server, whether via the
Internet or direct dial-up. Peapod makes efficient use of this bandwidth by
performing certain processing on the member's computer and by exchanging only
application-relevant information between a member's computer and the Peapod
server.
Peapod also believes that its three-tiered architecture offers a high degree
of scalability. Efficient interaction between the Peapod server and the
member's computer and client-side processing of certain application activities
reduce the processing requirements of Peapod's servers. In addition, the
partitioning of the application and the database enables Peapod to isolate and
optimize the differing processing requirements of these layers. As the Peapod
membership base grows and the number of simultaneous users increases, Peapod
can integrate additional application servers without impacting the rest of the
application architecture.
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Peapod's "thin client" architecture also provides Peapod with a great deal
of application functionality and flexibility. Because the application logic
and data is maintained centrally, Peapod can dynamically change much of the
content and appearance of the consumer software without having to modify the
client software on the member's computer. For example, during 1996, Peapod
introduced Internet e-mail features to its members without any related
modifications to the client software residing on members' computers. The
centralized application logic and data also enables Peapod to present
interactive marketing events or to customize the appearance of the application
among individual members. See "--Proprietary Targeting Engine."
The next version of the Peapod software, Version 5.0, will be based on
Microsoft's ActiveX technology and will be designed to offer an even greater
level of integration with the Web. For example, Peapod will be able to
incorporate Web site content, such as HTML documents or Shockwave animated
images, into its consumer interface. An interactive marketing client, for
instance, might choose to directly link its Peapod advertising and promotion
activity with its other Web presences. Additionally, as new consumer
technologies emerge and mature, such as Sun's Java programming language or
inexpensive Internet appliances, Peapod can quickly adapt its consumer
software to support those platforms.
Access. The software may be downloaded to the member's computer via the
Internet or from a Peapod diskette. Members can then access the Peapod servers
via direct dial-up or the Internet. The Peapod client software currently
supports both the Microsoft Windows and Macintosh user platforms.
Proprietary Targeting Engine. One key attribute of the Peapod application is
its ability to target various forms of redeemable content, such as
advertisements, electronic coupons, online surveys and product samples, to
various members based on a range of defined criteria. Peapod has developed the
Universal Event Processor, a flexible, high-performance database application,
to manage the targeting and redemption of these events. The flexibility of
this targeting and redemption capability enables Peapod to offer sophisticated
advertising and market research services to its consumer goods and retailer
clients. For example, Peapod can target an electronic coupon with varying
redemption values to different sets of members with similar purchasing
attributes in order to measure the relative effectiveness of the incentives.
See "--Interactive Marketing Services."
Business Support Applications. Peapod has designed and integrated several
business support systems with its shopping application in order to facilitate
the administration of the Peapod services. The Peapod fulfillment management
applications, installed at each of Peapod's fulfillment centers, enable Peapod
field operations managers to access and print member orders according to store
layout, manage delivery time availability and update the store-specific
product offerings. The Peapod accounting systems provide for the billing,
processing and collection functions associated with the transactions on the
Peapod service, including an electronic link of the processing of member
credit card payments and funds transfer. The member services and technical
support systems provide Peapod's telephone representatives with real-time
access to customer information, including order and online activity
information, allowing for responsive service to the various member needs. The
next release of the fulfillment management applications is being designed to
incorporate hand-held scanning technology to enhance and streamline the order
picking and packing functions and electronically integrate the actual member
order with the Peapod accounting systems.
MARKETING AND PROMOTION
Consumer Marketing. Until September 1995, Peapod relied largely on word-of-
mouth and point-of-purchase displays for member acquisition. Since that time,
Peapod has initiated promotional plans focused on radio and newspaper
advertising, direct mailings of starter kit diskettes and a variety of other
programs. The Company is testing television advertising in the Chicago market.
Much of Peapod's advertising is conducted on a cooperative basis with the
Company's retail partners, with both parties contributing financial and
management resources to member acquisition programs. In building consumer
awareness of its service, especially in newer areas, Peapod's advertising
focuses on co-branding its service with the name recognition of its retail
partners.
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<PAGE>
The Company's marketing objectives include, in addition to member
acquisition, increases in member usage, grocery order size and member
retention. Peapod has recently implemented several marketing programs offering
free gifts and service discounts to select members, and anticipates that it
will test a number of other incentives in an effort to increase member usage
and grocery order size. Additionally, Peapod intends to develop member
management programs designed to reward its loyal members and improve the
experience of its new members. The Company believes that over time the
extensive database and one-to-one marketing capabilities of its online system
will provide it with opportunities to tailor its services to the unique needs
of its members, and thereby improve membership satisfaction.
Retailer Marketing. The Company seeks to identify, and enter into an
agreement with, a high-quality grocery retailer in each of its metropolitan
markets. The Company has a separate sales and client service function that
focuses on securing relationships with grocery retailers. Senior management,
field management personnel and employees in other functional areas are
involved in providing ongoing corporate support to its retail partners.
Examples of support include, in addition to field operations management,
production of periodic out-of-stock reports indicating stocking problems in
specific stores, cross-functional planning for new market and fulfillment
center openings, and general management of Peapod's relationship with its
grocery retail partners.
Interactive Marketing Services. Peapod's interactive marketing services
personnel provide sales and client service support to consumer goods companies
and other advertisers. In 1996, the Company entered into an alliance with
ActMedia, Inc. ("ActMedia"), a subsidiary of Heritage Media Corporation,
pursuant to which ActMedia is selling certain media and promotional products
on Peapod's behalf to ActMedia's packaged goods clients. In addition, the
Company has a relationship with The M/A/R/C Group, a national marketing
research organization, to develop and market custom and syndicated research
applications to bring the value-added benefits of Peapod to consumer goods
companies. Peapod also has alliances with certain other interactive
advertising agencies to assist Peapod in its sales efforts. Peapod also
advertises its services in trade publications.
COMPETITION
The grocery retailing market is extremely competitive. The Company competes
with a number of providers of grocery products and services, including
traditional grocery retailers, other interactive or Internet-based grocery
providers, and providers that fulfill orders obtained via telephone or
facsimile. The Company also competes with many other companies that seek to
implement advertising, promotions and research programs for consumer goods
companies. Many of the Company's competitors are larger and have substantially
greater resources than the Company. In addition, the Company believes that
this competition will intensify as more grocery retailers, online marketing
services and information services companies seek to offer services in
competition with the Company.
Companies operating in the electronic (computer, facsimile or phone) grocery
shopping and delivery business compete on several factors, including the ease
of use, functionality and reliability of the shopping and ordering system,
product selection, price, the reliability and professionalism of delivery
operations and other customer services, and general brand awareness. The
Company has not experienced significant competition to date from other
electronic grocery and delivery services in any of its markets, other than
Boston where several less expensive, warehouse-based delivery services have
recently emerged. In competing against such services Peapod emphasizes its
user-friendly and functional online shopping system, its substantially greater
product selection, and the brand awareness being generated through its
cooperative marketing efforts with its retail partner.
The Company believes that most large grocery retailers will initiate online
shopping and delivery programs over time due to the large potential size of
this online sales and distribution channel, as well as the retailers' need to
defend their traditional customer base. Additionally, new retailers are likely
to emerge with warehouse-based distribution models in an attempt to lead the
development of the new channel. Although Peapod would like to form alliance
relationships with many of these grocery retailers, and believes that its
offerings are superior
33
<PAGE>
to those of other existing third party shopping service providers, some
retailers may choose to develop and operate their own systems. Alternatively,
retailers may seek to align with other parties that can develop online
software, manage the technology infrastructure or perform fulfillment
services. These relationships may, over time, give rise to new and significant
competitors for the Company. Further competitors may arise from large
technology companies that, in conjunction with grocery retailers or
independently, develop online grocery shopping systems. Because of the large
capital investments required in order to develop online grocery shopping and
delivery systems and to operate the service, the Company believes that large,
well-capitalized retailers or technology companies pose the most significant
long-term competitive threat.
With respect to interactive marketing services, the Company competes with
many other companies that seek to sell and execute advertising, promotions and
research programs to consumer goods companies. This market is extremely
competitive and includes advertising and promotional agencies, companies
implementing FSI coupon programs and in-store promotions, and traditional
consumer product research businesses. These companies also cover a variety of
media, including print, television or online. Companies in this market compete
on the basis of audience size for media exposure, demographics of the
audience, effectiveness in generating sales, quality of research data and
analysis, cost, and other factors. The online medium is in the early stages of
growth as a forum for advertising, promotion and research. The Company
believes that this medium, and in particular online grocery shopping services,
offer opportunities to impact sales of consumer products to a greater degree
than traditional media and promotions, and to perform higher quality and more
cost-effective research. See
"--Interactive Marketing Services."
EMPLOYEES
As of March 31, 1997, the Company had 225 full-time and 1,075 part-time
employees. Substantially all of the part-time employees serve in grocery
picking, packing, delivery, and customer support positions. Of the Company's
full-time employees, approximately 110 are in field operations, with the
remainder in information technology, sales and marketing, and general and
administrative functions. None of the Company's employees is represented by a
collective bargaining unit. The Company considers its relations with its
employees to be good.
PROPERTIES
The Company's principal offices are located currently in Evanston, Illinois
and occupy approximately 13,500 square feet. Peapod intends to exercise its
right to terminate its current lease and to move its principal offices to
29,700 square feet of office space in Skokie, Illinois in the summer of 1997.
This new lease is scheduled to expire in December 2004 and is renewable for an
additional five-year period. The Company also leases office space in Chicago,
San Francisco, Columbus, Boston, Houston and Atlanta for terms of between one
month and four years, which combined occupy approximately 6,500 square feet.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company believes that its success and ability to compete is dependent
upon its proprietary systems and technology. The Company relies on a
combination of copyright, trademark and trade secret laws as well as
confidentiality agreements and other measures to establish and protect its
proprietary rights. The Company does not have any patents. The Company has
U.S. registrations for the "Peapod" service mark and associated logos and for
Peapod's "Smart Shopping for Busy People" slogan. The Company has registered
copyrights, or has applied for copyright registration, with respect to certain
of its proprietary software, its Web site and certain marketing materials.
While the Company relies on trademark, trade secret and copyright laws to
protect its proprietary rights, the Company believes that the technical and
creative skills of its personnel, high-quality service standards, continued
development of its proprietary systems and technology, and brand name
recognition are more important to establish and maintain a leadership position
and strengthen its brand.
34
<PAGE>
As part of its confidentiality procedures, the Company generally enters into
agreements with its employees, retail partners and strategic partners and
limits access to and distribution of its software, documentation and other
proprietary information. There can be no assurance that steps taken by the
Company will prevent misappropriation of its technology or that agreements
entered into for that purpose will be enforceable. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's services or to obtain and use information that
the Company regards as proprietary. Policing unauthorized use of the Company's
proprietary rights is difficult. Any misappropriation of the Company's
technology or development of competitive technologies could have a material
adverse effect on the Company's business, results of operations or financial
condition. The Company could incur substantial costs in protecting and
enforcing its intellectual property. Moreover, the Company may in the future
receive notices from third parties claiming the infringement by the Company's
software or other aspects of the Company's business. While the Company is not
currently subject to any such claims, any future claim, with or without merit,
could result in significant litigation costs and diversion of resources
including the attention of management, and could have a material adverse
effect on the Company's business, results of operations or financial
condition.
LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings that management
believes would have a material adverse effect on the Company's financial
condition or results of operations.
35
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
Company's executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
---- --- ----------------------------
<S> <C> <C>
Andrew B. Parkinson (1).......... 39 Chairman, President and Chief Executive
Officer and Director
Thomas L. Parkinson (1).......... 37 Executive Vice President-Chief
Technology Officer and Director
John C. Walden................... 37 Executive Vice President-Finance and
Business Development
Timothy M. Dorgan................ 44 Executive Vice President-Interactive
Marketing Services
John A. Furton................... 33 Senior Vice President-Field Support and
Retailer Services
Tasso H. Coin (2)(3)............. 61 Director
Steven M. Friedman (2)........... 42 Director
Trygve E. Myhren (2)............. 60 Director
Seth L. Pierrepont (3)........... 46 Director
</TABLE>
- --------
(1) Messrs. Andrew and Thomas Parkinson are brothers.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
Messrs. Friedman, Myhren and Pierrepont were elected directors pursuant to
certain agreements between the Company and certain stockholders of the
Company. The provisions of such agreements relating to the election of
directors are expected to terminate upon consummation of the Offering.
Mr. Andrew B. Parkinson is a co-founder of the Company and has been its
President and Chief Executive Officer and a director since its founding in
1989. Prior to the founding of the Company, Mr. Parkinson held various brand
and product management positions with Kraft Foods, Inc. and Procter & Gamble
Co. Mr. Parkinson holds a BA in Economics from Wesleyan University.
Mr. Thomas L. Parkinson is a co-founder of the Company and has been its
Executive Vice President-Chief Technology Officer and a director since its
founding in 1989. He has had primary responsibility for directing consumer
product development and technology research and development since the
Company's founding and he is the principal architect of Peapod's software.
Prior to founding the Company in 1989, Mr. Parkinson held various field sales
and sales management positions with Procter & Gamble Co. Mr. Parkinson holds a
Masters in Industrial Design from Pratt Institute and a BA in Design from
Wesleyan University.
Mr. John C. Walden joined Peapod in 1996 as Executive Vice President-Finance
and Business Development. He is responsible for the Company's finance,
accounting, legal, business development and product management functions.
Prior to joining Peapod, Mr. Walden was Director, Media Ventures for Ameritech
Corporation where he effected and managed investments in interactive media
companies. Mr. Walden served as a director of Peapod in 1995 as Ameritech
Corporation's designee. From 1990 to 1994, he held a variety of executive
management positions with Storage Technology Corporation, a computer storage
system manufacturer, and a predecessor, XL/Datacomp, Inc., a computer
distribution company, including Vice President and General Manager, Vice
President-Corporate Development and Strategy, and General Counsel. Mr. Walden
holds a Masters in Management from Kellogg Graduate School of Management,
Northwestern University; a JD from Illinois Institute of Technology, Chicago-
Kent College of Law; and a BS in Finance from the University of Illinois.
36
<PAGE>
Mr. Timothy M. Dorgan joined Peapod in 1994 in his current role. As
Executive Vice President-Interactive Marketing Services, Mr. Dorgan is
responsible for the overall development and management of the Company's
interactive marketing and research services. Prior to joining Peapod, from
1992 to 1994, Mr. Dorgan served as President of Ketchum Advertising-Chicago, a
multi-national advertising agency. From 1987 to 1992, Mr. Dorgan was President
and Chief Operating Officer of Noble & Associates, an advertising and
marketing services firm specializing in food products. Mr. Dorgan holds a BS
in Communications from the University of Illinois.
Mr. John A. Furton is a co-founder of the Company and joined the Company in
1990. Since 1996, he has served in the role of Senior Vice President-Field
Support and Retailer Services in which he has responsibility for retailer
sales and client services and centralized support for fulfillment operations.
Prior to his current position, Mr. Furton was responsible for the Company's
fulfillment services as Vice President of Operations. Prior to joining Peapod,
from 1986 to 1990, Mr. Furton held various positions in information systems
consulting with Kraft Foods, Inc. and Michigan Bell Telephone Company. Mr.
Furton holds a BS in Computer Science and Software Engineering from Michigan
Technological University.
Mr. Tasso H. Coin has been a director of Peapod since 1992. He is President
of Tasso H. Coin Investment Development Company, a private investment and
advisory firm specializing in services for growth companies. Mr. Coin was a
founder of the Chicago law firm now known as Cowen, Crowley, Nord & Staub and
co-founder of AmBank Financial Services Inc., a bank holding Company. Mr. Coin
holds a JD from the University of Iowa, and a BA in Business Administration
from Augustana College.
Mr. Steven M. Friedman became a director in 1996. He is a general partner of
Eos Partners SBIC, L.P., an investment partnership, which he co-founded in
1994. From 1988 to 1993, Mr. Friedman was a principal and a general partner of
Odyssey Partners L.P., an investment partnership, which he joined in 1983. He
is a member of the board of directors of Forstmann & Company, Inc., Eagle Food
Centers, Inc. and The Caldor Corporation. Mr. Friedman holds an MBA and a BA
from the University of Chicago and a JD from Brooklyn Law School.
Mr. Trygve E. Myhren became a director in 1995. He is president of Myhren
Media, Inc., which invests in and advises media, telecommunications and
consumer products companies. He was President and Chief Operating Officer and
a director of The Providence Journal Company, a diversified media firm, from
1990 to 1996. From 1975 until 1988, Mr. Myhren was employed by American
Television and Communications Corporation, the cable television subsidiary of
Time, Inc. (now Time/Warner Cable), and he served as Chairman and Chief
Executive Officer from 1981 to 1988. Mr. Myhren was a member of the board of
the National Cable Television Association from 1981 to 1991 and served as its
Chairman in 1986 and 1987. Mr. Myhren currently serves on the Boards of J.D.
Edwards, Inc., Verio, Inc., Founders Funds and Advanced Marketing Services,
Inc. Mr. Myhren holds an MBA from the Amos Tuck School at Dartmouth and a BA
from Dartmouth College.
Mr. Seth L. Pierrepont has been a director of Peapod since 1992. Mr.
Pierrepont also served as the Company's Director of Marketing during 1993. He
is President of Sage Venture Management Incorporated, a private investment and
advisory services firm specializing in developing businesses. Prior to
founding Sage in 1990, Mr. Pierrepont was a Managing Director of Continental
Illinois Venture Corporation. Mr. Pierrepont holds an MBA from Columbia
University and a BA from the University of Pennsylvania.
BOARD OF DIRECTORS
The business of the Company is managed under the direction of the Company's
Board of Directors. The Board of Directors is presently composed of six
directors. Following the Offering, the directors will be divided into three
classes with staggered three-year terms (except for the first term of Class I
and Class II directors, which will be one and two-year terms, respectively).
Messrs. Andrew B. Parkinson and Tasso H. Coin will be in Class I and will
stand for election at the annual meeting of stockholders to be held in 1998.
Messrs. Thomas L. Parkinson and Seth L. Pierrepont will be in Class II and
will stand for election at the annual meeting of stockholders to be held in
1999, and Messrs. Steven M. Friedman and Trygve E. Myhren will be in Class III
and will stand for election at the annual meeting of stockholders to be held
in 2000. Officers of the Company are elected at each annual meeting of the
Board of Directors and serve at the discretion of the Board.
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<PAGE>
The Company's Board of Directors has established a Compensation Committee
and an Audit Committee. The Compensation Committee reviews and recommends the
compensation arrangements for all officers, approves such arrangements for
other senior level employees and administers and takes such other action as
may be required in connection with certain compensation and incentive plans of
the Company (including the grant of stock options). The Audit Committee
recommends the firm to be appointed as independent accountants to audit
financial statements and to perform services related to the audit, reviews the
scope and results of the audit with the independent accountants, reviews with
management and the independent accountants the Company's year-end operating
results and considers the adequacy of the internal accounting procedures.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company do not receive
compensation for serving as directors. Non-employee directors receive fees of
$1,000 per in-person meeting of the Board of Directors, $500 per telephonic
meeting of the Board of Directors lasting more than one hour, $750 per in-
person meeting of a committee of the Board of Directors and $375 per
telephonic meeting of a committee lasting more than one hour. All directors
are reimbursed for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors and meetings of committees of
the Board of Directors. In addition, all directors have been eligible to
participate in the Company's Director Unit Purchase Plan under which directors
were able to purchase equity interests in the Company at a discount to fair
market value. See "Stock Plans--Other Plans."
In connection with the Offering, the Company has adopted the 1997 Long-Term
Incentive Plan. See
"--Stock Plans." Pursuant to this plan, on the date of the closing of the
Offering (or, if later, on the date on which a person is first elected or
begins to serve as a non-employee director) each non-employee director will be
granted a nonqualified option to purchase 15,000 shares of Common Stock which
will vest one-third each on the first, second and third anniversaries thereof
and, on the date of each annual meeting of stockholders of the Company, each
person who is a non-employee director immediately after such annual meeting of
stockholders will be granted a nonqualified option to purchase 5,000 shares of
Common Stock which will vest on the day prior to the next annual meeting. The
per share exercise price of such options will be equal to the fair market
value of the Common Stock on the date of grant of such option.
EXECUTIVE COMPENSATION
Summary Compensation. The following summary compensation table sets forth
compensation for services awarded to, earned by or paid for services rendered
to the Company in all capacities during the year ended December 31, 1996 by
the Company's Chief Executive Officer and each of the Company's other four
most highly compensated executive officers (the "Named Executives").
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
----------------- NUMBER OF SHARES
NAME AND CAPACITY SERVED SALARY BONUS UNDERLYING OPTIONS
------------------------ -------- -------- -------------------
<S> <C> <C> <C>
Andrew B. Parkinson................ $120,000 $ 26,700 10,000
President and Chief Executive
Officer(2)
Thomas L. Parkinson................ 120,000 27,330 10,000
Executive Vice President-Content &
Consumer Product Development
John C. Walden..................... 147,115 130,725 30,000
Executive Vice President-Finance
and Business Development
Timothy M. Dorgan.................. 115,000 17,466 25,000
Executive Vice President-
Interactive Marketing Services
John A. Furton..................... 104,375 16,301 10,000
Senior Vice President-Field
Support and Retailer Services
</TABLE>
- --------
(1) All other compensation in the form of perquisites and other personal
benefits has been omitted because the aggregate amount of such perquisites
and other personal benefits constituted the lesser of $50,000 or 10% of
the total annual salary and bonus of the Named Executive for such year.
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<PAGE>
(2) Mr. Andrew Parkinson's compensation historically has been paid by Old
Peapod, the general partner of Peapod LP.
Option Information. The following table sets forth certain information
regarding the option grants made pursuant to the Company's option plans during
the fiscal year ending December 31, 1996, to each of the Named Executives.
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(4)
OPTIONS IN FISCAL EXERCISE EXPIRATION ----------------
NAME GRANTED YEAR(1) PRICE(2) DATE(3) 5% 10%
- ---- ---------- ---------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Andrew B. Parkinson. 10,000 3.3% $7.00 2/5/06 $38,593 $ 95,056
Thomas L. Parkinson. 10,000 3.3 7.00 2/5/06 38,593 95,056
John C. Walden...... 10,000 3.3 6.00 6/1/05 33,080 81,477
20,000 6.5 6.00 1/1/06 66,159 162,954
Timothy M. Dorgan... 25,000 8.1 7.00 2/5/06 96,482 237,641
John A. Furton...... 10,000 3.3 7.00 2/5/06 38,593 95,056
</TABLE>
- --------
(1) Based on an aggregate of 307,500 shares subject to options granted to
employees during fiscal 1996.
(2) Options were granted at an exercise price equal to the estimated fair
market value of the Peapod LP partnership units at the date of grant.
(3) The term of each option is generally nine years from the date of grant.
However, options may terminate before their expiration dates if the
optionee's status as an employee is terminated.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the future Common Stock
price.
FISCAL YEAR END OPTION VALUE
No options were exercised by the Named Executives during the fiscal year
ending December 31, 1996. The following tables sets forth for each of the
Named Executives, certain information concerning the value of unexercised
options at the end of fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF NET VALUES OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(1)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Andrew B. Parkinson......... 119,387 14,333 $1,469,212 $107,331
Thomas L. Parkinson......... 129,175 14,333 1,574,418 107,331
John C. Walden.............. 41,000 69,000 397,666 702,334
Timothy M. Dorgan........... 41,342 52,166 434,745 486,494
John A. Furton.............. 129,450 14,333 1,563,379 107,331
</TABLE>
- --------
(1) Computed using a share value of $14.00 per share, which is the assumed
initial public offering price.
MANAGEMENT BONUSES
Each of the Named Executives is eligible to receive an annual bonus based on
the achievement of individual and corporate goals.
STOCK PLANS
Long-Term Incentive Plan. In connection with the Offering, the Board of
Directors and stockholders of the Company approved the 1997 Long-Term
Incentive Plan (the "1997 Plan"). Under the 1997 Plan, the Company may grant
incentive stock options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified
options. The 1997 Plan also provides for the grant of stock appreciation
rights ("SARs"), bonus stock awards which are vested upon grant, stock awards
which may be
39
<PAGE>
subject to a restriction period or specified performance measures or both, and
performance shares. Performance shares are rights, contingent upon the
attainment of performance measures within a specified performance period, to
receive one share of Common Stock, which may be restricted. A total of
4,300,000 shares of Common Stock, including shares subject to previously
outstanding options, have been reserved for issuance under the 1997 Plan,
subject to adjustment in the event of a stock split, stock dividend or other
changes in capital structure. No grants may be made under the 1997 Plan after
ten years after its effective date. Directors, officers and other employees
are eligible, as well as consultants, to participate in the 1997 Plan. The
maximum number of shares of Common Stock with respect to which options or
SARs, stock awards or performance share awards, or a combination thereof may
in the future be granted during any calendar year to any participant in the
1997 Plan is 330,000, subject to adjustment in the event of a stock split,
stock dividend or other change in capital structure.
The 1997 Plan will be administered by the Compensation Committee. Subject to
the terms of the 1997 Plan, the Compensation Committee is authorized to select
eligible non-employee directors, officers and other key employees and to
determine the form, amount and timing of each award to such person and, if
applicable, the number of shares of Common Stock, the number of SARs and the
number of performance shares subject to the awards granted thereunder, the
exercise price or base price associated with the award, the time and
conditions of exercise, and all other terms and conditions of such award.
Options granted to employees under the 1997 Plan may be ISOs or nonqualified
options. The purchase price of shares of Common Stock purchasable upon
exercise of an option will be determined by the Compensation Committee at the
time of grant, but may not be less than 100% of the fair market value of such
shares of Common Stock on the date of grant. The aggregate fair market value
(determined as of the date the option is granted) of the stock with respect to
which ISOs are exercisable for the first time by the optionee in any calendar
year (under the 1997 Plan and any other incentive stock option plan of the
Company) may not exceed $100,000. ISOs granted under the 1997 Plan may not be
exercised after ten years from the date of grant. In the case of any eligible
employee who owns or is deemed to own stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, the
exercise price of any ISOs granted under the 1997 Plan may not be less than
110% of the fair market value of the Common Stock on the date of grant, and
the exercise period may not exceed five years from the date of grant. Options
granted under the 1997 Plan are not transferable by the optionee other than by
will or under the laws of descent and distribution except that, if the
optionee dies prior to exercising his option, the estate of the deceased
optionee may exercise all options in full until the expiration of one year
from the date of death or, if earlier, the termination of the option.
The Compensation Committee has made grants under the 1997 Plan, effective
upon commencement of the Offering, of options to purchase Common Stock to the
Named Executives as follows: Mr. A. Parkinson (50,000 shares), Mr. T.
Parkinson (50,000 shares), Mr. Walden (100,000 shares), Mr. Dorgan (100,000
shares) and Mr. Furton (50,000 shares). Each such stock option will have a per
share exercise price equal to the initial public offering price, and will
become exercisable as to 25% of such options beginning on the first
anniversary of the date of grant, and thereafter ratably on a monthly basis
over the next three years, and will expire eight years after the date of
grant.
Employee Stock Purchase Plan. An employee stock purchase plan also has been
approved by the Board of Directors and the stockholders of the Company
pursuant to which up to 150,000 shares of Common Stock may be purchased by
full-time employees who have at least one year of service with the Company.
Under this plan, purchases can be made on a quarterly basis at the lower of
85% of the fair market value at the beginning or end of the quarter. Shares so
purchased by an employee will not be delivered to the employee (and,
consequently, may not be sold by the employee) until the end of the calendar
year in which the purchase is made.
Other Plans. In prior years, Peapod LP adopted certain plans pursuant to
which certain executive officers, directors, advisors and employees were
granted options to purchase Peapod LP limited partnership units (the "Units").
The Executive Incentive Unit Option Plan and the Bonus Unit Option Plan were
adopted in 1993. Options under these plans generally vest over a five-year
period and expire eight to ten years from the date of grant. Peapod LP also
had Executive Option Purchase Plans covering the years 1992 through 1995;
Executive Unit Purchase Plans covering the years 1992 through 1997; and a
Director Unit Purchase Plan covering the years
40
<PAGE>
1995 through 1997. Options were granted under the Executive Option Purchase
Plans at fair market value as determined by the Board of Directors. Units were
purchased under the unit purchase plans at prices which ranged from 80% to 85%
of the fair market value of the Units as determined by the Board of Directors.
Options purchased under the Executive Option Purchase Plans vested immediately
upon the date of grant.
No additional grants of options or purchases of shares may be made under any
of the plans described under "--Other Plans."
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has entered into employment agreements and severance agreements
with each of the Named Executives. The agreements set forth compensation
arrangements, including base salaries and minimum targets for annual bonuses.
The agreements expire in 2002, and are renewable thereafter for one-year
terms. The Company may terminate a Named Executive's employment with or
without "cause," as defined in such agreements, and a Named Executive may
terminate his employment for any reason, including "good reason," as defined
in such agreements. Upon termination by the Company without "cause," or
termination by the employee for "good reason," such Named Executive is
entitled to severance payments equal to his base salary and bonus for 18
months. In the event there is a "change in control," as defined in the
severance agreements, prior to such termination, the Named Exective is
entitled to a lump sum severance payment equal to his base salary and bonus
for two years, and the vesting of all of such Named Executive stock options
will be accelerated so that all such stock options become immediately
exercisable. The current annual salary rates under the employment agreements
for the Company's Named Executives are as follows: Mr. A. Parkinson $140,000;
Mr. T. Parkinson, $140,000; Mr. Walden, $154,500; Mr. Dorgan, $121,900; and
Mr. Furton, $118,450. Under the terms of the agreements, annual salaries may
not be reduced; however increases in annual salaries are at the discretion of
the Board of Directors. The Named Executives and other senior managers have
entered into agreements with the Company containing confidentiality, non-
competition and non-solicitation provisions between the Company and such
employees for the terms set forth in each agreement. Pursuant to Mr. Walden's
employment arrangements, he will receive a bonus stock award of 15,000 shares
upon the consummation of the Offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Mr. Tasso H. Coin and Ms. M. Catherine Jaros, a former director
of the Company, comprised the Compensation Committee of the Board of
Directors.
The Company had an advisory agreement with Mr. Tasso H. Coin, who also
serves as a director of the Company, pursuant to which Mr. Coin had provided
certain advisory services to the Company and had received advisory fees in the
form of cash or shares of Common Stock. This advisory agreement was terminated
as of May 1, 1997. Mr. Coin's advisory fees from the Company are as follows:
$52,500 in 1997; $90,000 in 1996; $134,612 in 1995; and $294,954 in 1994.
During such periods, portions of Mr. Coin's advisory fees were paid in the
form of shares of Common Stock (such shares being valued for this purpose at
the then estimated fair market value, less a 15% to 20% discount). See "Stock
Plans--Other Plans."
In 1997, the Company entered into an agreement with Firefly Greetings,
L.L.C. ("Firefly"), a provider of personal greeting cards and other specialty
products, pursuant to which Peapod will create an online store through which
its members can shop for Firefly products utilizing a customized version of
the Peapod application. Mr. Tasso H. Coin, a director of the Company, is a
minority stockholder of, and a consultant to, Firefly. Under the agreement,
Firefly has agreed to pay Peapod development, management and transactional
fees.
CERTAIN TRANSACTIONS
REGISTRATION RIGHTS
The Company has granted to Messrs. Andrew and Thomas Parkinson and to
certain stockholders (the "Holders") certain rights (the "Registration
Rights") to require the Company to take action to register under the
Securities Act the sale of shares of Common Stock (the "Registrable Shares")
held by them. The number of such registrations which the Company is obligated
to effect is limited to four registrations in the aggregate. Such Registration
Rights, as well as rights granted to Mr. Tasso Coin, a director of the
Company, provide (the "Piggyback Rights") that in the event the Company
proposes to register any of its securities under the Securities
41
<PAGE>
Act at any time or times, subject to certain limitations, the Company will use
its best efforts to include the Registrable Shares and a pro rata portion of
Mr. Coin's shares in such registration upon the request of the Holders or Mr.
Coin. Shares sold by the Selling Stockholders in the event the Underwriters'
over-allotment option is exercised are being included in the registration in
which this Prospectus is included pursuant to Piggyback Rights. The Company is
generally required to bear the expenses of all such registrations, except
underwriting discounts and commissions. The Company also has agreed to
indemnify the Purchasers and their controlling persons against certain
liabilities, including liabilities under the Securities Act. After the
Offering, approximately 10.0 million shares of Common Stock of the Company
(including shares subject to currently exercisable options) (approximately 9.5
million shares if the over-allotment option is exercised in full) will be
subject to Registration Rights or Piggyback Rights.
OTHER
The Conversion. In the Conversion which was effected on May 31, 1997 (i) all
of the equity interests in Peapod LP were transferred to the Company in
exchange for 12,656,417 shares of Common Stock, (ii) Peapod LP was dissolved,
(iii) all of the assets and liabilities of Peapod LP were transferred to the
Company and (iv) outstanding options and warrants for equity interests in
Peapod LP were converted into options and warrants for shares of Common Stock.
The share numbers set forth below reflect the exchange in the Conversion of
Units for shares of Common Stock and of options and warrants to purchase Units
for options and warrants to purchase Common Stock.
Management Fees. Pursuant to Peapod LP's limited partnership agreement,
Peapod LP has been required to pay an annual management fee to the General
Partner which has historically been used to pay the salary of the Company's
Chief Executive Officer, Mr. Andrew Parkinson, and other General Partner
expenses. The management fee immediately prior to the Conversion was
approximately $14,600 per month. Peapod LP paid management fees to the General
Partner of $175,000 in 1996, $150,000 in 1995 and $125,000 in 1994. Peapod
LP's limited partnership agreement and the management fees payable thereunder
were terminated upon the Conversion.
Advisory Fees. The Company had an advisory agreement with Mr. Tasso H. Coin,
who also serves as a director of the Company, pursuant to which Mr. Coin
provided certain advisory services to the Company and received advisory fees
in the form of cash or shares of Common Stock. See "Management--Compensation
Committee Interlocks and Insider Participation." The Company also had an
advisory agreement with Mr. Seth L. Pierrepont, who serves as a director of
the Company, pursuant to which Mr. Pierrepont provided certain advisory
services to the Company and received compensation in the form of cash, options
or shares of Common Stock. The agreement was terminated on December 31, 1996.
In 1996, Mr. Pierrepont received a total of $66,000 in advisory fees,
including $30,000 paid in connection with the termination of the advisory
agreement. In connection with the termination of the advisory agreement in
1996, the Company also accelerated the vesting of certain options to purchase
32,500 shares of Common Stock at an exercise price of $2.22 per share. Mr.
Pierrepont also received advisory fees in each of 1995 and 1994, which
advisory fees totaled less than $60,000 in each such years. During such
periods, portions of Mr. Coin's and Mr. Pierrepont's advisory fees have been
paid in the form of shares of Common Stock (such shares being valued for this
purpose at the then estimated fair market value, less a 15% to 20% discount).
Certain Stockholders and Certain Directors. The Company was involved in the
following transactions with 5% stockholders: (i) on October 1, 1994, Tribune
National Marketing Company ("TNMC") purchased 694,248 shares of Common Stock
for an aggregate price of $1,388,496; (ii) on November 1, 1995, Ameritech
Corporation, TNMC and Providence Journal Company each purchased 75,792 shares
of Common Stock for an aggregate price of $738,972 pursuant to the exercise of
preemptive rights set forth in each of their purchase agreements; and (iii) on
April 19, 1996 TNMC and Providence Journal Company each purchased 166,667
shares of Common Stock for an aggregate price of $2,000,004.
The Company leases office equipment from Ameritech Credit Corporation, an
affiliate of Ameritech Corporation, pursuant to leases scheduled to expire in
1999. The aggregate monthly rental payment for all equipment leased under
these arrangements is $22,303.
The Company has an agreement to provide online shopping services for a
greeting card distributor. Mr. Tasso H. Coin, a director of the Company, is a
minority stockholder of, and a consultant to, such company. See "--
Compensation Committee Interlocks and Insider Participation."
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<PAGE>
STOCK OWNERSHIP
The following table sets forth certain information regarding beneficial
ownership of the Common Stock, before and after giving effect to the sale of
the shares of Common Stock offered hereby, by (i) each person who is known by
the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each director of the Company, (iii) each of the Named
Executives and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1)(2) SHARES AFTER THE OFFERING(1)(2)(3)
------------------------------- BEING -------------------------------
NAME NUMBER PERCENT OFFERED(3) NUMBER PERCENT
- ---- ---------------- -------------- ---------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Belo Holdings Corp.
400 South Record St.
Communications Center
Dallas, TX 75202........ 1,809,113 14.3% -- 1,809,113 11.1%
Tribune National
Marketing Company
435 North Michigan
Avenue
Chicago, Illinois 60611. 1,808,115 14.3 -- 1,808,115 11.1
Ameritech Corporation(4)
30 South Wacker Drive
Chicago, Illinois 60606. 1,010,091 8.0 -- 1,010,091 6.2
CIBC Wood Gundy
Ventures, Inc.
425 Lexington Avenue
New York, NY 10017...... 916,667 7.2 -- 916,667 5.6
Old Peapod(5)
1033 University Place
Evanston, IL 60201...... 3,106,293 24.5 -- 3,106,293 19.1
Andrew B.
Parkinson(5)(6)+........ 1,060,759 8.3 -- 1,060,759 6.5
Thomas L.
Parkinson(5)(7)+........ 1,094,535 8.6 -- 1,094,535 6.7
John C. Walden(8)....... 46,333 * -- 61,333 *
Timothy M. Dorgan(9).... 57,881 * -- 57,881 *
John A. Furton(10)...... 347,618 2.7 -- 347,618 2.1
Tasso H. Coin(11)....... 441,818 3.5 -- 441,818 2.7
Steven M. Friedman(12).. 416,667 3.3 -- 416,667 2.6
Trygve E. Myhren........ 36,321 * -- 36,321 *
Seth L. Pierrepont(13).. 434,662 3.4 -- 434,662 2.6
All executive officers
and directors as a
group (9 persons)....... 3,936,594 30.9% -- 3,951,594 23.3%
</TABLE>
- --------
+ The mailing address of each of these individuals is c/o the Company, 1033
University Place, Evanston, Illinois 60201.
*Less than 1%.
(1) Each stockholder possesses sole voting and investment power with respect
to the shares listed, except as otherwise indicated. In accordance with
the rules of the Securities and Exchange Commission, shares subject to
stock options which are currently exercisable or which become exercisable
within 60 days after the date hereof, are deemed to be beneficially owned
by the person or entity holding such option for purposes of computing such
person's or such entity's percentage ownership, but are not treated as
outstanding for the purpose of computing the percentage of any other
person or entity. The inclusion in the table of shares listed as
beneficially owned does not constitute an admission of beneficial
ownership.
(2) Number of shares deemed outstanding includes 12,656,517 shares outstanding
as of the date hereof and any shares subject to options held by the person
or entity in question that are currently exercisable or
43
<PAGE>
exercisable within 60 days after the date of this Prospectus. Number of
shares deemed outstanding after the Offering also includes the 3,600,000
shares of Common Stock which are being offered by the Company hereby and
15,000 bonus shares which will be issued to Mr. Walden upon the
consummation of the Offering.
(3) If the Underwriters' over-allotment option is exercised in full, the
Selling Stockholders will sell pursuant to such option the number of
shares of Common Stock set forth opposite their names and, after the
Offering, will beneficially own the number and percentage of shares of
Common Stock set forth opposite their names. For a description of the
relationships of certain of the Selling Stockholders with the Company, see
"Management," "Certain Transactions" and "Underwriting."
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL OWNERSHIP
OWNERSHIP AFTER THE OFFERING
PRIOR TO THE SHARES TO -----------------------
NAME OFFERING BE SOLD NUMBER PERCENT
---- ------------ --------- ------------ ----------
<S> <C> <C> <C> <C>
Tribune National Marketing
Company................... 1,808,115 181,248 1,626,867 10.0%
Ameritech Corporation...... 1,010,091 101,252 908,839 5.6
Service Master Venture Fund
L.L.C. ................... 500,000 50,120 449,880 2.8
Tasso H. Coin.............. 441,818 44,489 397,329 2.4
Equity-Linked Investors-II
.......................... 416,667 41,767 374,900 2.3
Eos Partners SBIC, L.P..... 416,667 41,767 374,900 2.3
The Travelers Insurance
Company................... 416,667 41,767 374,900 2.3
Benaroya Capital Company... 166,667 16,707 149,960 *
Montreaux Equity Partners.. 133,333 13,365 119,968 *
Glenbrook Partners, L.P. .. 41,667 4,177 37,490 *
Berkman Associates, L.P. .. 33,333 3,341 29,992 *
</TABLE>
(4) Includes 11,500 shares of Common Stock issuable pursuant to currently
exercisable warrants.
(5) It is expected that at some point after the Offering Old Peapod will
distribute the shares of Common Stock held by it to its equity owners.
Through their ownership interests in and positions with Old Peapod,
Messrs. Andrew and Thomas Parkinson may be deemed to share beneficial
ownership of the Common Stock held by Old Peapod.
(6) Includes 940,606 shares of Common Stock held indirectly through Mr. Andrew
Parkinson's equity ownership in Old Peapod and excludes the remaining
2,165,687 shares held by Old Peapod. Also includes 120,053 shares of
Common Stock issuable pursuant to options that are exercisable within 60
days after the date of this Prospectus.
(7) Includes 965,027 shares of Common Stock held indirectly through Mr. Thomas
Parkinson's equity ownership in Old Peapod (of which 36,301 shares are
held for the benefit of the minor children of Mr. Andrew Parkinson), and
excludes the remaining 2,141,266 shares held by Old Peapod. Also includes
129,508 shares of Common Stock issuable pursuant to options that are
exercisable within 60 days after the date of this Prospectus.
(8) Includes 44,333 shares of Common Stock issuable pursuant to options that
are exercisable within 60 days after the date of this Prospectus. In
addition, the shares beneficially owned by Mr. Walden after the Offering
include 15,000 bonus shares to be issued to him upon the consummation of
the Offering.
(9) Includes 44,341 shares of Common Stock issuable pursuant to options that
are exercisable within 60 days after the date of this Prospectus.
(10) Includes 215,162 shares of Common Stock held indirectly through Mr.
Furton's equity ownership in Old Peapod and 130,116 shares of Common
Stock issuable pursuant to options that are exercisable within 60 days
after the date of this Prospectus.
(11) Includes 257,453 shares of Common Stock held indirectly through Mr.
Coin's equity ownership in Old Peapod. Includes 12,554 shares
beneficially owned by Tasso H. Coin, which shares are held by American
Bank of Rock Island as Trustee of the Tasso H. Coin Investment
Development Profit Sharing Trust. Mr. Coin disclaims beneficial ownership
of such shares.
44
<PAGE>
(12) Steven M. Friedman is a general partner of Eos Partners SBIC, L.P., and
accordingly may be attributed shared beneficial ownership of the shares
owned by Eos Partners SBIC, L.P. Mr. Friedman disclaims beneficial
ownership of the shares beyond his ownership interests in Eos Partners
SBIC, L.P.
(13) Includes 204,152 shares of Common Stock issuable pursuant to options that
are exercisable within 60 days after the date of this Prospectus.
Excludes an aggregate of 32,833 shares held by various trusts for the
benefit of his children with respect to which shares Mr. Pierrepont
disclaims beneficial ownership.
DESCRIPTION OF CAPITAL STOCK
The Company's Restated Certificate of Incorporation (the "Charter") provides
that the authorized capital stock of the Company consists of 55,000,000 shares
of capital stock, consisting of 50,000,000 shares of Common Stock, par value
$.01 per share and 5,000,000 shares of Preferred Stock, par value $.01 per
share, issuable in series, including 500,000 shares of Series A Preferred
Stock, par value $.01 per share.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to receive ratably
such dividends, if any, as may be declared by the Board of Directors out of
funds legally available therefor, subject to any preferential dividend rights
of outstanding Preferred Stock. Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company available after the payment of all debts and
other liabilities and subject to the prior rights of holders of any
outstanding Preferred Stock. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of
Common Stock are, and the shares offered by the Company in the Offering will
be, when issued and paid for, fully paid and nonassessable.
PREFERRED STOCK
The Charter provides that the Board of Directors is authorized, subject to
certain limitations prescribed by law, without further stockholder approval,
to issue from time to time up to an aggregate of 5,000,000 shares of Preferred
Stock in one or more series and to fix or alter the designations, preferences,
rights and any qualifications, limitations or restrictions of the shares of
each such series thereof, including the dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption (including sinking fund
provisions), redemption price or prices, liquidation preferences and the
number of shares constituting any series or designations of such series. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change of control of the Company. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future. The Company has
no present plans to issue any shares of Preferred Stock except as described
under "--Rights."
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("DGCL"). Subject to certain exceptions, Section 203
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years
after the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained such status with the
approval of the Board of Directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder which is not shared pro rata with the other
stockholders of the Company. Subject to certain exceptions, an "interested
stockholder" is a person who, together with affiliates and associates, owns,
or within the past three years did own, 15% or more of the corporation's
voting stock.
45
<PAGE>
The Charter provides for the division of the Board of Directors into three
classes as nearly equal in size as possible with staggered three-year terms.
See "Management--Board of Directors." Any director may be removed only with
cause and then only by the vote of a majority of the shares entitled to vote
for the election of directors.
The Charter empowers the Board of Directors, when considering a tender offer
or merger or acquisition proposal, to take into account factors in addition to
potential economic benefits to stockholders. Such factors may include (i) the
comparison of the proposed consideration to be received by stockholders in
relation to the then current market price of the Company's capital stock, the
estimated current value of the Company in a freely negotiated transaction and
the estimated future value of the Company as an independent entity, (ii) the
impact of such a transaction on the employees, suppliers and customers of the
Company and its effect on the communities in which the Company operates and
(iii) the ability of the Company to fulfill its objectives under applicable
statutes and regulations.
The Charter provides that any action required or permitted to be taken by
the stockholders of the Company may be taken only at a duly called annual or
special meeting of the stockholders and that special meetings may be called
only by the Chairman, President or a majority of the Board of Directors of the
Company. These provisions could have the effect of delaying until the next
annual stockholders meeting, stockholder actions which are favored by the
holders of the outstanding voting securities of the Company. These provisions
may also discourage another person or entity from making a tender offer for
the Company's Common Stock, because such person or entity, even if it acquired
all or a majority of the outstanding voting securities of the Company, would
be able to take action as a stockholder (such as electing new directors or
approving a merger) only at a duly called stockholders meeting, and not by
written consent.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage.
The Charter requires the affirmative vote of the holders of at least 75% of
the outstanding voting stock of the Company to amend or repeal any of the
foregoing Charter provisions, and to reduce the number of authorized shares of
Common Stock and Preferred Stock. A 75% vote is required to amend or repeal
the Company's Amended and Restated By-Laws (the "By-Laws"). The By-Laws may
also be amended or repealed by a majority vote of the Board of Directors. Such
stockholder vote would be in addition to any separate class vote that might in
the future be required pursuant to the terms of any Preferred Stock that might
be outstanding at the time any such amendments are submitted to stockholders.
The By-Laws provide that for nominations for the Board of Directors or for
other business to be properly brought by a stockholder before an annual
meeting of stockholders, the stockholder must first have given timely notice
thereof in writing to the Secretary of the Company. To be timely, a
stockholder's notice generally must be delivered not later than 90 days in
advance of the anniversary date of the release of the Company's proxy
statement to stockholders in connection with the prior year's annual meeting
of stockholders. The notice must contain, among other things, certain
information about the stockholder delivering the notice and, as applicable,
background information about each nominee or a description of the proposed
business to be brought before the meeting. The Company's By-Laws also provide
that special meetings of stockholders may be called only by the Chairman,
President or a majority of the Board of Directors. Business transacted at a
special meeting is limited to the purposes for which the meeting is called.
The foregoing provisions could have the effect of making it more difficult
for a third party to acquire, or discouraging a third party from attempting to
acquire, control of the Company.
The Charter contains certain provisions permitted under the DGCL relating to
the liability of directors. These provisions eliminate a director's liability
for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Charter and By-Laws
46
<PAGE>
also contain provisions indemnifying the directors and officers of the Company
to the fullest extent permitted by the DGCL. The Company believes that these
provisions will assist the Company in attracting and retaining qualified
individuals to serve as directors.
The Company has also entered into indemnity agreements with each of its
directors and certain officers, including its executive officers, that require
the Company to advance expenses to each such director and officer in the event
that a claim is brought against such director or officer with respect to an
action for which the Company is obligated to provide indemnification under the
Company's Charter and By-Laws.
RIGHTS
The Board of Directors has adopted a stockholders rights plan. Under the
stockholders rights plan, each share of Common Stock will have associated with
it one preferred share purchase right (a "Right"). The terms of the Rights are
set forth in a Rights Agreement between the Company and First Chicago Trust
Co. of New York. Under certain circumstances described below, each right would
entitle the holders thereof to purchase one one-hundredth of a share of Series
A Junior Participating Preferred Stock for a price of $98 per one one-
hundredth of a share. The Rights are not presently exercisable and are
transferable only with the related shares of Common Stock. The Rights will not
become exercisable or be evidenced by separate certificates or traded
separately from the Common Stock prior to the occurrence of certain triggering
events described below. In such an event, separate Rights certificates would
be issued and distributed representing one right for each share of Common
Stock. There is no present market for the Rights separate from the Common
Stock and the Company cannot predict whether a trading market would develop
with respect to the Rights if the Rights ever become exercisable.
The Rights would become exercisable at the specified exercise price upon the
earliest to occur of (i) 10 Business Days after the first public announcement
that any person or group (other than an Exempt Person) has acquired (an
"Acquiring Person") Beneficial Ownership of 15% or more of the Company's
outstanding shares of Common Stock and (ii) 10 Business Days (unless delayed
by the Board of Directors) after any person or group (other than an Exempt
Person) has commenced, or announced the intention to commence, a tender or
exchange offer which would, upon its consummation, result in such person or
group being the Beneficial Owner of 15% or more of the Company's outstanding
shares of Common Stock (each a "Triggering Event"). Rights may not be
exercised following the occurrence of an event described below under "Flip-In"
prior to the expiration of the Company's right to redeem the Rights. Rights
certificates will be distributed when the Rights become exercisable. An
"Exempt Person" includes the Company and certain related entities.
Flip-In. After the Rights become exercisable (unless the Triggering Event is
the commencement or the announcement of a tender or exchange offer as
described in (ii) in the immediately preceding paragraph), the holders of the
Rights (other than an Acquiring Person and certain transferees therefrom)
would be entitled to purchase shares of Common Stock of the Company at a 50%
discount. After the occurrence of a Flip-In event, the Rights of an Acquiring
Person and such transferees become void.
Flip-Over. In the event that, on or after the date on which an Acquiring
Person has become such: (i) the Company merges into or consolidates with an
Interested Stockholder or, unless all holders of the outstanding shares of
Common Stock of the Company are treated the same, any other person (with
limited designated exceptions), (ii) an Interested Stockholder or, unless all
holders of the outstanding shares of Common Stock of the Company are treated
the same, any other person (with limited designated exceptions) merges into
the Company or (iii) the Company sells or transfers 50% or more of its
consolidated assets or earning power to an Interested Stockholder or, unless
all holders of the outstanding shares of Common Stock of the Company are
treated the same, any other person (with limited designated exceptions), the
holders of the Rights (other than Rights which have become void) would be
entitled to purchase common shares of the acquirer (or a person affiliated
therewith) at a 50% discount. In general, an Interested Stockholder is an
Acquiring Person and certain persons affiliated, associated or acting on
behalf of or in concert therewith.
47
<PAGE>
Redemption of Rights. The Rights may be redeemed, as a whole, at a redemption
price of $.01 per Right, subject to adjustment, at the direction of the Board
of Directors, at any time prior to the earliest of (i) 10 Business Days after
the first public announcement that any person (other than the Company and
certain related entities) has become an Acquiring Person, (ii) the occurrence
of any transaction described under "Flip-Over" and (iii) the date of final
expiration of the Rights. Under certain circumstances set forth in the proposed
Rights Agreement, the decision to redeem the Rights requires the concurrence of
at least a majority of the disinterested directors, after the occurrence of an
event described under "Flip-In" and prior to the occurrence of a transaction
described "Flip-Over," to redeem the Rights in whole, but not in part, at the
Redemption Price, but only (i) if the person who is the Acquiring Person shall
have reduced its Beneficial Ownership of the then outstanding shares Common
Stock of the Company to less than 10% or (ii) in connection with the
transaction described under "Flip-Over" which does not involve an Interested
Stockholder and in which all holders of the Common Stock of the Company are
treated the same.
Exchange of Shares for Rights. At any time after any person or group shall
have become an Acquiring Person and before any person (other than an Exempt
Person), together with its affiliates and associates, shall have become the
Beneficial Owner of 50% or more of the outstanding shares of the Common Stock
of the Company, the Board of Directors may direct the exchange of shares of
Common Stock (or Preferred Shares) for all or any part of the Rights (other
than Rights which have become void) at the exchange rate of one share of Common
Stock (or one one-hundredth of a Preferred Share) per Right, subject to
adjustment.
TERMS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
The Series A Junior Participating Preferred Stock (the "Preferred Shares")
which would be issuable upon exercise of the Rights (should the rights become
exercisable) would not be redeemable. Each Preferred Share would entitle the
holder thereof to receive a preferential quarterly dividend equal to 100 times
the aggregate per share amount of all cash dividends, plus 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends and
other distributions (other than in shares of Common Stock), declared on the
Common Stock during such quarter, adjusted to give effect to any dividend on
the Common Stock payable in shares of Common Stock or any subdivision,
combination or reclassification of the Common Stock (a "Dilution Event"). Each
Preferred Share would entitle the holder thereof to 100 votes on all matters
submitted to a vote of the stockholders of the Company, voting together as a
single class with the holders of the Common Stock and the holders of any other
class of capital stock having general voting rights, adjusted to give effect to
any Dilution Event. In the event of liquidation of the Company, the holder of
each Preferred Share would be entitled to receive a preferential liquidation
payment equal to 100 times the aggregate per share amount to be distributed to
the holders of the Common Stock, adjusted to give effect to any Dilution Event,
plus an amount equal to accrued and unpaid dividends and distributions on such
Preferred Share, whether or not declared, to the date of such payment. In the
event of any merger, consolidation or other transaction in which the
outstanding shares of Common Stock of the Company are exchanged for or
converted into other capital stock, securities, cash and/or other property,
each Preferred Share would be similarly exchanged or converted into 100 times
the per share amount applicable to the Common Stock, adjusted to give effect to
any Dilution Event.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is First Chicago Trust
Co. of New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 16,271,517 shares of
Common Stock outstanding. Of these shares, the 3,600,000 shares sold in the
Offering will be freely tradeable without restriction or further registration
under the Securities Act, except that any shares purchased by "affiliates" of
the Company, as that term is defined in Rule 144 ("Rule 144") under the
Securities Act ("Affiliates"), generally may be sold only in compliance with
the limitations of Rule 144 described below.
48
<PAGE>
The remaining 12,671,517 shares of Common Stock are deemed "restricted
securities" (the "Restricted Shares") under Rule 144 because they were
originally issued and sold by the Company in private transactions in reliance
upon exemptions from the Securities Act. Under Rule 144, substantially all of
these remaining Restricted Shares will become eligible for resale 90 days
after the date the Company becomes subject to the reporting requirements of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act")
(i.e., 90 days after the consummation of the Offering), and may be resold
prior to such date only in compliance with the registration requirements of
the Securities Act or pursuant to a valid exemption therefrom; and
approximately 11.8 million of such shares are subject to Lock-up Agreements.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially
owned Restricted Shares for at least one year (one year for sales of shares
meeting certain limitations) is entitled to sell within any three-month
period, a number of such shares that does not exceed the greater of (i) one
percent of the then outstanding shares of Common Stock (approximately 163,000
shares immediately after the Offering) or (ii) the average weekly trading
volume in the Common Stock in the over-the-counter market during the four
calendar weeks preceding the date on which notice of such sale is filed. In
addition, under Rule 144(k), a person who is not an Affiliate and has not been
an Affiliate for at least three months prior to the sale and who has
beneficially owned Restricted Shares for at least two years, may resell such
shares without compliance with the foregoing requirements. In meeting the one
and two-year holding periods described above, a holder of Restricted Shares
can include the holding periods of a prior owner who was not an Affiliate. The
holding period will include the period during which the person held
convertible securities of the Company or stock of the Company.
All executive officers and directors and certain stockholders of the
Company, who, after the Offering, will hold in the aggregate approximately
11.8 million shares of Common Stock and options to purchase approximately 1.1
million shares of Common Stock (out of the approximately 1.4 million shares
subject to currently outstanding options that are, or will become, exercisable
by the end of 1997), have agreed, pursuant to lock-up agreements, that they
will not, without the prior written consent of Smith Barney Inc., offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock
beneficially owned by them for a period of 180 days after the date of this
Prospectus, except pursuant to bona fide gifts to persons who agree in writing
to be bound by the provisions of the lock-up agreements.
The Company intends to file a registration statement under the Securities
Act to register all shares of Common Stock issuable pursuant to the Company's
1997 Plan. See "Management--Stock Plans." Subject to the completion of the
180-day period described above, shares of Common Stock issued after the
effective date of such registration statement upon the exercise of awards
issued under such plan generally will be eligible for sale in the public
market.
The Company has granted to certain officers and certain stockholders the
right to require the Company to register their stock under the Securities Act.
See "Certain Transactions."
49
<PAGE>
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below (the
"Underwriters") has severally agreed to purchase, and the Company has agreed
to sell to such Underwriter, shares of Common Stock which equal the number of
shares set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Smith Barney Inc...................................................
William Blair & Company, L.L.C.....................................
J.P. Morgan Securities Inc.........................................
---------
Total............................................................ 3,600,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., William Blair & Company,
L.L.C. and J.P. Morgan Securities Inc., are acting as the representatives (the
""Representatives''), propose initially to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the
cover page of this Prospectus and part to certain dealers at a price which
represents a concession not in excess of $ per share under the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
initial public offering, the public offering price and such concessions may be
changed by the Representatives. The Representatives have informed the Company
that the Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
The Selling Stockholders have granted to the Underwriters an option,
exercisable for 30 days from the date of this Prospectus, to purchase up to
540,000 additional shares of Common Stock at the price to public set forth on
the cover page of this Prospectus minus the underwriting discounts and
commissions. The Underwriters may exercise such option solely for the purpose
of covering over-allotments, if any, in connection with the Offering of the
shares offered hereby. To the extent such option is exercised, each
Underwriter will be obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number of
shares set forth opposite each Underwriter's name in the preceding table bears
to the total number of shares listed in such table.
The Company, its executive officers, directors and certain stockholders,
holding in the aggregate approximately 11.8 million shares of the Common Stock
have agreed that, for a period of 180 days from the date of this Prospectus,
they will not, without the prior written consent of Smith Barney Inc., offer,
sell, contract to sell, or otherwise dispose of, any shares of Common Stock or
any securities convertible into, or exercisable or exchangeable for, Common
Stock.
Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price for the shares of Common Stock
has been determined by negotiations among the Company, the Selling
Stockholders and the Representatives. Among the factors considered in
determining such price were
50
<PAGE>
the history of, and prospects, for the Company's business and the industry in
which it competes, an assessment of the Company's management and the present
state of the Company's development, the past operating results of the Company
and the trend of such operating results, the prospects for earnings of the
Company, the current state of the economy in the United States and the current
level of economic activity in the industry in which the Company competes and
in related or comparable industries, and currently prevailing conditions in
the securities markets, including current market valuations of publicly traded
companies which are comparable to the Company.
The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
At the request of the Company approximately 180,000 shares of Common Stock
offered hereby are being reserved for sale to certain persons, including
Peapod employees and others who have a business relationship with the Company.
Smith Barney Inc. has from time to time provided investment banking services
to the Company for which it has received customary fees. The Travelers
Insurance Company owns 416,667 shares of Common Stock, representing 2.6% of
the outstanding Common Stock after the Offering and is a Selling Stockholder.
In connection with this offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more Common Stock than the total amount
shown on the list of Underwriters and participations which appears above) and
may effect transactions which stabilize, maintain or otherwise affect the
market price of the Common Stock at levels above those which might otherwise
prevail in the open market. Such transactions may include placing bids for the
Common Stock or effecting purchases of the Common Stock for the purpose of
pegging, fixing or maintaining the price of the Common Stock or for the
purpose of reducing a syndicate short position created in connection with the
Offering. A syndicate short position may be covered by exercise of the option
described above rather than by open market purchases. In addition, the
contractual arrangements among the Underwriters include a provision whereby,
if, prior to termination of price and trading restrictions, the
Representatives purchase Common Stock in the open market for the account of
the underwriting syndicate and the securities purchased can be traced to a
particular Underwriter or member of the selling group, the underwriting
syndicate may require the Underwriter or selling group member in question to
purchase the Common Stock in question at the cost price to the syndicate or
may recover from (or decline to pay to) the Underwriter or selling group
member in question, the selling concession applicable to the securities in
question. The Underwriters are not required to engage in any of these
activities and any such activities, if commenced, may be discontinued at any
time.
This Offering is being made pursuant to Rule 2720 of the National
Association of Securities Dealers, Inc. ("NASDAQ Rule 2720") in order to
comply with the venture capital restrictions set forth in Rule
2710(c)(7)(C)(i) of the National Association of Securities Dealers, Inc.
Accordingly, the public offering price can be no higher than that recommended
by a "qualified independent underwriter" meeting certain standards. In
accordance with this requirement, William Blair & Company, L.L.C. has served
in such role and has recommended a maximum price in compliance with NASD Rule
2720. William Blair & Company, L.L.C. in its role as a qualified independent
underwriter has performed due diligence investigations and reviewed and
participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus forms a part.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Sidley & Austin, Chicago,
Illinois. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Mayer, Brown & Platt, Chicago, Illinois.
51
<PAGE>
EXPERTS
The financial statements of New Peapod , Inc. as of December 31, 1996 and for
the period from December 5, 1996 (inception) through December 31, 1996
appearing in this Prospectus and in the Registration Statement, have been
audited by KPMG Peat Marwick LLP, independent public accountants, as set forth
in their report thereon appearing elsewhere in this Prospectus and in the
Registration Statement, and are included in reliance upon such report given
upon the authority of said firm as experts in auditing and accounting.
The financial statements of Peapod LP as of December 31, 1995 and 1996 and
for each of the three years in the period ended December 31, 1996 appearing in
this Prospectus and in the Registration Statement, have been audited by KPMG
Peat Marwick LLP, independent public accountants, as set forth in their report
thereon appearing elsewhere in this Prospectus and in the Registration
Statement, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), a Registration Statement on Form S-1 (including all amendments
thereto, the "Registration Statement") under the Securities Act with respect to
the Common Stock offered hereby. As permitted by the rules and regulations of
the Commission, this Prospectus omits certain information contained in the
Registration Statement. For further information with respect to the Company and
the Common Stock offered hereby, reference is hereby made to the Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any agreement or other
document filed as an exhibit to the Registration Statement are not necessarily
complete, and in each instance reference is made to the copy of such agreement
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. The Registration Statement,
including the exhibits and schedules thereto, may be inspected at the public
reference facilities maintained by the Commission at Room 204, Judiciary Plaza,
450 Fifth Street, N.W., Washington, DC 20549; Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661; and Seven World Trade Center, New York, New
York 10048; and copies of all or any part thereof may be obtained from such
office upon payment of the prescribed fees. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements
and other information regarding registrants, such as the Company, that file
electronically with the Commission.
Upon completion of the Offering, the Company will be subject to the
information requirements of the Exchange Act of 1934, and, in accordance
therewith, will file reports, proxy statements and other information with the
Commission. Such reports, proxy material and other information concerning the
Company will be available for inspection and copying at prescribed rates at the
public reference facilities maintained by the Commission at the addresses set
forth above and will be available on the Commission's Web site
(http://www.sec.gov).
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
New Peapod, Inc.
Independent Auditors' Report............................................. F-2
Balance Sheets as of December 31, 1996 and March 31, 1997 (Unaudited) and
Pro Forma Balance Sheet as of March 31, 1997 (Unaudited) ............... F-3
Statement of Operations for the period from December 5, 1996 (inception)
through December 31, 1996 and Pro Forma Statement of Operations for the
year ended December 31, 1996 (Unaudited)................................ F-4
Statement of Operations for the three months ended March 31, 1997
(Unaudited) and Pro Forma Statement of Operations for the three months
ended March 31, 1997 (Unaudited)........................................ F-5
Notes to Financial Statements............................................ F-6
Peapod LP
Independent Auditors' Report............................................. F-9
Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997
(Unaudited)............................................................. F-10
Statements of Operations for the years ended December 31, 1994, 1995 and
1996 and the three months ended March 31, 1996 and 1997 (Unaudited)..... F-11
Statements of Partners' Capital for the years ended December 31, 1994,
1995 and 1996 and the three months ended March 31, 1997 (Unaudited)..... F-12
Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and the three months ended March 31, 1996 and 1997 (Unaudited)..... F-13
Notes to Financial Statements............................................ F-14
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
New Peapod, Inc.:
We have audited the accompanying balance sheet of New Peapod, Inc. as of
December 31, 1996, and the related statement of operations for the period from
December 5, 1996 (inception) through December 31, 1996. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Peapod, Inc. as of
December 31, 1996 and the results of its operations for the period from
December 5, 1996 (inception) through December 31, 1996, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
May 9, 1997
F-2
<PAGE>
NEW PEAPOD, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND MARCH 31, 1997
PRO FORMA BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31,
1996 MARCH 31, 1997 (UNAUDITED)
------------ --------------------------------------
NEW NEW PEAPOD, INC.
PEAPOD, INC. PEAPOD, INC. PEAPOD LP PRO FORMA
------------ ------------ ----------- ------------
ASSETS
------
<S> <C> <C> <C> <C>
Cash and cash equivalents.. $ -- $ -- $ 9,343,378 $ 9,343,378
Receivables, net of bad
debt allowance............ -- -- 1,183,014 1,183,014
Prepaid expenses........... -- -- 585,724 585,724
Other current assets....... -- -- 178,091 178,091
------- ------- ----------- -----------
Total current assets... -- -- 11,290,207 11,290,207
Property and equipment:
Computer equipment and
software................ -- -- 2,832,070 2,832,070
Service equipment and
other................... -- -- 799,330 799,330
------- ------- ----------- -----------
Property and equipment, at
cost...................... -- -- 3,631,400 3,631,400
Accumulated depreciation. -- -- (1,448,483) (1,448,483)
------- ------- ----------- -----------
Net property and equipment. -- -- 2,182,917 2,182,917
Capitalized software
development costs......... -- -- 299,029 299,029
Goodwill, net of
accumulated amortization.. -- -- 146,091 146,091
Other assets............... -- -- 788 788
------- ------- ----------- -----------
Total assets........... $ -- $ -- $13,919,032 $13,919,032
======= ======= =========== ===========
<CAPTION>
LIABILITIES AND OWNERS'
EQUITY
-----------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable......... $ -- $ -- $ 2,968,488 $ 2,968,488
Accrued compensation..... -- -- 887,688 887,688
Other accrued
liabilities............. -- -- 1,297,139 1,297,139
Current deferred service
fees.................... -- -- 1,414,164 1,414,164
Current obligations under
capital lease........... -- -- 350,377 350,377
------- ------- ----------- -----------
Total current
liabilities........... -- -- 6,917,856 6,917,856
Deferred service fees...... -- -- 607,383 607,383
Obligations under capital
lease, less current
obligations............... -- -- 360,069 360,069
------- ------- ----------- -----------
Total liabilities...... -- -- 7,885,308 7,885,308
Owners' equity:
Partners' capital........ -- -- 6,033,724 --
Preferred Stock, $.01 par
value, authorized
5,000,000 shares, none
issued and outstanding.. -- -- -- --
Common Stock, $.01 par
value, 50,000,000 shares
authorized, 100 shares
issued and outstanding
at December 31, 1996 and
March 31, 1997.......... 1 1 -- 126,159
Additional paid-in
capital................. 999 999 -- 5,908,565
Accumulated deficit...... (1,000) (1,000) -- (1,000)
------- ------- ----------- -----------
Total owners' equity... -- -- 6,033,724 6,033,724
------- ------- ----------- -----------
Total liabilities and
owners' equity........ $ -- $ -- $13,919,032 $13,919,032
======= ======= =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
NEW PEAPOD, INC.
STATEMENT OF OPERATIONS
PERIOD FROM DECEMBER 5, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NEW PEAPOD, INC.
PEAPOD, INC. PEAPOD LP* PRO FORMA
------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Grocery sales, net of returns......... $ -- $22,015,468 $22,015,468
Interactive marketing services........ -- 1,069,335 1,069,335
Member and retailer services.......... -- 6,087,742 6,087,742
------- ----------- -----------
Total revenues...................... -- 29,172,545 29,172,545
Costs and expenses:
Groceries sold, net of returns........ -- 22,015,468 22,015,468
Grocery operations.................... -- 8,141,184 8,141,184
General and administrative............ 1,000 2,918,876 2,919,876
Marketing and selling................. -- 3,984,166 3,984,166
System development and maintenance.... -- 1,492,126 1,492,126
Depreciation and amortization......... -- 650,954 650,954
------- ----------- -----------
Total costs and expenses............ 1,000 39,202,774 39,203,774
------- ----------- -----------
Operating loss.......................... (1,000) (10,030,229) (10,031,229)
Other income (expense):
Interest expense...................... -- (72,388) (72,388)
Interest income....................... -- 537,110 537,110
------- ----------- -----------
Net loss................................ $(1,000) $(9,565,507) $(9,566,507)
======= =========== ===========
Pro forma net loss per share............ $ (0.75)
===========
</TABLE>
- --------
*Represents the results of operations of Peapod LP for the year ended December
31, 1996.
See accompanying notes to financial statements.
F-4
<PAGE>
NEW PEAPOD, INC.
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
NEW PEAPOD, INC.
PEAPOD, INC. PEAPOD LP PRO FORMA
------------ ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Revenues:
Grocery sales, net of returns......... $ -- $ 9,216,332 $ 9,216,332
Interactive marketing services........ -- 425,024 425,024
Member and retailer services.......... -- 3,062,746 3,062,746
----- ----------- -----------
Total revenues...................... -- 12,704,102 12,704,102
Costs and expenses:
Groceries sold, net of returns........ -- 9,216,332 9,216,332
Grocery operations.................... -- 3,903,123 3,903,123
General and administrative............ -- 826,734 826,734
Marketing and selling................. -- 1,236,416 1,236,416
System development and maintenance.... -- 376,233 376,233
Depreciation and amortization......... -- 212,143 212,143
----- ----------- -----------
Total costs and expenses............ -- 15,770,981 15,770,981
----- ----------- -----------
Operating loss.......................... -- (3,066,879) (3,066,879)
Other income (expense):
Interest expense...................... -- (15,204) (15,204)
Interest income....................... -- 134,996 134,996
----- ----------- -----------
Net loss................................ $ -- $(2,947,087) $(2,947,087)
===== =========== ===========
Pro forma net loss per share............ $ (0.23)
===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
NEW PEAPOD, INC.
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION AND COMMON STOCK OFFERING
New Peapod, Inc. ("Company") is a Delaware corporation and was incorporated
on December 5, 1996. The Company will change its name to Peapod, Inc. in
conjunction with an initial public offering ("Offering") of Common Stock.
The Company was formed to effect an initial public offering of approximately
3,600,000 shares of Common Stock and to operate an interactive online grocery
shopping and delivery service subsequent to the Conversion described below and
elsewhere in this Prospectus. Prior to the completion of the Offering, (i) the
Company will exchange one share of Common Stock for each outstanding unit in
Peapod LP ("Partnership"), (ii) Peapod LP will dissolve, (iii) the assets and
liabilities of Peapod LP will be transferred to the Company and (iv)
outstanding warrants and options for equity interests in Peapod LP will be
exchanged for warrants and options for shares of the Company's Common Stock at
the same exchange ratio as used in the exchange of the Company's Common Stock
for the equity interests in Peapod LP, with no other changes in the terms of
such warrants and options. The transfer of the assets and liabilities of
Peapod LP to the Company will be recorded by the Company at the historical
carrying values of Peapod LP. The financial statements of the Partnership are
included elsewhere herein. The Company has not yet begun significant
operations.
(2) COMMON STOCK ISSUANCE
On December 11, 1996, 100 shares of the Company's Common Stock were issued
to Andrew Parkinson, Chief Executive Officer of Peapod LP, for services
rendered to the Company with an estimated fair value of $1,000.
On May 8, 1997, the Company amended its certificate of incorporation,
increasing the number of authorized shares of Common Stock to 50,000,000,
changing the par value to $.01 and authorizing 5,000,000 shares of $.01 par
value Preferred Stock. In addition, the Company declared a 100-to-1 Common
Stock split. These changes have been reflected retroactively in the
accompanying financial statements.
(3) INCOME TAXES
Income tax expense of $0 for the period ended December 31, 1996 differs from
the amount of income tax benefit computed by applying the federal statutory
tax rate of 34 percent to pretax loss due to nonutilization of net operating
losses. The gross deferred tax asset relating to the net operating loss of
$340 has been reduced to $0 by the establishment of a valuation allowance.
(4) INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements reflect all
adjustments which, in the opinion of management, are necessary for the fair
presentation of the results of the interim period presented.
(5) PRO FORMA PRESENTATION (UNAUDITED)
On April 1, 1997, the Company filed a registration statement with the
Securities and Exchange Commission for the Offering of 3,600,000 shares of
Common Stock. As described in this Prospectus, prior to the completion of the
Offering, (i) all of the equity interests in Peapod LP ("Partnership") will be
transferred to the Company in exchange for Common Stock, (ii) Peapod LP will
dissolve, (iii) the assets and liabilities of Peapod LP will be transferred to
the Company and (iv) outstanding warrants and options for equity interests in
Peapod LP will be converted into warrants and options for shares of the
Company's Common Stock. The Company will change its name to Peapod, Inc. in
conjunction with the Offering.
The March 31, 1997 pro forma balance sheet is presented to give effect to
the conversion of all then outstanding partnership units into 12,615,792
shares of Common Stock. Prior to the Conversion, the net losses of the
Partnership were allocated to the partners and reflected in partners' capital.
At the time of the Conversion,
F-6
<PAGE>
NEW PEAPOD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
partners' capital will be reclassified into Common Stock and additional paid-
in capital. The pro forma statement of operations for 1996 reflects the
Company's operations from December 5, 1996 (inception) through December 31,
1996 and the operations of the Partnership for the twelve months ended
December 31, 1996.
The pro forma statement of operations for the three months ended March 31,
1997 reflects the operations of the Company and the Partnership for such three
month period.
As of March 31, 1997 and giving effect to the Conversion, 12,615,892 shares
of Common Stock will be issued and outstanding and warrants and options will
be outstanding as indicated in the information below.
Warrant activity for the years ended December 31, 1994, 1995 and 1996 and
the three months ended March 31, 1997 is summarized below:
<TABLE>
<CAPTION>
SHARES WEIGHTED
OF AVERAGE
COMMON EXERCISE EXERCISE
STOCK PRICE PRICE
-------- -------- ----------
<S> <C> <C> <C>
Outstanding on January 1, 1994................ 716,541 $1.98 $1.33-2.00
Granted....................................... 32,083 2.24 2.23-2.25
Exercised..................................... (694,248) 2.00 2.00
--------
Outstanding on December 31, 1994.............. 54,376 1.92 1.33-2.25
Granted....................................... 11,500 3.25 3.25
Exercised..................................... (1,250) 2.23 2.23
--------
Outstanding on December 31, 1995.............. 64,626 2.15 1.33-3.25
Granted....................................... 3,215 7.00 7.00
--------
Outstanding on December 31, 1996.............. 67,841 $2.38 1.33-7.00
======== =====
Outstanding on March 31, 1997................. 67,841 $2.38 1.33-7.00
======== =====
</TABLE>
Information on options for shares of Common Stock is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------- THREE MONTHS ENDED
1994 1995 1996 MARCH 31, 1997
------------------ ------------------ ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
-------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 852,500 $1.58 861,849 $1.63 1,448,446 $2.20 1,630,946 $2.77
Granted................. 129,349 2.01 590,097 3.03 285,000 6.00 169,500 6.88
Forfeited............... (120,000) 1.67 (3,500) 2.36 (102,500) 3.78 (2,000) 6.00
Exercised............... -- -- -- --
-------- --------- --------- ---------
Outstanding at end of
period................. 861,849 $1.63 1,448,446 $2.20 1,630,946 $2.77 1,798,446 $3.15
======== ===== ========= ===== ========= ===== ========= =====
Options exercisable at
period end............. 668,349 $1.59 858,336 $1.79 1,116,172 $2.11 1,191,033 $2.29
======== ===== ========= ===== ========= ===== ========= =====
</TABLE>
The following table summarizes information about stock options outstanding
at March 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.33-1.80 688,844 6.21 years $1.52 678,844 $1.52
2.00-2.50 303,505 5.97 2.17 225,972 2.15
3.00-3.25 373,597 6.65 3.25 192,059 3.24
6.00 283,000 7.92 6.00 64,367 6.00
7.00 149,500 8.78 7.00 29,791 7.00
--------- ---------
1,798,446 6.74 years $3.15 1,191,033 $2.29
========= ========== ===== ========= =====
</TABLE>
F-7
<PAGE>
NEW PEAPOD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In connection with the Conversion (i) the Company is adopting the 1997 Long-
Term Incentive Plan pursuant to which options and other awards for up to
4,300,000 shares of Common Stock may be granted (including options previously
outstanding) to the Company's employees, directors and consultants and (ii)
the management agreement between the Partnership and its general partner will
be terminated.
The pro forma net loss per share is computed based on the weighted average
of 12,788,250 shares outstanding during 1996 and for the three months ended
March 31, 1997, assuming the Conversion occurred at January 1, 1996.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, common stock warrants and stock options issued during the twelve months
immediately preceding the offering date (using the treasury stock method and
an assumed initial public offering price per share of $14.00) have been
included in the calculation of Common Stock as if they were outstanding for
the entire period presented. Other common equivalent shares from stock options
and warrants are excluded from the computation because their effect is
antidilutive.
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners of Peapod LP:
We have audited the accompanying balance sheets of Peapod LP ("Partnership")
as of December 31, 1995 and 1996, and the related statements of operations,
partners' capital and cash flows for each of the years in the three-year
period ended December 31, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Peapod LP as of December
31, 1995 and 1996, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 7, 1997
F-9
<PAGE>
PEAPOD LP
BALANCE SHEETS
DECEMBER 31, 1995 AND 1996 AND MARCH 31, 1997
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1995 1996 1997
---------- ----------- -----------
(UNAUDITED)
ASSETS
------
<S> <C> <C> <C>
Cash and cash equivalents................ $2,466,191 $13,038,680 $ 9,343,378
Receivables, net of bad debt allowance of
$27,265 and $41,608 as of December 31,
1995 and 1996, respectively, and $61,779
as of March 31, 1997.................... 186,077 535,091 1,183,014
Prepaid expenses......................... 139,721 449,267 585,724
Other current assets..................... 244,156 189,402 178,091
---------- ----------- -----------
Total current assets................. 3,036,145 14,212,440 11,290,207
Property and equipment:
Computer equipment and software........ 1,537,101 2,492,507 2,832,070
Service equipment and other............ 399,011 764,418 799,330
---------- ----------- -----------
Property and equipment, at cost.......... 1,936,112 3,256,925 3,631,400
Accumulated depreciation............... (642,538) (1,247,238) (1,448,483)
---------- ----------- -----------
Net property and equipment............... 1,293,574 2,009,687 2,182,917
Capitalized software development costs... -- 148,454 299,029
Goodwill, net of accumulated amortization
of $95,907 and $134,864 as of December
31, 1995 and 1996, respectively, and
$144,603 as of March 31, 1997........... 194,787 155,830 146,091
Other assets............................. 6,582 1,947 788
---------- ----------- -----------
Total assets......................... $4,531,088 $16,528,358 $13,919,032
========== =========== ===========
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable....................... $1,660,543 $ 3,370,423 $ 2,968,488
Accrued compensation................... 347,149 1,078,705 887,688
Other accrued liabilities.............. 392,343 875,396 1,297,139
Current deferred service fees.......... 39,996 1,199,827 1,414,164
Current obligations under capital
lease................................. 157,808 332,490 350,377
---------- ----------- -----------
Total current liabilities............ 2,597,839 6,856,841 6,917,856
Deferred service fees.................... 146,672 929,445 607,383
Subordinated debentures.................. 125,000 -- --
Obligations under capital lease, less
current obligations..................... 249,017 339,529 360,069
---------- ----------- -----------
Total liabilities.................... 3,118,528 8,125,815 7,885,308
Total partners' capital.................. 1,412,560 8,402,543 6,033,724
---------- ----------- -----------
Total liabilities and partners'
capital............................. $4,531,088 $16,528,358 $13,919,032
========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-10
<PAGE>
PEAPOD LP
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Grocery sales, net of
returns.............. $ 6,745,130 $12,730,673 $22,015,468 $ 4,984,278 $ 9,216,332
Interactive marketing
services............. -- 162,699 1,069,335 194,326 425,024
Member and retailer
services............. 1,601,266 3,049,279 6,087,742 1,155,645 3,062,746
----------- ----------- ----------- ----------- -----------
Total revenues...... 8,346,396 15,942,651 29,172,545 6,334,249 12,704,102
Costs and expenses:
Groceries sold, net of
returns.............. 6,745,130 12,730,673 22,015,468 4,984,278 9,216,332
Grocery operations.... 3,262,578 5,167,847 8,141,184 1,553,803 3,903,123
General and
administrative....... 1,464,751 1,761,590 2,918,876 487,681 826,734
Marketing and selling. 571,621 1,532,983 3,984,166 610,788 1,236,416
System development and
maintenance.......... 328,739 964,496 1,492,126 355,423 376,233
Depreciation and
amortization......... 290,280 369,527 650,954 118,017 212,143
----------- ----------- ----------- ----------- -----------
Total costs and
expenses........... 12,663,099 22,527,116 39,202,774 8,109,990 15,770,981
----------- ----------- ----------- ----------- -----------
Operating loss.......... (4,316,703) (6,584,465) (10,030,229) (1,775,741) (3,066,879)
Other income (expense):
Interest expense...... (56,524) (68,472) (72,388) (19,842) (15,204)
Interest income....... 26,180 61,016 537,110 18,549 134,996
----------- ----------- ----------- ----------- -----------
Net loss................ $(4,347,047) $(6,591,921) $(9,565,507) $(1,777,034) $(2,947,087)
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-11
<PAGE>
PEAPOD LP
STATEMENTS OF PARTNERS' CAPITAL
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND THE THREE MONTHS ENDED MARCH
31, 1997
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS TOTAL
----------------------- ---------------------- -----------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
--------- ------------ --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1994................... 3,187,500 $ (1,946,806) 1,879,866 $ 2,505,712 5,067,366 $ 558,906
Restatement of beginning
of year net syndication
costs.................. -- -- -- (105,073) -- (105,073)
Issuance of limited
partnership units, net
of syndication costs... -- -- 1,743,141 3,708,671 1,743,141 3,708,671
Issuance of limited
partnership units upon
exercise of warrants... -- -- 694,248 1,388,496 694,248 1,388,496
Issuance of warrants.... -- -- -- 112 -- 112
Issuance of options for
services rendered...... -- -- -- 155,610 -- 155,610
Issuance of limited
partnership units for
services rendered...... -- -- 43,547 75,574 43,547 75,574
Allocation of net loss.. -- (2,387,334) -- (1,959,713) -- (4,347,047)
--------- ------------ --------- ----------- ---------- -----------
Balance at December 31,
1994................... 3,187,500 (4,334,140) 4,360,802 5,769,389 7,548,302 1,435,249
Sale of units owned by
General Partner........ (67,401) -- 67,401 -- -- --
Issuance of limited
partnership units, net
of syndication costs... -- -- 2,007,722 6,454,041 2,007,722 6,454,041
Repurchase of limited
partnership units...... -- -- (13,453) (43,722) (13,453) (43,722)
Issuance of limited
partnership units upon
exercise warrants...... -- -- 1,250 2,788 1,250 2,788
Issuance of options for
services rendered...... -- -- -- 99,658 -- 99,658
Issuance of limited
partnership units for
services rendered...... -- -- 20,550 56,467 20,550 56,467
Allocation of net loss.. -- (2,473,575) -- (4,118,346) -- (6,591,921)
--------- ------------ --------- ----------- ---------- -----------
Balance at December 31,
1995................... 3,120,099 (6,807,715) 6,444,272 8,220,275 9,564,371 1,412,560
Sale of units owned by
General Partner........ (13,806) -- 13,806 -- -- --
Issuance of limited
partnership units, net
of syndication costs... -- -- 2,876,000 16,231,748 2,876,000 16,231,748
Issuance of limited
partnership units for
services rendered and
at a discount.......... -- -- 86,341 323,742 86,341 323,742
Allocation of net loss.. -- (2,522,398) -- (7,043,109) -- (9,565,507)
--------- ------------ --------- ----------- ---------- -----------
Balance at December 31,
1996................... 3,106,293 (9,330,113) 9,420,419 17,732,656 12,526,712 8,402,543
Issuance of limited
partnership units for
services rendered and
at a discount
(unaudited)............ -- -- 89,080 578,268 89,080 578,268
Allocation of net loss
(unaudited)............ -- (725,877) -- (2,221,210) -- (2,947,087)
--------- ------------ --------- ----------- ---------- -----------
Balance at March 31,
1997 (unaudited)....... 3,106,293 $(10,055,990) 9,509,499 $16,089,714 12,615,792 $ 6,033,724
========= ============ ========= =========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-12
<PAGE>
PEAPOD LP
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------- ------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss.............. $(4,347,047) $(6,591,921) $(9,565,507) $(1,777,034) $(2,947,087)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization....... 290,280 369,527 650,954 118,017 212,143
Units and options
issued for services
rendered........... 231,184 156,125 146,151 110,860 428,295
Write-off of patent
application costs.. -- 18,653 -- -- --
Loss on disposition
of fixed assets.... -- 3,084 2,359 -- --
Changes in operating
assets and
liabilities:
(Increase)
decrease in
receivables...... (78,545) (76,444) (349,014) 65,104 (647,923)
(Increase) in
prepaid expenses. (25,169) (78,045) (309,546) (31,975) (136,457)
(Increase)
decrease in other
current assets... (78,579) (147,316) 54,754 177,245 11,312
Increase
(decrease) in
accounts payable. 756,680 494,055 1,709,880 290,094 (401,936)
Increase
(decrease) in
accrued
compensation..... 106,878 184,526 731,556 16,406 (191,017)
Increase
(decrease) in
other accrued
liabilities...... 149,071 172,059 483,053 (103,211) 421,743
Increase
(decrease) in
deferred service
fees............. (75,000) 24,168 1,942,604 298,334 (107,725)
----------- ----------- ----------- ----------- -----------
Net cash used in
operating
activities...... (3,070,247) (5,471,529) (4,502,756) (836,160) (3,358,652)
Cash flows from
investing activities:
Property and equipment
purchased............ (336,320) (629,833) (823,662) (212,857) (254,475)
Capitalized software
development costs.... -- -- (148,454) -- (150,575)
Proceeds from sale of
property and
equipment............ 1,000 700 -- -- --
Patent costs.......... (4,476) -- -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in
investing
activities...... (339,796) (629,133) (972,116) (212,857) (405,050)
Cash flows from
financing activities:
Proceeds from issuance
of limited
partnership units,
net of syndication
costs................ 3,708,671 6,454,041 16,409,339 180,834 149,973
Proceeds from issuance
of limited
partnership units
upon exercise of
warrants............. 1,388,496 2,788 -- -- --
Repurchase of limited
partnership units.... -- (43,722) -- -- --
Proceeds from issuance
of warrants.......... 112 -- -- -- --
Proceeds from issuance
of subordinated
debentures........... 750,000 -- -- -- --
Repayment of
subordinated
debentures........... (800,000) -- (125,000) (25,000) --
Proceeds from issuance
of notes payable..... 480,000 1,025,000 -- -- --
Payments on notes
payable.............. (493,049) (1,025,000) -- -- --
Payments on capital
lease obligations.... (14,135) (100,255) (236,978) (58,622) (81,573)
----------- ----------- ----------- ----------- -----------
Net cash provided
by financing
activities...... 5,020,095 6,312,852 16,047,361 97,212 68,400
----------- ----------- ----------- ----------- -----------
Net (decrease) increase
in cash............... 1,610,052 212,190 10,572,489 (951,805) (3,695,302)
Cash and cash
equivalents at
beginning of period... 643,949 2,254,001 2,466,191 2,466,191 13,038,680
----------- ----------- ----------- ----------- -----------
Cash and cash
equivalents at end of
period................ $ 2,254,001 $ 2,466,191 $13,038,680 $ 1,514,386 $ 9,343,378
=========== =========== =========== =========== ===========
Supplemental disclosure
of cash flows
information--interest
paid.................. $ 51,767 $ 67,506 $ 71,571 $ 13,859 $ 9,481
Supplemental disclosure
of noncash investing
and financing
activity--equipment on
capital leases........ 172,217 314,655 502,172 -- 120,000
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-13
<PAGE>
PEAPOD LP
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE PARTNERSHIP
Peapod LP ("Partnership"), an Illinois limited partnership, was formed on
June 1, 1992 as the successor to the business developed by Old Peapod
("General Partner"), the general partner of the Partnership.
The Partnership is an interactive online grocery shopping and delivery
service, which as of December 31, 1996 operated in the Chicago, Illinois, San
Francisco/San Jose, California, Columbus, Ohio and Boston, Massachusetts
metropolitan markets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Grocery sales are recognized when the grocery order is delivered to the
customer. Interactive marketing services are recognized over the life of the
contract as services are provided. Member and retailer services consist of
grocery retailer fees and fees from consumers. Grocery retailer fees include
contractual fees and performance-based fees. Contractual fees are recognized
on a straight-line basis over the life of the contract and performance-based
fees are recognized when the performance criteria are met. Fees from consumers
are recognized as services are provided.
Member Acquisition Costs
Member acquisition costs are expensed as incurred.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid investments with
original maturities of less than three months.
Property and Equipment
Property and equipment is recorded at cost and depreciated on a straight-
line basis over the estimated useful lives of the related assets, generally
four to five years. Leasehold improvements are amortized over the shorter of
the lease term or the estimated useful lives of the assets.
Capitalized Software Development Costs
Software development costs are capitalized in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86, which requires capitalization
of certain costs incurred subsequent to the determination of technological
feasibility. The Partnership has determined that technological feasibility
occurs in its product development cycle when a working model exists.
Capitalization ceases and product amortization commences upon the general
release of the product. Amortization is computed on a product-by-product
basis, using the lesser of the product's estimated useful life or a period
based on anticipated revenues. The Partnership capitalized $148,454 in
development costs in 1996 and amortized $85,597 in 1994. There was no
amortization in 1995 or 1996.
Goodwill
Goodwill is being amortized on a straight-line basis over its estimated
useful life of eight years.
F-14
<PAGE>
PEAPOD LP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
No provision is made for income taxes, as the Partnership is not directly
subject to taxation. The Partnership's net loss is allocated to and included
in the income tax returns of its partners.
Stock Option Plans
Prior to January 1, 1996, the Partnership accounted for its unit option
plans in accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date
of grant only if the fair market value of the underlying units exceeded the
exercise price. On January 1, 1996, the Partnership adopted SFAS No. 123,
Accounting for Stock-Based Compensation, which permits entities to recognize
as expense over the vesting period the fair value of all equity-based awards
on the date of grant. Alternatively, SFAS No. 123 allows entities to continue
to apply the provisions of APB Opinion No. 25 and provide pro forma
disclosures for employee unit option grants made in 1995 and future years as
if the fair-value based method defined in SFAS No. 123 had been applied. The
Partnership has elected to continue to apply the provisions of APB Opinion No.
25 and apply the pro forma disclosure provisions of SFAS No. 123.
Financial Instruments
The fair values of the Partnership's financial instruments do not materially
vary from the carrying values of such instruments.
Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount be
evaluated. Impairment is measured by comparing the carrying value to the
estimated and discounted future cash flows expected to result from the use of
the assets and their eventual disposition. The Partnership has determined that
as of December 31, 1996, there has been no impairment in the carrying values
of long-lived assets.
Use of Estimates
Management of the Partnership has made a number of estimates and assumptions
relating to the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain prior year balances have been reclassified to conform with the
current year presentation.
Interim Financial Statements
The accompanying unaudited interim financial statements reflect all
adjustments which, in the opinion of management, are necessary for the fair
presentation of the results of the interim periods presented. All such
adjustments are of a normal recurring nature.
F-15
<PAGE>
PEAPOD LP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) SUBORDINATED DEBENTURES
At December 31, 1995 and 1996, subordinated debentures consisted of the
following:
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
Debenture due on March 30, 1997, bearing interest at 12%.. $ 50,000 --
Debenture due on March 30, 1997, bearing interest at prime
plus 2% and 10.5% at December 31, 1995 adjusted annually
at February 1, subordinate to the $50,000 debenture noted
above.................................................... 25,000 --
Debenture due on May 30, 1998, bearing interest at prime
plus 2%, with interest through May 29, 1995 at 8% and 11%
at December 31, 1995 adjusted annually at May 29,
subordinate to the $50,000 debenture noted above......... 50,000 --
-------- -------
$125,000 --
======== =======
</TABLE>
(4) OPTIONS FOR LIMITED PARTNERSHIP UNITS
Peapod LP has two partnership unit option plans providing for the issuance
of options to eligible employees, directors, advisors and consultants. These
plans permit Peapod LP to issue options on terms that the Partnership
determines are appropriate, subject to a maximum term of 10 years. Such terms
include exercise price, number of units, vesting dates and other terms.
The Partnership applies APB Opinion No. 25 and related interpretations in
accounting for its plans. All options under the plans have been granted at
exercise prices not less than estimated fair market value at the date of the
grant. Accordingly, no compensation cost has been recognized for its fixed
unit option plans. Had compensation cost for the Partnership's unit option
plans been determined consistent with SFAS No. 123, the Partnership's net loss
would have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
<S> <C> <C>
Net loss available to partners
As reported.................................. $(6,591,921) $(9,565,507)
Pro forma for SFAS No. 123................... (6,750,362) (9,827,192)
</TABLE>
Under the option plans, the exercise price of each option equals the
estimated fair market value of the Partnership's units on the date of grant.
For purposes of calculating the compensation costs consistent with SFAS No.
123, the fair value of each grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in fiscal 1995 and 1996, respectively: no expected
dividend yield; expected volatility of 20 percent; risk free interest rates of
6.4% and 6.5% in 1995 and 1996, respectively, and expected lives of seven
years.
A third plan provided for the issuance of options to eligible employees,
advisors and consultants in lieu of compensation. This plan was terminated
effective December 31, 1995. During the years ended December 31, 1994 and
1995, expense was recorded of $155,610 and $99,658, respectively.
F-16
<PAGE>
PEAPOD LP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Additional information on units subject to options is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------------ ------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
-------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 852,500 $1.58 861,849 $1.63 1,448,446 $2.20
Granted................. 129,349 2.01 590,097 3.03 285,000 6.00
Forfeited............... (120,000) 1.67 (3,500) 2.36 (102,500) 3.78
Exercised............... -- -- --
-------- --------- ---------
Outstanding at end of
year................... 861,849 $1.63 1,448,446 $2.20 1,630,946 $2.77
======== ===== ========= ===== ========= =====
Options exercisable at
year end............... 668,349 $1.59 858,336 $1.79 1,116,172 $2.11
======== ===== ========= ===== ========= =====
</TABLE>
The following table summarizes information about unit options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$1.33--1.80 688,844 6.45 years $1.52 675,844 $1.52
2.00--2.50 303,505 6.22 2.17 217,621 2.14
3.00--3.25 373,597 6.90 3.25 170,957 3.24
6.00 265,000 8.10 6.00 51,750 6.00
--------- ---------
1,630,946 6.78 years $2.77 1,116,172 $2.11
========= ========== ===== ========= =====
</TABLE>
F-17
<PAGE>
PEAPOD LP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) WARRANTS FOR LIMITED PARTNERSHIP UNITS
Partnership unit warrant activity for the years ended December 31, 1994,
1995 and 1996 are summarized below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE EXERCISE
UNITS PRICE PRICE
-------- -------- ----------
<S> <C> <C> <C>
Outstanding on January 1, 1994................. 716,541 $1.98 $1.33-2.00
Granted........................................ 32,083 2.24 2.23-2.25
Exercised...................................... (694,248) 2.00 2.00
--------
Outstanding on December 31, 1994............... 54,376 1.92 1.33-2.25
Granted........................................ 11,500 3.25 3.25
Exercised...................................... (1,250) 2.23 2.23
--------
Outstanding on December 31, 1995............... 64,626 2.15 1.33-3.25
Granted........................................ 3,215 7.00 7.00
--------
Outstanding on December 31, 1996............... 67,841 $2.38 1.33-7.00
======== =====
</TABLE>
(6) COMMITMENTS AND CONTINGENCIES
Capital Leases
Peapod LP has capitalized certain computer equipment acquired through
capital leases. The future minimum lease payments as of December 31, 1996 are
as follows:
<TABLE>
<S> <C>
1997............................................................ $380,867
1998............................................................ 279,667
1999............................................................ 81,744
--------
742,278
Less amount representing interest............................... 70,259
--------
672,019
Less current obligations........................................ 332,490
--------
$339,529
========
</TABLE>
Costs and related accumulated amortization for equipment under capital
leases totaled $219,541 and $47,821, respectively, as of December 31, 1994;
$534,196 and $142,038, respectively, as of December 31, 1995; and $999,065 and
$298,424, respectively, as of December 31, 1996. Amortization expense totaled
$33,358, $94,217 and $184,490 for the years ended December 31, 1994, 1995 and
1996, respectively.
Operating Leases
The Company leases its office facilities under operating leases. Rent
expense on operating leases totaled $103,804, $155,730 and $237,797 for the
years ended December 31, 1994, 1995 and 1996, respectively. Total future
minimum lease payments under operating leases as of December 31, 1996 are as
follows:
<TABLE>
<S> <C>
1997............................................................. $308,655
1998............................................................. 294,198
1999............................................................. 286,138
2000............................................................. 52,320
2001............................................................. 13,080
--------
$954,391
========
</TABLE>
F-18
<PAGE>
PEAPOD LP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(7) RELIANCE ON CERTAIN RELATIONSHIPS
The business of the Partnership is dependent upon contracts with a grocery
retailer in each metropolitan market where the Partnership is doing business.
The continuation and the favorable renegotiation of each of its existing
contracts with grocery retailers and the negotiation of acceptable contracts
with retailers in new markets are material to the Partnership.
(8) PARTNERSHIP AGREEMENT AND LIQUIDATION PREFERENCES
Management Fees
In accordance with the Partnership Agreement, a management fee is payable to
the General Partner by the Partnership. For the years ended December 31, 1994,
1995 and 1996, the amount charged to general and administrative expenses
totaled $125,000, $150,000 and $175,000, respectively. At December 31, 1994,
1995 and 1996, $119,299, $478 and $13,788 of this management fee is payable to
the General Partner. As of December 31, 1996, future annual commitments under
the Partnership Agreement are $175,000.
Allocations and Distributions
Pursuant to the terms of the Partnership agreement, the net profits and
losses are to be allocated among the partners pro rata, based upon the number
of units held by each partner. In addition, if the number of units held by any
partner changes during the fiscal year, the allocation is to be adjusted in
proportion to the number of units and the number of full months during the
year that the units were held.
Distributions of cash or assets will be made from time to time and when
reasonably practicable, as determined by the General Partner.
Liquidation Preference
Certain holders of limited partner units issued in 1996 have a liquidation
preference over all other holders of limited and general partner units.
(9) PARTNERSHIP UNIT PROGRAMS
Peapod LP adopted a program where certain executives and advisors receive
units of the Partnership in lieu of compensation. The program allows these
executives and advisors to receive units at 80% of the estimated fair market
value during 1994 and 85% of the estimated fair market value during 1995 and
1996. Expense was recognized based on the estimated fair market value of the
partnership units at the date of issuance.
In 1995, Peapod LP adopted a director purchase plan whereby each director of
the Partnership was eligible to purchase units of the Partnership at 85% of
the estimated fair market value, up to $50,000 annually. Expense was
recognized based on the discount from estimated fair market value of the
partnership units at the date of issuance.
During the year ended December 31, 1994, 43,547 units were issued, and
$75,574 of expense was reflected in the financial statements. In addition,
8,040 units were issued on January 1, 1995 for compensation of 1994 services.
Expense of $17,929 was reflected in the financial statements for the year
ended December 31, 1994.
During the year ended December 31, 1995, 20,550 units were issued and
$38,538 of expense was reflected in the financial statements. In addition,
70,656 units were issued on January 1, 1996 for compensation of 1995 services
and under the director purchase plan. Expense of $102,038 was reflected in the
financial statements for the year ended December 31, 1995.
F-19
<PAGE>
PEAPOD LP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
During the year ended December 31, 1996, 86,341 units were issued and
$44,115 of expense was reflected in the financial statements. In addition,
45,292 units were issued on January 1, 1997 for compensation of 1996 services
and under the director purchase plan. Expense of $221,757 was reflected in the
financial statements for the year ended December 31, 1996.
(10) EMPLOYEE BENEFIT PLAN
Effective September 1, 1995, the Partnership implemented a 401(k) Savings
Plan ("Plan"). Qualified employees may participate in the Plan by contributing
up to 15% of their gross wages. The Partnership may elect to make matching
contributions at the discretion of the Board of Directors of the General
Partner. The Partnership has made no contributions through December 31, 1996.
(11) SYNDICATION COSTS
Prior to 1994, the Partnership capitalized syndication costs and amortized
them on a straight-line basis over five years. As of January 1, 1994, the
Partnership modified its method of accounting for syndication costs to reflect
them as a reduction from the proceeds of the issuance of limited partnership
units. The net capitalized syndication costs at December 31, 1993 of $105,073
were restated to reflect a reduction of limited partners' capital. This
modification did not have a material effect on the Partnership's results of
operations or financial position for all periods presented.
F-20
<PAGE>
[Photo of Peapod delivery person holding bag of groceries. Caption: "Smart
Shopping for Busy People.(R)"]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RE-
LATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH
IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OF-
FER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 13
Dividend Policy........................................................... 13
Capitalization............................................................ 13
Dilution.................................................................. 14
Selected Financial and Operating Data..................................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 23
Management................................................................ 36
Certain Transactions...................................................... 41
Stock Ownership........................................................... 43
Description of Capital Stock.............................................. 45
Shares Eligible for Future Sale........................................... 48
Underwriting.............................................................. 50
Legal Matters............................................................. 51
Experts................................................................... 51
Additional Information.................................................... 52
Index to Financial Statements............................................. F-1
</TABLE>
------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3,600,000 SHARES
PEAPOD, INC.
COMMON STOCK
LOGO
--------
PROSPECTUS
, 1997
--------
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY
J.P. MORGAN & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses (other than underwriting discount and expenses) payable by the
Company in connection with the sale of the Common Stock offered hereby
(including the Common Stock which may be issued pursuant to an over-allotment
option) are as follows:
<TABLE>
<CAPTION>
AMOUNT
----------
<S> <C>
SEC registration fee.......................................... $ 18,819
NASD filing fee............................................... 6,710
Nasdaq National Market fee.................................... 50,000
Printing and engraving expenses............................... 125,000
Legal fees and expenses....................................... 500,000
Accounting fees and expenses.................................. 250,000
Blue Sky fees and expenses (including legal fees and
expenses).................................................... 5,000
Transfer agent and registrar fees and expenses................ 10,000
Directors and officers liability insurance.................... 100,000
Miscellaneous................................................. 134,471
----------
Total..................................................... $1,200,000
==========
</TABLE>
- --------
*To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law and the Company's Charter and By-Laws
provide for indemnification of the Company's directors and officers for
liabilities and expenses that they may incur in such capacities. In general,
directors and officers are indemnified with respect to actions taken in good
faith in a manner reasonably believed to be in, or not opposed to, the best
interests of the Company, and with respect to any criminal action or
proceeding, actions that the indemnitee had no reasonable cause to believe
were unlawful. Reference is made to the Company's Charter and By-Laws filed as
Exhibits 3.1 and 3.2 hereto, respectively.
The Company will enter into indemnity agreements with each of its directors
and certain officers, including its executive officers, that will require the
Company to advance expenses to each such director and officer in the event
that a claim is brought against such director or officer with respect to an
action for which the Company is obligated to provide indemnification under the
Company's Charter and By-Laws.
The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of the Company against certain liabilities, including liabilities
under the Securities Act. Reference is made to the form of Underwriting
Agreement filed as Exhibit 1 hereto.
The Company is purchasing directors and officers liability insurance, which
would provide coverage against certain liabilities including liabilities under
the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the three years preceding the filing of this registration statement, the
Company sold the following securities which were not registered under the
Securities Act:
On January 1, 1994, the Company sold an aggregate of 29,502 limited
partnership units in Peapod LP ("Units") under its 1993 Executive Unit
Purchase Plan for the aggregate price of $35,402 to certain employees and a
director.
On January 1, 1994, the Company sold an aggregate of 160,669 options to
purchase Units ("Options") under its 1993 Executive Option Purchase Plan for
the aggregate price of $160,669 to certain employees and directors.
II-1
<PAGE>
On July 1, 1994, the Company sold 14,045 Units for an aggregate price of
$25,000 to a director under its 1994 Executive Unit Purchase Plan.
On August 1, 1994 and September 1, 1994, the Company sold an aggregate of
183,906 Units for an aggregate price of $410,110 to certain individuals and
investment entities.
On September 14, 1994, the Company sold 1,559,235 Units to Ameritech
Corporation for an aggregate price of $3,477,094.
On October 1, 1994, the Company sold 694,248 Units to Tribune National
Marketing Company for an aggregate price of $1,388,496.
On October 11, 1994, the Company sold 38,262 Options for an aggregate price
of $44,894 to an employee under its 1994 Executive Option Purchase Plan (the
"1994 Option Purchase Plan").
On November 4, 1994, the Company sold warrants to purchase an aggregate of
15,208 Units to Comdisco for an aggregate price of $37,499.
On January 1, 1995, the Company sold (i) an aggregate of 79,587 Options
under its 1994 Option Purchase Plan for an aggregate price of $106,803 to
certain employees and directors, (ii) an aggregate of 8,040 Units under its
1994 Executive Unit Purchase Plan for an aggregate price of $14,311 to certain
employees and (iii) 4,815 Units to an individual for an aggregate price of
$15,649.
On March 31, 1995, the Company sold an aggregate of 4,279 Options under its
1995 Executive Option Purchase Plan (the "1995 Option Purchase Plan") for an
aggregate price of $9,336 to certain employees and a director.
On April 1, 1995, the Company sold an aggregate of 8,478 Units under its
1995 Executive Unit Purchase Plan (the "1995 Unit Purchase Plan") for an
aggregate price of $21,619 to certain employees and directors.
On July 1, 1995, the Company sold 2,106 Units for an aggregate amount of
$5,813 under its 1995 Unit Purchase Plan to an affiliate of a director. The
Company also sold 1,250 Units for an aggregate price of $2,788 to an
investment entity pursuant to the exercise of its warrant right.
On July 1, 1995 and August 1, 1995, the Company sold an aggregate of 216,296
Units for an aggregate price of $702,962 to certain individuals and investment
entities.
On July 27, 1995, the Company sold 1,559,235 Units to Providence Journal
Company for an aggregate price of $5,067,514.
On August 15, 1995, the Company sold 14,808 Options under its 1995 Option
Purchase Plan for an aggregate price of $35,001 in foregone compensation to an
employee, pursuant to a severance agreement.
On October 1, 1995, the Company sold 1,926 Units under its 1995 Unit
Purchase Plan to an affiliate of a director for an aggregate price of $5,316.
On November 1, 1995, the Company sold an aggregate of 227,376 Units to
Tribune National Marketing Company, Ameritech Corporation and Providence
Journal Company for an aggregate price of $738,972. The Company also sold
warrants to purchase an aggregate of 11,500 Units to Ameritech Credit
Corporation for an aggregate price of $37,375.
On December 31, 1995, the Company sold an aggregate of 23,405 Options under
its 1995 Option Purchase Plan for an aggregate price of $55,321 to certain
employees and directors.
II-2
<PAGE>
On January 1, 1996, the Company sold (i) an aggregate of 24,426 Units under
its 1995 Unit Purchase Plan for an aggregate price of $67,416 to certain
employees and a director and (ii) an aggregate of 56,033 Units under its
Director Unit Purchase Plan for an aggregate price of $177,590 to certain
directors.
On March 1, 1996, the Company sold 998 Units to the Providence Journal
Company for an aggregate price of $3,244.
On December 1, 1996, the Company sold 5,882 Units pursuant to its 1996
Executive Unit Purchase Plan (the "1996 Unit Purchase Plan") to a director for
an aggregate price of $29,998.
On January 1, 1997, the Company sold (i) an aggregate of 35,489 Units under
its 1996 Unit Purchase Plan for an aggregate price of $180,994 to certain
employees and (ii) an aggregate of 14,845 Units under its Director Unit
Purchase Plan for an aggregate price of $47,995 to certain directors.
On February 1, 1997, the Company sold an aggregate of 16,803 Units under its
Director Unit Purchase Plan for an aggregate of $99,978 to certain directors.
On February 15, 1997, the Company sold an aggregate of 21,943 Units under
its 1997 Unit Purchase Plan for an aggregate price of $130,561 to certain
employees.
On April 11, 1994, the Company sold subordinated debentures and warrant
rights to purchase a total of 5,000 Units to Samuel Parkinson, Brant Smith and
John Traeger for an aggregate amount of $200,000.
On April 18, 1994, the Company sold subordinated debentures and warrant
rights to purchase a total of 1,250 Units to Anne L. Fawcett and Helen P. Hall
for an aggregate amount of $50,000.
On May 4, 1994, the Company sold subordinated debentures and warrant rights
to purchase a total of 1,250 Units to P-J Investments for an aggregate amount
of $50,000.
On May 9, 1994, the Company sold subordinated debentures and warrant rights
to purchase a total of 625 Units to Lynn J. Nord for an aggregate amount of
$25,000.
On May 12, 1994, the Company sold subordinated debentures and warrant rights
to purchase a total of 625 Units to Peter M. Gaines for an aggregate amount of
$25,000.
On June 14, 1994, the Company sold subordinated debentures and warrant
rights to purchase a total of 7,500 Units to Alis & Co. and the Howard H. Cohn
Trust for an aggregate amount of $300,000.
On July 5, 1994, the Company sold subordinated debentures and warrant rights
to purchase a total of 1,250 Units to Nickel Plate Ventures, L.P. for an
aggregate amount of $50,000.
On July 6, 1994, the Company sold subordinated debentures and warrant rights
to purchase a total of 625 Units to Ned M. Cole, Jr. for an aggregate amount
of $25,000.
On July 13, 1994, the Company sold subordinated debentures and warrant
rights to purchase a total of 625 Units to David Hoffman for an aggregate
amount of $25,000.
No underwriter was involved in any of the above-referenced sales.
On April 19, 1996, the Company sold an aggregate of 2,875,002 Units for an
aggregate price of $17,250,012 to the following investors: Benaroya Capital
Company (166,667 Units), Providence Journal Company (166,667 Units), Montreaux
Equity Management LP (133,333 Units), Eos Partners SBIC, L.P. (416,667 Units),
The Travelers Insurance Company (416,667 Units), ELI-Pod, Inc. (416,667
Units), Tribune National Marketing Company (166,667 Units), Glenbrook
Partners, L.P. (41,667 Units), CIBC Wood Gundy Ventures, Inc. (916,667 Units)
and Berkman Associates, L.P. (33,333 Units). Smith Barney Inc. was the
principal underwriter for the offering and received underwriting commissions
of $762,500.
II-3
<PAGE>
All sales to Tribune National Marketing Company, Ameritech Corporation and
Providence Journal Company were made in reliance on Section 4(2) of the
Securities Act of 1933, as amended (the "Securities Act") as sales to
sophisticated investors capable of evaluating the risks of the purchase, with
access to all relevant information, who have made appropriate written
representations of investment intent and have received legended securities.
All sales to employees or directors under Unit Purchase Plans or Option
Purchase Plans were made in reliance on Rule 701 promulgated under the
Securities Act pursuant to a written compensatory benefit plan provided to
each participant.
All other sales referred to above were made in reliance on Rule 505 or 506
of Regulation D to persons reasonably believed to be Accredited Investors (as
defined in Regulation D) who have made appropriate written representations of
investment intent and have received legended securities.
II-4
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement
3.1 --Restated Certificate of Incorporation of the Company
3.2 --Restated By-Laws of the Company
4.1 --Form of Stockholders Rights Plan
4.2 --Form of Certificate of Designation of Series A Junior
Participating Preferred Stock (included in Exhibit 4.1 to this
Registration Statement)
5.1 --Opinion of Sidley & Austin
10.1 --Conversion Agreement
10.2 --Lease of the Company's new principal offices to be located in
Skokie, Illinois
10.3 --Agreement dated September 1, 1995 between Jewel Food Stores,
Inc. and Peapod LP (subject to a request for confidential
treatment pursuant to Rule 406 of the Securities Act).
10.4 --Form of Employment Agreement between the Company and Andrew B.
Parkinson
10.5 --Form of Employment Agreement between the Company and Thomas L.
Parkinson
10.6 --Form of Employment Agreement between the Company and John C.
Walden
10.7 --Form of Employment Agreement between the Company and Timothy M.
Dorgan
10.8 --Form of Employment Agreement between the Company and John A.
Furton
10.9 --Form of Severance Agreement between the Company and each of
Andrew B. Parkinson, Thomas L. Parkinson, John P. Walden, Timothy
M. Dorgan and John A. Furton.
10.10 --Amended and Restated Investors Agreement, dated April 1, 1997,
among the Company and certain investors.
10.11 --Unitholders Agreement among Peapod LP, the General Partners and
certain investors.
10.12 --Form of Parkinson Registration Rights Agreement among the
Company, Andrew B. Parkinson and Thomas L. Parkinson.
10.13 --Form of Tasso H. Coin Registration Rights Agreement between the
Company and Tasso H. Coin.
10.14 --Form of 1997 Long-Term Incentive Plan
10.15 --Form of Employee Stock Purchase Plan
10.16 --Form of Indemnification Agreement between the Company and each
of its directors and executive officers
11 --Statement re: computation of per share earnings
23.1 --Consent of KPMG Peat Marwick LLP
23.2 --Consent of Sidley & Austin (included in Exhibit 5.1)
24.1 --Powers of Attorney (included on signature page)
</TABLE>
(b) Financial Statement Schedules
None of the schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are required
under the related instructions or are inapplicable, and therefore have been
omitted.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser; (2) that for
purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective; and (3) that for the
purpose of determining any liability under the Securities Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new registration statement relating to the securities offered therein, and the
Offering of such securities at that time shall be deemed to be the initial
bona fide Offering thereof.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN CHICAGO, ILLINOIS ON
JUNE 9, 1997.
Peapod, Inc.
/s/ Andrew B. Parkinson
By: _________________________________
Andrew B. Parkinson
President
POWER OF ATTORNEY AND SIGNATURES
WE, THE UNDERSIGNED OFFICERS AND DIRECTORS OF PEAPOD, INC., HEREBY SEVERALLY
CONSTITUTE AND APPOINT ANDREW B. PARKINSON AND JOHN C. WALDEN, AND EACH OF
THEM SINGLY, OUR TRUE AND LAWFUL ATTORNEYS, WITH FULL POWER TO THEM AND EACH
OF THEM SINGLY, TO SIGN FOR US IN OUR NAMES IN THE CAPACITIES INDICATED BELOW,
ALL PRE-EFFECTIVE AND POST-EFFECTIVE AMENDMENTS TO THIS REGISTRATION
STATEMENT, INCLUDING ANY FILINGS PURSUANT TO RULE 462(B) UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND GENERALLY TO DO ALL THINGS IN OUR NAMES AND ON
OUR BEHALF IN SUCH CAPACITIES TO ENABLE PEAPOD, INC. TO COMPLY WITH THE
PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ALL REQUIREMENTS OF
THE SECURITIES AND EXCHANGE COMMISSION.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
TO REGISTRATION STATEMENT HAS BEEN SIGNED ON JUNE 9, 1997 BY THE FOLLOWING
PERSONS IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S)
--------- --------
<S> <C>
/s/ Andrew B. Parkinson Chairman, President and Chief Executive
___________________________________________ Officer (principal executive officer) and
Andrew B. Parkinson Director
/s/ Thomas L. Parkinson Executive Vice President, Chief Technology
___________________________________________ Officer and Director
Thomas L. Parkinson
/s/ John C. Walden Executive Vice President, Finance and
___________________________________________ Business Development (principal financial
John C. Walden officer)
/s/ Earl W. Rachowicz Vice President and Controller (principal
___________________________________________ accounting officer)
Earl W. Rachowicz
/s/ Tasso H. Coin Director
___________________________________________
Tasso H. Coin
/s/ Steven M. Friedman Director
___________________________________________
Steven M. Friedman
/s/ Trygve E. Myhren Director
___________________________________________
Trygve E. Myhren
/s/ Seth L. Pierrepont Director
___________________________________________
Seth L. Pierrepont
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 --Form of Underwriting Agreement
+3.1 --Restated Certificate of Incorporation of the Company
+3.2 --Restated By-Laws of the Company
4.1 --Form of Stockholders Rights Plan
4.2 --Form of Certificate of Designation of Series A Junior Participating
Preferred Stock (included in Exhibit 4.1 to this Registration
Statement)
5.1 --Opinion of Sidley & Austin
10.1 --Conversion Agreement
+10.2 --Lease of the Company's new principal offices to be located in
Skokie, Illinois
+10.3 --Agreement dated September 1, 1995 between Jewel Food Stores, Inc.
and Peapod LP (subject to a request for confidential treatment
pursuant to Rule 406 of the Securities Act).
--Form of Employment Agreement between the Company and Andrew B.
10.4 Parkinson
--Form of Employment Agreement between the Company and Thomas L.
10.5 Parkinson
10.6 --Form of Employment Agreement between the Company and John C. Walden
--Form of Employment Agreement between the Company and Timothy M.
10.7 Dorgan
10.8 --Form of Employment Agreement between the Company and John A. Furton
10.9 --Form of Severance Agreement between the Company and each of Andrew
B. Parkinson, Thomas L. Parkinson, John P. Walden, Timothy M. Dorgan
and John A. Furton.
10.10 --Amended and Restated Investors Agreement, dated April 1, 1997, among
the Company and certain investors.
10.11 --Unitholders Agreement among Peapod LP, the General Partners and
certain investors.
10.12 --Form of Parkinson Registration Rights Agreement among the Company,
Andrew B. Parkinson and Thomas L. Parkinson.
10.13 --Form of Tasso H. Coin Registration Rights Agreement between the
Company and Tasso H. Coin
10.14 --Form of 1997 Long-Term Incentive Plan
10.15 --Form of Employee Stock Purchase Plan
10.16 --Form of Indemnification Agreement between the Company and each of
its directors and executive officers
11 --Statement re: computation of per share earnings
23.1 --Consent of KPMG Peat Marwick LLP
23.2 --Consent of Sidley & Austin (included in Exhibit 5.1)
24.1 --Powers of Attorney (included on signature page)
</TABLE>
- --------
+Previously filed
II-8
<PAGE>
EXHIBIT 1.1
Proof of June 5, 1997
3,600,000 Shares
PEAPOD, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
June __, 1997
Smith Barney Inc.
William Blair & Company, L.L.C.
J.P. Morgan Securities Inc.
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Peapod, Inc., a Delaware corporation (the "Company"), proposes to issue and
sell an aggregate of 3,600,000 shares of its common stock, $0.01 par value per
share, to the several Underwriters named in Schedule II hereto (the
"Underwriters") and the persons named in Schedule I hereto (the "Selling
Stockholders") propose to sell to the several Underwriters, in the aggregate, up
to an additional 540,000 shares of common stock of the Company upon the terms
and conditions set forth herein. The Company and the Selling Stockholders are
hereinafter sometimes referred to as the "Sellers." The Company's common stock,
$0.01 par value, is hereinafter referred to as the "Common Stock", the 3,600,000
shares of Common Stock to be issued and sold to the Underwriters by the Company
are hereinafter referred to as the "Firm Shares" and the 540,000 shares of
additional Common Stock to be sold to the Underwriters by Selling Stockholders
are hereinafter referred to as the "Additional Shares." The Firm Shares and the
Additional Shares are hereinafter collectively referred to as the "Shares".
The business of the Company began in 1989 and was originally operated
through one of its predecessors Peapod, Inc., a Delaware corporation ("Old
Peapod"). On June 1, 1992, Peapod LP, an Illinois limited partnership ("Peapod
LP") was formed and substantially all the assets and liabilities as well as the
operations of Old Peapod were transferred to Peapod LP and Old Peapod became the
sole general partner of Peapod LP. On May 31, 1997, pursuant to the terms of the
Conversion Agreement dated May 30, 1997 by and among New Peapod, Inc., Peapod
LP, Peapod Inc. and Eli-Pod, Inc. and the agreement and documents referred to
therein (collectively, the "Conversion Documents"),(i) all of the equity
interests in Peapod LP were transferred to the Company and (ii) the assets and
liabilities of Peapod LP as well as the operations of Peapod LP were transferred
to the
<PAGE>
Company. The events referred to in the immediately preceding sentence shall
herein after collectively be referred to as the "Conversion."
The Company and the Selling Stockholders wish to confirm as follows their
respective agreements with you (the "Representatives") and the other several
Underwriters on whose behalf you are acting, in connection with the several
purchases of the Shares by the Underwriters.
1. 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 of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-1 under the Act (the "initial
registration statement"), including a prospectus subject to completion relating
to the Shares. The term "Registration Statement" as used in this Agreement means
the initial registration statement (including all financial schedules and
exhibits) and any registration statement increasing the size of the offering
filed pursuant to Rule 462(b) of the Act (including all financial schedules and
exhibits) (a "Rule 462(b) Registration Statement"), as either may be amended at
the time they become effective, or, if the initial registration statement and
any Rule 462(b) Registration Statement became effective prior to the execution
of this Agreement, as either may be supplemented or amended prior to the
execution of this Agreement. If it is contemplated, at the time this Agreement
is executed, that a post-effective amendment or amendments to the initial
registration statement and any Rule 462(b) Registration Statement will be filed
and must be declared effective before the offering of the Shares may commence,
the term "Registration Statement" as used in this Agreement means the initial
registration statement and any Rule 462(b) Registration Statement as amended by
said post-effective amendment or amendments. The term "Prospectus" as used in
this Agreement means the prospectus in the form included in the Registration
Statement, or, if the prospectus included in the Registration Statement omits
information in reliance on Rule 430A under the Act and such information is
included in a prospectus filed with the Commission pursuant to Rule 424(b) under
the Act, the term "Prospectus" as used in this Agreement means the prospectus in
the form included in the Registration Statement as supplemented by the addition
of the Rule 430A information contained in the prospectus filed with the
Commission pursuant to Rule 424(b). The term "Prepricing Prospectus" as used in
this Agreement means the prospectus subject to completion in the form included
in the initial registration statement at the time of the initial filing of the
initial registration statement with the Commission, and as such prospectus shall
have been amended from time to time prior to the date of the Prospectus.
2. Agreements to Sell and Purchase. Subject to such adjustments as you
may determine in order to avoid fractional shares, the Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company and the Selling Stockholders herein contained and
subject to all the terms and conditions set forth herein, each Underwriter
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of $______ per Share (the "purchase price per share"), the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule II hereto.
The Selling Stockholders listed in Schedule I hereto also agree, subject to
all the terms and conditions set forth herein, to sell to the Underwriters, and,
upon the basis of the representations,
-2-
<PAGE>
warranties and agreements of the Company and the Selling Stockholders herein
contained and subject to all the terms and conditions set forth herein, the
Underwriters shall have the right to purchase from the Selling Stockholders
listed in Schedule I hereto, at the purchase price per share, pursuant to an
option (the "over-allotment option") which may be exercised at any time and from
time to time prior to 9:00 P.M., New York City time, on the 30th day after the
date of the Prospectus (or, if such 30th day shall be a Saturday or Sunday or a
holiday, on the next business day thereafter when the New York Stock Exchange is
open for trading), up to an aggregate of 540,000 Additional Shares from the
Selling Stockholders listed on Schedule I hereto (the maximum number of
Additional Shares which each of them agrees to sell upon the exercise by the
Underwriters of the over-allotment option is set forth opposite their respective
names in Schedule I). Additional Shares may be purchased only for the purpose
of covering over-allotments made in connection with the offering of the Firm
Shares. The number of Additional Shares which the Underwriters elect to
purchase upon any exercise of the over-allotment option shall be provided by
each Selling Stockholder who has agreed to sell Additional Shares in proportion
to the respective maximum numbers of Additional Shares which each such Selling
Stockholder has agreed to sell. Upon any exercise of the over-allotment option,
each Underwriter, severally and not jointly, agrees to purchase from each
Selling Stockholder who has agreed to sell Additional Shares the number of
Additional Shares (subject to such adjustments as you may determine in order to
avoid fractional shares) which bears the same proportion to the number of
Additional Shares to be sold by each Selling Stockholder who has agreed to sell
Additional Shares as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule II hereto (or such number of Firm Shares increased
as set forth in Section 12 hereof) bears to the aggregate number of Firm Shares
to be sold by the Company.
Certificates in transferable form for the Shares (including any Additional
Shares) which each of the Selling Stockholders agrees to sell pursuant to this
Agreement have been placed in custody with First Chicago Trust Co. of New York
(the "Custodian") for delivery under this Agreement pursuant to a Custody
Agreement and Power of Attorney (the "Custody Agreement") executed by each of
the Selling Stockholders appointing Steven M. Friedman and Tasso H. Coin as
agents and attorneys-in-fact (the "Attorneys-in-Fact"). Each Selling
Stockholder agrees that (i) the Additional Shares represented by the
certificates held in custody pursuant to the Custody Agreement are subject to
the interests of the Underwriters, the Company and each other Selling
Stockholder, (ii) the arrangements made by the Selling Stockholders for such
custody are, except as specifically provided in the Custody Agreement,
irrevocable, and (iii) the obligations of the Selling Stockholders hereunder and
under the Custody Agreement shall not be terminated by any act of such Selling
Stockholder or by operation of law, whether by the death or incapacity of any
Selling Stockholder or the occurrence of any other event. If any Selling
Stockholder shall die or be incapacitated or if any other event shall occur
before the delivery of the Additional Shares hereunder, certificates for the
Additional Shares of such Selling Stockholder shall be delivered to the
Underwriters by the Attorneys-in-Fact in accordance with the terms and
conditions of this Agreement and the Custody Agreement as if such death or
incapacity or other event had not occurred, regardless of whether or not the
Attorneys-in-Fact or any Underwriter shall have received notice of such death,
incapacity or other event. Each Attorney-in-Fact is authorized, on behalf of
each of the Selling Stockholders, to execute this Agreement and any other
documents necessary or desirable in connection with the sale of the Additional
Shares to be sold hereunder by such Selling Stockholder, to make delivery of the
certificates for such Additional Shares, to receive the proceeds of the sale of
such Additional Shares,
-3-
<PAGE>
to give receipts for such proceeds, to pay therefrom any expenses to be borne by
such Selling Stockholder in connection with the sale and public offering of such
Additional Shares, to distribute the balance thereof to such Selling
Stockholder, and to take such other action as may be necessary or desirable in
connection with the transactions contemplated by this Agreement. Each Attorney-
in-Fact agrees to perform his duties under the Custody Agreement.
3. Terms of Public Offering. The Sellers have been advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable and initially to offer the
Shares upon the terms set forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Sidley & Austin, One First National Plaza, Chicago, Illinois 60603, at 10:00
A.M., Chicago time, on June __, 1997 (the "Closing Date"). The place of closing
for the Firm Shares and the Closing Date may be varied by agreement among you,
the Company and the Attorneys-in-Fact.
Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at the aforementioned office of
Sidley & Austin at such time on such date (the "Option Closing Date"), which may
be the same as the Closing Date but shall in no event be earlier than the
Closing Date nor earlier than two nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in a written
notice from you on behalf of the Underwriters to the Company and the Attorneys-
in-Fact of the Underwriters' determination to purchase a number, specified in
such notice, of Additional Shares. The place of closing for any Additional
Shares and the Option Closing Date for such Additional Shares may be varied by
agreement among you, the Company and the Attorneys-in-Fact.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor in immediately available funds.
5. Agreements of the Company. The Company agrees with the several
Underwriters as follows:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the Registration Statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, the
Company will endeavor to cause the Registration Statement or such post-effective
amendment to become effective as soon as possible and will advise you promptly
and, if requested by you, will confirm such advice in writing, when the
Registration Statement or such post-effective amendment has become effective.
-4-
<PAGE>
(b) The Company will advise you promptly and, if requested by you,
will confirm such advice in writing: (i) of any request by the Commission for
amendment of or a supplement to the Registration Statement, any Prepricing
Prospectus or the Prospectus or for additional information; (ii) 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) within the period of time referred to in paragraph (f)
below, of any change in the Company's condition (financial or other), business,
prospects, properties, net worth or results of operations, or 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 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 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 every reasonable effort to obtain
the withdrawal of such order at the earliest possible time.
(c) The Company will furnish to you, without charge, four signed
copies of the initial registration statement and any Rule 462(b) Registration
Statement as originally filed with the Commission and of each amendment thereto,
including financial statements and all exhibits thereto, and will also furnish
to you, without charge, such number of conformed copies of the initial
registration statement and any Rule 462(b) Registration Statement as originally
filed and of each amendment thereto, but without exhibits, as you may request.
(d) The Company will not (i) file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which you
shall not previously have been advised or to which you shall object after being
so advised or (ii) so long as, in the opinion of counsel for the Underwriters, a
Prospectus is required to be delivered in connection with sales by any
Underwriter or dealer, file any information, documents or reports pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange Act") without
delivering a copy of such information, documents or reports to you, as
Representatives of the Underwriters, prior to or concurrently with such filing.
(e) Prior to the execution and delivery of this Agreement, the
Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.
(f) 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 Underwriters a prospectus is required by the Act to be delivered
in connection with sales by any Underwriter or dealer, the Company will
expeditiously deliver to each Underwriter and each dealer, without charge, as
many copies of the Prospectus (and of any amendment or supplement thereto) as
you may
-5-
<PAGE>
request. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. 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 Underwriters is required to be set forth in the
Prospectus (as then amended or 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 Act or any other law, the Company will
forthwith prepare and, subject to the provisions of paragraph (d) above, file
with the Commission an appropriate supplement or amendment thereto, and will
expeditiously furnish to the Underwriters and dealers a reasonable number of
copies thereof. In the event that the Company and you, as Representatives of
the several Underwriters, agree that the Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(g) The Company will cooperate with you and with counsel for the
Underwriters in connection with the registration or qualification of the Shares
for offering and sale by the several Underwriters and by dealers under the
securities or Blue Sky laws of such jurisdictions as you may designate and will
file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject.
(h) The Company will make generally available to its security holders
a consolidated earnings statement, which need not be audited, covering a twelve-
month period commencing after the effective date of the Registration Statement
and ending not later than 15 months thereafter, as soon as practicable after the
end of such period, which consolidated earnings statement shall satisfy the
provisions of Section ll(a) of the Act.
(i) During the period of five years hereafter, the Company will
furnish to you (i) as soon as available, a copy of each report of the Company
mailed to stockholders or filed with the Commission, and (ii) from time to time
such other information concerning the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provisions hereof (otherwise than pursuant to the
second paragraph of Section 12 hereof or by notice given by you terminating this
Agreement pursuant to Section 12 or Section 13 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company or the Selling Stockholders to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the Representatives for all reasonable out-of-pocket expenses (including
reasonable fees and expenses of counsel for the Underwriters) incurred by you in
connection herewith.
-6-
<PAGE>
(k) The Company will apply the net proceeds from the sale of the
Shares to be sold by it hereunder substantially in accordance with the
description set forth in the Prospectus.
(l) If Rule 430A of the Act is employed, the Company will timely file
the Prospectus pursuant to Rule 424(b) under the Act and will advise you of the
time and manner of such filing.
(m) Except as provided in this Agreement or as contemplated by the
Prospectus, the Company will not sell, contract to sell or otherwise dispose of
any Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, or grant any options or warrants to purchase
Common Stock, for a period of 180 days after the date of the Prospectus, without
the prior written consent of Smith Barney Inc.; provided, that the Company may
(i) issue or sell securities pursuant to options or warrants outstanding as of
the date hereof, (ii) issue additional options under the Company's 1997 Long-
Term Incentive Plan and (iii) sell Common Stock to employees under its Employee
Stock Purchase Plan.
(n) The Company has furnished or will furnish to you "lock-up"
letters, in form and substance satisfactory to you, signed by each of its
current officers and directors and each of its stockholders listed in Schedule
III.
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the Common Stock
listed, subject to notice of issuance, on the Nasdaq National Market
concurrently with the effectiveness of the initial registration statement.
(q) If the Company elects to rely upon Rule 462(b) of the Act, the
Company shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) of the Act by 10:00 P.M. Washington D.C. time on the
date of this Agreement, and the Company shall at the time of filing either pay
to the Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) of the Act.
6. Agreements of the Selling Stockholders. Each of the Selling
Stockholders agrees with the several Underwriters as follows:
(a) Such Selling Stockholder will cooperate to the extent necessary
to cause the initial registration statement and any Rule 462(b) Registration
Statement or any post-effective amendment thereto to become effective at the
earliest possible time.
(b) Such Selling Stockholder will pay all Federal and other taxes, if
any on the transfer or sale of the Shares being sold by the Selling Stockholder
to the Underwriters.
-7-
<PAGE>
(c) Such Selling Stockholder will do or perform all things required
to be done or performed by the Selling Stockholder prior to any Option Closing
Date to satisfy all conditions precedent to the delivery of the Shares pursuant
to this Agreement.
(d) Such Selling Stockholder has executed or will execute a "lock-up"
letter as provided in Section 5(n) above and will not sell, contract to sell or
otherwise dispose of any Common Stock, except for the sale of Shares to the
Underwriters pursuant to this Agreement, prior to the expiration of 180 days
after the date of the Prospectus, without the prior written consent of Smith
Barney Inc.
(e) Except as stated in this Agreement and in the Prepricing
Prospectus and the Prospectus, such Selling Stockholder will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(f) Such Selling Stockholder will advise you promptly, and if
requested by you, will confirm such advice in writing, within the period of time
referred to in Section 5(f) hereof, of any change in the information relating to
such Selling Stockholder which comes to the attention of such Selling
Stockholder that suggests that any statement with respect to such Selling
Stockholder made in the Registration Statement or the Prospectus (as then
amended or supplemented, if amended or supplemented) is or may be untrue in any
material respect or that the Registration Statement or Prospectus (as then
amended or supplemented, if amended or supplemented) omits or may omit to state
a material fact or a fact necessary to be stated therein in order to make the
statements therein not misleading in any material respect, or of the necessity
to amend or supplement the Prospectus (as then amended or supplemented, if
amended or supplemented) in order to comply with the Act or any other law.
7. Representations and Warranties of the Company. The Company represents
and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the initial
registration statement and any Rule 462(b) Registration Statement as originally
filed or as part of any amendment or supplement thereto, or filed pursuant to
Rule 424 under the Act, complied when so filed in all material respects with the
provisions of the Act. The Commission has not issued any order preventing or
suspending the use of any Prepricing Prospectus.
(b) The initial registration statement and any Rule 462(b)
Registration Statement in the form in which they became or become effective and
also in such form as they may be when any post-effective amendment thereto shall
become effective and the prospectus and any supplement or amendment thereto when
filed with the Commission under Rule 424(b) under the Act, complied or will
comply in all material respects with the provisions of the Act and did not or
will 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 not misleading, except that this representation and
warranty does not apply to statements in or omissions from the initial
registration statement and any Rule 462(b) Registration Statement or the
prospectus made in reliance upon and
-8-
<PAGE>
in conformity with information relating to any Underwriter furnished to the
Company in writing by or on behalf of any Underwriter through you expressly for
use therein.
(c) All the outstanding shares of Common Stock of the Company have
been duly authorized and validly issued, are fully paid and nonassessable and
are free of any preemptive or similar rights; the Shares to be issued and sold
by the Company have been duly authorized and, when issued and delivered to the
Underwriters against payment therefor in accordance with the terms hereof, will
be validly issued, fully paid and nonassessable and free of any preemptive or
similar rights; and the capital stock of the Company conforms to the description
thereof in the initial registration statement and any Rule 462(b) Registration
Statement and the prospectus.
(d) The Company is a corporation duly organized and validly existing
in good standing under the laws of the State of Delaware with full corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus, and is
duly registered and qualified to conduct its business and is in good standing in
each jurisdiction or place where the nature of its properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have a material adverse effect on the
condition (financial or other), business, properties, net worth or results of
operations of the Company taken as a whole. The Company has no subsidiaries.
(e) There are no legal or governmental proceedings pending or, to the
knowledge of the Company threatened, against the Company, or to which the
Company or any of its properties is subject, that are required to be described
in the Registration Statement or the Prospectus but are not described as
required, and there are no agreements, contracts, indentures, leases or other
instruments that are required to be described in the Registration Statement or
the Prospectus or to be filed as an exhibit to the Registration Statement that
are not described or filed as required by the Act.
(f) The Company, Peapod LP and Old Peapod have not been in violation
of their respective certificates of incorporation, by-laws or other
organizational documents, as the case may be, or of any law, ordinance,
administrative or governmental rule or regulation applicable to them or of any
decree of any court or governmental agency or body having jurisdiction over
them, or in default in any material respect in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or any
other evidence of indebtedness or in any material agreement, indenture, lease or
other instrument to which the Company is a party or by which the Company or its
properties may be bound except for such violations or defaults which
individually or in the aggregate would not have material adverse effect on the
Company's condition (financial or other), business, prospects, property, net
worth or results of operations.
(g) Neither the issuance and sale of the Shares, the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby (A) requires any consent,
approval, authorization or other order of or registration or filing with, any
court, regulatory body, administrative agency or other governmental body, agency
or official (except such as may be required for the registration of the Shares
under the Act and the Exchange Act and compliance with the securities or Blue
Sky laws of various jurisdictions, all of which have been or will be effected in
accordance with this Agreement) or conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the
-9-
<PAGE>
certificate of incorporation, bylaws, or other organizational documents, of the
Company, or (B) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, any agreement, indenture, lease or
other instrument to which the Company is a party or by which any of them or any
of its properties may be bound, or violates or will violate any statute, law,
regulation or filing or judgment, injunction, order or decree applicable to the
Company or any of its properties, or will result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the Company
pursuant to the terms of any agreement or instrument to which any of them is a
party or by which any of them may be bound or to which any of the property or
assets of any of them is subject except, in each case, for such conflicts,
breaches, defaults or violations which individually and in the aggregate would
not have a material adverse effect on the Company's condition (financial or
other), business, prospects, properties, net worth or results of operations.
(h) The accountants, KPMG Peat Marwick LLP, who have certified or
shall certify the financial statements included in the Registration Statement
and the Prospectus (or any amendment or supplement thereto) are independent
public accountants as required by the Act.
(i) The financial statements, together with related schedules and
notes, included in the Registration Statement and the Prospectus (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of Peapod LP
and Old Peapod, as the case may be, on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; the other
financial and statistical information and data included in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) are
fairly presented and prepared on a basis consistent with such financial
statements and the books and records of Peapod LP or Old Peapod, as the case may
be; and the pro forma financial statements and other pro forma financial
information included in the Prospectus present fairly the information shown
therein, have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements, have been properly
compiled on the pro forma bases described therein, and, in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein.
(j) The execution and delivery of, and the performance by the Company
of its obligations under this Agreement have been duly and validly authorized by
the Company, and this Agreement has been duly executed and delivered by the
Company and constitutes the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as rights
to indemnity and contribution hereunder may be limited by federal or state
securities laws.
(k) Except as disclosed in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company nor Peapod LP has incurred any liability or obligation, direct or
contingent, or entered into any transaction, not in the ordinary course of
business, that is material to the Company
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or Peapod LP, as the case may be, and there has not been any change in the
capital stock, or material increase in the short-term debt or long-term debt, of
the Company or Peapod LP, or any material adverse change, or any development
involving or which may reasonably be expected to involve, a prospective material
adverse change, in the condition (financial or other), business, net worth or
results of operations of the Company or Peapod LP.
(l) The Company has good and marketable title to all property (real
and personal) described in the Prospectus as being owned by it including,
without limitation, all property which was to be transferred to the Company
pursuant to the Conversion, free and clear of all liens, claims, security
interests or other encumbrances except such (i) as are described in the
Registration Statement and the Prospectus or in a document filed as an exhibit
to the Registration Statement and all the property described in the Prospectus
as being held under lease by the Company or Peapod LP by the Company in each
case under valid, subsisting and enforceable leases and (ii) that individually
and in the aggregate would not have a material adverse effect on the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations.
(m) None of the Company, Peapod LP or Old Peapod have distributed
and, prior to the later to occur of (i) the Closing Date and (ii) completion of
the distribution of the Shares, will not distribute any offering material in
connection with the offering and sale of the Shares other than the Registration
Statement, the Prepricing Prospectus, the Prospectus or other materials, if any,
permitted by the Act.
(n) The Company has, and Peapod LP and Old Peapod had, such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own their respective properties and
to conduct their business, in all material respects, in the manner described in
the Prospectus, subject to such qualifications as may be set forth in the
Prospectus; the Company has fulfilled and performed all its material obligations
with respect to such permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any such
permit, subject in each case to such qualification as may be set forth in the
Prospectus; and, except as described in the Prospectus, none of such permits
contains any restriction that is materially burdensome to the Company.
(o) The Company maintains, and Old Peapod and Peapod LP maintained, a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(p) To the Company's knowledge, neither the Company, Peapod LP, Old
Peapod nor any employee or agent of any of the foregoing has made any payment of
funds or received or retained any funds in violation of any law, rule or
regulation, which payment, receipt or retention of funds is of a character
required to be disclosed in the Prospectus.
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(q) The Company, Peapod LP and Old Peapod have each filed all tax
returns required to be filed, which returns are complete and correct in all
material respects, and none of the foregoing are in default in the payment of
any taxes which were payable pursuant to said returns or any assessments with
respect thereto.
(r) No holder of any security of the Company has any right to require
registration of shares of Common Stock or any other security of the Company
because of the filing of the initial registration statement or any Rule 462(b)
Registration Statement or consummation of the transactions contemplated by this
Agreement, except for persons who are Selling Stockholders or other stockholders
described in the Prospectus as having registration rights.
(s) The Company owns, possesses or has the right to use all patents,
trademarks, trademark registrations, service marks, service mark registrations,
trade names, copyrights, licenses, inventions, trade secrets and rights
described in the Prospectus as being owned by the Company or Peapod LP or any of
them or in all material respects necessary for the conduct of the Company's
business, and the Company is not aware of any claim to the contrary or any
challenge by any other person to the rights of the Company or Peapod LP with
respect to the foregoing.
(t) The Company is not now, and after sale of the Shares to be sold
by it hereunder and application of the net proceeds from such sale as described
in the Prospectus under the caption "Use of Proceeds" will not be, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(u) The Company, Peapod LP and Old Peapod have complied with all
provisions of Florida Statutes, Section 517.075, relating to issuers doing
business with Cuba.
(v) The Conversion has been completed and is effective.
8. Representations and Warranties of the Selling Stockholders. Each
Selling Stockholder represents and warrants to each Underwriter that:
(a) Such Selling Stockholder now has, and on any Option Closing Date
will have, valid and marketable title to the Additional Shares to be sold by
such Selling Stockholder, free and clear of any lien, claim, security interest
or other encumbrance, including, without limitation, any restriction on
transfer.
(b) Such Selling Stockholder now has, and on any Option Closing Date
will have, full legal right, power and authorization, and any approval required
by law, to sell, assign transfer and deliver such Additional Shares in the
manner provided in this Agreement, and upon delivery of and payment for such
Additional Shares hereunder, the several Underwriters will acquire valid and
marketable title to such Additional Shares free and clear of any lien, claim,
security interest, or other encumbrance.
(c) This Agreement and the Custody Agreement have been duly
authorized, executed and delivered by or on behalf of such Selling Stockholder
and are the valid and binding agreements
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of such Selling Stockholder enforceable against such Selling Stockholder in
accordance with their terms.
(d) Neither the execution and delivery of this Agreement or the
Custody Agreement by or on behalf of such Selling Stockholder nor the
consummation of the transactions herein or therein contemplated by or on behalf
of such Selling Stockholder requires any consent, approval, authorization or
order of, or filing or registration with, any court, regulatory body,
administrative agency or other governmental body, agency or official (except
such as may be required under the Act or such as may be required under state
securities or Blue Sky laws governing the purchase and distribution of the
Shares) or conflicts or will conflict with or constitutes or will constitute a
breach of, or default under, or violates or will violate, any agreement,
indenture or other instrument to which such Selling Stockholder is a party or by
which such Selling Stockholder is or may be bound or to which any of such
Selling Stockholder's property or assets is subject, or any statute, law, rule,
regulation, ruling, judgment, injunction, order or decree applicable to such
Selling Stockholder or to any property or assets of such Selling Stockholder
except, in each case, for such conflicts, breaches, defaults or violations which
individually or in the aggregate would not have a material adverse effect on the
Company's condition (financial or other), business, prospects, properties, net
worth or results of operations.
(e) The Registration Statement and the Prospectus, insofar as they
relate to such Selling Stockholder, do not and will not contain an untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
(f) Such Selling Stockholder does not have any knowledge or any
reason to believe that the Registration Statement or the Prospectus (or any
amendment or supplement thereto) contains any untrue statement of a material
fact or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(g) The representations and warranties of such Selling Stockholder in
the Custody Agreement are, and on any Option Closing Date will be, true and
correct.
(h) Such Selling Stockholder has not taken, directly or indirectly,
any action designed to or that might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Additional Shares, except for the lock-up arrangements
described in the Prospectus.
9. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each of you and each
other Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20(a) the Exchange Act from and
against any and all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Prepricing Prospectus or in the Registration Statement or the Prospectus or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein
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<PAGE>
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of or are based upon any untrue
statement or omission or alleged untrue statement or omission which has been
made therein or omitted therefrom in reliance upon and in conformity with the
information relating to such Underwriter furnished in writing to the Company by
or on behalf of any Underwriter through you expressly for use in connection
therewith; provided, however, that the indemnification contained in this
paragraph (a) with respect to any Prepricing Prospectus shall not inure to the
benefit of any Underwriter (or to the benefit of any person controlling such
Underwriter) on account of any such loss, claim, damage, liability or expense
arising from the sale of the Shares by such Underwriter to any person if a copy
of the Prospectus shall not have been delivered or sent to such person within
the time required by the Act and the regulations thereunder, and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in such Prepricing Prospectus was corrected in the
Prospectus, provided that the Company has delivered the Prospectus to the
several Underwriters in requisite quantity on a timely basis to permit such
delivery or sending. The foregoing indemnity agreement shall be in addition to
any liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the Company, and the Company shall
assume the defense thereof, including the employment of counsel and payment of
all fees and expenses. Such Underwriter or any such controlling person shall
have the right to employ separate counsel in any such action, suit or proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the Company has agreed in writing to pay such fees and expenses, (ii)
the Company has failed to assume the defense and employ counsel, or (iii) the
named parties to any such action, suit or proceeding (including any impleaded
parties) include both such Underwriter or such controlling person and the
Company and such Underwriter or such controlling person shall have been advised
by its counsel that representation of such indemnified party and the Company by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them (in
which case the Company shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such Underwriter or such controlling
person). It is understood, however, that the Company shall, in connection with
any one such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all such Underwriters and controlling persons not
having actual or potential differing interests with you or among themselves,
which firm shall be designated in writing by Smith Barney Inc., and that all
such fees and expenses shall be reimbursed as they are incurred. The Company
shall not be liable for any settlement of any such action, suit or proceeding
effected without its written consent, but if settled with such written consent,
or if there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company agrees to indemnify and hold harmless any Underwriter,
to the extent provided in the preceding paragraph, and any such controlling
person from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgment.
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<PAGE>
(c) Each Selling Stockholder agrees, severally and not jointly, to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, the Company, its directors, its
officers to sign the Registration Statement, and any person who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
each Underwriter, but only with respect to the information furnished in writing
by or on behalf of such Selling Shareholder expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against any Underwriter, any such controlling person of the Company, any
of its directors, any such officer, or any such controlling person of the
Company, based on the Registration Statement, the Prospectus or any Prepricing
Prospectus or any amendment or supplement thereto, and in respect of which
indemnity may be sought against any Selling Stockholder pursuant to this
paragraph (c), such Selling Stockholder shall have the rights and duties given
to the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof such Selling Stockholder shall not be required to do
so, but may employ separate counsel therein and participate in the defense
thereof, but the fees and expenses of such counsel shall be at such Selling
Stockholder's expense), and each Underwriter, each such controlling person of
any Underwriter, the Company, its directors, any such officer, and any such
controlling person of the Company shall have the rights and duties given to the
Underwriters by paragraph (b) above. The foregoing indemnity agreement shall be
in addition to any liability which any Selling Stockholder may otherwise have;
provided, however, that in no event shall a Selling Shareholder's liability
pursuant to this paragraph (c) exceed the aggregate proceeds they receive from
the sale of the Additional Shares hereunder.
(d) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement, each Selling Stockholder, and any person who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, to the same extent as the foregoing indemnity from the Company and the
Selling Stockholders to each Underwriter, but only with respect to information
relating to such Underwriter furnished in writing by or on behalf of such
Underwriter through you expressly for use in the Registration Statement, the
Prospectus or any Prepricing Prospectus, or any amendment or supplement thereto.
If any action, suit or proceeding shall be brought against the Company, any of
its directors, any such officer, any Selling Stockholder, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(d), such Underwriter shall have the rights and duties given to the Company by
paragraph (b) above (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, the Selling Stockholder, and any such
controlling person shall have the rights and duties given to the Underwriters by
paragraph (b) above. The foregoing indemnity agreement shall be in addition to
any liability which any Underwriter may otherwise have.
(e) If the indemnification provided for in this Section 9 is unavailable
to an indemnified party under paragraphs (a), (c) or (d) hereof in respect of
any losses, claims, damages, liabilities or
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expenses referred to therein, then an indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Selling Stockholders and the
Underwriters from the offering of the Shares, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, the Selling Stockholders and
the Underwriters in connection with the statements or omissions that resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the Company
and the Underwriters shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus; provided that, in the event that the Underwriters shall have
purchased any Additional Shares hereunder, any determination of the relative
benefits received by the Company, the Selling Stockholders or the Underwriters
from the offering of the Shares shall include the net proceeds (before deducting
expenses) received by the Company and the Selling Stockholders, and the
underwriting discounts and commissions received by the Underwriters, from the
sale of such Additional Shares, in each case computed on the basis of the
respective amounts set forth in the notes to the table on the cover page of the
Prospectus. The relative fault of the Company, the Selling Stockholders and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Selling Stockholders or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
(f) The Company, the Selling Stockholders and the Underwriters agree that
it would not be just and equitable if contribution pursuant to this Section 9
were determined by a pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in paragraph (e)
above. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, liabilities and expenses referred to in paragraph (e)
above shall be deemed to include, subject to the limitations set forth above,
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 9, (i) no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission and (ii) no Selling Stockholder will be required to
contribute more than the net proceeds such Selling Stockholder receives from the
sale of Additional Shares hereunder. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several in proportion to the respective numbers of Firm Shares set
forth opposite their names in Schedule II hereto (or such numbers of Firm Shares
increased as set forth in Section 12 hereof) and not joint. The Selling
Stockholders' obligations to contribute pursuant to this Section 9 are several
in proportion to the respective number of Additional Shares sold by each of them
hereunder and not joint.
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(g) No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened action,
suit or proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding.
(h) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Company and the Selling Stockholders set
forth in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Underwriter or
any person controlling any Underwriter, the Company its directors or officers or
the Selling Stockholders or any person controlling the Company, (ii) acceptance
of any Shares and payment therefor hereunder, and (iii) any termination of this
Agreement. A successor to any Underwriter or any person controlling any
Underwriter, or to the Company its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 9.
(i) In no event shall a Selling Shareholder's liability resulting from the
breach of the representation set forth in Section 8(f) exceed the aggregate
proceeds it receives from the sale of the Additional Shares hereunder.
10. Conditions of Underwriters' Obligations. The several obligations of
the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and delivered, it is
necessary for the initial registration statement or a post-effective amendment
thereto to be declared effective before the offering of the Shares may commence,
the initial registration statement or such post-effective amendment shall have
become effective not later than 5:30 P.M., New York City time, on the date
hereof, or at such later date and time as shall be consented to in writing by
you, and all filings, if any, required by Rules 424 and 430A under the Act shall
have been timely made; if the Company has elected to rely upon Rule 462(b), the
Rule 462(b) Registration Statement shall have become effective by 10:00 P.M.
Washington D.C. time on the date of this Agreement; no stop order suspending the
effectiveness of the initial registration statement and any Rule 462(b)
Registration Statement shall have been issued and no proceeding for that purpose
shall have been instituted or, to the knowledge of the Company or any
Underwriter, threatened by the Commission, and any request of the Commission for
additional information (to be included in the initial registration statement and
any Rule 462(b) Registration Statement or the prospectus or otherwise) shall
have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting the condition (financial or other), business,
properties, net worth, or results of operations of the Company not
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contemplated by the Prospectus, which in your opinion, as Representatives of the
several Underwriters, would materially, adversely affect the market for the
Shares, or (ii) any event or development relating to or involving the Company or
any officer or director of the Company or any Selling Stockholder which makes
any statement made in the Prospectus untrue in any material respect or which, in
the opinion of the Company and its counsel or the Underwriters and their
counsel, requires the making of any addition to or change in the Prospectus in
order to state a material fact required by the Act or any other law to be stated
therein or necessary in order to make the statements therein not misleading, if
amending or supplementing the Prospectus to reflect such event or development
would, in your opinion, as Representatives of the several Underwriters,
materially adversely affect the market for the Shares.
(c) You shall have received on the Closing Date, an opinion of Sidley
& Austin, counsel for the Company and the Selling Stockholders, dated the
Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
i) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of Delaware with
corporate power and authority to own, lease and operate its properties and to
conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto);
ii) The authorized and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the Prospectus;
and the authorized capital stock of the Company conforms in all material
respects as to legal matters to the description thereof contained in the
Prospectus under the caption "Description of Capital Stock";
iii) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares to be issued and sold by the
Company hereunder, have been duly authorized and validly issued, and are fully
paid and nonassessable;
iv) The Shares to be issued and sold to the Underwriters by
the Company hereunder have been duly authorized and, when issued and delivered
to the Underwriters against payment therefor in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable and free of any
preemptive, or to the knowledge of such counsel similar rights that entitle or
will entitle any person to acquire any Shares upon the issuance thereof by the
Company;
v) The form of certificates for the Shares conforms to the
requirements of the Delaware General Corporation Law;
vi) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to the knowledge of
such counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose are pending before
or contemplated by the Commission; and any required filing of the Prospectus
pursuant to Rule 424(b) has been made in accordance with Rule 424(b);
vii) The Company has corporate power and authority to enter
into this Agreement and to issue, sell and deliver the Shares to be sold by it
to the Underwriters as provided
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herein, and this Agreement has been duly authorized, executed and delivered by
the Company and is a valid, legal and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except that no
opinion is expressed with respect to the provisions relating to indemnity and
contribution and subject to the qualification that the enforceability of the
Company's obligations hereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally and by general equitable principles;
viii) Neither the offer, sale or delivery of the Shares,
the execution, delivery or performance of this Agreement, compliance by the
Company with the provisions hereof, nor consummation by the Company of the
transactions contemplated hereby conflicts or will conflict with or constitutes
or will constitute a breach of, or a default under, the certificate of
incorporation or bylaws of the Company or any agreement, indenture, lease or
other instrument to which the Company is a party or by which the Company or any
of its properties is bound that is an exhibit to the Registration Statement
except for any such conflicts, breaches or defaults that individually or in the
aggregate do not have a material adverse effect on the Company's business
(financial or other), business prospects, net worth or results of operation;
ix) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained under the Act and the Exchange Act
or such as may be required under state securities or Blue Sky laws governing the
purchase and distribution of the Shares) for the valid issuance and sale of the
Shares to the Underwriters as contemplated by this Agreement;
x) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements and the
notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act;
xi) To the knowledge of such counsel, (A) other than as
described or contemplated in the Prospectus (or any supplement thereto), there
are no legal or governmental proceedings pending or threatened against the
Company or to which the Company or any of its property is subject, which are
required to be described in the Registration Statement or Prospectus (or any
amendment or supplement thereto) and (B) there are no agreements, contracts,
indentures, leases or other instruments, that are required to be described in
the Registration Statement or the Prospectus (or any amendment or supplement
thereto) or to be filed as an exhibit to the Registration Statement that are not
described or filed as required, as the case may be;
xii) The statements in the Registration Statement and
Prospectus of the Company's agreement with Jewel/Osco and under the captions
"Certain Transactions" and "Descriptions of Capital Stock", insofar as they are
descriptions of contracts, agreements or other legal documents, or refer to
statements of law or legal conclusions, are fair summaries of the information
required to be shown;
-19-
<PAGE>
xiii) This Agreement and the Custody Agreement have each
been duly executed and delivered by or on behalf of each of the Selling
Stockholders and are valid and binding agreements of each Selling Stockholder
enforceable against each Selling Stockholder in accordance with their terms,
except that no opinion is expressed with respect to the provisions relating to
indemnity and contribution and subject to the qualification that the
enforceability of the Company's obligations hereunder may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights generally and by general
equitable principles;
xiv) To the knowledge of such counsel, each Selling
Stockholder has full legal right, power and authorization, and any approval
required by law, to sell, assign, transfer and deliver good and marketable title
to the Additional Shares which such Selling Stockholder has agreed to sell
pursuant to this Agreement;
xv) Upon registration of the number of Additional Shares
being sold by all of the Selling Stockholders on the applicable Option Closing
Date to the Underwriters in the names of the Underwriters in the stock records
of the Company, the Underwriters will, assuming the Underwriters are purchasing
such shares in good faith and without notice of any adverse claim within the
meaning of the Uniform Commercial Code as currently in effect in the State of
Illinois, have acquired all rights of such Selling Stockholders in such
Additional Shares free and clear of any such adverse claims; and
xvi) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including review and discussion
of the contents thereof, and nothing has come to the attention of such counsel
that has caused it to believe that the Registration Statement at the time the
Registration Statement became effective, or the Prospectus, as of its date and
as of the Closing Date or the Option Closing Date, as the case may be, contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that any amendment or supplement to the Prospectus, as of its
respective date, and as of the Closing Date or the Option Closing Date, as the
case may be, contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion with respect to the
financial statements and the notes thereto and the schedules and other financial
and statistical data included in the Registration Statement or the Prospectus).
In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company (A) as to matters set forth in paragraphs (xiii), (xiv) and
(xv) on other opinions of counsel retained by the Selling Stockholders or (B) as
to laws of any jurisdiction other than the United States, the States of Illinois
and New York and the General Corporation Law of the State of Delaware, provided
in either case that (1) each such local counsel is acceptable to the
Representatives and (2) such reliance is
-20-
<PAGE>
expressly authorized by each opinion so relied upon and a copy of each such
opinion is delivered to the Representatives and is, in form and substance
reasonably satisfactory to them and their counsel.
(d) You shall have received on the Closing Date, an opinion of
Cowen, Crowley, Nord & Staub, corporate counsel for the Company, dated the
Closing Date and addressed to you, as Representatives of the several
Underwriters, to the effect that:
i) The Company is duly registered and qualified to
conduct its business and is in good standing in each state where, to such
counsel's knowledge, the nature of the Company's properties or the conduct of
its business requires such registration or qualification, except where the
failure so to register or qualify does not have a material adverse effect on the
financial condition, business, properties, net worth or results of operations of
the Company;
ii) The Company has corporate power and to such counsel's
knowledge has authority, and all necessary governmental authorizations,
approvals, orders, licenses, certificates, franchises and permits of and from
all governmental regulatory officials and bodies to own its properties and to
conduct it business as now being conducted (except where the failure so to have
any such authorizations, approvals, orders, licenses, certificates, franchises
or permits, would not have a material adverse effect on the financial condition,
business, properties, net worth or results operations of the Company;
iii) Other than as described or contemplated in the
Prospectus (or any supplement thereto), there are no legal or governmental
proceedings pending or to the best knowledge of such counsel threatened against
the Company would have a material adverse effect on the financial condition,
business, properties, net worth or results of operation of the Company;
iv) The Company is not in violation of its certificate of
incorporation or bylaws, or to the knowledge of such counsel is not in default
in the performance of any material obligation, agreement or condition contained
in any bond, debenture, note or other evidence of indebtedness, except as may be
disclosed in the Prospectus and except for such defaults which would not have a
material adverse effect on the financial condition, business, properties, net
worth or results of operations of the Company;
v) To the knowledge of such counsel the Company is not,
and Peapod LP and Old Peapod are not in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to them or of any
decree of any court or governmental agency or body having jurisdiction over them
which would have a material adverse effect on the financial condition, business,
properties, net worth or results of operations of the Company;
vi) To the knowledge of such counsel, there are no
outstanding options, warrants or other rights calling for the issuance of, and
such counsel does not know of any commitment, plan or arrangement to issue, any
shares of capital stock of the Company or any security convertible into or
exchangeable or exercisable for capital stock of the Company other than the
options issued to Company employees, directors and consultants, warrants issued
pursuant to Company equipment leases and subordinated debentures, and
commitments or plans to issue
-21-
<PAGE>
securities under the Company's 1997 Long Term Incentive Plan and Employee Stock
Purchase Plan;
vii) To the knowledge of such counsel, except as described
in the Prospectus, there is no holder of any security of the Company or any
other person who has the right, contractual or otherwise, to cause the Company
to sell or otherwise issue to them, or to permit them to underwrite the sale of,
the Shares or the right to have any Common Stock or other securities of the
Company included in the Registration Statement or the right, as a result of the
filing of the Registration Statement, to require registration under the Act of
any shares of Common Stock or other securities of the Company; and
viii) The Conversion is effective and complete in all
material respects.
With respect to the opinion being rendered pursuant to
clause (iii) above, counsel may rely upon computer searches conducted with
respect to the jurisdiction such counsel is aware of the Company conducting its
business.
(e) You shall have received on the Closing Date, an
opinion of McDermott, Will & Emery corporate counsel for the Company, dated the
Closing Date and addressed to you as Representatives of the several
Underwriters, to the effect that:
We have acted as counsel to Peapod, Inc. (the "Company") and its
predecessor, Peapod L.P. from time to time in connection with certain
intellectual property matters. At the request of the Company, we have reviewed
the statements contained in the fourth and fifth sentences of the first
paragraph of "Business - Intellectual Property and Other Proprietary Rights" in
the Company's Prospectus dated June __, 1997, and advise you as follows with
respect thereto:
(i) According to the U.S. Patent and Trademark Office and
pursuant to an Assignment dated May 31, 1997 from Peapod LP
to the Company and a subsequent name change of New Peapod,
Inc. to Peapod, Inc., the Company owns the following:
trademark and service mark registrations for PEAPOD: Nos.
1,709,175 and 1,922,505; trademark and service mark
registrations for PEAPOD (and design): Nos. 1,719,180;
1,775,744; and 1,765,041; and service mark registration No.
2,035,762 for SMART SHOPPING FOR BUSY PEOPLE.
(ii) According to the records of the U.S. Copyright Office and
pursuant to an Assignment dated May 31, 1997 from Peapod LP
to the Company and a subsequent name change of New Peapod,
Inc. to Peapod, Inc., the Company owns the following
copyright registrations for certain of its computer
programs: TX-3-892-779; TX-3-892-780; TX-3-892-781; TX-3-
892-782; TX-3-892-783; TX-3-914-950; and TX-3-390-052.
(iii) The Company has pending applications to register the
copyrights in its Web site as of January 20, 1997, its
computer disk jacket that is distributed to users of its
service, and its "Online Grocery Shopping & Delivery"
pamphlet.
-22-
<PAGE>
The foregoing is based solely upon our representation of the Company
as referred to above and a review of public record information from the U.S.
Patent and Trademark Office and the U.S. Copyright Office and the Assignment
dated May 31, 1997 from Peapod LP to the Company.
To date we have not received directly or on behalf of the Company any
written claim from a third party to the effect that the Company's trademarks or
copyrights infringe upon the rights of third parties (except for a trademark
dispute as to the scope of a Peapod trademark used by a Seattle enterprise which
markets slippers and possibly other clothing) and further have not been advised
in writing by any officer of Peapod LP or the Company that they have received
any written claim from a third party relating to the Company's use of its
trademarks and copyrights.
(f) You shall have received on the Closing Date an opinion of
Mayer, Brown & Platt, counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, with respect
to the matters referred to in clauses(iv), (vi), (vii), (x) and (xvi) of the
foregoing paragraph (c) and such other related matters as you may request.
(g) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from KPMG Peat Marwick LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.
(h)(i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short-term or long-term debt of the Company (other than in the
ordinary course of business) from that set forth or contemplated in the
Registration Statement or the Prospectus (or any amendment or Supplement
thereto); (iii) there shall not have been, since the respective dates as of
which information is given in the Registration Statement and the Prospectus (or
any amendment or supplement thereto), except as may otherwise be stated in the
Registration Statement and Prospectus (or any amendment or supplement thereto),
any material adverse change in the condition (financial or other), business,
prospects, properties, net worth or results of operations of the Company; (iv)
the Company shall not have any liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), that are material to the
Company other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 10(h) and in Section
10(i) hereof.
(i) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
-23-
<PAGE>
(j) All the representations and warranties of the Selling
Stockholders contained in this Agreement shall be true and correct on and as of
the date hereof and on and as of the Closing Date as if made on and as of the
Closing Date, and you shall have received a certificate, dated the Closing Date
and signed by or on behalf of the Selling Stockholders to the effect set forth
in this Section 10(j) and in Section 10(k) hereof.
(k) The Selling Stockholders shall not have failed at or prior
to the Closing Date to have performed or complied with any of their agreements
herein contained and required to be performed or complied with by them hereunder
at or prior to the Closing Date.
(l) The Shares shall have been listed or approved for listing
upon notice of issuance on the Nasdaq National Market.
(m) The Sellers shall have furnished or caused to be furnished
to you such further certificates and documents as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Company or
any Attorney-in-Fact or any Selling Stockholder and delivered to you, as
Representatives of the Underwriters, or to counsel for the Underwriters, shall
be deemed a representation and warranty by the Company, the Selling Stockholders
or the particular Selling Stockholder, as the case may be, to each Underwriter
as to the statements made therein.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of any Option Closing
Date of the conditions set forth in this Section 10, except that, if any Option
Closing Date is other than the Closing Date, the certificates, opinions and
letters referred to in paragraphs (c) through (j) shall be dated the Option
Closing Date in question and the opinions called for by paragraphs (c), (d), (e)
and (f) shall be revised to reflect the sale of Additional Shares.
11. Expenses. The Sellers (in proportion to the number of Shares
being offered by each of them, including any Additional Shares which the
Underwriters shall have elected to purchase) agree to pay the following costs
and expenses and all other costs and expenses incident to the performance by
them of their obligations hereunder: (i) the preparation, printing or
reproduction, and filing with the Commission of the Registration Statement
(including financial statements and exhibits thereto), each Prepricing
Prospectus, the Prospectus, and each amendment or supplement to any of them;
(ii) the printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
Registration Statement, each Prepricing Prospectus, the Prospectus, and all
amendments or supplements to any of them as may be reasonably requested for use
in connection with the offering and sale of the Shares; (iii) the preparation,
printing, authentication, issuance and delivery of certificates for the Shares,
including any stamp taxes in connection with the original issuance and sale of
the Shares; (iv) the printing (or reproduction) and delivery of this Agreement,
Blue Sky Memorandum and all other agreements or
-24-
<PAGE>
documents printed (or reproduced) and delivered in connection with the offering
of the Shares; (v) the registration of the Shares under the Exchange Act and the
listing of the Shares on the Nasdaq National Market; (vi) the registration or
qualification of the Shares for offer and sale under the securities or Blue Sky
laws of the several states as provided in Section 5(g) hereof (including the
reasonable fees, expenses and disbursements of counsel for the Underwriters
relating to the preparation, printing or reproduction, and delivery of the Blue
Sky Memorandum and such registration and qualification not to exceed $5,000);
(vii) the filing fees and the fees and expenses of counsel for the Underwriters
in connection with any filings required to be made with the National Association
of Securities Dealers, Inc.; (viii) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Shares; and (ix) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company and the Selling
Stockholders; provided that the Company shall pay all the expenses enumerated in
clauses (i) through (ix) other than any stamp taxes payable with respect to
Shares sold by the Selling Stockholders and any fees and expenses not exceeding
$20,000 of one counsel for the Selling Stockholders.
12. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for the Registration Statement or a post-effective amendment thereto to be
declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the Registration Statement or such post-
effective amendment has been released by the Commission. Until such time as this
Agreement shall have become effective, it may be terminated by the Company, by
notifying you, or by you, as Representatives of the several Underwriters, by
notifying the Company and the Selling Stockholders.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule II hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or refuse
to purchase Shares which it or they are obligated to purchase on the Closing
Date and the aggregate number of Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares which the
Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration
-25-
<PAGE>
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule II hereto who, with your approval and the approval of the Company,
purchases Shares which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 12 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
13. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company or any Selling Stockholder, by notice to the Company,
if prior to the Closing Date or any Option Closing Date (if different from the
Closing Date and then only as to the Additional Shares), as the case may be, (i)
trading in securities generally on the New York Stock Exchange, American Stock
Exchange or the Nasdaq National Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial banking activities in New York
or Illinois shall have been declared by either federal or state authorities, or
(iii) there shall have occurred any outbreak or escalation of hostilities or
other international or domestic calamity, crisis or change in political,
financial or economic conditions, the effect of which on the financial markets
of the United States is such as to make it, in your judgment, impracticable or
inadvisable to commence or continue the offering of the Shares at the offering
price to the public set forth on the cover page of the Prospectus or to enforce
contracts for the resale of the Shares by the Underwriters. Notice of such
termination may be given to the Company by telegram, telecopy or telephone and
shall be subsequently confirmed by letter.
14. Information Furnished by the Underwriters. The statements set
forth in the last paragraph on the cover page, the stabilization legend on the
inside cover page, and the statements in the first, third and tenth paragraphs
under the caption "Underwriting" in any Prepricing Prospectus and in the
Prospectus, constitute the only information furnished by or on behalf of the
Underwriters through you as such information is referred to in Sections 7(b) and
9 hereof.
15. Miscellaneous. Except as otherwise provided in Sections 5, 12 and
13 hereof, notice given pursuant to any provision of this Agreement shall be in
writing and shall be delivered (i) if to the Company, at the office of the
Company at Peapod, Inc., 1033 University Place, Suite 375, Evanston, Illinois
60201, Attention: John C. Walden, Executive Vice President of Finance and
Business Development with a copy to John J. Sabl, Esq., Sidley & Austin, One
First National Plaza, Chicago, Il 60603; or (ii) if to the Selling Stockholders,
at Tasso H. Coin Investment Development 55 W. Monroe Street, Chicago, Il 60603,
Attention: Tasso H. Coin with a copy to John J. Sabl, Esq. Sidley & Austin One
First National Plaza, Chicago, Il 60603 or (iii) if to you, as Representatives
of the several Underwriters, care of Smith Barney Inc., 388 Greenwich Street,
New York, New York 10013, Attention: Manager, Investment Banking Division with a
copy to Philip J. Niehoff, Esq. Mayer, Brown & Platt 190 S. LaSalle Street,
Chicago, Il 60603.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 9 hereof and their respective
successors and assigns, to the extent provided herein, and no
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<PAGE>
other person shall acquire or have any right under or by virtue of this
Agreement. Neither the term "successor" nor the term "successors and assigns"
as used in this Agreement shall include a purchaser from any Underwriter of any
of the Shares in his status as such purchaser.
16. Applicable Law; Counterparts. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois applicable to
contracts made and to be performed within the State of Illinois.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
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<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
PEAPOD, INC.
By
---------------------------------------
Andrew B. Parkinson
President and Chief Executive Officer
Each of the Selling Stockholders
named in Schedule I hereto
By
---------------------------------------
Attorney-in-Fact
By
---------------------------------------
Attorney-in-Fact
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule II
hereto.
SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY, L.L.C.
J.P. MORGAN SECURITIES INC.
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By
-----------------
Managing Director
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<PAGE>
SCHEDULE I
PEAPOD, INC.
Additional Shares
- -----------------
Number of
Selling Stockholders Additional Shares
-------------------- -----------------
<TABLE>
<CAPTION>
<S> <C>
Tribune National Marketing Company............... 181,248
Ameritech Corporation............................ 101,252
Service Master Venture Fund L.L.C................ 50,120
Tasso H. Coin.................................... 44,489
Equity-Linked Investors-II.................... 41,767
Eos Partners SBIC, L.P........................... 41,767
The Travelers Insurance Company.................. 41,767
Benaroya Capital Company......................... 16,707
Montreaux Equity Partners........................ 13,365
Glenbrook Partners, L.P.......................... 4,177
Berkman Associates, L.P.......................... 3,341
-------
Total 540,000
=======
</TABLE>
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<PAGE>
SCHEDULE II
PEAPOD, INC.
Firm Shares
- -----------
Underwriter Firm Shares
- ----------- -----------
Smith Barney Inc..........
William Blair &
Company, L.L.C..........
J.P. Morgan
Securities Inc..........
Total..... ---------------------
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SCHEDULE III
LOCKUP LETTERS
A.H. Belo Corp. (Belo Holdings, Inc.)
Ameritech Corporation
Benaroya Capital Company
CIBC Wood Gundy Ventures, Inc.
Coin, A. Regan
Coin, Stanley H.
Coin, Tasso H.
Coin, Tasso H., Jr.
Consuelo & Seth Pierrepont Generation-Skipping Trust
Consuelo Dianne Pierrepont 1995 Trust
Dorgan, Timothy M.
ELI-Pod, Inc. Desai
EOS Partners SBIC, L.P.
Friedman, Steven M.
Furton, John A.
Glenbrook Partners
GM&P DeKraker Trust
Gorter Family Partners
Harris-Peapod Investment Partnership
Montreux Equity Partners
Myhren, Trygve E.
Natasha Partners (Seth Pierrepont)
Nathali Rutherford Pierrepont 1995 Trust
Old Peapod
Parkinson, Alexander Biddle
Parkinson, Andrew
Parkinson, Samuel
Parkinson, Thomas
Parkinson, William Wright
Parthenis, Pete
Pierrepont, Seth L.
Rachowicz, Earl
Sage Venture Management (Seth Pierrepont)
ServiceMaster Venture Fund LLC
Seth Low Pierrepont 1995 Trust
TH Coin Keogh PST Trust (Tasso Coin)
TH Coin Investment Development PST
Travelers Insurance Company
Tribune National Marketing Company
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<PAGE>
Walden, John C.
Walsh, Anne Marie
WPP Group USA, Inc.
Berkman Associates, L.P.
Couderay Partners
Rabinowitz, Daniel
-32-
<PAGE>
EXHIBIT 4.1
================================================================================
STOCKHOLDERS RIGHTS AGREEMENT
Dated as of June 9, 1997
between
PEAPOD, INC.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK
as Rights Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Certain Definitions............................................................... 1
Section 2. Appointment of Rights Agent....................................................... 7
Section 3. Issuance of Rights Certificates................................................... 7
Section 4. Form of Rights Certificates....................................................... 10
Section 5. Countersignature and Registration................................................. 11
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated,
Destroyed, Lost or Stolen Rights Certificates................................... 12
Section 7. Exercise of Rights; Exercise Price; Expiration Date of Rights..................... 12
Section 8. Cancellation and Destruction of Rights Certificates............................... 15
Section 9. Reservation and Availability of Preferred Shares.................................. 15
Section 10. Record Date of Preferred Share Ownership......................................... 17
Section 11. Adjustment of Exercise Price, Number and Kind of Shares and Number of Rights..... 17
Section 12. Certificate of Adjusted Exercise Price or Number of Shares....................... 25
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power............. 25
Section 14. Fractional Rights and Fractional Shares.......................................... 29
Section 15. Rights of Action................................................................. 30
Section 16. Agreements of Holders of Rights.................................................. 31
Section 17. Rights Certificate Holder Not Deemed a Stockholder............................... 31
Section 18. Concerning the Rights Agent...................................................... 32
Section 19. Merger or Consolidation of the Rights Agent...................................... 32
Section 20. Duties of the Rights Agent....................................................... 33
Section 21. Resignation or Removal of the Rights Agent....................................... 35
Section 22. Issuance of New Rights Certificates.............................................. 36
Section 23. Redemption....................................................................... 37
Section 24. Exchange......................................................................... 39
Section 25. Notice to Holders of Rights Certificates of Certain Events....................... 40
Section 26. Other Notices.................................................................... 41
Section 27. Supplements and Amendments....................................................... 42
Section 28. Successors....................................................................... 43
Section 29. Certain Determinations and Actions by the Board.................................. 43
Section 30. Benefits of this Agreement....................................................... 43
Section 31. Severability..................................................................... 44
</TABLE>
-i-
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<TABLE>
<CAPTION>
<S> <C> <C>
Section 32. Governing Law.......................................................................... 44
Section 33. Counterparts........................................................................... 44
Section 34. Descriptive Headings................................................................... 44
Exhibit A - Form of Certificate of Designations of
Series A Junior Participating Preferred
Stock.................................................................................. A-1
Exhibit B - Form of Rights Certificate............................................................. B-1
Exhibit C - Summary of Rights to Purchase Shares of
Series A Junior Participating Preferred
Stock.................................................................................. C-1
</TABLE>
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<PAGE>
STOCKHOLDERS RIGHTS AGREEMENT
-----------------------------
Stockholders Rights Agreement dated as of June 9, 1997 (this
"Agreement") between Peapod, Inc., a Delaware corporation (the "Company"), and
First Chicago Trust Company of New York, a national banking association (the
"Rights Agent").
W I T N E S S E T H :
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WHEREAS, the Board of Directors of the Company desires to provide all
stockholders of the Company with the opportunity to benefit from the long-term
prospects and value of the Company and to ensure that all such stockholders
receive fair and equal treatment in the event of any proposed takeover of the
Company; and
WHEREAS, on May 29, 1997, the Board of Directors of the Company
authorized and declared a dividend of one preferred stock purchase right
(individually a "Right" and collectively the "Rights") for each share of Common
Stock (as hereinafter defined) of the Company outstanding at the Close of
Business on the effective date of the Company's initial public offering
registration statement, file no. 333-24341 (the "Record Date"), each Right
representing the right to purchase one one-hundredth of a Preferred Share (as
hereinafter defined) upon the terms and subject to the conditions herein after
set forth, and contemplates that one Right will be issued with respect to each
share of Common Stock which shall become outstanding after the Record Date and
prior to the earlier of the Redemption Date and the Final Expiration Date (as
such terms are hereinafter defined), including any shares of Common Stock issued
by reason of the exercise of any option, warrant, right (other than the Rights)
or conversion or exchange privilege contained in any option, warrant, right
(other than the Rights) or convertible or exchangeable security issued by the
Company prior to the Distribution Date, unless the Board (as hereinafter
defined) shall expressly provide to the contrary at the time of issuance of any
such option, warrant, right or convertible or exchangeable security.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
Section 1. Certain Definitions. For all purposes of this Agreement,
unless the context otherwise requires, the following terms shall have the
respective meanings set forth below:
(a) "Acquiring Person" shall mean any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of
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Common Stock of the Company then outstanding, but shall not include (i) the
Company, (ii) any Subsidiary of the Company, (iii) any employee benefit plan or
other compensation program or arrangement of the Company or of any such
Subsidiary, (iv) any Person holding such shares of Common Stock for or pursuant
to the terms of any such plan, program or arrangement and each Affiliate and
Associate thereof, and (v) Andrew B. Parkinson and Thomas L. Parkinson, and each
Affiliate and Associate thereof, including, without limitation, Peapod
Liquidating Corporation, (the Persons specified in clauses (i) through (v) being
hereinafter collectively called "Exempt Persons"). Notwithstanding the preceding
sentence, no Person shall become an "Acquiring Person" as the result of an
acquisition by the Company of shares of its Common Stock which, by reason of
reducing the number of its then outstanding shares of Common Stock, increases
the percentage of its then outstanding shares of Common Stock Beneficially Owned
by such Person to 15% or more; provided, however, that if such Person shall,
after such purchase by the Company, become the Beneficial Owner of any
additional shares of Common Stock of the Company, then such Person shall be
deemed to be an "Acquiring Person." Notwithstanding the foregoing, if the Board
of Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and such Person
divests as promptly as practicable a sufficient number of shares of Common Stock
so that such Person would no longer be an "Acquiring Person," as defined
pursuant to the foregoing provisions of this paragraph (a), then such Person
shall not be deemed to be an "Acquiring Person" for any purpose of this
Agreement.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2, as in effect on the date of this
Agreement, under the Exchange Act; provided, however, that no director or
officer of the Company shall be deemed an Affiliate or Associate of any other
director or officer of the Company solely as a result of his or her being a
director or officer of the Company.
(c) "Beneficial Owner" (including the terms "Beneficially Own" and
"Beneficial Ownership"), when used with respect to any Person, shall be deemed
to include any securities which:
(i) such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly (determined as provided in Rule
13d-3, as in effect on the date of this Agreement, under the Exchange Act);
(ii) such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has:
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(A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the satisfaction
of any conditions, or both) pursuant to any written or oral agreement,
arrangement or understanding (other than customary agreements with and
among underwriters and selling group members with respect to a bona
fide public offering of securities), upon the exercise of any options,
warrants, rights (other than the Rights) or conversion or exchange
privileges or otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to Beneficially Own: (I) securities
tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange or (II)
securities issuable upon exercise of the Rights at any time prior to
the Distribution Date; or
(B) the right to vote pursuant to any written or oral agreement,
arrangement or understanding; provided, however, that a Person shall
not be deemed the Beneficial Owner of, or to Beneficially Own, any
security otherwise subject to this item (B) if such agreement,
arrangement or understanding to vote (I) arises solely from a
revocable proxy or consent given to such Person or any of such
Person's Affiliates or Associates in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable rules and regulations under the Exchange Act and (II) is
not also then reportable by such Person on Schedule 13D (or any
comparable or successor report then in effect) under the Exchange Act;
or
(C) the right to dispose of pursuant to any written or oral
agreement, arrangement or understanding (other than customary agreements
with and among underwriters and selling group members with respect to a
bona fide public offering of securities); or
(iii) are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or
Associates has any written or oral agreement, arrangement or understanding
(other than customary agreements with and among underwriters and selling
group members with respect to a bona fide public offering of securities)
for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to item (B) of subparagraph (ii) of the first
paragraph of this definition) or disposing of any securities of the
Company.
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Notwithstanding the first paragraph of this definition, no director or
officer of the Company shall be deemed to be the "Beneficial Owner" of, or to
"Beneficially Own," shares of Common Stock or other securities of the Company
beneficially owned by any other director or officer of the Company solely as a
result of his or her being a director or officer of the Company.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in the State of Illinois are authorized
or obligated by law or executive order to close.
(f) "Certificate of Designations" shall mean the Certificate of
Designations for the Preferred Shares in substantially the form attached hereto
as Exhibit A.
(g) "Close of Business" on any given date shall mean 5:00 P.M.,
Chicago time, on such date or, if such date is not a Business Day, then 5:00
P.M., Chicago time, on the next succeeding Business Day.
(h) "Common Stock," when used with reference to the Company, shall
mean the Common Stock, $.01 par value, of the Company. "Common Stock," when
used with reference to any Person other than the Company, shall mean the capital
stock with the greatest voting power (or the other equity securities or equity
interests having the power to control or direct management) of such Person or,
if such Person is a Subsidiary of another Person, of the Person which ultimately
controls such first-mentioned Person and which has issued and outstanding such
capital stock, equity securities or equity interests.
(i) "Disinterested Director" shall mean (i) any member of the Board,
while such a member, who is not a Restricted Person, or a representative or
nominee of a Restricted Person, and was a member of the Board prior to the date
of this Agreement and (ii) any individual who subsequently becomes a member of
the Board and is not a Restricted Person, or a representative or nominee of a
Restricted Person, if such individual's nomination for election or election to
the Board is recommended or approved by a majority of the Disinterested
Directors then in office.
(j) "Distribution Date" shall have the meaning set forth in Section
3(a).
(k) "Equivalent Preferred Shares" shall have the meaning set forth in
Section 11(b).
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(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
in effect on the date of this Agreement.
(m) "Exchange Rate" shall have the meaning set forth in Section 24(a).
(n) "Exempt Persons" shall have the meaning set forth in the
definition of "Acquiring Person."
(o) "Exercise Price" shall have the meaning set forth in Section 7(b).
(p) "Fair Market Value" shall have the meaning and be determined as
set forth in Section 11(d).
(q) "Final Expiration Date" shall have the meaning set forth in
Section 7(a).
(r) "Interested Stockholder" shall mean any Restricted Person or any
Affiliate or Associate of any other Person in which such Restricted Person has
an interest, or any Person acting, directly or indirectly, on behalf of or in
concert with any such Restricted Person.
(s) "NASDAQ" shall have the meaning set forth in Section 9(c).
(t) "Permitted Offer" shall mean any tender or exchange offer for all
of the outstanding shares of Common Stock of the Company at a price and on terms
determined, prior to the purchase of shares under such tender or exchange offer,
by at least a majority of the members of the Board who are Disinterested
Directors and who are not officers of the Company to be appropriate (taking into
account all factors which such Disinterested Directors deem relevant, including,
without limitation, prices reasonably obtainable if the Company or its assets
were sold on an orderly basis designed to realize maximum value) and otherwise
in the best interests of the Company and its stockholders (other than the Person
or any Affiliate or Associate thereof on whose behalf or for whose benefit such
tender or exchange offer is being made).
(u) "Person" shall mean any individual, firm, corporation, partnership
or other entity, and shall include any successor (by merger or otherwise) of any
of the foregoing.
(v) "Preferred Shares" shall mean the Series A Junior Participating
Preferred Stock of the Preferred Stock, which series shall have the powers,
preferences and other rights set forth in the Certificate of Designations.
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(w) "Preferred Stock," when used with reference to the Company, shall
mean the Preferred Stock, $.01 par value, of the Company.
(x) "Principal Party" shall have the meaning set forth in Section
13(e).
(y) "Record Date" shall have the meaning set forth in the second
recital clause of this Agreement.
(z) "Redemption Date" shall have the meaning set forth in Section
7(a).
(aa) "Redemption Price" shall have the meaning set forth in Section
23(a).
(bb) "Restricted Person" shall mean an Acquiring Person or any
Affiliate or Associate of an Acquiring Person.
(cc) "Rights" shall have the meaning set forth in the second recital
clause of this Agreement.
(dd) "Rights Certificates" shall mean the certificates evidencing the
Rights after the Distribution Date.
(ee) "Section 11(a)(ii) Event" shall mean any event described in
Section 11(a)(ii).
(ff) "Section 13 Event" shall mean any transaction described in
Section 13(a).
(gg) "Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
(hh) "Security" shall have the meaning set forth in Section 11(d).
(ii) "Share Acquisition Date" shall mean the first date on which there
shall be a public announcement (which shall include, without limitation, any
press release or publicly available filing with the Securities and Exchange
Commission or any other federal or state governmental authority or agency) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(jj) "Stock" shall have the meaning set forth in Section 11(d).
(kk) "Subsidiary" of any Person shall mean any corporation or other
entity of which a majority of the voting power or the other equity securities or
equity interests having the power
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to control or direct management) is owned, directly or indirectly, by such
Person.
(ll) "Summary of Rights" shall mean the Summary of Rights to Purchase
shares of Series A Junior Participating Preferred Stock in substantially the
form attached hereto as Exhibit C.
(mm) "Trading Day" shall have the meaning set forth in Section
11(d)(i).
(nn) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints
the Rights Agent to act as agent for the Company and the holders of the Rights
(which holders, as provided in Section 3, shall, prior to the Distribution Date,
also be the holders of the Common Stock of the Company) in accordance with the
terms and conditions of this Agreement. The Rights Agent hereby accepts such
appointment. The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable. In the event the Company appoints one or
more Co-Rights Agents, the respective obligations and duties of the Rights Agent
and of any Co-Rights Agent shall be as the Company shall specify in writing.
The Rights Agent shall have no duty to supervise, and shall not be liable for
the acts or omissions of, any Co-Rights Agent.
Section 3. Issuance of Rights Certificates.
(a) Until the earliest of (i) the Close of Business on the 10th
Business Day after the Share Acquisition Date (or, if the Share Acquisition Date
shall have occurred prior to the Record Date, the Close of Business on the 10th
Business Day after the Record Date) or (ii) the Close of Business on the 10th
Business Day (or, anything in Section 27 to the contrary notwithstanding, such
other Business Day as may be determined by action of the Board prior to the
occurrence of any Section 11(a)(ii) Event) after the date of the commencement by
any Person (other than an Exempt Person) of, or the first public announcement of
the intention of any Person (other than an Exempt Person) to commence, a tender
or exchange offer if, upon the consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock of the Company
then outstanding (the earliest of the dates specified clauses (i) and (ii) being
hereinafter called the "Distribution Date"), the Rights shall be evidenced and
be transferable only as provided in Section 3(b). As soon as practicable after
the Distribution Date or, in the case of any shares of Common Stock of the
Company which are issued or otherwise become outstanding after the Distribution
Date and prior to the
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earlier of the Redemption Date and the Final Expiration Date, including any
shares of Common Stock issued by reason of the exercise of any option, warrant,
right (other than the Rights) or conversion or exchange privilege contained in
any option, warrant, right (other than the Rights) or convertible or
exchangeable security issued by the Company prior to the Distribution Date,
unless the Board shall have expressly provided to the contrary at the time of
issuance of any such option, warrant, right or convertible or exchangeable
security, simultaneously with the issuance of stock certificates for such shares
of Common Stock, the Company shall prepare and execute, the Rights Agent shall
countersign and the Company shall deliver or cause to be delivered (or the
Rights Agent shall, if requested, deliver), by first-class mail, postage
prepaid, to each record holder of shares of Common Stock of the Company as of
the Close of Business on the Distribution Date or, in the case of shares of
Common Stock issued or otherwise becoming outstanding after the Distribution
Date (unless otherwise provided with respect thereto as aforesaid), to each
record holder of the shares of Common Stock so being issued or becoming
outstanding at the time of such occurrence, at its last address shown on the
registry books of the transfer agent for the Common Stock of the Company, one or
more Rights Certificates evidencing one Right for each share of Common Stock of
the Company so held, issued or becoming outstanding. As of and after the
Distribution Date, the Rights shall be evidenced solely by the Rights
Certificates.
(b) On the Record Date, or as soon as practicable thereafter, the
Company shall send a copy of the Summary of Rights, by first-class mail, postage
prepaid, to each record holder of shares of Common Stock of the Company as of
the Close of Business on the Record Date, at its last address shown on the
registry books of the transfer agent for the Common Stock of the Company. Until
the Distribution Date: no Rights Certificates shall be issued; each stock
certificate for shares of Common Stock of the Company outstanding as of the
Record Date, until the earliest of the Distribution Date, the Redemption Date
and the Final Expiration Date, shall be deemed also to constitute a certificate
for the Rights associated with the shares represented thereby, together with a
copy of the Summary of Rights attached thereto; and the registered holder of
such shares shall also be the registered holder of the associated Rights. Until
the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date, the surrender for transfer of any such stock certificate, with
or without a copy of the Summary of Rights attached thereto, shall also
constitute the transfer of the Rights associated with the shares of Common Stock
represented thereby.
(c) Any stock certificate for shares of Common Stock of the Company
which shall be delivered by or on behalf of the Company
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(including, without limitation, stock certificates for shares of Common Stock
which are reacquired by the Company and then transferred) after the Record Date
and prior to the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date shall have impressed, printed or written thereon, or
otherwise affixed thereto, the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Stockholders Rights Agreement dated as
of June 9, 1997 (the "Rights Agreement") between Peapod, Inc. (the
"Company") and First Chicago Trust Company of New York, as Rights Agent,
the terms, provisions and conditions of which are incorporated herein by
reference and made a part hereof. The Rights Agreement is on file at the
principal office of the Company and the principal office of such Rights
Agent, and the Company will mail to the holder of this certificate a copy
without charge after receipt of a written request therefor. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Rights (i) may be redeemed at a redemption price (subject
to adjustment) $.01 per Right or (ii) under certain circumstances, may be
exchanged, in whole or in part, for shares of Common Stock of the Company
at an exchange rate (subject to adjustment) of one share of Common Stock
per Right, all as set forth in the Rights Agreement. Under certain
circumstances, as set forth in the Rights Agreement, Rights Beneficially
Owned by a Restricted Person (as such terms are defined in the Rights
Agreement), or by specified transferees from a Restricted Person, shall be
or become void."
Each stock certificate containing the foregoing legend, until the
earliest of the Distribution Date, the Redemption Date and the Final Expiration
Date, shall be deemed also to constitute a certificate for the Rights associated
with the shares represented thereby, and the registered holder of such shares
shall also be the registered holder of the associated Rights. Until the earliest
of the Distribution Date, the Redemption Date and the Final Expiration Date, the
surrender for transfer of any such stock certificate shall also constitute the
transfer of the Rights associated with the shares of Common Stock represented
thereby. The omission of the foregoing legend shall not in any manner whatsoever
affect the application or interpretation of Section 7(d).
(d) In the event that the Company shall reacquire any shares of its
Common Stock after the Record Date and prior to the Distribution Date, the
Rights associated with such shares shall be
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deemed cancelled and retired, the Company not being entitled to exercise any
Rights associated with shares of its Common Stock which are no longer
outstanding.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (including the Form of Election to
Purchase and Certification of Status and the Form of Assignment and
Certification of Status to be set forth on the reverse side thereof) shall be in
substantially the form attached hereto as Exhibit B and may have such marks of
identification or designation and such legends, summaries or endorsements set
forth thereon as the Company may deem appropriate and are not inconsistent with
the provisions of this Agreement, or as may be required to conform to customary
practice or to comply with any applicable law or any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed. Subject to Sections 11 and 22, the
Rights Certificates, whenever distributed, shall be dated as of the Record Date
(or, in the case of Rights with respect to shares of Common Stock issued or
becoming outstanding after the Record Date, the same date as the stock
certificate evidencing such shares), shall (if the Company shall so require)
indicate the date of countersignature by the Rights Agent and shall entitle the
holders thereof to purchase such number of one one-hundredths of a Preferred
Share at the Exercise Price as shall be set forth therein, but the number of
such one one-hundredths of a Preferred Share and the Exercise Price shall be
subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 that represents Rights Beneficially Owned by: (i) a Restricted Person, (ii) a
transferee from a Restricted Person who becomes a transferee after the Acquiring
Person becomes such or (iii) a transferee from a Restricted Person who becomes a
transferee prior to or concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer (whether or not for
consideration) from such Acquiring Person (or any Affiliate or Associate
thereof) to holders of equity interests in such Acquiring Person (or any such
Affiliate or Associate) or to any Person with whom such Acquiring Person (or any
such Affiliate or Associate) has any continuing written or oral agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of Section 7(d), and any
Rights Certificate issued pursuant to Section 6, 11 or 22 upon the transfer,
exchange, replacement or adjustment of any other Rights Certificate referred to
in this sentence, shall have deleted therefrom the second sentence of the legend
on the Form of Rights Certificate attached
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hereto as Exhibit B and, in lieu thereof, shall contain the following two
sentences:
"The Rights represented by this Rights Certificate are or were
Beneficially Owned by a Restricted Person (as such term is defined in such
Agreement). This Rights Certificate and the Rights represented hereby shall
be or become void under the circumstances specified in Section 7(d) of such
Agreement."
The Company shall give prompt written notice to the Rights Agent after
becoming aware of the existence and identity of any Restricted Person. The
failure to insert the foregoing sentences on any such Rights Certificate or any
defect therein shall not in any manner whatsoever affect the application or
interpretation of Section 7(d). The Company shall specify to the Rights Agent in
writing which Rights Certificates are to be so legended.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President, any of its Vice Presidents
or its Treasurer, either manually or by facsimile signature, and shall have
affixed thereto the Company's seal or a facsimile thereof attested by its
Secretary or any of its Assistant Secretaries, either manually or by facsimile
signature. The Rights Certificates shall be manually countersigned by an
authorized signatory of the Rights Agent and shall not be valid or obligatory
for any purpose unless so countersigned. In case any officer of the Company who
shall have executed any Rights Certificate or who shall have attested the
Company's seal thereon shall cease to be such officer of the Company before such
Rights Certificate shall have been countersigned by an authorized signatory of
the Rights Agent and issued and delivered by or on behalf of the Company, such
Rights Certificate, nevertheless, may be countersigned by the Rights Agent and
issued and delivered by or on behalf of the Company with the same force and
effect as though the individual who executed such Rights Certificate or who
attested the Company's seal thereon had not ceased to be such officer; and any
Rights Certificate may be executed on behalf of the Company and the Company's
seal may be attested by any individual who, at the actual date of such execution
or attestation, shall be a proper officer of the Company, although at the date
of execution of this Rights Agreement such person was not such an officer.
(b) After the Distribution Date, the Rights Agent shall keep or cause
to be kept, at its principal office, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall show the names and
addresses of the
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respective holders of the Rights Certificates, the number of Rights evidenced on
its face by each Rights Certificate, the date of each Rights Certificate and (if
required by the Company) the date of countersignature by the Rights Agent.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to Sections 4(b), 7(d) and 14, at any time after the
Close of Business on the Distribution Date and prior to the Close of Business on
the earlier of the Redemption Date and the Final Expiration Date, any Rights
Certificate (other than any Rights Certificate which shall have been exchanged
pursuant to Section 24) may be transferred, split up, combined or exchanged for
one or more other Rights Certificates, entitling the registered holder to
purchase the same number of one one-hundredths of a Preferred Share (or after a
Triggering Event, the securities, cash and other property purchasable in lieu
thereof) as the Rights Certificate or Rights Certificates surrendered entitled
such registered holder to purchase. Any registered holder desiring to transfer,
split up, combine or exchange one or more Rights Certificates shall make such
request in a writing delivered to the Rights Agent, and shall surrender the
Rights Certificates to be transferred, split up, combined or exchanged, with the
Form of Assignment and Certification of Status on the reverse side thereof duly
executed, together with such signature guarantees and other documentation as the
Rights Agent may reasonably request, at the principal office of the Rights
Agent. Thereupon the Company shall prepare and execute, the Rights Agent shall
countersign and the Company shall deliver or cause to be delivered (or the
Rights Agent shall, if requested, deliver) to the person entitled thereto one or
more Rights Certificates as so requested. The Company may require payment of a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer, split up, combination or exchange of Rights
Certificates and reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in the case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to them or, in the case of
mutilation, upon surrender to the Rights Agent of the mutilated Rights
Certificate, and, at the Company's request, reimbursement to the Company and the
Rights Agent of all reasonable expenses incidental thereto, the Company shall
prepare and execute, the Rights Agent shall countersign and the Company shall
deliver or cause to be delivered (or the Rights Agent shall, if requested,
deliver) to the registered holder
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thereof a new Rights Certificate of like tenor in lieu of the Rights Certificate
so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Exercise Price; Expiration Date of
Rights.
(a) Subject to Section 7(d), the registered holder of any Rights
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein), in whole or in part, at any time after the Distribution Date
and prior to the earliest of (i) the Close of Business on the tenth anniversary
of the Record Date (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 (the "Redemption Date") and (iii)
the time at which such Rights are exchanged as provided in Section 24, upon
surrender of such Rights Certificate, with the Form of Election to Purchase and
Certification of Status on the reverse side thereof duly executed, together with
such signature guarantees and other documentation as the Rights Agent may
reasonably request, to the Rights Agent at its principal office, accompanied by
payment (as provided in subsection (c) of this Section 7) of the Exercise Price
for each one one-hundredth of a Preferred Share (or after a Triggering Event,
the securities, cash and other property purchasable in lieu thereof) as to which
the surrendered Rights are then being exercised.
(b) The price (the "Exercise Price") for each one one-hundredth of a
Preferred Share purchased upon exercise of the Rights shall initially be $98.00
shall be subject to adjustment from time to time as provided in Sections 11 and
13 and shall be payable in lawful money of the United States of America in
accordance with subsection (c) of this Section 7.
(c) Upon receipt of a Rights Certificate representing then exercisable
Rights, with the Form of Election to Purchase and Certification of Status on the
reverse side thereof duly executed, together with such signature guarantees and
other documentation as the Rights Agent may reasonably request, accompanied by
payment of the Exercise Price for the number of one one-hundredths of a
Preferred Share (or after a Triggering Event, the securities, cash and other
property purchasable in lieu thereof) being purchased, plus the amount of any
applicable transfer tax (as determined by the Rights Agent) required to be paid
by the holder of such Rights Certificate in accordance with Section 9, by
certified or cashier's check or money order payable to the order of the Company,
the Rights Agent shall, subject to the terms and conditions of this Agreement,
thereupon promptly (i) requisition from any transfer agent for the Preferred
Shares (or, if the Rights Agent is such a transfer agent, make available) stock
certificates for the number of one one-hundredths of a Preferred Share being
purchased, the Company hereby irrevocably authorizing any such transfer agent to
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comply with all such requests, (ii) if the Company shall have elected to deposit
the Preferred Shares issuable upon exercise of the Rights with a depository
agent, requisition from the depository agent depository receipts for the number
of one one-hundredths of a Preferred Share being purchased (in which case stock
certificates for the Preferred Shares represented by such depository receipts
shall be deposited by the transfer agent for the Preferred Shares with the
depository agent), the Company hereby irrevocably authorizing any such
depository agent to comply with all such requests, (iii) after a Triggering
Event, requisition or obtain from the appropriate Person or Persons such
securities, cash and other property as may then be purchasable in lieu of
Preferred Shares, the Company hereby irrevocably authorizing all such requests,
(iv) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of the issuance of any fractional share in accordance with Section
14 and (v) promptly after receipt of such stock certificates, depository
receipts, securities, cash and/or other property, cause the same to be delivered
to or upon the order of the registered holder of such Rights Certificate,
registered (when appropriate) in such name or names as may be designated by such
registered holder.
(d) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of any Section 11(a)(ii) Event, any Rights
Beneficially Owned by: (i) a Restricted Person, (ii) a transferee from a
Restricted Person who becomes a transferee after the Acquiring Person becomes
such or (iii) a transferee from a Restricted Person who becomes a transferee
prior to or concurrently with the Acquiring Person becoming such and receives
such Rights pursuant to either (A) a transfer (whether or not for consideration)
from such Acquiring Person (or any Affiliate or Associate thereof) to holders of
equity interests in such Acquiring Person (or any such Associate or Affiliate)
or to any Person with whom such Acquiring Person (or any such Associate or
Affiliate) has any continuing written or oral agreement, arrangement or
understanding regarding the transferred Rights or (B) a transfer which the Board
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(d) shall be or become
void without any further action; and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise, from and after such first occurrence. The Company
shall use all reasonable efforts to ensure that the provisions of this Section
7(d) and Section 4(b) are complied with, but shall have no liability to any
holder of the Rights Certificates or to any other Person as a result of the
Company's failure to make any applicable finding or determination with respect
to any Restricted Person, or any transferee therefrom.
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(e) Notwithstanding subsection (a) of this Section 7, a Right may be
exercised by the holder thereof on or after the Distribution Date and prior to
the receipt of the associated Rights Certificate by notifying the Rights Agent
in writing and furnishing to the Rights Agent such information and evidence as
to such election as the Rights Agent may reasonably request; provided, however,
that the Rights Agent shall not be required to take any of the actions specified
in subsection (c) of this Section 7 until such holder shall have fully satisfied
the applicable requirements specified therein.
(f) Neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to any Rights or Rights Certificate upon the
purported exercise or transfer thereof unless the registered holder thereof
shall have (i) completed and signed the Certification of Status following the
Form of Election to Purchase or the Form of Assignment, as the case may be, set
forth on the reverse side of the Rights Certificate surrendered for such
exercise or transfer and (ii) provided such additional evidence as to the
identity of the Beneficial Owner (or former Beneficial Owner) thereof or the
Affiliates or Associates thereof as the Company shall reasonably request.
(g) In case the registered holder of any Rights Certificate shall
exercise less than all of the Rights evidenced thereby, then, subject to the
provisions of Section 14, a new Rights Certificate evidencing the Rights
remaining unexercised shall be prepared and executed by the Company and
countersigned and delivered by the Rights Agent to the registered holder of such
surrendered Rights Certificate or to such registered holder's duly authorized
assigns.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form
or, if surrendered to the Rights Agent, shall be cancelled by it; and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
this Agreement. The Company shall deliver to the Rights Agent for cancellation,
and the Rights Agent shall cancel, any other Rights Certificate purchased or
reacquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company or shall,
at the written request of the Company, destroy such cancelled Rights
Certificates and deliver a certificate of the destruction thereof to the
Company.
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Section 9. Reservation and Availability of Preferred Shares.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued Preferred Shares, or any
authorized and issued Preferred Shares held in its treasury, the number of
Preferred Shares required to permit the exercise in full of all outstanding
Rights.
(b) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all Preferred Shares delivered upon exercise
of the Rights shall, at the time of delivery of the stock certificates therefor
in accordance with Section 7(c) (including the receipt of payment of the
Exercise Price), be duly and validly authorized and issued and fully paid and
nonassessable.
(c) The Company covenants and agrees that it will use its best efforts
to cause, from and after such time as the Rights shall become exercisable, all
Preferred Shares issued or reserved for issuance to be listed, upon official
notice of issuance, on the principal national securities exchange, if any, on
which its Common Stock is listed or, if the principal market for Common Stock is
not on any national securities exchange, to be eligible for quotation on the The
Nasdaq Stock Market ("NASDAQ") or any successor thereto or other comparable
quotation system.
(d) The Company covenants and agrees that it will use its best efforts
to (i) file, as soon as practicable after the occurrence of any Section
11(a)(ii) Event for which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iv),
or as soon as required by law after the Distribution Date, as the case may be, a
registration statement on an appropriate form under the Securities Act with
respect to the securities purchasable upon exercise of the Rights, (ii) cause
such registration statement to become effective as soon as practicable after
such filing and (iii) cause such registration statement to remain effective
(with a prospectus which at all times meets the requirements of the Securities
Act) until the earliest of (A) the date as of which the Rights are no longer
exercisable for such securities, (B) the Redemption Date and (C) the Final
Expiration Date. The Company further covenants and agrees that it will take
such action as may be appropriate under, and which will ensure compliance with,
the securities or "blue sky" laws of such jurisdictions as may be necessary or
appropriate in connection with the exercisability of the Rights. The Company
may temporarily suspend, for not more than 90 days after the applicable date
specified in the first sentence of this subsection (d), the exercisability of
the Rights in order to prepare and file such registration statement and permit
it to
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become effective and to complete such securities or "blue sky" law action. Upon
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, and the Company
shall also issue a public announcement at such time as the suspension shall no
longer be in effect. Failure of the Company to notify the Rights Agent of any
such suspension shall not affect the effectiveness thereof. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction unless the requisite qualification or exemption in such
jurisdiction shall have been effected. Until otherwise notified in writing by
the Company, the Rights Agent may assume that each purported exercise of the
Rights is permitted by this Agreement and by applicable law, and the Rights
Agent shall not be liable for acting in reliance upon such assumption.
(e) The Company covenants and agrees that, subject to Section 6, it
will pay when due and payable any and all federal and state original issue or
transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Rights or the Rights Certificates or of any stock certificate
for Preferred Shares issued upon exercise of the Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of any Rights Certificate to a Person other than, or
the issuance of any stock certificate for Preferred Shares upon exercise of any
of the Rights represented by such Rights Certificate in a name other than, the
registered holder of such Rights Certificate or to issue or deliver any Rights
Certificate or stock certificate for Preferred Shares upon such transfer or
exercise until any such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender thereof) or until
it has been established to the Company's reasonable satisfaction that no such
tax is due.
(f) After a Triggering Event, the provisions of this Section 9 shall
apply, to the extent applicable and appropriate, to all shares of capital stock
and other securities then purchasable upon exercise of the Rights.
Section 10. Record Date of Preferred Share Ownership. The Person in
whose name any stock certificate for Preferred Shares is issued upon exercise of
any of the Rights shall for all purposes be deemed to have become the holder of
record of the Preferred Shares represented thereby on, and such stock
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered to the Rights Agent with proper
payment of the Exercise Price (and all applicable transfer taxes, if any);
provided, however, that if the date of such surrender and payment shall be a
date upon which the registry books of the transfer agent for the Preferred
Shares are closed, such Person shall be deemed to
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have become the record holder of such Preferred Shares on, and such stock
certificate shall be dated, the next succeeding Business Day on which such
registry books are open.
Section 11. Adjustment of Exercise Price, Number and Kind of Shares
and Number of Rights. The Exercise Price, the number and kind of shares of
capital stock for which each Right is exercisable and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.
(a) (i) In the event that the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares into a greater
number of Preferred Shares, (C) combine or consolidate the outstanding Preferred
Shares into a smaller number of Preferred Shares or (D) issue any shares of
capital stock of any class in a reclassification of the Preferred Shares
(including any such reclassification in connection with a combination or merger
in which the Company is the continuing or surviving corporation), except as
otherwise provided in this Section 11(a) and in Section 7(d), the Exercise Price
in effect at the Close of Business on the record date for such dividend or at
the effective time of such subdivision, combination, consolidation or
reclassification, and the number and kind of shares of capital stock issuable
upon exercise of the Rights at such date or time, shall be proportionately
adjusted so that the registered holder of each Right exercised after such date
or time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date or time and at a time when the registry books of the transfer agent for the
Preferred Shares were open, such registered holder would have been entitled to
receive by reason of such dividend, subdivision, combination, consolidation or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon the exercise thereof.
If an event shall occur which would require an adjustment under both this
paragraph (i) and paragraph (ii) of this subsection (a), the adjustment provided
for in this paragraph (i) shall be in addition to, and shall be made prior to,
any adjustment required pursuant to such paragraph (ii).
(ii) Subject to Section 24, in the event that any Person, either alone
or together with its Affiliates and Associates, shall become an Acquiring
Person, then, in such case and promptly following such occurrence, proper
provision shall be made so that the registered holder of each Right, except
as otherwise provided in Section 7(d), shall thereafter have the right to
receive, upon exercise thereof and payment of an amount equal to the
product determined by multiplying the then
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current Exercise Price by the number of one one-hundredths of a Preferred
Share for which such Right was exercisable immediately prior to such
occurrence, in accordance with this Agreement, in lieu of Preferred Shares,
the number of shares of Common Stock determined dividing such product by
50% of the Fair Market Value (determined as provided in subsection (d) of
this Section 11) of one share of Common Stock on the date of such
occurrence.
(iii) In the event that there shall not be sufficient authorized and
unissued or treasury shares of Common Stock to permit the exercise in full
of the Rights in accordance with paragraph (ii) of this subsection (a), the
Company shall take all necessary action to authorize and reserve for
issuance such number of additional shares of Common Stock as may from time
to time be required to be issued upon the exercise in full of all
outstanding Rights and, if necessary, shall use its best efforts to obtain
stockholder approval thereof. Notwithstanding the preceding sentence, if at
least a majority of the Disinterested Directors shall determine that such
action is necessary or appropriate and is not contrary to the best
interests of the holders of the Rights, such Disinterested Directors may
cause the Company, in lieu of issuing shares of Common Stock in accordance
with such paragraph (ii), to distribute, or if a sufficient number of
shares of Common Stock cannot be issued for such purpose in accordance with
the provisions hereof, the Company shall distribute, upon the exercise of
each Right, cash, debt securities, Preferred Shares, other shares of
Preferred Stock, other property or any combination thereof having an
aggregate Fair Market Value (determined as provided in subsection (d) of
this Section 11) equal to the Fair Market Value (as so determined) of the
number of shares of Common Stock which otherwise would have been issuable
pursuant to such paragraph (ii). Any such decision by a majority of the
Disinterested Directors must be made and publicly announced within 30 days
after the occurrence of any Section 11(a)(ii) Event.
(b) In the event that the Company shall fix a record date for the
making of any distribution to all registered holders of Preferred Shares of
options, warrants or rights entitling them (for a period expiring not later than
45 calendar days after such record date) to subscribe for or purchase Preferred
Shares (or shares of capital stock of any class of the Company having the same
(or more favorable) powers, preferences and rights as the Preferred Shares
("Equivalent Preferred Shares"), or securities convertible into or exchangeable
for Preferred Shares or Equivalent Preferred Shares, at a price per Preferred
Share or per Equivalent Preferred Share (or having a conversion or exchange
price per share, in the case of securities convertible into or exchangeable for
Preferred
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<PAGE>
Shares or Equivalent Preferred Shares) less than the Fair Market Value
(determined as provided in subsection (d) of this Section 11) of one Preferred
Share on such record date, the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
number of Preferred Shares outstanding on such record date, plus the number of
Preferred Shares which the aggregate offering price of the total number of
Preferred Shares and/or Equivalent Preferred Shares so to be offered (and/or the
aggregate initial conversion or exchange price, in the case of convertible or
exchangeable securities so to be offered) would purchase at such Fair Market
Value, and the denominator of which shall be the number of Preferred Shares
outstanding on such record date, plus the total number of Preferred Shares
and/or Equivalent Preferred Shares so to be offered (and/or into or for which
the convertible or exchangeable securities so to be offered are initially
convertible or exchangeable); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
the exercise thereof. In case all or part of such subscription price may be
paid in a form other than cash, the value of such non-cash consideration shall
be its Fair Market Value (determined as provided in such subsection (d)).
Preferred Shares owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any computation provided for in this
subsection (b). The adjustment required by this subsection (b) shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the Exercise Price shall be adjusted to the
Exercise Price which would have been in effect if such record date had not been
fixed.
(c) In the event that the Company shall fix a record date for the
making of any distribution to all registered holders of Preferred Shares
(including any such distribution made in connection with a combination or merger
in which the Company is the continuing or surviving corporation) of cash (other
than a regular quarterly cash dividend), options, warrants, rights (other than
those referred to in subsection (b) of this Section 11), securities, evidences
of indebtedness or other property (excluding any dividend payable in Preferred
Shares, but including any dividend payable in other shares of capital stock),
the Exercise Price to be in effect after such record date shall be determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Fair Market Value (determined
as provided in subsection (d) of this Section 11) of one one-hundredth of a
Preferred Share on such record date, less the Fair Market Value (as so
determined) of the cash, options, warrants, rights, securities, evidences of
indebtedness or other property so to be distributed and properly
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attributable to one one-hundredth of a Preferred Share, and the denominator of
which shall be such Fair Market Value of one one-hundredth of a Preferred Share;
provided, however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon the exercise thereof. The adjustment
required by this subsection (c) shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Exercise Price shall be adjusted to the Exercise Price which would have been
in effect if such record date had not been fixed.
(d) For the purpose of any computation required under this Agreement,
"Fair Market Value," when used with respect to Preferred Shares or shares of
Common Stock or other capital stock of any class (collectively, a "Stock"), to
any option, warrant, right or other security or evidence of indebtedness
(collectively, a "Security") or to any other property, shall be determined as
provided in this subsection (d):
(i) In the case of any Stock or Security which is publicly traded, the
Fair Market Value on any date shall be deemed to be the average of the
daily closing prices per share of such Stock or per unit of such Security
for the 30 consecutive Trading Days immediately prior to such date;
provided, however, that in the event that the Fair Market Value per share
of any Stock is determined during a period commencing after the public
announcement by its issuer of (A) a dividend or distribution on such Stock
payable in shares of such Stock or securities convertible into or
exchangeable for shares of such Stock or (B) a subdivision, combination,
consolidation or reclassification of such Stock, and ending prior to the
expiration of the 30 Trading Days after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision,
combination, consolidation or reclassification, then, in each such case,
the Fair Market Value of such Stock shall be properly adjusted to take into
account "ex-dividend" trading. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale shall take place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New
York Stock Exchange or, if such Stock or Security is not listed or admitted
to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the principal national securities exchange on
which such Stock or Security is listed or admitted to trading; or if such
Stock or Security is not listed or
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admitted to trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the last quoted high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or any
other similar system then in use; or if on any such day no bid for such
Stock or Security is quoted by any such organization, the average of the
closing bid and asked prices, as furnished by a professional market maker
making a market in such Stock or Security selected by the Board. If during
any relevant period no market maker is making a market in such Stock or
Security, its Fair Market Value on a specified date shall be determined
reasonably and with utmost good faith to the holders of the Rights by the
Board; provided, however, that if at the time of such determination there
shall be an Acquiring Person, the Fair Market Value of such Stock or
Security on such date shall be determined by a nationally recognized
investment banking firm selected by the Board, which determination shall be
described in a statement filed with the Rights Agent and shall be binding
on the Company, the Rights Agent and the holders of the Rights. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which such Stock or Security is listed or admitted to trading
is open for the transaction of business or, if such Stock or Security is
not listed or admitted to trading on any national securities exchange, a
Business Day.
(ii) In the case of any Stock or Security which is not publicly traded,
the Fair Market Value on any date shall be the fair value per share of such
Stock or per unit of such Security as determined reasonably and with utmost
good faith to the holders of the Rights by the Board; provided, however,
that if at the time of such determination there shall be an Acquiring
Person, the Fair Market Value of such Stock or Security on such date shall
be determined by a nationally recognized investment banking firm selected
by the Board, which determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Company, the Rights Agent
and the holders of the Rights.
(iii) In the case of any property which is not a Stock or a Security,
the Fair Market Value on any date shall be determined reasonably and with
utmost good faith to the holders of Rights by the Board; provided, however,
that if at the time of such determination there shall be an Acquiring
Person, the Fair Market Value of such property on such date shall be
determined by a nationally recognized investment banking firm selected by
the Board, which determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Company, the Rights Agent and
the holders of the Rights.
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(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Exercise
Price then in effect; provided, however, that any adjustments which by reason of
this subsection (e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
Section 11 shall be made to the nearest whole cent, to the nearest one ten-
thousandth of a share of Common Stock or other capital stock of any class (other
than Preferred Shares) or to the nearest one one-millionth of a Preferred Share,
as the case may be. Notwithstanding the first sentence of this subsection (e),
any adjustment required by this Section 11 shall be made no later than the
earliest of (i) three years after the date of the occurrence requiring such
adjustment, (ii) the Redemption Date and (iii) the Final Expiration Date.
(f) If as a result of an adjustment required by any Triggering Event
the holder of any Rights thereafter exercised shall become entitled to receive
any shares of capital stock of any class of the Company (other than Preferred
Shares), the number of such other shares so receivable upon exercise of any
Rights shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as reasonably possible to the provisions with respect to
the Preferred Shares contained in this Section 11, and the provisions of
Sections 7, 9, 10, 13 and 14 with respect to the Preferred Shares shall apply on
like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one one-hundredths of a
Preferred Share purchasable from time to time hereunder upon exercise of the
Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised the option provided in
subsection (i) of this Section 11, upon each adjustment of the Exercise Price as
a result of the calculations required by subsection (b) or (c) of this Section
11, each Right outstanding immediately prior to the making of such Exercise
Price adjustment shall thereafter evidence the right to purchase, at the
adjusted Exercise Price, the number of one one-hundredths of a Preferred Share
(calculated to the nearest one one-millionth) determined by (i) multiplying the
number of one one-hundredths of a Preferred Share purchasable upon exercise of
such Right immediately prior to such adjustment by the Exercise Price in effect
immediately prior to such adjustment and (ii) dividing the product so obtained
by the Exercise Price in effect immediately after such adjustment.
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(i) The Company may elect, on or after the date on which any
adjustment of the Exercise Price is required to be made hereunder, to adjust the
number of Rights outstanding in substitution for making an adjustment in the
number of one one-hundredths of a Preferred Share purchasable upon exercise of
each Right. Each Right outstanding after such an adjustment in the number of
Rights shall be exercisable for the same number of one one-hundredths of a
Preferred Share as such Right was exercisable for immediately prior to such
adjustment; but each Right held of record prior to such adjustment shall become
the number of Rights (calculated to the nearest one ten-thousandth) determined
by dividing the Exercise Price in effect immediately prior to the occurrence
requiring the adjustment of the Exercise Price by the Exercise Price in effect
immediately after such adjustment of the Exercise Price. The Company shall make
a prompt public announcement of its election to adjust the number of Rights
outstanding, indicating the record date for the adjustment and, if known at the
time of such announcement, the amount of the adjustment to be made. Such record
date may be the date on which the Exercise Price is required to be adjusted or
any day thereafter, unless the Rights Certificates shall have been issued, in
which case such record date shall be at least 10 days after the date of such
public announcement. If the Rights Certificates shall have been issued, upon
each adjustment of the number of Rights outstanding pursuant to this subsection
(i), the Company shall, as promptly as practicable, cause to be distributed to
each registered holder of the Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14, the additional Rights to which
such registered holder shall be entitled as a result of such adjustment; or, at
its option, the Company shall cause to be distributed to each such registered
holder, in substitution and replacement for the Rights Certificates held by such
registered holder prior to the date of such adjustment, but only upon surrender
thereof (if so required by the Company), new Rights Certificates evidencing all
the Rights to which such registered holder shall be entitled after such
adjustment. Rights Certificates so distributed shall be executed and
countersigned in the manner provided in Section 5 (and may designate, at the
option of the Company, the adjusted Exercise Price) and shall be registered in
the names of the registered holders of the Rights Certificates on the record
date specified in the aforesaid public announcement.
(j) Irrespective of any adjustment or change in the Exercise Price or
the number of one one-hundredths of a Preferred Share issuable upon exercise of
the Rights, the Rights Certificates theretofore and thereafter issued may
continue to designate the Exercise Price and the number of one one-hundredths of
a Preferred Share which were designated in the Rights Certificates originally
issued hereunder.
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(k) Before taking any action which would cause an adjustment reducing
the Exercise Price below one one-hundredth of the then par value, if any, of the
Preferred Shares issuable upon exercise of the Rights, the Company shall take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Preferred Shares at such adjusted Exercise Price.
(l) In any case in which this Section 11 shall require an adjustment
of the Exercise Price effective as of the record date for a particular event,
the Company may elect to defer until the occurrence of such event the issuing to
the holder of any Rights exercised after such record date of the Preferred
Shares (and/or the other shares of capital stock, securities or other property
of the Company, if any) issuable upon such exercise in excess of the Preferred
Shares (and/or the other shares of capital stock, securities or other property
of the Company, if any) issuable upon such exercise on the basis of the Exercise
Price in effect immediately prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such excess upon the
occurrence of such event.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Board shall be entitled to make reductions in the Exercise Price, in addition to
the adjustments expressly required by this Section 11, as and to the extent that
the Board, in its sole discretion, shall determine to be advisable in order that
any dividend on the Preferred Shares payable in Preferred Shares, any
subdivision, combination or consolidation of the Preferred Shares (by
reclassification or otherwise than by payment of dividends in Preferred Shares)
into a greater or lesser number of Preferred Shares, any issuance of Preferred
Shares solely for cash at less than the Fair Market Value thereof, any issuance
solely for cash of Preferred Shares or securities which by their terms are
convertible into or exchangeable for Preferred Shares or any issuance of
options, warrants, rights, securities, evidences of indebtedness or other
property subject to subsection (b) or (c) of this Section 11, hereafter made by
the Company to the holders of the Preferred Shares, shall not be taxable to such
holders.
(n) In the event that the Company shall at any time after the date of
this Agreement and prior to the Distribution Date (i) declare a dividend on its
outstanding shares of Common Stock payable in shares of Common Stock or (ii)
effect a subdivision, combination or consolidation of its outstanding shares of
Common Stock (by reclassification or otherwise than by payment of dividends in
shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then, in each such case: (i) the number of one one-hundredths of a
Preferred Share purchasable after
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such event upon proper exercise of each Right shall be determined by multiplying
the number of one one-hundredths of a Preferred Share so purchasable immediately
prior to such event by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such event; and (ii) each share of Common Stock outstanding
immediately after such event shall have issued with respect to it the same
number of Rights which each share of Common Stock outstanding immediately prior
to such event had issued with respect to it. The adjustment required by this
subsection (n) shall be made successively whenever such a dividend is declared
or such a subdivision, combination or consolidation is effected.
(o) Except as permitted by Sections 23 and 27, the Company covenants
and agrees that, after the Distribution Date, it will not take, or permit any of
its Subsidiaries to take, any action if at the time such action would be taken
it is reasonably foreseeable that such action would eliminate or substantially
diminish the benefits intended to be afforded by the Rights.
Section 12. Certificate of Adjusted Exercise Price or Number of
Shares. Whenever any adjustment shall be required by Section 11, 13 or 23(g),
the Company shall promptly (a) prepare a certificate setting forth such
adjustment and a brief statement of the facts requiring such adjustment, (b)
file with the Rights Agent and with each transfer agent for the Preferred Shares
or the Common Stock of the Company a copy of such certificate and (c) mail a
brief summary thereof to each registered holder of the Rights in accordance with
Section 26. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment described therein and shall not be deemed to
have knowledge of any such adjustment unless and until it shall have received
such certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power. (a) In the event that, on or after the occurrence of any Section
11(a)(ii) Event, directly or indirectly: (i) the Company shall consolidate with,
or merge with and into, any Interested Stockholder or, if in such consolidation
or merger all holders of the Common Stock of the Company are not treated the
same, any other Person (other than a wholly-owned Subsidiary of the Company in a
transaction not prohibited by Section 11(o)), so that the Company shall not be
the continuing or surviving corporation, (ii) any Interested Stockholder or, if
in such merger all holders of the Common Stock of the Company are not treated
the same, any other Person (other than a wholly-owned Subsidiary of the Company
in a
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transaction not prohibited by Section 11(o)) shall merge with and into the
Company, so that the Company shall be the continuing or surviving corporation,
and in connection with such merger either (A) all or part of the outstanding
shares of Common Stock of the Company shall be converted or changed into or
exchanged for capital stock or other securities of any other Person (or the
Company), cash and/or other property or (B) such shares of Common Stock shall
remain outstanding, unconverted and unchanged, or (iii) the Company shall sell
or otherwise transfer (or one or more of its Subsidiaries shall sell or
otherwise transfer), in one or a series of related transactions, assets or
earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any Interested Stockholder
or, if in such transaction or transactions the holders of the Common Stock of
the Company are not treated the same, any other Person or Persons (other than
the Company or one or more of its wholly-owned Subsidiaries in one or more
transactions, each of which is not prohibited by Section 11(o)), then, in each
such case, proper provision shall be made so that (w) the registered holder of
each Right, except as otherwise provided in Section 7(d), shall thereafter have
the right to receive, upon exercise thereof and payment of an amount equal to
the product determined by multiplying the then current Exercise Price by the
number of one one-hundredths of a Preferred Share for which such Right is then
exercisable, in accordance with this Agreement, in lieu of Preferred Shares, the
number of freely tradable shares (which shall be duly authorized, validly
issued, fully paid and non-assessable) of Common Stock of the Principal Party
or, in the case of a merger described in clause (ii) of this sentence in which
the Common Stock of the Company shall remain outstanding, unconverted and
unchanged, of the Company, free and clear of all rights of call or first
refusal, liens, encumbrances or other adverse claims, determined by dividing
such product by 50% of the Fair Market Value (determined as provided in Section
11(d)) of the shares of Common Stock of such Principal Party (or, if
appropriate, the Company) on the date of consummation of such Section 13 Event;
(x) such Principal Party shall thereafter be liable for, and shall assume, by
reason of the consummation of such Section 13 Event, all the obligations and
duties of the Company under this Agreement; (y) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 shall apply to such Principal Party;
and (z) such Principal Party shall take such steps (including, but not limited
to, the reservation of a sufficient number of its shares of Common Stock to
permit exercise of all outstanding Rights in accordance with this subsection (a)
and the distribution of cash, debt securities, shares and other property in
accordance with Section 11(a)(iv))in connection with the consummation of such
Section 13 Event as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably possible, in relation to the
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shares of Common Stock thereafter deliverable upon exercise of the Rights.
(b) After the Distribution Date, the Company shall not consolidate or
merge with any other Person (other than a wholly-owned Subsidiary of the Company
in a transaction not prohibited by Section 11(o)), or sell or otherwise transfer
(or permit one or more of its Subsidiaries to sell or otherwise transfer), in
one or a series of related transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons (other than the Company or one
or more of its wholly-owned Subsidiaries in one or more transactions, each of
which is not prohibited by Section 11(o)), if (i) at the time of or immediately
after the consummation of such transaction there are any options, warrants,
rights, conversion or exchange privileges or securities outstanding or any
written or oral agreements, arrangements or understandings (including provisions
contained in the Company's Certificate of Incorporation or By-laws) in effect
which, as a result of the consummation of such transaction, would eliminate or
substantially diminish the benefits intended to be afforded by the Rights, or
(ii) prior to, at the time of or immediately after the consummation of such
transaction the stockholders of the Person who constitutes, or would constitute,
the Principal Party for the purpose of subsection (a) of this Section 13 shall
have received a distribution of Rights previously owned by such Person or any of
its Affiliates or Associates.
(c) The Company shall not consummate any Section 13 Event unless
prior thereto (i) the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and (ii) the Company, the Principal Party and each other Person who
may become the Principal Party as a result of the consummation of such Section
13 Event shall have executed and delivered to the Rights Agent a supplemental
agreement providing (x) for the implementation of all the terms and conditions
set forth in this Section 13 and (y) that, as soon as practicable after the date
of such Section 13 Event, the Principal Party, at its own expense, shall:
(A) prepare and file a registration statement on an appropriate
form under the Securities Act with respect to the Rights and the securities
purchasable upon exercise thereof, and use its best efforts to cause such
registration statement to become effective as soon as practicable after
such filing and to remain effective (with a prospectus which at all times
meets the requirements of the Securities Act) until the earliest of
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the date as of which the Rights are no longer exercisable for such
securities, the Redemption Date and the Final Expiration Date;
(B) use its best efforts to qualify or register the Rights and
the securities purchasable upon exercise thereof under the securities or
"blue sky" laws of such jurisdictions as may be necessary or appropriate in
connection with the exercisability of the Rights;
(C) use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise thereof on a
national securities exchange or to meet the eligibility requirements for
quotation on NASDAQ; and
(D) deliver to the registered holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
complying in all material respects with the requirements for registration
of securities on Form 10 under the Exchange Act.
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not apply to a transaction described in clause (i) or (ii) of
subsection (a) thereof if (i) such transaction is consummated with a Person or
Persons who acquired their shares of Common Stock of the Company pursuant to a
Permitted Offer, (ii) the price per share of Common Stock of the Company
provided in such transaction shall not be less than the price per share of
Common Stock of the Company paid to all holders whose shares were purchased
pursuant to such Permitted Offer and (iii) the form of consideration being
offered to the remaining holders of the Common Stock of the Company pursuant to
such transaction is the same as the form of consideration paid pursuant to such
Permitted Offer. Upon consummation of any transaction authorized by this
subsection (d), all Rights shall expire.
(e) "Principal Party" shall mean: in the case of any transaction
described in clause (i) or (ii) of subsection (a) of this Section 13, the Person
which is the issuer of the securities into which shares of Common Stock of the
Company are being converted or changed in such transaction or, if there shall be
more than one such issuer, the issuer having shares of Common Stock with the
greatest aggregate market value; or if no securities are being issued in such
transaction for shares of Common Stock of the Company, the Person which is the
other party to such transaction or, if there shall be more than one such Person,
the Person having shares of Common Stock with the greatest aggregate market
value; and in the case of any transaction described in clause (iii) of such
subsection (a), the Person which is the party receiving the
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greatest portion of the assets or earning power sold or otherwise transferred
pursuant to such transaction or transactions; provided, however, that in any
such case (i) if the shares of Common Stock of such Person shall not at the time
of the consummation of such transaction have been continuously registered under
Section 12 of the Exchange Act during the immediately preceding 12-month period,
and such Person shall be a direct or indirect Subsidiary or Affiliate of another
Person the shares of Common Stock of which shall have been so registered,
"Principal Party" shall mean such other Person; and (ii) if such Person shall be
a direct or indirect Subsidiary or Affiliate of more than one other Person, the
shares of Common Stock of two or more of which shall have been so registered,
"Principal Party" shall mean whichever of such other Persons shall have Common
Stock with the greatest aggregate market value; and (iii) if such Person shall
be owned, directly or indirectly, by a joint venture formed by two or more
Persons which are not owned, directly or indirectly, by the same Person, the
rules set forth in clauses (i) and (ii) of this proviso shall apply to each
chain of ownership of any joint venturer as though such joint venture were a
"Subsidiary" of all of such joint venturers, and the Principal Party in each
such chain shall bear the obligations and duties set forth in this Section 13 in
the same proportion as their direct or indirect ownership interest in such
Person bears to the total of such ownership interests.
(f) If, in the case of any transaction described in clause (iii) of
subsection (a) of this Section 13, the Person or Persons to whom assets or
earning power are sold or otherwise transferred are individuals, then, in lieu
of any other payment or distribution required by this Section 13, and the
Company shall require as a condition to such transaction that, such Person or
Persons shall pay to each holder of a Rights Certificate, upon its surrender to
the Rights Agent and in exchange therefor (without requiring any payment by such
holder), cash in the amount determined by multiplying the then current Exercise
Price by the number of one one-hundredths of a Preferred Share for which a Right
is then exercisable.
(g) In no event shall the Rights Agent have any obligations or duties
in respect of any Section 13 Event, except as expressly set forth in this
Agreement. The Rights Agent may rely, and shall be fully protected in relying
upon, a certificate of the Company stating that the provisions of this Section
13 have been fulfilled. The prior written consent of the Rights Agent shall be
required in connection with any supplemental agreement which alters or impairs
the rights, obligations, duties or immunities of the Rights Agent hereunder.
(h) The provisions of this Section 13 shall similarly apply to
successive consolidations, mergers, sales or other
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transfers. In the event that any Section 13 Event shall occur at any time after
the occurrence of any Section 11(a)(ii) Event, the Rights which have not been
theretofore exercised shall thereafter be exercisable in the manner described in
this Section 13.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractional Rights or
to distribute Rights Certificates which evidence fractional Rights. If the
Company shall determine not to issued fractional Rights, the Company shall pay,
in lieu of issuing fractional Rights, to the registered holders of the Rights
with respect to which fractional Rights would otherwise be issuable an amount in
cash equal to the same fraction of the Fair Market Value (determined as provided
in Section 11(d) for the Trading Day immediately prior to the date on which such
fractional Rights would otherwise have been issued) of one Right.
(b) The Company shall not be required to issue fractional Preferred
Shares (other than fractions which are multiples of one one-hundredth of a
Preferred Share) upon exercise of the Rights or to distribute stock certificates
which evidence fractional Preferred Shares (other than fractions which are
multiples of one one-hundredth of a Preferred Share). If the Company shall
determine not to issue fractional Preferred Shares that are not multiples of one
one-hundredth of a Preferred Share, the Company shall pay to the registered
holders of the Rights Certificates at the time Rights represented thereby are
exercised, in lieu of such fractional Preferred Shares, an amount in cash equal
to the same fraction of the Fair Market Value (determined as provided in Section
11(d) for the Trading Day immediately prior to the date of such exercise) of one
one-hundredth of a Preferred Share.
(c) Each holder of a Right, by accepting the same, expressly waives
such holder's right to receive or exercise any fractional Right or to receive
any fractional Preferred Share upon the exercise of such Right (except as
provided in this Section 14).
Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action which the Rights Agent may have under
Sections 18 and 20, are vested in the registered holders of the Rights
Certificates (or, prior to the Distribution Date, the registered holders of the
Common Stock of the Company); and the registered holder of any Rights
Certificate (or, prior to the Distribution Date, of any stock certificate for
shares of such Common Stock), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
any other stock certificate for shares of Common Stock), may, on such registered
holder's own behalf and
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for such registered holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Company to enforce, or
otherwise act in respect of, such registered holder's right to exercise the
Rights evidenced by such Rights Certificate (or, prior to the Distribution Date,
such stock certificate) in the manner provided in such Rights Certificate and in
this Agreement. Without limiting the generality of the foregoing or any remedies
available to the holders of the Rights, it is specifically acknowledged that the
registered holders of the Rights would not have an adequate remedy at law for
any breach of this Agreement and will be entitled to specific performance of the
obligations and duties under, and injunctive relief against any actual or
threatened violations of the obligations and duties of any Person subject to,
this Agreement.
Section 16. Agreements of Holders of Rights. Each holder of a Right,
by accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights shall be transferable
only simultaneously and together with the transfer of shares of Common Stock of
the Company;
(b) after the Distribution Date, the Rights Certificates shall be
transferable on the registry books of the Rights Agent only if surrendered at
the principal office of the Rights Agent, with the Form of Assignment and
Certification of Status on the reverse side thereof duly executed, together with
such signature guarantees and other documentation as the Rights Agent may
reasonably request;
(c) subject to Sections 6 and 7(d), the Company and the Rights Agent
may deem and treat the Person in whose name any Rights Certificate (or, prior to
the Distribution Date, any stock certificate for Common Stock of the Company) is
registered as the absolute owner thereof and of the Rights represented thereby
(notwithstanding any notations of ownership or other writing on such Rights
Certificate or stock certificate made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary; and
(d) neither the Company nor the Rights Agent shall have any liability
to any holder of a Right or to any other Person because of its inability to
perform any of its obligations or duties under this Agreement by reason of any
applicable law, any preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission or
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any rule, regulation or executive order promulgated or enacted by any such
governmental authority prohibiting or otherwise restraining performance of any
such obligation or duty; provided, however, that the Company shall use its best
efforts to have any such injunction, order, decree or ruling lifted or otherwise
overturned as soon as reasonably possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, to receive
dividends or other distributions on or to exercise any preemptive rights with
respect to, or shall be deemed for any other purpose to be the holder of, the
Preferred Shares or other shares of capital stock of any class of the Company
which may at the time be issuable upon exercise of the Rights represented
thereby; nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company, or any right to vote for the
election of directors or upon any other matter submitted to stockholders at any
meeting thereof, to give or withhold consent to any corporate action, to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 25) or to receive dividends, subscription rights or other
distributions, until the Rights represented by such Rights Certificate shall
have been exercised, in whole or in part, in accordance with the provisions
hereof.
Section 18. Concerning the Rights Agent.
(a) The Company covenants and agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time on the written request of the Rights Agent, to reimburse it for all
reasonable expenses and counsel fees incurred in connection with the acceptance
and administration of this Agreement and the performance of its obligations and
duties hereunder. The Company also covenants and agrees to indemnify the Rights
Agent for, and to hold it harmless against, any loss, liability or expense,
incurred without negligence, bad faith or willful misconduct on its part, for
any action taken, suffered or omitted by it in connection with the acceptance
and administration of this Agreement and the performance of its obligations and
duties hereunder, including the costs and expenses of defending against any
claim of liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability
for, or in respect of, any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate, stock certificate for Preferred Shares, Common Stock or other
shares of capital stock of the Company, instrument of assignment or transfer,
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power of attorney, endorsement, affidavit, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be executed and, where necessary, verified or acknowledged by the proper
Person or Persons.
Section 19. Merger or Consolidation of the Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the stockholder services or corporate trust business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as successor Rights Agent under Section 21. In case at
the time any successor Rights Agent shall succeed to the agency created by this
Agreement any of the Rights Certificates countersigned by its predecessor Rights
Agent shall not have been delivered, such successor Rights Agent may adopt the
counter signature of its predecessor Rights Agent and deliver the Rights
Certificates so countersigned; or in case at such time any of the Rights
Certificates shall not have been countersigned, such successor Rights Agent may
countersign such Rights Certificates either in the name of its predecessor
Rights Agent or in the name of such successor Rights Agent; and in all such
cases, such Rights Certificates shall have the full force and effect provided
therein and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver the Rights Certificates so countersigned; or in case at
such time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases, such Rights Certificates shall
have the full force and effect provided therein and in this Agreement.
Section 20. Duties of the Rights Agent. The Rights Agent undertakes
the obligations and duties imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of the Rights
Certificates (or, prior to the Distribution Date, the stock certificates for
Common Stock of the Company), by accepting the same, shall be bound, and no
implied obligations or duties shall be read into this Agreement against the
Rights Agent:
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(a) the Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the written opinion of such legal counsel shall be
full and complete authorization and protection to the Rights Agent as to any
action taken, suffered or omitted by it in good faith and in accordance with
such opinion;
(b) whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking, suffering or omitting any
action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate executed by any one of the Chairman of the Board,
the President, any Vice President, the Treasurer or the Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full and
complete authorization and protection to the Rights Agent as to any action
taken, suffered or omitted by it in good faith in reliance upon such
certificate;
(c) the Rights Agent shall be liable hereunder to the Company and any
other Person only for its own negligence, bad faith or willful misconduct;
(d) the Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except its countersignature thereon) or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only;
(e) the Rights Agent shall not be responsible for the validity of
this Agreement or the execution and delivery hereof (except for its due
execution hereof) or for the validity or execution of any Rights Certificate
(except for its countersignature thereon); nor shall the Rights Agent be
responsible for any breach by the Company of any covenant or condition contained
in this Agreement or in any Rights Certificate; nor shall the Rights Agent be
responsible for any change in the exercisability of the Rights (including Rights
becoming void pursuant to Section 7(d)), for any adjustment or change (or for
the manner or method of determining same) in the terms of the Rights (including
any adjustment or change in the Exercise Price or in the number or kind of
shares, securities or other property issuable upon the exercise thereof)
required by Section 11, 13, 23 or 24 or for ascertaining the existence of facts
which would require any such change or adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice, in the
manner provided in Section 12, that such change or adjustment is required); nor
shall the Rights Agent by any act hereunder be
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deemed to have made any representation or warranty as to the authorization or
reservation of any Preferred Shares or shares of Common Stock to be issued
pursuant to this Agreement or any Rights Certificate or as to whether any
Preferred Shares or shares of Common Stock will, when issued, be validly
authorized and issued and fully paid and nonassessable;
(f) the Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement;
(g) the Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its obligations and duties
hereunder from any one of the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company, and to apply to such
officers for advice or instructions in connection with its obligations and
duties; and the Rights Agent shall not be liable for any action taken, suffered
or omitted by it in good faith and in accordance with the written instructions
of any such officer or for any delay in acting while waiting for such
instructions;
(h) the Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in the Rights or in any other
securities of the Company (including the Preferred Shares and its Common Stock)
or become pecuniarily interested in any transaction in which the Company (or any
of its Subsidiaries) may be interested, or contract with or lend money to the
Company (or any of its Subsidiaries), and may otherwise act as fully and freely
as though it were not the Rights Agent under this Agreement; and nothing herein
shall preclude the Rights Agent from acting in any other capacity for the
Company, any of its Subsidiaries or any other entity;
(i) the Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any of its obligations or duties hereunder
either directly or by or through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorney or agent or for any loss to the Company
resulting from any such act, default, neglect or misconduct, provided the Rights
Agent exercised reasonable care in the selection and continued employment of
such attorney or agent;
(j) if, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the Form of Certification of Status
attached to the Form of Election to
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Purchase or the Form of Assignment, as the case may be, has either not been
completed or indicates an affirmative response to Question 1 and/or 2 thereof,
the Rights Agent shall not take any further action with respect to the requested
exercise or transfer without first consulting with the Company; and
(k) no provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its obligations or duties or in the exercise of its rights
or powers hereunder if there shall be reasonable grounds for believing that
repayment of such funds or adequate indemnification against such risk or
liability is not reasonably assured.
Section 21. Resignation or Removal of the Rights Agent. The Rights
Agent or any successor Rights Agent may resign and be discharged from its
obligations and duties under this Agreement upon 30 days' prior notice to the
Company and to each transfer agent for the Preferred Shares and for the Common
Stock of the Company, sent by registered or certified mail, postage prepaid, and
to each registered holder of the Rights Certificates, sent by first-class mail,
postage prepaid. The Company may remove the Rights Agent or any successor Rights
Agent upon 30 days' prior notice to the Rights Agent or successor Rights Agent,
as the case may be, and to each transfer agent for the Preferred Shares and for
the Common Stock of the Company, sent by registered or certified mail, postage
prepaid, and to each registered holder of the Rights Certificates, sent by
first-class mail, postage prepaid. If the Rights Agent or any successor Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor Rights Agent. If the Company shall fail to
make such appointment within 30 days after giving notice of such removal or
after receiving notice of such resignation or incapacity, either from the
resigning or incapacitated Rights Agent or from the registered holder of any
Rights Certificate (who shall, with such notice, submit its Rights Certificate
for inspection by the Company), then the incumbent Rights Agent or the
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a successor Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a corporation organized and doing business under the laws of the United States
of America, the State of Delaware, the State of New York or the State of
Illinois (or of any other state so long as such corporation is authorized to do
business as a banking institution in the State of Delaware, the State of New
York or the State of Illinois), be in good standing under the laws of the
jurisdiction of its incorporation, have an office in the State of Delaware, the
State of New York or the State of Illinois, be authorized under such laws to
exercise corporate trust or stock transfer powers, be subject to
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supervision or examination by federal or state authority and have at the time of
its appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (b) an affiliate of a corporation described in clause (a) of this
sentence. After its appointment, the successor Rights Agent shall be vested with
the same rights, powers, obligations, duties and immunities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent for
the Preferred Shares and for the Common Stock of the Company, and mail notice
thereof to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or any successor Rights Agent or the appointment of any successor
thereto.
Section 22. Issuance of New Rights Certificates. Notwithstanding any
provision of this Agreement or of the Rights Certificates to the contrary, the
Company may, at its option, issue new Rights Certificates evidencing the Rights
in such form as may be approved by the Board to reflect any adjustment or change
in the Exercise Price or in the number or kind of shares, securities or other
property issuable upon exercise of the Rights in accordance with the provisions
of this Agreement; provided, however, that (a) no such Rights Certificates shall
be issued if, and to the extent that, the Company shall be advised by counsel
that such issuance could create a significant risk of material adverse tax
consequences to the Company or to the Persons to whom such Rights Certificates
would be issued and (b) no such Rights Certificates shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
Section 23. Redemption.
(a) The Board may, at its option, at any time prior to the earliest
of (i) the Close of Business on the 10th Business Day after the Share
Acquisition Date (or, if the Share Acquisition Date shall have occurred prior to
the Record Date, the Close of Business on the 10th Business Day after the Record
Date), (ii) the occurrence of any Section 13 Event and (iii) the Final
Expiration Date, redeem all, but not less than all, of the then outstanding
Rights at a redemption price of $.01 per Right, adjusted as provided in
subsection (g) of this Section 23 (such redemption price being hereinafter
called the "Redemption Price"); provided, however, that if the Board shall
authorize the redemption of the
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Rights at a time at which there is an Acquiring Person, there must be
Disinterested Directors then in office and such authorization shall require the
concurrence of at least a majority of such Disin terested Directors.
(b) In addition to the right of redemption reserved in the first
sentence of subsection (a) of this Section 23, if there shall be Disinterested
Directors then in office, the Board may redeem, with the concurrence of at least
a majority of the Disinterested Directors, all, but not less than all, of the
then outstanding Rights at the Redemption Price after the Share Acquisition
Date, but prior to the occurrence of any Section 13 Event, if either (i) the
Person who is an Acquiring Person shall have transferred or otherwise disposed
of (either alone or together with its Affiliates and Associates) such number of
shares of Common Stock of the Company, in one or a series of related
transactions not directly or indirectly involving the Company or any of its
Subsidiaries or the occurrence of any Section 13 Event, as shall result in such
Person thereafter being a Beneficial Owner of less than 10% of the then
outstanding shares of Common Stock of the Company, and after such transfer or
other disposition there is no other Acquiring Person, or (ii) in connection with
any Section 13 Event which shall not involve an Interested Stockholder and in
which all holders of the Common Stock of the Company are treated the same.
(c) Notwithstanding any other provision of this Agreement, the Rights
shall not be exercisable after the first occurrence of any Section 11(a)(ii)
Event until such time as the Company's right of redemption under this Section 23
shall have expired.
(d) In considering whether to redeem the Rights, the Board and the
Disinterested Directors may consider the best long-term and short-term interests
of the Company and its stockholders, including, without limitation, the effects
of the redemption of the Rights upon employees, creditors, suppliers and
customers of the Company or of its Subsidiaries and upon the communities in
which offices or other establishments of the Company and such Subsidiaries are
located and all other pertinent factors. The redemption of the Rights by the
Board may be made effective at such time, on such basis and with such conditions
as the Board, in its sole discretion, may establish.
(e) Immediately after action by the Board directing the redemption of
the Rights pursuant to subsection (a) or (b) of this Section 23, and without any
further action and without any notice, the right to exercise the Rights shall
terminate, and thereafter each registered holder of the Rights shall only be
entitled to receive the Redemption Price therefor. The Company shall give
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prompt written notice to the Rights Agent and prompt public notice to the
holders of the Rights of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not affect the validity
of such redemption. Within 10 days after action by the Board directing the
redemption of the Rights, the Company shall mail (or cause the Rights Agent to
mail) a notice of redemption to each registered holder of the then outstanding
Rights, at its last address appearing on the registry books of the Rights Agent
or, prior to the Distribution Date, on the registry books of the transfer agent
for the Common Stock of the Company. Any notice which is mailed in the manner
provided in this subsection (e) shall be deemed given, whether or not received
by the registered holder to whom sent. Each notice of redemption shall state the
method by which payment of the Redemption Price is to be made. Neither the
Company nor any of its Affiliates or Associates may at any time redeem, acquire
or purchase for value any Rights other than in the manner set forth in this
Section 23 and Section 24 or in connection with any purchase of outstanding
shares of its Common Stock prior to the Distribution Date.
(f) The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on its Fair Market Value (determined as provided
in Section 11(d)) as of the date of redemption) or any other form of
consideration deemed appropriate by the Board.
(g) In the event that the Company shall at any time after the date of
this Agreement (i) declare a dividend on its outstanding shares of Common Stock
payable in shares of Common Stock or (ii) effect a subdivision, combination or
consolidation of its outstanding shares of Common Stock (by reclassification or
otherwise than by payment of dividends in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then, in each such case, the
Redemption Price after such event shall equal the Redemption Price in effect
immediately prior to such event multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such event and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such event; provided, however, that such
adjustment shall be made only if the amount of the Redemption Price would be
reduced or increased by at least $.001 per Right.
Section 24. Exchange.
(a) The Board may, at its option, at any time on or after the
occurrence of any Section 11(a)(ii) Event, exchange all or any part of the then
outstanding and exercisable Rights (which shall not include any Rights which
have become void pursuant to Section 7(d)) for shares of Common Stock of the
Company at an
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exchange rate of one share of Common Stock per Right, appropriately adjusted to
reflect any event specified in clauses (A) through (D), inclusive, of the first
sentence of Section 11(a)(i) or in Section 11(n) occurring after the date hereof
(such exchange rate being hereinafter called the "Exchange Rate"); provided,
however, that the Board shall not be authorized to effect such an exchange at
any time after any Person (other than an Exempt Person), together with the
Affiliates and Associates of such Person, shall have become the Beneficial Owner
of 50% or more of the then outstanding shares of Common Stock of the Company.
(b) Immediately after action by the Board directing the exchange of
any Rights pursuant to subsection (a) of this Section 24, and without any
further action and without any notice, the right to exercise such Rights shall
terminate, and thereafter each registered holder of such Rights shall only be
entitled to receive the number of shares of Common Stock of the Company which
shall equal the number of such Rights held by such registered holder multiplied
by the Exchange Rate then in effect. The Company shall give prompt written
notice to the Rights Agent and prompt public notice to the holders of the Rights
of any such exchange; provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such exchange. Within 10
days after action by the Board directing the exchange of any Rights, the Company
shall mail (or cause the Rights Agent to mail) a notice of exchange to each
registered holder of such Rights, at its last address appearing on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock of the Company. Any notice
which is mailed in the manner provided in this subsection (b) shall be deemed
given, whether or not received by the registered holder to whom sent. Each
notice of exchange shall state the method by which the exchange of shares of
Common Stock for Rights will be effected and, in the event of any partial
exchange, the number of Rights which will be exchanged. Any partial exchange
shall be effected pro rata among the registered holders of the Rights based upon
the number of Rights held (excluding Rights which shall have become void
pursuant to Section 7(d)); and, in such case, a new Rights Certificate
evidencing the Rights not being exchanged shall be prepared and executed by the
Company and countersigned and delivered by the Rights Agent to the registered
holder of such Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Shares (or Equivalent Preferred Shares) for
shares of Common Stock in effecting an exchange for Rights, at the initial rate
of one one-hundredth of a Preferred Share (or Equivalent Preferred Share) for
each share of Common Stock, appropriately adjusted to reflect any adjustments in
the voting rights of the Preferred Shares pursuant
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to the Certificate of Designations attached hereto as Exhibit A, so that the
fractional Preferred Share delivered in lieu of each share of Common Stock shall
have the same voting rights as one share of Common Stock.
(d) In the event that there shall not be sufficient authorized and
unissued or treasury shares of Common Stock or Preferred Shares (or Equivalent
Preferred Shares) to permit the exchange of Rights directed by the Board, the
Company shall take all necessary action to authorize and reserve for issuance
such number of additional shares of Common Stock or Preferred Shares (or
Equivalent Preferred Shares) as may be required for issuance upon such exchange
and, if necessary, shall use its best efforts to obtain stockholder approval
thereof.
(e) The Company shall not be required to issue fractional shares of
Common Stock in exchange for Rights or to distribute stock certificates which
evidence fractional shares of Common Stock. If the Company shall determine not
to issue fractional shares of Common Stock, the Company shall pay to the
registered holders of the Rights with respect to which such fractional shares
would otherwise be issuable an amount in cash equal to the same fraction of the
Fair Market Value (determined as provided in Section 11(d) for the Trading Day
immediately prior to the date of such exchange) of one share of Common Stock.
Section 25. Notice to Holders of Rights Certificates of Certain
Events.
(a) In the event that at any time after the Distribution Date, the
Company shall propose: (i) to pay any dividend payable in shares of capital
stock of any class of the Company to the holders of Preferred Shares or to make
any other cash distribution to the holders of Preferred Shares (other than a
regular quarterly cash dividend); (ii) to effect any reclassification of the
Preferred Shares (other than a reclassification involving only the subdivision
of the outstanding Preferred Shares); (iii) to make any distribution to the
holders of Preferred Shares described in subsection (b) or (c) of Section 11;
(iv) to effect any Section 13 Event; (v) to pay any dividend on its shares of
Common Stock payable in shares of Common Stock or to effect a subdivision,
combination or consolidation of its outstanding shares of Common Stock (by
reclassification or otherwise than by payment of dividends in shares of Common
Stock); or (vi) to effect the liquidation, dissolution or winding up of the
Company; then, in each such case, the Company shall give to the Rights Agent and
each registered holder of the Rights, in the manner provided in Section 26,
written notice of such proposed action, which shall specify the record date for
such stock dividend or distribution or the date on which such reclassification,
Section 13 Event,
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liquidation, dissolution or winding up is expected to occur (and the date for
participation therein by the holders of the Common Stock and/or Preferred Shares
if any such date is to be fixed). Such notice shall be given, in the case of any
action described in clause (i) or (iii) of the preceding sentence, at least 10
days prior to the record date and, in the case of any other such action, at
least 20 days prior to the date of taking of such proposed action or the date
for participation therein by the holders of Preferred Shares, whichever shall be
the earlier.
(b) In case any Section 11(a)(ii) Event shall occur, the Company
shall, as soon as practicable thereafter, give to the Rights Agent and each
registered holder of the Rights, in the manner provided in Section 26, written
notice of the occurrence thereof, which notice shall describe such occurrence
and its consequences in reasonable detail.
Section 26. Other Notices. Except as otherwise provided herein,
notices or demands authorized by this Agreement to be given or made by the
Rights Agent or by the registered holder of any Rights, Rights Certificate or
stock certificate for shares of Common Stock of the Company to or on the Company
shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address shall be filed in writing with the
Rights Agent) as follows:
Peapod, Inc.
1033 University Place, Suite 375
Evanston, Illinois 60201
Attention: President
Except as otherwise provided herein, notices or demands authorized by
this Agreement to be given or made by the Company or by the registered holder of
any Rights, Rights Certificate or stock certificate for shares of Common Stock
of the Company to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address
shall be filed in writing with the Company) as follows:
______________________
______________________
______________________
Attention: ______________________
Except as otherwise provided herein, notices or demands authorized by
this Agreement to be given or made by the Company or the Rights Agent to the
registered holder of any Rights, Rights Certificate or stock certificate for
shares of Common Stock of the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed to such holder at its last
address
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<PAGE>
appearing on the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for the Common
Stock of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution
Date, but subject to the last sentence of this Section 27, the Company and the
Rights Agent, if so directed in writing by the Company, shall supplement or
amend any term, provision or condition of this Agreement, without the approval
of the registered holders of the stock certificates representing the Common
Stock, and the Rights. From and after the Distribution Date, but subject to the
last sentence of this Section 27, the Company and the Rights Agent, if so
directed in writing by the Company, shall supplement or amend this Agreement,
without the approval of the registered holders of the Rights (however
represented), in order: (a) to cure any ambiguity, (b) to correct or supplement
any term, provision or condition of this Agreement which may be defective or
inconsistent with any other term, provision or condition hereof, (c) to shorten
or lengthen any time period specified herein (except that if any such shortening
or lengthening is authorized by the Board at a time at which there is an
Acquiring Person, there must be Disinterested Directors then in office and any
such shortening or lengthening shall require the concurrence of at least a
majority of such Disinterested Directors) or (d) to change or supplement one or
more of the terms, provisions or conditions hereof in any manner which the
Company may deem necessary or desirable and which shall not adversely affect, as
determined by the Board (with the concurrence of at least a majority of the
Disinterested Directors), the interests of the holders (other than any
Restricted Person or the transferees therefrom specified in Section 7(d) of the
Rights (however represented); provided, however, that this Agreement may not be
supplemented or amended pursuant to clause (c) of this sentence (i) to lengthen
any time period (except as permitted by Section 3(a)(ii)) unless (A) approved by
at least a majority of the Disinterested Directors and (B) such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders (other than any Restricted Person or the transferees
therefrom specified in Section 7(d)) of the Rights or (ii) to lengthen any time
period relating to when the Rights may be redeemed if at such time the Rights
are not then redeemable. Upon the delivery of a certificate from an appropriate
officer of the Company stating that the proposed supplement or amendment is in
compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment; provided, however, that the Rights Agent shall not
be required to execute any supplement or amendment which affects any of the
Rights Agent's rights, powers, obligations, duties or immunities under this
Agreement without its consent. On and after the Distribution Date, no supplement
or amendment shall be made which changes the Exercise Price, the number of one
one-hundredths of a Preferred Share for which a Right
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<PAGE>
is exercisable, the Redemption Price or the Final Expiration Date. Prior to the
Distribution Date, the interests of the holders of the Rights shall be deemed
coincident with the interests of the holders of the Common Stock of the Company.
Section 28. Successors. All of the terms, provisions and conditions of
this Agreement by or for the benefit of the Company or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns.
Section 29. Certain Determinations and Actions by the Board. For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including the determination of the
percentage of such outstanding shares of which any Person is the Beneficial
Owner, shall be made in accordance with the last sentence of Rule 13d-
3(d)(1)(i), as in effect on the date hereof, under the Exchange Act. The Board
(or, as and when set forth herein, the Disinterested Directors) shall have the
exclusive power and authority to interpret this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to make all determinations deemed
necessary or advisable for such administration, including, without limitation, a
determination to redeem or not to redeem the Rights, to exchange or not to
exchange the Rights or to supplement or amend this Agreement. All such
calculations, determinations, interpretations and exercises (including, for
purposes of clause (b) below, all omissions with respect to the foregoing) which
are done or made by the Board (or the Disinterested Directors) in good faith
shall (a) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other Persons and (b) not subject any director
(including any Disinterested Director) to any liability to the holders of the
Rights or to any other Person.
Section 30. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the stock certificates for the
Common Stock of the Company) any legal or equitable right, remedy or claim under
this Agreement; but this Agreement shall be for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
stock certificates for the Common Stock of the Company).
Section 31. Severability. If any term, provision or condition of this
Agreement shall be held by a court of competent
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<PAGE>
jurisdiction or other lawful authority to be invalid, void or unenforceable, the
remaining terms, provisions, and conditions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that if any such term, provision or condition is held by such
court or authority to be invalid, void or unenforceable and the Board (with the
concurrence of at least a majority of the Disinterested Directors then in
office) shall determine in good faith that severing the same from this Agreement
would adversely affect the purposes or effect of this Agreement, the right of
redemption set forth in Section 23 shall be reinstated and shall not expire
until the Close of Business on the 10th day following the date of such
determination by the Board.
Section 32. Governing Law. This Agreement and each Rights Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts made and to be
performed entirely within such State.
Section 33. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall for all purposes be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
PEAPOD, INC.
By: ______________________________
(Corporate Seal) Andrew B. Parkinson
Chairman, President and
Chief Executive
Attest:
By: _________________________
John C. Walden
Executive Vice President
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: ______________________________
(Corporate Seal) Name:
Title:
Attest:
By: _________________________
Name:
Title:
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<PAGE>
FORM OF
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
PEAPOD, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
-------------------------
Peapod, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "Corporation"), does hereby
certify that, pursuant to authority conferred upon its Board of Directors by its
Restated Certificate of Incorporation, and by the provisions of Section 151 of
the General Corporation Law of the State of Delaware, the following resolution
was adopted by its Board of Directors at a meeting duly called and held on
May 29, 1997:
RESOLVED, that, pursuant to the authority conferred upon the Board of
Directors of the Corporation (the "Board") by the provisions of the Restated
Certificate of Incorporation of the Corporation and by the provisions of Section
151 of the General Corporation Law of the State of Delaware, there is hereby
created a series of Preferred Stock of the Corporation, which series shall have
the following powers, designations, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations or
restrictions thereof, in addition to those set forth in the Restated Certificate
of Incorporation of the Corporation:
Section 1. Designation of Series; Number of Shares. The series of
Preferred Stock established hereby shall be designated the "Series A Junior
Participating Preferred Stock" (the "Series A Preferred Stock") and the
authorized number of shares constituting the Series A Preferred Stock shall be
500,000. Such number of authorized shares may be increased or decreased, from
time to time, by resolution of the Board; provided, however, that no such
decrease shall reduce the number of authorized shares of the Series A Preferred
Stock to a number less than the number of shares of the Series A Preferred Stock
then outstanding, plus the number of shares of the Series A Preferred Stock then
reserved for issuance upon the exercise of any outstanding options, warrants or
rights or the exercise of any conversion or exchange privilege contained in any
outstanding security issued by the Corporation.
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Section 2. Dividends and Distributions.
(a) Subject to the rights of the holders of shares of any other series
of the Preferred Stock (or shares of any other class of capital stock of the
Corporation) ranking senior to the Series A Preferred Stock with respect to
dividends, the holders of shares of the Series A Preferred Stock, in preference
to the holders of shares of Common Stock and of any other class of capital stock
of the Corporation ranking junior to the Series A Preferred Stock with respect
to dividends, shall be entitled to receive, when, as and if declared by the
Board out of funds legally available therefor, quarterly dividends payable in
cash on the first day of March, June, September, and December in each year (each
such date being a "Dividend Payment Date"), commencing on the first Dividend
Payment Date after the initial issuance of a share or fractional share of the
Series A Preferred Stock, in an amount per share (rounded to the nearest whole
cent) equal to 100 times the aggregate per share amount of all cash dividends,
plus 100 times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions (other than a dividend payable in shares of
Common Stock or a distribution in connection with the subdivision of the
outstanding shares of Common Stock, by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Dividend Payment Date or,
with respect to the first Dividend Payment Date, since the initial issuance of a
share or fractional share of the Series A Preferred Stock. The multiple of 100
(the "Dividend Multiple") set forth in the preceding sentence shall be adjusted
from time to time as hereinafter provided in this paragraph (a). In the event
that the Corporation shall at any time after the effective date of this
Certificate of Designations (i) declare or pay any dividend on the Common Stock
payable in shares of Common Stock or (ii) effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then, in each such case, the
Dividend Multiple thereafter applicable to the determination of the amount of
dividends per share which the holders of shares of the Series A Preferred Stock
shall be entitled to receive shall be the Dividend Multiple in effect
immediately prior to such event multiplied by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately after such
event and the denominator of which shall be the number of shares of Common Stock
that were outstanding immediately prior to such event.
(b) The Board shall declare, out of funds legally available therefor,
a dividend or distribution on the Series A Preferred Stock, as provided in
paragraph (a) of this Section 2, immediately after it has declared a dividend or
distribution on the
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Common Stock (other than a dividend payable in shares of Common Stock).
(c) Dividends shall begin to accrue and be cumulative on the
outstanding shares of the Series A Preferred Stock from the Dividend Payment
Date next preceding the date of issuance of such shares, unless such date of
issuance shall be prior to the record date for the first Dividend Payment Date,
in which case dividends on such shares shall begin to accrue and be cumulative
from the date of issuance of such shares, or unless such date of issuance shall
be after the close of business on the record date with respect to any Dividend
Payment Date and on or prior to such Dividend Payment Date, in which case
dividends on such shares shall begin to accrue and be cumulative from such
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on shares of the Series A Preferred Stock in an amount less than
the total amount of dividends then accrued shall be allocated pro rata among
such shares. The Board may fix a record date for the determination of the
holders of shares of the Series A Preferred Stock entitled to receive payment of
any dividend or distribution declared thereon, which record date shall be not
more than the number of days prior to the date fixed for such payment permitted
by applicable law.
Section 3. Voting Rights. In addition to any other voting rights
required by applicable law, the holders of shares of the Series A Preferred
Stock shall have the following voting rights:
(d) Each share of the Series A Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of the
stockholders of the Corporation. The multiple of 100 (the "Voting Multiple")
set forth in the preceding sentence shall be adjusted from time to time as
hereinafter provided in this paragraph (a). In the event that the Corporation
shall at any time after the effective date of this Certificate of Designations
(i) declare or pay any dividend on the Common Stock payable in shares of Common
Stock or (ii) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the Voting Multiple
thereafter applicable to the determination of the number of votes per share to
which the holders of shares of the Series A Preferred Stock shall be entitled
shall be the Voting Multiple in effect immediately prior to such event
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which shall be the number of shares of Common Stock that were outstanding
immediately prior to such event.
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<PAGE>
(e) Except as otherwise provided in this Certificate of Designations,
in any other Certificate of Designations establishing another series of the
Preferred Stock (or any series of any other class of capital stock of the
Corporation) or by applicable law, the holders of the Series A Preferred Stock,
the holders of the Common Stock and the holders of any other class of capital
stock of the Corporation having general voting rights shall vote together as a
single class on all matters submitted to a vote of the stockholders of the
Corporation.
(f) Except as otherwise provided in this Certificate of Designations
or by applicable law, the holders of the Series A Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the
extent provided in paragraph (b) of this Section 3) for the taking of any
corporate action.
Section 4. Certain Restrictions.
(g) Whenever dividends or other distributions payable on the Series A
Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on
outstanding shares of the Series A Preferred Stock shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares of any class of capital stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or winding up of
the Corporation) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of any class of capital stock of the Corporation ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up of
the Corporation) with the Series A Preferred Stock, except dividends paid
ratably on the Series A Preferred Stock and all such parity stock on which
dividends are accrued and unpaid in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem, purchase or otherwise acquire for consideration any
shares of any class of capital stock of the Corporation ranking junior
(either as to dividends or upon liquidation, dissolution or winding up of
the Corporation) to the Series A Preferred Stock, except that the
Corporation may at any time redeem, purchase or otherwise acquire any
shares of such junior stock in exchange for other shares of any class of
capital stock of the Corporation ranking junior (both as to
A-4
<PAGE>
dividends and upon dissolution, liquidation or winding up of the
Corporation) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of the
Series A Preferred Stock or any shares of any class of capital stock of the
Corporation ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up of the Corporation) with the Series
A Preferred Stock, or redeem any shares of such parity stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board) to the holders of all such shares upon such terms
and conditions as the Board, after taking into consideration the respective
annual dividend rates and the other relative powers, preferences and rights
of the respective series and classes of such shares, shall determine in
good faith will result in fair and equitable treatment among the respective
holders of shares of all such series and classes.
(h) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of any class of
capital stock of the Corporation unless the Corporation could, under paragraph
(a) of this Section 4, purchase or otherwise acquire such shares at such time
and in such manner.
Section 5. Reacquired Shares. Any shares of the Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after such purchase or
acquisition. All such canceled shares shall thereupon become authorized and
unissued shares of Preferred Stock and may be reissued as part of any new series
of the Preferred Stock, subject to the conditions and restrictions on issuance
set forth in the Certificate of Incorporation of the Corporation, as amended
from time to time, in any other Certificate of Designations establishing another
series of the Preferred Stock (or any series of any other class of capital stock
of the Corporation) or in any applicable law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation (whether voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made (a) to the holders of shares of any
class of capital stock of the Corporation ranking junior (either as to dividends
or upon liquidation, dissolution or winding up of the Corporation) to the Series
A Preferred Stock unless, prior thereto, the holder of each outstanding share of
the Series A Preferred Stock shall have received an amount equal to the accrued
and unpaid dividends and distributions thereon, whether or not declared, to the
date of such payment, plus an amount equal to an aggregate amount, subject to
A-5
<PAGE>
adjustment as hereinafter provided in this Section 6, equal to 100 times the
aggregate per share amount to be distributed to the holders of the Common Stock
or (b) to the holders of shares of any class of capital stock of the Corporation
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up of the Corporation) with the Series A Preferred Stock, except
distributions made ratably on the Series A Preferred Stock and all such parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up. In the event
that the Corporation shall at any time after the effective date of this
Certificate of Designations (a) declare or pay any dividend on the Common Stock
payable in shares of Common Stock or (b) effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then, in each such case, the
aggregate amount per share which the holders of shares of the Series A Preferred
Stock shall thereafter be entitled to receive pursuant to clause (a)(ii) of the
preceding sentence shall be the aggregate amount per share in effect pursuant to
such clause immediately prior to such event multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately after such event and the denominator of which shall be the number of
shares of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In the event that the
Corporation shall be a party to any consolidation, merger, combination or other
transaction in which the outstanding shares of Common Stock are converted or
changed into or exchanged for other capital stock, securities, cash or other
property, or any combination thereof, then, in each such case, each share of the
Series A Preferred Stock shall at the same time be similarly converted or
changed into or exchanged for an aggregate amount, subject to adjustment as
hereinafter provided in this Section 7, equal to 100 times the aggregate amount
of capital stock, securities, cash and/or other property (payable in kind), as
the case may be, into which or for which each share of Common Stock is being
converted or changed or exchanged. In the event that the Corporation shall at
any time after the effective date of this Certificate of Designations (a)
declare or pay any dividend on the Common Stock payable in shares of Common
Stock or (ii) effect a subdivision, combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the aggregate amount per
share which the holders of shares of the Series A Preferred Stock shall
thereafter be entitled to receive pursuant to the preceding sentence shall be
the aggregate amount
A-6
<PAGE>
per share in effect pursuant to such sentence immediately prior to such event
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which shall be the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 8. No Redemption. The shares of the Series A Preferred Stock
shall not be redeemable at any time.
Section 9. Rank. Unless otherwise provided in the Certificate of
Designations establishing another series of the Preferred Stock after the
effective date of this Certificate of Designations, the Series A Preferred Stock
shall rank, as to the payment of dividends and the making of any other
distribution of assets of the Corporation, senior to the Common Stock, but
junior to all other series of the Preferred Stock.
Section 10. Amendments. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences and rights of the Series A Preferred Stock so as
to adversely affect any thereof without the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the Series A Preferred Stock,
voting separately as a single class.
Section 11. Fractional Shares. Fractional shares of the Series A
Preferred Stock may be issued, but, unless the Board shall otherwise determine,
only in multiples of one one-hundredth of a share. The holder of any fractional
share of the Series A Preferred Stock shall be entitled to receive dividends,
participate in distributions, exercise voting rights and have the benefit of all
other powers, preferences and rights relating to the Series A Preferred Stock in
the same proportion as such fractional share bears to a whole share.
A-7
<PAGE>
IN WITNESS WHEREOF, PEAPOD, INC. has caused this Certificate to be
signed by Thomas L. Parkinson, its Executive Vice President, Content and
Consumer Product Development this ___day of____________, 1997.
PEAPOD, INC.
By: _____________________________
Thomas L. Parkinson
Executive Vice President,
Content and Consumer Product
Development
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<PAGE>
Exhibit B
---------
FORM
of
RIGHTS CERTIFICATE
Certificate No. R- _________ Rights
_______ Aggregate Number of
Shares of Series A Junior
Participated Preferred Stock
Initially Purchasable
NOT EXERCISABLE AFTER _______________, 2007 OR EARLIER IF REDEMPTION
OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF PEAPOD, INC., AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS
SET FORTH IN THE STOCKHOLDERS RIGHTS AGREEMENT HEREINAFTER MENTIONED.
UNDER CERTAIN CIRCUMSTANCES DESCRIBED IN SUCH AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY A RESTRICTED PERSON (AS SUCH TERM IS DEFINED IN
SUCH AGREEMENT), OR BY SPECIFIED TRANSFEREES FROM A RESTRICTED PERSON,
SHALL BE OR BECOME VOID.
B-1
<PAGE>
RIGHTS CERTIFICATE
PEAPOD, INC.
This certifies that _________________________, or registered
assigns, is the registered owner of the number of Rights set forth above, each
of which entitles the owner, subject to the terms, provisions and conditions of
the Stockholders Rights Agreement dated as of ____________, 1997 (the "Rights
Agreement") between Peapod, Inc., a Delaware corporation (the "Company"), and
_______________ (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date and prior to the Close of Business on ___________,
2007, at the principal office of the Rights Agent or its successor as Rights
Agent, one one-hundredth of a fully paid and nonassessable share of Series A
Junior Participating Preferred Stock, $.01 par value (the "Preferred Shares"),
of the Company at a price (the "Exercise Price") of $___ per one one-hundredth
of a Preferred Share, upon presentation and surrender of this Rights Certificate
with the Form of Election to Purchase and the related Form of Certification of
Status duly executed, together with such signature guarantees and other
documentation as the Rights Agent may reasonably request. The number of Rights
evidenced by this Rights Certificate (as well as the number of one one-
hundredths of a Preferred Share which may be purchased upon the exercise of each
Right) set forth above, and the Exercise Price set forth above, are the numbers
and the Exercise Price as of ________________, based on the Preferred Shares as
constituted on such date. As provided in the Rights Agreement, such number of
Rights (and/or such number of one one-hundredths of a Preferred Share) and such
Exercise Price are subject to change and adjustment upon the happening of
certain events specified in the Rights Agreement. Capitalized terms not defined
herein have the respective meanings specified in the Rights Agreement.
From and after the first occurrence of any Section 11(a)(ii) Event, if
the Rights evidenced by this Rights Certificate are Beneficially Owned by (i) a
Restricted Person, (ii) a transferee from a Restricted Person who becomes a
transferee after the Acquiring Person becomes such or (iii) under certain
circumstances specified in the Rights Agreement, a transferee from a Restricted
Person who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such, such Rights shall be or become void, and no holder hereof
shall have any rights whatsoever with respect to such Rights.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
incorporated herein by reference and
B-2
<PAGE>
made a part hereof, to which Rights Agreement reference is hereby made for a
full description of the rights, powers, obligations, duties and immunities
hereunder of the Company, the Rights Agent and the holders of the Rights
Certificates. Under the circumstances set forth in the Rights Agreement, the
exercisability of the Rights represented hereby may be temporarily suspended.
The Rights Agreement is on file at the principal office of the Company and at
the principal office of the Rights Agent, and a copy will be provided upon
written request to the Secretary of the Company.
Upon surrender at the principal office of the Rights Agent, this
Rights Certificate, with or without other Rights Certificates, may be exchanged
for one or more Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase the same aggregate number of one one-hundredths
of a Preferred Share as the Rights evidenced by the Rights Certificates so
surrendered. If this Rights Certificate shall be exercised in part, the holder
hereof shall be entitled to receive, upon surrender hereof, one or more Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Rights Certificate (i) may be redeemed, at the direction of
the Board, at a redemption price (subject to adjustment) of $.01 per Right
(payable in cash, shares of Common Stock of the Company or any other form of
consideration deemed appropriate by the Board) or (ii) under certain
circumstances, may be exchanged, in whole or in part, at the direction of the
Board, for shares of Common Stock of the Company or Preferred Shares at an
exchange rate (subject to adjustment) of one share of Common Stock or one one-
hundredth of a Preferred Share per Right.
No fractional Preferred Share will be issued upon the exercise of any
Rights represented hereby (other than fractions which are a multiple of one one-
hundredth of a Preferred Share), but in lieu thereof a cash payment will be made
as provided in the Rights Agreement.
No holder, as such, of this Rights Certificate shall be entitled to
vote, to receive dividends or other distributions on or to exercise any
preemptive rights with respect to, or shall be deemed for any other purpose to
be the holder of, the Preferred Shares or other shares of capital stock of any
class of the Company which may at any time be issuable upon exercise hereof; nor
shall anything contained herein or in the Rights Agreement be construed to
confer upon the holder hereof, as such, any of the rights of a stockholder of
the Company, or any right to vote for the election of directors or upon any
other matter submitted to stockholders at any meeting thereof, to give or
withhold consent to any corporate action, to receive notice of meetings or other
actions affecting
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<PAGE>
stockholders (except as provided in the Rights Agreement) or to receive
dividends, subscription rights or other distributions, until the Rights
evidenced by this Rights Certificate shall have been exercised, in whole or in
part, in accordance with the provisions of the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
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<PAGE>
IN WITNESS WHEREOF, this Rights Certificate has been executed by the
Company by the duly authorized facsimile signature of a proper officer of the
Company and a facsimile of its corporate seal has been imprinted hereon and duly
attested by the duly authorized facsimile signature of a proper officer of the
Company.
Dated as of _______________, 1997.
PEAPOD, INC.
(Corporate Seal) By: ______________________________
Name:
Title:
ATTEST:
______________________________
Name:
Title:
Countersigned:
_______________________________________,
as Rights Agent
By____________________________
Authorized Signature
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<PAGE>
[Reverse Side of Rights Certificate]
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by this Rights Certificate)
To Peapod, Inc.:
The undersigned hereby irrevocably elects to exercise __________
Rights represented by this Rights Certificate to purchase the Preferred Shares
(or other securities, cash or property) issuable upon the exercise of such
Rights and requests that certificates for such Preferred Shares be issued in the
name of:
Please insert social security
or other identifying number: ____________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights represented by this Rights
Certificate, a new Rights Certificate for the remaining unexercised Rights shall
be registered in the name of and delivered to:
Please insert social security
or other identifying number: ____________________
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated: _______________, 19__
_______________________________________
Signature
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<PAGE>
Signature Guaranteed: ________________________________
Signatures must be guaranteed by a participant in a recognized
Signature Guaranty Medallion Program.
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate
boxes that:
(1) this Rights Certificate
[_] is
[_] is not
being exercised by or on behalf of a Person who is or was a Restricted Person
(as such term is defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[_] did
[_] did not
acquire, directly or indirectly, the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became a Restricted Person.
_______________________________________
Signature
Date: _______________, 19__
B-7
<PAGE>
NOTICE
------
The signature(s) on the foregoing Form of Election to Purchase and
Certification of Status must correspond to the name written upon the face of
this Rights Certificate in every particular, without alteration or enlargement
or any change whatsoever.
In the event the Certification of Status set forth above is not
completed, the Company will deem the Beneficial Owner of the Rights represented
by this Rights Certificate to be a Restricted Person (as such term is defined in
the Rights Agreement), will not honor the Election to Purchase and will affix a
legend to such effect on this Rights Certificate and on any Rights Certificates
issued in exchange for this Rights Certificate.
B-8
<PAGE>
[Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if such
holder desires to transfer this Rights Certificate)
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: _______________, 19__
_______________________________________
Signature
Signature Guaranteed: ________________________________
Signatures must be guaranteed by a participant in a recognized
Signature Guaranty Medallion Program.
B-9
<PAGE>
CERTIFICATION OF STATUS
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate
[_] is
[_] is not
being sold, assigned or transferred by or on behalf of a Person who is or was a
Restricted Person (as such term is defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the
undersigned, it
[_] did
[_] did not
acquire, directly or indirectly the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became a Restricted Person.
_______________________________________
Signature
Date: _______________, 19__
B-10
<PAGE>
NOTICE
------
The signature(s) on the foregoing Form of Assignment and Certification
of Status must correspond to the name written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the Certification of Status set forth above is not
completed, the Company will deem the Beneficial Owner of the Rights represented
by this Rights Certificate to be a Restricted Person (as such term is defined in
the Rights Agreement), will not honor the Assignment and will affix a legend to
such effect on this Rights Certificate and any Rights Certificates issued in
exchange for this Rights Certificate.
B-11
<PAGE>
Exhibit C
---------
SUMMARY OF RIGHTS TO PURCHASE
SHARES OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
On May 29, 1997, the Board of Directors (the "Board") of Peapod, Inc.,
a Delaware corporation (the "Corporation"), declared a dividend of one preferred
stock purchase right (a "Right") for each outstanding share of Common Stock,
$.01 par value (the "Common Stock"), of the Corporation. The dividend is
payable on the effective date of the Corporation's initial public offering
registration statement, file no. 333-24341 (the "Record Date") to the holders of
record of the Common Stock at the Close of Business on such date. Each Right
entitles the holder thereof (except as described below) to purchase from the
Corporation one one-hundredth of a share of the Series A Junior Participating
Preferred Stock, $.01 par value (the "Preferred Shares"), of the Corporation at
a price (the "Exercise Price") of $98.00 per one one-hundredth of a Preferred
Share, subject to adjustment. The terms of the Rights are set forth in the
Stockholders Rights Agreement dated as of June 9, 1997 (the "Rights Agreement")
between the Corporation and First Chicago Trust Company of New York, as Rights
Agent (the "Rights Agent"). Capitalized terms not defined herein have the
respective meanings specified in the Rights Agreement.
Distribution Date; Transfer of Rights
Initially, the Rights associated with the Common Stock outstanding as
of the Record Date will be evidenced solely by the stock certificates for such
Common Stock. The Rights will separate from the Common Stock upon the earliest
to occur of (i) 10 Business Days after the first public announcement that any
Person (other than an Exempt Person (as hereinafter defined)) has become an
Acquiring Person (as hereinafter defined) and (ii) 10 Business Days (or such
other Business Day as may be determined by action of the Board prior to the time
that any Person shall become an Acquiring Person (as hereinafter defined) after
the commencement by any Person (other than an Exempt Person) of, or the first
public announcement of its intention to commence, a tender or exchange offer if,
upon the consummation thereof, such Person would be the Beneficial Owner of 15%
or more of the outstanding shares of Common Stock (the earliest of the dates
specified in clauses (i) and (ii) being hereinafter called the "Distribution
Date"). After the Distribution Date, the Rights will be evidenced solely by
separate certificates and will trade independently from the Common Stock.
An "Acquiring Person" is any Person who or which, together with its
Affiliates and Associates, has acquired 15% or
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<PAGE>
more of the shares of Common Stock then outstanding, but does not include (i)
the Corporation, (ii) any Subsidiary of the Corporation, (iii) any employee
benefit plan or other compensation program or arrangement of the Corporation or
of any such Subsidiary or (iv) any Person holding shares of Common Stock for or
pursuant to the terms of any such plan, program or arrangement (the Persons
specified in clauses (i) through (iv) being herein collectively called "Exempt
Persons"). Notwithstanding the foregoing, if the Board of Directors of the
Corporation determines in good faith that a Person who would otherwise be an
"Acquiring Person," has become so inadvertently, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an "Acquiring Person," then such Person shall not
be deemed to be an "Acquiring Person."
A "Disinterested Director" is (i) any member of the Board who is not a
Restricted Person (as hereinafter defined), or a representative or nominee of a
Restricted Person, and was a member of the Board prior to the date of the Rights
Agreement and (ii) any individual who subsequently becomes a member of the Board
and is not a Restricted Person, or a representative or nominee of a Restricted
Person, and whose nomination for election to the Board is recommended or
approved by a majority of the Disinterested Directors then in office. A
"Restricted Person" is an Acquiring Person or any Affiliate or Associate
thereof.
The Rights Agreement provides that, until the Distribution Date (or
the earlier redemption or expiration of the Rights), the Rights may be
transferred only with the associated shares of Common Stock. Until the
Distribution Date (or the earlier redemption or expiration of the Rights), stock
certificates for Common Stock issued after the Record Date, either upon transfer
of outstanding shares or original issuance of additional shares of Common Stock,
will contain a legend incorporating the Rights Agreement by reference. Until the
Distribution Date (or the earlier redemption or expiration of the Rights), the
surrender for transfer of any stock certificate for shares of Common Stock, with
or without such legend and whether or not a copy of this Summary of Rights is
attached thereto, will also constitute the transfer of the Rights associated
with the shares of Common Stock represented by such stock certificate.
As soon as practicable after the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to the
holders of record of the Common Stock as of the Close of Business on the
Distribution Date, which thereafter will constitute the sole evidence of the
Rights. Each share of Common Stock issued by the Corporation after the Record
Date and prior to the earlier redemption or expiration of the Rights, including
any shares of Common Stock issued by reason of the exercise of any option,
warrant, right (other than the Rights) or conversion or exchange privilege
(however evidenced) issued by the
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<PAGE>
Corporation prior to the Distribution Date, will be accompanied by a Right
(unless the Board expressly provides to the contrary at the time of issuance of
any such option, warrant, right or privilege), and Rights Certificates
evidencing such Rights will be issued at the same time as the stock certificates
for the associated shares of Common Stock.
The Rights are not exercisable until the Distribution Date. Moreover,
the time when the Rights may be exercised is restricted as described in the next
paragraph. The Rights will expire on the tenth anniversary of the Record Date
(the "Final Expiration Date"), unless the Final Expiration Date is extended or
unless the Rights are earlier redeemed or exchanged by the Corporation, in each
case as described below.
Exercise of Rights Under Certain Circumstances
In the event that any Person becomes an Acquiring Person, proper
provision will be made so that the registered holder of each Right (other than
Rights Beneficially Owned as described in the next sentence) will thereafter
have the right to receive, upon exercise thereof, the number of shares of Common
Stock which, at the time of the occurrence of such event, will have a market
value equal to two times the then current Exercise Price. After the first
occurrence of either of the events described in the preceding sentence, all
Rights which are, or (under certain circumstances specified in the Rights
Agreement) were, Beneficially Owned by a Restricted Person or specified
transferees therefrom will be or become void. Under no circumstances may a
Right be exercised after the occurrence of either such event unless the
Corporation's right to redeem the Rights (as described below) has expired.
If, on or after the date on which any Person has become an Acquiring
Person, any of the following transactions occur: (i) the Corporation merges
into or consolidates with an Interested Stockholder (as hereinafter defined) or,
unless all holders of the Corporation's outstanding shares of Common Stock are
treated the same, another Person (with limited designated exceptions); (ii) an
Interested Stockholder or, unless all holders of the Corporation's outstanding
shares of Common Stock are treated the same, another Person (with limited
designated exceptions) merges into the Corporation and either (A) all or part of
the outstanding shares of Common Stock of the Corporation are converted into
capital stock or other securities of any other Person (or the Corporation), cash
and/or other property or (B) such shares remain outstanding, unconverted and
unchanged; or (iii) the Corporation sells or transfers 50% or more of its
consolidated assets or earning power to an Interested Stockholder (as
hereinafter defined) or, unless all holders of the Corporation's outstanding
shares of Common Stock are treated the same, another Person (with limited
designated exceptions); proper provision will be made so that the registered
holder of each Right (other than Rights which have become void)
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<PAGE>
will thereafter have the right (the "Flip-Over Right") to receive, upon exercise
thereof, the number of common shares of the acquiror (or of another Person
affiliated therewith) which, at the time of consummation of such transaction,
will have a market value equal to two times the then current Exercise Price. An
"Interested Stockholder" is any Restricted Person or any Affiliate or Associate
of any other Person in which such Restricted Person has an interest, or any
Person acting, directly or indirectly, on behalf of or in concert with any such
Restricted Person.
Adjustments to Exercise Price and Stock Purchasable Upon Exercise
The Exercise Price payable, the number and kind of shares of capital
stock issuable upon exercise of the Rights and the number of Rights outstanding
are subject to adjustment from time to time to prevent dilution (i) in the event
of a dividend payable in Preferred Shares on, or a subdivision, combination or
reclassification of, the Preferred Shares, (ii) upon the grant to the holders of
the Preferred Shares of certain options, warrants or rights to subscribe for or
purchase Preferred Shares at a price, or securities convertible into or
exchangeable for Preferred Shares with a conversion or exchange price, less than
the then Fair Market Value of the Preferred Shares or (iii) upon the
distribution to the holders of the Preferred Shares of cash, securities,
evidences of indebtedness or other property (other than a regular quarterly cash
dividend or a dividend payable in Preferred Shares) or options, warrants or
rights (other than those referred to in clause (ii) above).
The number of outstanding Rights and the number of one one-hundredths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a dividend on the Common Stock payable in shares of
Common Stock or a subdivision, combination or reclassification of the Common
Stock occurring, in any such case, prior to the Distribution Date.
With certain specified exceptions, no adjustment in the Exercise Price
will be made until the cumulative adjustments required equal at least 1% of the
Exercise Price. The Corporation is not required to issue fractional Preferred
Shares (other than fractions which are multiples of one one-hundredth of a
Preferred Share), but in lieu thereof the Corporation would be required to make
a cash payment based on the Fair Market Value of the Preferred Shares on the
trading day immediately preceding the date of exercise.
Terms of Preferred Shares
The Preferred Shares receivable upon exercise of the Rights will not
be redeemable. Each Preferred Share will entitle the holder thereof to receive
a preferential quarterly dividend equal to 100 times the aggregate per share
amount of all cash
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<PAGE>
dividends, plus 100 times the aggregate per share amount (payable in kind) of
all non-cash dividends and other distributions (other than in shares of Common
Stock), declared on the Common Stock during such quarter, adjusted to give
effect to any dividend on the Common Stock payable in shares of Common Stock or
any subdivision, combination or reclassification of the Common Stock (a
"Dilution Event"). Each Preferred Share will entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation,
voting together as a single class with the holders of the Common Stock and the
holders of any other class of capital stock having general voting rights,
adjusted to give effect to any Dilution Event. In the event of liquidation of
the Corporation, the holder of each Preferred Share will be entitled to receive
a preferential liquidation payment equal to 100 times the aggregate per share
amount to be distributed to the holders of the Common Stock, adjusted to give
effect to any Dilution Event, plus an amount equal to accrued and unpaid
dividends and distributions on such Preferred Share, whether or not declared, to
the date of such payment. In the event of any merger, consolidation or other
transaction in which the outstanding shares of Common Stock of the Corporation
are exchanged for or converted into other capital stock, securities, cash and/or
other property, each Preferred Share will be similarly exchanged or converted
into 100 times the per share amount applicable to the Common Stock, adjusted to
give effect to any Dilution Event.
Because of the nature of the dividend, voting, liquidation and other
rights accorded to each Preferred Share, the value of the one one-hundredth of a
Preferred Share receivable upon the exercise of each Right should approximate
the value of one share of Common Stock.
Redemption of Rights
At any time prior to the earliest of (i) 10 Business Days after the
first public announcement that any Person (other than an Exempt Person) has
become an Acquiring Person, (ii) the occurrence of any transaction which permits
the exercise of the Flip-Over Right and (iii) the Final Expiration Date, the
Board may redeem the Rights in whole, but not in part, at the redemption price
of $.01 per Right, adjusted to give effect to any Dilution Event (the
"Redemption Price"). The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the Board, in its sole
discretion, may establish. After the redemption period has expired, the
Corporation's right of redemption may be reinstated, under the circumstances
specified in the Rights Agreement, which include the concurrence of at least a
majority of the Disinterested Directors, if either (i) the Person who became an
Acquiring Person shall reduce, in one or a series of related transactions not
involving the Corporation or any Subsidiary or the occurrence of any transaction
which permits the exercise of the Flip-Over Right, its Beneficial Ownership of
the
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<PAGE>
outstanding shares of Common Stock to less than 10% of such outstanding shares
or (ii) in connection with any transaction which permits the exercise of the
Flip-Over Right, which does not involve an Interested Stockholder and in which
all holders of the Common Stock are treated the same. Immediately after action
by the Board directing the redemption of the Rights, the option to exercise the
Rights will terminate, and thereafter each registered holder of the Rights will
only be entitled to receive the Redemption Price therefor.
Exchange of Rights
At any time after any Person has become an Acquiring Person and prior
to the time that any Person (other than an Exempt Person), together with its
Affiliates and Associates, has become the Beneficial Owner of 50% or more of the
outstanding shares of Common Stock, the Board may direct that all or any part of
the outstanding Rights (other than Rights which have become void) be exchanged
for shares of Common Stock at the exchange rate of one share of Common Stock (or
one one-hundredth of a Preferred Share or of another share of capital stock of
the Corporation having equivalent rights, preferences and privileges) per Right,
adjusted to give effect to any Dilution Event.
Amendment of the Rights and the Rights Agreement
Prior to the Distribution Date, the terms of the Rights and the Rights
Agreement may be supplemented or amended by the Board in any manner. From and
after the Distribution Date, the Rights may be supplemented or amended by the
Board, without the approval of the holders of the Rights, in certain respects
which do not adversely affect, as determined by the Board (with the concurrence
of at least a majority of the Disinterested Directors), the interests of such
holders; provided, however, that the Rights Agreement cannot be amended to
lengthen (i) any time period unless (A) such lengthening is approved by at least
a majority of the Disinterested Directors and (B) such lengthening is for the
benefit of the holders of the Rights or (ii) any time period relating to when
the Rights may be redeemed if at such time the Rights are not then redeemable.
Miscellaneous
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Corporation, including, without limitation, the
right to vote or to receive dividends.
C-6
<PAGE>
A copy of the Rights Agreement is available free of charge from the
Corporation. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
C-7
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF SIDLEY & AUSTIN]
June 9, 1997
Peapod, Inc.
1033 University Place
Suite 375
Evanston, Illinois 60201
Re: Registration of 3,600,000 shares of Common
Stock, $.01 par value, and Associated
Preferred Stock Purchase Rights
Ladies and Gentlemen:
We refer to the Registration Statement (Registration No. 333-24341) on
Form S-1 filed on April 1, 1997 by Peapod, Inc., a Delaware corporation (the
"Company"), with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), Amendment No. 1
thereto filed with the SEC on May 12, 1997, Amendment No. 2 thereto filed with
the SEC on May 15, 1997 and Amendment No. 3 thereto being filed with the SEC on
June 9, 1997 (such registration statement, as so amended, being hereinafter
referred to as the "Registration Statement") relating to the registration of
4,140,000 shares of Common Stock, $.01 par value (the "Shares"), of the Company,
together with 4,140,000 Preferred Stock Purchase Rights (the "Rights")
associated therewith. The terms of the Rights are set forth in the Rights
Agreement to be entered into (the "Rights Agreement") between the Company and
First Chicago Trust Company of New York, as Rights Agent.
The Shares include 3,600,000 shares (the "Company Shares") to be sold
by the Company and up to 540,000 shares, some or all of which may be sold by
certain selling stockholders named in the Registration Statement pursuant to an
over-allotment option (the "Overallotment Shares").
We are familiar with the proceedings to date with respect to the
proposed offering and sale of the Shares, together with the associated Rights,
and have examined such records,
<PAGE>
SIDLEY & AUSTIN CHICAGO
Peapod, Inc.
June 9, 1997
Page 2
documents and questions of law, and satisfied ourselves as to such matters of
fact, as we have considered relevant and necessary as a basis for this opinion.
Based on the foregoing, we are of the opinion that:
1. The Company is duly incorporated and validly existing under the
laws of the State of Delaware.
2. The Company Shares will be legally issued, fully paid and non-
assessable when (i) the Registration Statement, as finally amended, shall have
become effective under the Securities Act; (ii) the Company's Board of Directors
or a duly authorized committee thereof shall have duly adopted final resolutions
authorizing the issuance and sale of the Company Shares as contemplated by the
Registration Statement; and (iii) certificates representing the Company Shares
shall have been duly executed, countersigned and registered and duly delivered
to the purchasers thereof against payment of the agreed consideration therefor
(not less than the par value thereof).
3. The Overallotment Shares have been legally issued and are fully
paid and non-assessable.
4. The Rights associated with the Company Shares will be legally
issued when (i) the Registration Statement, as finally amended, shall have
become effective under the Securities Act; (ii) the Company's Board of Directors
or a duly authorized committee thereof shall have duly adopted final resolutions
authorizing the issuance of the Rights as contemplated by the Registration
Statement;(iii) such Rights shall have been duly issued in accordance with the
terms of the Rights Agreement; and (iv) the Company Shares shall have been duly
issued and paid for as set forth in paragraph 2.
5. The Rights associated with the Overallotment Shares will be
legally issued when such Rights shall have been duly issued in accordance with
the terms of the Rights Agreement.
We do not find it necessary for the purpose of this opinion to cover,
and accordingly we express no opinion as to, the application of the securities
or blue sky laws of the various states to the sale of the Shares or the Rights.
This opinion is limited to the General Corporation Law of the State of
Delaware and the Securities Act.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all references to
<PAGE>
SIDLEY & AUSTIN CHICAGO
Peapod, Inc.
June 9, 1997
Page 3
our Firm included in or made a part of the Registration Statement. In giving
such consent, we do not thereby admit that we are within the category of persons
whose consent is required by Section 7 of the Securities Act or the related
Rules promulgated by the SEC.
Very truly yours,
Sidley & Austin
<PAGE>
EXHIBIT 10.1
CONVERSION AGREEMENT
AND PLAN OF REORGANIZATION
--------------------------
THIS CONVERSION AGREEMENT AND PLAN OF REORGANIZATION is made and entered
into this 30th day of May, 1997, by and among New Peapod, Inc., a Delaware
corporation ("NPI"), Peapod LP, an Illinois limited partnership ("PLP"), Peapod,
Inc., a Delaware corporation ("OPI"), and ELI-Pod, Inc. ("ELI-Pod").
RECITALS
--------
WHEREAS, the parties believe that it is in the best interests of PLP to
conduct its business in the future as a corporation; and
WHEREAS, the parties desire to effect such incorporation by converting PLP
into a corporation through a combination of tax-free reorganizations under
Section 368(a)(1)(C) of the Code, tax-free unit transfers under Section 351 of
the Code, and the subsequent dissolution of PLP; and
WHEREAS, OPI is the sole general partner of PLP and possesses the authority
under the Partnership Agreement to cause all of PLP's limited partners to
transfer their Units to NPI for purposes of the Conversion; and
WHEREAS, as an integral part of each Reorganization, OPI and ELI-Pod will
each distribute the Stock it receives and liquidate after the First Closing.
NOW THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties agree as follows:
ARTICLE I
---------
DEFINITIONS
-----------
For purposes of this Agreement, the following terms shall have the
following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986, as amended.
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<PAGE>
(b) "Conversion" shall mean the integrated series of transactions by
which the entire business of PLP is transferred to NPI as a result of NPI
acquiring all of the outstanding Units in exchange for Stock.
(c) "First Closing" shall mean the closing of the transfer of the
Units held by OPI, ELI-Pod, and the other Transferors in exchange for Stock as
contemplated by this Agreement.
(d) "IPO" shall mean the initial public offering pursuant to which NPI
will offer, through underwriters, shares of its Stock to the public subsequent
to, and in reliance on, the Conversion.
(e) "Partnership Act" shall mean the Illinois Uniform Revised Limited
Partnership Act.
(f) "Partnership Agreement" shall mean the Agreement of Limited
Partnership of Peapod LP, executed as of the 14th day of May, 1992, as amended.
(g) "Reorganization" shall mean the transactions in which (i) OPI
transfers substantially all of its properties to NPI solely in exchange for
Stock and (ii) ELI-Pod transfers substantially all of its properties to NPI
solely in exchange for Stock.
(h) "Second Closing" shall mean the closing of the transfer of the
business of PLP to NPI.
(i) "Stock" shall mean voting common stock, $.01 par value, with
associated preferred stock purchase rights to purchase 1/100 of a share of
Series A Junior Participating Preferred Stock, par value $.001 per share, of
NPI.
(j) "Transferors" shall mean OPI, ELI-Pod, and all other limited
partners of PLP.
(k) "Transferred Property" shall mean all of the Units owned by OPI.
(l) "Units" shall mean a partner's equity interest in PLP, as defined
in the Partnership Agreement.
ARTICLE II
----------
THE TRANSACTION
---------------
2.1 First Closing Exchanges. At the First Closing:
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<PAGE>
(a) OPI hereby agrees to transfer, assign and deliver to NPI the
Transferred Property, which will constitute substantially all of the property of
OPI now and on the date of the First Closing, free and clear of all liens,
claims, security interests or restrictions on transfer, solely in exchange for
one share of Stock for each Unit transferred to NPI. NPI shall not assume and
shall not be liable or responsible for any debt, liability or obligation of OPI,
whether known or unknown, including any obligations with respect to OPI's
outstanding options, warrants, or similar interests, and whether or not related
to the Transferred Property.
(b) ELI-Pod hereby agrees to transfer, assign and deliver to NPI all
its Units, which will constitute substantially all of the property of ELI-Pod
now and on the date of the First Closing, free and clear of all liens, claims,
security interests or restrictions on transfer, solely in exchange for one share
of Stock for each Unit transferred to NPI. NPI shall not assume and shall not be
liable or responsible for any debt, liability or obligation of ELI-Pod, whether
known or unknown, including any obligations with respect to ELI-Pod's
outstanding options, warrants, or similar interests, if any, and whether or not
related to the Units it holds.
(c) Immediately prior to the transfers set forth in Section 2.1(a)
hereof, OPI, in its capacity as the sole general partner of PLP, and pursuant to
the authority granted it under Section 13.11 of the Partnership Agreement,
hereby agrees, on behalf of itself and the Transferors, to cause to be
transferred, assigned and delivered to NPI, all of the Units owned of record by
the limited partners of PLP on the date of the First Closing, solely in exchange
for one share of Stock for each Unit transferred to NPI.
(d) NPI hereby agrees to issue and deliver to the Transferors one
share of Stock for each Unit transferred to NPI. Such Stock shall, upon receipt
respectively of the consideration described in Sections 2.1(a) and 2.1(b) and
(c) hereof, be fully-paid, validly-issued and non-assessable. The shares of
Stock shall be registered in the respective names of the exchanging Unit holders
or such names as shall be designated by such parties.
2.2 Second Closing Transfers. At the Second Closing, the entire business
then conducted by PLP shall be assigned, transferred and delivered to NPI,
pursuant to Section 8 of the Partnership Act and such instruments of conveyance
and assumption as PLP and NPI deem appropriate, all as more fully described in
Article IV hereof.
2.3 OPI and ELI-Pod Distributions. After the First Closing, each of OPI
and ELI-Pod shall distribute the Stock received in the Reorganization, as well
as its other properties, as a part of, and pursuant to, this plan of
reorganization. Such distribution may be in one distribution, or in a series of
distributions, all of which shall be in liquidation of the respective entities.
ARTICLE III
-----------
PLP DISSOLUTION
---------------
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<PAGE>
3.1 PLP Asset Transfers. PLP shall transfer to NPI all of its properties,
business and assets of every kind and description to the extent assignable,
whether real, personal, or mixed, whether tangible or intangible, and wherever
located, as they shall exist at the Second Closing. Such transfers shall
include, but shall not be limited to:
(a) all cash, cash equivalents and investments.
(b) all accounts and notes receivable.
(c) all prepaid expenses.
(d) all other tangible and intangible property used in the conduct of
the business of PLP, including all property and equipment, all office
furnishings, fixtures, supplies and leasehold improvements, all automobiles and
other transportation equipment, all computer equipment, and all machinery and
equipment.
(e) all goodwill, technical and marketing information, new
developments, inventions, ideas, know-how, trade secrets and documentation
thereof.
(f) all patents, trademarks, service marks, copyrights and trade
names, and all applications (whether pending or in the process of preparation)
and registrations therefor which are owned by PLP, and all trade secrets and
know-how and all licenses with respect to any of the foregoing.
(g) all software and documentation thereof (including all electronic
data processing systems and program specifications, source codes, data,
documentation and other materials) related to the business.
(h) all customer files, collection and credit records, purchasing
records, supplier lists, parts lists, advertising literature, vendor lists, and
all rights or claims in or under customer and supplier contracts.
(i) all rights, claims or entitlements arising from the conduct of
the PLP business or which relate to or arise from or in connection with the
transferred assets.
(j) all rights under all oral and written retailer, sponsor, service,
development, confidentiality, employment, license or other agreements related to
the business of PLP.
(k) all transferable governmental licenses, permits, approvals,
registrations, certificates of occupancy and license and permit applications.
(l) all documents and records related to the assets or the business of
PLP.
-4-
<PAGE>
(m) all security deposits on leases to which PLP is a party.
(n) all rights under all contracts to which PLP is a party which are
not otherwise specified above.
3.2 PLP Liabilities and Obligations. NPI shall assume, discharge and
otherwise be responsible for all debts, obligations, responsibilities or
liabilities of PLP arising at any time prior to the Second Closing, whether
known or unknown, contingent or absolute, accrued or unaccrued, liquidated or
unliquidated, or otherwise. Without limiting the generality of the foregoing,
NPI shall assume and be liable for all:
(a) Express or implied employment agreements and employment policies
or procedures;
(b) PLP contracts, whether express, implied, oral, informal or other;
(c) Liabilities of PLP to creditors for accounts or notes payable and
liabilities under capital leases;
(d) Liabilities and obligations to current or former employees of PLP
including, but not limited to, liabilities for accrued vacation pay, bonuses,
sick leave and holiday pay, liabilities for accident, disability, health or
workers' compensation insurance or benefits, obligations to employees for
severance pay, if any, any liability or responsibility for maintenance or
continuation of employee insurance following termination of employment, any
liability or obligation under any pension, profit sharing or other employee
benefit plan relating to employees of PLP and any liability or obligation of PLP
for the payment of wages, salaries and benefits, pension contributions or profit
sharing contributions;
(e) Liabilities and obligations for taxes of any kind, including
federal, state and local taxes, withholding taxes, duties and assessments,
excise taxes, FICA contributions, or penalties or interest on any of the
foregoing, whether or not accrued as of the Second Closing Date;
(f) Liabilities, obligations or claims for damage or injury (real or
alleged) to persons or property including, but not limited to, product liability
and infringement claims arising from the business conducted by PLP prior to the
date of the Second Closing; and
(g) Liabilities and obligations with respect to litigation, if any,
whether or not pending as of the date of the Second Closing.
3.3 Personnel and Plans.
(a) PLP and NPI agree that, effective as of the Second Closing, NPI
shall employ each then employee of PLP, whether such employee is part time or
full time and active or inactive,
-5-
<PAGE>
upon terms substantially similar to the terms enjoyed by such employee
immediately prior to the Second Closing, provided that Section 3.3(a) does not
confer any rights or remedies upon such employees, and NPI may terminate such
employment at any time consistent with existing agreements which may be amended
from time to time.
(b) PLP and NPI agree that, effective as of the Second Closing, NPI
shall be substituted for PLP as the employer under all Plans and any other plan
or arrangement under which PLP provides or ever has provided current or deferred
compensation or other benefits to its current or former employees, and NPI shall
assume all of the rights, duties and obligations of the sponsoring employer
under all such plans and arrangements. In accordance with the foregoing, PLP
shall assume and be vested with all of the powers, duties, rights, privileges,
discretions and obligations of PLP as the employer under the Plans. For all
purposes of the Plans, PLP's transferred employees shall be deemed to be
employed and to have been employed by NPI to the extent they were employed by
PLP, and no break or interruption of employment or participation of an employee
shall be deemed to have occurred by reason of the transfer of employees from PLP
to NPI or by reason of the transfer of the Plans as set forth herein. The names
of the Plans shall be changed to reflect the substitution of NPI for PLP as
contemplated herein.
3.4 PLP Options and Warrants.
(a) At the Second Closing, each outstanding option and warrant to
purchase Units (each, an "Option"), shall be assumed by NPI and shall constitute
an option to acquire, on substantially the same terms and conditions as were
applicable under such Option, including, without limitation, term,
exercisability, vesting schedule, acceleration and termination provisions, the
same number of shares of Stock, rounded down to the nearest whole share.
(b) Employment with PLP shall be credited to the optionees for
purposes of determining the number of NPI shares of Stock subject to exercise
under converted Options after the Second Closing. None of the Options that are
unvested at the Second Closing shall become vested as a result of the execution
and delivery of this Agreement or the consummation of the Conversion.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
4.1 Representations and Warranties of OPI. OPI hereby represents and
warrants to NPI that the statements contained in this Section 4.1 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the date of the First Closing (as though made then and as though the date
of the First Closing were substituted for the date of this Agreement throughout
this Section 4.1). All such representations and warranties shall survive the
First Closing.
-6-
<PAGE>
(a) Organization; Capitalization. OPI is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. OPI is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where such qualification is required.
(b) Authorization of Transaction. OPI has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, each of the stockholders and the board of directors
of OPI has duly authorized the execution, delivery, and performance of this
Agreement by OPI. This Agreement constitutes the valid and legally binding
obligation of OPI, enforceable in accordance with its terms and conditions.
(c) Title to Assets. OPI has good and marketable title to the
Transferred Property, free and clear of all liens, claims, security interests or
restrictions on transfer.
(d) Tax Matters. The properties to be transferred by OPI under
Section 2.1 hereof will constitute "substantially all" of the properties of OPI
within the meaning of the Code and the rules promulgated thereunder.
4.2 Representations and Warranties of ELI-Pod. ELI-Pod hereby represents
and warrants to NPI that the statements contained in this Section 4.2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the date of the First Closing (as though made then and as though
the date of the First Closing were substituted for the date of this Agreement
throughout this Section 4.2). All such representations and warranties shall
survive the First Closing.
(a) Organization; Capitalization. ELI-Pod is a corporation duly
organized, validly existing, and in good standing under the laws of the state of
its incorporation. ELI-Pod is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required.
(b) Authorization of Transaction. ELI-Pod has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, each of the stockholders and the board of directors
of ELI-Pod has duly authorized the execution, delivery, and performance of this
Agreement by ELI-Pod. This Agreement constitutes the valid and legally binding
obligation of ELI-Pod, enforceable in accordance with its terms and conditions.
(c) Title to Assets. ELI-Pod has good and marketable title to the
Units it holds, free and clear of all liens, claims, security interests or
restrictions on transfer.
(d) Tax Matters. The properties to be transferred by ELI-Pod under
Section 2.1 hereof will constitute "substantially all" of the properties of ELI-
Pod within the meaning of the Code and the rules promulgated thereunder.
-7-
<PAGE>
4.3 Representations and Warranties of NPI. NPI hereby represents and
warrants to PLP and OPI that the statements contained in this Section 4.3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the date of the First Closing (as though made then and as though
the date of the First Closing were substituted for the date of this Agreement
throughout this Section 4.3). All such representations and warranties shall
survive the First Closing.
(a) Organization; Capitalization. NPI is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware. NPI is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where such qualification is required.
(b) Authorization of Transaction. NPI has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors of NPI has duly authorized
the execution, delivery, and performance of this Agreement by NPI. This
Agreement constitutes the valid and legally binding obligation of NPI,
enforceable in accordance with its terms and conditions.
(c) Stock. Upon consummation of the transactions contemplated hereby
and the issuance and delivery of the certificates representing the shares of
Stock as set forth in Article II above, such shares of Stock will be duly
authorized, validly issued, fully paid, and non-assessable shares of Stock, will
have been issued in compliance with all applicable state and federal securities
laws, and will not have been issued in violation of any preemptive rights or
rights of first refusal.
4.4 Representations and Warranties of PLP. PLP represents and warrants to
OPI and NPI that the statements contained in this Section 4.4 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the date of the First Closing (as though made then and as though the date of the
First Closing were substituted for the date of this Agreement throughout this
Section 4.4).
(a) Organization. PLP is a limited partnership duly organized,
validly existing, and in good standing under the laws of the State of Illinois.
PLP is duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required.
(b) Authorization of Transaction. PLP has full power and authority
(including full limited partnership power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the general partner of PLP has duly authorized the
execution, delivery, and performance of this Agreement by PLP. This Agreement
constitutes the valid and legally binding obligation of PLP, enforceable in
accordance with its terms and conditions.
ARTICLE V
---------
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<PAGE>
COVENANTS
---------
5.1 Covenants of OPI.
(a) Name Change. OPI shall deliver to NPI, at the First Closing,
executed copies of Articles of Amendment to OPI's Articles of Incorporation, in
form for filing and recording, changing the name of OPI to "Peapod Liquidating
Corporation". OPI shall not, after the date of the First Closing, use the word
"Peapod" or any variation thereof in connection with any business conducted or
anticipated by PLP or NPI and shall discontinue all use of the name "Peapod" on
or before December 31, 1998. Except as otherwise provided herein, NPI shall on
and after the date of the First Closing own and possess, to the exclusion of OPI
and PLP, all right, title and interest in the name "Peapod" and all other
tradenames, trademarks and servicemarks used in the business of PLP.
(b) Dissolution/No Compete. OPI anticipates that it will liquidate
and dissolve as soon as conveniently possible, taking into account its need to
develop and effect a program for dealing with its outstanding options and
warrants. During the period prior to its dissolution, it shall not, directly or
indirectly, promote, sell, or license, in any of the states in which PLP
currently does business or anticipates doing business, any products or services
which are similar to or in competition with those offered by PLP or NPI, nor
shall it own, manage, operate, render advice to, or otherwise engage in any
business competitive with the business conducted on and after the Second Closing
by NPI. Except as and to the extent required by law, OPI shall not disclose or
use any of NPI's trade secrets or other information deemed confidential by NPI.
(c) Retained Liabilities. OPI shall timely pay and fully discharge
any and all of its liabilities and obligations existing at the First Closing.
(d) Records and Documents. Following the First Closing, OPI shall
grant to NPI and its representatives full and complete access to, and the right
to make copies of, those records and documents, possession of which is retained
by OPI. If after the First Closing, OPI desires to dispose of such records, it
shall first give NPI sixty days' written notice, during which period NPI shall
have the right to take possession of such records without cost.
(e) Further Assurances. From time to time, at NPI's request and
without further consideration, OPI shall execute and deliver such documents,
instruments or assurances, and take such other action as NPI may reasonably
request to more effectively assign, convey and transfer any of the Transferred
Property to NPI.
(f) Transaction Reporting. OPI shall treat the exchanges described
in Sections 2.1(a) and 2.1(d) hereof as a tax-free reorganization within the
meaning of Section 368(a)(1)(C) of the Code, and shall report the transaction as
such for purposes of all filings with Federal, state and local taxing
authorities.
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<PAGE>
5.2 Covenants of NPI. NPI shall treat the exchanges described in (i)
Sections 2.1(a), 2.1(b), and 2.1(d) hereof as tax-free reorganizations within
the meaning of Section 368(a)(1)(C) of the Code, (ii) Section 2.1(c) as a tax-
free exchange within the meaning of Section 351 of the Code and shall report the
exchanges as such for purposes of all filings with Federal, state and local
taxing authorities.
5.3 Covenants of PLP.
(a) Conduct of Business. From the date hereof until the Second
Closing, PLP shall use its best efforts to preserve, protect and maintain its
business and shall operate its business consistent with prior practice and in
the ordinary course of business.
(b) Dissolution. At the Second Closing, PLP shall take all actions
necessary or appropriate to effect its dissolution within the meaning of Section
8 of the Partnership Act.
(c) Access. From the date hereof through the Second Closing, PLP
shall give NPI and its representatives full and free access at all reasonable
times to all the PLP properties, facilities, personnel, books, records and
agreements as NPI may from time to time request.
ARTICLE VI
----------
CLOSING
-------
6.1 The Closing. Subject to the terms and conditions of this Agreement,
the First Closing exchanges and the Second Closing transfers shall take place,
in that order, on a date and time prior to the closing of the IPO agreed by the
parties at the offices of Cowen, Crowley, Nord & Staub in Chicago, Illinois, or
such other place as the parties may otherwise agree.
6.2 Closing Deliveries.
(a) At the First Closing, (i) OPI will deliver to NPI certificates
representing all of the Units it holds, endorsed in blank or accompanied by duly
executed assignment documents, (ii) OPI, in its capacity as the sole general
partner of PLP, will cause PLP to deliver to NPI certificates representing all
of the Units the Transferors hold, endorsed in blank or accompanied by duly
executed assignment documents, (iii) ELI-Pod will deliver to NPI certificates
representing all of the Units it holds, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) NPI will deliver to the Transferors
stock certificates representing all of the Stock to be delivered hereunder.
(b) At the Second Closing, (i) PLP will execute, acknowledge, and
deliver to NPI an assignment and bill of sale and such other instruments of
sale, transfer, conveyance, and assignment
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<PAGE>
as NPI may reasonably request, and (ii) NPI will execute, acknowledge, and
deliver to PLP an assumption agreement and such other instruments of assumption
as PLP may reasonably request.
ARTICLE VII
-----------
GENERAL PROVISIONS
------------------
7.1 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed given if
delivered by certified or registered mail (first class postage pre-paid),
guaranteed overnight delivery or facsimile transmission if such transmission is
confirmed by delivery by certified or registered mail (first class postage pre-
paid) or guaranteed overnight delivery, to the following addresses and facsimile
numbers (or to such other addresses or facsimile numbers which such party shall
designate in writing to the other party):
If to NPI, PLP, or OPI, to:
1033 University Place
Evanston, Illinois 60201
Attention: President
Fax: (847) 492-0171
Copies to:
Cowen, Crowley, Nord & Staub
55 W. Monroe Street
Chicago, Illinois 60603
Attention: Wilbert F. Crowley
Facsimile: (312) 641-6959
7.2 Entire Agreement. This Agreement (including the Exhibits and
Schedules attached hereto), that certain Investors Agreement of even date
herewith, and the other documents delivered at the First Closing and the Second
Closing pursuant hereto, contain the entire understanding of the parties in
respect of its subject matter and supersedes all prior agreements and
understandings (oral or written) between or among the parties with respect to
such subject matter.
7.3 Amendment; Waiver. This Agreement may not be modified, amended,
supplemented, canceled, or discharged, except by written instrument executed by
each of the parties hereto. No failure to exercise, and no delay in exercising,
any right, power, or privilege under this Agreement shall operate as a waiver,
nor shall any single or partial exercise of any right, power, or privilege
hereunder preclude the exercise of any other right, power or privilege. No
waiver of any breach of any provision shall be deemed to be a waiver of any
preceding or succeeding breach of the same or
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<PAGE>
any other provision, nor shall any waiver be implied from any course of dealing
between the parties. No extension of time for performance of any obligations or
other acts hereunder or under any other agreement shall be deemed to be an
extension of the time for performance of any other obligations or any other
acts.
7.4 Binding Effect; Assignment. The rights and obligations of this
Agreement shall bind and inure to the benefit of the parties and their
respective successors and assigns. Nothing expressed or implied herein shall be
construed to give any other person any legal or equitable rights hereunder.
Except as expressly provided herein, the rights and obligations of this
Agreement may not be assigned by any of the parties hereto without the prior
written consent of the other parties hereto.
7.5 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
7.6 Interpretation. When a reference is made in this Agreement to an
article, section, paragraph, clause, schedule, or exhibit, such reference shall
be deemed to be to this Agreement unless otherwise indicated. The headings
contained herein and on the schedules are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement or the
schedules. Whenever the words "include", "includes", or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". Time shall be of the essence in this Agreement.
7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Illinois without giving effect
to any choice or conflict of law provision or rule (either of the State of
Illinois or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Illinois.
7.8 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto, and their
respective successors and permitted assigns.
7.9 Stock Legend. Each Stock certificate and each certificate issued in
exchange for or upon the transfer of any certificate of Stock, with the
exception of such certificates which represent securities that have been
registered and sold under the Securities Act of 1933, as amended, in connection
with the IPO, shall be imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A REGISTRATION STATEMENT WITH
RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT AND UNDER ANY
APPLICABLE STATE SECURITIES LAWS UNLESS, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY
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<PAGE>
TO THE COMPANY, AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT
AND STATE SECURITIES LAWS IS AVAILABLE."
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
NEW PEAPOD, INC.,
a Delaware corporation
By: /s/ Andrew B. Parkinson
-----------------------
Name: Andrew B. Parkinson
Title: President
PEAPOD, INC.,
a Delaware corporation
By: /s/ Andrew B. Parkinson
-----------------------
Name: Andrew B. Parkinson
Title: President
PEAPOD LP,
an Illinois limited partnership
Peapod, Inc.
Its general partner
By: /s/ Andrew B. Parkinson
-----------------------
Name: Andrew B. Parkinson
Title: President
ELI-POD, INC.
By: /s/ Damon H. Ball
-----------------
Name: Damon H. Ball
Title:
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<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement") dated as of June 9, 1997
between Andrew B. Parkinson (the "Executive") and Peapod, Inc., a Delaware
corporation (the "Company" or "Employer"). The Company's principal office is
located at 1033 University Place, Suite 375, Evanston, Illinois 60201.
WHEREAS, the Company desires to continue to employ the Executive as
its Chairman, President and Chief Executive Officer, and the Executive desires
to continue such employment, for the term and upon the other conditions
hereinafter set forth; and
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Severance Agreement (the "Severance Agreement") providing for
certain substantial severance benefits.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01. Position; Term; Responsibilities. The Company shall
employ the Executive as its Chairman, President and Chief Executive Officer, for
a term commencing on the date hereof (the "Commencement Date") and ending on the
fifth anniversary of the Commencement Date (subject to automatic extension as
provided in Section 1.03, the "Employment Period"). Subject to the powers,
authorities and responsibilities vested in the Board of Directors (including any
committees thereof, the "Board") of the Company, the Executive shall have the
responsibility and authority vested by the Company's By-laws in the Chairman,
President and Chief Executive Officer. The Executive shall also perform such
other executive and administrative duties for the Company and its subsidiaries
and affiliates (not inconsistent with the position of Chairman, President and
Chief Executive Officer, as may from time to time be authorized or directed by
the Board. The Executive agrees to be employed by the Company in all such
capacities, as such capacities may be amended from time to time by written
agreement between Employer and Executive, for the Employment
<PAGE>
Period, subject to all the covenants and conditions hereinafter set forth.
Section l.02. Duties. During the Employment Period, the Executive
shall perform faithfully the duties assigned to him hereunder to the best of his
abilities and devote his full and undivided business time and attention to the
transaction of the Company's business and not engage in any other business
activities except with the approval of the Board. The previous sentence shall
not preclude the Executive from participating in the affairs of any
governmental, educational or other charitable institution so long as the Board
does not determine in good faith that such activities unreasonably interfere
with the business of the Company or the performance by Executive of his duties
hereunder.
Section 1.03. Automatic Extension of Employment Term; Termination.
(a) The Employment Term shall be automatically extended for
successive one-year periods on the fifth anniversary of the Commencement Date
and each succeeding anniversary unless either party has delivered notice to the
contrary (a "Non-Extension Notice") to the other party not less than one year
prior to such anniversary.
(b) The term of this Agreement shall be the Employment Term (as
extended as provided in Section 1.03); provided that, the Company and Executive
each shall have the right to terminate this Agreement at any time during the
Employment Term, subject to the rights and obligations of such parties as set
forth in the Severance Agreement.
ARTICLE II
Compensation
Section 2.01. Base Compensation. As compensation for his services
hereunder, the Company shall pay to the Executive during the Employment Period a
minimum annual salary of $140,000 (the "Base Salary"), less required or
authorized deductions, payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The Executive's
salary may be increased from time to time above the Base Salary required by this
Section 2.01 at the discretion of the Board.
Section 2.02 Bonus Plan. The Executive shall be entitled to
participate in a management bonus plan as modified by the Board from time to
time. Such plan shall, at a minimum, provide for an opportunity for the
Executive to earn a cash bonus
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<PAGE>
on an annual basis of up to 30% of Executive's Base Salary received for the
year as to which such bonus is earned (the "Target Bonus"), based on the meeting
of performance goals (such as individual, departmental or Company-wide goals) as
may be set from time to time by the Board in its absolute discretion (i.e., the
Executive shall be entitled to receive a cash bonus with respect to such year of
30% of Base Salary if the levels of such performance goals are fully achieved
for such year). This Section 2.02 shall not limit the Board's ability to
establish management bonus plans providing for a greater Target Bonus for the
Executive or to provide a cash bonus for the Executive in any given year that is
greater than the Target Bonus.
Section 2.03. Employee Benefits. The Executive shall be entitled to
participate in incentive compensation plans of the Company that are applicable
to the Executive during the Employment period and shall be eligible for payments
consistent with the terms of such plans. Upon satisfaction of any eligibility
requirements, during the Employment Period, the Executive shall be entitled to
participate in such employee benefit plans and to receive such other fringe
benefits as are from time to time made generally available to the senior
management of the Company; provided that if a severance benefit is payable to
the Executive pursuant to Section 2.05, such benefit shall be paid in lieu of
any benefit otherwise payable to Executive pursuant to any Company severance
plan unless such plan expressly provides that payments thereunder will be made
in addition to the severance payments provided hereunder. As of the date hereof,
such plans include a 401(k) plan, automobile allowance program, life insurance
program and long-term disability plan. Nothing herein shall be construed to
require the Company to establish, or shall preclude the Company, in its absolute
discretion, from changing or amending, in whole or in part, or revoking, any one
or more of such employee benefit plans or programs without notice. In addition,
the Executive shall be entitled to take time off for vacation or illness in
accordance with the Company's policies with respect thereto established from
time to time with respect to the Company's senior management.
Section 2.04. Expense Reimbursements. The Company shall reimburse the
Executive for all proper expenses incurred by Executive in the performance of
Executive's duties hereunder in accordance with the policies and procedures
established by the Board.
Section 2.05. Severance Benefits; Severance Agreement. Concurrently
herewith, the Executive and Peapod are entering into the Severance Agreement
which provides certain substantial severance benefits for the Executive in the
event of termination of Executive's employment with the Company. The Executive
shall be
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<PAGE>
entitled to the benefits of such Severance Agreement as if the provisions
thereof were set forth fully herein.
ARTICLE III
Noncompetition; Confidential Information
Section 3.01. Noncompetition; Non-Solicitation. As a condition to
Executive's employment hereunder and to the Company's obligations hereunder,
Executive agrees to enter into, concurrently with his execution of this
Agreement, an "Employee Nonsolicitation and Noncompete Agreement" in the form
attached hereto as Exhibit A, and the Executive agrees to comply fully with all
of the terms and provisions of such "Employee Nonsolicitation and Noncompete
Agreement" as if such terms and provisions were fully set forth in this
Agreement. The covenants contained in such "Employee Nonsolicitation and
Noncompete Agreement" shall survive the conclusion of the Executive's employment
by the Company as set forth therein.
ARTICLE IV
Miscellaneous
Section 4.01. Notices. Any notice or request required or permitted to
be given hereunder shall be sufficient if in writing and delivered personally or
sent by registered or certified mail, return receipt requested, as follows: if
to the Executive, to the address of Executive as set forth in the records of the
Company, and if to the Company, to its address hereinabove set forth, or to any
other address designated by either party by notice similarly given. Such notice
shall be deemed to have been given upon the personal delivery or such mailing
thereof, as the case may be.
Section 4.02. Authority; No Conflict. The Executive represents and
warrants to the Company that the Executive has full right and authority to
execute and deliver this Agreement and to comply with the terms and provisions
hereof and that the execution and delivery of this Agreement and compliance with
the terms and provisions hereof by the Executive will not conflict with or
result in a breach of the terms, conditions or provisions of any agreement,
restriction or obligation by which the Executive is bound.
Section 4.03. Assignment and Succession. The Agreement shall be
binding upon and shall operate for the benefit of the parties hereto and their
respective legal representatives, legatees, distributees, heirs, and successors
and assigns. The Executive acknowledges that the services he renders pursuant to
this Agreement are unique and personal. Accordingly, Executive may not assign
any of the Executive's rights contained in this
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<PAGE>
Agreement or delegate any of his duties hereunder. The Company may assign its
rights, duties or obligations under this Agreement to a purchaser or transferee
of all, or substantially all, of the Company's assets.
Section 4.04. Headings. The Article, Section paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 4.05. Applicable Law. This Agreement shall at all times be
governed by and construed, interpreted and enforced in accordance with the
internal laws (as opposed to conflict of laws provisions) of the State of
Illinois.
Section 4.06. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law. In the event that any provision of this Agreement shall be held
to be void or unenforceable, the remaining provisions of this Agreement shall
continue in full force and effect.
Section 4.07. Waiver, Etc. The waiver of a breach of any provision of
this Agreement shall not operate or be construed to be a waiver of any other or
a subsequent breach. No delay or omission in the exercise of any power, remedy,
or right herein provided or otherwise available to any party, shall impair or
affect the right of such party thereafter to exercise the same. Any extension of
time or other indulgence granted to a party hereunder or to any other person
shall not otherwise alter or affect any power, remedy or right of any other
party, or obligations of the party to whom such extension or indulgence is
granted except as specifically waived.
Section 4.08. Dispute Resolution. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association ("AAA") in
accordance with its National Rules for the Resolution of Employment Disputes, to
the extent not inconsistent with this provision. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Such arbitration shall be conducted in Chicago, Illinois before a
single arbitrator. The parties shall select an arbitrator by mutual agreement
from a panel of arbitrators experienced in arbitrating employment disputes
proposed by AAA. If the parties are unable to agree on an arbitrator, AAA shall
select an arbitrator in accordance with its procedures. Nothing herein shall
preclude the Company from seeking and/or obtaining injunctive relief under the
Employee Nonsolicitation and Noncompete Agreement required hereunder to be
executed by the Executive.
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<PAGE>
Section 4.09. Entire Agreement. This Agreement, together with the
"Employee Nonsolicitation and Noncompete Agreement" and the Severance Agreement,
contain the entire agreement of the parties relating to the subject matter
hereof including, but not limited to, any previous written agreements concerning
Executive's employment with Employer. This agreement may not be modified or
discharged orally, but only by an agreement in writing signed by the party
against whom enforcement of any change, modification, waiver, extension, or
discharge is sought.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PEAPOD, INC.
By:
--------------------------------
Thomas L. Parkinson
Executive Vice President -
Chief Technology Officer
ANDREW B. PARKINSON
-----------------------------------
Andrew B. Parkinson
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<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement") dated as of June 9, 1997
between Thomas L. Parkinson (the "Executive") and Peapod, Inc., a Delaware
corporation (the "Company" or "Employer"). The Company's principal office is
located at 1033 University Place, Suite 375, Evanston, Illinois 60201.
WHEREAS, the Company desires to continue to employ the Executive as
its Executive Vice President-Chief Technology Officer, and the Executive desires
to continue such employment, for the term and upon the other conditions
hereinafter set forth; and
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Severance Agreement (the "Severance Agreement") providing for
certain substantial severance benefits.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01. Position; Term; Responsibilities. The Company shall
employ the Executive as its Executive Vice President-Chief Technology Officer
for a term commencing on the date hereof (the "Commencement Date") and ending on
the fifth anniversary of the Commencement Date (subject to automatic extension
as provided in Section 1.03, the "Employment Period"). Subject to the powers,
authorities and responsibilities vested in the Board of Directors (including any
committees thereof, the "Board") of the Company and the Chief Executive Officer
of the Company (the "Company CEO"), the Executive shall oversee the technology
development and implementation activities of the Company and have the
responsibility and authority for the formulation and execution of the policies
relating to, and the administration of, such activities. The Executive shall
hold the title of Executive Vice President-Chief Technology Officer or such
other or additional title as is not inconsistent with the aforementioned
responsibilities and shall report to the Company CEO. The Executive shall also
perform such other executive and admini strative duties for the Company and its
subsidiaries and affiliates
<PAGE>
(not inconsistent with the position of Executive Vice President-Chief Technology
Officer), as may from time to time be authorized or directed by the Company CEO.
The Executive agrees to be employed by the Company in all such capacities, as
such capacities may be amended from time to time by written agreement between
Employer and the Executive, for the Employment Period, subject to all the
covenants and conditions hereinafter set forth.
Section l.02. Duties. During the Employment Period, the Executive
shall perform faithfully the duties assigned to him hereunder to the best of his
abilities and devote his full and undivided business time and attention to the
transaction of the Company's business and not engage in any other business
activities except with the approval of the Company CEO. The previous sentence
shall not preclude the Executive from participating in the affairs of any
governmental, educational or other charitable institution so long as the Board
does not determine in good faith that such activities unreasonably interfere
with the business of the Company or the performance by Executive of his duties
hereunder.
Section 1.03. Automatic Extension of Employment Term; Termination.
(a) The Employment Term shall be automatically extended for
successive one-year periods on the fifth anniversary of the Commencement Date
and each succeeding anniversary unless either party has delivered notice to the
contrary (a "Non-Extension Notice") to the other party not less than one year
prior to such anniversary.
(b) The term of this Agreement shall be the Employment Term (as
extended as provided in Section 1.03); provided that, the Company and the
Executive each shall have the right to terminate this Agreement at any time
during the Employment Term, subject to the rights and obligations of such
parties as set forth in the Severance Agreement.
ARTICLE II
Compensation
Section 2.01. Base Compensation. As compensation for his services
hereunder, the Company shall pay to the Executive during the Employment Period a
minimum annual salary of $140,000 (the "Base Salary"), less required or
authorized deductions, payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The Executive's
salary may be increased from time to time above the Base Salary required by this
Section 2.01 at the discretion of the Board.
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<PAGE>
Section 2.02. Bonus Plan. The Executive shall be entitled to
participate in a management bonus plan as modified by the Board from time to
time. Such plan shall, at a minimum, provide for an opportunity for the
Executive to earn a cash bonus on an annual basis of up to 30% of the
Executive's Base Salary received for the year as to which such bonus is earned
(the "Target Bonus"), based on the meeting of performance goals (such as
individual, departmental or Company-wide goals) as may be set from time to time
by the Board in its absolute discretion (i.e., the Executive shall be entitled
to receive a cash bonus with respect to such year of 30% of Base Salary if the
levels of such performance goals are fully achieved for such year). This
Section 2.02 shall not limit the Board's ability to establish management bonus
plans providing for a greater Target Bonus for the Executive or to provide a
cash bonus for the Executive in any given year that is greater than the Target
Bonus.
Section 2.03. Employee Benefits. The Executive shall be entitled to
participate in incentive compensation plans of the Company that are applicable
to the Executive during the Employment period and shall be eligible for payments
consistent with the terms of such plans. Upon satisfaction of any eligibility
requirements, during the Employment Period, the Executive shall be entitled to
participate in such employee benefit plans and to receive such other fringe
benefits as are from time to time made generally available to the senior
management of the Company; provided that if a severance benefit is payable to
the Executive pursuant to Section 2.05, such benefit shall be paid in lieu of
any benefit otherwise payable to Executive pursuant to any Company severance
plan unless such plan expressly provides that payments thereunder will be made
in addition to the severance payments provided hereunder. As of the date
hereof, such plans include a 401(k) plan, automobile allowance program, life
insurance program and long-term disability plan. Nothing herein shall be
construed to require the Company to establish, or shall preclude the Company, in
its absolute discretion, from changing or amending, in whole or in part, or
revoking, any one or more of such employee benefit plans or programs without
notice. In addition, the Executive shall be entitled to take time off for
vacation or illness in accordance with the Company's policies with respect
thereto established from time to time with respect to the Company's senior
management.
Section 2.04. Expense Reimbursements. The Company shall reimburse
the Executive for all proper expenses incurred by Executive in the performance
of Executive's duties hereunder in accordance with the policies and procedures
estblished by the Board.
Section 2.05. Severance Benefits; Severance Agreement. Concurrently
herewith, the Executive and Peapod are entering into
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<PAGE>
the Severance Agreement which provides certain substantial severance benefits
for the Executive in the event of termination of the Executive's employment with
the Company. The Executive shall be entitled to the benefits of such Severance
Agreement as if the provisions thereof were set forth fully herein.
ARTICLE III
Noncompetition; Confidential Information
Section 3.01. Noncompetition; Non-Solicitation. As a condition to
the Executive's employment hereunder and to the Company's obligations hereunder,
the Executive agrees to enter into, concurrently with his execution of this
Agreement, an "Employee Nonsolicitation and Noncompete Agreement" in the form
attached hereto as Exhibit A, and the Executive agrees to comply fully with all
of the terms and provisions of such "Employee Nonsolicitation and Noncompete
Agreement" as if such terms and provisions were fully set forth in this
Agreement. The covenants contained in such "Employee Nonsolicitation and
Noncompete Agreement" shall survive the conclusion of the Executive's employment
by the Company as set forth therein.
ARTICLE IV
Miscellaneous
Section 4.01. Notices. Any notice or request required or permitted
to be given hereunder shall be sufficient if in writing and delivered personally
or sent by registered or certified mail, return receipt requested, as follows:
if to the Executive, to the address of Executive as set forth in the records of
the Company, and if to the Company, to its address hereinabove set forth, or to
any other address designated by either party by notice similarly given. Such
notice shall be deemed to have been given upon the personal delivery or such
mailing thereof, as the case may be.
Section 4.02. Authority; No Conflict. The Executive represents and
warrants to the Company that the Executive has full right and authority to
execute and deliver this Agreement and to comply with the terms and provisions
hereof and that the execution and delivery of this Agreement and compliance with
the terms and provisions hereof by the Executive will not conflict with or
result in a breach of the terms, conditions or provisions of any agreement,
restriction or obligation by which the Executive is bound.
Section 4.03. Assignment and Succession. The Agreement shall be
binding upon and shall operate for the benefit of the parties hereto and their
respective legal representatives, legatees, distributees, heirs, and successors
and assigns. The
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<PAGE>
Executive acknowledges that the services he renders pursuant to this Agreement
are unique and personal. Accordingly, the Executive may not assign any of the
Executive's rights contained in this Agreement or delegate any of his duties
hereunder. The Company may assign its rights, duties or obligations under this
Agreement to a purchaser or transferee of all, or substantially all, of the
Company's assets.
Section 4.04. Headings. The Article, Section paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 4.05. Applicable Law. This Agreement shall at all times be
governed by and construed, interpreted and enforced in accordance with the
internal laws (as opposed to conflict of laws provisions) of the State of
Illinois.
Section 4.06. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law. In the event that any provision of this Agreement shall
be held to be void or unenforceable, the remaining provisions of this Agreement
shall continue in full force and effect.
Section 4.07. Waiver, Etc. The waiver of a breach of any provision
of this Agreement shall not operate or be construed to be a waiver of any other
or a subsequent breach. No delay or omission in the exercise of any power,
remedy, or right herein provided or otherwise available to any party, shall
impair or affect the right of such party thereafter to exercise the same. Any
extension of time or other indulgence granted to a party hereunder or to any
other person shall not otherwise alter or affect any power, remedy or right of
any other party, or obligations of the party to whom such extension or
indulgence is granted except as specifically waived.
Section 4.08. Dispute Resolution. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association ("AAA") in
accordance with its National Rules for the Resolution Employments Disputes, to
the extent not inconsistent with this provision. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Such arbitration shall be conducted in Chicago, Illinois before a
single arbitrator. The parties shall select an arbitrator by mutual agreement
from a panel of arbitrators experienced in arbitrating employment disputes
proposed by AAA. If the parties are unable to agree on an arbitrator, AAA shall
select an arbitrator in accordance with its procedures. Nothing herein shall
preclude the Company from seeking and/or
-5-
<PAGE>
obtaining injunctive relief under the Employee Nonsolicitation and Noncompete
Agreement required hereunder to be executed by the Executive.
Section 4.09. Entire Agreement. This Agreement, together with the
"Employee Nonsolicitation and Noncompete Agreement" and the Severance Agreement,
contain the entire agreement of the parties relating to the subject matter
hereof including, but not limited to, any previous written agreements concerning
Executive's employment with Employer. This agreement may not be modified or
discharged orally, but only by an agreement in writing signed by the party
against whom enforcement of any change, modification, waiver, extension, or
discharge is sought.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PEAPOD, INC.
By:________________________________
Andrew B. Parkinson
Chairman, President and Chief
Executive Officer
THOMAS L. PARKINSON
___________________________________
Thomas L. Parkinson
-7-
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement") dated as of June 9, 1997
between John C. Walden (the "Executive") and Peapod, Inc., a Delaware
corporation (the "Company" or "Employer"). The Company's principal office is
located at 1033 University Place, Suite 375, Evanston, Illinois 60201.
WHEREAS, the Company desires to continue to employ the Executive as
its Executive Vice President-Finance and Business Administration, and the
Executive desires to continue such employment, for the term and upon the other
conditions hereinafter set forth; and
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Severance Agreement (the "Severance Agreement") providing for
certain substantial severance benefits.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01. Position; Term; Responsibilities. The Company shall
employ the Executive as its Executive Vice President-Finance and Business
Administration for a term commencing on the date hereof (the "Commencement
Date") and ending on the fifth anniversary of the Commencement Date (subject to
automatic extension as provided in Section 1.03, the "Employment Period").
Subject to the powers, authorities and responsibilities vested in the Board of
Directors (including any committees thereof, the "Board") of the Company and
the Chief Executive Officer of the Company (the "Company CEO"), the Executive
shall oversee the finance and accounting, business development, product
management and legal activities of the Company and have the responsibility and
authority for the formulation and execution of the policies relating to, and the
administration of, such activities. The Executive shall hold the title of
Executive Vice President-Finance and Business Administration or such other or
additional title as is not inconsistent with the aforementioned responsibilities
and shall report to the Company CEO. The Executive shall also perform such
<PAGE>
other executive and administrative duties for the Company and its subsidiaries
and affiliates (not inconsistent with the position of Executive Vice President-
Finance and Business Administration), as may from time to time be authorized or
directed by the Company CEO. The Executive agrees to be employed by the Company
in all such capacities, as such capacities may be amended from time to time by
written agreement between Employer and the Executive, for the Employment
Period, subject to all the covenants and conditions hereinafter set forth.
Section l.02. Duties. During the Employment Period, the Executive
shall perform faithfully the duties assigned to him hereunder to the best of his
abilities and devote his full and undivided business time and attention to the
transaction of the Company's business and not engage in any other business
activities except with the approval of the Company CEO. The previous sentence
shall not preclude the Executive from participating in the affairs of any
governmental, educational or other charitable institution so long as the Board
does not determine in good faith that such activities unreasonably interfere
with the business of the Company or the performance by Executive of his duties
hereunder.
Section 1.03. Automatic Extension of Employment Term; Termination.
(a) The Employment Term shall be automatically extended for
successive one-year periods on the fifth anniversary of the Commencement Date
and each succeeding anniversary unless either party has delivered notice to the
contrary (a "Non-Extension Notice") to the other party not less than one year
prior to such anniversary.
(b) The term of this Agreement shall be the Employment Term (as
extended as provided in Section 1.03); provided that, the Company and the
Executive each shall have the right to terminate this Agreement at any time
during the Employment Term, subject to the rights and obligations of such
parties as set forth in the Severance Agreement.
ARTICLE II
Compensation
Section 2.01. Base Compensation. As compensation for his services
hereunder, the Company shall pay to the Executive during the Employment Period a
minimum annual salary of $154,500 (the "Base Salary"), less required or
authorized deductions, payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The Executive's
salary may be increased from time to time above the
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<PAGE>
Base Salary required by this Section 2.01 at the discretion of the Board.
Section 2.02. Bonus Plan; Special Incentive Bonus. (a) The Executive
shall be entitled to participate in a management bonus plan as approved by the
Board from time to time. Such plan shall, at a minimum, provide for an
opportunity for the Executive to earn a cash bonus on an annual basis of up to
30% of the Executive's Base Salary received for the year as to which such bonus
is earned (the "Target Bonus"), based on the meeting of performance goals (such
as individual, departmental or Company-wide goals) as are mutually agreed by the
Company and the Executive (i.e., the Executive shall be entitled to receive a
cash bonus with respect to such year of 30% of Base Salary if the levels of such
performance goals are fully achieved for such year). This Section 2.02 shall not
limit the Board's ability to establish management bonus plans providing for a
greater Target Bonus for the Executive or to provide a cash bonus for the
Executive in any given year that is greater than the Target Bonus.
(b) Upon receipt of at least $5 million (or any lesser amount set by
the Board) from a private placement or alternate financing or series of
financings (including an initial public offering) occurring subsequent to the
Company's 1996 private placement and pursuant to terms and timetable approved by
the Board, the Executive shall receive 15,000 shares of Common Stock of the
Company (the "Shares"). If it becomes unnecessary for any reason to raise such
additional equity capital during the next 11 months, Executive shall
nevertheless be entitled to the issuance of the Shares at the end of such
period.
Section 2.03. Employee Benefits. The Executive shall be entitled to
participate in incentive compensation plans of the Company that are applicable
to the Executive during the Employment period and shall be eligible for payments
consistent with the terms of such plans. Upon satisfaction of any eligibility
requirements, during the Employment Period, the Executive shall be entitled to
participate in such employee benefit plans and to receive such other fringe
benefits as are from time to time made generally available to the senior
management of the Company; provided that if a severance benefit is payable to
the Executive pursuant to Section 2.05, such benefit shall be paid in lieu of
any benefit otherwise payable to Executive pursuant to any Company severance
plan unless such plan expressly provides that payments thereunder will be made
in addition to the severance payments provided hereunder. As of the date
hereof, such plans include a 401(k) plan, automobile allowance program, life
insurance program and long-term disability plan. Nothing herein shall be
construed to require the Company to establish, or shall preclude the Company, in
its absolute discretion, from changing or amending, in whole or in
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<PAGE>
part, or revoking, any one or more of such employee benefit plans or programs
without notice. In addition, the Executive shall be entitled to take time off
for vacation or illness in accordance with the Company's policies with respect
thereto established from time to time with respect to the Company's senior
management.
Section 2.04. Expense Reimbursements. The Company shall reimburse
the Executive for all proper expenses incurred by Executive in the performance
of Executive's duties hereunder in accordance with the policies and procedures
established by the Board.
Section 2.05. Severance Benefits; Severance Agreement. Concurrently
herewith, the Executive and Peapod are entering into the Severance Agreement
which provides certain substantial severance benefits for the Executive in the
event of termination of the Executive's employment with the Company. The
Executive shall be entitled to the benefits of such Severance Agreement as if
the provisions thereof were set forth fully herein.
ARTICLE III
Noncompetition; Confidential Information
Section 3.01. Noncompetition; Non-Solicitation. As a condition to
the Executive's employment hereunder and to the Company's obligations hereunder,
the Executive agrees to enter into, concurrently with his execution of this
Agreement, an "Employee Nonsolicitation and Noncompete Agreement" in the form
attached hereto as Exhibit A, and the Executive agrees to comply fully with all
of the terms and provisions of such "Employee Nonsolicitation and Noncompete
Agreement" as if such terms and provisions were fully set forth in this
Agreement. The covenants contained in such "Employee Nonsolicitation and
Noncompete Agreement" shall survive the conclusion of the Executive's employment
by the Company as set forth therein.
ARTICLE IV
Miscellaneous
Section 4.01. Notices. Any notice or request required or permitted
to be given hereunder shall be sufficient if in writing and delivered personally
or sent by registered or certified mail, return receipt requested, as follows:
if to the Executive, to the address of Executive as set forth in the records of
the Company, and if to the Company, to its address hereinabove set forth, or to
any other address designated by either party by notice similarly given. Such
notice shall be deemed to have been given upon the personal delivery or such
mailing thereof, as the case may be.
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<PAGE>
Section 4.02. Authority; No Conflict. The Executive represents and
warrants to the Company that the Executive has full right and authority to
execute and deliver this Agreement and to comply with the terms and provisions
hereof and that the execution and delivery of this Agreement and compliance with
the terms and provisions hereof by the Executive will not conflict with or
result in a breach of the terms, conditions or provisions of any agreement,
restriction or obligation by which the Executive is bound.
Section 4.03. Assignment and Succession. The Agreement shall be
binding upon and shall operate for the benefit of the parties hereto and their
respective legal representatives, legatees, distributees, heirs, and successors
and assigns. the Executive acknowledges that the services he renders pursuant
to this Agreement are unique and personal. Accordingly, the Executive may not
assign any of the Executive's rights contained in this Agreement or delegate any
of his duties hereunder. The Company may assign its rights, duties or
obligations under this Agreement to a purchaser or transferee of all, or
substantially all, of the Company's assets.
Section 4.04. Headings. The Article, Section paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 4.05. Applicable Law. This Agreement shall at all times be
governed by and construed, interpreted and enforced in accordance with the
internal laws (as opposed to conflict of laws provisions) of the State of
Illinois.
Section 4.06. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law. In the event that any provision of this Agreement shall
be held to be void or unenforceable, the remaining provisions of this Agreement
shall continue in full force and effect.
Section 4.07. Waiver, Etc. The waiver of a breach of any provision
of this Agreement shall not operate or be construed to be a waiver of any other
or a subsequent breach. No delay or omission in the exercise of any power,
remedy, or right herein provided or otherwise available to any party, shall
impair or affect the right of such party thereafter to exercise the same. Any
extension of time or other indulgence granted to a party hereunder or to any
other person shall not otherwise alter or affect any power, remedy or right of
any other party, or obligations of the party to whom such extension or
indulgence is granted except as specifically waived.
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<PAGE>
Section 4.08. Dispute Resolution. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association ("AAA") in
accordance with its National Rules for the Resolution Employments Disputes, to
the extent not inconsistent with this provision. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Such arbitration shall be conducted in Chicago, Illinois before a
single arbitrator. The parties shall select an arbitrator by mutual agreement
from a panel of arbitrators experienced in arbitrating employment disputes
proposed by AAA. If the parties are unable to agree on an arbitrator, AAA shall
select an arbitrator in accordance with its procedures. Nothing herein shall
preclude the Company from seeking and/or obtaining injunctive relief under the
Employee Nonsolicitation and Noncompete Agreement required hereunder to be
executed by the Executive.
Section 4.09. Entire Agreement. This Agreement, together with the
"Employee Nonsolicitation and Noncompete Agreement" and the Severance Agreement,
contain the entire agreement of the parties relating to the subject matter
hereof including, but not limited to, any previous written agreements concerning
Executive's employment with Employer. This agreement may not be modified or
discharged orally, but only by an agreement in writing signed by the party
against whom enforcement of any change, modification, waiver, extension, or
discharge is sought.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PEAPOD, INC.
By:____________________________________
Andrew B. Parkinson
Chairman, President and
Chief Executive Officer
JOHN C. WALDEN
_______________________________________
John C. Walden
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<PAGE>
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement") dated as of June 9, 1997
between Timothy M. Dorgan (the "Executive") and Peapod, Inc., a Delaware
corporation (the "Company" or "Employer"). The Company's principal office is
located at 1033 University Place, Suite 375, Evanston, Illinois 60201.
WHEREAS, the Company desires to continue to employ the Executive as
its Executive Vice President-Interactive Marketing, and the Executive desires to
continue such employment, for the term and upon the other conditions hereinafter
set forth; and
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Severance Agreement (the "Severance Agreement") providing for
certain substantial severance benefits.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01. Position; Term; Responsibilities. The Company shall
employ the Executive as its Executive Vice President-Interactive Marketing for a
term commencing on the date hereof (the "Commencement Date") and ending on the
fifth anniversary of the Commencement Date (subject to automatic extension as
provided in Section 1.03, the "Employment Period"). Subject to the powers,
authorities and responsibilities vested in the Board of Directors (including any
committees thereof, the "Board") of the Company and the Chief Executive Officer
of the Company (the "Company CEO"), the Executive shall oversee the interactive
marketing services activities of the Company and have responsibility and
authority for the formulation and execution of the policies relating to, and the
administration of, such area. The Executive shall hold the title of Executive
Vice President-Interactive Marketing or such other or additional title as is not
inconsistent with the aforementioned responsibilities and shall report to the
Company CEO. The Executive shall also perform such other executive and
administrative duties for the Company and its subsidiaries and affiliates (not
inconsistent with the position of Executive Vice President-Interactive
Marketing), as may from time to time be authorized or
<PAGE>
directed by the Company CEO. The Executive agrees to be employed by the Company
in all such capacities, as such capacities may be amended from time to time by
written agreement between Employer and the Executive, for the Employment Period,
subject to all the covenants and conditions hereinafter set forth.
Section l.02. Duties. During the Employment Period, the Executive
shall perform faithfully the duties assigned to him hereunder to the best of his
abilities and devote his full and undivided business time and attention to the
transaction of the Company's business and not engage in any other business
activities except with the approval of the Company CEO. The previous sentence
shall not preclude the Executive from participating in the affairs of any
governmental, educational or other charitable institution so long as the Board
does not determine in good faith that such activities unreasonably interfere
with the business of the Company or the performance by Executive of his duties
hereunder.
Section 1.03. Automatic Extension of Employment Term; Termination.
(a) The Employment Term shall be automatically extended for
successive one-year periods on the fifth anniversary of the Commencement Date
and each succeeding anniversary unless either party has delivered notice to the
contrary (a "Non-Extension Notice") to the other party not less than one year
prior to such anniversary.
(b) The term of this Agreement shall be the Employment Term (as
extended as provided in Section 1.03); provided that, the Company and the
Executive each shall have the right to terminate this Agreement at any time
during the Employment Term, subject to the rights and obligations of such
parties as set forth in the Severance Agreement.
ARTICLE II
Compensation
Section 2.01. Base Compensation. As compensation for his services
hereunder, the Company shall pay to the Executive during the Employment Period a
minimum annual salary of $121,900 (the "Base Salary"), less required or
authorized deductions, payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The Executive's
salary may be increased from time to time above the Base Salary required by this
Section 2.01 at the discretion of the Board.
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<PAGE>
Section 2.02. Bonus Plan. The Executive shall be entitled to
participate in a management bonus plan as modified by the Board from time to
time. Such plan shall, at a minimum, provide for an opportunity for the
Executive to earn a cash bonus on an annual basis of up to 25% of the
Executive's Base Salary received for the year as to which such bonus is earned
(the "Target Bonus"), based on the meeting of performance goals (such as
individual, departmental or Company-wide goals) as may be set from time to time
by the Board in its absolute discretion (i.e., the Executive shall be entitled
to receive a cash bonus with respect to such year of 25% of Base Salary if the
levels of such performance goals are fully achieved for such year). This
Section 2.02 shall not limit the Board's ability to establish management bonus
plans providing for a greater Target Bonus for the Executive or to provide a
cash bonus for the Executive in any given year that is greater than the Target
Bonus. The Executive's participation in the Company's current management bonus
plan may be replaced, in whole or in part, by the Executive's participation in a
commission-based plan mutually agreed upon by the Company and the Executive.
Section 2.03. Employee Benefits. The Executive shall be entitled to
participate in incentive compensation plans of the Company that are applicable
to the Executive during the Employment period and shall be eligible for payments
consistent with the terms of such plans. Upon satisfaction of any eligibility
requirements, during the Employment Period, the Executive shall be entitled to
participate in such employee benefit plans and to receive such other fringe
benefits as are from time to time made generally available to the senior
management of the Company; provided that if a severance benefit is payable to
the Executive pursuant to Section 2.05, such benefit shall be paid in lieu of
any benefit otherwise payable to Executive pursuant to any Company severance
plan unless such plan expressly provides that payments thereunder will be made
in addition to the severance payments provided hereunder. As of the date
hereof, such plans include a 401(k) plan, automobile allowance program, life
insurance program and long-term disability plan. Nothing herein shall be
construed to require the Company to establish, or shall preclude the Company, in
its absolute discretion, from changing or amending, in whole or in part, or
revoking, any one or more of such employee benefit plans or programs without
notice. In addition, the Executive shall be entitled to take time off for
vacation or illness in accordance with the Company's policies with respect
thereto established from time to time with respect to the Company's senior
management.
Section 2.04. Expense Reimbursements. The Company shall reimburse
the Executive for all proper expenses incurred by Executive in the performance
of Executive's duties hereunder in accordance with the policies and procedures
established by the Board.
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<PAGE>
Section 2.05. Severance Benefits; Severance Agreement. Concurrently
herewith, the Executive and Peapod are entering into the Severance Agreement
which provides certain substantial severance benefits for the Executive in the
event of termination of the Executive's employment with the Company. The
Executive shall be entitled to the benefits of such Severance Agreement as if
the provisions thereof were set forth fully herein.
ARTICLE III
Noncompetition; Confidential Information
Section 3.01. Noncompetition; Non-Solicitation. As a condition to
the Executive's employment hereunder and to the Company's obligations hereunder,
the Executive agrees to enter into, concurrently with his execution of this
Agreement, an "Employee Nonsolicitation and Noncompete Agreement" in the form
attached hereto as Exhibit A, and the Executive agrees to comply fully with all
of the terms and provisions of such "Employee Nonsolicitation and Noncompete
Agreement" as if such terms and provisions were fully set forth in this
Agreement. The covenants contained in such "Employee Nonsolicitation and
Noncompete Agreement" shall survive the conclusion of the Executive's employment
by the Company as set forth therein.
ARTICLE IV
Miscellaneous
Section 4.01. Notices. Any notice or request required or permitted
to be given hereunder shall be sufficient if in writing and delivered personally
or sent by registered or certified mail, return receipt requested, as follows:
if to the Executive, to the address of Executive as set forth in the records of
the Company, and if to the Company, to its address hereinabove set forth, or to
any other address designated by either party by notice similarly given. Such
notice shall be deemed to have been given upon the personal delivery or such
mailing thereof, as the case may be.
Section 4.02. Authority; No Conflict. The Executive represents and
warrants to the Company that the Executive has full right and authority to
execute and deliver this Agreement and to comply with the terms and provisions
hereof and that the execution and delivery of this Agreement and compliance with
the terms and provisions hereof by the Executive will not conflict with or
result in a breach of the terms, conditions or provisions of any agreement,
restriction or obligation by which the Executive is bound.
Section 4.03. Assignment and Succession. The Agreement shall be
binding upon and shall operate for the benefit of the
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<PAGE>
parties hereto and their respective legal representatives, legatees,
distributees, heirs, and successors and assigns. the Executive acknowledges
that the services he renders pursuant to this Agreement are unique and personal.
Accordingly, the Executive may not assign any of the Executive's rights
contained in this Agreement or delegate any of his duties hereunder. The
Company may assign its rights, duties or obligations under this Agreement to a
purchaser or transferee of all, or substantially all, of the Company's assets.
Section 4.04. Headings. The Article, Section paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 4.05. Applicable Law. This Agreement shall at all times be
governed by and construed, interpreted and enforced in accordance with the
internal laws (as opposed to conflict of laws provisions) of the State of
Illinois.
Section 4.06. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law. In the event that any provision of this Agreement shall
be held to be void or unenforceable, the remaining provisions of this Agreement
shall continue in full force and effect.
Section 4.07. Waiver, Etc. The waiver of a breach of any provision
of this Agreement shall not operate or be construed to be a waiver of any other
or a subsequent breach. No delay or omission in the exercise of any power,
remedy, or right herein provided or otherwise available to any party, shall
impair or affect the right of such party thereafter to exercise the same. Any
extension of time or other indulgence granted to a party hereunder or to any
other person shall not otherwise alter or affect any power, remedy or right of
any other party, or obligations of the party to whom such extension or
indulgence is granted except as specifically waived.
Section 4.08. Dispute Resolution. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association ("AAA") in
accordance with its National Rules for the Resolution Employments Disputes, to
the extent not inconsistent with this provision. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Such arbitration shall be conducted in Chicago, Illinois before a
single arbitrator. The parties shall select an arbitrator by mutual agreement
from a panel of arbitrators experienced in arbitrating employment disputes
proposed by AAA. If the parties are unable to agree on an arbitrator, AAA
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<PAGE>
shall select an arbitrator in accordance with its procedures. Nothing herein
shall preclude the Company from seeking and/or obtaining injunctive relief under
the Employee Nonsolicitation and Noncompete Agreement required hereunder to be
executed by the Executive.
Section 4.09. Entire Agreement. This Agreement, together with the
"Employee Nonsolicitation and Noncompete Agreement" and the Severance Agreement,
contain the entire agreement of the parties relating to the subject matter
hereof including, but not limited to, any previous written agreements concerning
Executive's employment with Employer. This agreement may not be modified or
discharged orally, but only by an agreement in writing signed by the party
against whom enforcement of any change, modification, waiver, extension, or
discharge is sought.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PEAPOD, INC.
By:____________________________
Andrew B. Parkinson
Chairman, President and
Chief Executive Officer
TIMOTHY M. DORGAN
_______________________________
Timothy M. Dorgan
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<PAGE>
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
Employment Agreement (the "Agreement") dated as of June 9, 1997
between John A. Furton (the "Executive") and Peapod, Inc., a Delaware
corporation (the "Company" or "Employer"). The Company's principal office is
located at 1033 University Place, Suite 375, Evanston, Illinois 60201.
WHEREAS, the Company desires to continue to employ the Executive as
its Senior Vice President-Field Support and Retailer, and the Executive desires
to continue such employment, for the term and upon the other conditions
hereinafter set forth; and
WHEREAS, concurrently herewith, the Executive and the Company are
entering into a Severance Agreement (the "Severance Agreement") providing for
certain substantial severance benefits.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Executive and the Company hereby agree as follows:
ARTICLE I
Employment
Section 1.01. Position; Term; Responsibilities. The Company shall
employ the Executive as its Senior Vice President-Field Support and Retailer for
a term commencing on the date hereof (the "Commencement Date") and ending on the
fifth anniversary of the Commencement Date (subject to automatic extension as
provided in Section 1.03, the "Employment Period"). Subject to the powers,
authorities and responsibilities vested in the Board of Directors (including any
committees thereof, the "Board") of the Company and the Chief Executive Officer
of the Company (the "Company CEO"), the Executive shall oversee the field
support and retailer services activities of the Company and have the
responsibility and authority for the formulation and execution of the policies
relating to, and the administration of, such activities. The Executive shall
hold the title of Senior Vice President-Retailer Development and Field Support
or such other or additional title as is not inconsistent with the aforementioned
responsibilities and shall report to the Company CEO. The Executive shall also
perform such other executive and administrative duties for the Company and its
subsidiaries and affiliates (not inconsistent with the position of Senior Vice
<PAGE>
President-Field Support and Retailer), as may from time to time be authorized or
directed by the Company CEO. The Executive agrees to be employed by the Company
in all such capacities, as such capacities may be amended from time to time by
written agreement between Employer and the Executive, for the Employment Period,
subject to all the covenants and conditions hereinafter set forth.
Section l.02. Duties. During the Employment Period, the Executive
shall perform faithfully the duties assigned to him hereunder to the best of his
abilities and devote his full and undivided business time and attention to the
transaction of the Company's business and not engage in any other business
activities except with the approval of the Company CEO. The previous sentence
shall not preclude the Executive from participating in the affairs of any
governmental, educational or other charitable institution so long as the Board
does not determine in good faith that such activities unreasonably interfere
with the business of the Company or the performance by Executive of his duties
hereunder.
Section 1.03. Automatic Extension of Employment Term; Termination.
(a) The Employment Term shall be automatically extended for
successive one-year periods on the fifth anniversary of the Commencement Date
and each succeeding anniversary unless either party has delivered notice to the
contrary (a "Non-Extension Notice") to the other party not less than one year
prior to such anniversary.
(b) The term of this Agreement shall be the Employment Term (as
extended as provided in Section 1.03); provided that, the Company and the
Executive each shall have the right to terminate this Agreement at any time
during the Employment Term, subject to the rights and obligations of such
parties as set forth in the Severance Agreement.
ARTICLE II
Compensation
Section 2.01. Base Compensation. As compensation for his services
hereunder, the Company shall pay to the Executive during the Employment Period a
minimum annual salary of $118,450 (the "Base Salary"), less required or
authorized deductions, payable in installments in accordance with the Company's
normal payment schedule for senior management of the Company. The Executive's
salary may be increased from time to time above the Base Salary required by this
Section 2.01 at the discretion of the Board.
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<PAGE>
Section 2.02. Bonus Plan. The Executive shall be entitled to
participate in a management bonus plan as modified by the Board from time to
time. Such plan shall, at a minimum, provide for an opportunity for the
Executive to earn a cash bonus on an annual basis of up to 20% of the
Executive's Base Salary received for the year as to which such bonus is earned
(the "Target Bonus"), based on the meeting of performance goals (such as
individual, departmental or Company-wide goals) as may be set from time to time
by the Board in its absolute discretion (i.e., the Executive shall be entitled
to receive a cash bonus with respect to such year of 20% of Base Salary if the
levels of such performance goals are fully achieved for such year). This
Section 2.02 shall not limit the Board's ability to establish management bonus
plans providing for a greater Target Bonus for the Executive or to provide a
cash bonus for the Executive in any given year that is greater than the Target
Bonus.
Section 2.03. Employee Benefits. The Executive shall be entitled to
participate in incentive compensation plans of the Company that are applicable
to the Executive during the Employment period and shall be eligible for payments
consistent with the terms of such plans. Upon satisfaction of any eligibility
requirements, during the Employment Period, the Executive shall be entitled to
participate in such employee benefit plans and to receive such other fringe
benefits as are from time to time made generally available to the senior
management of the Company; provided that if a severance benefit is payable to
the Executive pursuant to Section 2.05, such benefit shall be paid in lieu of
any benefit otherwise payable to Executive pursuant to any Company severance
plan unless such plan expressly provides that payments thereunder will be made
in addition to the severance payments provided hereunder. As of the date
hereof, such plans include a 401(k) plan, automobile allowance program, life
insurance program and long-term disability plan. Nothing herein shall be
construed to require the Company to establish, or shall preclude the Company, in
its absolute discretion, from changing or amending, in whole or in part, or
revoking, any one or more of such employee benefit plans or programs without
notice. In addition, the Executive shall be entitled to take time off for
vacation or illness in accordance with the Company's policies with respect
thereto established from time to time with respect to the Company's senior
management.
Section 2.04. Expense Reimbursements. The Company shall reimburse
the Executive for all proper expenses incurred by Executive in the performance
of Executive's duties hereunder in accordance with the policies and procedures
established by the Board.
Section 2.05. Severance Benefits; Severance Agreement. Concurrently
herewith, the Executive and Peapod are entering into
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<PAGE>
the Severance Agreement which provides certain substantial severance benefits
for the Executive in the event of termination of the Executive's employment with
the Company. The Executive shall be entitled to the benefits of such Severance
Agreement as if the provisions thereof were set forth fully herein.
ARTICLE III
Noncompetition; Confidential Information
Section 3.01. Noncompetition; Non-Solicitation. As a condition to
the Executive's employment hereunder and to the Company's obligations hereunder,
the Executive agrees to enter into, concurrently with his execution of this
Agreement, an "Employee Nonsolicitation and Noncompete Agreement" in the form
attached hereto as Exhibit A, and the Executive agrees to comply fully with all
of the terms and provisions of such "Employee Nonsolicitation and Noncompete
Agreement" as if such terms and provisions were fully set forth in this
Agreement. The covenants contained in such "Employee Nonsolicitation and
Noncompete Agreement" shall survive the conclusion of the Executive's employment
by the Company as set forth therein.
ARTICLE IV
Miscellaneous
Section 4.01. Notices. Any notice or request required or permitted
to be given hereunder shall be sufficient if in writing and delivered personally
or sent by registered or certified mail, return receipt requested, as follows:
if to the Executive, to the address of Executive as set forth in the records of
the Company, and if to the Company, to its address hereinabove set forth, or to
any other address designated by either party by notice similarly given. Such
notice shall be deemed to have been given upon the personal delivery or such
mailing thereof, as the case may be.
Section 4.02. Authority; No Conflict. The Executive represents and
warrants to the Company that the Executive has full right and authority to
execute and deliver this Agreement and to comply with the terms and provisions
hereof and that the execution and delivery of this Agreement and compliance with
the terms and provisions hereof by the Executive will not conflict with or
result in a breach of the terms, conditions or provisions of any agreement,
restriction or obligation by which the Executive is bound.
Section 4.03. Assignment and Succession. The Agreement shall be
binding upon and shall operate for the benefit of the parties hereto and their
respective legal representatives, legatees, distributees, heirs, and successors
and assigns. The
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Executive acknowledges that the services he renders pursuant to this Agreement
are unique and personal. Accordingly, the Executive may not assign any of the
Executive's rights contained in this Agreement or delegate any of his duties
hereunder. The Company may assign its rights, duties or obligations under this
Agreement to a purchaser or transferee of all, or substantially all, of the
Company's assets.
Section 4.04. Headings. The Article, Section paragraph and
subparagraph headings are for convenience of reference only and shall not define
or limit the provisions hereof.
Section 4.05. Applicable Law. This Agreement shall at all times be
governed by and construed, interpreted and enforced in accordance with the
internal laws (as opposed to conflict of laws provisions) of the State of
Illinois.
Section 4.06. Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law. In the event that any provision of this Agreement shall
be held to be void or unenforceable, the remaining provisions of this Agreement
shall continue in full force and effect.
Section 4.07. Waiver, Etc. The waiver of a breach of any provision
of this Agreement shall not operate or be construed to be a waiver of any other
or a subsequent breach. No delay or omission in the exercise of any power,
remedy, or right herein provided or otherwise available to any party, shall
impair or affect the right of such party thereafter to exercise the same. Any
extension of time or other indulgence granted to a party hereunder or to any
other person shall not otherwise alter or affect any power, remedy or right of
any other party, or obligations of the party to whom such extension or
indulgence is granted except as specifically waived.
Section 4.08. Dispute Resolution. Any controversy or claim arising
out of or relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association ("AAA") in
accordance with its National Rules for the Resolution Employments Disputes, to
the extent not inconsistent with this provision. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Such arbitration shall be conducted in Chicago, Illinois before a
single arbitrator. The parties shall select an arbitrator by mutual agreement
from a panel of arbitrators experienced in arbitrating employment disputes
proposed by AAA. If the parties are unable to agree on an arbitrator, AAA shall
select an arbitrator in accordance with its procedures. Nothing herein shall
preclude the Company from seeking and/or
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obtaining injunctive relief under the Employee Nonsolicitation and Noncompete
Agreement required hereunder to be executed by the Executive.
Section 4.09. Entire Agreement. This Agreement, together with the
"Employee Nonsolicitation and Noncompete Agreement" and the Severance Agreement,
contain the entire agreement of the parties relating to the subject matter
hereof including, but not limited to, any previous written agreements concerning
Executive's employment with Employer. This agreement may not be modified or
discharged orally, but only by an agreement in writing signed by the party
against whom enforcement of any change, modification, waiver, extension, or
discharge is sought.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
PEAPOD, INC.
By _________________________________
Andrew B. Parkinson
Chairman, President and
Chief Executive Officer
JOHN A. FURTON
____________________________________
John A. Furton
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Exhibit 10.9
EXECUTIVE FORM
SEVERANCE AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into as of the ___ day of
__________, 1997 by and between Peapod, Inc., a Delaware corporation (the
"Company"), and _______________ (the "Executive").
W I T N E S S E T H
WHEREAS, the Executive currently serves as a key employee of the Company
and his services and knowledge are valuable to the Company in connection with
the management of one or more of the Company's principal operating facilities,
divisions, departments or subsidiaries; and
WHEREAS, concurrently with the execution hereof, Executive and the Company
are entering into an employment agreement, which employment agreement provides
for substantial benefits; and
WHEREAS, the Board (as defined in Section 1) has determined that it is in
the best interests of the Company and its stockholders to secure the Executive's
continued services and to ensure the Executive's continued dedication and
objectivity in the event of any threat or occurrence of, or negotiation or other
action that could lead to, or create the possibility of, a Change in Control (as
defined in Section 1) of the Company, without concern as to whether the
Executive might be hindered or distracted by personal uncertainties and risks
created by any such possible Change in Control, and to encourage the Executive's
full attention and dedication to the Company, the Board has authorized the
Company to enter into this Agreement.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and the Executive hereby
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have
the respective meanings set forth below:
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(a) "Board" means the Board of Directors of the Company.
(b) "Cause" means (1) a willful refusal by the Executive to perform or
substantial disregard of those duties and responsibilities properly assigned to
the Executive, and if a Change of Control has occurred, if those duties and
responsibilities do not differ in any material respect from the duties and
responsibilities of the Executive during the 90-day period immediately prior to
a Change in Control (other than as a result of incapacity due to physical or
mental illness), in any case, which is not remedied in a reasonable period of
time after receipt of written notice from the Company specifying such breach,
(2) embezzlement or misappropriation of corporate funds by the Executive, other
act of dishonesty by the Executive, or significant activities by the Executive
harmful to the reputation of the Company, or (3) significant violation by the
Executive of any statutory or common law duty of loyalty to the Company.
(c) "Change in Control" means:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of beneficial
ownership within the meaning of Rule 13d-3 promulgated under the Exchange Act,
of 20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change in Control: (A) any acquisition directly from the Company
(excluding any acquisition resulting from the exercise of an exercise,
conversion or exchange privilege in respect of outstanding convertible or
exchangeable securities), (B) any acquisition by the Company, (C) any
acquisition by an Exempt Person, (D) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (E) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation involving the Company, if, immediately
after such reorganization, merger or consolidation, each of the conditions
described in clauses (i), (ii) and (iii) of subsection (3) of this Section
(1)(c) shall be satisfied; and provided further that, for purposes of clause
(B), if any Person (other than the Company or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company) shall become the beneficial owner of 20% or more of
the Outstanding Company Common Stock or 20% or more of the Outstanding Company
Voting Securities by reason of an
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acquisition by the Company and such Person shall, after such acquisition by the
Company, become the beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding Company Voting Securities and
such beneficial ownership is publicly announced, such additional beneficial
ownership shall constitute a Change in Control;
(2) individuals who, as of the date of the consummation of the Company's
initial public offering of Common Stock, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of such Board;
provided, however, that any individual who becomes a director of the Company
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by the vote of at least 66-2/3% of the
directors then comprising the Incumbent Board shall be deemed to have been a
member of the Incumbent Board; and provided further, that no individual who was
initially elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall be deemed to have been a member of the Incumbent Board;
(3) approval by the stockholders of the Company of a reorganization, merger
or consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 60% of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
indirectly) in substantially the same proportions relative to each other as
their beneficial ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (ii) no Person (other than an Exempt Person; the
Company; any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company; the corporation
resulting from such Corporate Transaction; and any Person which beneficially
owned, immediately prior to such Corporate Transaction, directly or indirectly,
20% or more of the
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Outstanding Company Common Stock or the Outstanding Company Voting Securities,
as the case may be) will beneficially own, directly or indirectly, 20% or more
of, respectively, the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the
outstanding securities of such corporation entitled to vote generally in the
election of directors and (iii) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or
(4) approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.
(d) "Company" shall have the meaning set forth in the second recital of
this Agreement.
(e) "Date of Termination" means (1) the effective date on which the
Executive's employment by the Company terminates as specified in a prior written
notice by the Company or the Executive, as the case may be, to the other,
delivered pursuant to Section 11 or (2) if the Executive's employment by the
Company terminates by reason of death, the date of death of the Executive.
(f) "Employment Agreement" means the Employment Agreement of even date
hereof between Executive and Peapod, as it may be amended from time to time.
(g) "Exempt Person" means each of Andrew B. Parkinson and Thomas L.
Parkinson and any Affiliate (as such term is defined in Rule 12b-1 under the
Securities Exchange Act of 1934, as in effect on the date hereof, "Affiliate")
thereof.
(h) "Good Reason" means, without the Executive's express written consent,
the occurrence of any of the following events.
(1) any of (i) the assignment to the Executive of any duties inconsistent
in any material respect with the Executive's position(s), duties,
responsibilities or status with the Company as provided under the Employment
Agreement or, if the Employment Agreement is no longer in effect, immediately
prior to the termination thereof or, if a Change of Control has occurred,
immediately prior to such Change in Control, (ii) a change in the Executive's
reporting responsibilities, titles or offices with the Company inconsistent with
the Employment Agreement or, if the Employment Agreement is no longer in effect,
as in effect immediately prior to the termination thereof, or, if a Change of
Control has occurred, as in effect immediately prior to such Change in Control,
or (iii) any removal or involuntary termination of the Executive from the
Company otherwise than as
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expressly permitted by this Agreement or any failure to re-elect the Executive
to any position with the Company held by the Executive as provided under the
Employment Agreement or, if the Employment Agreement is no longer in effect, as
in effect immediately prior to the termination thereof, or, if a Change of
Control has occurred, immediately prior to such Change in Control;
(2) a reduction by the Company in the Executive's rate of annual base
salary as provided under the Employment Agreement or a change to Executive's
bonus compensation that is adverse to the Executive and is inconsistent with the
Employment Agreement, or, if the Employment Agreement is no longer in effect,
such annual base salary or bonus compensation plan as in effect immediately
prior to the termination thereof, or, if a Change of Control has occurred, such
annual base salary or bonus compensation plan as in effect immediately prior to
such Change in Control or as the same may be increased from time to time
thereafter;
(3) any requirement of the Company that the Executive (i) be based
anywhere other than at the facility where the Executive is located at the date
of this Agreement (or a new headquarters within a 30 mile radius of the
Company's current headquarters) or, if a Change of Control has occurred, at the
time of the Change in Control, or (ii) travel on Company business to an extent
substantially more burdensome than the travel obligations of the Executive
immediately prior to the date hereof, or, if a Change of Control has occurred,
at the time of such Change in Control;
(4) if a Change of Control has occurred, the failure of the Company to (i)
continue in effect any employee benefit plan or compensation plan in which the
Executive is participating immediately prior to such Change in Control, unless
the Executive is permitted to participate in other plans providing the Executive
with substantially comparable benefits, or the taking of any action by the
Company which would adversely affect the Executive's participation in or
materially reduce the Executive's benefits under any such plan, (ii) provide the
Executive and the Executive's dependents welfare benefits (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) in accordance with the most favorable plans, practices, programs
and policies of the Company and its affiliated companies in effect for the
Executive immediately prior to such Change in Control, (iii) provide fringe
benefits in accordance with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in effect for the Executive
immediately prior to such Change in Control, (iv) provide an office or offices
of a size and with furnishings and other appointments, together with secretarial
and
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other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies immediately prior
to such Change in Control, (v) provide the Executive with paid vacation in
accordance with the most favorable plans, policies, programs and practices of
the Company and its affiliated companies as in effect for the Executive
immediately prior to such Change in Control, or (vi) reimburse the Executive
promptly for all reasonable employment expenses incurred by the Executive in
accordance with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive immediately
prior to such Change in Control;
(5) the failure of the Company to obtain the assumption agreement from any
successor as contemplated in Section 10(b); or
(6) the Company delivers a Non-Extension Notice (as defined in the
Employment Agreement) to the Executive under Section 1.03 of the Employment
Agreement.
For purposes of this Agreement, any good faith determination of Good Reason
made by the Executive shall be conclusive; provided, however, that an isolated,
insubstantial and inadvertent action taken in good faith and which is remedied
by the Company promptly after receipt of notice thereof given by the Executive
shall not constitute Good Reason.
(i) "Nonqualifying Termination" means a termination of the Executive's
employment (1) by the Company for Cause, (2) by the Executive for any reason
other than a Good Reason, (3) as a result of the Executive's death or (4) by the
Company due to the Executive's absence from his duties with the Company on a
full-time basis for at least 180 consecutive days as a result of the Executive's
incapacity due to physical or mental illness; provided, however, that a
termination of the Executive's employment for any reason whatsoever during the
"Window Period" (hereinafter defined) shall not constitute a Nonqualifying
Termination.
(j) "Termination Period" means the period of time beginning with the date
hereof and ending on the earliest to occur of (1) ten years after the date
hereof, (2) Executive's death and (3) two years following such Change in
Control, (the "Termination Date").
(k) "Window Period" means the 30-day period commencing one year after the
date of a Change in Control.
2. Obligations of the Executive. The Executive agrees that in the event
any person or group attempts a Change in Control, he shall not voluntarily leave
the employ of the Company
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without Good Reason (a) until such attempted Change in Control terminates or (b)
if a Change in Control shall occur, until 90 days following such Change in
Control. For purposes of the foregoing subsection (a), Good Reason shall be
determined as if a Change in Control had occurred when such attempted Change in
Control became known to the Board.
3. Payments Upon Termination of Employment.
---------------------------------------
(a) If during the Termination Period the employment of the Executive shall
terminate, other than by reason of a Nonqualifying Termination, then the Company
shall pay to the Executive (or the Executive's beneficiary or estate) as
compensation for services rendered to the Company (i) in the event such
employment terminates more than 60 days prior to a Change of Control, at such
intervals as Executive's base salary and at such time as Executive's annual
bonus would otherwise be paid, and (ii) in the event such employment terminates
less than 60 days prior to a Change of Control or terminates after a Change of
Control, within 30 days following the Date of Termination in a lump sum:
(1) a cash amount equal to the sum of (i) the Executive's full annual base
salary from the Company and its affiliated companies through the Date of
Termination, to the extent not theretofore paid, (ii) the Executive's annual
bonus in an amount at least equal to the higher of (x) one-half of the maximum
bonus the Executive could earn during the fiscal year during which such
termination occurs and (y) the average of the Executive's annual bonus paid or
payable, including by reason of any deferral, to the Executive by the Company
and its affiliated companies in respect of the three fiscal years of the Company
(or such portion thereof during which the Executive performed services for the
Company if the Executive shall have been employed by the Company for less than
such three fiscal year period) immediately preceding the fiscal year in which
such termination occurs, multiplied by a fraction, the numerator of which is the
number of days in the fiscal year through the Date of Termination and the
denominator of which is 365 or 366, as applicable, and (iii) any compensation
previously deferred by the Executive (together with any interest and earnings
thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid; plus
(2) a cash amount (subject to any applicable payroll or other taxes
required to be withheld pursuant to Section 4) in an amount equal to (i) two (2)
times (1.5 times if a Change of Control has not occurred) the Executive's
highest annual base salary from the Company and its affiliated companies in
effect during the 12-month period prior to the Date of Termination, plus (ii)
two (2) times (1.5 times if a Change of Control has not occurred) an amount at
least equal to the higher of (x) one-half
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of the maximum bonus the Executive could earn during the fiscal year during
which such termination occurs and (y) the average of the Executive's annual
bonus paid or payable, including by reason of any deferral, to the Executive by
the Company and its affiliated companies in respect of the three fiscal years of
the Company (or such portion thereof during which the Executive performed
services for the Company if the Executive shall have been employed by the
Company for less than such three fiscal year period) immediately preceding the
fiscal year in which such termination in which the termination occurs, provided,
however, that in the event there are fewer than 24 (18 if a Change of Control
has not occurred) whole months remaining from the Date of Termination to the
Termination Date, the amount calculated in accordance with this Section 3(a)(2)
shall be reduced as determined by multiplying such amount by a fraction the
numerator of which is the number of months, including any partial month (with
any partial month being expressed as a fraction the numerator of which is the
number of days remaining in such month and the denominator of which is the
number of days in such month), so remaining and the denominator of which is 24
(18 if a Change of Control has not occurred); provided further, that any amount
paid pursuant to this Section 3(a)(2) shall be paid in lieu of any other amount
of severance relating to salary or bonus continuation to be received by the
Executive upon termination of employment of the Executive under any severance
plan, policy or arrangement of the Company.
(b) If during the Termination Period the employment of the Executive shall
terminate other than by reason of a Nonqualifying Termination, in addition to
the payments to be made pursuant to paragraph (a) of this Section 3, for a
period of two years (18 months if a Change in Control has not occurred)
commencing on the Date of Termination, the Company shall continue to keep in
full force and effect all policies of medical, accident, disability and life
insurance with respect to the Executive and his dependents with the same level
of coverage, upon the same terms and otherwise to the same extent as such
policies shall have been in effect immediately prior to the Date of Termination,
and the Company and the Executive shall share the costs of the continuation of
such insurance coverage in the same proportion as such costs were shared
immediately prior to the Date of Termination; provided that, if Executive
becomes eligible during such period to participate in another group plan with
respect to any such policies by reason of subsequent employment or otherwise,
the Executive's coverage under the Company policies will terminate in accordance
with the transition of coverage provisions in the Company's policies.
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(c) If during the Termination Period the employment of the Executive shall
terminate by reason of a Nonqualifying Termination, then the Company shall pay
to the Executive within 30 days following the Date of Termination, a cash amount
equal to the sum of (1) the Executive's full annual base salary from the Company
through the Date of Termination, to the extent not theretofore paid and (2) any
compensation previously deferred by the Executive (together with any interest
and earnings thereon) and any accrued vacation pay, in each case to the extent
not theretofore paid.
4. Withholding Taxes. The Company may withhold from all payments due to
the Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
5. Reimbursement of Expenses. If any contest or dispute shall arise under
this Agreement involving termination of the Executive's employment with the
Company after a Change of Control or involving the failure or refusal of the
Company to perform fully in accordance with the terms hereof after a Change of
Control, the Company shall reimburse the Executive, on a current basis, for all
legal fees and expenses, if any, incurred by the Executive in connection with
such contest or dispute, together with interest in an amount equal to the prime
rate of The Northern Trust Company from time to time in effect, but in no event
higher than the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives the Executive's statement
for such fees and expenses through the date of payment thereof; provided,
however, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Executive's claims in such contest or
dispute, the Executive shall be required to reimburse the Company, over a period
of 12 months from the date of such resolution, for all sums advanced to the
Executive pursuant to this Section 5.
6. Termination of Agreement. (a) This Agreement shall be effective as of
the date hereof and shall terminate upon
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the first to occur of (i) the Termination Date and (ii) Executive's death.
7. Scope of Agreement. Nothing in this Agreement shall be deemed to
entitle the Executive to continued employment with the Company or its
subsidiaries.
8. Directors and Officers Liability Insurance; Indemnification. The
Company agrees that, notwithstanding a Termination of Executive's employment
with the Company, the Company shall, for at least three years after the Date of
Termination, use all reasonable efforts to have Executive included as a named
insured or otherwise covered for actions or failures to act by Executive in his
capacity as a director or officer of the Company to at least the same extent as
other executive officers or directors, as the case may be, of the Company under
any directors and officers liability insurance policies maintained by the
Company; provided that the additional cost of providing coverage with a
retroactive date including Executive's period of service or with an extended
reporting period or a combination of both does not materially increase the cost
of the Company's directors and officers insurance. The Company agrees that it
will not alter the indemnification provisions in its charter or by-laws so as to
give Executive less protection thereunder with respect to periods during which
Executive served the Company as an executive officer or other employee than is
afforded to other executive officers or peer employees, as the case may be, with
respect to periods during which they serve the Company.
9. Successors; Binding Agreement.
(a) This Agreement shall not be terminated by any merger or consolidation
of the Company whereby the Company is or is not the surviving or resulting
corporation or as a result of any transfer of all or substantially all of the
assets of the Company. In the event of any such merger, consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon the
surviving or resulting corporation or the person or entity to which such assets
are transferred.
(b) The Company agrees that concurrently with any merger, consolidation or
transfer of assets referred to in paragraph (a) of this Section 9, it will cause
any successor or transferee unconditionally to assume, by written instrument
delivered to the Executive (or his beneficiary or estate), all of the
obligations of the Company hereunder. Failure of the Company to obtain such
assumption prior to the effectiveness of any such merger, consolidation or
transfer of assets shall be a breach of this Agreement and shall entitle the
Executive to compensation and other benefits from the Company in the same amount
and on the same terms as the Executive would be entitled hereunder if the
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Executive's employment were terminated following a Change in Control other than
by reason of a Nonqualifying Termination. For purposes of implementing the
foregoing, the date on which any such merger, consolidation or transfer becomes
effective shall be deemed the Date of Termination.
(c) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts would be payable to the Executive hereunder had the
Executive continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to such person or
persons appointed in writing by the Executive to receive such amounts or, if no
person is so appointed, to the Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage prepaid,
addressed (1) if to the Executive, to _________________________, and if to the
Company, to Peapod, Inc., 1033 University Place, Evanston, Illinois 60201,
attention _______________________ with a copy to the Secretary, or (2) to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
(b) A written notice of termination of the Executive's employment by the
Company or the Executive, as the case may be, shall (i) indicate the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) specify the Date of Termination date (which
date shall be not less than 15 days after the giving of such notice). The
failure by the Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
11. Full Settlement; Resolution of Disputes. (a) The Company's obligation
to make any payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the
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Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and, such amounts shall not be reduced, except as
set forth in Section 3(b), whether or not the Executive obtains other
employment.
(b) If there shall be any dispute between the Company and the Executive in
the event of any termination of the Executive's employment, then, unless and
until there is a final determination rendered as provided in Section 16
declaring that such termination was for Cause, that the determination by the
Executive of the existence of Good Reason was not made in good faith, or that
the Company is not otherwise obligated to pay any amount or provide any benefit
to the Executive and his dependents or other beneficiaries, as the case may be,
under paragraphs (a) and (b) of Section 3, the Company shall pay all amounts,
and provide all benefits, to the Executive and his dependents or other
beneficiaries, as the case may be, that the Company would be required to pay or
provide pursuant to paragraphs (a) and (b) of Section 3 as though such
termination were by the Company without Cause or by the Executive with Good
Reason; provided, however, that the Company shall not be required to pay any
disputed amounts pursuant to this paragraph except upon receipt of an
undertaking by or on behalf of the Executive to repay all such amounts to which
the Executive is ultimately adjudged by such court not to be entitled.
12. Employment with Subsidiaries. Employment with the Company for
purposes of this Agreement shall include employment with any corporation or
other entity in which the Company has a direct or indirect ownership interest of
50% or more of the total combined voting power of the then outstanding
securities of such corporation or other entity entitled to vote generally in the
election of directors.
13. Governing Law; Validity. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Illinois without regard to the
principle of conflicts of laws. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which other provisions shall remain in
full force and effect.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
15. Miscellaneous. No provision of this Agreement may be modified or
waived unless such modification or waiver is
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agreed to in writing and signed by the Executive and by a duly authorized
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. Failure by the Executive or the Company to insist
upon strict compliance with any provision of this Agreement or to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement. The rights of, and benefits payable to,
the Executive, his estate or his beneficiaries pursuant to this Agreement are in
addition to any rights of, or benefits payable to, the Executive, his estate or
his beneficiaries under any other employee benefit plan or compensation program
of the Company.
16. Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration administered by the American Arbitration Association ("AAA") in
accordance with its National Rules for the Resolution of Employment Disputes, to
the extent not inconsistent with this provision. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Such arbitration shall be conducted in Chicago, Illinois before a
single arbitrator. The parties shall select an arbitrator by mutual agreement
from a panel of arbitrators experienced in arbitrating employment disputes
proposed by AAA. If the parties are unable to agree on an arbitrator, AAA shall
select an arbitrator in accordance with its procedures).
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PEAPOD, INC.
By ____________________________
Name:
Title:
[EXECUTIVE]
________________________________
[Name]
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<PAGE>
EXHIBIT 10.10
AMENDED AND RESTATED
INVESTORS AGREEMENT
dated as of
April 1, 1997
by and among
NEW PEAPOD, INC.
PEAPOD LP
PEAPOD, INC.
and
EACH OF THE STOCKHOLDERS NAMED HEREIN
<PAGE>
AMENDED AND RESTATED INVESTORS AGREEMENT
THIS AGREEMENT is made as of April 1, 1997, by and among New Peapod, Inc.,
a Delaware corporation (the "Company"), Peapod LP, an Illinois limited
partnership ("Peapod LP"), Peapod, Inc., a Delaware corporation ("Peapod,
Inc."), Andrew B. Parkinson, Thomas L. Parkinson, and each of the persons set
forth on the Schedule of Stockholders attached hereto (collectively with their
permitted successors and assigns, the "Stockholders").
Pursuant to that certain Conversion Agreement and Plan of Reorganization of
May 30, 1997 (the "Plan"), the persons set forth on the Schedule of Stockholders
attached hereto, together with certain other persons, shall exchange their
limited partnership interests of Peapod LP for shares of voting common stock
("Common Stock" or "Shares"), par value $.01 per share, of the Company,
immediately prior to the closing of the initial public offering of Common Stock
of the Company (such date being the "Closing Date").
The parties hereto acknowledge that following the transactions occurring on
the Closing Date (i) Peapod, Inc. shall dissolve and its corporate existence
shall cease to exist and (ii) New Peapod, Inc. shall change its name to "Peapod,
Inc."
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby agree as follows:
Effective Date.
This Agreement is conditioned upon the closing of the initial public
offering of Common Stock of the Company prior to December 31, 1997, and shall
take effect as of the Closing Date.
1. Existing Agreements.
The parties hereto agree that the terms of the agreements set forth below
in this Section 2 shall terminate and be of no further force and effect.
(a) Agreement dated as of August 13, 1993 by and between Tribune
Company and Peapod LP, as amended by the Amendment and Waiver dated as of
September 15, 1994 by and among Tribune Company, Tribune National Marketing
Company ("Tribune"), Peapod LP, and Peapod, Inc., and as further amended by the
Amendment dated as of January 15, 1996 by and among Tribune, Peapod LP, and
Peapod, Inc. other than Articles III and IV and Section 9.2 thereof which shall
continue to be in effect in accordance with their terms;
(b) Unitholders Agreement dated as of September 15, 1994 by and among
Ameritech Corporation ("Ameritech"), Peapod LP, Tribune Company, and Tribune;
<PAGE>
(c) Unit Purchase Agreement dated as of September 15, 1994 by and
among Ameritech, Peapod LP, and Peapod, Inc., as amended by the Amendment dated
as of January 15, 1996, and as further amended by the Amendment dated as of July
25, 1996 other than Articles III and IV and Section 9.2 thereof which shall
continue to be in effect in accordance with their terms;
(d) Stockholders Agreement dated as of September 15, 1994 by and among
Ameritech, Peapod, Inc., Andrew B. Parkinson, and Thomas L. Parkinson;
(e) Agreement dated as of July 27, 1995 by and between Providence
Journal Company ("Providence") and Peapod LP, as amended by the Amendment dated
as of January 15, 1996 other than Articles III and IV and Section 9.2 thereof
which shall continue to be in effect in accordance with their terms;
(f) Unitholders Agreement dated as of July 23, 1996 by and among
Peapod LP, Peapod, Inc., ServiceMaster Venture Fund, L.L.C. ("ServiceMaster"),
and The ServiceMaster Company Limited Partnership other than Sections 1, 2 and
10(a) thereof which shall continue to be in effect in accordance with their
terms; and
(g) Unitholders Agreement dated as of January 2, 1997 by and among
Peapod LP, Peapod, Inc., and WPP Group USA, Inc. ("WPP") other than Sections 1,
2 and 10(a) thereof which shall continue to be in effect in accordance with
their terms.
2. Registration Rights.
(a) Demand Registrations.
(i) Demand Registrations by Stockholders. Any of the
Stockholders may request an aggregate of two registrations under the
Securities Act of 1933, as amended from time to time ("Securities Act") of
all or a part of their Shares ("Demand Registration"); provided, that the
aggregate offering price of such Shares requested to be registered in any
such Demand Registration must equal at least $10 million; and provided
further, that each demand registration effected by the parties to that
certain Unitholders Agreement dated as of April 19, 1996 (the "Venture
Unitholders Agreement") by and among Peapod LP, Peapod, Inc. and each of
the unitholders named therein ("Ventureholders") shall preclude one of the
permitted Demand Registrations hereunder. Any such request for a Demand
Registration under this Section 3(a)(i) shall specify the approximate
number of Shares requested to be registered and the anticipated per Share
price range for such offering.
(ii) Upon Effectiveness. A registration will not count as one of
the permitted Demand Registrations until it has become effective (unless
such registration has not become effective due solely to the fault of the
Stockholders requesting such registration).
(iii) Notice of and Priority on Demand Registrations. Any
Stockholder that requests a Demand Registration shall notify each other
Stockholder of such request within ten days thereafter to permit
participation of such other Stockholders in such registration,
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<PAGE>
which notice shall set forth the terms of such request. In the event a
Ventureholder requests a demand registration pursuant to its rights
thereunder, the Company will notify the Stockholders of such request within
ten days thereafter to permit participation of the Stockholders in such
registration, which notice shall set forth the terms of such request. If a
Demand Registration is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the number
of Shares requested to be included in such offering exceeds the number of
Shares which can be sold therein without adversely affecting the
marketability of the offering, the Company will include in such
registration the Shares requested to be included in such registration, pro
rata among the Stockholders and Ventureholders so requesting on the basis
of the number of Shares owned by each such holder.
(iv) Restrictions on Demand Registrations. The Company will not
be obligated to effect any Demand Registration within 180 days after the
effective date of a previous Demand Registration or a registration in which
the Stockholders were given piggyback rights pursuant to Section 3(b). The
Company may postpone for up to 120 days the filing or the effectiveness of
a registration statement for a Demand Registration if (1) the Company has
engaged or will engage in a firm commitment underwritten public offering
within 90 days of the request for registration, or (2) the Company
reasonably determines that the requested registration would interfere with
a "material transaction", defined as a transaction that would require a
filing on a Current Report on Form 8-K with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended from time
to time (the "Exchange Act"); provided that in such event, the Stockholders
initially requesting such Demand Registration will be entitled to withdraw
such request and, if such request is withdrawn, such Demand Registration
will not count as one of the permitted Demand Registrations hereunder.
(v) Selection of Underwriters. The Company will have the right
to select the investment banker(s) and manager(s) of national standing to
administer the offering, subject to the approval of the holders of a
majority of the Stockholders and Ventureholders included in any Demand
Registration, which approval will not be unreasonably withheld.
(b) Piggyback Registrations.
(i) Right to Piggyback. Whenever the Company proposes to
register its securities for an aggregate offering price of at least $5
million under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Shares (other than forms for registrations relating solely
to employee benefit plans or transactions effected pursuant to Rule 145
under the Securities Act) (a "Piggyback Registration"), the Company will
give prompt written notice to all the Stockholders of its intention to
effect such a registration and will include in such registration all Shares
with respect to which the Company has received written requests from
Stockholders for inclusion therein within 30 days after the receipt of the
Company's notice.
(ii) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten registration on behalf of the Company, and
the managing underwriters advise
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<PAGE>
the Company in writing that in their opinion the number of Shares requested
to be included in such registration exceeds the number which can be sold in
such offering without adversely affecting the marketability of the
offering, the Company will include in such registration: first, the Shares
the Company proposes to sell; and second, after all Shares the Company
proposes to sell are included, the Shares requested to be included in such
registration, pro rata among the requesting holders of Shares or of rights
to acquire Shares on the basis of the number of Shares owned or subject to
such rights.
(iii) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten registration other than on behalf of the
Company, and the managing underwriters advise the Company in writing that
in their opinion the number of Shares requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company will
include in such registration the Shares requested to be included in such
registration, pro rata among the requesting holders of Shares or of rights
to acquire Shares on the basis of the number of Shares owned or subject to
such rights.
(c) Holdback Agreements. Each Stockholder agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144) of Shares of
the Company, or any securities convertible into or exchangeable or exercisable
for such Shares, during the seven days prior to and the 120-day period beginning
on the effective date of any underwritten public offering of Shares (except as
part of such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(d) Registration Procedures. Whenever the Stockholders have requested
that any Shares be registered pursuant to this Agreement, the Company will use
its best efforts to effect the registration and the sale of such Shares in
accordance with the intended method of disposition thereof, and pursuant thereto
the Company will as expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission
a registration statement with respect to such Shares and use its best
efforts to cause such registration statement to become effective, provided
that before filing a registration statement or prospectus or any amendments
or supplements thereto, the Company will furnish to the counsel selected by
the holders of a majority of the Shares covered by such registration
statement copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel;
(ii) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than three months
and comply with the provisions of the Securities Act with respect to the
disposition of all Shares covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
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<PAGE>
(iii) furnish to each selling Stockholder such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Stockholder may
reasonably request in order to facilitate the disposition of the Shares
owned by such Stockholder;
(iv) use its best efforts to register or qualify such Shares
under such other securities or blue sky laws of such jurisdictions as any
selling Stockholder reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Stockholder to consummate the disposition in such jurisdictions of the
Shares owned by such Stockholder, provided that the Company will not be
required to (x) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph, (y)
subject itself to taxation in any such jurisdiction, or (z) consent to
general service of process in any such jurisdiction;
(v) notify each selling Stockholder, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such
Stockholder, the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Shares, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(vi) cause all such Shares to be listed on each securities
exchange on which similar securities issued by the Company are then listed
or, if not so listed, to be listed on The Nasdaq Stock Market;
(vii) provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement;
(viii) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions
as the holders of a majority of the Shares being sold or the underwriters,
if any, reasonably request in order to expedite or facilitate the
disposition of such Shares;
(ix) make available for inspection by any selling Stockholder,
any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant, or other agent
retained by any such Stockholder or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees, and independent
accountants to supply all information reasonably requested by any such
Stockholder, underwriter, attorney, accountant, or agent in connection with
such registration statement;
(x) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security
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<PAGE>
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
and
(xi) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any Shares included in such registration statement for
sale in any jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order.
(e) Registration Expenses. The Company shall pay all expenses
incurred by itself and the Stockholders incident to the registration provisions
of this Agreement, including without limitation, the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any of its liability insurance, the
expenses and fees for listing the securities to be registered on the applicable
securities exchange or on The Nasdaq Stock Market, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for the Company and all independent certified public accountants, underwriters
(excluding underwriting discounts and selling commissions), and other persons
retained by the Company and the reasonable cost (not to exceed $20,000) of one
special legal counsel to represent such holders proposing to distribute their
securities through such registration (the "Registration Expenses"); provided,
that in the event a Demand Registration is withdrawn by the Stockholders, then
(as determined by the Stockholders holding a majority of the Shares requesting
such registration) either (x) the Stockholders requesting such registration
shall pay the Registration Expenses relating to such Demand Registration, or (y)
such Demand Registration shall count as one of the permitted Demand
Registrations hereunder; provided further, that each Stockholder shall pay its
allocable share of all underwriting discounts and selling commissions in
connection with all such registrations.
(f) Indemnification Pursuant to a Registration.
(i) The Company agrees to indemnify, to the extent permitted by
law, each Stockholder, its officers and directors and each person who
controls such Stockholder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities, and expenses (including
investigation and legal fees and expenses incurred in connection with any
claim asserted) to which they or any of them may be subject caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus, or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such
Stockholder expressly for use therein or by such Stockholder's failure to
deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished such
Stockholder with copies of the same. In connection with an underwritten
offering, the Company will indemnify such underwriters, their officers, and
directors and each person who
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<PAGE>
controls such underwriters (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification of
the Stockholders.
(ii) In connection with any registration statement in which a
Stockholder is participating, each such Stockholder will furnish to the
Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify
the Company, its directors and officers, and each person who controls the
Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities, and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus, or preliminary prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements
therein not misleading based solely upon information so furnished to the
Company in writing expressly for use therein; provided, however, that the
maximum liability of such indemnifying Stockholder hereunder shall be
limited to the proceeds actually received by such Stockholder from the sale
of such Shares.
(iii) Any person entitled to indemnification hereunder will (x)
give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (y) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If such defense
is assumed, the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(iv) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of Shares.
The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the
event the Company's indemnification is unavailable for any reason.
(g) Participation in Underwritten Registrations. No person may
participate in any registration hereunder which is underwritten unless such
person (i) agrees to sell such person's Shares on the basis provided in any
underwriting arrangements approved by the person or persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, and other documents
required under the terms of such underwriting arrangements.
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(h) Transfer of Registration Rights. The rights to cause the Company
to register Shares granted to a Stockholder under this Section 3 may be assigned
to a transferee (or a subsequent transferee) of all the Stockholder's Shares
pursuant to the terms hereof provided that notice of such assignment is given to
the Company.
3. Additional Covenants and Agreements.
(a) Current Public Information. The Company hereby covenants and
agrees that the Company shall file all reports required to be filed by it under
the Securities Act and the Exchange Act and the rules and regulations adopted by
the Securities and Exchange Commission thereunder and shall take such further
action as any Stockholder may reasonably request, all to the extent required to
enable such Stockholder to sell Shares pursuant to Rule 144 adopted by the
Securities and Exchange Commission under the Securities Act (as such rule may be
amended from time to time) or any similar rule or regulation hereafter adopted
by the Securities and Exchange Commission.
(b) Confidentiality Covenant of the Stockholders. Each Stockholder
("Stockholder" under this Section 4(b) shall include, for purposes of
ServiceMaster, The ServiceMaster Company Limited Partnership and each of its
Affiliates) hereby covenants and agrees as to itself that all information
previously or concurrently furnished to such Stockholder by the Company, Peapod
LP, Peapod, Inc., and its and their officers, directors, employees, and agents
shall be kept strictly confidential by such Stockholder and shall not be used or
disclosed to anyone except to the extent (1) contemplated by this Agreement, (2)
at the time such information was so furnished to such Stockholder, such
information was in the public domain or thereafter became a part of the public
domain through no act or omission by such Stockholder, in each case as
determined by the Company, (3) such information was, at the time such
information was so furnished to such Stockholder, in such Stockholder's
possession, as shown by written records of such Stockholder, (4) such
information is required to be disclosed by a court or governmental authority,
provided such Stockholder gives the Company advance notice of the intended
disclosure and uses its reasonable efforts to obtain confidential treatment by
the authority to which disclosure is made, (5) the Company consents in writing
to disclosure of such information, (6) necessary to provide information to such
Stockholder's employees and agents on a "need-to-know" basis, or (7) disclosure
of such information is required by law or government regulation, including the
reporting requirements of the Exchange Act, or by the rules, regulations, or
policies of any national securities exchange or association.
4. Agreements with ServiceMaster. For purposes of this Section 5,
"ServiceMaster" means ServiceMaster Venture Fund L.L.C., The ServiceMaster
Company Limited Partnership, and each of their Affiliates. ServiceMaster hereby
covenants and agrees that, (1) so long as ServiceMaster Venture Fund L.L.C. owns
Shares, ServiceMaster shall not invest in or acquire Streamline, Inc.; and (2)
so long as ServiceMaster Venture Fund L.L.C. owns Shares or for a period from
the date hereof and ending on July 25, 2001, whichever is shorter, without the
written consent of the Company, ServiceMaster shall not invest in any in any
other entity in which a significant line of business is providing on-line
ordering of groceries and/or the delivery of groceries to the home; and (3) so
long as ServiceMaster Venture Fund L.L.C. owns Shares, ServiceMaster will not
solicit for the purpose of employment, any employee of the Company. For purpose
of clause (2) in the
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foregoing sentence, the term "significant" means a line of business which
generates revenues of at least $10,000,000 per year.
5. Agreements with Ameritech. The Company and Ameritech agree for the
benefit of each other and no third party as follows:
(a) Compliance with MFJ.
(i) Neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby by Ameritech will, to
the best of Ameritech's knowledge, as a result of the Company's present
business operations as disclosed to Ameritech by the Company, result in
Ameritech or the Company being in violation of or in conflict with the
consent decree entered in the case of United States of America v. Western
Electric Company, Inc., et al., C.A. No. 82-0192 (D.D.C.), including orders
issued and entered by the courts relating to the same, interpretations
thereof issued from time to time by the Department of Justice and
legislation that may be enacted relating to the same (the "MFJ"). Subject
to the accuracy of the previous sentence and except as specified in this
Section 6(a), the Company shall not take or fail to take any action that
could endanger Ameritech's compliance with the MFJ, including, without
limitation, the following actions if they might have such result: (i) any
investment by the Company; or (ii) engaging directly or indirectly in any
line of business or in any business activity not previously conducted by
the Company prior to the date hereof. Any action or failure to act that
could have the effect set forth in the preceding sentence shall only be
approved by the Company at a meeting of the Board, at which Ameritech's
designee is present and has voted to approve such action or failure to act
upon five business days, prior written notice to Ameritech's designee
describing such action or failure to act proposed to be voted on.
(ii) Ameritech shall promptly give the Company written notice of
any additions to or modifications of the MFJ that could, to the best
knowledge of Ameritech, cause Ameritech to be in violation of the MFJ by
virtue of Ameritech's ownership of Shares. The Company shall promptly give
Ameritech written notice of any actions or failure to act, or any proposed
actions or failures to act, by the Company that could, to the best
knowledge of the Company, cause Ameritech to be in violation of the MFJ by
virtue of Ameritech's ownership of Shares. Ameritech and the Company shall
cooperate in good faith with each other to resolve any other issues that
may arise under the MFJ with respect to Ameritech's ownership of Shares in
a manner reasonably satisfactory to the Company; provided, however, that
neither Ameritech nor the Company shall be required, in their respective
reasonable judgment, to (1) relinquish any of their material benefits or
rights under this Agreement or (2) materially and adversely modify or
divest any of their material current business activities or assets in order
to perform their obligations under Section 6(a)(i) or this Section
6(a)(ii).
(iii) Ameritech shall indemnify and hold the Company harmless
from any and all claims, losses, damages and expenses (including reasonable
legal expenses) arising out of any inaccuracy in Ameritech's representation
in the first sentence of Section 6(a)(i).
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(b) Restrictions on Assignability. Ameritech's rights under this
Section 6 are not assignable.
6. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties hereto
and supersedes any prior understandings, agreements, or representations by or
between the parties hereto, written or oral, to the extent they related in any
way to the subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. Except as otherwise provided herein, no party
hereto may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other parties
hereto.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given upon receipt
if it is sent by facsimile, or reputable express courier, and addressed or
otherwise sent to the intended recipient as set forth below:
If to the Company:
Peapod, Inc.
1033 University Place
Evanston, Illinois 60201
Attention: President
Facsimile: (847) 492-0171
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Copies to:
Cowen, Crowley, Nord & Staub
55 W. Monroe Street
Chicago, Illinois 60603
Attention: Wilbert F. Crowley
Facsimile: (312) 855-6959
If to the Stockholders, to the addresses and facsimile numbers on file with
the Company.
Any party hereto may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address or facsimile
number set forth above or on file with the Company using any other means
(including personal delivery, messenger service, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is received by
the intended recipient. Any party hereto may change the address or facsimile
number to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other parties hereto notice in the
manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law provision or rule (either of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid against the Company or the Stockholders unless the same
shall be in writing and signed by the Company and the holders of at least two-
thirds of the Shares, respectively. No waiver by any parties hereto of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
* * *
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<PAGE>
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTORS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
New Peapod, Inc.
By:_________________________________________
Printed Name:_________________________
Title:________________________________
Peapod, Inc.
By:_________________________________________
Printed Name:_________________________
Title:________________________________
Peapod LP
By: Peapod, Inc.
its General Partner
By:___________________________________
Printed Name:_________________________
Title:________________________________
____________________________________________
Andrew B. Parkinson
____________________________________________
Thomas L. Parkinson
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<PAGE>
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTORS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
The Providence Journal Company
By:____________________________________________
Printed Name:____________________________
Title:___________________________________
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<PAGE>
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTORS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Tribune National Marketing Company
By:____________________________________________
Printed Name:____________________________
Title:___________________________________
Tribune Company
By:____________________________________________
Printed Name:____________________________
Title:___________________________________
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<PAGE>
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTORS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
ServiceMaster Venture Fund L.L.C.
By: The ServiceMaster Company
its Managing Member
By:_________________________________________________
Printed Name:__________________________________
Title:_________________________________________
The ServiceMaster Company Limited Partnership
By: ServiceMaster Management Corporation
its General Partner
By:____________________________________________
Printed Name:____________________________
Title:___________________________________
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<PAGE>
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTORS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
WPP Group USA, Inc.
By:____________________________________________
Printed Name:____________________________
Title:___________________________________
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<PAGE>
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTORS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Ameritech Corporation
By:____________________________________________
Printed Name:____________________________
Title:___________________________________
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<PAGE>
SCHEDULE OF STOCKHOLDERS
------------------------
Number of Shares
----------------
The Providence Journal Company
Tribune National Marketing Company
ServiceMaster Venture Fund L.L.C.
WPP Group USA, Inc.
Ameritech Corporation
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<PAGE>
Exhibit 10.11
UNITHOLDERS AGREEMENT
dated as of
April 19, 1996
by and among
PEAPOD LP,
PEAPOD, INC.,
and
EACH OF THE UNITHOLDERS NAMED HEREIN
<PAGE>
UNITHOLDERS AGREEMENT
---------------------
THIS AGREEMENT is made as of April 19, 1996, by and among peapod LP,
an Illinois limited partnership (the "Company"), Peapod, Inc., a Delaware
corporation ("Peapod"), and each of the persons set forth on the Schedule of
Investors attached hereto (collectively with their permitted successors and
assigns, the "Investors"). Certain capitalized terms used herein are defined in
Section 7 hereof.
The Investors will purchase 2,875,002 limited partnership units of the
Company pursuant to a purchase agreement by and among certain of the Investors
and the Company dated as of the date hereof (the "Purchase Agreement").
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby agree as follows:
1. Board of Directors.
(a) From and after the Closing (as defined in the Purchase Agreement)
and until the provisions of this Section 1 cease to be effective, Peapod and the
other parties hereto, as applicable, shall take all necessary and desirable
actions within its and their control (including, without limitation, calling
special board and stockholder meetings), so that:
(i) Steven M. Friedman or such other subsequent representative
designated by holders of a majority of the New Units (other than holders or
their Affiliates that held Units prior to the Closing Date) in each case
subject to Peapod's reasonable approval, shall be elected to the board of
directors of Peapod (the "Board"). In the event that any such
representative for any reason ceases to serve as a member of the Board
during his term of office, the resulting vacancy on the Board shall be
filled by a representative designated by holders of a majority of the New
Units (other than holders or their Affiliates that held Units prior to the
Closing Date), subject to the Company's reasonable approval;
(ii) one representative designated by CIBC Wood Gundy Ventures, Inc.
(the "CIBCWG Representative") and one representative designated by ELI-Pod,
Inc. or Desai Capital Management (the "Desai Representative"), in each case
subject to Peapod's reasonable approval, shall have such rights as set
forth in this Section 1(a) (ii). Peapod shall give the CIBCWG
<PAGE>
Representative and the Desai Representative written notice of each meeting
of the Board at the time such notice is given to the other members of the
Board. Each of the CIBCWG Representative and the Desai Representative shall
be entitled to receive all written materials and other information
(including copies of meeting minutes) given to directors at the same time
such materials and information are given to the directors. Each of the
CIBCWG Representative and the Desai Representative shall be entitled to
attend and participate in each such Board meeting (including telephonic
meetings); and
(iii) the Board shall hold a meeting at least once each quarter.
(b) The provisions of Section 1(a) (i) shall terminate and be of no
further force and effect if the Investors (other than holders or their
Affiliates that held Units prior to the Closing Date) and their Affiliates hold
in the aggregate less than 10% of the outstanding Units on a fully-diluted
basis, and (x) before the third anniversary of the Closing Date, Eos Partners
SBIC, L.P., Montreux International Equity Partners, L.P., and CIBC Wood Gundy
Ventures, Inc. in the aggregate at any time own less than 80% of their combined
percentage ownership of the Units on a fully-diluted basis on the Closing Date,
or (y) after the third anniversary of the Closing Date, Eos Partners SBIC, L.P.
Montreux International Equity Partners, L.P., and CIBC Wood Gundy Ventures, Inc.
in the aggregate at any time own less than 50% of their combined percentage
ownership of the Units on a fully-diluted basis on the Closing Date, and
(c) The provisions of Section 1(a) (ii) shall terminate and be of no
further force and effect if the Investors (other than holders or their
Affiliates that held Units prior to the Closing Date) and their Affiliates hold
in the aggregate less than 10% of the outstanding Units on a fully-diluted
basis, and (x) before the third anniversary of the Closing Date, CIBC Wood Gundy
Ventures, Inc. (with respect to the CIBCWG Representative only) or Eli-Pod, Inc.
or Desai Capital Management (with respect to the Desai Representative only) at
any time owns less than 80% of its percentage ownership of the Units on a fully-
diluted basis on the Closing Date, or (y) after the third anniversary of the
Closing Date, CIBC Wood Gundy Ventures, Inc. (with respect to the CIBCWG
Representative only) or Eli-pod, Inc. or Desai Capital Management (with respect
to the Desai Representative only) at any time owns less than 50% of its
percentage ownership of the Units on a fully-diluted basis on the Closing Date.
(d) The provisions of this Section 1 shall terminate automatically and
be of no further force and effect upon a Qualified Public Offering.
-2-
<PAGE>
(e) If the holders of a majority of the New Units (other than holders
or their Affiliates that held Units prior to the Closing Date) fail to designate
a representative to fill a directorship pursuant to the terms of Section
1(a)(i), the election of a person to such directorship shall be accomplished in
accordance with Peapod's Amended and Restated By-Laws and applicable law.
(f) The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the Board
and any committee thereof.
2. Transfer and Issuance of New Units.
(a) Transfer of New Units. The terms of this Section 2(a) are
subject to Article XIV of the Agreement of Limited Partnership (the "Partnership
Agreement"). In addition, each Investor hereby agrees that it will not sell,
transfer, assign, pledge, hypothecate, or otherwise dispose of (a "Transfer")
its New Units for a period of two years beginning on the date hereof to any
person other than (i) to an Affiliate of such Investor (provided that the
restrictions contained in this Section 2 shall continue to be applicable to the
New Units after any such Transfer and provided further that the transferees of
such New Units shall have agreed in writing to be bound by the provisions of
this Agreement affecting the New Units so transferred), or (ii) pursuant to a
Public Sale. Each Investor hereby further agrees that Peapod's right and option
under Section 14.4 of the Partnership Agreement to purchase the Offered Units
(as defined in Section 14.4(a) of the Partnership Agreement) shall be for a
period of 120 days and not 30 days.
(b) First Offer Right.
(i) Except for (1) the New Units; (2) options to purchase Units
issued prior to the date hereof in connection with executive and employee
compensation plans and agreements adopted by the Board; (3) Units or
options to purchase Units which may hereafter be issued upon approval of
the Board in connection with executive and employee compensation plans and
agreements not exceeding 5% of the then outstanding Units on a fully-
diluted basis; (4) Units issued in connection with a merger, consolidation,
reorganization, or acquisition by the Company of the securities or assets
of another entity; (5) any security if the holders of a majority of the New
Units (other than holders of their Affiliates that held Units prior to the
Closing Date) consent in writing that the terms of this Section 2(b) shall
not apply to such security; (6) Units or other securities issued in
connection with any Unit or other securities split, dividend, or
recapitalization by the Company; and (7) securities not falling within the
foregoing
-3-
<PAGE>
exceptions and issued on an aggregate basis for less than $1.5 million and
more than the Liquidation Value individually, if the Company issues or
sells any Units, the Company shall offer to sell to each holder of New
Units (other than holders or their Affiliates that held Units prior to the
Closing Date) a number of Units equal to the quotient determined by
dividing (x) the number of Units then held by such holder by (y) the sum of
the total number of outstanding Units plus Units issuable pursuant to
options, warrants, rights to purchase Units, or convertible securities
outstanding prior to such issuance or sale.
(ii) In order to exercise its purchase rights hereunder, each holder
of New Units (other than holders or their Affiliates that held Units prior
to the Closing Date) must, within 20 days after receipt of written notice
from the Company describing in reasonable detail the Units being offered,
the purchase price thereof, the payment terms, and such holder's percentage
allotment deliver a written notice to the Company describing its election
to purchase all or portion of the Units offered therein hereunder.
(iii) Upon the expiration of the offering period described above, the
Company will be entitled to sell such Units which the holders of New Units
(other than holders or their Affiliates that held Units prior to the
Closing Date) have not elected to purchase during the 90 days following
such expiration on terms and conditions no more favorable to the purchasers
thereof than those offered to such holders. Any securities offered or sold
by the Company after such 90-day period must be reoffered to the holders of
New Units (other than holders or their Affiliates that held Units prior to
the Closing Date) pursuant to the terms of this Section 2(b).
(iv) The rights under this Section 2(b) will terminate upon the
earlier to occur of (1) the effectiveness of a registration statement filed
by the Company with the Securities and Exchange Commission under the
Securities Act, (2) the holders of New Units (other than holders or their
Affiliates that held Units prior to the Closing Date) in the aggregate own
less than 10% of the outstanding Units on a fully-diluted basis, or (3) on
the third anniversary of the date hereof.
(v) The rights under this Section 2(b) may be assigned to a
transferee of the Investor (or a subsequent transferee) pursuant to the
terms hereof provided that notice of such assignment is given to the
Company.
-4-
<PAGE>
(c) Participation Rights. The terms of this Section 2(c) are subject
to Article XIV of the Partnership Agreement, including the Company's prior right
and option to purchase Units contained in Section 14.4 thereof. At least 120
days prior to any Transfer of any New Units (other than a Transfer to an
Affiliate or pursuant to a Public Sale) or any Transfer of more than 30% of the
Units held by each of Andrew B. Parkinson or Thomas L. Parkinson (other than a
Transfer to family members effected by will, laws of descent, or for estate
planning purposes or a Transfer pursuant to a Public Sale), the Investor, Andrew
B. Parkinson, or Thomas L. Parkinson, as applicable, making such Transfer
(collectively, the "Transferring Holder") shall deliver a written notice (the
"Sale Notice") to the Company and to the Investors, Thomas L. Parkinson, and
Andrew B. Parkinson (the "Other Holders"), specifying in reasonable detail the
identity of the prospective transferee(s) and the terms and conditions of the
Transfer. The Other Holders may elect to participate in the contemplated
Transfer by delivering written notice to the Transferring Holder within 60 days
after delivery of the Sale Notice. If any Other Holders have elected to
participate in such Transfer, the Transferring Holder and such Other Holders
shall be entitled to sell in the contemplated Transfer, at the same price and on
the same terms, a number of New Units (or Units, in the case of Thomas L.
Parkinson and Andrew B. Parkinson) equal to the product of (i) the quotient
determined by dividing the percentage of New Units plus Units owned by Thomas L.
Parkinson and Andrew B. Parkinson (collectively, the "Total Units") owned by
such person by the aggregate percentage of Total Units owned by the Transferring
Holder and the Other Holders participating in such sale and (ii) the number of
New Units and Units, in the case of Thomas L. Parkinson and Andrew B. Parkinson,
to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 New Units
by the Transferring Holder, and if the Transferring Holder at such time owns
30% of the Total Units and if one Other Holder elects to participate and owns
20% of the Total Units, the Transferring Holder would be entitled to sell 60 New
Units (30%/50% X 100 New Units) and the Other Holder would be entitled to sell
40 New Units (20%/50% X 100 New Units).
Each of the Investors, Andrew B. Parkinson, and Thomas L. Parkinson,
as applicable, shall use best efforts to obtain the agreement of the prospective
transferee(s) to the Participation of the Other Holders in any contemplated
Transfer, and none of the Investors, Andrew B. Parkinson, and Thomas L.
Parkinson, as applicable, shall transfer any of its New Units or his Units, as
applicable, to the prospective transferee(s) if the prospective transferee(s)
declines to allow the participation of the Other Holders.
-5-
<PAGE>
The provisions of this Section 2(c) shall terminate automatically and
be of no further force and effect upon a Qualified Public Offering.
(d) Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any New Units in violation of any provision of this Agreement shall
be void, and the Company shall not record such Transfer on its books or treat
any purported transferee of such New Units as the owner of New Units for any
purpose.
3. Legend. Each certificate for New Units and each certificate
issued in exchange for or upon the transfer of any New Units (if such New Units
remain New Units as defined herein after such Transfer) shall be imprinted with
a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, HYPOTHECATED, OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES
WHICH IS EFFECTIVE UNDER SUCH ACT AND UNDER ANY APPLICABLE STATE
SECURITIES LAWS UNLESS, IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND STATE SECURITIES LAWS IS AVAILABLE. THE
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO THE CONDITIONS SPECIFIED IN THE UNITHOLDERS AGREEMENT, DATED AS OF
APRIL 19, 1996, AS AMENDED FROM TIME TO TIME (THE "UNITHOLDERS
AGREEMENT"), BY AND AMONG THE COMPANY AND CERTAIN INVESTORS NAMED
THEREIN, AND IN THE AGREEMENT OF LIMITED PARTNERSHIP OF THE COMPANY,
AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH
SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO
SUCH TRANSFER. A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
4. Registration Rights.
(a) Demand Registrations. All registrations requested pursuant to this
section 4(a) are referred to herein as "Demand Registrations".
(i) Following Third Anniversary. In the event the Company shall not
have completed a Qualified Public Offering prior to the third anniversary
of the Closing Date (used herein as defined in the Purchase Agreement),
the holders of
-6-
<PAGE>
a majority of the New Units may thereafter request a registration under the
Securities Act of all or part of their New Units on Form S-1 or any similar
long-form registration ("Long-Form Registration"); provided the holders of
at least 35% of the Units shall have consented to such request; and
provided further that the per Unit offering price of the New Units
requested to be so registered must equal at least twice the Liquidation
Value (the "IPO Demand Registration"). Prior to the Company's filing of a
registration statement relating to the IPO Demand Registration, the Company
shall be reorganized into a "C" corporation. The holders of New Units will
be entitled to request one additional Long-Form Registration following the
IPO Demand Registration; provided that the aggregate offering value of the
New Units requested to be registered in such additional Long-Form
Registration must equal at least $10 million; provided further that any
demand registration effected by Tribune National Marketing Company,
Ameritech Corporation, or The Providence Journal Company pursuant to
contractual rights shall preclude the additional permitted Long-Form
Registration hereunder. Such request for a Long-Form Registration under
this Section 4(a) (i) shall specify the approximate number of New Units
requested to be registered and the anticipated per Unit price range for
such offering.
(ii) Following Qualified Public Offering. In the event the Company
shall have completed a Qualified Public Offering prior to the third
anniversary of the Closing Date, the holders of New Units following such
Qualified Public Offering may request two Long-Form Registrations under the
Securities Act of all or a part of their New Units; provided, that the
aggregate offering price of the New Units requested to be registered in any
such Long-Form Registration must equal at least $10 million; and provided
further that each demand registration effected by Tribune National
Marketing Company, Ameritech Corporation, or The Providence Journal Company
shall preclude one of the permitted Long-Form Registrations hereunder. Any
such request for a Long-Form Registration under this Section 4(a) (ii)
shall specify the approximate number of New Units requested to be
registered and the anticipated per Unit price range for such offering.
(iii) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to Sections 4(a) (i) and (ii), following
the effectiveness of a registration statement filed by the Company in which
all of the holders' New Units shall not have been included as requested,
the holders of New Units may request one registration under the Securities
Act of all or a part of their New Units on Form S-3 or any similar short-
form registration ("Short-Form
-7-
<PAGE>
Registration"), if available, to register at least all of such New Units
not so included; provided, that the aggregate offering price of the Units
requested to be registered in any such Short-Form Registration must equal
at lease $7.5 million. In addition, the holders of New Units may request
one additional Short-Form Registration; provided, that the aggregate
offering price of the Units requested to be registered in any such Short-
Form Registration must equal at least $7.5 million. Any such request for a
Short-Form Registration under this Section 4(a)(iii) shall specify the
approximate number of New Units requested to be registered and the
anticipated per Unit price range for such offering.
(iv) Upon Effectiveness. A registration will not count as one of the
permitted Demand Registrations until it has become effective (unless such
registration has not become effective due solely to the fault of the
holders requesting such registration).
(v) Notice of and Priority on Demand Registrations. Any Investor
that requests a Demand Registration shall notify each other Investor of
such request within ten days thereafter to permit participation of such
other Investor in such registration, which notice shall set forth the terms
of such request. If a Demand Registration is an underwritten offering and
the managing underwriters advise the Company in writing that in their
opinion the number of New Units and other Units requested to be included in
such offering exceeds the number of New Units and other Units, if any,
which can be sold therein without adversely affecting the marketability of
the offering, the Company will include in such registration the Units
requested to be included in such registration, pro rata among the holders
of such Units on the basis of the number of Units owned by each such
holder; provided however, if such offering is pursuant to the IPO Demand
Registration, the Company shall include in such offering any Units the
Company shall propose to sell prior to including any outstanding New Units
or Units provided for above.
(vi) Restrictions on Demand Registrations. The Company will not be
obligated to effect any Demand Registration within 180 days after the
effective date of a previous Demand Registration or a registration in which
the holders of New Units were given piggyback rights pursuant to Section
4(b). The Company may postpone for up to 120 days the filing or the
effectiveness of a registration statement for a Demand Registration if (1)
the Company has engaged or will engage in a firm commitment underwritten
public offering within 90 days of the request for resignation, or (2) the
Company reasonably determines that the requested registration would
interfere
-8-
<PAGE>
with a "material transaction", defined as a transaction that would require
a filing on a Current Report on Form 8-K with the Securities and Exchange
Commission under the Exchange Act; provided that in such event, the holders
of New Units initially requesting such Demand Registration will be entitled
to withdraw such request and, if such request is withdrawn, such Demand
Registration will not count as one of the permitted Demand Registrations
hereunder.
(vii) Selection of Underwriters. The Company will have the right to
select the investment banker(s) and manager(s) of national standing to
administer the offering, subject to the approval of the holders of a
majority of the New Units included in any Demand Registration, which
approval will not be unreasonably withheld.
(b) Piggyback Registrations
(i) Right to Piggyback. Whenever the Company proposes to register its
securities for an aggregate offering price of at least $5 million under the
Securities Act (other than pursuant to a Demand Registration) and the
registration form to be used may be used for the registration of New Units
(other than forms for registrations relating solely to employee benefit
plans or transactions effected pursuant to Rule 145 under the Securities
Act) (a "Piggyback Registration"), the Company will give prompt written
notice to all holders of New Units of its intention to effect such a
registration and will include in such registration all New Units with
respect to which the Company has received written requests for inclusion
therein within 30 days after the receipt of the Company's notice.
(ii) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number
of securities requested to be included in such registration exceeds the
number which can be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such
registration: first, the securities the Company proposes to sell; and
second, after all securities the Company proposes to sell are included, the
Units requested to be included in such registration, pro rata among the
holders of such Units on the basis of the number of Units owned by each
such holder.
(iii) Priority on Secondary Registrations. If a Piggyback Registration
is an underwritten registration other than on behalf of the Company, and
the managing underwriters
-9-
<PAGE>
advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such
registration the Units requested to be included in such registration, pro
rata among the holders of such Units on the basis of the number of Units
owned by each such holder.
(c) Holdback Agreements. Each holder of New Units agrees not to
effect any public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 120-day period beginning on the effective date of any underwritten
public offering of Units (except as part of such underwritten registration),
unless the underwriters managing the registered public offering otherwise
agree.
(d) Registration Procedures. Whenever the holders of New Units have
requested that any New Units be registered pursuant to this Agreement, the
Company will use its best efforts to effect the registration and the sale of
such New Units in accordance with the intended method of disposition thereof,
and pursuant thereto the Company will as expeditiously as possible:
(i) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such New Units and use its best
efforts to cause such registration statement to become effective (provided
that before filing a registration statement or prospectus or any amendments
or supplements thereto, the Company will furnish to the counsel selected by
the holders of a majority of the New Units covered by such registration
statement copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel);
(ii) prepare and file with the Securities and Exchange Commission
such amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than three months
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(iii) furnish to each seller of New Units such number of copies of
such registration statement, each amendment and
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<PAGE>
supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such
seller may reasonably request in order to facilitate the disposition of the
New Units owned by such seller;
(iv) use its best efforts to register or qualify such New Units under
such other securities or blue sky laws of such jurisdictions as any seller
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the New Units owned by such seller
(provided that the Company will not be required to (x) qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph, (y) subject itself to taxation in any such
jurisdiction, or (z) consent to general service of process in any such
jurisdiction);
(v) notify each seller of such New Units, at any time when a
prospectus-relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such New Units, such
prospectus will not contain an untrue statement of a material fact or omit
to state any fact necessary to make the statements therein not misleading;
(vi) cause all such New Units to be listed on each securities exchange
on which similar securities issued by the Company are then listed or, if
not so listed, to be listed on The Nasdaq Stock Market;
(vii) provide a transfer agent and registrar for all such New Units
not later than the effective date of such registration statement;
(viii) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the New Units being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate the disposition
of such New Units;
(ix) make available for inspection by any seller of New Units, any
underwriter participating in any disposition
-11-
<PAGE>
pursuant to such registration statement and any attorney, accountant, or
other agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees, and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant, or agent in connection with such
registration statement;
(x) otherwise use its best efforts to comply with all applicable rules
and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning
with the first day of the Company's first full calendar quarter after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder; and
(xi) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any New Units included in such registration statement for
sale in any jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order.
(e) Registration Expenses. The Company shall pay all expenses incident
to the registration provisions of this Agreement, including without limitation,
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance, the expenses and fees for listing the securities to be registered on
the applicable securities exchange or on the Nasdaq Stock Market, all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, and fees and
disbursements of counsel for the Company and all independent certified public
accountants, underwriters (excluding underwriting discounts and selling
commissions), and other persons retained by the Company (the "Registration
Expenses"); provided, that in the event a Demand Registration is withdrawn by
the Investors, then (as determined by the Investors holding a majority of the
New Units originally requesting such registration) either (x) the Investors
shall pay the Registration Expenses relating to such Demand Registration, or (y)
such Demand Registration shall count as one of the permitted Demand
Registrations hereunder; provided further that each Investor
-12-
<PAGE>
shall pay its allocable share of all underwriting discounts and selling
commissions in connection with all such registrations.
(f) Indemnification Pursuant to a Registration.
(i) The Company agrees to indemnify, to the extent permitted by law,
each holder of New Units, its officers and directors and each person who
controls such holder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities, and expenses (including investigation
and legal fees and expenses incurred in connection with any claim asserted)
to which they or any of them may be subject caused by any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus, or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by such holder
expressly for use therein or by such holder's failure to deliver a copy of
the registration statement or prospectus or any amendments or supplements
thereto after the Company has furnished such holder with copies of the
same. In connection with an underwritten offering, the Company will
indemnify such underwriters, their officers, and directors and each person
who controls such underwriters (within the meaning of the Securities Act)
to the same extent as provided above with respect to the indemnification of
the holders of New Units.
(ii) In connection with any registration statement in which a holder
of New Units is participating, each such holder will furnish to the Company
in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company,
its directors and officers, and each person who controls the Company
(within the meaning of the Securities Act) against any losses, claims,
damages, liabilities, and expenses resulting from any untrue or alleged
untrue statement of material fact contained in the registration statement,
prospectus, or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading based solely upon information so furnished to the Company in
writing expressly for use therein; provided, however, that the maximum
liability of such indemnifying holder hereunder shall be limited to the
proceeds actually received by such holder from the sale of such securities.
-13-
<PAGE>
(iii) Any person entitled to indemnification hereunder will (x) give
prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (y) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified
and indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is
assumed, the indemnified party will not be subject to any liability for any
settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(iv) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of
securities. The Company also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such
party in the event the Company's indemnification is unavailable for any
reason.
(g) Participation in Underwritten Registrations. No person may
participate in any registration hereunder which is underwritten unless such
person (a) agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the person or persons entitled hereunder
to approve such arrangements and (b) completes and executes all questionnaires,
powers or attorney, indemnities, underwriting agreements, and other documents
required under the terms of such underwriting arrangements.
(h) Rights of this Section. Notwithstanding any other provision
contained herein, the rights under this Section 4 shall not inure to the benefit
of any Investor that held any Units prior to the Closing Date. With respect to
the New Units held by an Investor that held any Units prior to the Closing Date,
such New Units shall be deemed "Registrable Securities" for purposes of the
Agreement by and among Tribune National Marketing Company, the Company, and
Peapod dated as of August 13, 1993, as amended as of September 15, 1994, and as
further amended January 15, 1996, and the Agreement by and between The
Providence Journal Company and the
-14-
<PAGE>
Company dated as of July 27, 1995 as amended as of January 15, 1996.
(i) Transfer of Registration Rights. The rights to cause the Company
to register securities granted to an Investor under this Section 4 may be
assigned to a transferee of the investor (or a subsequent transferee) pursuant
to the terms hereof provided that notice of such assignment is given to the
Company.
5. Antidilution Provisions. In order to prevent dilution of the
rights of the New Units, the number of New Units shall be subject to adjustment
from time to time as provided in this Section 5.
(a) Adjustment of Number of New Units. If and whenever on or after the
date hereof, the Company issues or sells any Units for a consideration per Unit
less than the Liquidation Value (used herein as defined in the Purchase
Agreement), then immediately upon such issue or sale, the Company shall issue to
each holder of New Units a number of New Units equal to the difference between
(x) the product of the Adjusted Liquidation Value in effect immediately prior to
such issuance multiplied by the number of New Units held by such holder
immediately prior to such issuance divided by the Adjusted Liquidation Value
resulting from such issuance minus (y) the number of New Units held by such
holder immediately prior to such issuance. "Adjusted Liquidation Value" means
the quotient of (x) the sum of (1) the total purchase price of all New Units by
the Investors (as set forth opposite "Total" under the column "Aggregate
Purchase Price for the New Units" on Schedule 2.2 of the Purchase Agreement)
plus (2) the consideration, if any, received by the Company upon the issuance
(or deemed issuance pursuant to Section 5 (b) hereof) of additional Units
divided by (y) the sum of (1) the number of New Units issued by the Company to
the Investors (including the issuance of additional New Units pursuant to
Section 6.5 of the Purchase Agreement) plus (2) the number of additional Units
issued (or deemed to be issued pursuant to Section 5(b) hereof) by the Company.
(b) Effect on Adjusted Liquidation Value of Certain Events. Solely
for the purpose of determining the Adjusted Liquidation Value under Section
5(a), the following shall be applicable:
(i) Exceptions. Notwithstanding any other provision in this Section
5(b), Section 5(a) shall not apply to issuances or sales by the Company of:
(x) Units issued pursuant to options and warrants outstanding on the
Closing Date; (y) Units or options to purchase Units which may hereafter be
issued in connection with executive and employee compensation plans and
agreements not exceeding 10% of the number of
15
<PAGE>
outstanding Units plus Units issuable pursuant to options, warrants, rights
to purchase Units, or convertible securities on the date hereof; and (z)
Units or other securities issued in connection with any Unit or other
securities split, Unit or other securities dividend or recapitalization by
the Company.
(ii) Issuance of Rights or Options. If the Company in any manner
grants any rights or options to subscribe for or to purchase Units or any
other securities convertible into or exchangeable for Units (such rights or
options being herein called "Options" and such convertible or exchangeable
securities being herein called "Convertible Securities") and the price per
Unit for which Units are issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities is less than the
Liquidation Value, then the total maximum number of Units issuable upon the
exercise of such Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to be outstanding and to have been issued and
sold by the Company for such price per Unit. For purposes of this Section,
the "price per Unit for which Units are issuable upon the exercise of such
Options or upon conversion or exchange of such Convertible Securities" is
determined by dividing (A) the total amount, if any, received or receivable
by the Company as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Company
upon the exercise of all such Options, plus in the case of such Options
which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the issuance
or sale of such Convertible Securities and the conversion or exchange
thereof, by (B) the total maximum number of Units issuable upon exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further
adjustment of the Adjusted Liquidation Value shall be made upon the actual
issuance of such Units or of such Convertible Securities upon the exercise
of such Options or upon the actual issuance of such Units upon conversion
or exchange of such Convertible Securities.
(iii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the price per Unit
for which Units are issuable upon such conversion or exchange is less than
the Liquidation Value, then the maximum number of Units issuable upon
conversion or exchange of such Convertible Securities shall be deemed to be
outstanding and to have been issued and sold by the Company for such price
per Unit. For the purposes of this Section,
-16-
<PAGE>
the "price per Unit for which Units are issuable upon such conversion or
exchange" is determined by dividing (A) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (B) the total maximum number of Units issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Adjusted Liquidation Value shall be made upon the actual
issue of such Units upon conversion or exchange of such Convertible
Securities, and if any such issue or sale of such Convertible Securities is
made upon exercise of any Options for which adjustments of the Adjusted
Liquidation Value had been or are to be made pursuant to other provisions
of this Section, no further adjustment of the Adjusted Liquidation Value
shall be made by reason of such issue or sale.
(iv) Change in Option Price or Conversion Rate. If the purchase price
provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Units change at any time, the Adjusted Liquidation Value
in effect at the time of such change shall be readjusted to the Adjusted
Liquidation Value which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration, or changed conversion
rate, as the case may be, at the time initially granted, issued, or sold
and the number of New Units shall be correspondingly readjusted.
(v) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
exercise of such Option or right, the Adjusted Liquidation Value then in
effect and the number of New Units acquirable hereunder shall be adjusted
to the Adjusted Liquidation Value and the number of New Units which would
have been in effect at the time of such expiration or termination had such
Option or Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued.
(vi) Calculation of Consideration Received. If any Units, Options, or
Convertible Securities are issued or sold or deemed to have been issued or
sold for cash, the consideration received therefor shall be deemed to be
the amount paid by the holder thereof. In case any Units,
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<PAGE>
Options, or Convertible Securities are issued or sold for a consideration
other than cash, the amount of the consideration other than cash received
by the Company shall be the fair value of such consideration determined in
good faith by the Board.
(c) Subdivision or Combination of Units. If the Company at any time
subdivides (by any Unit split, dividend, recapitalization or otherwise) its
Units into a greater number of Units, the Adjusted Liquidation Value in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of New Units shall be proportionately increased. If the Company at any
time combines (by reverse Unit split or otherwise) its Units into a smaller
number of Units, the Adjusted Liquidation Value in effect immediately prior to
such combination shall be proportionately increased and the number of New Units
shall be proportionately decreased.
(d) Reorganization, Reclassification, Consolidation, Merger, or Sale.
Any recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or substantially all of the Company's assets to another person, or
other transaction which is effected in such a way that holders of Units are
entitled to receive (either directly or upon subsequent liquidation) securities
or assets with respect to or in exchange for Units is referred to herein as
"Organic Change." In any such case, the Company shall make appropriate provision
(in form and substance satisfactory to the holders representing a majority of
the New Units then outstanding) with respect to such holders' rights and
interests to insure that the provisions of this Section 5 shall thereafter be
applicable to the New Units (including, in the case of any such consolidation,
merger, or sale in which the successor entity or purchasing entity is other than
the Company, an immediate adjustment of the Adjusted Liquidation Value to the
value for the Units reflected by the terms of such consolidation, merger, or
sale, and a corresponding immediate adjustment in the number of New Units, if
the value so reflected is less than the Adjusted Liquidation Value in effect
immediately prior to such consolidation, merger, or sale). The Company shall not
effect any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor entity (if other than the Company) resulting from
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form and substance satisfactory to the holders
representing a majority of the New Units then outstanding), the obligation to
deliver to each such holder such shares of securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.
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<PAGE>
(e) Certain Events. If any event occurs of the type contemplated by
the provisions of this Section 5 but not expressly provided for by such
provisions (including, without limitation, the granting of securities
appreciation rights, phantom securities rights or other rights with equity
features), then the Board shall make an appropriate adjustment in the Adjusted
Liquidation Value and the number of New Units so as to protect the rights of the
holders of the New Units; provided that no such adjustment shall increase the
Adjusted Liquidation Value or decrease the number of New Units as otherwise
determined pursuant to this Section 5.
(f) Notices. Immediately upon any adjustment of the Adjusted
Liquidation Value, the Company shall give written notice thereof to the holder
of New Units, setting forth in reasonable detail and certifying the calculation
of such adjustment. The Company shall also give written notice to the holders of
New Units at least 20 days prior to the date on which any Organic Change,
dissolution, or liquidation shall take place.
(g) Termination. The rights under this Section 5 will terminate upon
the earlier to occur of (i) the effectiveness of a registration statement filed
by the Company with the Securities and Exchange Commission under the Securities
Act with respect to an offering of Units, (ii) the holders of New Units (other
than holders or their Affiliates that held Units prior to the Closing Date) in
the aggregate own less than 10% of the outstanding Units on a fully-diluted
basis, or (iii) on the third anniversary of the date hereof.
6. Rollup. In the event Peapod, pursuant to Section 13.11 of the
Partnership Agreement, causes the Company to incorporate its business, or any
portion thereof, Peapod shall cause such incorporation to take the form of a
transfer by each Limited and General Partner (as defined in the Partnership
Agreement) of Units held by such Limited and General Partner to one or more
corporations in exchange for shares of capital stock of such corporation(s),
which exchange shall be done in manner that would avoid or minimize to the
maximum extent possible (a) any limitations for purposes of Rule 144 under the
Securities Act, on the tacking by the Investors of the holding periods of their
respective Units surrendered in such exchange to the holding periods of the new
securities respectively issued to them, and (b) the creation of taxable events
for the Company, Peapod, or the Investors as a result of such exchange, and that
would permit to the maximum extent possible any corporate Investor to effect a
tax-free reorganization with the resulting corporation. From and after the
consummation of such exchange, the resulting corporation shall be deemed to be
the Company under this Agreement. The holders of New Units shall receive in such
exchange shares of capital stock of the resulting corporation that contains
substantially the same
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<PAGE>
rights, preferences, and other terms as the New Units, and shall also contain
voting rights.
7. Definitions.
"Adjusted Liquidation Value" has the meaning set forth in Section 5(a)
hereto.
"Affiliate" of an Investor means any other person, entity or
investment fund that directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with the Investor.
"Board" has the meaning set forth in Section 1 hereto.
"CIBCWG Representative" has the meaning set forth in Section 1 hereto.
"Company" has the meaning set forth in the preface hereto.
"Convertible Securities" has the meaning set forth in Section 5(b)(ii)
hereto.
"Demand Registration" has the meaning set forth in Section 4(a)(i)
hereto.
"IPO Demand Registration" has the meaning set forth in
Section 4(a)(i) hereto.
"Investors" has the meaning set forth in the preface hereto.
"Long-Form Registration" has the meaning set forth in Section 4(a)(i)
hereto.
"New Units" means (i) any Units (as defined in the Partnership
Agreement) purchased or otherwise acquired by any Investor pursuant to the
Purchase Agreement or this Agreement, and (ii) any equity securities issued or
issuable directly or indirectly with respect to the Units referred to in clause
(i) above by way of a securities dividend or split or in connection with a
combination of securities, recapitalization, merger, consolidation, share
exchange, or other reorganization. As to any particular Units constituting New
Units such Units will cease to be New Units when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them or (y) sold in a Public Sale.
-20-
<PAGE>
"Options" has the meaning set forth in Section 5(b)(ii) hereto.
"Organic Change" has the meaning set forth in Section 5(d) hereto.
"Other Holders" has the meaning set forth in Section 2(c) hereto.
"Partnership Agreement" has the meaning set forth in Section 2(a)
hereto.
"Peapod" has the meaning set forth in the preface hereto.
"Piggyback Registration" has the meaning set forth in Section 4(b)(i)
hereto.
"Public Sale" means any sale of New Units to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer, or market maker pursuant to the provisions of Rule 144 adopted under the
Securities Act.
"Purchase Agreement" has the meaning set forth in the preface hereto.
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of Units having an aggregate
value of at least $10 million.
"Registration Expenses" has the meaning set forth in Section 4(e)
hereto.
"Sale Notice" has the meaning set forth in Section 2(c) hereto.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Short-Form Registration" has the meaning set forth in Section
4(a)(iii) hereto.
"Total Units" has the meaning set forth in Section 2(c) hereto.
"Transfer" has the meaning set forth in Section 2(a) hereto.
"Transferring Holder" has the meaning set forth in Section 2(c)
hereto.
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<PAGE>
8. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties hereto
and supersedes any prior understandings, agreements, or representations by or
between the parties hereto, written or oral, to the extent they related in any
way to the subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. Transfers made pursuant to and in accordance
with Section 2 hereof shall be permitted, and all permitted transfers (other
than pursuant to a Public Sale) shall be bound by the terms hereof. Except as
otherwise provided herein, no party hereto may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other parties hereto.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given upon receipt if it
is sent by facsimile, or reputable express courier, and addressed or otherwise
sent to the intended recipient as set forth below:
If to the Company or Peapod:
Peapod, Inc.
1033 University Place
Evanston, Illinois 60201
Attention: Andrew B. Parkinson
Facsimile: (847) 492-0171
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<PAGE>
Copy to:
Scott N. Gierke, P.C.
McDermott, Will & Emery
227 West Monroe Street, 55th Floor
Chicago, Illinois 60606
Facsimile: (312) 984-3669
If to the Investors, to the addresses and facsimile numbers set forth
on Schedule 2.2 to the Purchase Agreement.
Copy to:
John J. Suydam, Esq.
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza, 41st Floor
New York, New York 10112
Facsimile: (212) 408-2420
Any party hereto may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address or facsimile
number set forth above using any other means (including personal delivery,
messenger service, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party hereto may change the address or facsimile number to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other parties hereto notice in the manner herein set
forth.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law provision or rule (either of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid against the Company or the Investors unless the same
shall be in writing and signed by the Company and the holders of at least two-
thirds of the New Units, respectively. No waiver by any parties hereto of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
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<PAGE>
(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
* * *
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<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Peapod LP
By: Peapod, Inc.
its General Partner
By: /s/ Andrew B. Parkinson
-----------------------------------------
Printed Name: Andrew B. Parkinson
--------------------------
Title: President
---------------------------------
Peapod, Inc.
By: /s/ Andrew B. Parkinson
-----------------------------------------
Printed Name: Andrew B. Parkinson
--------------------------
Title: President
---------------------------------
/s/ Andrew B. Parkinson
--------------------------------------------
Andrew B. Parkinson, for purposes of
Section 2(c) only
/s/ Thomas L. Parkinson
--------------------------------------------
Thomas L. Parkinson, for purposes of
Section 2(c) only
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Benaroya Capital Company
By: /s/ John T. Carleton
-----------------------------------------
Printed Name: John T. Carleton
--------------------------
Title: Senior Vice President
---------------------------------
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
The Providence Journal Company
By: /s/ Paul H. McTear Jr.
--------------------------------------------
Printed Name: Paul H. McTear Jr.
-----------------------------
Title: VP Finance & Business Development
------------------------------------
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Montreux International Equity Partners, L.P.
By: Montreux Equity Management, L.P.
its General Partner
By: /s/ Daniel K. Turner III
-----------------------------------------
Printed Name: Daniel K. Turner III
--------------------------
Its: General Partner
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Eos Partners SBIC, L.P.
By: Eos SBIC General, L.P.
its General Partner
By: Eos SBIC, Inc.
its General Partner
By: /s/ Marc H. Michel
-----------------------------------------
Printed Name: Marc H. Michel
--------------------------
Title:
---------------------------------
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Tribune National Marketing Company
By: /s/ M. Catherine Jaros
-----------------------------------------
Printed Name: M. Catherine Jaros
--------------------------
Title: VP Marketing
---------------------------------
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
ELI-Pod, Inc.
By: /s/ Frank J. Pados
-----------------------------------------
Printed Name: Frank J. Pados
--------------------------
Title: President
---------------------------------
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
The Travelers Insurance Company
By: /s/ Craig H. Farnswoe
-----------------------------------------
Printed Name: Craig H. Farnswoe
--------------------------
Title: 2nd Vice President
---------------------------------
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Glenbrook Partners, L.P.
By: Prim Ventures, Inc.
its General Partner
By: /s/ Peter R. Knapp
-----------------------------------------
Printed Name: Peter R. Knapp
--------------------------
Title: Executive Vice President
---------------------------------
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
CIBC Wood Gundy Ventures, Inc.
By: /s/ Lori G. Koffman
-----------------------------------------
Printed Name: Lori G. Koffman
--------------------------
Title: Vice President
---------------------------------
<PAGE>
SIGNATURE PAGE TO
UNITHOLDERS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Berkman Associates, L.P.
By: Berkman Investors, Inc.
its General Partner
By: /s/ David J. Berkman
-----------------------------------------
David J. Berkman
Vice President
<PAGE>
EXHIBIT 10.12
PARKINSON'S REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of May 30, 1997, by and among Peapod, Inc., a
Delaware corporation (the "Company"), Peapod LP, an Illinois limited partnership
("Peapod LP"), Peapod, Inc., a Delaware corporation ("Peapod, Inc."), and Andrew
B. Parkinson and Thomas L. Parkinson (collectively with their permitted
successors and assigns, the "Stockholders").
Pursuant to that certain Conversion Agreement and Plan of Reorganization
dated May 30, 1997 (the "Plan"), the Stockholders, together with certain other
persons, shall exchange their limited partnership interests of Peapod LP for
shares of voting common stock ("Common Stock" or "Shares"), par value $.01 per
share, of the Company, prior to the closing of the initial public offering (the
"IPO") of Common Stock of the Company (such date being the "IPO Closing Date").
The parties hereto acknowledge that following the transactions occurring on
the IPO Closing Date (i) Peapod, Inc. shall dissolve and its corporate existence
shall cease to exist and (ii) New Peapod, Inc. shall change its name to "Peapod,
Inc."
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement hereby agree as follows:
1. Effective Date.
This Agreement is conditioned upon the closing of the initial public
offering of Common Stock of the Company prior to December 31, 1997, and shall
take effect immediately following the completion of the IPO.
2. Definitions.
"Common Stock" has the meaning set forth in the first recital of this
Agreement.
"Company" has the meaning set forth in this first paragraph of this
Agreement.
"Demand Registration" has the meaning set forth in Section 3(a)(i) of
this Agreement.
"Exchange Act" has the meaning set-forth in Section 3(a)(iv) of this
Agreement.
"Holder" means, collectively, the Ventureholders and the Investors.
"Investors" means the stockholders named in the Investors Agreement,
and their successors.
<PAGE>
"Investors Agreement" means that certain Amended and Restated
Investors Agreement dated as of April 1, 1997 by and among the Company, Peapod
LP., Peapod Inc. and the stockholders named herein.
"IPO Closing Date" has the meaning set forth in the first recital of
this Agreement.
"Peapod, Inc." has the meaning set forth in the first paragraph of
this Agreement.
"Peapod LP" has the meaning set forth in the first paragraph of this
Agreement.
"Piggyback Registration" has the meaning set forth in Section 3(b)(i)
of this Agreement.
"Option Shares" means Shares subject to rights to acquire such Shares.
"Securities Act" has the meaning set forth in Section 3(a)(i) of this
Agreement.
"Severance Agreement" means the Severance Agreement, dated May __,
1997, between the Company and Andrew B. Parkinson or Thomas L. Parkinson, as the
case may be.
"Shares" has the meaning set forth in the first recital of this
Agreement.
"Stockholders" has the meaning set forth in the first paragraph of
this Agreement.
"Unitholders Agreement" means that certain Unitholders Agreement dated
as of April 19, 1996, as amended, by and among Peapod LP, Peapod, Inc. and each
of the unitholders named therein.
"Ventureholders" means the unitholders named in the Unitholders
Agreement, and their successors.
3. Registration Rights.
(a) Demand Registrations.
(i) Demand Registrations by Stockholders. Each Stockholder,
with respect to himself, shall have the demand registration rights set
forth in this Section 3(a) beginning immediately after the first to occur
of (A) the third anniversary of the IPO Closing Date and (b) the Company's
termination of such Stockholder's employment for any reason other than for
"Cause" as such term is defined in such Stockholder's Severance Employment
Agreement. The Stockholders may request an aggregate of two registrations
under the Securities Act of 1933, as amended from time to time ("Securities
Act") of all or a part of their Shares ("Demand Registration"); provided,
that the aggregate offering price of such Shares requested to be registered
in any such Demand Registration must equal at least $5 million. Any such
request for a Demand Registration under this Section 3(a)(i) shall specify
the approximate number of Shares requested to be registered and the
anticipated per Share price range for such offering.
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<PAGE>
(ii) Upon Effectiveness. A registration will not count as one
of the permitted Demand Registrations until it has become effective (unless
such registration has not become effective due solely to the fault of the
Stockholder(s) requesting such registration).
(iii) Notice of and Priority on Demand Registrations. A
Stockholder that requests a Demand Registration shall notify the other
Stockholder of such request within ten days thereafter to permit
participation of such other Stockholder in such registration, which notice
shall set forth the terms of such request. [In the event a Stockholder
requests a Demand Registration pursuant to its rights hereunder, the
Company will notify the Holders of such request in order to permit
participation of the Holders in such registration.] If a Demand
Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of Shares
requested to be included in such offering exceeds the number of Shares
which can be sold therein without adversely affecting the marketability of
the offering, the Company will include in such registration the Shares
requested to be included in such registration, pro rata among the
Stockholders and other Holders so requesting on the basis of the number of
Shares owned by, and the number of Shares subject to rights to acquire
Shares held by, each such holder.
(iv) Restrictions on Demand Registrations. The Company will
not be obligated to effect any Demand Registration within 180 days after
the effective date of a previous Demand Registration or a registration in
which the Stockholders were given piggyback rights pursuant to Section
3(b). The Company may postpone for up to 120 days the filing or the
effectiveness of a registration statement for a Demand Registration if (1)
the Company has engaged or will engage in a firm commitment underwritten
public offering within 90 days of the request for registration, or (2) the
Company reasonably determines that the requested registration would
interfere with a "material transaction", defined as a transaction that
would require a filing on a Current Report on Form 8-K with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as
amended from time to time (the "Exchange Act"); provided that in such
event, the Stockholder(s) initially requesting such Demand Registration
will be entitled to withdraw such request and, if such request is
withdrawn, such Demand Registration will not count as one of the permitted
Demand Registrations hereunder.
(v) Selection of Underwriters. The Company will have the
right to select the investment banker(s) and manager(s) of national
standing to administer the offering, subject to the approval of the
Stockholders included in any Demand Registration, which approval will not
be unreasonably withheld.
(b) Piggyback Registrations.
(i) Right to Piggyback. At any time after the completion of
the IPO (but not as part of the IPO, including any overallotment option
granted in connection with the IPO), whenever the Company proposes to
register its securities for an aggregate offering price of at least $5
million under the Securities Act (other than pursuant to a Demand
Registration) and the registration form to be used may be used for the
registration of Shares (other than forms for registrations relating solely
to employee benefit plans or transactions effected
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<PAGE>
pursuant to Rule 145 under the Securities Act) (a "Piggyback
Registration"), the Company will give prompt written notice to the
Stockholders of its intention to effect such a registration and will
include in such registration all Shares with respect to which the Company
has received written requests from Stockholders for inclusion therein
within 30 days after the receipt of the Company's notice.
(ii) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten registration on behalf of the Company, and
the managing underwriters advise the Company in writing that in their
opinion the number of Shares requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability of the offering, the Company will include in
such registration: first, the Shares the Company proposes to sell; and
second, after all Shares the Company proposes to sell are included, the
Shares requested to be included in such registration, pro rata among the
requesting holders of Shares or of rights to acquire Shares on the basis of
the number of Shares owned or subject to such rights.
(iii) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten registration other than on behalf of the
Company, and the managing underwriters advise the Company in writing that
in their opinion the number of Shares requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company will
include in such registration the Shares requested to be included in such
registration, pro rata among the requesting holders of Shares or of rights
to acquire Shares on the basis of the number of Shares owned or subject to
such rights.
(c) Holdback Agreements. Each Stockholder agrees not to effect any
public sale or distribution (including sales pursuant to Rule 144) of Shares of
the Company, or any securities convertible into or exchangeable or exercisable
for such Shares, during the seven days prior to and the 120-day period beginning
on the effective date of any underwritten public offering of Shares (except as
part of such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(d) Registration Procedures. Whenever the Stockholders have
requested that any Shares be registered pursuant to this Agreement, the Company
will use its best efforts to effect the registration and the sale of such Shares
in accordance with the intended method of disposition thereof, and pursuant
thereto the Company will as expeditiously as possible:
(i) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Shares and use its
best efforts to cause such registration statement to become effective,
provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish to the counsel
selected by the holders of a majority of the Shares covered by such
registration statement copies of all such documents proposed to be filed,
which documents will be subject to the review of such counsel;
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<PAGE>
(ii) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep
such registration statement effective for a period of not less than three
months and comply with the provisions of the Securities Act with respect to
the disposition of all Shares covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers thereof set forth in such registration statement;
(iii) furnish to each selling Stockholder such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Stockholder may
reasonably request in order to facilitate the disposition of the Shares
owned by such Stockholder;
(iv) use its best efforts to register or qualify such Shares
under such other securities or blue sky laws of such jurisdictions as any
selling Stockholder reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Stockholder to consummate the disposition in such jurisdictions of the
Shares owned by such Stockholder, provided that the Company will not be
required to (x) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this paragraph, (y)
subject itself to taxation in any such jurisdiction, or (z) consent to
general service of process in any such jurisdiction;
(v) notify each selling Stockholder, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such
Stockholder, the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Shares, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading;
(vi) cause all such Shares to be listed on each securities
exchange on which similar securities issued by the Company are then listed
or, if not so listed, to be listed on The Nasdaq Stock Market;
(vii) provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement;
(viii) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions
as the holders of a majority of the Shares being sold or the underwriters,
if any, reasonably request in order to expedite or facilitate the
disposition of such Shares;
(ix) make available for inspection by any selling Stockholder,
any underwriter participating in any disposition pursuant to such
registration statement and any attorney,
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<PAGE>
accountant, or other agent retained by any such Stockholder or underwriter,
all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors,
employees, and independent accountants to supply all information reasonably
requested by any such Stockholder, underwriter, attorney, accountant, or
agent in connection with such registration statement;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission,
and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least twelve
months beginning with the first day of the Company's first full calendar
quarter after the effective date of the registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder; and
(xi) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any Shares included in such registration statement for
sale in any jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order.
(e) Registration Expenses.
(i) The Company shall pay all expenses incurred by itself and the
Stockholders incident to the Piggyback Registration provisions of this
Agreement, including without limitation, the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any of its liability insurance, the
expenses and fees for listing the securities to be registered on the applicable
securities exchange or on The Nasdaq Stock Market, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, and fees and disbursements of counsel
for the Company and all independent certified public accountants, underwriters
(excluding underwriting discounts and selling commissions), and other persons
retained by the Company and the reasonable cost (not to exceed $20,000) of one
special legal counsel to represent such holders proposing to distribute their
securities through such registration (the "Registration Expenses"); provided
that each Stockholder shall pay its allocable share of all underwriting
discounts and selling commissions in connection with all such Piggyback
Registrations.
(ii) All registration expenses and underwriting discounts and selling
commissions incident to any Demand Registration shall be borne by the Company
and the Stockholders (and any other holders included in such registration) in
proportion to the number of securities to be registered by each.
(f) Indemnification Pursuant to a Registration.
(i) The Company agrees to indemnify, to the extent permitted by
law, each Stockholder, its officers and directors and each person who
controls such Stockholder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities, and expenses
-6-
<PAGE>
(including investigation and legal fees and expenses incurred in connection
with any claim asserted) to which they or any of them may be subject caused
by any untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus, or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such
Stockholder expressly for use therein or by such Stockholder's failure to
deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished such
Stockholder with copies of the same. In connection with an underwritten
offering, the Company will indemnify such underwriters, their officers, and
directors and each person who controls such underwriters (within the
meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Stockholders.
(ii) In connection with any registration statement in which a
Stockholder is participating, each such Stockholder will furnish to the
Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify
the Company, its directors and officers, and each person who controls the
Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities, and expenses resulting from any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus, or preliminary prospectus or any amendment thereof
or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements
therein not misleading based solely upon information so furnished to the
Company in writing expressly for use therein; provided, however, that the
maximum liability of such indemnifying Stockholder hereunder shall be
limited to the proceeds actually received by such Stockholder from the sale
of such Shares.
(iii) Any person entitled to indemnification hereunder will (x)
give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (y) unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party. If such defense
is assumed, the indemnifying party will not be subject to any liability for
any settlement made by the indemnified party without its consent (but such
consent will not be unreasonably withheld). An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not
be obligated to pay the fees and expenses of more than one counsel for all
parties indemnified by such indemnifying party with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(iv) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
person of such indemnified party and will survive the transfer of Shares.
The Company also agrees to make such provisions, as are reasonably
-7-
<PAGE>
requested by any indemnified party, for contribution to such party in the
event the Company's indemnification is unavailable for any reason.
(g) Participation in Underwritten Registrations. No person may
participate in any registration hereunder which is underwritten unless such
person (i) agrees to sell such person's Shares on the basis provided in any
underwriting arrangements approved by the person or persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements, and other documents
required under the terms of such underwriting arrangements.
(h) Transfer of Registration Rights. The rights to cause the Company
to register Shares granted to a Stockholder under this Section 3 may be assigned
to a transferee (or a subsequent transferee) of all the Stockholder's Shares
pursuant to the terms hereof provided that notice of such assignment is given to
the Company.
4. Current Public Information. The Company hereby covenants and agrees
that the Company shall file all reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
Securities and Exchange Commission thereunder and shall take such further action
as any Stockholder may reasonably request, all to the extent required to enable
such Stockholder to sell Shares pursuant to Rule 144 adopted by the Securities
and Exchange Commission under the Securities Act (as such rule may be amended
from time to time) or any similar rule or regulation hereafter adopted by the
Securities and Exchange Commission.
5. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties hereto
and supersedes any prior understandings, agreements, or representations by or
between the parties hereto, written or oral, to the extent they related in any
way to the subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. Except as otherwise provided herein, no party
hereto may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other parties
hereto.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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<PAGE>
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given upon receipt
if it is sent by facsimile, or reputable express courier, and addressed or
otherwise sent to the intended recipient as set forth below:
If to the Company:
Peapod, Inc.
1033 University Place
Evanston, Illinois 60201
Attention: President
Facsimile: (847) 492-0171
Copies to:
Cowen, Crowley, Nord & Staub
55 W. Monroe Street
Chicago, Illinois 60603
Attention: Wilbert F. Crowley
Facsimile: (312) 855-6959
If to the Stockholders, to the addresses and facsimile numbers on file with
the Company.
Any party hereto may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address or facsimile
number set forth above or on file with the Company using any other means
(including personal delivery, messenger service, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is received by
the intended recipient. Any party hereto may change the address or facsimile
number to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other parties hereto notice in the
manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law provision or rule (either of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid against the Company or the Stockholders unless the same
shall be in writing and signed by the Company and the holders of at least two-
thirds of the Shares, respectively. No waiver by any parties hereto of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default,
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<PAGE>
misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
* * *
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<PAGE>
SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
Peapod, Inc.
By:______________________________________
Printed Name:______________________
Title:_____________________________
Peapod, Inc.
By:______________________________________
Printed Name:______________________
Title:_____________________________
Peapod LP
By: Peapod, Inc.
its General Partner
By:________________________________
Printed Name:______________________
Title:_____________________________
_________________________________________
Andrew B. Parkinson
_________________________________________
Thomas L. Parkinson
-11-
<PAGE>
EXHIBIT 10.13
TASSO H. COIN REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT is made as of May ___, 1997 by and among New Peapod, Inc., a
Delaware corporation (the "Company"), Peapod LP, an Illinois limited partnership
("Peapod LP"), Peapod, inc., the general partner of Peapod LP ("General
Partner"), and Tasso H. Coin (the "Stockholder"). The Company, Peapod LP and
the General Partner are collectively referred to as "Peapod".
WHEREAS, Peapod is planning to make an initial public offering of Company
securities for an aggregate offering price of at least $40 million prior to the
end of 1997 including an option allowing the underwriters to purchase Company
securities from certain Company shareholders for the purpose of covering
overallotments (such option being referred to herein as the "Overallotment
Option" and such initial public offering being referred to herein as the "IPO");
and
WHEREAS, to facilitate the IPO, Peapod is in the process of converting
Peapod LP to a corporation by causing its partners to exchange their partnership
units for shares of common stock in the Company ("Common Stock" or "Shares");
and
WHEREAS, the Stockholder presently owns, directly or beneficially, limited
partnership units of Peapod LP, shares of common stock of the General Partner
and options to purchase such units and shares, all as set forth on Schedule A
hereto (such securities, including securities issued in exchange for such
securities, being sometimes referred to herein as "Stockholder's Equity
Interest").
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. Effective Date. This Agreement is conditioned upon the closing of the
IPO prior to January 1, 1998, and shall take effect as of the closing date of
the IPO ("Closing Date").
2. Termination of Existing Agreement. The Agreement for Holding and
Transferring Securities between the parties dated January 2, 1996 shall
terminate and be of no further force and effect as of the Closing Date.
3. Registration Rights.
(a) Overallotment Option Right. Subject to the following terms and
conditions, the Stockholder shall have the right to be included as a selling
stockholder in the Overallotment Option and to have Stockholder's Shares
registered and sold thereunder pro rata in the proportion that Stockholder's
Equity Interest bears to the number of Shares owned by, or subject to options
held by, other stockholders included in the Overallotment Option.
<PAGE>
(i) Termination of Overallotment Option Right. The Stockholder's
registration right under Section 3(a) shall terminate upon the inclusion of
Stockholder's Shares in an Overallotment Option in accordance with this
Agreement, whether or not such Overallotment Option is exercised.
(ii) Registration Procedures. Whenever the Stockholder has
requested that any Shares be registered pursuant to Section 3(a) of this
Agreement, the Company will use its best efforts to effect the registration
and the sale of such Shares in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as expeditiously
as possible:
2
<PAGE>
(A) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Shares and
use its best efforts to cause such registration statement to become
effective, provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will
furnish to the counsel selected by the holders of a majority of the
Shares covered by such registration statement copies of all such
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(B) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be
necessary to keep such registration statement effective for a period
of not less than three months and comply with the provisions of the
Securities Act with respect to the disposition of all Shares covered
by such registration statement during such period in accordance with
the intended methods of disposition by the sellers thereof set forth
in such registration statement;
(C) furnish the Stockholder such number of copies of such
registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as the Stockholder
may reasonably request in order to facilitate the disposition of the
Shares owned by the Stockholder;
(D) use its best efforts to register or qualify such Shares
under such other securities or blue sky laws of such jurisdictions as
the Stockholder reasonably requests and do any and all other acts and
things which may be reasonably necessary or advisable to enable the
Stockholder to consummate the disposition in such jurisdictions of the
Shares owned by the Stockholder, provided that the Company will not be
required to (x) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
paragraph, (y) subject itself to taxation in any such jurisdiction, or
(z) consent to general service of process in any such jurisdiction;
(E) notify the Stockholder, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements
therein not misleading, and, at the request of the Stockholder, the
Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Shares, such
prospectus will not contain an untrue statement of a material fact or
omit to state any fact necessary to make the statements therein not
misleading;
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(F) cause all such Shares to be listed on each securities
exchange on which similar securities issued by the Company are then
listed or, if not so listed, to be listed on The Nasdaq Stock Market;
(G) provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement;
(H) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the
holders of a majority of the Shares being sold or the underwriters, if
any, reasonably request in order to expedite or facilitate the
disposition of such Shares;
(I) make available for inspection by the Stockholder, any
underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant, or other agent
retained by the Stockholder or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees, and
independent accountants to supply all information reasonably requested
by the Stockholder, underwriter, attorney, accountant, or agent in
connection with such registration statement;
(J) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months beginning with the first day of the Company's first full
calendar quarter after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(K) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any Shares included in such registration statement
for sale in any jurisdiction, the Company will use its reasonable best
efforts promptly to obtain the withdrawal of such order.
(iii) Registration Expenses. The Company shall pay all expenses
incurred by itself and the Stockholders incident to the registration
provisions of this Agreement, including without limitation, the Company's
internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any of its
liability insurance, the expenses and fees for listing the securities to be
registered on the applicable securities exchange or on The Nasdaq Stock
Market, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing
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expenses, messenger and delivery expenses, and fees and disbursements of
counsel for the Company and all independent certified public accountants,
underwriters (excluding underwriting discounts and selling commissions),
and other persons retained by the Company and the reasonable cost (not to
exceed $20,000) of one special legal counsel to represent all holders
proposing to distribute their securities through such registration (the
"Registration Expenses").
(iv) Indemnification Pursuant to a Registration.
(A) The Company agrees to indemnify, to the extent permitted by
law, the Stockholder against all losses, claims, damages, liabilities,
and expenses (including investigation and legal fees and expenses
incurred in connection with any claim asserted) to which he may be
subject caused by any untrue or alleged untrue statement of material
fact contained in any registration statement, prospectus, or
preliminary prospectus or any amendment thereof or supplement thereto
or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by the Stockholder
expressly for use therein or by the Stockholder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Stockholder
with copies of the same. In connection with an underwritten offering,
the Company will indemnify such underwriters, their officers, and
directors and each person who controls such underwriters (within the
meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Stockholder.
(B) In connection with any registration statement in which the
Stockholder is participating, the Stockholder will furnish to the
Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will
indemnify the Company, its directors and officers, and each person who
controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities, and expenses
resulting from any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus, or preliminary
prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not misleading
based solely upon information so furnished to the Company in writing
expressly for use therein; provided, however, that the maximum
liability of the Stockholder hereunder shall be limited to the
proceeds actually received by the Stockholder from the sale of such
Shares.
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(C) Any person entitled to indemnification hereunder will (x)
give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (y) unless in such
indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to
such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified
party. If such defense is assumed, the indemnifying party will not be
subject to any liability for any settlement made by the indemnified
party without its consent (but such consent will not be unreasonably
withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest
may exist between such indemnified party and any other of such
indemnified parties with respect to such claim.
(D) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made
by or on behalf of the indemnified party or any officer, director or
controlling person of such indemnified party and will survive the
transfer of Shares. The Company also agrees to make such provisions,
as are reasonably requested by any indemnified party, for contribution
to such party in the event the Company's indemnification is
unavailable for any reason.
(b) Insider Piggyback. Whenever the Company proposes to register
Shares for an aggregate offering price of at least $5 million under the
Securities Act of 1933 (other than a registration relating solely to employee
benefit plans or transactions effected pursuant to Rule 145 under the Securities
Act of 1933) and such registration includes a proposal to register a percentage
of Insider Securities as defined below (the highest percentage of Insider
Securities to be registered on behalf of any individual Insider in any offer
being referred to herein as the "Registration Percentage"), then the Company
shall, upon the Stockholder's timely written request, use all commercially
reasonable efforts to include, on the same terms and conditions as such
registration, not less than the Registration Percentage of the Shares then owned
by the Stockholder or remaining subject to option, including reasonable
cooperation to facilitate exercise of options. The Stockholder shall give the
Company written notice of such request no later than fourteen (14) days after
receipt of notice of such registration from the Company. In addition, if the
Registration Percentage or any lesser percentage of Insider Securities included
in such registration are to be distributed in an underwritten offering, the
Registration Percentage or such lesser percentage of Company Shares then held by
Stockholder or remaining subject to option shall be included in such offering.
Notwithstanding the foregoing, the Stockholder shall not have the right to
participate in such registration or underwritten offering (i) solely by reason
of the participation of another security holder pursuant to a contractual
obligation to register the securities of such security holder or (ii) to the
extent forbidden by or inconsistent with other agreements to which the Company
is a party.
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"Insider Securities" as used herein shall mean securities of the
Company issued to and held by, or subject to options held by, any current or
former executive employee, advisor or consultant of the Company or member of its
Board of Directors (Insiders").
(c) Participation in Underwritten Registrations. The Stockholder may
not participate in any registration hereunder which is underwritten unless he
(i) agrees to sell his Shares on the basis provided in any underwriting
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements, and other documents required
under the terms of such underwriting arrangements.
(d) Restrictions on Assignability. The rights to cause the Company to
register Shares granted to the Stockholder under this Section 3 may be assigned
to a transferee (or a subsequent transferee) of fifty percent (50%) or more of
the Stockholder's Equity Interest pursuant to the terms hereof, provided that
notice of such assignment is given to the Company.
4. Miscellaneous.
(a) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
(b) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties hereto
and supersedes any prior understandings, agreements, or representations by or
between the parties hereto, written or oral, to the extent they relate to the
subject matter hereof.
(c) Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. Except as otherwise provided herein, no party
hereto may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other parties
hereto.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication
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hereunder shall be deemed duly given upon receipt if it is sent by facsimile, or
reputable express courier, and addressed or otherwise sent to the intended
recipient as set forth below:
If to the Company:
Peapod, Inc.
1033 University Place
Evanston, Illinois 60201
Attention: President
Facsimile: (847) 492-0171
Copies to:
Cowen, Crowley, Nord & Staub
55 W. Monroe Street
Chicago, Illinois 60603
Attention: Wilbert F. Crowley
Facsimile: (312) 855-6959
If to the Stockholder, to the addresses and facsimile number on file with
the Company.
Any party hereto may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address or facsimile
number set forth above or on file with the Company using any other means
(including personal delivery, messenger service, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is received by
the intended recipient. Any party hereto may change the address or facsimile
number to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other parties hereto notice in the
manner herein set forth.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Illinois without giving
effect to any choice or conflict of law provision or rule (either of the State
of Illinois or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Illinois.
(h) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid against the Company or the Stockholder unless the same
shall be in writing and signed by the Company and the Stockholder. No waiver by
any parties hereto of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
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(i) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed as of the date first above written.
New Peapod, Inc.
By:________________________________________
________________________________ Printed Name:________________________
Tasso H. Coin
Title:_______________________________
Peapod, Inc.
By:________________________________________
Printed Name:________________________
Title:_______________________________
Peapod LP
By: Peapod, Inc.
its General Partner
By:__________________________________
Printed Name:________________________
Title:_______________________________
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EXHIBIT 10.14
PEAPOD, INC.
1997 LONG-TERM INCENTIVE PLAN
I. INTRODUCTION
1.1 Purposes. The purposes of the 1997 Long-Term Incentive Plan (the
"Plan") of Peapod, Inc. (the "Company"), and its subsidiaries from time to time
(individually a "Subsidiary" and collectively the "Subsidiaries"), are (a) to
align the interests of the Company's stockholders and the recipients of awards
under this Plan by increasing the proprietary interest of such recipients in the
Company's growth and success, (b) to advance the interests of the Company by
attracting and retaining officers and other key employees, and well-qualified
persons who are not officers or employees of the Company ("non-employee
directors") for service as directors of the Company and (c) to motivate such
employees and non-employee directors to act in the long-term best interests of
the Company's stockholders. For purposes of this Plan, references to employment
by the Company shall also mean employment by a Subsidiary.
1.2 Certain Definitions.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2, as in effect on the effective date of this
Plan, under the Exchange Act; provided, however, that no director or officer of
the Company shall be deemed an Affiliate or Associate of any other director or
officer of the Company solely as a result of his or her being a director or
officer of the Company.
"Agreement" shall mean the written agreement evidencing an award
hereunder between the Company and the recipient of such award.
"Beneficial Owner" (including the terms "Beneficially Own" and
"Beneficial Ownership"), when used with respect to any Person, shall be deemed
to include any securities which:
(a) such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly (determined as provided in Rule 13d-3,
as in effect on the effective date of this Plan, under the Exchange Act);
(b) such Person or any of such Person's Affiliates or Associates,
directly or indirectly, has:
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time or upon the satisfaction of
any conditions, or both) pursuant
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to any written or oral agreement, arrangement or understanding (other than
customary agreements with and among underwriters and selling group members
with respect to a bona fide public offering of securities), upon the
exercise of any options, warrants, rights or conversion or exchange
privileges or otherwise; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to Beneficially Own securities tendered
pursuant to a tender or exchange offer made by or on behalf of such Person
or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or
(ii) the right to vote pursuant to any written or oral agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to Beneficially Own, any security
otherwise subject to this item (ii) if such agreement, arrangement or
understanding to vote (1) arises solely from a revocable proxy or consent
given to such Person or any of such Person's Affiliates or Associates in
response to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations under the Exchange
Act and (2) is not also then reportable by such Person on Schedule 13D (or
any comparable or successor report then in effect) under the Exchange Act;
or
(iii) the right to dispose of pursuant to any written or oral
agreement, arrangement or understanding (other than customary agreements
with and among underwriters and selling group members with respect to a
bona fide public offering of securities); or
(c) are beneficially owned, directly or indirectly, by any other
Person with which such Person or any of such Person's Affiliates or Associates
has any written or oral agreement, arrangement or understanding (other than
customary agreements with and among underwriters and selling group members with
respect to a bona fide public offering of securities) for the purpose of
acquiring, holding, voting (except to the extent contemplated by the proviso to
item (ii) of subparagraph (b) of the first paragraph of this definition) or
disposing of any securities of the Company.
Notwithstanding the first paragraph of this definition, no director or
officer of the Company shall be deemed to be the "Beneficial Owner" of, or to
"Beneficially Own," shares of Common Stock or other securities of the Company
beneficially owned by any other director or officer of the Company solely as a
result of his or her being a director or officer of the Company.
"Board" shall mean the Board of Directors of the Company.
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"Bonus Stock" shall mean shares of Common Stock which are not subject
to a Restriction Period or Performance Measures.
"Bonus Stock Award" shall mean an award of Bonus Stock under this
Plan.
"Cause" shall mean embezzlement or misappropriation of corporate
funds, other act of dishonesty, significant activities harmful to the reputation
of the Company, willful refusal to perform or substantial disregard of an
employee's duties or significant violation of any statutory or common law duty
of loyalty to the Company.
"Change in Control" shall have the meaning set forth in Section
6.8(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Committee designated by the Board,
consisting of two or more members of the Board, each of whom shall be (a) a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act
and (b) an "outside director" within the meaning of Section 162(m) of the Code,
subject to any transition rules applicable to the definition of outside
director.
"Common Stock" shall mean the common stock, $.01 par value, of the
Company.
"Conversion" shall mean the conversion effected in accordance with
that certain Conversion Agreement and Plan of Reorganization pursuant to which
(i) all equity interests in Peapod LP, an Illinois limited partnership ("Old
Peapod"), will be transferred to the Company for shares of Common Stock, (ii)
Old Peapod will dissolve, (iii) all assets and liabilities of Old Peapod will be
transferred to the Company and (iv) outstanding options and warrants for equity
interests in Old Peapod will be converted into options and warrants for shares
of Common Stock.
"Company" has the meaning specified in Section 1.1.
"Directors Options" shall have the meaning set forth in Section 5.1.
"Disability" shall mean the inability for a continuous period of at
least six months of the holder of an award to perform substantially such
holder's duties and responsibilities, as determined solely by the Committee.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Exempt Person" shall mean each of Andrew B. Parkinson and Thomas L.
Parkinson and each Affiliate thereof.
"Fair Market Value" shall mean, on the commencement of the Company's
initial public offering of Common Stock, the initial public offering price of a
share of Common Stock, and thereafter, the last sale price of a share of Common
Stock as reported in the National Association of Securities Dealers Automated
Quotation National Market System on the date as of which such value is being
determined, or, if the Common Stock is listed on a national securities exchange,
the last sale price of a share of Common Stock on the principal national stock
exchange on which the Common Stock is traded on the date as of which such value
is being determined, or, if there shall be no reported transactions for such
date, on the next preceding date for which transactions were reported; provided,
however, that if Fair Market Value for any date cannot be so determined, Fair
Market Value shall be determined by the Committee by whatever means or method as
the Committee, in the good faith exercise of its discretion, shall at such time
deem appropriate.
"Free-Standing SAR" shall mean an SAR which is not issued in tandem
with, or by reference to, an option, which entitles the holder thereof to
receive, upon exercise, shares of Common Stock (which may be Restricted Stock),
cash or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.
"Incentive Stock Option" shall mean an option to purchase shares of
Common Stock that meets the requirements of Section 422 of the Code, or any
successor provision, which is intended by the Committee to constitute an
Incentive Stock Option.
"Incumbent Board" shall have the meaning set forth in Section
6.8(b)(ii) hereof.
"Mature Shares" shall mean shares of Common Stock for which the holder
thereof has good title, free and clear of all liens and encumbrances and which
such holder either (a) has held for at least six months or (b) has purchased on
the open market.
"Non-Employee Director" shall mean any director of the Company who is
not an officer or employee of the Company or any Subsidiary (except in the
definition of Committee, in which case "Non-Employee Director" shall have the
meaning set forth in Rule 16b-3 under the Exchange Act).
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"Non-Statutory Stock Option" shall mean a stock option which is not an
Incentive Stock Option.
"Old Options" shall mean the outstanding options to purchase equity
interests in Old Peapod, which options are being exchanged in the Conversion for
options to purchase a like number of shares of Common Stock in the Company.
"Performance Measures" shall mean the criteria and objectives,
established by the Committee, which shall be satisfied or met (a) as a condition
to the exercisability of all or a portion of an option or SAR or (b) during the
applicable Restriction Period or Performance Period as a condition to the
holder's receipt, in the case of a Restricted Stock Award, of the shares of
Common Stock subject to such award, or, in the case of a Performance Share
Award, of payment with respect to such award. Such criteria and objectives may
include one or more of the following: the attainment by a share of Common Stock
of a specified Fair Market Value for a specified period of time, earnings per
share, return to stockholders (including dividends), return on equity, earnings
of the Company, revenues, market share, cash flows or cost reduction goals, or
any combination of the foregoing. If the Committee desires that compensation
payable pursuant to any award subject to Performance Measures be "qualified
performance-based compensation" within the meaning of section 162(m) of the
Code, the Performance Measures shall be established by the Committee no later
than the end of the first quarter of the Performance Period or Restriction
Period, as applicable (or such other time designated by the Internal Revenue
Service).
"Performance Period" shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.
"Performance Share" shall mean a right, contingent upon the attainment
of specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock, or in lieu
thereof, the Fair Market Value of such Performance Share in cash.
"Performance Share Award" shall mean an award of Performance Shares
under this Plan.
"Permanent and Total Disability" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.
"Person" shall mean any individual, firm, corporation, partnership or
other entity, and shall include any successor (by merger or otherwise) of any of
the forgoing.
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"Restricted Stock" shall mean shares of Common Stock which are subject
to a Restriction Period.
"Restricted Stock Award" shall mean an award of Restricted Stock under
this Plan.
"Restriction Period" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.
"SAR" shall mean a stock appreciation right which may be a Free-
Standing SAR or a Tandem SAR.
"Stock Award" shall mean a Restricted Stock Award or a Bonus Stock
Award.
"Substitute Options" shall mean the options to purchase shares of
Common Stock in the Company that are being substituted in the Conversion for the
outstanding options to purchase equity interests in Old Peapod.
"Tandem SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Statutory Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.
"Tax Date" shall have the meaning set forth in Section 6.5.
"Ten Percent Holder" shall have the meaning set forth in Section
2.1(a).
1.3 Administration. This Plan shall be administered by the
Committee. Subject to Section 6.1, any one or a combination of the following
awards may be made under this Plan to eligible persons: (a) options to purchase
shares of Common Stock in the form of Incentive Stock Options or Non-Statutory
Stock Options, (b) SARs in the form of Tandem SARs or Free-Standing SARs, (c)
Stock Awards in the form of Restricted Stock or Bonus Stock and (d) Performance
Shares. The Committee shall, subject to the terms of this Plan, select eligible
persons for participation in this Plan and determine the form, amount and timing
of each award to such persons and, if applicable, the
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number of shares of Common Stock, the number of SARs and the number of
Performance Shares subject to such an award, the exercise price or base price
associated with the award, the time and conditions of exercise or settlement of
the award and all other terms and conditions of the award, including, without
limitation, the form of the Agreement evidencing the award. The Committee shall,
subject to the terms of this Plan, interpret this Plan and the application
thereof, establish rules and regulations it deems necessary or desirable for the
administration of this Plan and may impose, incidental to the grant of an award,
conditions with respect to the award, such as limiting competitive employment or
other activities. All such interpretations, rules, regulations and conditions
shall be conclusive and binding on all parties.
The Committee may delegate some or all of its power and authority
hereunder to the Chief Executive Officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to (a) the grant
of an award under this Plan to any person who is a "covered employee" within the
meaning of Section 162(m) of the Code or who, in the Committee's judgment, is
likely to be a covered employee at any time during the period an award hereunder
to such employee would be outstanding or (b) the selection for participation in
this Plan of an officer or other person subject to Section 16 of the Exchange
Act or decisions concerning the timing, pricing or amount of an award to such an
officer or other person.
No member of the Board of Directors or Committee, and neither the
Chief Executive Officer nor any other executive officer to whom the Committee
delegates any of its power and authority hereunder, shall be liable for any act,
omission, interpretation, construction or determination made in connection with
this Plan in good faith, and the members of the Board of Directors and the
Committee and the President and Chief Executive Officer or other executive
officer shall be entitled to indemnification and reimbursement by the Company in
respect of any claim, loss, damage or expense (including attorneys' fees)
arising therefrom to the full extent permitted by law, except as otherwise may
be provided in the Company's Certificate of Incorporation and/or By-laws, as the
same may be amended or restated from time to time, and under any directors' and
officers' liability insurance that may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (a) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (b) acts approved in
writing by a majority of the members of the Committee without a meeting.
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Notwithstanding anything to the contrary herein, any grant of awards
to a Non-Employee Director (not including awards under Article V) shall require
the approval of the Board.
1.4 Eligibility. Participants in this Plan shall consist of such
directors, officers or other key employees of the Company and its Subsidiaries
as the Committee, in its sole discretion, may select from time to time. The
Committee's selection of a person to participate in this Plan at any time shall
not require the Committee to select such person to participate in this Plan at
any other time. Non-Employee Directors shall also be eligible to participate in
this Plan in accordance with Article V.
1.5 Shares Available. Subject to adjustment as provided in Sections
6.7 and 6.8, 4,300,000 shares of Common Stock shall be available under this
Plan, reduced by the sum of the aggregate number of shares of Common Stock (a)
that are issued upon the grant of a Stock Award and (b) which become subject to
outstanding options, including Directors' Options, outstanding Free-Standing
SARs and outstanding Performance Shares. To the extent that shares of Common
Stock subject to an outstanding option (other than in connection with the
exercise of a Tandem SAR), Free-Standing SAR or Performance Share are not issued
or delivered by reason of the expiration, termination, cancellation or
forfeiture of such award or by reason of the delivery or withholding of shares
of Common Stock to pay all or a portion of the exercise price of an award, if
any, or to satisfy all or a portion of the tax withholding obligations relating
to an award, then such shares of Common Stock shall again be available under
this Plan.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
To the extent required by Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which options (excluding the Substitute Options) or SARs, Stock
Awards or Performance Share Awards, or a combination thereof may be granted
during any calendar year to any person shall be 330,000 subject to adjustment as
provided in Section 6.7.
1.6 Substitute Options. Notwithstanding anything to the contrary
herein, the exercise price, vesting schedule and expiration of the Substitute
Options shall be as set forth in the new option agreements covering such
Substitute Options, which agreements reflect certain terms of the Old Options.
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II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Stock Options. The Committee may, in its discretion, grant
options to purchase shares of Common Stock to such eligible persons as may be
selected by the Committee. Each option, or portion thereof, that is not an
Incentive Stock Option, shall be a Non-Statutory Stock Option. Each Incentive
Stock Option shall be granted within ten years of the effective date of this
Plan. To the extent that the aggregate Fair Market Value (determined as of the
date of grant) of shares of Common Stock with respect to which options
designated as Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company, or any parent or Subsidiary) exceeds the amount (currently $100,000)
established by the Code, such options shall constitute Non-Statutory Stock
Options.
Options shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of
Common Stock subject to an option shall be determined by the Committee. The
purchase price per share of Common Stock purchasable upon exercise of the option
shall be determined by the Committee; provided, however, that the purchase price
per share of Common Stock purchasable upon exercise of an option shall not be
less than 100% of the Fair Market Value of a share of Common Stock on the date
of grant of such option; provided further, that if an Incentive Stock Option
shall be granted to any person who, at the time such option is granted, owns
capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
Subsidiary) (a "Ten Percent Holder"), the purchase price per share of Common
Stock shall be the price (currently 110% of Fair Market Value) required by the
Code in order to constitute an Incentive Stock Option.
(b) Option Period and Exercisability. The period during which an
option may be exercised shall be determined by the Committee; provided, however,
that no Incentive Stock Option shall be exercised later than ten years after its
date of grant; provided further, that if an Incentive Stock Option shall be
granted to a Ten Percent Holder, such option shall not be exercised later than
five years after its date of grant. The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a condition to
the grant of an option or to the exercisability of all or a portion of an
option. The Committee shall determine whether an option shall become exercisable
in cumulative or non-cumulative installments and in part or in full at any time.
An exercisable option, or portion thereof, may be exercised only with respect to
whole shares of
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Common Stock, except that if the remaining option then exercisable is for less
than a whole share, such remaining amount may be exercised.
(c) Method of Exercise. An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and accompanied by payment therefor in full (or
arrangement made for such payment to the Company's satisfaction) either (1) in
cash, (2) by delivery of Mature Shares having a Fair Market Value, determined as
of the date of exercise, equal to the aggregate purchase price payable by reason
of such exercise, (3) by authorizing the Company to withhold whole shares of
Common Stock which would otherwise be delivered upon exercise of the option
having a Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (4) in cash by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (5) a combination of (1), (2) and (3), in each
case to the extent set forth in the Agreement relating to the option, (ii) if
applicable, by surrendering to the Company any Tandem SARs which are canceled by
reason of the exercise of the option and (iii) by executing such documents as
the Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (2)-(5). Any fraction of a
share of Common Stock which would be required to pay such purchase price shall
be disregarded and the remaining amount due shall be paid in cash by the
optionee. No certificate representing Common Stock shall be delivered until the
full purchase price therefor has been paid.
(d) Additional Options. The Committee shall have the authority to
include in any Agreement relating to an option a provision entitling the
optionee to an additional option in the event such optionee exercises the option
represented by such option agreement, in whole or in part, by delivering
previously owned whole shares of Common Stock in payment of the purchase price
in accordance with this Plan and such Agreement. Any such additional option
shall be for a number of shares of Common Stock equal to the number of delivered
shares, shall have a purchase price determined by the Committee in accordance
with this Plan, shall be exercisable on the terms and subject to the conditions
set forth in the Agreement relating to such additional option.
2.2 Stock Appreciation Rights. The Committee may, in its discretion,
grant SARs to such eligible persons as may be selected by the Committee. The
Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
contain such additional terms and
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conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an
award shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted. The base price of a Tandem SAR shall be the purchase
price per share of Common Stock of the related option. The base price of a
Free-Standing SAR shall be determined by the Committee; provided, however, that
such base price shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date of grant of such SAR.
(b) Exercise Period and Exercisability. The Agreement relating to an
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later than
the expiration, cancellation, forfeiture or other termination of the related
option. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met as a condition to the exercisability of an SAR.
The Committee shall determine whether an SAR may be exercised in cumulative or
non-cumulative installments and in part or in full at any time. An exercisable
SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only
with respect to whole shares of Common Stock and, in the case of a Free-Standing
SAR, only with respect to a whole number of SARs. If an SAR is exercised for
shares of Restricted Stock, a certificate or certificates representing such
Restricted Stock shall be issued in accordance with Section 3.2(c) and the
holder of such Restricted Stock shall have such rights of a stockholder of the
Company as determined pursuant to Section 3.2(d). Prior to the exercise of an
SAR for shares of Common Stock, including Restricted Stock, the holder of such
SAR shall have no rights as a stockholder of the Company with respect to the
shares of Common Stock subject to such SAR.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
canceled by reason of the exercise of the Tandem SAR and (iii) by executing such
documents as the Company may reasonably request. A Free-Standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number (or if the remaining SAR then exercisable is for less then one whole
share, such remaining amount) of SARs which are being exercised and (ii) by
executing such documents as the Company may reasonably request.
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2.3 Termination of Employment or Service with the Company.
(a) Disability. Subject to paragraph (f) below and Section 6.8, and
unless otherwise specified in the Agreement relating to an option or SAR, as the
case may be, if the employment or service with the Company of the holder of an
option or SAR terminates by reason of Disability, each option and SAR held by
such holder shall be exercisable only to the extent that such option or SAR, as
the case may be, is exercisable on the effective date of such holder's
termination of employment or service and may thereafter be exercised by such
holder (or such holder's legal representative or similar person) until and
including the earliest to occur of (i) the date which is three months (or such
other period as set forth in the Agreement relating to such option or SAR) after
the effective date of such holder's termination of employment or service and
(ii) the expiration date of the term of such option or SAR.
(b) Retirement. Subject to paragraph (f) below and Section 6.8, and
unless otherwise specified in the Agreement relating to an option or SAR, as the
case may be, if the employment or service with the Company of the holder of an
option or SAR terminates by reason of retirement on or after age 65 with the
consent of the Company, each option and SAR held by such holder shall be
exercisable only to the extent that such option or SAR, as the case may be, is
exercisable on the effective date of such holder's termination of employment or
service and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until and including the earliest to occur of
(i) the date which is three months (or such other period as set forth in the
Agreement relating to such option or SAR) after the effective date of such
holder's termination of employment or service and (ii) the expiration date of
the term of such option or SAR.
(c) Death. Subject to paragraph (f) below and Section 6.8, and
unless otherwise specified in the Agreement relating to an option or SAR, as the
case may be, if the employment or service with the Company of the holder of an
option or SAR terminates by reason of death, each option and SAR held by such
holder shall be exercisable only to the extent that such option or SAR, as the
case may be, is exercisable on the date of such holder's death, and may
thereafter be exercised by such holder's executor, administrator, legal
representative, beneficiary or similar person, as the case may be, until and
including the earliest to occur of (i) the date which is one year (or such other
period as set forth in the Agreement relating to such option or SAR) after the
date of death and (ii) the expiration date of the term of such option or SAR.
(d) Other Termination. If the employment or service with the Company
of the holder of an option or SAR is terminated
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by the Company for Cause, each option and SAR held by such holder shall
terminate automatically on the effective date of such holder's termination of
employment or service.
Subject to paragraph (f) below and Section 6.8, and unless specified
in the Agreement relating to an option or SAR, as the case may be, if the
employment or service with the Company of the holder of an option or SAR
terminates for any reason other than Disability, retirement on or after age 65
with the consent of the Company, death or for Cause, each option and SAR held by
such holder shall be exercisable only to the extent that such option or SAR is
exercisable on the effective date of such holder's termination of employment or
service and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until and including the earliest to occur of
(i) the date which is three months (or such other period as set forth in the
Agreement relating to such option or SAR) after the effective date of such
holder's termination of employment or service and (ii) the expiration date of
the term of such option or SAR.
(e) Death Following Termination of Employment or Service. Subject to
paragraph (f) below and Section 6.8, and unless otherwise specified in the
Agreement relating to an option or SAR, as the case may be, if the holder of an
option or SAR dies during the three-month period following termination of
employment or service by reason of Disability, or if the holder of an option or
SAR dies during the six-month period following termination of employment or
service by reason of retirement on or after age 65 with the consent of the
Company, or if the holder of an option or SAR dies during the three-month period
following termination of employment or service for any reason other than
Disability or retirement on or after age 65 with the consent of the Company (or,
in each case, such other period as set forth in the Agreement relating to such
option or SAR), each option and SAR held by such holder shall be exercisable
only to the extent that such option or SAR is exercisable on the effective date
of such holder's termination and may thereafter be exercised by the holder's
executor, administrator, legal representative, beneficiary or similar person, as
the case may be, until and including the earliest to occur of (i) the date which
is one year (or such other period as set forth in the Agreement relating to such
option or SAR) after the date of death and (ii) the expiration date of the term
of such option or SAR.
(f) Termination of Employment or Service - Incentive Stock Options.
Subject to Section 6.8 and unless otherwise specified in the Agreement relating
to the option, if the employment or service with the Company of a holder of an
incentive stock option terminates by reason of Permanent and Total Disability
(as defined in Section 22(e)(3) of the Code), each incentive stock option held
by such optionee shall be exercisable only to the extent that such option is
exercisable on
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the effective date of such optionee's termination of employment or service by
reason of Permanent and Total Disability, and may thereafter be exercised by
such optionee (or such optionee's legal representative or similar person) until
and including the earliest to occur of (i) the date which is three months (or
such other period no longer than one year as set forth in the Agreement relating
to such option) after the effective date of such optionee's termination of
employment or service by reason of Permanent and Total Disability and (ii) the
expiration date of the term of such option.
Subject to Section 6.8 and unless otherwise specified in the Agreement
relating to the option, if the employment or service with the Company of a
holder of an Incentive Stock Option terminates by reason of death, each
Incentive Stock Option held by such optionee shall be exercisable only to the
extent that such option is exercisable on the date of such optionee's death and
may thereafter be exercised by such optionee's executor, administrator, legal
representative, beneficiary or similar person until and including the earliest
to occur of (i) the date which is one year (or such other period as set forth in
the Agreement relating to such option) after the date of death and (ii) the
expiration date of the term of such option.
If the employment or service with the Company of the optionee of an
Incentive Stock Option is terminated by the Company for Cause, each Incentive
Stock Option held by such optionee shall terminate automatically on the
effective date of such optionee's termination of employment or service.
If the employment or service with the Company of a holder of an
Incentive Stock Option terminates for any reason other than Permanent and Total
Disability, death or Cause, each Incentive Stock Option held by such optionee
shall be exercisable only to the extent such option is exercisable on the
effective date of such optionee's termination of employment or service, and may
thereafter be exercised by such holder (or such holder's legal representative or
similar person) until and including the earliest to occur of (i) the date which
is three months after the effective date of such optionee's termination of
employment or service and (ii) the expiration date of the term of such option.
If the holder of an Incentive Stock Option dies during the three-month
period following termination of employment or service by reason of Permanent and
Total Disability (or such other period as set forth in the Agreement relating to
such option), or if the holder of an Incentive Stock Option dies during the
three-month period following termination of employment or service for any reason
other than Permanent and Total Disability, death or Cause, each Incentive Stock
Option held by such optionee shall be exercisable only to the extent such option
is exercisable on the effective date of such optionee's termination and may
thereafter be exercised by the optionee's
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executor, administrator, legal representative, beneficiary or similar person
until and including the earliest to occur of (i) the date which is one year (or
such other period as set forth in the Agreement relating to such option) after
the date of death and (ii) the expiration date of the term of such option.
III. STOCK AWARDS
3.1 Stock Awards. The Committee may, in its discretion, grant Stock
Awards to such eligible persons as may be selected by the Committee. Subject to
adjustment as provided in Sections 6.7 and 6.8 of this Plan, the aggregate
number of shares of Common Stock available under this Plan for all Stock Awards
shall not exceed 500,000 of the aggregate number of shares of Common Stock
available under this Plan. The Agreement relating to a Stock Award shall
specify whether the Stock Award is a Restricted Stock Award or Bonus Stock
Award.
3.2 Terms of Stock Awards. Stock Awards shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment or service of
the Company during the specified Restricted Period and for the forfeiture of the
shares of Common Stock subject to such award (x) if specified Performance
Measures are not satisfied or met during the specified Restriction Period or (y)
if the holder of such award does not remain continuously in the employment or
service of the Company during the specified Restriction Period.
Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods.
(c) Share Certificates. During the Restriction Period, a certificate
or certificates representing a Restricted Stock Award shall be registered in the
holder's name and may bear a legend, in addition to any legend which may be
required pursuant to Section 6.6, indicating that the ownership of the
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shares of Common Stock represented by such certificate is subject to the
restrictions, terms and conditions of this Plan and the Agreement relating to
the Restricted Stock Award. All such certificates shall be deposited with the
Company, together with stock powers or other instruments of assignment
(including a power of attorney), each endorsed in blank with a guarantee of
signature if deemed necessary or appropriate by the Company, which would permit
transfer to the Company of all or a portion of the shares of Common Stock
subject to the Restricted Stock Award in the event such award is forfeited in
whole or in part. Upon termination of any applicable Restriction Period (and
the satisfaction or attainment of applicable Performance Measures), or upon the
grant of a Bonus Stock Award, in each case subject to the Company's right to
require payment of any taxes in accordance with Section 6.5, a certificate or
certificates evidencing ownership of the requisite number of shares of Common
Stock shall be delivered to the holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a stockholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
other than a distribution in cash, shall be deposited with the Company and shall
be subject to the same restrictions as the shares of Common Stock with respect
to which such distribution was made.
(e) Awards to Certain Executive Officers. Notwithstanding any other
provision of this Article III, and only to the extent necessary to ensure the
deductibility of the award to the Company, the Fair Market Value of the number
of shares of Common Stock subject to a Stock Award granted to a "covered
employee" within the meaning of Section 162(m) of the Code shall not exceed
$1,000,000 (i) at the time of grant in the case of a Stock Award granted upon
the attainment of Performance Measures or (ii) in the case of a Restricted Stock
Award with Performance Measures which shall be satisfied or met as a condition
to the holder's receipt of the shares of Common Stock subject to such award, on
the earlier of (x) the date on which the Performance Measures are satisfied or
met and (y) the date the holder makes an election under Section 83(b) of the
Code.
3.3 Termination of Employment or Service. Subject to Section 6.8 and
unless otherwise set forth in the Agreement relating to a Restricted Stock
Award, if the employment or service with the Company of the holder of such award
terminates, the portion of such award which is subject to a Restriction Period
shall terminate as of the effective date of such holder's
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termination of employment or service and shall be forfeited and such portion
shall be canceled by the Company.
IV. PERFORMANCE SHARE AWARDS
4.1 Performance Share Awards. The Committee may, in its discretion,
grant Performance Share Awards to such eligible persons as may be selected by
the Committee.
4.2 Terms of Performance Share Awards. Performance Share Awards shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures. The number
of Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of such award, if specified
Performance Measures are not satisfied or met during the specified Performance
Period.
(c) Settlement of Vested Performance Share Awards. The Agreement
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on any deferred
dividend equivalents, with respect to the number of shares of Common Stock
subject to such award. If a Performance Share Award is settled in shares of
Restricted Stock, a certificate or certificates representing such Restricted
Stock shall be issued in accordance with Section 3.2(c) and the holder of such
Restricted Stock shall have such rights of a stockholder of the Company as
determined pursuant to Section 3.2(d). Prior to the settlement of a Performance
Share Award in shares of Common Stock, including Restricted Stock, the holder of
such award shall have no rights as a stockholder of the Company with respect to
the shares of Common Stock subject to such award.
4.3 Termination of Employment or Service. Subject to Section 6.8 and
unless otherwise set forth in the Agreement relating to a Performance Share
Award, if the employment or service with the Company of the holder of such award
terminates,
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the portion of such award which is subject to a Performance Period on the
effective date of such holder's termination of employment or service shall be
forfeited and such portion shall be canceled by the Company.
V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
5.1 Eligibility. Each Non-Employee Director shall be granted options
to purchase shares of Common Stock in accordance with this Article V
(collectively "Directors Options"). All options granted under this Article V
shall constitute Non-Statutory Stock Options.
5.2 Grants of Stock Options. Each Non-
Employee Director shall be granted Non-Statutory Stock Options as follows:
(a) Time of Grant. On the date of the initial public offering (the
"IPO") of Common Stock by the Company, each Non-Employee Director shall be
granted an option to purchase 15,000 shares of Common Stock at a purchase price
equal to the initial public offering purchase price. In addition, following the
IPO, (i) on the date on which a person is first elected or begins to serve as a
Non-Employee Director (other than by reason of termination of employment) he or
she shall be granted an option to purchase 15,000 shares of Common Stock at a
purchase price per share equal to the Fair Market Value of a share of Common
Stock on the date of grant of such option and (ii) on the date of each annual
meeting of the Company, each Non-Employee Director shall be granted an option to
purchase 5,000 shares of Common Stock at a purchase price per share equal to the
Fair Market Value of a share of Common Stock on the date of grant of such
option; provided, however, that no such grants will be made to the extent an
automatic option grant is being or has been made to such Non-Employee Director
as of or with respect to such date pursuant to another incentive compensation
plan of the Company.
(b) Option Period and Exercisability. Except as otherwise provided
herein and except for options granted pursuant to Section 5.2(a)(ii), each
option granted under this Article V shall not be exercisable during the first
year following its date of grant. Thereafter, such option may be exercised: (i)
on or after the first anniversary of its date of grant, for up to one-third of
the shares of Common Stock subject to such option on its date of grant, (ii) on
or after the second anniversary of its date of grant, for up to an additional
one-third (two-thirds on a cumulative basis) of the shares of Common Stock
subject to such option on its date of grant, and (iii) on or after the third
anniversary of its date of grant, for up to the remaining one-third (all shares
on a cumulative basis) of the shares of Common Stock subject to such option on
its date of grant. Each option granted pursuant to Section 5.2(a)(ii) shall not
be exercisable until, and such option shall become exercisable in full as of,
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the date immediately preceding the date of the Company's annual meeting next
following the annual meeting on which such option was granted. Each option
granted under this Article V shall expire ten years after its date of grant. An
exercisable option, or portion thereof, may be exercised in whole or in part
only with respect to whole shares of Common Stock. Options granted under this
Article V shall be exercisable in accordance with Section 2.1(c).
5.3 Termination of Directorship.
(a) Disability. Subject to Section 6.8, if the holder of an option
granted under this Article V ceases to be a director of the Company by reason of
Disability, each such option held by such holder shall be exercisable only to
the extent that such option is exercisable on the effective date of such
holder's ceasing to be a director and may thereafter be exercised by such holder
(or such holder's guardian, legal representative or similar person) until the
earliest to occur of the (i) date which is three months after the effective date
of such holder's ceasing to be a director and (ii) the expiration date of the
term of such option.
(b) Retirement. Subject to Section 6.8, if the holder of an option
granted under this Article V ceases to be a director of the Company on or after
age 65, each such option held by such holder shall be exercisable only to the
extent that such option is exercisable on the effective date of such holder's
ceasing to be a director and may thereafter be exercised by such holder (or such
holder's legal representative or similar person) until the earliest to occur of
the (i) date which is three months after the effective date of such holder's
ceasing to be a director and (ii) the expiration date of the term of such
option.
(c) Death. Subject to Section 6.8, if the holder of an option granted
under this Article V ceases to be a director of the Company by reason of death,
each such option held by such holder shall be fully exercisable and may
thereafter be exercised by such holder's executor, administrator, legal
representative, beneficiary or similar person, as the case may be, until the
earliest to occur of (i) the date which is one year after the date of death and
(ii) the expiration date of the term of such option.
(d) Other Termination. Subject to Section 6.8, if the holder of an
option granted under this Article V ceases to be a director of the Company for
any reason other than Disability, retirement on or after age 65 or death, each
such option held by such holder shall be exercisable only to the extent such
option is exercisable on the effective date of such holder's ceasing to be a
director and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until the earliest to occur of (i) the date
which is three months after the
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effective date of such holder's ceasing to be a director and (ii) the expiration
date of the term of such option.
(e) Death Following Termination of Directorship. Subject to Section
6.8, if the holder of an option granted under this Article V dies during the
three-month period following such holder's ceasing to be a director of the
Company by reason of Disability, or if such a holder dies during the three-month
period following such holder's ceasing to be a director of the Company on or
after age 65, or if such a holder dies during the three-month period following
such holder's ceasing to be a director for any reason other than by reason of
Disability or retirement on or after age 65, each such option held by such
holder shall be exercisable only to the extent that such option is exercisable
on the effective date of such holder's ceasing to be a director and may
thereafter be exercised by the holder's executor, administrator, legal
representative, beneficiary or similar person, as the case may be, until the
earliest to occur of the (i) date one year after the date of death and (ii) the
expiration date of the term of such option.
5.4 Directors Options. Each Directors Option shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable:
(a) Option Period and Exercisability. Directors Options shall become
exercisable as provided in Section 5.2(b). If at any time prior to the time that
a Directors Option first becomes exercisable, a Non-Employee Director shall no
longer be a member of the Board, such Directors Option shall become void and of
no further force or effect.
(b) Purchase Price. The purchase price for the shares of Common Stock
subject to any Directors Option shall be equal to 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such Directors Option. Such
Directors Options shall be exercisable in accordance with Section 2.1(c).
(c) Restrictions on Transfer. Directors Options shall be subject to
the transfer restrictions and other provisions of Section 6.4.
(d) Expiration. Each Directors Option which has become exercisable
pursuant to Section 5.4(a), to the extent not theretofore exercised, shall
expire on the first to occur of (i) the date which is three months after the
first date on which the Non-Employee Director shall no longer be a member of the
Board or the Board of Directors of a Subsidiary and (ii) the tenth anniversary
of the date of grant of such option; provided, however, that if the Non-Employee
Director shall die within such three-month period following the date on which he
shall have ceased to serve as such a director or if the Non-Employee
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Director shall cease to be a director of the Company by reason of death, such
option may be exercised at any time within the one-year period following the
date of death to the extent not theretofore exercised (but in no event later
than the tenth anniversary of the date of grant).
VI. GENERAL
6.1 Effective Date and Term of Plan; Submission to Stockholders. This
Plan shall be submitted to the stockholders of the Company for approval and, if
approved by the affirmative vote of a majority of the voting power of the shares
of capital stock of the Company entitled to vote thereon, shall become effective
as of the commencement of the IPO. This Plan shall terminate ten years after its
effective date unless terminated earlier by the Board. Termination of this Plan
shall not affect the terms or conditions of any award granted prior to
termination.
Awards hereunder may be made at any time prior to the termination of
this Plan, provided that no award may be made later than ten years after the
effective date of this Plan. In the event that this Plan is not approved by the
stockholders of the Company, this Plan and any awards hereunder shall be void
and of no force or effect.
6.2 Amendments. The Board may amend this Plan as it shall deem
advisable, subject to any requirement of stockholder approval required by
applicable law, rule or regulation, including Section 162(m) and Section 422 of
the Code; provided, however, that no amendment shall be made without stockholder
approval if such amendment would (a) reduce the minimum purchase price in the
case of an option or the base price in the case of an SAR, (b) effect any change
inconsistent with Section 422 of the Code or (c) extend the term of this Plan.
No amendment may impair the rights of a holder of an outstanding award without
the consent of such holder.
6.3 Agreement. Each award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions applicable to such award. No
award shall be valid until an Agreement is executed by the Company and the
recipient of such award and, upon execution by each party and delivery of the
Agreement to the Company, such award shall be effective as of the effective date
set forth in the Agreement.
6.4 Non-Transferability of Stock Options, SARs and Performance
Shares. No option, SAR or Performance Share shall be transferable other than (i)
by will, the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company or (ii) as otherwise set forth in
the Agreement relating to such award. Each option, SAR or Performance Share may
be exercised or settled during the
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participant's lifetime only by the holder or the holder's legal representative
or similar person. Except as permitted by the second preceding sentence, no
option, SAR or Performance Share may be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of any option, SAR or Performance Share, such award and all
rights thereunder shall immediately become null and void.
6.5 Tax Withholding. The Company shall have the right to require,
prior to the issuance or delivery of any shares of Common Stock or the payment
of any cash pursuant to an award made hereunder, payment by the holder of such
award of any Federal, state, local or other taxes which may be required to be
withheld or paid in connection with such award. An Agreement may provide that
(i) the Company shall withhold whole shares of Common Stock which would
otherwise be delivered to a holder, having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with an award (the "Tax Date"), or withhold an amount of cash which
would otherwise be payable to a holder, in the amount necessary to satisfy any
such obligation or (ii) the holder may satisfy any such obligation by any of the
following means: (1) a cash payment to the Company, (2) delivery to the Company
of Mature Shares having an aggregate Fair Market Value, determined as of the Tax
Date, equal to the amount necessary to satisfy any such obligation, (3)
authorizing the Company to withhold whole shares of Common Stock which would
otherwise be delivered having an aggregate Fair Market Value, determined as of
the Tax Date, or withhold an amount of cash which would otherwise be payable to
a holder, equal to the amount necessary to satisfy any such obligation, (4) in
the case of the exercise of an option, a cash payment by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (5) any combination of (1), (2) and (3), in each case to
the extent set forth in the Agreement relating to the award; provided, however,
that the Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (2)-(5). An Agreement may provide for shares of
Common Stock to be delivered or withheld having an aggregate Fair Market Value
in excess of the minimum amount required to be withheld. Any fraction of a share
of Common Stock which would be required to satisfy such an obligation shall be
disregarded and the remaining amount due shall be paid in cash by the holder.
6.6 Restrictions on Shares. Each award made hereunder shall be
subject to the requirement that if at any time the Company determines that the
listing, registration or qualification of the shares of Common Stock subject to
such award upon any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any other
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action is necessary or desirable as a condition of, or in connection with, the
delivery of shares thereunder, such shares shall not be delivered unless such
listing, registration, qualification, consent, approval or other action shall
have been effected or obtained, free of any conditions not acceptable to the
Company. The Company may require that certificates evidencing shares of Common
Stock delivered pursuant to any award made hereunder bear a legend indicating
that the sale, transfer or other disposition thereof by the holder is prohibited
except in compliance with the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
6.7 Adjustment. Except as provided in Section 6.8, in the event of
any stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to holders of
Common Stock other than a regular cash dividend, the number and class of
securities available under this Plan, the number and class of securities subject
to each outstanding option and the purchase price per security, the number of
securities subject to each option to be granted to Non-Employee Directors
pursuant to Article V, the terms of each outstanding SAR, the number and class
of securities subject to each outstanding Stock Award, and the terms of each
outstanding Performance Share shall be appropriately adjusted by the Committee,
such adjustments to be made in the case of outstanding options and SARs without
an increase in the aggregate purchase price or base price. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
If any such adjustment would result in a fractional security being (a) available
under this Plan, such fractional security shall be disregarded, or (b) subject
to an award under this Plan, the Company shall pay the holder of such award, in
connection with the first vesting, exercise or settlement of such award, in
whole or in part, occurring after such adjustment, an amount in cash determined
by multiplying (i) the fraction of such security (rounded to the nearest
hundredth) by (ii) the excess, if any, of (1) the Fair Market Value on the
vesting, exercise or settlement date over (2) the exercise or base price, if
any, of such award.
6.8 Change in Control.
(a) (i) Notwithstanding any provision in this Plan or any Agreement,
in the event of a Change in Control pursuant to Section (b)(iii) or (iv)
below, (1) all outstanding options and SARS shall immediately become
exercisable in full, (2) the Restriction Period applicable to any
outstanding Restricted Stock Award shall lapse, (3) the Performance Period
applicable to any outstanding Performance Share shall lapse and (4) the
Performance Measures applicable to any outstanding Restricted Stock Award
(if any) and to any outstanding Performance Share shall be
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deemed to be satisfied at the maximum level. If, in connection with such
Change in Control, holders of Common Stock receive solely shares of common
stock that are registered under Section 12 of the Exchange Act, there shall
be substituted for each share of Common Stock available under this Plan,
whether or not then subject to an outstanding award, the number and class
of shares into which each outstanding share of Common Stock shall be
converted pursuant to such Change in Control. If, in connection with such
Change in Control, holders of Common Stock receive solely cash and shares
of common stock that are registered under Section 12 of the Exchange Act,
each outstanding award shall be surrendered to and canceled by the Company,
and the holder shall receive, within ten days of the occurrence of such
Change in Control, a proportionate amount of cash in the manner provided in
Section (a)(ii) below, and there shall be substituted for the award
surrendered a similar award reflecting a proportionate number of the class
of shares into which each outstanding share of Common Stock shall be
converted to such Change in Control. In the event of any such substitution,
the proportion of cash and common stock, the purchase price per share in
the case of an option and the base price in the case of an SAR, and any
other terms of outstanding awards shall be appropriately adjusted by the
Committee, such adjustments to be made in the case of outstanding options
and SARs without an increase in the aggregate purchase price or base price;
provided, that the proportion of cash and common stock substituted for
outstanding awards shall reflect the approximate proportion of cash and
common stock received by holders of Common Stock in such Change in Control.
If, in connection with a Change in Control, holders of Common Stock receive
any portion of the consideration in a form other than cash or shares of
common stock that are registered under Section 12 of the Exchange Act, each
share of Common Stock available under this Plan, whether or not then
subject to an outstanding award, shall be substituted or surrendered for
such proportion of common stock, cash or other consideration as shall be
determined by the Committee pursuant to Section 6.7.
(ii) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(i) or (ii) below,
or in the event of a Change in Control pursuant to Section (b)(iii) or (iv)
below in connection with which the holders of Common Stock receive cash,
each outstanding award shall be surrendered to the Company by the holder
thereof, and each such award shall immediately be canceled by the Company,
and the holder shall receive, within ten days of the occurrence of a Change
in Control pursuant to Section (b)(i) or (ii) below or within ten days of
the approval of the stockholders of the Company contemplated by Section
(b)(iii) or (iv) below, a cash
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payment from the Company in an amount equal to (1) in the case of an
option, the number of shares of Common Stock then subject to such option,
multiplied by the excess, if any, of the greater of (A) the highest per
share price offered to stockholders of the Company in any transaction
whereby the Change in Control takes place or (B) the Fair Market Value of a
share of Common Stock on the date of occurrence of the Change in Control,
over the purchase price per share of Common Stock subject to the option;
(2) in the case of a Free-Standing SAR, the number of shares of Common
Stock then subject to such SAR, multiplied by the excess, if any, of the
greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B)
the Fair Market Value of a share of Common Stock on the date of occurrence
of the Change in Control, over the base price of the SAR; and (3) in the
case of a Restricted Stock Award or Performance Share Award, the number of
shares of Common Stock or the number of Performance Shares, as the case may
be, then subject to such award, multiplied by the greater of (A) the
highest per share price offered to stockholders of the Company in any
transaction whereby the Change in Control takes place or (B) the Fair
Market Value of a share of Common Stock on the date of occurrence of the
Change in Control. In the event of a Change in Control, each Tandem SAR
shall be surrendered by the holder thereof and shall be canceled
simultaneously with the cancellation of the related option. Except as may
be provided in an agreement relating to an award, the Company may, but is
not required to, cooperate with any person who is subject to Section 16 of
the Exchange Act to assure that any cash payment in accordance with the
foregoing to such person is made in compliance with Section 16 and the
rules and regulations thereunder.
(b) "Change in Control" shall mean:
(i) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2)
of the Exchange Act, of Beneficial Ownership of 20% or more of either (1)
the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (2) the combined voting power of the
then outstanding securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
providing however, the following acquisitions shall not constitute a Change
of Control: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or
exchange privilege unless the security being so exercised, converted or
exchanged was acquired directly from the Company), (B) any acquisition by
the Company, (C) any acquisition by an
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Exempt Person, (D) any acquisition by an employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company, or (E) any acquisition by any corporation pursuant to a
transaction which complies with clauses (1), (2) and (3) of subsection
(iii) of this Section 6.8(b); provided further, that for purposes of clause
(B), if any Person (other than an Exempt Person, the Company or any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company) shall become the
Beneficial Owner of 20% or more of the Outstanding Company Common Stock or
20% or more of the Outstanding Company Voting Securities by reason of an
acquisition by the Company, and such Person shall, after such acquisition
by the Company, become the Beneficial Owner of any additional shares of the
Outstanding Company Common Stock or any additional Outstanding Company
Voting Securities and such Beneficial Ownership is publicly announced, such
additional Beneficial Ownership shall constitute a Change in Control;
(ii) individuals who, as of the effective date hereof, constitute
the Board of Directors (the "Incumbent Board") cease for any reason to
constitute at least a majority of such Board; provided that any individual
who becomes a director of the Company subsequent to the effective date
hereof whose election by the Company's stockholders, was approved by the
vote of at least 66-2/3% of the directors then comprising the Incumbent
Board shall be deemed a member of the Incumbent Board; and provided
further, that any individual who was initially elected as a director of the
Company as a result of an actual or threatened election contest, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act, or any other actual or threatened solicitation of proxies or
consents by or on behalf of any Person other than the Board shall not be
deemed a member of the Incumbent Board;
(iii) approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company (a "Corporate
Transaction"); excluding, however, a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals or entities who are
the Beneficial Owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to
such Corporate Transaction will Beneficially Own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of common stock, and
the combined voting power of the outstanding securities of such corporation
entitled to vote generally in the election of directors, as the case may
be, of the corporation resulting from such Corporate Transaction
(including,
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without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or indirectly) in substantially the same proportions relative to
each other as their Beneficial Ownership, immediately prior to such
Corporate Transaction, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (2) no Person
(other than an Exempt Person; the Company; any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company; the corporation resulting from such Corporate
Transaction; and any Person which Beneficially Owned, immediately prior to
such Corporate Transaction, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or the Outstanding Company Voting
Securities, as the case may be) will Beneficially Own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common
stock of the corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding securities of such corporation
entitled to vote generally in the election of directors and (3) individuals
who were members of the Incumbent Board will constitute at least a majority
of the members of the board of directors of the corporation resulting from
such Corporate Transaction; or
(iv) approval by the stockholders of the Company of a plan of
complete liquidation or dissolution of the Company.
Notwithstanding anything to the contrary herein, no Change of Control
shall be deemed to have taken place as a result of the issuance of shares of
Common Stock by the Company or the sale of shares of Common Stock by its
stockholders in connection with the Company's initial public offering.
6.9 No Right of Participation or Employment/Service. No person shall
have any right to participate in this Plan. Neither this Plan nor any award made
hereunder shall confer upon any person any right to continued employment or
service by the Company, any Subsidiary or any affiliate of the Company or affect
in any manner the right of the Company, any Subsidiary or any affiliate of the
Company to terminate the employment or service of any person at any time without
liability hereunder.
6.10 Rights as Stockholder. No person shall have any right as a
stockholder of the Company with respect to any shares of Common Stock or other
equity security of the Company which is subject to an award hereunder unless and
until such person becomes a stockholder of record with respect to such shares of
Common Stock or equity security.
6.11 Governing Law. This Plan, each award hereunder and the related
Agreement, and all determinations made and
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actions taken pursuant thereto, to the extent not otherwise governed by the Code
or the laws of the United States, shall be governed by the laws of the State of
Delaware and construed in accordance therewith without giving effect to
principles of conflicts of laws.
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EXHIBIT 10.15
Peapod, Inc.
Employee Stock Purchase Plan
1. Purpose. The purpose of the Peapod, Inc. Employee Stock Purchase
Plan (the "Plan") is to provide employees of Peapod, Inc., a Delaware
corporation (the "Company"), and its Subsidiary Companies (as defined below)
added incentive to remain employed by such companies and to encourage increased
efforts to promote the best interests of such companies by permitting eligible
employees to purchase shares of common stock, par value $.01 per share, of the
Company ("Common Stock") at below-market prices. The Plan is intended to
qualify as an "employee stock purchase plan" under section 423 of the Internal
Revenue Code of 1986, as amended (the "Code"). For purposes of the Plan, the
term "Subsidiary Companies" shall mean all corporations which are subsidiary
corporations (within the meaning of Section 424(f) of the Code) and of which the
Company is the common parent. The Company and its Subsidiary Companies that,
from time to time, adopt the Plan are sometimes hereinafter called collectively
the "Participating Companies."
2. Eligibility. Participation in the Plan shall be open to each
employee of the Participating Companies who satisfies all of the following
conditions (an "Eligible Employee"):
(a) such employee's customary employment is for more than 20 hours
per week;
(b) such employee's customary employment is for more than 5 months
per calendar year; and
(c) such employee has been continuously employed by the Participating
Companies for at least twelve months.
No right to purchase Common Stock hereunder shall accrue under the Plan in favor
of any person who is not an Eligible Employee as of the first day of a Purchase
Period (as defined in Section 3). Notwithstanding anything contained in the
Plan to the contrary, no Eligible Employee shall acquire a right to purchase
Common Stock hereunder if (i) immediately after receiving such right, such
employee would own 5% or more of the total combined voting power or value of all
classes of stock of the Company or any Subsidiary Company (including any stock
attributable to such employee under section 424(d) of the Code), or (ii) for any
calendar year such right would permit such employee's aggregate rights to
purchase stock under all employee stock purchase plans of the Company and its
Subsidiary Companies exercisable during such calendar year to accrue at a rate
which exceeds $25,000 of
<PAGE>
fair market value of such stock for such calendar year. In addition, the number
of shares of Common Stock which may be purchased by any Eligible Employee during
any Purchase Period shall not exceed the whole number of shares of Common Stock
determined by dividing $6,250, or, except as provided in the preceding sentence,
such greater number as may be determined by the Committee, by 85% of the fair
market value (determined as described in Section 5) of a share of Common Stock
on the first day of the Purchase Period.
3. Effective Date of Plan; Purchase Periods. The Plan shall become
effective on [October] 1, 1997 or on such later date as may be specified by the
Board of Directors (the "Board") of the Company or the Committee (as defined in
Section 11). The Plan shall cease to be effective unless, within 12 months
before or after the date of its adoption by the Board, it has been approved by
the shareholders of the Company.
A "Purchase Period" shall consist of the three month period beginning
on each October 1, January 1, April 1, and July 1, commencing on or after the
effective date and prior to termination of the Plan.
4. Basis of Participation. (a) Payroll Deduction. Each Eligible
Employee shall be entitled to enroll in the Plan as of the first day of any
Purchase Period which begins on or after such employee has become an Eligible
Employee.
To enroll in the Plan, an Eligible Employee shall execute and deliver
a payroll deduction authorization (the "Authorization") to the Company or its
designated agent at the time and in the manner specified by the Company. The
executed Authorization shall become effective on the first day of the Purchase
Period following the day of delivery thereof to the Company or its designated
agent. Each Authorization shall direct that payroll deductions be made by the
employee's employer for each payroll period during which the employee is a
participant in the Plan. The amount of each payroll deduction specified in an
Authorization for each such payroll period shall be the amount determined by the
Committee computed by dividing the dollar amount specified by the participant,
not to exceed $6,250, or such greater amount as may be specified by the
Committee, by the number of payroll periods in the Purchase Period.
Payroll deductions (and any other amount paid under the Plan) shall be
made for each participant in accordance with such participant's Authorization
until such participant's participation in the Plan terminates, such
participant's Authorization is revised or the Plan terminates, all as
hereinafter provided.
A participant may change the amount of his or her payroll deduction
effective as of the first day of any Purchase Period by filing a new
Authorization with the Company or its
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designated agent at the time and in the manner specified by the Committee. A
participant may not change the amount of his or her payroll deduction effective
as of any date other than the first day of a Purchase Period, except that a
participant may elect to terminate his or her participation in the Plan as
provided in Section 7.
Payroll deductions for each participant shall be credited to a
purchase account established on behalf of the participant on the books of the
participant's employer or such employer's designated agent (a "Purchase
Account"). At the end of each Purchase Period, the amount in each participant's
Purchase Account will be applied to the purchase from the Company of the number
of shares of Common Stock determined by dividing such amount by the Purchase
Price (as defined in Section 5) for such Purchase Period. No interest shall
accrue at any time for any amount credited to a Purchase Account of a
participant.
(b) Other Methods of Participation. The Committee may, in its
discretion, establish additional procedures whereby Eligible Employees may
participate in the Plan by means other than payroll deduction, including, but
not limited to, delivery of funds by participants in a lump sum or automatic
charges to participants' bank accounts. Such other methods of participating
shall be subject to such rules and conditions as the Committee may establish.
The Committee may at any time amend, suspend or terminate any participation
procedures established pursuant to this paragraph without prior notice to any
participant or Eligible Employee.
5. Purchase Price. The purchase price (the "Purchase Price") per
share of Common Stock hereunder for any Purchase Period shall be the lesser of
85% of the fair market value of a share of Common Stock on the first day of such
Purchase Period and 85% of the fair market value of a share of Common Stock on
the last day of such Purchase Period. If such sum results in a fraction of one
cent, the Purchase Price shall be increased to the next higher full cent. For
purposes of the Plan, unless otherwise determined by the Committee, the fair
market value of a share of Common Stock on a given day shall be the last sale
price of a share of Common Stock as reported on the Nasdaq Capital Stock Market
on the date as of which such value is being determined, or, if the Common Stock
is listed on a national securities exchange, the last sale price of a share of
Common Stock on the principal national stock exchange on which the Common Stock
is traded on the date as of which such value is being determined, or, if there
shall be no reported transactions for such date, on the next preceding date for
which transactions were reported. In no event, however, shall the Purchase
Price be less than the par value of a share of Common Stock.
6. Issuance of Stock. The Common Stock purchased by each
participant shall be considered to be issued and outstanding to such
participant's credit as of the close of business on the
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last day of each Purchase Period. The total number of shares of Common Stock
purchased by all participants during each Purchase Period shall be issued, as of
the last day in such Purchase Period, to a nominee or agent for the benefit of
the participants. A participant will be issued a certificate for his or her
shares of Common Stock as soon as practicable after December 31 of the year in
which such shares were purchased by such participant, provided that, the
participant has requested that a certificate for his or her shares be issued,
the participant's participation in the Plan has been terminated or the Plan is
terminated.
After the close of each Purchase Period, a report will be sent to each
participant stating the entries made to such participant's Purchase Account, the
number of shares of Common Stock purchased and the applicable Purchase Price.
In the event that the maximum number of shares of Common Stock are purchased by
the participant for the Purchase Period and cash remains credited to the
participant's Purchase Account, such cash shall be delivered promptly to such
participant. For purposes of the preceding sentence, the maximum number of
shares of Common Stock that may be purchased by a participant for a Purchase
Period shall be determined under the last sentence of Section 2, as limited by
the third sentence of Section 2.
7. Termination of Participation. A participant may elect at any
time to terminate his or her participation in the Plan, provided such election
is received by the Company or its designated agent in writing prior to the date
specified by the Committee for termination of participation during the Purchase
Period for which such termination is to be effective. Upon any such termination,
the cash credited to such participant's Purchase Account on the date of such
termination shall be delivered promptly to such participant, and certificates
for the number of full shares of Common Stock held for his or her benefit, and
the cash equivalent for any fractional share so held shall be delivered to the
participant as soon as practicable after December 31 of the year in which such
shares were purchased by such participant. Such cash equivalent shall be
determined by multiplying the fractional share by the fair market value of a
share of Common Stock on the last day of the Purchase Period immediately
preceding such termination, determined as provided in Section 5.
If the participant dies, terminates employment with the Participating
Companies for any reason, or otherwise ceases to be an Eligible Employee, such
participant's participation in the Plan shall immediately terminate. Upon such
terminating event, the cash credited to such participant's Purchase Account on
the date of such termination shall be delivered promptly to such participant or
his or her legal representative, as the case may be, and one or more
certificates for the number of full shares of Common Stock held for such
participant's benefit, and the cash equivalent of any fractional share so held,
determined as
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provided above in this Section 7, shall be delivered to such participant or his
or her legal representative, as the case may be, as soon as practicable after
December 31 of the year in which such termination occurs.
8. Termination or Amendment of the Plan. The Company, by action of
the Board or the Committee, may terminate the Plan at any time, in which case
notice of such termination shall be given to all participants, but any failure
to give such notice shall not impair the effectiveness of the termination.
Without any action being required, the Plan shall terminate in any
event when the maximum number of shares of Common Stock to be sold under the
Plan (as provided in Section 12) has been purchased. Such termination shall not
impair any rights which under the Plan shall have vested on or prior to the date
of such termination. If at any time the number of shares of Common Stock
remaining available for purchase under the Plan are not sufficient to satisfy
all then-outstanding purchase rights, the Board or Committee may determine an
equitable basis of apportioning available shares of Common Stock among all
participants.
The Board or the Committee may amend the Plan from time to time in any
respect for any reason; provided, however, no such amendment shall (a)
materially adversely affect any purchase rights outstanding under the Plan
during the Purchase Period in which such amendment is to be effected, (b)
increase the maximum number of shares of Common Stock which may be purchased
under the Plan, (c) decrease the Purchase Price of a share of Common Stock for
any Purchase Period below the lesser of 85% of the fair market value thereof on
the first day of such Purchase Period and 85% of such fair market value on the
last day of such Purchase Period or (d) adversely affect the qualification of
the Plan under section 423 of the Code.
Upon termination of the Plan, one or more certificates for the number
of full shares of Common Stock held for each participant's benefit and the cash
equivalent of any fractional share so held, determined as provided in Section 7
shall be delivered to such participant as soon as practicable after [December 31
of the year in which] the Plan terminates, and, except as otherwise provided in
Section 14, the cash, if any, credited to the such participant's Purchase
Account, shall be distributed to such participant promptly after the Plan
terminates.
9. Non-Transferability. Rights acquired under the Plan are not
transferable and may be exercised only by a participant.
10. Shareholder's Rights. No Eligible Employee or participant shall
by reason of the Plan have any rights of a
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shareholder of the Company until he or she shall acquire a share of Common Stock
as herein provided.
11. Administration of the Plan. The Plan shall be administered by a
committee appointed by the Board consisting of three or more members of the
Board (the "Committee"). Unless otherwise determined by the Board, the
Compensation Committee of the Board shall serve as the Committee. In addition
to the power to amend or terminate the Plan pursuant to Section 8, the Committee
shall have full power and authority to: (i) interpret and administer the Plan
and any instrument or agreement entered into under the Plan; (ii) establish such
rules and regulations and appoint such agents as it shall deem appropriate for
the proper administration of the Plan; and (iii) make any other determination
and take any other action that the Committee deems necessary or desirable for
administration of the Plan. Decisions of the Committee shall be final,
conclusive and binding upon all persons, including the Company, any participant
and any other employee of the Company. A majority of the members of the
Committee may determine its actions and fix the time and place of its meetings.
The Plan shall be administered so as to ensure that all participants
have the same rights and privileges as are provided by section 423(b)(5) of the
Code.
12. Maximum Number of Shares. The maximum number of shares of Common
Stock which may be purchased under the Plan is 150,000, subject to adjustment as
hereinafter set forth. Shares of Common Stock sold hereunder may be treasury
shares, authorized and unissued shares, or any combination thereof. If the
Company shall, at any time after the effective date of the Plan, change its
issued Common Stock into an increased number of shares, with or without par
value, through a stock dividend or a stock split, or into a decreased number of
shares, with or without par value, through a combination of shares, then,
effective with the record date for such change, the maximum number of shares of
Common Stock which thereafter may be purchased under the Plan and the maximum
number of shares which thereafter may be purchased during any Purchase Period
shall be the maximum number of shares which, immediately prior to such record
date, remained available for purchase under the Plan and under any Purchase
Period proportionately increased, in case of such stock dividend or stock split,
or proportionately decreased in case of such combination of shares.
13. Miscellaneous. Except as otherwise expressly provided herein,
any Authorization, election or notice under the Plan from an Eligible Employee
or participant shall be delivered to the Company or its designated agent and,
subject to any limitations specified in the Plan, shall be effective when so
delivered. The Plan, and the Company's obligation to sell and deliver shares of
Common Stock hereunder, shall be subject to all applicable federal and state
laws, rules and regulations, and to
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such approval by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required.
14. Change in Control. In order to maintain the participants' rights
in the event of any Change in Control of the Company, as hereinafter defined,
upon such Change in Control the then current Purchase Period shall thereupon
end, and the cash credited to all participants' Purchase Accounts shall be
applied to purchase shares pursuant to Sections 5 and 6, and the Plan shall
immediately thereafter terminate. For purposes of this Section 14, "Change in
Control" shall have the same meaning as set forth in the Company's 1997 Long-
Term Incentive Plan.
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EXHIBIT 10.16
INDEMNIFICATION AGREEMENT
AGREEMENT made this ___ day of __________, 1997, between Peapod, Inc.,
a Delaware corporation (the "Company"), and ________________ (the "Indemnitee").
WHEREAS, it is essential to the Company and its stockholders to
attract and retain qualified and capable directors, officers, employees, agents
and fiduciaries;
WHEREAS, the Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation") and Restated By-Laws (the "By-Laws") requires
the Company to indemnify, and permits the Company to advance expenses to, its
directors and officers to the extent not prohibited by law, and allows the
Company to indemnify employees and agents;
WHEREAS, in recognition of Indemnitee's need for protection against
personal liability in order to induce Indemnitee to serve or continue to serve
the Company in an effective manner, and, in the case of directors and officers,
to supplement or replace the Company's directors' and officers' liability
insurance coverage, and in part to provide Indemnitee with specific contractual
assurance that the protection promised by the Certificate of Incorporation and
By-Laws will be available to Indemnitee (regardless of, among other things, any
amendment to or revocation of the Certificate of Incorporation or By-Laws or any
change in the composition of the Company's Board of Directors or any acquisition
transaction relating to the Company), the Company, with the prior approval of
the Company's stockholders, wishes to provide the Indemnitee with the benefits
contemplated by this Agreement; and
WHEREAS, as a result of the provision of such benefits Indemnitee has
agreed to serve or to continue to serve the Company;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Definitions. The following terms, as used herein, shall have the
following respective meanings:
(a) A Change in Control: shall be deemed to have occurred if any of
the following shall have occurred:
(1) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section
<PAGE>
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership within the
meaning of Rule 13d-3 promulgated under the Exchange Act, of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change in
Control: (A) any acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise, conversion or exchange
privilege in respect of outstanding convertible or exchangeable securities), (B)
any acquisition by the Company, (C) any acquisition by an Exempt Person, (D) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, (E) any
acquisition by any corporation pursuant to a reorganization, merger or
consolidation involving the Company, if, immediately after such reorganization,
merger or consolidation, each of the conditions described in clauses (i), (ii)
and (iii) of subsection (3) of this Section (1)(c) shall be satisfied; and
provided further that, for purposes of clause (B), if any Person (other than the
Company or any employee benefit plan (or related trust) sponsored or maintained
by the Company or any corporation controlled by the Company) shall become the
beneficial owner of 20% or more of the Outstanding Company Common Stock or 20%
or more of the Outstanding Company Voting Securities by reason of an acquisition
by the Company and such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional shares of the Outstanding Company
Common Stock or any additional Outstanding Company Voting Securities and such
beneficial ownership is publicly announced, such additional beneficial ownership
shall constitute a Change in Control;
(2) individuals who, as of the date of the consummation of the
Company's initial public offering of Common Stock, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided, however, that any individual who becomes a director of the
Company subsequent to the date hereof whose election, or nomination for election
by the Company's stockholders, was approved by the vote of at least 66-2/3% of
the directors then comprising the Incumbent Board shall be deemed to have been a
member of the Incumbent Board; and provided further, that no individual who was
initially elected as a director of the Company as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the
Board shall be deemed to have been a member of the Incumbent Board;
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<PAGE>
(3) approval by the stockholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (i) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Corporate Transaction will beneficially own, directly
or indirectly, more than 60% of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
indirectly) in substantially the same proportions relative to each other as
their beneficial ownership, immediately prior to such Corporate Transaction, of
the Outstanding Company Common Stock and the Outstanding Company Voting
Securities, as the case may be, (ii) no Person (other than an Exempt Person; the
Company; any employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company; the corporation
resulting from such Corporate Transaction; and any Person which beneficially
owned, immediately prior to such Corporate Transaction, directly or indirectly,
20% or more of the Outstanding Company Common Stock or the Outstanding Company
Voting Securities, as the case may be) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares of common stock
of the corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such corporation entitled to vote
generally in the election of directors and (iii) individuals who were members of
the Incumbent Board will constitute at least a majority of the members of the
board of directors of the corporation resulting from such Corporate Transaction;
or
(4) approval by the stockholders of the Company of a plan of complete
liquidation or dissolution of the Company.
(b) Claim: means any threatened, pending or completed action, suit,
arbitration or proceeding, or any inquiry or investigation, whether brought by
or in the right of the Company or otherwise, that Indemnitee in good faith
believes might lead to the institution of any such action, suit, arbitration or
proceeding, whether civil, criminal, administrative, investigative or other, or
any appeal therefrom.
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(c) Equity Security: shall have the meaning given to such term under
Rule 3a11-1 of the General Rules and Regulations under the Exchange Act as in
effect on the date hereof.
(d) "Exempt Person" means each of Andrew B. Parkinson and Thomas L.
Parkinson and any Affiliate (as such term is defined in Rule 12b-1 under the
Securities Exchange Act of 1934, as in effect on the date hereof, "Affiliate")
thereof.
(e) Exchange Act: means the Securities and Exchange Act of 1934, as
amended.
(f) D&O Insurance: means any valid directors' and officers' liability
insurance policy maintained by the Company for the benefit of the Indemnitee, if
any.
(g) Determination: means a determination, and Determined means a
matter which has been determined based on the facts known at the time, by: (i) a
majority vote of a quorum of disinterested directors, or (ii) if such a quorum
is not obtainable, or even if obtainable, if a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or, in the event
there has been a Change in Control, by the Special Independent Counsel (in a
written opinion) selected by Indemnitee as set forth in Section 6, or (iii) a
majority of the disinterested stockholders of the Company, or (iv) a final
adjudication by a court of competent jurisdiction.
(h) Excluded Claim: means any payment for Losses or Expenses in
connection with any Claim: (i) based upon or attributable to Indemnitee gaining
in fact any personal profit or advantage to which Indemnitee is not entitled; or
(ii) for the return by Indemnitee of any remuneration paid to Indemnitee without
the previous approval of the stockholders of the Company which is illegal; or
(iii) for an accounting of profits in fact made from the purchase or sale by
Indemnitee of securities of the Company within the meaning of Section 16 of the
Exchange Act or similar provisions of any state law; or (iv) resulting from
Indemnitee's knowingly fraudulent, dishonest or willful misconduct; or (v) the
payment of which by the Company under this Agreement is not permitted by
applicable law.
(i) Expenses: means any reasonable expenses incurred by Indemnitee
as a result of a Claim or Claims made against Indemnitee for Indemnifiable
Events including, without limitation, attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
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(j) Fines: means any fine, penalty or, with respect to an employee
benefit plan, any excise tax or penalty assessed with respect thereto.
(k) Indemnifiable Event: means any event or occurrence, occurring
prior to or after the date of this Agreement, related to the fact that
Indemnitee is, was or has agreed to serve as, a director, officer, employee,
trustee, agent or fiduciary of the Company, or is or was serving at the request
of the Company as a director, officer, employee, trustee, agent or fiduciary of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, or by reason of anything done or not done by Indemnitee,
including, but not limited to, any breach of duty, neglect, error, misstatement,
misleading statement, omission, or other act done or wrongfully attempted by
Indemnitee, or any of the foregoing alleged by any claimant, in any such
capacity.
(l) Losses: means any amounts or sums which Indemnitee is legally
obligated to pay as a result of a Claim or Claims made against Indemnitee for
Indemnifiable Events including, without limitation, damages, judgments and sums
or amounts paid in settlement of a Claim or Claims, and Fines.
(m) Person: means any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
(n) Potential Change in Control: shall be deemed to have occurred if
(A) the Company enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control; (B) any Person (including the Company)
publicly announces an intention to take or to consider taking actions which if
consummated would constitute a Change in Control; or (C) the Board of Directors
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(o) Relative: means a Person's spouse, parents, children, siblings,
mother- and father-in-law, sons- and daughters-in-law, and brothers- and
sisters-in-law.
(p) Reviewing Party: means any appropriate person or body consisting
of a member or members of the Company's Board of Directors or any other person
or body appointed by the Board (including the Special Independent Counsel
referred to in Section 6) who is not a party to the particular Claim for which
Indemnitee is seeking indemnification.
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<PAGE>
(q) Subsidiary: means any corporation of which a majority of any
class of Equity Security is owned, directly or indirectly, by the Company.
(r) Trust: means the trust established pursuant to Section 7 hereof.
(s) Voting Shares: means any issued and outstanding shares of
capital stock of the Company entitled to vote generally in the election of
directors.
2. Basic Indemnification Agreement. In consideration of, and as an
inducement to, the Indemnitee rendering valuable services to the Company, the
Company agrees that in the event Indemnitee is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company will indemnify Indemnitee to the fullest extent
authorized by law, against any and all Losses and Expenses (including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Losses and Expenses) of such Claim, whether or not such Claim
proceeds to judgment or is settled or otherwise is brought to a final
disposition, subject in each case, to the further provisions of this Agreement.
3. Limitations on Indemnification. Notwithstanding the provisions of
Section 2, Indemnitee shall not be indemnified and held harmless from any Losses
or Expenses (a) which have been Determined, as provided herein, to constitute an
Excluded Claim; (b) to the extent Indemnitee is indemnified by the Company and
has actually received payment pursuant to the Certificate of Incorporation, By-
Laws, D&O Insurance or otherwise; or (c) other than pursuant to the last
sentence of Section 4(d) or Section 15, in connection with any claim initiated
by Indemnitee, unless the Company has joined in or the Board of Directors has
authorized such claim.
4. Indemnification Procedures.
(a) Promptly after receipt by Indemnitee of notice of any Claim,
Indemnitee shall, if indemnification with respect thereto may be sought from the
Company under this Agreement, notify the Company of the commencement thereof;
provided, however, that the failure to give such notice promptly shall not
affect or limit the Company's obligations with respect to the matters described
in the notice of such Claim, except to the extent that the Company is prejudiced
thereby. Indemnitee agrees further not to make any admission or effect any
settlement with respect to such Claim without the consent of the Company, except
any Claim with respect to which the Indemnitee has undertaken the
6
<PAGE>
defense in accordance with the second to last sentence of Section 4(d).
(b) If, at the time of the receipt of such notice, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement of Claim to the insurers in accordance with the procedures set
forth in the respective policies. The Company shall thereafter take all
necessary or desirable action to cause such insurers to pay, on behalf of
Indemnitee, all Losses and Expenses payable as a result of such Claim.
(c) To the extent the Company does not, at the time of the Claim have
applicable D&O Insurance, or if a Determination is made that any Expenses
arising out of such Claim will not be payable under the D&O Insurance then in
effect, the Company shall be obligated to pay the Expenses of any Claim in
advance of the final disposition thereof and the Company, if appropriate, shall
be entitled to assume the defense of such Claim, with counsel satisfactory to
Indemnitee, upon the delivery to Indemnitee of written notice of its election so
to do. After delivery of such notice, the Company will not be liable to
Indemnitee under this Agreement for any legal or other Expenses subsequently
incurred by Indemnitee in connection with such defense other than reasonable
Expenses of investigation; provided that Indemnitee shall have the right to
employ its counsel in such Claim but the fees and expenses of such counsel
incurred after delivery of notice from the Company of its assumption of such
defense shall be at the Indemnitee's expense; provided further that if: (i) the
employment of counsel by Indemnitee has been previously authorized by the
Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (iii) the Company shall not, in fact, have employed counsel to
assume the defense of such action, the reasonable fees and expenses of counsel
shall be at the expense of the Company.
(d) All payments on account of the Company's indemnification
obligations under this Agreement shall be made within sixty (60) days of
Indemnitee's written request therefor unless a Determination is made that the
Claims giving rise to Indemnitee's request are Excluded Claims or otherwise not
payable under this Agreement, provided that all payments on account of the
Company's obligation to pay Expenses under Section 4(c) of this Agreement prior
to the final disposition of any Claim shall be made within 20 days of
Indemnitee's written request therefor and such obligation shall not be subject
to any such Determination but shall be subject to Section 4(e) of this
Agreement. In the event the Company takes the position that Indemnitee is not
entitled to indemnification in connection with the proposed settlement of any
Claim, Indemnitee shall have the right at his own expense to undertake defense
of any such Claim,
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<PAGE>
insofar as such proceeding involves Claims against the Indemnitee, by written
notice given to the Company within 10 days after the Company has notified
Indemnitee in writing of its contention that Indemnitee is not entitled to
indemnification; provided, however, that the failure to give such notice within
such 10-day period shall not affect or limit the Company's obligations with
respect to any such Claim if such Claim is subsequently determined not to be an
Excluded Claim or otherwise to be payable under this Agreement, except to the
extent that the Company is prejudiced thereby. If it is subsequently determined
in connection with such proceeding that the Indemnifiable Events are not
Excluded Claims and that Indemnitee, therefor, is entitled to be indemnified
under the provisions of Section 2 hereof, the Company shall promptly indemnify
Indemnitee.
(e) Indemnitee hereby expressly undertakes and agrees to reimburse
the Company for all Losses and Expenses paid by the Company in connection with
any Claim against Indemnitee in the event and only to the extent that a
Determination shall have been made by a court of competent jurisdiction in a
decision from which there is no further right to appeal that Indemnitee is not
entitled to be indemnified by the Company for such Losses and Expenses because
the Claim is an Excluded Claim or because Indemnitee is otherwise not entitled
to payment under this Agreement.
(f) In connection with any Determination as to whether Indemnitee is
entitled to be indemnified hereunder the burden of proof shall be on the Company
to establish that Indemnitee is not so entitled.
5. Settlement. The Company shall have no obligation to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any Claim
effected without the Company's prior written consent. The Company shall not
settle any Claim in which it takes the position that Indemnitee is not entitled
to indemnification in connection with such settlement without the consent of
Indemnitee, nor shall the Company settle any Claim in any manner which would
impose any Fine or any obligation on Indemnitee, without Indemnitee's written
consent. Neither the Company nor Indemnitee shall unreasonably withhold its or
his consent to any proposed settlement.
6. Change in Control; Extraordinary Transactions. The Company and
Indemnitee agree that if there is a Change in Control of the Company (other than
a Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control)
then all Determinations thereafter with respect to the rights of Indemnitee to
be paid Losses and Expenses under this Agreement shall be made only by a special
independent counsel (the "Special Independent Counsel") selected by Indemnitee
and approved by the
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Company (which approval shall not be unreasonably withheld) or by a court of
competent jurisdiction. The Company shall pay the reasonable fees of such
Special Independent Counsel and shall indemnify such Special Independent Counsel
against any and all reasonable expenses (including reasonable attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement or
its engagement pursuant hereto.
The Company covenants and agrees that, in the event of a Change in
Control which is a Corporate Transaction as defined in (3) of Section 1(a), the
Company will use its best efforts (a) to have the obligations of the Company
under this Agreement including, but not limited to those under Section 7,
expressly assumed by the surviving, purchasing or succeeding entity, or (b)
otherwise adequately to provide for the satisfaction of the Company's
obligations under this Agreement, in a manner reasonably acceptable to the
Indemnitee.
7. Establishment of Trust. In the event of a Potential Change in
Control, the Company shall, upon written request by Indemnitee, create a trust
(the "Trust") for the benefit of Indemnitee and from time to time upon written
request of Indemnitee shall fund the Trust in an amount sufficient to satisfy
any and all Losses and Expenses which are actually paid or which Indemnitee
reasonably determines from time to time may be payable by the Company under this
Agreement. The amount or amounts to be deposited in the Trust pursuant to the
foregoing funding obligation shall be determined by the Reviewing Party, in any
case in which the Special Independent Counsel is involved. The terms of the
Trust shall provide that upon a Change in Control: (i) the Trust shall not be
revoked or the principal thereof invaded without the written consent of
Indemnitee; (ii) the trustee of the Trust shall advance, within 20 days of a
request by Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby
agrees to reimburse the Trust under the circumstances under which Indemnitee
would be required to reimburse the Company under Section 4(e) of this
Agreement); (iii) the Company shall continue to fund the Trust from time to time
in accordance with the funding obligations set forth above; (iv) the trustee of
the Trust shall promptly pay to Indemnitee all Losses and Expenses for which
Indemnitee shall be entitled to indemnification pursuant to this Agreement; and
(v) all unexpended funds in the Trust shall revert to the Company upon a final
determination by a court of competent jurisdiction in a final decision from
which there is no further right of appeal that Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee of the Trust shall be
chosen by Indemnitee.
8. No Presumption. For purposes of this Agreement, the termination
of any Claim by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a
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plea of nolo contendere, or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not meet any particular standard of conduct or
have any particular belief or that a court has determined that indemnification
is not permitted by applicable law.
9. Non-exclusivity, Etc. The rights of Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Certificate of
Incorporation, the Company's By-Laws, the Delaware General Corporation Law, any
vote of stockholders or disinterested directors or otherwise, both as to action
in Indemnitee's official capacity and as to action in any other capacity by
holding such office, and shall continue after Indemnitee ceases to serve the
Company as a director, officer, employee, agent or fiduciary, for so long as
Indemnitee shall be subject to any Claim by reason of (or arising in part out
of) an Indemnifiable Event. To the extent that a change in the Delaware General
Corporation Law (whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently under the
Certificate of Incorporation and this Agreement, it is the intent of the parties
hereto that Indemnitee shall enjoy by this Agreement the greater benefits so
afforded by such change.
10. Liability Insurance; Notice Regarding Insurance.
(a) To the extent the Company maintains an insurance policy or
policies providing directors' and officers' liability insurance, Indemnitee, if
an officer or director of the Company, shall be covered by such policy or
policies, in accordance with its or their terms, to the maximum extent of the
coverage available for any director or officer of the Company.
(b) The Company shall provide notice to the Indemnitee in the event
that (i) the Company's then current D&O Insurance will not be renewed or will
lapse and the Company will not obtain new D&O Insurance in an amount not
materially less than, and with a scope of coverage not materially less than,
that of the terminating D&O Insurance or (ii) the Company's then current D&O
Insurance will be reduced to a material extent in amount or scope. Such notice
shall be provided at least thirty (30) days prior to such expiration or
reduction in amount or scope, as the case may be.
11. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
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12. Partial Indemnity, Etc. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Losses and Expenses of a Claim but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding
any other provision of this Agreement, to the extent that Indemnitee has been
successful on the merits or otherwise in defense of any or all Claims relating
in whole or in part to any Indemnifiable Event or in defense of any issue or
matter therein, including dismissal without prejudice, Indemnitee shall be
indemnified against all Expenses incurred in connection therewith.
13. Contribution. If the indemnification or reimbursement provided
for hereunder is finally judicially determined by a court of competent
jurisdiction to be unavailable to Indemnitee in respect of any Losses or
Expenses of a Claim (other than for any reason specified in Section 3 hereof),
then the Company agrees, to the extent permitted by applicable law, in lieu of
indemnifying Indemnitee, to contribute to the amount paid or payable by
Indemnitee as a result of such Losses or Expenses in such proportion as is
appropriate to reflect the relative benefits accruing to the Company and
Indemnitee with respect to the events giving rise to such Losses or Expenses.
If, however, the allocation provided by the immediately preceding sentence is
not permitted by applicable law, then the Company agrees to contribute to the
amount paid or payable by Indemnitee as a result of such Losses or Expenses in
such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and of Indemnitee with respect to the
events giving rise to such Losses or Expenses. For purposes of this Section 13,
(i) the relative benefits accruing to the Company shall be deemed to be the
benefits accruing to it and to all of its directors, officers, employees and
agents (other than Indemnitee), as a group and treated as one person (the
"Company Group"), and the relative benefits accruing to Indemnitee shall be
deemed to be an amount not greater than Indemnitee's compensation from the
Company during the first year in which the events giving rise to such Losses or
Expenses are alleged to have occurred, and (ii) the relative fault of the
Company shall be deemed to be the fault of the Company Group, and the relative
fault of the Company and Indemnitee shall be determined by reference to the
relative intent, knowledge and access to information of the Company Group and
Indemnitee and their relative opportunity to have altered or prevented the
events giving rise to such Losses or Expenses.
14. Liability of Company. Indemnitee agrees that neither the
stockholders nor the directors nor any officer, employee, representative or
agent of the Company shall be personally liable for the satisfaction of the
Company's
11
<PAGE>
obligations under this Agreement and Indemnitee shall look solely to the assets
of the Company for satisfaction of any claims hereunder.
15. Enforcement.
(a) Indemnitee's right to indemnification and other rights under this
Agreement shall be specifically enforceable by Indemnitee only in the state or
Federal courts of the States of Delaware or Illinois and shall be enforceable
notwithstanding any adverse Determination by the Company's Board of Directors,
independent legal counsel, the Special Independent Counsel or the Company's
stockholders and no such Determination shall create a presumption that
Indemnitee is not entitled to be indemnified hereunder. In any such action the
Company shall have the burden of proving that indemnification is not required
under this Agreement.
(b) In the event that any action is instituted by Indemnitee under
this Agreement, or to enforce or interpret any of the terms of this Agreement,
Indemnitee shall be entitled to be paid all court costs and reasonable expenses,
including reasonable counsel fees, incurred by Indemnitee with respect to such
action, unless the court determines that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous.
16. Severability. In the event that any provision of this Agreement
is determined by a court to require the Company to do or to fail to do an act
which is in violation of applicable law, such provision (including any provision
within a single section, paragraph or sentence) shall be limited or modified in
its application to the minimum extent necessary to avoid a violation of law,
and, as so limited or modified, such provision and the balance of this Agreement
shall be enforceable in accordance with their terms to the fullest extent
permitted by law.
17. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.
18. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consents to the jurisdiction of the courts of the States of Delaware
and Illinois for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agrees that any action instituted
under this Agreement shall be brought only in the state and Federal courts of
the States of Delaware and Illinois.
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19. Notices. All notices or other communications required or
permitted hereunder shall be sufficiently given for all purposes if in writing
and personally delivered, telegraphed, telexed, sent by facsimile transmission
or sent by registered or certified mail, return receipt requested, with postage
prepaid addressed as follows, or to such other address as the parties shall have
given notice of pursuant hereto:
(a) If to the Company, to:
John C. Walden
Executive Vice President
Peapod, Inc.
1033 University Place, Suite 375
Evanston, Illinois 60201
(b) If to Indemnitee, to:
______________________________
c/o Peapod, Inc.
1033 University Place, Suite 375
Evanston, Illinois 60201
20. Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original and all of which, when taken together, shall
constitute one and the same instrument.
21. Successors and Assigns. This Agreement shall be (i) binding upon
all successors and assigns of the Company, including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, and (ii) binding
upon and inure to the benefit of any successors and assigns, heirs, and personal
or legal representatives of Indemnitee.
22. Amendment; Waiver. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as of the day and year first above written.
PEAPOD, INC.
By:_______________________________
Name:
Title:
_______________________________
(Indemnitee)
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<PAGE>
Exhibit 11
Peapod, Inc.
Statement Regarding Computation of Net Loss per Share of Common Stock
<TABLE>
<CAPTION>
Year ended Three months ended
December 31, 1996 March 31, 1997
----------------- ------------------
<S> <C> <C>
Net Loss $(9,566,507) $(2,947,087)
=========== ===========
Weighted average
Common Shares
outstanding 12,526,812 12,615,892
Additional shares
pursuant to SAB 83
computation 261,438 172,358
----------- -----------
Shares used in computing
pro forma net loss
per share of Common
Stock 12,788,250 12,788,250
=========== ===========
Pro forma net loss
per share of Common
Stock $ (0.75) $ (0.23)
=========== ===========
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report dated May 9, 1997, relating to the
balance sheet of New Peapod, Inc. as of December 31, 1996, and the related
statement of operations for the period from December 5, 1996 (inception)
through December 31, 1996, included herein and to the use of our report dated
February 7, 1997, relating to the balance sheets of Peapod LP as of December
31, 1995 and 1996, and the related statements of operations, partners'
capital, and cash flows for each of the years in the three-year period ended
December 31, 1996, included herein and to the reference to our firm under the
headings "Selected Financial and Operating Data" and "Experts" in the
Prospectus.
Chicago, Illinois KPMG Peat Marwick LLP
June 8, 1997
