<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Peapod, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LOGO
PEAPOD, INC.
9933 WOODS DRIVE
SKOKIE, ILLINOIS 60077
April 10, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of Peapod, Inc., a Delaware corporation, to be held at 9:00 a.m. (Chicago
time) on Friday, May 8, 1998 at The Orrington Hotel, 1710 Orrington Avenue,
Evanston, Illinois 60201.
The formal notice of the meeting, Proxy Statement and 1997 Annual Report are
enclosed. The matters to be considered at the meeting are described in the
accompanying Proxy Statement. Regardless of your plans for attending in
person, it is important that your shares be represented at the meeting.
Therefore, please complete, sign, date and return the enclosed proxy card in
the enclosed postage prepaid envelope. This will enable you to vote on the
business to be transacted whether or not you attend the meeting.
We hope that you can attend the 1998 Annual Meeting of Stockholders, which
will be our first annual meeting as a publicly-held corporation.
Sincerely,
/s/ Andrew B. Parkinson
Andrew B. Parkinson
Chairman, President and Chief
Executive Officer
<PAGE>
LOGO
PEAPOD, INC.
9933 WOODS DRIVE
SKOKIE, ILLINOIS 60077
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 1998
To the Stockholders of
PEAPOD, INC.
The 1998 Annual Meeting of Stockholders of Peapod, Inc., a Delaware
corporation (the "Company"), will be held at The Orrington Hotel, 1710
Orrington Avenue, Evanston, Illinois 60201 on Friday, May 8, 1998, at 9:00
a.m., Chicago time, for the following purposes:
1. to elect two (2) Class I directors; and
2. to transact such other business as may properly come before the Annual
Meeting of Stockholders or any adjournments thereof.
THE BOARD OF DIRECTORS HAS FIXED THE CLOSE OF BUSINESS ON APRIL 8, 1998 AS
THE RECORD DATE FOR THE DETERMINATION OF STOCKHOLDERS ENTITLED TO NOTICE OF,
AND TO VOTE AT, THE ANNUAL MEETING OF STOCKHOLDERS.
YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING PROXY STATEMENT. WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED, POSTAGE PREPAID
ENVELOPE. IF YOU ATTEND THE MEETING AND WISH TO VOTE IN PERSON, YOU MAY
WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
This Notice of Annual Meeting of Stockholders is first being sent to
stockholders on or about April 13, 1998.
By Order of the Board of Directors,
/s/ Andrew B. Parkinson
Andrew B. Parkinson
Chairman, President and
Chief Executive Officer
April 10, 1998
<PAGE>
PEAPOD, INC.
9933 WOODS DRIVE
SKOKIE, ILLINOIS 60077
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 1998
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of Peapod, Inc., a Delaware corporation
(the "Company"), for use at the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 9:00 a.m. (Chicago time) on May 8, 1998, at
The Orrington Hotel, 1710 Orrington Avenue, Evanston, Illinois 60201.
The Board of Directors has fixed the close of business on April 8, 1998 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting. On April 3, 1998, the Company had
outstanding 16,879,629 shares of Common Stock, par value $.01 per share
("Common Stock"). A list of stockholders of record entitled to vote at the
Annual Meeting will be available for inspection by any stockholder, for any
purpose germane to the meeting, during normal business hours, for a period of
10 days prior to the meeting, at the office of the Company located at 9933
Woods Drive, Skokie, Illinois 60077.
Whether or not you plan to attend the Annual Meeting, please sign, date and
mail your proxy in the enclosed self-addressed postage prepaid envelope. The
proxies will vote your shares according to your instructions. If you return a
properly signed and dated proxy card but do not mark a choice on one or more
items, your shares will be voted in accordance with the recommendation of the
Board of Directors as set forth in this Proxy Statement. The proxy card gives
authority to the proxies to vote your shares in their discretion on any other
matter properly presented at the Annual Meeting.
You may revoke your proxy at any time prior to voting at the Annual Meeting
by delivering written notice to the Secretary of the Company, by submitting a
subsequently dated proxy or by attending the Annual Meeting and voting in
person at the Annual Meeting.
This Proxy Statement is first being sent or given to stockholders on or
about April 13, 1998.
VOTING INFORMATION
Each holder of outstanding shares of Common Stock is entitled to one vote
for each share of Common Stock held in such holder's name with respect to all
matters on which holders of Common Stock are entitled to vote at the Annual
Meeting. Except as otherwise required by law, the holders of shares of Common
Stock (the "Holders") shall vote together and not as separate classes. A
Holder may, with respect to the election of the Class I directors, vote FOR
the election of the director nominees or WITHHOLD authority to vote for such
director nominees. All properly executed and unrevoked proxies received in the
accompanying form in time for the Annual Meeting will be voted in the manner
directed therein. If no direction is made on a proxy, such proxy will be voted
FOR the election of the named director nominees to serve as Class I directors.
The proxy card gives authority to the proxies to vote your shares in their
discretion on any other matter properly presented at the Annual Meeting. If a
proxy indicates that all or a portion of the votes represented by such proxy
are not being voted with respect to a particular matter, such non-votes will
not be considered present and entitled to vote on such matter, although such
votes may be considered present and entitled to vote on other matters and will
count for purposes of determining the presence of a quorum. A quorum will be
present if a majority of the shares of Common Stock are represented in person
or by proxy at the Annual Meeting.
1
<PAGE>
The election of the Class I directors requires the affirmative vote of a
plurality of votes cast by the Holders present in person or represented by
proxy and entitled to vote on such matter at the Annual Meeting. Accordingly,
if a quorum is present at the Annual Meeting, the persons receiving the
greatest number of votes by the Holders will be elected to serve as the Class
I directors. Since the election of directors requires only the affirmative
vote of a plurality of the votes cast by the Holders present in person or
represented by proxy and entitled to vote with respect to such matter,
withholding authority to vote for a nominee and non-votes with respect to the
election of directors will not affect the outcome of the election of
directors.
PROPOSAL 1
ELECTION 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 five
directors, divided into three classes. At the Annual Meeting, two Class I
directors will be elected to serve until the annual meeting in the year 2001,
or until their successors are elected and qualified. The nominees for election
as Class I directors are identified below. In the event the nominees who have
expressed an intention to serve if elected, fail to stand for election, the
persons named in the proxy presently intend to vote for a substitute nominee
designated by the Board of Directors.
NOMINEES
The following persons, if elected at the Annual Meeting, will serve as Class
I directors until the annual meeting in the year 2001, or until their
successors are elected and qualified.
CLASS I DIRECTORS--TERM SCHEDULED TO EXPIRE IN 2001
Mr. Andrew B. Parkinson, age 40, is a co-founder of the Company and has been
its Chairman, President and Chief Executive Officer 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. Andrew Parkinson is the brother of Thomas Parkinson, the Company's
Executive Vice President-Chief Technology Officer.
Mr. Tasso H. Coin, age 62, has been a director of the Company 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.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTES "FOR" THE NOMINEES
FOR CLASS I DIRECTORS.
OTHER DIRECTORS
The following persons are currently directors of the Company whose terms
will continue after the Annual Meeting.
CLASS II DIRECTORS--TERM SCHEDULED TO EXPIRE IN 1999
Thomas L. Parkinson, age 37, 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. Thomas Parkinson is
the brother of Andrew Parkinson, the Company's Chairman, President and Chief
Executive Officer.
2
<PAGE>
Seth L. Pierrepont, age 47, has been a director of the Company 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 currently serves on the Boards of
Firefly Greetings LLC, The Hotchkiss School, The Nature Conservancy of
Illinois, and the Montana Land Reliance.
CLASS III DIRECTORS--TERM SCHEDULED TO EXPIRE IN 2000
Trgyve E. Myhren, age 61, 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 Board of J.D.
Edwards, Inc. (JDEC), Verio, Inc., Founders Funds, Advanced Marketing
Services, Inc. (ADMS) and the University of Denver.
MEETINGS AND COMMITTEES
The Board of Directors of the Company held six meetings during fiscal 1997.
One director missed one meeting in fiscal 1997.
The Board of Directors does not presently have a formal nominating
committee.
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. The Audit Committee currently consists of
Messrs. Seth L. Pierrepont (Chairman) and Tasso H. Coin. The Audit Committee
held four meetings in fiscal 1997 which were attended by both members of the
Audit Committee.
The Compensation Committee, which currently consists of Messrs. Trygve E.
Myhren (Chairman) and Tasso H. Coin, reviews and approves the compensation
arrangements for all officers and other senior level employees, and
administers and takes such other actions as may be required in connection with
certain compensation and incentive plans of the Company (including the grant
of stock options). The Compensation Committee also recommends fees to be paid
to members of the Board of Directors. The Compensation Committee held five
meetings in fiscal 1997 which were attended by all members of the Compensation
Committee. The Company's By-Laws require that the Compensation Committee
consists of non-employee directors.
COMPENSATION OF DIRECTORS
Non-employee directors receive compensation 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 committees
of the Board of Directors and $375 per telephonic meeting of committees of the
Board of Directors lasting more than one hour. Directors who are officers or
employees of the Company receive no compensation for serving as directors. All
directors are reimbursed for all reasonable and necessary expenditures
incurred in connection with attendance at meetings of the Board of Directors
and meetings of committees of the Board of Directors.
Under the Company's 1997 Long-Term Incentive Plan (the "1997 Plan"), upon
the consummation of the Company's Initial Public Offering on June 10, 1997
(the "Initial Public Offering"), each non-employee director
3
<PAGE>
who is currently a director was granted a nonqualified option to purchase
15,000 shares of Common Stock at $16.00 per share, the public offering price.
In addition, on the date on which a new director is first elected or begins to
serve as a non-employee director, each such non-employee director will be
granted a nonqualified option to purchase 15,000 shares of Common Stock under
the Company's 1997 Plan. Under the 1997 Plan, on the date of each annual
meeting of the Company, each non-employee director will be granted an option
to purchase 5,000 shares of Common Stock. Finally, the Company's 1997 Plan
provides that non-employee directors may be granted nonqualified options to
purchase shares of Common Stock at the discretion of the Compensation
Committee to advance the interests of the Company by retaining well-qualified
directors. The per share exercise price of all such options is or will be no
less than the fair market value of the Common Stock on the date of grant and
such options vest or will vest with respect to one-third of the options on the
first, second and third anniversaries of the date of grant, except with
respect to the grant of options in connection with an annual meeting as
described above, which options will become exercisable in full as of the date
immediately preceding the date of the Company's annual meeting next following
the annual meeting on which such option was granted.
EXECUTIVE OFFICERS
The following sets forth certain information with respect to the executive
officers of the Company.
Andrew B. Parkinson, age 40, is a co-founder of the Company and has been its
Chairman, President and Chief Executive Officer since its founding in 1989.
See "Election of Directors."
Thomas P. Parkinson, age 37, 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. See "Election of Directors."
John C. Walden, age 38, joined the Company in 1996. Since September 1997, he
has served in the role of Chief Operating Officer and Secretary and is
responsible for the Company's business development, product management
functions and legal. Prior to his current position, Mr. Walden served as
Executive Vice President- Finance and Business Development and Secretary.
Prior to joining the Company, Mr. Walden was a Director, Media Ventures for
Ameritech Corporation where he effected and managed investments in interactive
media companies. Mr. Walden served as a director of the Company 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.
Timothy M. Dorgan, age 45, joined the Company in 1994 in his current role,
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.
John A. Furton, age 33, 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.
John P. Miller, age 40, joined the Company in 1997 in his current role, as
Senior Vice President-Chief Financial Officer and Administrative Officer. Mr.
Miller is responsible for accounting, finance and human resource functions.
Prior to joining the Company, from 1993 to 1997 he served as Controller for
The Interlake Corporation and from 1989 to 1993 he served as Vice President-
Finance of the Material Handling Division of The Interlake Corporation. Mr.
Miller is a Certified Public Accountant.
4
<PAGE>
Carl E. Alguire, age 40, currently serves as Senior Vice President-
Operations. He joined the Company in 1994 as Regional Vice President and
served in that capacity until 1997. Prior to joining the Company, from 1989 to
1994, Mr. Alguire was Vice President of Expressline/Mercury Delivery, Inc.
where he was responsible for all daily operations of Cleveland's largest rush
delivery company. He also founded and ran a $3.5 million general and grocery
delivery business, and held the position of grocery store manager for Fisher
Foods, Inc.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
Summary Compensation. The following summary compensation table sets forth
certain information concerning compensation for services rendered in all
capacities awarded to, earned by, or paid to the Company's Chief Executive
Officer and each of the Company's other four most highly compensated executive
officers (the "Named Executives") during the years ended December 31, 1995,
1996 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION AWARDS
------------ ---------------------
YEAR RESTRICTED SHARES
ENDED STOCK UNDERLYING
NAME AND PRINCIPAL POSITION DEC. 31 SALARY BONUS AWARDS OPTIONS
- --------------------------- ------- ------ ----- ---------- ----------
<S> <C> <C> <C> <C> <C>
Andrew B. Parkinson........... 1997 $140,000 $ 28,235 $ -- 60,000
Chairman, President and 1996 $120,000 $ 26,700 $ -- 10,000
Chief Executive Officer 1995 $ 90,000 $ 19,200 $ -- 12,754
Thomas L. Parkinson........... 1997 $140,000 $ 30,723 $ -- 60,000
Executive Vice President- 1996 $120,000 $ 27,330 $ -- 10,000
Chief Technology Officer 1995 $ 90,000 $ 19,200 $ -- 30,622
and Director
John C. Walden................ 1997 $154,500 $137,746 $ -- 120,000
Chief Operating Officer 1996 $147,115 $130,725 $ -- 10,000
and Secretary 1995 $ -- $ -- $ -- --
Timothy M. Dorgan............. 1997 $121,900 $ 21,336 $ -- 125,000
Executive Vice President- 1996 $115,000 $ 17,466 $ -- 15,000
Interactive Marketing 1995 $100,000 $ 14,231 $ -- 3,508
Services
John A. Furton................ 1997 $118,450 $ 16,586 $ -- 60,000
Executive Vice President- 1996 $104,375 $ 16,301 $ -- 10,000
Field Support and Retailer 1995 $ 82,000 $ 12,000 $ -- 4,689
Services
</TABLE>
5
<PAGE>
General Information Regarding Options. The following tables show information
regarding stock options held by the Named Executives.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
% OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION
UNDERLYING GRANTED FOR OPTION TERM
OPTIONS TO EXERCISE EXPIRATION -------------------
NAME GRANTED (1) EMPLOYEES PRICE DATE 5% 10%
- ---- ---------- --------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Andrew B. Parkinson..... 10,000 0.89% $ 7.00 2/05/2006 $ 38,593 $ 95,056
25,000 2.23% $16.00 6/11/2005 $110,513 $ 244,204
25,000 2.23% $17.60 6/11/2002 $121,564 $ 268,624
Thomas P. Parkinson..... 10,000 0.89% $ 7.00 2/05/2006 $ 38,593 $ 95,056
25,000 2.23% $16.00 6/11/2005 $110,513 $ 244,204
25,000 2.23% $17.60 6/11/2002 $121,564 $ 268,624
John C. Walden.......... 20,000 1.79% $ 6.00 1/01/2006 $ 66,159 $ 162,954
100,000 8.93% $16.00 6/11/2005 $763,929 $1,829,742
Timothy M. Dorgan....... 25,000 2.23% $ 7.00 2/05/2006 $ 96,482 $ 237,641
100,000 8.93% $16.00 6/11/2005 $763,929 $1,829,742
John A. Furton.......... 10,000 0.89% $ 7.00 2/05/2006 $ 38,593 $ 95,056
50,000 4.47% $16.00 6/11/2005 $381,964 $ 914,871
</TABLE>
- --------
(1) The stock options for the Named Executives vest with respect to 25% of the
options on the first anniversary of the date of grant, and, thereafter
with respect to 1/48th on the last day of each month and are exercisable
until the eighth anniversary of the date of grant, except with respect to
the options granted to Andrew and Thomas Parkinson with an exercise price
of $17.60, which options expire on the fifth anniversary of the date of
grant.
OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
SHARES OPTIONS AS OF OPTION VALUE AS OF
ACQUIRED DECEMBER 31, 1997 DECEMBER 31, 1997 (1)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew B. Parkinson..... -- $ -- 121,219 62,501 $575,559 $ 3,084
Thomas P. Parkinson..... -- $ -- 131,007 62,501 $607,355 $ 3,084
John C. Walden.......... 5,847 $36,544 45,152 159,001 $ 98,163 $157,835
Timothy M. Dorgan....... -- $ -- 50,090 143,418 $149,885 $ 82,545
John A. Furton.......... -- $ -- 131,282 62,501 $594,254 $ 3,084
</TABLE>
- --------
(1) Represents the aggregate dollar value of in-the-money, unexercised options
held at the end of the year, based on the difference between the exercise
price and $6.50, the closing price for the Common Stock as of December 31,
1997, the last trading day in fiscal 1997, as reported for Nasdaq National
Market Issues in The Wall Street Journal.
6
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has 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 Executive 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's 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 Company also has agreements
with the Named Executives containing confidentiality, non-competition and non-
solicitation provisions between the Company and such employees for the terms
set forth in each agreement.
MANAGEMENT BONUS PLAN
Each of the Named Executives is eligible to receive an annual bonus based on
the achievement of individual and corporate goals. Awards are determined by
the Compensation Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
All compensation decisions for the Chief Executive Officer and each of the
other Named Executives are currently made by the Compensation Committee of the
Board of Directors. The Compensation Committee consists of Messrs. Trygve E.
Myhren (Chairman) and Tasso H. Coin. Each member of the Compensation Committee
is a non-employee director who has not previously been an officer or employee
of the Company.
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. This advisory agreement was terminated
as of May 1, 1997. Mr. Coin's advisory fees from the Company during 1997 were
$52,500.
EXECUTIVE OFFICER COMPENSATION REPORT BY THE COMPENSATION COMMITTEE
This report is submitted by the Compensation Committee of the Board of
Directors.
Compensation Policies. The Compensation Committee sets the compensation of
the Chief Executive Officer and also sets the compensation of the other
executive officers, taking into consideration the recommendations of the Chief
Executive Officer. All other employees' compensation is set by the Chief
Executive Officer subject to the review of the Compensation Committee. The
Compensation Committee also administers the Company's stock-based compensation
plans. The Compensation Committee consists of two non-employee directors.
The philosophy of the Compensation Committee and the Company is to provide
competitive salaries as well as competitive incentives designed to:
. Attract and retain well-qualified executives necessary to the Company's
long-term success;
. Provide incentives for achievement of short-term individual, business
unit and corporate goals;
. Provide incentives for achievement of long-term business unit and
corporate goals; and
7
<PAGE>
. Align the interests of management with those of the stockholders to
encourage the achievement of continuing increases in stockholder value.
The compensation mix reflects a balance of annual base salary payments,
annual incentive bonus payments, long-term stock based incentives and other
competitive executive benefits. Incentive compensation has historically been
determined on an annual basis. Beginning in 1998, the Compensation Committee
will also take into account quarterly performance of the Chief Executive
Officer and other executive officers.
Base. It is the Compensation Committee's policy to establish base salaries
and provide benefit packages at competitive levels in order to attract and
retain well-qualified executives. Base salaries of senior executives are based
on several factors including an assessment of the position and particular
responsibilities of such officer, the performance of the Company, comparable
companies, the economy in general and such other factors as the Compensation
Committee may deem relevant. The 1997 average base salary of senior executives
increased 11.6% over the previous year's level primarily to bring the base
compensation to levels closer to those of other technology and growth-related
companies.
Annual Bonus Plan. The existing annual bonus plan was designed to provide
incentives and rewards for achievement of short-term individual goals as well
as business unit and Company goals by giving salaried employees the
opportunity for bonuses based on individual performance, the performance of
the business unit to which the employee is assigned, and the Company's
performance. In the case of executive officers, the bonus is based on the
achievement of individual performance goals (25-50% weighting) and the
performance of the Company and/or the applicable business unit (75-50%).
Individual performance goals are tailored to each individual's position and
duties and vary in terms of number, scope and substance among the eligible
employees. Individual performance goals for employees are established by
management and then reviewed with the employee. The performance goals for each
business unit and the Company as a whole relate to the achievement of
predetermined financial or operating factors. Company and business unit
quarterly goals are established before the start of each fiscal year and are
reviewed and approved by the Compensation Committee. Awards under the annual
bonus plan are based on a percentage of earned salary. Bonuses are conditioned
on achieving minimum or "threshold" goals. During 1997, bonuses were paid out
for employee's achievement of individual performance goals, certain business
unit operating results and total Company performance.
Long-Term Stock Based Incentives. Stock option awards are designed to
encourage long-term commitment to the Company by participating executives,
more closely align executive and stockholder interests and reward executives
and other key employees for building stockholder value. The Compensation
Committee recognizes that the Company competes for executives with other
technology and growth-oriented companies and believes that stock ownership by
management is a critical element of compensation. Stock based awards have been
granted by the Company to executives and other key employees since the
Company's inception.
Stock options are granted at the fair market value price of the Common Stock
on the date of grant, are subject to vesting over time and only have future
value for the employees if the stock price appreciates from the date of grant.
Factors influencing stock based grants to employees include performance of the
Company, relative levels of responsibility, contributions to the business of
the Company and competitiveness with other technology and growth-oriented
companies. As of December 31, 1997, approximately 57% of full-time employees
held stock options.
In connection with the Company's Initial Public Offering, the Compensation
Committee granted options to purchase an aggregate of 350,000 shares of Common
Stock to the executive officers at that time and in addition approved the
granting to key employees of options to purchase an aggregate of 460,000
shares of Common Stock. See "Option Grants in Fiscal 1997" above. Each of the
options has an exercise price equal to the Initial Public Offering price of
$16.00 per share (except with respect to the incentive stock options granted
to Messrs. Andrew and Thomas Parkinson which have an exercise price of
$17.60). In light of the fact that the exercise price of the stock options
granted at the time of the Initial Public Offering are significantly higher
than the current market price of Common Stock, the Compensation Committee
believes that such stock options do not have the
8
<PAGE>
intended effect of enhancing the Company's ability to attract and retain
executives in competition with technology and growth-oriented companies.
Consequently, the Compensation Committee is considering ways to provide
enhanced incentives to certain key employees and senior executives.
Benefits. Benefits offered to key executives are largely those that are
offered to the general employee population, such as group health and life
insurance coverage and participation in the Peapod, Inc. Stock Purchase Plan.
Benefits are not tied directly to corporate performance.
Chief Executive Officer. The Chief Executive Officer's Compensation is based
upon the policies and objectives discussed above. Mr. Andrew Parkinson's
annual base salary was $140,000 at the end of 1997, an increase of 17% above
the 1996 level. Mr. Parkinson received a bonus of $28,235 in 1997. Going
forward, 75% of Mr. Parkinson's bonus opportunity is based on target financial
and operating results of the Company established at the beginning of the
fiscal year.
In February 1997, Mr. Parkinson was granted options to purchase 10,000
shares of Common Stock (at an exercise price of $7.00 per share) based on 1996
performance and subsequently, in June 1997, Mr. Parkinson was granted options
to purchase an additional 50,000 shares of Common Stock (25,000 at an exercise
price of $16.00 and 25,000 at an exercise price of $17.60) in connection with
the completion of the Initial Public Offering. See "Summary Compensation
Table."
The Compensation Committee believes that the Company's executive
compensation policies and programs serve the interests of the Company and its
stockholders.
THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS
Trgyve E. Myhren (Chairman)
Tasso H. Coin
9
<PAGE>
PERFORMANCE GRAPH
The rules of the Securities and Exchange Commission ("SEC") require each
public company to include a performance graph comparing the cumulative total
stockholder return on such company's common stock for the five preceding fiscal
years, or such shorter period as the registrant's class of securities has been
registered with the SEC, with the cumulative total returns of a broad equity
market index and a peer group or similar index. The Common Stock began trading
on the Nasdaq Stock Market under the symbol "PPOD" on June 10, 1997.
Accordingly, the performance graph included in this Proxy Statement shows the
period from June 10, 1997 through December 31, 1997.
The following chart graphs the performance of the cumulative total return to
stockholders (stock price appreciation plus dividends) between June 10, 1997
and December 31, 1997 in comparison to The Nasdaq Stock Market-U.S. Index and
the Hambrecht & Quist Technology Index (the "Technology Index") comprised of
securities of technology companies traded on the Nasdaq Stock Market, the New
York Stock Exchange and the American Stock Exchange.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG PEAPOD, INC., THE NASDAQ STOCK MARKET-U.S. INDEX
AND THE TECHNOLOGY INDEX
LOGO
<TABLE>
<CAPTION>
6/10/97 6/30/97 9/30/97 12/31/97
------- ------- ------- --------
<S> <C> <C> <C> <C>
Peapod, Inc.................................... $100 $ 70.00 $ 78.00 $ 40.63
The Nasdaq Stock Market-U.S. Index............. $100 $103.00 $120.00 $112.94
Technology Index............................... $100 $104.00 $126.00 $106.41
</TABLE>
Assumes $100 invested on June 10, 1997 in Peapod, Inc. Common Stock, The
Nasdaq Stock Market-U.S. Index and the Technology Index. Cumulative total
return assumes reinvestment of dividends.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 3, 1998 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>
AMOUNT OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2) CLASS
- --------------------------- ------------ -------
<S> <C> <C>
Belo Holdings Corp........................................ 1,809,113 10.7%
400 South Record Street
Communications Center
Dallas, TX 75202
Tribune National Marketing Company........................ 1,808,115 10.7%
435 North Michigan Avenue
Chicago, Illinois 60611
Ameritech Corporation (3)................................. 1,010,091 6.0%
30 South Wacker Drive
Chicago, Illinois 60606
CIBC Wood Gundy Ventures, Inc............................. 916,667 5.4%
425 Lexington Avenue
New York, NY 10017
Andrew B. Parkinson (4)+.................................. 1,063,060 6.3%
Thomas L. Parkinson (5)+.................................. 1,143,598 6.7%
John C. Walden (6)+....................................... 74,666 *
Timothy M. Dorgan (7)+.................................... 63,381 *
John A. Furton (8)+....................................... 322,286 1.9%
Tasso H. Coin (9)+........................................ 377,250 2.2%
Trygve E. Myhren+......................................... 40,321 *
Seth L. Pierrepont (10)+.................................. 402,137 2.3%
All executive officers and directors as a group (10 3,465,293 20.5%
persons)..................................................
</TABLE>
- --------
+The mailing address of each of these individuals is c/o the Company, 9933
Woods Drive, Skokie, Illinois 60077.
*Less than 1%.
(1) Except as set forth in the footnotes to this table, the persons named in
the table above have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
(2) Number of shares deemed outstanding includes 16,879,629 shares
outstanding as of April 3, 1998 and any shares subject to options held by
the person or entity in question that are currently exercisable or will
become exercisable within 60 days.
(3) Includes 11,500 shares of common stock issuable pursuant to currently
exercisable warrants.
(4) Includes 123,053 shares of common stock issuable pursuant to options that
are exercisable within 60 days.
(5) Includes 55,503 shares held for the benefit of the minor children of Mr.
Andrew B. Parkinson. Also, includes 132,841 shares of Common Stock
issuable pursuant to options that are exercisable within 60 days.
11
<PAGE>
(6) Includes 53,819 shares of Common Stock issuable pursuant to options that
are exercisable within 60 days.
(7) Includes 57,841 shares of Common Stock issuable pursuant to options that
are exercisable within 60 days.
(8) Includes 133,116 shares of Common Stock issuable pursuant to options that
are exercisable within 60 days.
(9) 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 Corporation Profit Sharing Trust and 20,002 shares owned by
Mr. Coin's wife. Mr. Coin disclaims beneficial ownership of such shares.
(10) Includes 204,152 shares of Common Stock issuable pursuant to options that
are exercisable within 60 days. Excludes an aggregate of 42,833 shares
held by various trusts for the benefit of his children with respect to
which shares Mr. Pierrepont disclaims beneficial ownership.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended, and
the rules and regulations thereunder require the Company's directors and
executive officers and persons who are deemed to own more than ten percent of
the Common Stock (collectively, the "Reporting Persons"), to file certain
reports ("Section 16 Reports") with the SEC with respect to their beneficial
ownership of Common Stock. The Reporting Persons are also required to furnish
the Company with copies of all Section 16 Reports they file.
Based solely on a review of the forms it has received and on written
representations from certain Reporting Persons that no such forms were
required for them, the Company believes that during fiscal 1997 all Section 16
filing requirements applicable to its directors, executive officers and
greater than 10% beneficial owners were complied with by such persons except
with respect to the following: due to an administrative error, Mr. Walden
failed to report timely a holding on Form 3.
CERTAIN RELATIONSHIPS AND RELATED 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 of 1933, as amended (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 (the "Piggyback Rights"),
provide that in the event the Company proposes to register any of its
securities under the Securities 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. The Company is generally required to
bear the expenses of all such registrations, except underwriting discounts and
commissions. As of December 31, 1997, approximately 10.0 million shares of
Common Stock of the Company (including shares subject to currently exercisable
options) were subject to Registration Rights or Piggyback Rights.
OTHER
The Conversion. In a conversion (the "Conversion") which was effected on May
31, 1997 (i) all of the equity interests in Peapod LP, an Illinois limited
liability partnership ("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.
12
<PAGE>
Management Fees. Pursuant to Peapod LP's limited partnership agreement,
Peapod LP had been required to pay an annual management fee to Peapod
Liquidating Corp., a Delaware corporation ( the "General Partner" or "PLC"),
which had 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's limited partnership agreement and the
management fees payable thereunder were terminated upon the Conversion.
The Liquidation. PLC, the predecessor of the Company, was liquidated on
January 21, 1998. The 3,106,293 shares of the Common Stock of the Company
owned by PLC were distributed pro rata to the shareholders of PLC in
proportion to their relative ownership interests in PLC.
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. See "Compensation Committee Interlocks and Insider
Participation in Compensation Decisions." This advisory agreement was
terminated as of May 1, 1997. Mr. Coin's advisory fees from the Company were
$52,500 in 1997.
Certain Stockholders and Certain Directors. The Company leases office
equipment from Ameritech Credit Corporation, an affiliate of Ameritech
Corporation which is a 5% stockholder of the Company, pursuant to leases
scheduled to expire in 1999. The aggregate monthly rental payment for all
equipment leased under these arrangements is $22,303.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of KPMG Peat Marwick L.L.P. who served as the Company's
independent public accountants for the last fiscal year, are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
and to respond to appropriate questions raised by stockholders at the Annual
Meeting or submitted in writing prior thereto.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In order to be considered for inclusion in the Company's proxy materials for
the 1999 Annual Meeting of Stockholders, any stockholder proposal must be
addressed to Peapod, Inc., 9933 Woods Drive, Skokie, Illinois 60077,
Attention: Secretary, and must be received no later than January 13, 1999.
The Company's By-laws set forth additional requirements and procedures
regarding the submission by stockholders of matters for consideration at an
annual meeting of stockholders. A nomination or proposal that does not comply
with such requirements and procedures will be disregarded.
EXPENSES OF SOLICITATION
Your proxy is solicited by the Board of Directors and its agents and the
cost of solicitation will be paid by the Company. Officers, directors and
regular employees of the Company, acting on its behalf, may also solicit
proxies by telephone, facsimile transmission or personal interview. The
Company will, at its expense, request brokers and other custodians, nominees
and fiduciaries to forward proxy soliciting material to the beneficial owners
of shares of record by such persons.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY (WITHOUT EXHIBITS) OF ITS
ANNUAL REPORT ON FORM 10-K (THE "REPORT") FOR THE FISCAL YEAR ENDED DECEMBER
31, 1997, INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, UPON
THE WRITTEN REQUEST OF ANY STOCKHOLDER AS OF THE RECORD DATE. THE COMPANY WILL
PROVIDE COPIES OF THE EXHIBITS TO THE REPORT UPON PAYMENT OF A REASONABLE FEE
THAT WILL NOT EXCEED THE COMPANY'S REASONABLE EXPENSES INCURRED IN CONNECTION
THEREWITH. REQUESTS FOR SUCH MATERIALS SHOULD BE DIRECTED TO PEAPOD, INC.,
9933 WOODS DRIVE, SKOKIE, ILLINOIS 60077, TELEPHONE (847) 583-9400, ATTENTION:
JOHN C. WALDEN.
13
<PAGE>
OTHER BUSINESS
It is not anticipated that any matter will be considered by the stockholders
other than those set forth above, but if other matters are properly brought
before the Annual Meeting, the persons named in the proxy will vote in
accordance with their best judgment.
By order of the Board of Directors,
LOGO
ANDREW B. PARKINSON
Chairman, President and Chief
Executive Officer
ALL STOCKHOLDERS ARE URGED TO SIGN, DATE
AND MAIL THEIR PROXIES PROMPTLY.
14
<PAGE>
PEAPOD, INC.
This Proxy Is Solicited on Behalf of The Board of Directors
The undersigned hereby appoints Andrew B. Parkinson and John C. Walden, or
either of them, the attorney or attorneys and proxy or proxies of the
undersigned with full power of substitution to attend the 1998 Annual Meeting of
Stockholders of Peapod, Inc. (the "Company") to be held at the Orrington Hotel,
1710 Orrington Avenue, Evanston, Illinois, at 9:00 a.m., Chicago time on May 8,
1998 and at any adjournment thereof, to vote all shares of stock of the Company
that the undersigned shall be entitled to vote. Said proxies are instructed to
vote on the matters set forth in the proxy statement as specified below. The
Board of Directors recommends a vote FOR all nominees listed on the reverse.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
[X] Please mark your 2179
vote as in this
example.
This proxy when properly signed and dated will be voted in the manner
directed herein by the undersigned Stockholder. If no direction is made, this
proxy will be voted FOR all nominees listed below.
FOR WITHHELD
1. Election of [_] [_]
Directors.
Class I - Terms to Expire at 2001 Annual Meeting
Andrew B. Parkinson
Tasso H. Coin
(Instructions: to withhold authority for any individual nominees write that
nominee's name in the blank space below.)
- --------------------------------------------------------------------------------
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Mark here if [_]
you plan to
attend the meeting.
Please sign exactly as name appears to the left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title. If a corporation, please sign in
full corporate name by authorized officer. If a partnership, sign in
partnership name by authorized person. If more than one trustee, all should
sign. This proxy may be revoked any time prior to it exercise.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
________________________________________________ (L.S.)
________________________________________________ (L.S.)
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE.
