<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 8-K
CURRENT REPORT
----------------
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 28, 2000
(Date of earliest event reported: April 14, 2000)
----------------
PEAPOD, INC.
(Exact name of Registrant as Specified in Its Charter)
----------------
Delaware 0-22557 36-4118175
(State or Other (Commission File (I.R.S. Employer
Jurisdiction Number) Identification Number)
of Incorporation or
Organization)
9933 Woods Drive, Skokie, Chicago, 60077
Illinois (Zip Code)
(Address of Principal Executive
Offices)
Registrant's telephone number, including area code: (847) 583-9400
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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<PAGE>
Item 5. Other Events
On April 14, 2000, the Registrant entered into a Purchase Agreement (the
"Purchase Agreement") with Koninklijke Ahold N.V. ("Ahold"). Under the
Purchase Agreement, subject to certain conditions, including stockholder
approval of the transaction, the Registrant agreed to issue and sell to Ahold,
and Ahold agreed to purchase from the Registrant (in one or more, but no more
than three issuances), 726,371 shares of the Registrant's Series B Convertible
Preferred Stock, par value $.01 per share (the "Series B Preferred Stock"),
for a purchase price of $100 per share, and warrants (the "Warrants") to
purchase 32,894,270 shares of the Registrant's common stock ("Common Stock").
The Series B Preferred Stock is initially convertible at a conversion price of
$3.75 per share into 19,369,873 shares of Common Stock, which represents
approximately 51% of the Common Stock outstanding as of April 14, 2000 (for
this purpose, treating as outstanding the shares of Common Stock subject to
the Series B Preferred Stock). The Warrants have an exercise price of $3.75,
subject to adjustment, and are exercisable into approximately 24% of the
Common Stock outstanding as of April 14, 2000 (treating as outstanding the
shares of Common Stock subject to the Series B Preferred Stock, the Warrants
and the Warrants described in the next paragraph). Under the Purchase
Agreement, prior to the receipt of stockholder approval of the transaction,
Ahold has the right, but not the obligation, to purchase shares of Series B
Preferred Stock and Warrants representing, collectively, up to 20% of the
Registrant's outstanding voting securities (calculated on a pre-transaction
basis). The final closing (if there is more than one closing) of the issuance
of Series B Preferred Stock and the Warrants is to occur as soon as
practicable (but not more than three business days) after the satisfaction or
waiver of all of the closing conditions set forth in the Purchase Agreement,
including receipt of stockholder approval.
Simultaneously with the signing of the Purchase Agreement, the Registrant
entered into a $20 million secured revolving credit facility with Ahold
maturing in April 2003. The initial borrowings under the credit facility
refinanced $3 million in secured term loans issued by the Registrant to an
affiliate of Ahold on April 5, 2000 (in the amount of $2 million) and on April
10, 2000 (in the amount of $1 million). Pursuant to security agreements entered
into in connection with the credit facility, the Registrant's obligations
under the credit facility are secured by a lien on substantially all of the
Registrant's personal property, including its intellectual property. In
connection with the credit and security agreements, the Registrant issued to
Ahold warrants to purchase an aggregate of 3,666,667 shares of common stock at
an initial exercise price of $3.00, subject to adjustment.
In connection with the Purchase Agreement and related agreements, the
Registrant and Ahold also entered into a Supply and Services Agreement
providing, among other things, that (i) the Registrant will purchase from
Ahold all of the Registrant's requirements for perishables and nonperishables
(subject to certain limited exceptions) for sale and delivery to customers in
connection with the Registrant's business and (ii) Ahold will perform certain
services related to the Registrant's business including fulfillment, delivery,
field operations, and overhead services. Ahold will provide warerooms to the
Registrant (pursuant to the terms of a separate license agreement) in
connection with Ahold's performance of such services. The Supply and Services
Agreement further provides that Ahold and the Registrant will enter into a
separate Technology Partnership Agreement pursuant to which the Registrant
will grant to Ahold broad rights to use the Registrant's proprietary
application software. The initial term of the Supply and Services Agreement is
five years and may be renewed by Ahold for an additional five-year period.
Otherwise, after the initial term, the Supply and Services Agreement will
automatically renew for additional one-year periods unless either party
provides an appropriate notice of nonrenewal.
Additionally, the Registrant and Ahold entered into a Registration Rights
Agreement, and the Registrant's directors, in their capacity as stockholders,
and two significant stockholders of the Registrant, entered into Voting
Agreements with Ahold.
Copies of the agreements relating to the transaction described above are
attached hereto as Exhibits 99.1 through 99.13.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Businesses Acquired:
Not applicable.
(b) Pro Forma Financial Information:
Not applicable.
(c) Exhibits:
<TABLE>
<C> <S>
99.1 Purchase Agreement dated April 14, 2000 between the Registrant
and Koninklijke Ahold N.V.
99.2 Credit Agreement dated April 14, 2000 between the Registrant and
Koninklijke Ahold N.V.
99.3 Amended and Restated Security Agreement dated as of April 5,
2000 by the Registrant to BEW, Inc. and Koninklijke Ahold N.V.
99.4 Amended and Restated Collateral Assignment of Intellectual
Property Agreement dated as of April 14, 2000 by the Registrant
to BEW, Inc. and Koninklijke Ahold N.V.
99.5 Registration Rights Agreement dated April 14, 2000 between the
Registrant and Koninklijke Ahold N.V.
99.6 Supply and Services Agreement dated April 14, 2000 between the
Registrant and Koninklijke Ahold N.V.
99.7 Voting Agreement dated April 14, 2000 among Thomas L. Parkinson,
Andrew B. Parkinson, Trygve E. Myhren, Robert S. Goodale, Tasso
H. Coin, Seth L. Pierrepont, Mark VanStekelenburg, Drayton
McLane and Koninklijke Ahold N.V.
99.8 Voting Agreement dated April 14, 2000 among Tribune National
Marketing Company, Nevis Capital Management, Inc. and
Koninklijke Ahold N.V.
99.9 Warrant to Purchase 100,000 shares of Common Stock of the
Registrant issued April 10, 2000 to Koninklijke Ahold N.V.
99.10 Warrant to Purchase 3,566,667 shares of Common Stock of the
Registrant issued April 14, 2000 to Koninklijke Ahold N.V.
99.11 Form of Warrant to Purchase 32,894,270 shares of Common Stock of
the Registrant to Koninklijke Ahold N.V.
99.12 Form of Certificate of Designations of Series B Convertible
Preferred Stock of the Registrant
99.13 Promissory Note issued by the Registrant to BEW, Inc. on April
5, 2000 in the amount of $3,000,000.
</TABLE>
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Peapod, Inc.
/s/ Dan Rabinowitz
By: _________________________________
Dan Rabinowitz
Senior Vice President and Chief
Financial Officer
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
*99.1 Purchase Agreement dated April 14, 2000 between the Registrant and
Koninklijke Ahold N.V.
*99.2 Credit Agreement dated April 14, 2000 between the Registrant and
Koninklijke Ahold N.V.
*99.3 Amended and Restated Security Agreement dated as of April 5, 2000 by
the Registrant to BEW, Inc. and Koninklijke Ahold N.V.
*99.4 Amended and Restated Collateral Assignment of Intellectual Property
Agreement dated as of April 14, 2000 by the Registrant to BEW, Inc.
and Koninklijke Ahold N.V.
*99.5 Registration Rights Agreement dated April 14, 2000 between the
Registrant and Koninklijke Ahold N.V.
*99.6 Supply and Services Agreement dated April 14, 2000 between the
Registrant and Koninklijke Ahold N.V.
*99.7 Voting Agreement dated April 14, 2000 among Thomas L. Parkinson,
Andrew B. Parkinson, Trygve E. Myhren, Robert S. Goodale, Tasso H.
Coin, Seth L. Pierrepont, Mark VanStekelenburg, Drayton McLane and
Koninklijke Ahold N.V.
*99.8 Voting Agreement dated April 14, 2000 among Tribune National Marketing
Company, Nevis Capital Management, Inc. and Koninklijke Ahold N.V.
*99.9 Warrant to Purchase 100,000 shares of Common Stock of the Registrant
issued April 10, 2000 to Koninklijke Ahold N.V.
*99.10 Warrant to Purchase 3,566,667 shares of Common Stock of the Registrant
issued April 14, 2000 to Koninklijke Ahold N.V.
*99.11 Form of Warrant to Purchase 32,894,270 shares of Common Stock of the
Registrant to Koninklijke Ahold N.V.
*99.12 Form of Certificate of Designations of Series B Convertible Preferred
Stock of the Registrant
*99.13 Promissory Note issued by the Registrant to BEW, Inc. on April 5, 2000
in the amount of $3,000,000.
</TABLE>
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*Filed herewith.
5
<PAGE>
Exhibit 99.1
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PURCHASE AGREEMENT
among
PEAPOD, INC.,
a Delaware corporation
and
KONINKLIJKE AHOLD N.V.
-----------------------
Dated
April 14, 2000
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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ARTICLE I
<S> <C>
DEFINITIONS............................................................... 1
ARTICLE II
SALE AND PURCHASE......................................................... 7
SECTION 2.1. Sale and Issuance of Shares and Warrants................... 7
SECTION 2.2. Closings................................................... 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 8
SECTION 3.1. Organization and Standing.................................. 8
SECTION 3.2. Capital Stock.............................................. 8
SECTION 3.3. Subsidiaries............................................... 9
SECTION 3.4. Authorization; Enforceability.............................. 9
SECTION 3.5. No Violation; Consents..................................... 9
SECTION 3.6. Permits.................................................... 10
SECTION 3.7. Litigation................................................. 10
SECTION 3.8. SEC Documents; Financial Statements........................ 10
SECTION 3.9. Change in Condition........................................ 11
SECTION 3.10. Employee Benefit Plans and Labor Matters.................. 11
SECTION 3.11. Interests in Real Property................................ 14
SECTION 3.12. Leases.................................................... 14
SECTION 3.13. Compliance with Law....................................... 15
SECTION 3.14. Related Party Transactions................................ 15
SECTION 3.15. Tax Matters............................................... 15
SECTION 3.16. Environmental Matters..................................... 16
SECTION 3.17. Intellectual Property..................................... 17
SECTION 3.18. Registration Rights....................................... 20
SECTION 3.19. Insurance................................................. 20
SECTION 3.20. Contracts................................................. 20
SECTION 3.21. Questionable Payments..................................... 21
SECTION 3.22. Accuracy of Information................................... 21
SECTION 3.23. Private Offering.......................................... 21
SECTION 3.24. Split Pea................................................. 21
SECTION 3.25. Brokers................................................... 22
SECTION 3.26. Voting and Proxy Agreements............................... 22
SECTION 3.27. Rights Agreement.......................................... 22
SECTION 3.28. Determination of Amount of Capital........................ 22
SECTION 3.29. Fairness Opinion.......................................... 23
SECTION 3.30. State Takeover Statutes................................... 23
SECTION 3.31. Malloy Stock, Options and Note............................ 23
SECTION 3.32. Other Interests........................................... 23
SECTION 3.33. Books and Records......................................... 23
SECTION 3.34. Personal Property......................................... 23
SECTION 3.35. Accounts Receivable....................................... 23
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 3.36. Inventory................................................ 24
SECTION 3.37. Product Liability........................................ 24
SECTION 3.38. Copies of Documents...................................... 24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.......................... 24
SECTION 4.1. Authorization; Enforceability; No Violations.............. 24
SECTION 4.2. Consents.................................................. 25
SECTION 4.3. Private Placement......................................... 25
ARTICLE V
COVENANTS OF THE COMPANY................................................. 25
SECTION 5.1. Operation of Business..................................... 25
SECTION 5.2. Negative Covenants........................................ 26
SECTION 5.3. Access to Books and Records............................... 28
SECTION 5.4. Agreement to Take Necessary and Desirable Actions......... 29
SECTION 5.5. Compliance with Conditions; Commercially Reasonably
Efforts............................................................... 29
SECTION 5.6. Consents and Approvals.................................... 29
SECTION 5.7. Stockholder Approval...................................... 29
SECTION 5.8. Tax Treatment of Preferred Stock.......................... 30
SECTION 5.9. Other Activities of Purchaser............................. 30
SECTION 5.10. HSR Act Filings.......................................... 30
SECTION 5.11. No Solicitation.......................................... 30
SECTION 5.12. Use of Proceeds.......................................... 32
SECTION 5.13. Reduction of Capital..................................... 32
SECTION 5.14. Amendment of Bylaws...................................... 32
SECTION 5.15. Transfer Agent; CUSIP.................................... 32
SECTION 5.16. Notification of Certain Matters.......................... 32
SECTION 5.17. Malloy Shares............................................ 32
ARTICLE VI
COVENANTS OF THE PURCHASER............................................... 33
SECTION 6.1. Agreement to Take Necessary and Desirable Actions......... 33
SECTION 6.2. Compliance with Conditions; Commercially Reasonable
Efforts............................................................... 33
SECTION 6.3. HSR Act Filings........................................... 33
SECTION 6.4. Confidential Information.................................. 33
SECTION 6.5. Notification of Certain Matters........................... 33
SECTION 6.6. Restrictions on Mergers................................... 34
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING.......................................... 34
SECTION 7.1. Conditions to the Company's Obligations................... 34
SECTION 7.2. Conditions to The Purchaser's Obligations................. 34
</TABLE>
ii
<PAGE>
<TABLE>
ARTICLE VIII
<CAPTION>
Page
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<S> <C>
INFORMATION; DIRECTORS; RESERVATION OF STOCK.............................. 36
SECTION 8.1. Access to Information...................................... 36
SECTION 8.2. Information Rights of Purchaser............................ 37
SECTION 8.3. Information Rights......................................... 38
SECTION 8.4. Directors.................................................. 38
SECTION 8.5. Reservation of Common Stock................................ 39
ARTICLE IX
MISCELLANEOUS............................................................. 40
SECTION 9.1. Survival; Indemnification.................................. 40
SECTION 9.2. Notices.................................................... 41
SECTION 9.3. Governing Law.............................................. 42
SECTION 9.4. Termination; Fees.......................................... 43
SECTION 9.5. Entire Agreement........................................... 43
SECTION 9.6. Modifications and Amendments............................... 43
SECTION 9.7. Waivers and Extensions..................................... 43
SECTION 9.8. Titles and Headings; Interpretation........................ 44
SECTION 9.9. Exhibits and Schedules..................................... 44
SECTION 9.10. Expenses; Brokers......................................... 44
SECTION 9.11. Press Releases and Public Announcements................... 44
SECTION 9.12. Assignment; No Third Party Beneficiaries.................. 44
SECTION 9.13. Severability.............................................. 44
SECTION 9.14. Counterparts Counterparts; Facsimile...................... 44
SECTION 9.15. Further Assurances........................................ 44
SECTION 9.16. Remedies Cumulative....................................... 45
</TABLE>
iii
<PAGE>
SCHEDULES
<TABLE>
<CAPTION>
<C> <S>
Schedule I Series B Preferred Stock and Warrants to be Purchased
Schedule 3.2 Capital Stock
Schedule 3.3 Subsidiaries
Schedule 3.5 No Violation; Consents
Schedule 3.7 Litigation
Schedule 3.10 Employee Benefit Plans and Labor Matters
Schedule 3.10(n) Employee Severance Arrangements
Schedule 3.11 Interests in Real Property
Schedule 3.12 Leases
Schedule 3.14 Related Party Transactions
Schedule 3.16 Environmental
Schedule 3.17 Intellectual Property
Schedule 3.18 Registration Rights
Schedule 3.20 Contracts
Schedule 3.31 Malloy Agreement
Schedule 3.32 Other Equity Interests
Schedule 5.1(d) Key Employees
Schedule 5.2 Negative Covenants
EXHIBITS
<CAPTION>
<C> <S>
Exhibit A Credit Agreement
Exhibit B Amended and Restated Security Agreement
Exhibit C Amended and Restated Collateral Assignment of
Intellectual Property Agreement
Exhibit D Registration Rights Agreement
Exhibit E Services Agreement
Exhibit F Voting Agreement
Exhibit G Warrant (Credit Agreement)
Exhibit H Warrant (Preferred Stock)
Exhibit I Certificate of Designation
Exhibit J Opinion of Sidley & Austin
</TABLE>
iv
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of April 14, 2000, by
and among Peapod, Inc., a Delaware corporation (the "Company"), and
KONINKLIJKE AHOLD N.V., a public company with limited liability organized and
existing under the laws of the Netherlands (the "Purchaser").
WHEREAS, in contemplation of this Agreement, the Company issued the
Promissory Note dated April 5, 2000 in favor of BEW, Inc., a Delaware
Corporation ("BEW"), an Affiliate of the Purchaser, and entered into a
Security Agreement dated April 5, 2000 with BEW (as amended, the "Note and
Security Agreement"), whereby BEW advanced $3,000,000 to the Company;
WHEREAS, in connection with the Note and Security Agreement the Company
issued a warrant (the "Previously Issued Warrant") dated April 10, 2000 in
favor of the Purchaser, (the "Parent") for 100,000 shares of Common Stock (as
defined below);
WHEREAS, in connection with the execution of this Agreement, the Company
will enter into the Credit and Security Agreements (as defined below) to
refinance the Note and Security Agreement;
WHEREAS, on the date hereof A. Michael Meurs, Steve Odland and William J.
Grice, nominees of the Purchaser, have been appointed as directors of the
Company;
WHEREAS, the Board of Directors of the Company has approved the issue of
the Securities (as defined below) by the Company to the Purchaser and each of
the Supervisory Board and the Executive Board of the Parent has approved the
subscription of the Securities by the Purchaser; and
WHEREAS, in connection with the execution of this Agreement, the Company
will enter into a Services Agreement (as defined below) for the provision of
services between the Company and the Purchaser and its Affiliates, and the
other Documents (as defined below);
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, shall include (a) in
the case of a person who is an individual, (i) members of such specified
person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified person or members of such person's
immediate family as determined in accordance with the foregoing clause (i),
and (b) any person that directly or indirectly owns more than 5% of any class
of capital stock or other interest of such specified person. For the purposes
of this definition, "control," when used with respect to any person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, for
purposes of this Agreement, Nevis, Tribune, the Purchaser and its Affiliates
shall not be deemed Affiliates of the Company.
"Associates" shall have the meaning provided in the Rights Agreement.
"Aggregate Number" shall have the meaning set forth in Section 2.1(b).
<PAGE>
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall have the meaning set forth in Section 5.11.
"Alternative Transaction Documentation" shall have the meaning set forth in
Section 5.11.
"Applicable Law" shall mean, with respect to any person, any law, statute,
rule, regulation, order, writ, injunction, judgment or decree of any
Governmental Authority to which such person or any of its subsidiaries is
bound or to which any of their respective properties is subject.
"Audited Financial Statements" shall have the meaning set forth in Section
3.8.
"Benefit Plan" shall have the meaning set forth in Section 3.10.
"BEW" shall have the meaning set forth in the Recitals.
"Business Day" shall mean any day except a Saturday, a Sunday or any other
day on which commercial banks are required or authorized to close in Chicago,
Illinois or New York, New York.
"Certificate of Designation" shall have the meaning set forth in Section
2.1.
"Charter" with respect to any corporation shall mean the certificate of
incorporation or articles of incorporation of such corporation.
"Closing" shall have the meaning set forth in Section 2.1(b).
"Closing Date" shall have the meaning set forth in Section 2.2(a).
"Code" shall mean have the meaning set forth in Section 3.10.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Commitments" shall have the meaning set forth in Section 3.20.
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
"Company" shall have the meaning set forth in the Preamble.
"Credit and Security Agreements" shall mean the Credit Agreement, to be
entered into by and between the Company and the Purchaser on the date hereof,
substantially in the form attached as Exhibit A hereto (the "Credit
Agreement"), the Amended and Restated Security Agreement, dated as of April 5,
2000, by and among BEW, the Purchaser and the Company, substantially in the
form attached as Exhibit B hereto, the Amended and Restated Collateral
Assignment of Intellectual Property Agreement, to be entered into by and
between the Purchaser and the Company, on the date hereof, substantially in
the form attached as Exhibit C hereto, together with all documents,
agreements, certificates and instruments entered into in connection therewith
on or after the date hereof.
"Date Data" shall have the meaning set forth in Section 3.17(l).
"DGCL" shall mean the Delaware General Corporation Law.
"Documents" shall mean (i) this Agreement, (ii) the Warrants, (iii) the
Certificate of Designation, (iv) the Registration Rights Agreement, (v) the
Credit and Security Agreements, (v) the Services Agreement, (vi) the Wareroom
License Agreement, (vii) the Technology Partnership and License Agreement, and
(viii) the Voting Agreements.
2
<PAGE>
"Employee" shall have the meaning set forth in Section 3.10.
"Environmental Claim" shall have the meaning set forth in Section 3.16(c).
"Environmental Laws" shall have the meaning set forth in Section 3.16(a).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean with respect to any person (within the meaning
of section 3(9) of ERISA) any other person that would be regarded together
with such person as a single employer under section 414(b), (c), (m) or (o) of
the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Final Closing" shall have the meaning set forth in Section 2.1(b).
"Final Closing Date" shall have the meaning set forth in Section 2.1(b).
"Financial Statements" shall mean the Audited Financial Statements and the
Interim Financial Statements.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to
time, consistently applied.
"Governmental Authority" shall mean any foreign, Federal, state or local
court or governmental or regulatory authority.
"Holder" shall mean any person that is the beneficial owner of Shares,
Warrants, or shares of Common Stock issued upon conversion of Shares or upon
exercise of Warrants, as a result of the sale, assignment or other transfer of
Securities originally issued to the Purchaser or issuable or issued upon the
conversion or exercise of any such Securities.
"Houlihan Lokey" shall have the meaning set forth in Section 3.25.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations and any similar state
acts.
"HSR Approval" shall mean the expiration of all waiting periods under the
HSR Act applicable to the issuance of Series B Preferred Stock as contemplated
by the Documents.
"Indemnified Party" shall have the meaning set forth in Section 9.1(c).
"Indemnifying Party" shall have the meaning set forth in Section 9.1(c).
"Intellectual Property" shall mean all domestic and foreign trademarks,
service marks, trade names, corporate and business names, brand names,
Internet domain names, universal resource locators ("URLs"), designs, logos,
trade dress, slogans, and general intangibles of like nature, together with
all goodwill, registrations and applications related to the foregoing
(collectively, "Trademarks"); patents and industrial designs (including any
continuations, divisionals, continuations-in-part, renewals, provisionals,
reissues, and applications for any of the foregoing); copyrights (including
any registrations and applications for any of the foregoing); Software; "mask
works" (as defined under 17 USC section 901) and any registrations and
applications for "mask works"; inventions (whether or not patentable),
invention disclosures, moral and economic rights of authors and inventors
(however denominated), technical data and customer lists; technology,
3
<PAGE>
trade secrets and other confidential information, know-how, proprietary
processes, formulae, algorithms, models, and methodologies (whether or not
patentable) (collectively, "Trade Secrets"); all improvements and refinements
of any of the foregoing; rights of publicity and privacy relating to the use
of the names, likenesses, voices, signatures and biographical information of
real persons; in each case used in or necessary for the business of the
Company and any Subsidiary.
"Key Stockholders" shall mean Tribune, Nevis, Thomas L. Parkinson, Andrew
B. Parkinson, Trygve E. Myhren, Robert S. Goodale, Tasso H. Coin, Seth L.
Pierrepont, Mark VanStekelenburg and Drayton McLane.
"Leases" shall have the meaning set forth in Section 3.12.
"License Agreements" shall have the meaning set forth in Section 3.17.
"Lien" shall mean any pledge, lien, claim, restriction, charge or
encumbrance of any kind.
"Malloy Agreement" shall have the meaning set forth in Section 3.31.
"Material Adverse Effect" shall mean a material adverse effect (i) on the
business, operations, prospects, properties, earnings, assets, liabilities or
condition (financial or other) of the Company and its Subsidiaries, taken as a
whole, or (ii) on the ability of the Company or any of its Subsidiaries to
perform its obligations hereunder or under any of the other Documents.
"Materials of Environmental Concern" shall have the meaning set forth in
Section 3.16.
"NASD" shall mean the National Association of Security Dealers.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Nevis" shall mean Nevis Capital Management, Inc., a Maryland corporation.
"Note and Security Agreement" shall have the meaning set forth in the
Recitals.
"Notices" shall have the meaning set forth in Section 9.2.
"PBGC" shall have the meaning set forth in Section 3.10.
"Permitted Liens" shall mean: (i) liens for Taxes and other governmental
charges and assessments arising in the ordinary course of business which are
not yet due and payable, (ii) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the
ordinary course of business for sums not yet due and payable (iii) other liens
or imperfections on property which are not material in amount, do not
interfere with, and are not violated by, the consummation of the transactions
contemplated by this Agreement, and do not impair the marketability of, or
materially detract from the value of or materially impair the existing use of,
the property affected by such lien or imperfection, and (iv) liens created or
permissible under the Credit and Security Agreements.
"Permitted Transferee" shall mean any person.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean the preferred stock, par value $.01 per share,
of the Company.
"Previously Issued Warrant" shall have the meaning set forth in the
Recitals.
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"Purchaser" shall have the meaning set forth in the Preamble.
"Purchaser Nominees" shall mean the nominees of the Purchaser to serve as
directors of the Company.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement to be entered into by and among the Company and the Purchaser on the
date hereof, substantially in the form attached as Exhibit D hereto.
"Related Party" shall have the meaning set forth in Section 3.14.
"Rights" shall have the meaning set forth in Section 3.27.
"Rights Agreement" shall have the meaning set forth in Section 3.5.
"SEC Documents" shall have the meaning set forth in Section 3.8(c).
"Securities" shall mean the Shares and the Warrants.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Series B Preferred Stock" shall mean the Series B Convertible Preferred
Stock, par value $0.01 per share, of the Company.
"Services Agreement" shall mean the Supply and Services Agreement to be
entered into by and between the Company and the Purchaser or its Affiliate, on
the date hereof, substantially in the form attached as Exhibit E hereto.
"Shares" shall mean the shares of Series B Preferred Stock to be issued and
sold by the Company to the Purchaser under Section 2.1(b) hereof.
"Software" shall mean any and all (a) computer programs, including any and
all software implementation of algorithms, models and methodologies, whether
in source code or object code form, (b) databases and compilations, including
any and all data and collections of data, (c) designs, processes, procedures
and data collectors, and (d) all documentation, including user manuals and
training materials, relating to any of the foregoing.
"Split Pea" shall have the meaning set forth in Section 3.24.
"Stockholder Approval" shall have the meaning set forth in Section 5.7.
"Stockholder Meeting" shall have the meaning set forth in Section 5.7.
"Subsequent Filings" shall have the meaning set forth in Section 3.8.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such person, by a subsidiary of such person, or by such person and
one or more subsidiaries of such person, (b) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, or (c) any other person (other than a
corporation) in which such person, a subsidiary of such person or such person
and one or more subsidiaries of such person, directly or indirectly, at the
date of determination thereof, has (i) at least a majority ownership interest,
(ii) the power to elect or direct the election of the directors or other
governing body of such person, or (iii) the power to direct or cause the
direction of the affairs or management of such person. For purposes of this
definition, a person is deemed to own any capital stock or other ownership
interest if such person has the right to acquire such capital stock or other
ownership interest, whether through the exercise of any purchase option,
conversion privilege or similar right.
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"Subsidiary" shall mean a subsidiary of the Company.
"Taxes" shall mean all foreign, Federal, State and local taxes, including,
without limitation, any interest, penalties or additions to tax that may
become payable in respect thereof, imposed by any Governmental Authority,
which taxes shall include, without limiting the generality of the foregoing,
all income taxes, profits, capital gains, payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workmen's compensation
taxes and other obligations of the same or a similar nature, whether arising
before, on or after the Closing Date and shall include any liability for such
amounts as a result of either being a member of a combined, consolidated,
unitary or affiliated group or of a contractual obligation to indemnify any
person or other entity.
"Tax Returns" shall mean all returns, declarations, statements, schedules,
forms, reports, information returns or other documents (including any related
or supporting information), and any amendments thereto, filed or required to
be filed with any Governmental Authority in connection with the determination,
assessment, collection or administration of any Taxes.
"Technology Partnership and License Agreement" shall mean the Technology
Partnership and License Agreement to be entered into by and between the
Company and the Purchaser or its Affiliate, on or prior to the first Closing,
in form and substance, reasonably satisfactory to the Company and the
Purchaser.
"Threshold Securities" shall mean a number of securities of the Company
that constitute, or if exercised, exchanged or converted into Common Stock
would constitute, at least 10% of the aggregate issued and outstanding Common
Stock.
"Trade Secrets" shall have the meaning set forth in the definition of
"Intellectual Property" in this Article I.
"Trademarks" shall have the meaning set forth in the definition of
"Intellectual Property" in this Article I.
"Tribune" shall mean Tribune National Marketing Company, a Delaware
corporation.
"Voting Agreements" shall mean one or more voting agreements dated April
14, 2000, by and among the Key Stockholders substantially in the form of
Exhibit F hereto.
"Wareroom License Agreement" shall mean the Wareroom License Agreement to
be entered into by and between the Company and the Purchaser or its Affiliate,
on or prior to the first Closing, substantially in the form of Exhibit B
attached to the Services Agreement.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification Act
of 1988, as amended, and any applicable state or local law with regard to
"plant closings" or "mass layoffs" as such terms are defined in the WARN Act
or applicable state or local law.
"Warrants" shall mean the Warrant (Credit Agreement) to be issued on the
date hereof by the Company in favor of the Purchaser to purchase Common Stock,
substantially in the form of Exhibit G attached hereto, and the Warrant
(Preferred Stock) to be issued by the Company in favor of the Purchaser to
purchase Common Stock, substantially in the form of Exhibit H attached hereto,
in accordance with Section 2.1(b).
"Wasserstein" shall have the meaning set forth in Section 3.25.
"Year 2000 Compliance" shall have the meaning set forth in Section 3.17.
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ARTICLE II
SALE AND PURCHASE
SECTION 2.1. Sale and Issuance of Shares and Warrants.
(a) On the date hereof and concurrently with the execution of the Credit
and Security Agreements, the Purchaser shall purchase and accept from the
Company the Warrants (Credit Agreement) for the purchase price indicated on
Schedule I.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, the Company shall issue and the Purchaser shall purchase and
accept from the Company the number (the "Aggregate Number") of shares of
Series B Preferred Stock and Warrants (Preferred Stock) for the purchase
prices indicated on Schedule I as soon as practicable after all of the
conditions set forth in Article VII hereof shall have been satisfied or
duly waived, including, without limitation, receipt of Stockholder
Approval, but in no event later than three Business Days thereafter (the
"Final Closing Date"). Notwithstanding the foregoing, the Purchaser shall
have the right to purchase shares of Series B Preferred Stock and Warrants
(Preferred Stock) in one or more closings, but no more than three closings
(each, a "Closing", and the Closing occurring on the Final Closing Date,
the "Final Closing") such that the number of shares of Series B Preferred
Stock and Warrants equals the Aggregate Number; provided, that, any such
purchase by Purchaser shall be in accordance with and not in violation of
NASD rules and regulations. At each Closing, the Purchaser shall purchase
and accept from the Company shares of Series B Preferred Stock and Warrants
(Preferred Stock) on a pro rata basis (for example, if at a Closing, the
Purchaser purchases 10% of the shares of Series B Preferred Stock set forth
in Schedule I, the Purchaser shall purchase 10% of the Warrants (Preferred
Stock) set forth in Schedule I).
(c) On or before the first Closing, the Company shall adopt and file
with the Secretary of State of Delaware the Certificate of Designation
relating to the Series B Preferred Stock (the "Certificate of
Designation"), substantially in the form attached as Exhibit I hereto.
SECTION 2.2. Closings.
(a) Each Closing (other than the Final Closing), shall take place at
9:00 a.m., New York time, on the date five Business Days after the
Purchaser has provided written notice to the Company that all of the
conditions relating to such Closing set forth in Article VII hereof shall
have been satisfied or duly waived or at such other time and date as the
parties hereto shall agree in writing (the "Closing Date"), at the offices
of White & Case LLP, 1155 Avenue of the Americas, New York, New York or at
such other place as the parties hereto shall agree in writing.
(b) The Final Closing, shall take place at 9:00 a.m., New York time on
the Final Closing Date or at such other time and date as the parties hereto
shall agree in writing, at the offices of White & Case LLP, 1155 Avenue of
the Americas, New York, New York or at such other place as the parties
hereto shall agree in writing.
(c) On each Closing Date (i) the Purchaser shall deposit into a bank
account designated by the Company not later than one Business Day prior to
such Closing Date, by wire transfer of immediately available funds, an
amount equal to the aggregate purchase price of the Securities being
purchased by the Purchaser from the Company pursuant to Section 2.2(a), and
(ii) the Company shall deliver to the Purchaser, against payment of the
purchase price therefor, certificates representing the Shares and Warrants,
being purchased by the Purchaser pursuant to Section 2.2(a). The Shares and
Warrants shall be in definitive form and registered in the name of the
Purchaser or its nominee or designee and in such denominations (including
fractional shares) as the Purchaser shall request not later than one
Business Day prior to the Closing Date.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser as follows:
SECTION 3.1. Organization and Standing. The Company is duly incorporated,
validly existing and in good standing as a domestic corporation under the laws
of the State of Delaware and has all requisite corporate power and authority
to own its properties and assets and to carry on its business as it is now
being conducted and as proposed to be conducted. The Company is duly qualified
to transact business as a foreign corporation and is in good standing in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of its business makes such qualification necessary, except where
the failure to so qualify or be in good standing could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
SECTION 3.2. Capital Stock. On the date hereof, the authorized capital
stock of the Company will consist solely of (a) 50,000,000 shares of Common
Stock and (b) 5,000,000 shares of Preferred Stock. Immediately prior to the
Closing, or if there is more than one Closing, the Final Closing, following
the filing of the amendment to the Company's Charter increasing the authorized
shares of stock of the Company, the authorized capital stock of the Company
will consist solely of (a) 100,000,000 shares of Common Stock and (b)
10,000,000 shares of Preferred Stock. As of the date hereof, of the 50,000,000
shares of Common Stock authorized, (i) 18,260,842 shares of Common Stock are
issued and outstanding, (ii) 3,611,716 shares are reserved for issuance
pursuant to outstanding options and warrants and existing employee stock
plans, (iii) 19,369,873 shares are reserved for issuance upon conversion of
the shares of Series B Preferred Stock, (iv) 100,000 shares will be reserved
for issuance upon exercise of the Previously Issued Warrant and 36,460,937
shares will be reserved for issuance upon exercise of the Warrants. As of the
date hereof, of the 5,000,000 shares of Preferred Stock authorized,
(i) 1,000,000 shares have been designated Series A Preferred Stock, none of
which will be issued or outstanding but all of which have been reserved for
issuance upon the exercise of rights under the Rights Agreement. Immediately
prior to the first Closing, or if there is more than one Closing, the Final
Closing, 730,000 shares will have been designated Series B Preferred Stock. As
of the date hereof, there are securities convertible, exchangeable or
exerciscable into 661,319 shares of Common Stock at or below $3.75 per share
of Common Stock. Immediately following each Closing, each share of capital
stock of the Company that is issued and outstanding will be duly authorized,
validly issued, fully paid and nonassessable, and will not be subject to nor
issued in violation of, any preemptive rights. All shares of Series B
Preferred Stock issued in a Closing, or as a dividend on any outstanding
shares of Series B Preferred Stock, will be duly authorized, validly issued,
fully paid and nonassessable. The Previously Issued Warrant and all Warrants
issued at a Closing will be duly authorized, validly issued, fully paid and
nonassessable. Upon conversion of any shares of Series B Preferred Stock in
accordance with their terms, all of the Common Stock issued upon such
conversion will be duly authorized, validly issued, fully paid and
nonassessable. Upon exercise of the Previously Issued Warrant and the Warrants
in accordance with their terms, the Common Stock issued upon such exercise
will be duly authorized, validly issued, fully paid and nonassessable. Except
for the Previously Issued Warrant and as set forth on Schedule 3.2 or as
contemplated by this Agreement, at the date hereof there are, and immediately
following each Closing there will be (a) no outstanding or authorized options,
warrants, agreements, conversion rights, preemptive rights, other rights,
subscriptions, claims of any character, obligations, convertible or
exchangeable securities, or other commitments, contingent or otherwise,
relating to shares of capital stock of the Company or any of its Subsidiaries
or pursuant to which the Company or any of its Subsidiaries is or may become
obligated to issue shares of its capital stock or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, purchase or
acquire, any shares of the capital stock of the Company or any of its
Subsidiaries, (b) no restrictions upon the dividends, voting or transfer of
any shares of capital stock of the Company pursuant to its Charter, Bylaws or
other governing documents or any agreement or other instruments to which it is
a party or by which it is bound, and (c) no shares of Common Stock or
Preferred Stock held by the Company in its treasury. The holders of the Series
B Preferred Stock will, upon issuance thereof, have the rights set forth in
the Certificate of Designation. Neither the Company nor any of its
Subsidiaries has authorized or outstanding bonds,
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debentures, notes or other indebtedness the holders of which have the right to
vote (or convertible or exercisable for or exchangeable into securities the
holders of which have the right to vote) with the stockholders of such person
on any matter. Except as contemplated by this Agreement or the Rights
Agreement or as set forth on Schedule 3.2, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Common Stock or the
capital stock of the Company or any of its Subsidiaries.
SECTION 3.3. Subsidiaries. The Company has no Subsidiaries.
SECTION 3.4. Authorization; Enforceability. The Company has the corporate
power to execute, deliver and perform its obligations under each of the
Documents and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of the Documents and to
consummate the transactions contemplated hereby and thereby except, with
respect to the Closing, or the Final Closing if the Purchaser elects to have
more than one Closing, the Stockholder Approval. No other corporate
proceedings on the part of the Company are necessary therefor. The Company has
duly executed and delivered this Agreement. This Agreement constitutes, and
each of the other Documents, when executed and delivered by the Company and,
assuming due execution by the other parties hereto and thereto (other than the
Subsidiaries), will constitute legal, valid and binding obligations of the
Company enforceable against it in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
SECTION 3.5. No Violation; Consents.
(a) The execution, delivery and performance by the Company of each of
the Documents to which it is a party, all actions taken in connection with
the execution of the Voting Agreement, the consummation of the transactions
contemplated hereby and thereby does not and will not contravene any
Applicable Law, except for any such contraventions that could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. No actions taken in connection with the execution of the
Voting Agreement contravenes any Applicable Law. The execution, delivery
and performance by the Company of the Documents to which it is a party and
the consummation of the transactions contemplated hereby and thereby (i)
will not (x) violate, result in a breach of or constitute (with due notice
or lapse of time or both) a default under any contract, lease, loan
agreement, Benefit Plan, mortgage, security agreement, trust indenture or
other agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of them is bound or to which any of
their properties or assets is subject, except to the extent any such
conflict or breach, singly or in the aggregate, would not have a Material
Adverse Effect, (y) result in the creation or imposition of any Lien (other
than a Permitted Lien) upon any of the properties or assets of any of them,
or (z) except as set forth on Schedule 3.5(a), obligate the Company to make
any payment or incur any additional obligation, or give rise to any right
of any person with respect to the Company, under any term or provision of
any contract or agreement, the Charter or Bylaws of the Company, any
Benefit Plan or any Applicable Law, that relates to a change of control or
ownership of the Company or any similar provision, (ii) will not violate
any provision of its Charter or Bylaws, and (iii) will not result in the
Purchaser or any of its Affiliates, Associates or Permitted Transferees
being (x) an "Acquiring Person" under the Amended and Restated Stockholder
Rights Agreement, dated as of April 14, 2000 (the "Rights Agreement"), by
and between the Company and First Chicago Trust Company of New York, a
division of Equiserve, as Rights Agent, or (y) an "interested stockholder,"
under Section 203 of the DGCL.
(b) Except as set forth on Schedule 3.5(b), no consent, authorization or
order of, or filing or registration with, any Governmental Authority or
other person is required to be obtained or made by the Company or any of
its Subsidiaries for the execution, delivery and performance of any of the
Documents, or the consummation of any of the transactions contemplated
hereby or thereby, except (i) the HSR Approval, and (ii) the Stockholder
Approval, which will have been obtained on or prior to the Closing Date, or
the Final Closing Date if the Purchaser elects to have more than one
Closing.
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SECTION 3.6. Permits. Each of the Company and its Subsidiaries has such
licenses, permits, exemptions, consents, waivers, authorizations, orders and
approvals from appropriate Governmental Authorities ("Permits") as are
necessary to own, lease or operate their properties and to conduct their
businesses as currently owned and conducted and all such Permits are valid and
in full force and effect, except such Permits that the failure to have or to
be in full force and effect could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. No action by the
Company or any of its Subsidiaries outside the normal course of business is
required in order that all material Permits shall remain in full force and
effect following either of the Closings.
SECTION 3.7. Litigation. Except as set forth on Schedule 3.7, there are no
pending or, to the best knowledge of the Company, threatened claims, actions,
suits, labor disputes, grievances, administrative or arbitration or other
proceedings or, to the best knowledge of the Company, investigations against
the Company, its Subsidiaries or their respective assets or properties before
or by any Governmental Authority or before any arbitrator that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. None of the transactions contemplated by any of the Documents
is restrained or enjoined (either temporarily, preliminarily or permanently),
and no material adverse conditions have been imposed thereon by any
Governmental Authority or arbitrator. None of the Company, its Subsidiaries or
any of their respective assets or properties, is subject to any order, writ,
judgment, award, injunction or decree of any Governmental Authority or
arbitrator, that could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 3.8. SEC Documents; Financial Statements.
(a) The Company has provided to the Purchaser copies of the audited
consolidated balance sheet of the Company and its consolidated Subsidiaries
as of December 31, 1998 (the "1998 Financials") and December 31, 1999 (the
"1999 Financials"), together with the related audited consolidated
statements of operations, stockholders' equity and cash flows for the
fiscal year then ended, and the notes thereto, accompanied with respect to
the 1998 Financials by the unqualified opinion thereon of KPMG LLP and with
respect to the 1999 Financials by the qualified opinion of KPMG
(collectively, the "Audited Financial Statements"). The Audited Financial
Statements (including the notes thereto) were prepared in accordance with
GAAP and present fairly, in all material respects, the consolidated
financial position and results of operation of the Company and its
consolidated Subsidiaries as of December 31, 1998 and December 31, 1999 and
for the periods then ended.
(b) Neither the Company nor any of its Subsidiaries has any material
claims, liabilities or indebtedness, contingent or otherwise of any kind
whatsoever (whether accrued, absolute, contingent or otherwise and whether
or not required to be reflected in the Company's financial statements in
accordance with GAAP), except (i) as set forth in the Audited Financial
Statements, (ii) the Credit and Security Agreements, and (iii) liabilities
to trade creditors incurred subsequent to December 31, 1999 in the ordinary
course of business consistent with past practices not involving borrowings
by the Company or any Subsidiary.
(c) Since January 1, 1997, the Company has filed all forms, reports and
documents with the Commission (including all exhibits thereto) required
under the Securities Act or the Exchange Act or the rules and regulations
promulgated thereunder (collectively, the "SEC Documents"), each of which
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act as in effect on the dates so filed.
None of the SEC Documents (as of their respective filing dates) contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. Any forms, reports and documents filed by the Company with the
Commission subsequent to the date hereof and prior to the Final Closing
Date (collectively, the "Subsequent Filings") will comply in all material
respects with all applicable requirements of the Securities Act and the
Exchange Act and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
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under which they were made, not misleading. The Company has heretofore
furnished to the Purchaser copies of each of the SEC Documents (other than
exhibits or schedules to the SEC Documents) and will furnish to the
Purchaser copies of each Subsequent Filing promptly after the date of such
filing.
(d) No representation or warranty of the Company contained in any
document, certificate or written statement furnished to the Purchaser by or
at the direction of the Company for use in connection with the transactions
contemplated by this Agreement, contains any untrue statement of a material
fact or omits to state any material fact (known to the Company, in the case
of information not furnished by them) necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made. There are no facts known to any
of the Company or its Subsidiaries (other than matters of a general
economic nature) that could, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect and that have not been
disclosed in the SEC Documents, this Agreement or in such other documents,
certificates and statements furnished to the Purchaser for use in
connection with the transactions contemplated by this Agreement.
SECTION 3.9. Change in Condition.
(a) Except as set forth on Schedule 3.9, since December 31, 1999, the
Company and its Subsidiaries have operated their respective businesses only
in the ordinary course consistent with past practices and there has not
occurred (i) any event, occurrence or conditions, or to the best knowledge
of the Company, any circumstance or development that could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect,
or (ii) any action specified in Section 5.2 of this Agreement.
SECTION 3.10. Employee Benefit Plans and Labor Matters.
(a) For purposes of this Agreement:
(i) "Benefit Plan" means any employee benefit plan, arrangement,
policy or commitment, including, without limitation, any employment,
consulting, severance or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings,
retirement, stock option, stock purchase or severance pay plan, any
life, health, disability or accidental death and dismemberment
insurance plan, any holiday and vacation practice or any other employee
benefit plan, within the meaning of section 3(3) of ERISA, whether
formal or informal, written or oral and whether legally binding or not,
that is maintained, administered or contributed to or was maintained,
administered or contributed to at any time by the Company or any of its
ERISA Affiliates for the benefit of any employee, former employee,
consultant, officer or director of the Company or any ERISA Affiliate;
(ii) "Code" means the Internal Revenue Code of 1986, as amended;
(iii) "Employee" means any individual employed by the Company or any
of its ERISA Affiliates;
(iv) "IRS" means the United States Internal Revenue Service; and
(v) "PBGC" means the Pension Benefit Guaranty Corporation.
(b) Schedule 3.10 lists all Benefit Plans. With respect to each such
plan, the Company has delivered or made available to the Purchasers correct
and complete copies of (i) all plan documents and agreements and related
trust or other funding arrangements (including all amendments thereto);
(ii) all summary plan descriptions and material employee communications;
(iii) the annual report and actuarial report (including all schedules
thereto) if required under ERISA or other applicable law, for the last
three most recently completed plan years; (iv) the most recent annual
audited financial statement; (v) if the plan is intended to qualify under
Code section 401(a) or 403(a), the most recent determination letter, if
any, received from the IRS; and (vi) all material communications with any
Governmental Authority (including, without limitation, the PBGC, the U.S.
Department of Labor and the IRS).
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(c) There are no Benefit Plans that (i) are covered by or subject to any
liability under Code section 412, ERISA section 302 or Title IV of ERISA
and no condition exists that presents a material risk to the Company or any
ERISA Affiliate of incurring such liability; (ii) are intended to qualify
under Code section 401(a) or 403(a) other than the Peapod 401(k) Savings
Plan; (iii) provide benefits to current or former Employees or their
respective beneficiaries beyond their retirement or other termination of
service (other than coverage mandated by Code section 4980B or Part 6 of
Title I of ERISA); or (iv) are self-insured "multiple employer welfare
arrangements," as such term is defined in section 3(40) of ERISA.
(d) Each Benefit Plan conforms in all respects to, and its
administration is in all respects in compliance with, its terms and all
Applicable Law, including but not limited to ERISA and the Code, except to
the extent that the failure to conform or to be administered would not
reasonably be expected to result in a material liability.
(e) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former Employee, officer or director of
the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any similar payment; or (ii) accelerate the time of payment
or vesting of any right or privilege, or increase the amount of any
compensation due to, any current or former Employee, officer or director of
the Company.
(f) No Benefit Plan is a "multiple employer plan" or a "multiemployer
plan" within the meaning of the Code or ERISA.
(g) In the six years preceding the date hereof, (i) no Benefit Plan that
is or was subject to Title IV of ERISA has been terminated; (ii) no
reportable event within the meaning of section 4043 of ERISA has occurred;
(iii) no filing of a notice of intent to terminate such a Benefit Plan has
been made; (iv) the PBGC has not initiated any proceeding to terminate any
such Benefit Plan and no condition exists that presents a material risk
that such proceeding will be initiated; and (v) no prohibited transaction
(within the meaning of Section 406 of ERISA or Section 4975 of the Code),
breach of fiduciary duty (pursuant to Section 409 of ERISA) or civil action
(pursuant to Section 502 of ERISA) has occurred that could result in a
material liability to the Company or any Subsidiary.
(h) Except for the Executive Employment Agreement between William Malloy
and the Company, dated as of September 27, 1999, neither the Company nor
any of its Subsidiaries has any existing arrangement with any of its
Employees providing for an excise tax gross up in respect of any excise
taxes imposed by section 4999 of the Code.
(i) Except as set forth on Schedule 3.10, none of the Company, any
Subsidiary or any ERISA Affiliate has any commitment or formal plan,
whether legally binding or not, to create any additional employee benefit
plan or modify or change any existing Benefit Plan that would affect any
Employee, former Employee or director of the Company.
(j) Except as set forth on Schedule 3.10, (i) no amounts payable under
the Benefit Plans will fail to be deductible for federal income tax
purposes by virtue of section 162(a)(1), 162(m) or 280G of the Code and
(ii) all contributions (including all employer contributions and employee
salary reduction contributions) required to be made to any Benefit Plan by
applicable law or regulation or by any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance
policies funding any Benefit Plan, have been timely made or paid in full
or, to the extent not required to be made or paid on or before the date
hereof, have been fully reflected on the financial statements in accordance
with GAAP. Each Benefit Plan that is an employee welfare benefit plan under
Section 3(1) of ERISA either (i) is funded through an insurance company
contract and is not a "welfare benefit fund" with the meaning of
Section 419 of the Code or (ii) has benefits paid as needed solely from the
general assets of the Company and its Subsidiaries.
(k) No liability, claim, action or litigation has been made, commenced
or, to the Company's knowledge, threatened with respect to any Benefit Plan
(other than routine claims for benefits payable in the ordinary course, and
appeals of such desired claims).
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(l) Except as set forth on Schedule 3.10, (i) there is no labor strike,
dispute, slowdown, stoppage or lockout actually pending, or to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company or any of its Subsidiaries and during the past five
years there has not been any such action;
(ii) to the knowledge of the Company and any of its Subsidiaries,
there are no union claims to represent the employees of the Company or
any of its Subsidiaries;
(iii) neither the Company nor any of its Subsidiaries is a party to
or bound by any collective bargaining or similar agreement with any
labor organization, or work rules or practices agreed to with any labor
organization or employee association applicable to employees of the
Company or any of its Subsidiaries;
(iv) none of the employees of the Company or any of its Subsidiaries
are represented by any labor organization and none of the Company or
any of its Subsidiaries have any knowledge of any current union
organizing activities among the employees of the Company or any of its
Subsidiaries, nor does any question concerning representation exist
concerning such employees;
(v) true, correct and complete copies of all written personnel
policies, rules and procedures applicable to employees of the Company
or any of its Subsidiaries have heretofore been delivered to the
Purchaser;
(vi) the Company and its Subsidiaries are, and have at all times
been, in material compliance with all applicable laws respecting
employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health,
and are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or
regulation;
(vii) there is no unfair labor practice charge or complaint against
the Company or any Subsidiary pending or, to the knowledge of the
Company and any of its Subsidiaries, threatened before the National
Labor Relations Board or any similar state or foreign agency;
(viii) there is no grievance or arbitration proceeding arising out
of any collective bargaining agreement or other grievance procedure
relating to the Company or any of its Subsidiaries;
(ix) to the knowledge of the Company and any of its Subsidiaries, no
charges with respect to or relating to the Company or any of its
Subsidiaries are pending before the Equal Employment Opportunity
Commission or any other agency responsible for the prevention of
unlawful employment practices
(x) to the knowledge of the Company and any of its Subsidiaries, no
federal, state, local or foreign agency responsible for the enforcement
of labor or employment laws intends to conduct an investigation with
respect to or relating to the Company and any of its Subsidiaries and
no such investigation is in progress; and
(xi) there are no complaints, controversies, lawsuits or other
proceedings pending or, to the knowledge of the Company or any of its
Subsidiaries, any applicant for employment or classes of the foregoing
alleging breach of any express or implied contract or employment, any
law or regulation governing employment or the termination thereof or
other discriminatory, wrongful or tortious conduct in connection with
the employment relationship. Except as set forth in Schedule 3.10,
there are no employment contracts or severance agreements with any
employees of the Company or any of its Subsidiaries. The execution of
this Agreement and the consummation of the transactions contemplated
hereby shall not result in a breach or other violation of any
collective bargaining agreement to which the Company or any of its
Subsidiaries is a party.
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(m) Since the enactment of the WARN Act, neither the Company nor any of
its Subsidiaries have effectuated (i) a "plant closing" (as defined in the
WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility of the Company or
any of its Subsidiaries, or (ii) a "mass layoff" (as defined in the WARN
Act) affecting any site of employment or facility of the Company or any of
its Subsidiaries; nor has the Company or any of its Subsidiaries been
affected by any transaction or engaged in layoffs or employment
terminations sufficient in number to trigger application of any similar
state or local law. Except as set forth in Schedule 3.10, none of the
employees of the Company or any of its Subsidiaries has suffered an
"employment loss" (as defined in the WARN Act) with regard to their
employment with the Company or any of its Subsidiaries since March 1, 1995.
(n) Except as set forth on Schedule 3.10(n) neither the Company nor any
of its Subsidiaries have any employment or severance agreements with any
Employees or former employees (to the extent the Company continues to have
obligations with respect to former employees).
SECTION 3.11. Interests in Real Property.
(a) Schedule 3.11 sets forth a true and complete list of all real
properties owned and all material real property leased by the Company or
any of its Subsidiaries. Each of the Company and its Subsidiaries has good
and marketable title in fee simple to all real properties owned by it, free
and clear of all Liens, except for Permitted Liens, and valid and
enforceable leasehold interests in all real estate leased by it, except
where the lack of such title or the invalidity or unenforceability of such
leasehold interests could not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(b) None of the real properties owned by, or the leasehold estates of,
the Company or any Subsidiary are subject to (i) any Liens or (ii) any
easements, rights of way, licenses, grants, building or use restrictions,
exceptions, reservations, limitations or other impediments that, in either
case (i) or (ii), will materially adversely affect the value thereof for
their present use, taken as a whole, or that materially interfere with or
impair the present and continued use thereof, taken as a whole, in the
usual and normal conduct of the business of any such person.
(c) To the best knowledge of the Company, all improvements on such real
properties and the operations therein conducted conform in all material
respects to all applicable health, fire, environmental, safety, zoning and
building laws, ordinances and administrative regulations (whether through
grandfathering provisions, permitted use exceptions, variances or
otherwise), except for possible nonconforming uses or violations that do
not and will not interfere with the present use, operation or maintenance
thereof as now used, operated or maintained or access thereto, and that do
not and will not materially affect the value thereof for their present use.
Neither the Company nor any Subsidiary has received notice of any violation
of or noncompliance with any such laws, ordinances or administrative
regulations from any applicable governmental or regulatory authority,
except for notices of violations or failures so to comply, if any, that
could not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
SECTION 3.12. Leases.
(a) (i) Neither the Company nor any Subsidiary is in breach of or
default (and no event has occurred which, with due notice or lapse of time
or both, may constitute a breach or default) under any lease required to be
set forth on Schedule 3.11 (the "Leases") and (ii) no party to any Lease
has given, or to the best knowledge of the Company threatened to give, or
advised that it will be giving the Company or any Subsidiary written notice
of or made a claim with respect to any breach or default, the consequences
of which, in either case (i) or (ii) could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(b) Except as set forth on Schedule 3.12, after taking into account the
exercise of any options (which are exercisable solely at the discretion of
the Company or any Subsidiary), none of the Leases terminates by its terms
before January 1, 2002.
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(c) None of the Leases require a consent to be obtained for the
execution, delivery and performance of any of the Documents or the
consummation of any of the transactions contemplated hereby or thereby.
(d) Neither the Company nor any Subsidiary has any ownership, financial
or other interest in the landlords under any of the Leases.
SECTION 3.13. Compliance with Law. The operations of the Company and its
Subsidiaries have been conducted in accordance with all Applicable Laws,
including, without limitation, all Applicable Laws relating to consumer
protection, currency exchange, employment (including, without limitation,
equal opportunity and wage and hour), safety and health, environmental
protection, conservation, wetlands, architectural barriers to the handicapped,
fire, zoning and building, occupation safety, pension and securities, except
for violations or failures so to comply, if any, that could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Subsidiary has received notice of any violation of
or noncompliance with any Applicable Laws except as set forth on Schedule 3.13
and except for notices of violations or failures so to comply, if any, that
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 3.14. Related Party Transactions. Except as set forth on Schedule
3.14 and except for the consummation of the transactions contemplated by the
Documents (including, without limitation, the Voting Agreements) (i) neither
the Company nor any of its Subsidiaries is a party to any agreement or
arrangement with or for the benefit of any person who, to the Company's
knowledge, based on a review of Schedule 13Ds and Schedule 13Gs filed under
the Exchange Act, is a holder of 5% or more of the outstanding equity
securities of the Company or any officer, director, partner or Affiliate of
any such person ("Related Party"); (ii) all transactions between the Company
and its Subsidiaries, on the one hand, and a Related Party, on the other hand,
are on terms and conditions which could be obtained from an unaffiliated third
party in an arm's length transaction; and (iii) no Affiliate of the Company or
Related Party is a supplier, lessor, lessee or competitor of the Company or
any of its Subsidiaries.
SECTION 3.15. Tax Matters.
(a) The Company and its Subsidiaries have duly and properly filed, or
will duly and properly file, on a timely basis, all material Tax Returns
which were or will be required to be filed by them for all periods ending
on or before any Closing Date. All such Tax Returns of the Company and its
Subsidiaries were (or will be) true, correct and complete in all material
respects when filed. The Company and its Subsidiaries have paid all
material Taxes and Tax liabilities required to be paid by them for periods
ending on or before any Closing Date, or with respect to any period that
ends after any Closing Date, the portion of such period up to and including
any Closing Date, other than those Taxes being contested in good faith or
those Taxes currently payable without penalty or interest, in each case
which have been adequately disclosed and for which an adequate reserve or
accrual has been established in the Financial Statements in accordance with
GAAP.
(b) All material Taxes that the Company and its Subsidiaries are or were
required by law to withhold or collect through any Closing Date have been
duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Authority. There are no Liens with respect to Taxes
upon any of the properties or assets, real or personal, tangible or
intangible, of the Company or any Subsidiary except for statutory liens for
Taxes not yet due or delinquent.
(c) Neither the Company nor any of its Subsidiaries is currently the
beneficiary of any waivers or extensions with respect to any Tax Returns,
no Tax Returns of the Company or any Subsidiary are currently under audit
or examination by any Governmental Authority and to the best knowledge of
the Company and its Subsidiaries, no such audit or examination is
threatened. Neither the Company nor any Subsidiary has received any notices
from any Governmental Authority relating to any issue which could
materially affect the Tax liability of the Company or any Subsidiary. No
issue was raised in any audit or examination of Tax Returns by any
Governmental Authority that, if raised with respect to any period not so
audited or examined, could be expected to result in a proposed deficiency.
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(d) Neither the Company nor any of its Subsidiaries is party to, bound
by or has an obligation under any Tax allocation, Tax indemnity, or Tax
sharing agreement or similar contract arrangement. Neither the Company nor
any of its Subsidiaries (i) has been a member of an affiliated group filing
a consolidated Tax Return (other than a group the common parent of which
was the Company), or (ii) has been included in any "consolidated,"
"unitary" or "combined" Tax Return provided for under the law of any
foreign jurisdiction or any state or locality with respect to Taxes for any
taxable period for which the statute of limitations has not expired (other
than a group the common parent of which was the Company), or (iii) has any
liability for the Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract, agreement to indemnify or otherwise. Neither the Company nor any
of its Subsidiaries has any obligation by contract, agreement, arrangement
or otherwise to permit any person, other than the Company and its
Subsidiaries, to use the benefit of a refund, credit or offset of Tax of
any of the Company and its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of section
897(c)(2) of the Code during the period specified in
section 897(c)(1)(A)(ii) of the Code.
(f) Neither the Company nor any of its Subsidiaries has filed (or will
file prior to any Closing) a consent under section 341(f) of the Code.
(g) The Company has not applied for, been granted, or agreed to any
accounting method change for which it will be required to take into account
any adjustment under Section 481 of the Code or any similar provision of
the Code or the corresponding tax laws of any nation, state or locality.
SECTION 3.16. Environmental Matters.
(a) The Company and its Subsidiaries are in compliance in all material
respects with all applicable federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata, and natural resources
(together "Environmental Laws" and including, without limitation, laws and
regulations relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants, contaminants, wastes, toxic or hazardous
substances or wastes, petroleum and petroleum products, asbestos or
asbestos-containing materials, polychlorinated biphenyls, lead or lead-
based paints or materials, or radon ("Materials of Environmental
Concern")), or otherwise relating to the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern, or the preservation of the
environment or mitigation of adverse effects thereon and each law and
regulation with regard to record keeping, notification, disclosure, and
reporting requirements respecting Materials of Environmental Concern. The
Company and its Subsidiaries possess all permits and other governmental
authorizations required under all applicable Environmental Laws, and are in
compliance in all material respects with the terms and conditions thereof.
(b) The Company and its Subsidiaries have not received any communication
(written or oral), whether from a Governmental Authority, citizens group,
employee or otherwise, that alleges that the Company or any of its
Subsidiaries are not in full compliance with any Environmental Laws and, to
the best knowledge of the Company, there are no circumstances that may
prevent or interfere with such full compliance in the future.
(c) There is no claim, action, written or oral notice or cause of action
pending or, to the best knowledge of the Company, any investigation or
notice of violation threatened (together, "Environmental Claim") by any
person or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from
(a) the presence, or release into the environment, of any Material of
Environmental Concern at any location, whether or not owned, leased or
operated by the Company or any of its Subsidiaries or (b) circumstances
forming the basis
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of any violation, or alleged violation, of any Environmental Law, that in
either case is pending or threatened against the Company, or any of its
Subsidiaries or against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has retained or
assumed either contractually or by operation of law.
(d) To the best knowledge of the Company, there are no past or present
actions, activities, circumstances, conditions, events or incidents,
including, without limitation, the release, emission, discharge, presence
or disposal of any Material of Environmental Concern, that could form the
basis of any Environmental Claim against the Company or any of its
Subsidiaries or, to the Company's and any of its Subsidiaries' best
knowledge, against any person or entity whose liability for any
Environmental Claim the Company or any of its Subsidiaries has retained or
assumed either contractually or by operation of law.
(e) Without in any way limiting the generality of the foregoing, (i)
there are no on-site or off-site locations where the Company or any of its
Subsidiaries has (previously or currently) stored, disposed or arranged for
the disposal of Materials of Environmental Concern, (ii) there are no
underground storage tanks located on any property owned, leased, operated
or controlled by the Company or any of its Subsidiaries, (iii) there is no
asbestos contained in or forming part of any building, building component,
structure or office space owned, leased, operated or controlled by the
Company or any of its Subsidiaries, and (iv) there are no PCBs or PCB-
containing items are used or stored at any property owned, leased, operated
or controlled by the Company or any of its Subsidiaries.
(f) The Company and its Subsidiaries have provided to the Purchaser all
assessments, reports, data, results of investigations or audits, and other
information that is in the possession of or reasonably available to the
Company or any of its Subsidiaries regarding environmental matters
pertaining to the environmental condition of the business of the Company or
any of its Subsidiaries, or the compliance (or noncompliance) by the
Company or any of its Subsidiaries with any Environmental Laws.
(g) Neither the Company nor any of its Subsidiaries is required by
virtue of the transactions set forth herein and contemplated hereby, or as
a condition to the effectiveness of any transactions contemplated hereby,
(i) to perform a site assessment for Materials of Environmental Concern,
(ii) to remove or remediate Materials of Environmental Concern, (iii) to
give notice to or receive approval from any Governmental Authority, or (iv)
to record or deliver to any person or entity any disclosure document or
statement pertaining to environmental matters.
SECTION 3.17. Intellectual Property.
(a) Schedule 3.17(a) sets forth, for the Intellectual Property owned by
the Company or any Subsidiary, a complete and accurate list of all U.S. and
foreign (i) patents and patent applications; (ii) trademark registrations
(including Internet domain registrations), trademark applications, and
material unregistered trademarks; (iii) copyright and mask work
registrations, copyright and mask work applications, and material
unregistered copyrights; and (iv) all Software (other than readily
available "off-the-shelf" commercial software programs having an
acquisition price of less than $5,000) which are owned, licensed, or
leased, by the Company or any Subsidiary, identifying which Intellectual
Property is owned, licensed, or leased, as the case may be. The
Intellectual Property constitutes all the intellectual property necessary
to operate the business of the Company and its Subsidiaries as of the
Closing Date in substantially the manner in which it is currently operated.
To the extent indicated on Schedule 3.17(a), the Intellectual Property has
been duly registered in, filed in or issued by the United States Patent and
Trademark Office, United States Copyright Office, a duly authorized and
appropriate domain name registrar, the appropriate offices in the various
states of the United States and the appropriate offices of other
jurisdictions (foreign and domestic), and each such registration, filing
and issuance remains in full force and effect as of the Closing Date.
(b) Schedule 3.17(b) sets forth a complete and accurate list of all
material oral or written agreements (whether between the Company or a
Subsidiary and third parties or inter-corporate) to which the Company or
any Subsidiary is a party or otherwise bound, (i) granting or obtaining any
right to use or practice any rights under any Intellectual Property (other
than licenses for readily available "off-the-shelf" commercial
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software programs having an acquisition price of less than $5,000), or (ii)
restricting the Company's or any Subsidiary's right to use any Intellectual
Property, including, without limitation, license agreements, development
agreements, distribution agreements, settlement agreements, consent to use
agreements, and covenants not to sue (collectively, the "License
Agreements"). The License Agreements are valid and binding obligations of
the Company or a Subsidiary, as applicable, enforceable in accordance with
their terms, and to the Company's knowledge, there exists no event or
condition which will result in a violation or breach of, or constitute
(with or without due notice of lapse of time or both) a default by any
party under any such License Agreement. Except as set forth in Schedule
3.17(b), neither the Company nor any of its Subsidiaries have licensed or
sublicensed its rights in any material Intellectual Property other than
pursuant to the License Agreements. No royalties, honoraria or other fees
are currently payable by the Company or any Subsidiary to any third parties
for the use of or right to use any Intellectual Property except pursuant to
the License Agreements and set forth on Schedule 3.17(b).
(c) The Company or a Subsidiary owns, or to the Company's best knowledge
has a valid right to use, free and clear of all Liens, all of the
Intellectual Property. The Company or a Subsidiary is listed in the records
of the appropriate United States, state, or foreign registry as the sole
current owner of record for each application and registration and has the
exclusive right to file, prosecute and maintain all applications and
registrations with respect to the Intellectual Property that is listed on
Schedule 3.17(a).
(d) The Intellectual Property owned by the Company or any Subsidiary
and, to the Company's knowledge, any material Intellectual Property
licensed to the Company or any Subsidiary, has not been canceled, expired,
abandoned or otherwise terminated and all renewal fees in respect thereof
have been duly paid, and to the Company's knowledge is valid and
enforceable.
(e) Neither the Company nor any of its Subsidiaries has received any
written notice or claim and there is no pending or, to the best of the
Company's knowledge, threatened claim, suit, arbitration, interference or
other adversarial or contested proceeding before any court, agency,
arbitral tribunal, or registration authority in any jurisdiction (foreign
or domestic) involving the Intellectual Property owned by the Company or
its Subsidiaries, or, to the best of the Company's knowledge, the material
Intellectual Property licensed to the Company or any Subsidiary, alleging
that the activities or the conduct of the Company's or any Subsidiary's
businesses infringe upon, dilute, violate or constitute the unauthorized
use, misuse or misappropriation of the intellectual property rights of any
third party or challenging the Company's or any Subsidiary's ownership,
use, validity, enforceability or registrability of any Intellectual
Property. There are no settlements, forebearances to sue, consents,
judgments, or orders or similar obligations to which the Company or any
Subsidiary is a party other than the License Agreements which (i) restrict
the Company's or any Subsidiary's right to use any Intellectual Property,
(ii) restrict the Company's or any Subsidiary's businesses in order to
accommodate a third party's intellectual property rights or (iii) permit
third parties to use any Intellectual Property owned by the Company or any
Subsidiary. To the best knowledge of the Company, neither the Company nor
any of its Subsidiaries know of any valid basis for any such claims.
(f) The conduct of the Company's and any Subsidiary's business as
currently conducted or planned to be conducted does not infringe upon
(either directly or indirectly such as through contributory infringement or
inducement to infringe) any intellectual property rights owned or
controlled by any third party. To the Company's knowledge, no third party
is misappropriating, infringing, diluting or violating any Intellectual
Property owned by the Company or any Subsidiary and no such claims, suits,
arbitrations or other adversarial proceedings have been brought or
threatened against any third party by the Company or any Subsidiary.
(g) The Company and each Subsidiary take reasonable measures to protect
the confidentiality of its Trade Secrets, including requiring their
employees and other parties having access thereto to execute written non-
disclosure agreements. To the best of the Company's knowledge, no Trade
Secret of the Company or its Subsidiaries has been disclosed or authorized
to be disclosed to any third party other than pursuant to a non-disclosure
agreement. To the best of the Company's knowledge, no party to any non-
disclosure
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agreement relating to its Trade Secrets is in breach or default thereof.
The Purchaser has been provided with a copy of the Company's form of non-
disclosure agreement and the non-disclosure agreements referred to in this
clause (g) contain substantially the same terms and conditions as the form
of non-disclosure agreement.
(h) No current or former partner, director, officer, or employee of the
Company or any Subsidiary (or any of their respective predecessors in
interest) will, after giving effect to the transactions contemplated
herein, directly own or retain any rights to use any of the Intellectual
Property owned or used by the Company or any Subsidiary.
(i) With respect to the Software set forth in Schedule 3.17(a) which is
owned by the Company, such Software was either developed (i) by employees
of the Company or any Subsidiary within the scope of their employment or
(ii) by independent contractors who have assigned their rights to the
Company or any Subsidiary pursuant to signed, written agreements.
(j) Except as set forth in Schedule 3.17(a), for the twelve month period
prior to the Closing Date, the Internet domain names and URL's of the
Intellectual Property (together with any content and other materials
accessible and/or displayed thereon, the "Sites") direct and resolve to the
appropriate Internet protocol addresses and are and have been maintained
and accessible to Internet users on those certain computers used by the
Company to make the Sites so accessible (the "Server") approximately
twenty-four (24) hours per day, seven (7) days per week ("24/7") and are
and have been operational for downloading content from the Server on a 24/7
basis. The Company has fully operational back-up copies of the Sites (and
all related software, databases and other information), made from the
current versions of the Sites as accessible to Internet users on the Server
(and copied directly therefrom) which copies will have been made at least
every two weeks from the date hereof until the Closing Date. Such back-up
copies are kept in a safe and secure environment, fit for the back-up of
media, and are not located at the same location of the Server. The Company
has no reason to believe that the Sites will not operate on the Server or
will not continue to be accessible to Internet users on a 24/7 basis prior
to, at the time of, and after the Closing Date.
(k) The Trademarks listed on Schedule 3.17(a), for which the Company or
any Subsidiary has obtained or applied for a registration have been
continuously used in the form appearing in, and in connection with the
goods and services listed in, their respective registration certificates,
and are all the Trademarks that are material to the Company and its
Subsidiaries. To the knowledge of the Company, there has been no prior use
of such Trademarks by any third party which would confer upon said third
party superior rights in such Trademarks. The Company and its Subsidiaries
have undertaken reasonable policing of such Trademarks against third party
infringement.
(l) All material Software and systems used by the Company and each
Subsidiary are Year 2000 Compliant. As used herein, "Year 2000 Compliant"
and "Year 2000 Compliance" shall mean for all dates and times, including,
without limitation dates and times after December 31, 1999 and in the
multi-century scenario, when used on a stand-alone system or in combination
with other software or systems: (i) the application system functions and
receives, processes, manipulates and calculates dates, times and date-
related data correctly without abnormal results; (ii) there is no century
ambiguity; (iii) all reports and displays are sorted correctly; and (iv)
leap years are accounted for and correctly identified (including, without
limitation, that 2000 is recognized as a leap year). The Company and each
Subsidiary have obtained written representations or assurances from each
entity that (x) provides material data of any type that includes date
information or which is otherwise derived from, dependent on or related to
date information ("Date Data") to the Company or any Subsidiary, (y)
processes in any way Date Data for the Company or any Subsidiary or (z)
otherwise provides any material product or service to the Company or any
Subsidiary that is dependent on Year 2000 Compliance, that all of such
entity's Date Data and related material software and systems that are used
for, or on behalf of, the Company or any Subsidiary are Year 2000
Compliant. Neither the Company nor any Subsidiary has experienced any
material disruptions to the business of the Company and its Subsidiaries as
a result of a failure by the Company, a Subsidiary, or any third party to
be
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Year 2000 Compliant. The Company and its Subsidiaries have established and
put in place, commercially reasonable contingency plans to address, correct
and otherwise attend to any material problems that may occur with its
material Software and systems as a result of a failure of such Software or
systems to be Year 2000 Compliant.
SECTION 3.18. Registration Rights. Except as set forth on Schedule 3.18,
neither the Company nor any of its Subsidiaries is under any obligation to
register any of its outstanding securities pursuant to the Securities Act.
SECTION 3.19. Insurance. The Company and its Subsidiaries maintain, with
reputable insurers, insurance in such amounts, including deductible
arrangements, and of such a character as is customary for companies engaged in
the same or similar business. All policies of title, fire, liability,
casualty, business interruption, workers' compensation and other forms of
insurance including, but not limited to, directors and officers insurance,
held by the Company and its Subsidiaries as of the date hereof, are in full
force and effect in accordance with their terms. Neither the Company nor any
of its Subsidiaries is in default under any provisions of any such policy of
insurance and neither the Company nor any of its Subsidiaries has received
notice of cancellation of any such insurance.
SECTION 3.20. Contracts.
(a) Schedule 3.20 sets forth a true and complete list of all contracts
and other instruments to which the Company or any of its Subsidiaries is a
party that are material to the business, operations, properties, prospects
or financial condition of any of them (collectively, the "Commitments"),
including without limitation:
(i) any material agreement, contract or commitment relating to the
employment of any person by the Company or any of its Subsidiaries, or
any bonus, deferred compensation, pension, profit sharing, stock
option, employee stock purchase, retirement or other employee benefit
plan;
(ii) any material agreement, indenture or other instrument which
contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock;
(iii) any agreement, contract or commitment relating to capital
expenditures in excess of $100,000 in any fiscal year;
(iv) any agreement to acquire, directly or indirectly, any equity
interest in or assets of any other person (other than purchases of
supplies, inventory, or equipment in the ordinary course of business)
whether or not the transactions contemplated thereby have been
consummated, and under which the Company or any of its Subsidiaries
continues to have any outstanding obligations;
(v) any loan (other than accounts receivable from trade debtors
arising in the ordinary course of business) or advance to (other than
travel or entertainment advances to employees made in the ordinary
course of business), or investment in, any person or any agreement,
contract or commitment relating to the making of any such loan, advance
or investment;
(vi) any agreement relating to indebtedness in excess of $500,000;
(vii) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any other person (other than the
endorsement of negotiable instruments for collection in the ordinary
course of business) in excess of $500,000;
(viii) any material management service, consulting, financial
advisory or any other similar type contract including, without
limitation, any contract with any investment or commercial bank;
(ix) any material agreement, contract or commitment limiting the
ability of the Company or any of its Subsidiaries to engage in any line
of business or to compete with any person;
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(x) any agreement, contract or commitment which involves payments in
excess of $100,000 in any calendar year and is not cancelable without
penalty within 30 days;
(xi) any agreement, contract or commitment for the disposal of a
material amount of assets or properties of the Company or any of its
Subsidiaries (other than sales to customers in the ordinary course of
business);
(xii) any agreement, contract or commitment which is material to the
Company or any of its Subsidiaries and contain a "change in control" or
similar provision;
(xiii) any agreement, contract or commitment relating to any
material joint venture, partnership, strategic alliance or similar
arrangement;
(xiv) any collective bargaining agreement, labor contract or other
written arrangement with any labor union or any employee organization;
(xv) any material agreement, contract or commitment with any
Affiliate; and
(xvi) any other material agreement, contract or commitment.
(b) Each Commitment is in full force and effect on the date hereof.
Neither the Company nor any of its Subsidiaries is in default in respect of
any Commitment, and no event has occurred which, with due notice or lapse
of time or both, would constitute such a default, except for any such
defaults that could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. To the best knowledge of the
Company, no other party to any of the Commitments is in default in respect
thereof, and no event has occurred which, with due notice or lapse of time
or both, would constitute such a default.
SECTION 3.21. Questionable Payments. None of the Company, any of its
Subsidiaries nor, to the Company's knowledge, any employee, agent or
representative of the Company or any of its Subsidiaries acting on their
behalf has, directly or indirectly, made any bribes, kickbacks, illegal
payments or illegal political contributions using corporate funds of the
Company or any Subsidiary or made any illegal payments to obtain or retain
business using corporate funds of the Company or any Subsidiary in violation
of the U.S. Foreign Corrupt Practices Act of 1977.
SECTION 3.22. Accuracy of Information. None of the representations,
warranties or statements of the Company contained in this Agreement or in the
exhibits hereto contains any untrue statement of a material fact or, taken as
a whole together with the SEC Documents, omits to state any material fact
necessary in order to make any of such representations, warranties or
statements not misleading. All information relating to the Company and its
Subsidiaries that may be material to a purchaser for value of the Securities
has been disclosed to the Purchaser and any such information arising on or
after the date hereof will forthwith be disclosed to the Purchaser. Nothing
contained in the schedules hereto could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
SECTION 3.23. Private Offering. None of the Company, any of its
Subsidiaries, nor anyone acting on their behalf, has offered or sold or will
offer or sell any securities, or has taken or will take any other action,
which could reasonably be expected to subject the offer, issuance or sale of
the Securities, as contemplated hereby, to the registration provisions of the
Securities Act.
SECTION 3.24. Split Pea.
(a) On the liquidation of Split Pea Software, Inc. ("Split Pea"), the
Company received good, valid and marketable title to all the assets,
properties and rights of Split Pea, free and clear of any Liens. The
liquidation of Split Pea was effected in accordance with the liquidation
plan approved by the Company, and the shareholders of Split Pea other the
Company received nothing other than the forgiveness of the promissory note
dated December 31, 1998, in favor of the Company as part of the
liquidation. This liquidation of Split Pea was effected in accordance with
Applicable Law.
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(b) The Company owns, licenses, leases or has any right to use or
license the SuRF Software (as defined in that certain Bill of Sale and
Assignment of Assets dated as of December 31, 1998 between the Company and
Split Pea Software, Inc.) and any modifications, enhancements or new
versions thereof. The SuRF Software is not material to the business of the
Company or any of its Subsidiaries and neither the Company nor any of its
Subsidiaries utilizes, relies on, or licenses the SuRF Software in its
business or operations as currently conducted or proposed to be conducted
(other than in connection with the Software License Agreement dated
December 12, 1997, between Coles Myer Ltd. and the Company).
SECTION 3.25. Brokers. The Company and its Subsidiaries and their agents
and representatives have incurred no obligation or liability, contingent or
otherwise, for brokerage or finders' fees, agents' commissions, investment
banking fees, or other similar payment in connection with this Agreement
except fees payable in cash to Wasserstein Perella & Co., Inc. ("Wasserstein")
that do not exceed $6,000,000, pursuant to a letter agreement dated August 3,
1999, as amended by a letter agreement dated April 13, 2000, and Houlihan
Lokey Howard & Zukin Financial Advisors, Inc. ("Houlihan Lokey") that do not
exceed $400,000, pursuant to a letter agreement dated February 14, 2000, as
supplemented by the addendum dated April 4, 2000, correct and complete copies
of which has been delivered to the Purchaser.
SECTION 3.26. Voting and Proxy Agreements. Each of the Voting Agreements
are in full force and effect and constitute a valid and binding obligation of
each of the Key Stockholders, enforceable against each in accordance with its
terms.
SECTION 3.27. Rights Agreement. The Company, with the approval of the
Board, has duly amended the Rights Agreement so as (a) to grant to the
Purchaser a number of rights under such agreement ("Rights") equivalent to the
number that would be associated with the number of shares of Common Stock into
which the shares of Series B Preferred Stock purchased by the Purchaser
hereunder are convertible, as such number may be adjusted from time to time
pursuant to the provisions in the Rights Agreement and the Certificate of
Designation, (b) to grant, upon each issuance of shares of Series B Preferred
Stock as a dividend on the outstanding shares of Series B Preferred Stock, to
the recipient of such dividend, a number of Rights equivalent to the number
that would be associated with the number of shares of Common Stock into which
such shares of Series B Preferred Stock so issued as dividends are
convertible, as such number may be adjusted from time to time pursuant to the
provisions in the Rights Agreement and the Certificate of Designation, and (c)
to exclude the Purchaser and its Affiliates, Associates and Permitted
Transferees from the definition of "Acquiring Person" in the Rights Agreement.
A copy of the Rights Agreement has been furnished to the Purchaser. During
such time as the Purchaser or any of its Affiliates is an owner of any shares
of Series B Preferred Stock, shares of Common Stock into which such shares of
Series B Preferred Stock may have been converted, or warrants to purchase
shares of Common Stock, and while the Rights are outstanding, (i) the Company
shall not amend or supplement the Rights Agreement in any manner that would
result in it or any of its Affiliates, Associates or Permitted Transferees
becoming an Acquiring Person (as defined in the Rights Agreement) or being the
cause or occasion of a Trigger Event (as defined in the Rights Agreement)
occurring, and shall amend or supplement the Rights Agreement as necessary to
ensure that the Purchaser and its Affiliates, Associates or Permitted
Transferees does not so become an Acquiring Person or be the cause or occasion
of a Trigger Event occurring, and (ii) the Company may amend the Rights
Agreement or may adopt a new rights agreement similar to the Rights Agreement
only if (A) such amendment or new agreement provides for the issuance to the
holders of the shares of Series B Preferred Stock (I) of rights identical per
share of Common Stock to those to be issued to holders of other shares of
Common Stock, and (II) of a number of rights with respect to each share of
Series B Preferred Stock equal to the number of shares of Common Stock into
which such shares of Series B Preferred Stock are then convertible, multiplied
by the number of rights to be issued with respect to each such share of Common
Stock, and (B) the Company's amendment, adoption of such new agreement, or of
any amendment or supplement to either thereto, complies with clause (i) (in
the case of an adoption of such new agreement, such new agreement being deemed
an amendment to the Rights Agreement under clause (i)).
SECTION 3.28. Determination of Amount of Capital. The Board of Directors of
the Company has, by resolution, duly resolved in accordance with Section 154
of the DGCL that $7,300 (constituting the aggregate
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par value of the 730,000 shares of Series B Preferred Stock to be issued by
the Company to the Purchaser) shall constitute "capital" and the remainder of
the consideration received by the Company for such shares shall constitute
"surplus" (in each case, as such terms are used in Section 154 of the DGCL).
SECTION 3.29. Fairness Opinion. The Company's Board of Directors has
received oral opinions of each of Wasserstein and Houlihan Lokey that the
proposed consideration to be received by the Company pursuant to this
Agreement is fair to the Company and from a financial point of view. A
complete and correct signed copy of a written opinion confirming each such
oral opinion shall be delivered to the Company on April 17, 2000. Promptly
upon receipt thereof, the Company shall deliver such written opinions to the
Purchaser.
SECTION 3.30. State Takeover Statutes. The Company has taken all necessary
actions to render inapplicable Section 203 of the DGCL to the Purchaser, its
Affiliates, Associates and their transferees. No other takeover statute or
similar statute or regulation of any state is applicable to this Agreement,
the Previously Issued Warrants or the Warrants (including all of the
transactions contemplated hereby and thereby).
SECTION 3.31. Malloy Stock, Options and Note. The Company and William M.
Malloy have executed a Separation Agreement (the "Malloy Agreement") in the
form previously delivered to the Purchaser.
SECTION 3.32. Other Interests. Except for the Company's interest in its
Subsidiaries, or as set forth in Schedule 3.32, neither the Company nor its
Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in, nor is the Company or any of its Subsidiaries subject to
any obligation or requirement to provide for or to make any investment (in the
form of a loan, capital contribution or otherwise) to or in, any person.
SECTION 3.33. Books and Records. The respective minute books of the Company
and its Subsidiaries, to the extent previously made available to the Purchaser
and its representatives, contain, and the respective minutes of books of the
Company and its Subsidiaries made available to the Purchaser after the date
hereof will contain, accurate records of all meetings of, and corporate
actions taken by (including action taken by written consent) the respective
shareholders and Board of Directors of the Company and its Subsidiaries, it
being understood that certain of such minutes are in draft form and are marked
as such. None of the Company or any of its Subsidiaries has any of its
records, systems, controls, data or information recorded, stored, maintained,
operated or otherwise wholly or partly dependent upon or held by any means
(including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and
therefrom) are not under the exclusive ownership and direct control the
Company or its Subsidiaries.
SECTION 3.34. Personal Property. Except for properties and assets reflected
in the Financial Statements, or acquired since December 31, 1999, which have
been sold or otherwise disposed of in the ordinary course of business, each of
the Company and its Subsidiaries has good, valid and marketable title to (a)
all of its owned personal properties and assets (tangible and intangible),
including, without limitation, all of the personal properties and assets
reflected in the Audited Financial Statements, except as may be indicated in
the notes thereto, and (b) all of the personal properties and assets (tangible
or intangible) purchased by the Company and its Subsidiaries since December
31, 1999, in each case free and clear of all Liens, except for Permitted
Liens. All of the tangible personal property owned by each of the Company and
its Subsidiaries is in good operating condition and repair, ordinary wear and
tear excepted, and is adequate and suitable for the purposes for which they
are presently being used.
SECTION 3.35. Accounts Receivable. The amount of all accounts receivable,
unbilled invoices and other debts due or recorded in the respective records
and books of account of the Company and its Subsidiaries as being due to the
Company and its Subsidiaries as of the date hereof (less the amount of any
provision or reserve therefor made in accordance with GAAP in the respective
records and books of account of the Company and its Subsidiaries) are good and
collectible in full in the ordinary course of business; and none of such
accounts receivable or other debts is subject to any counterclaim or set-off
except to the extent of any such provision or reserve. The reserve for
doubtful accounts reflected in the Audited Financial Statements has been
established in
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accordance with GAAP and no receivable which should have been written down or
reserved against in accordance with GAAP has not been written down or reserved
against. There has been no material adverse change since December 31, 1999 in
the amount of accounts receivable or other debts due to the Company and its
Subsidiaries or the allowances with respect thereto, or accounts payable of
the Company and its Subsidiaries, from that reflected in the Audited Financial
Statements.
SECTION 3.36. Inventory. The inventory of the Company and its Subsidiaries
consists of items that are in all material respects good and merchantable and
are of a quality and quantity presently usable in the ordinary course of
business. The inventory is valued (on an average cost basis) at the lower of
cost or market value. All items of the inventory have been properly recorded
on the books and records of the Company (including appropriate provisions for
items which are obsolete, below standard quality or unusable given the current
state of operations of the Company), all in accordance with GAAP. Since
December 31, 1999, none of the Company nor any of its Subsidiaries has changed
the method of valuing its respective inventory.
SECTION 3.37. Product Liability. There are no recalls in progress, or the
best knowledge of the Company, threatened or pending under the Consumer
Products Safety Act, as amended, or any similar act or statute (collectively,
"Consumer Protection Legislation") with respect to any products sold by the
Company or its Subsidiaries, and no report has been filed under any Consumer
Protection Legislation or is required to be filed with respect to any product
sold by the Company or its Subsidiaries.
SECTION 3.38. Copies of Documents. The Company has made available for
inspection and copying by the Purchaser and their advisers, true, complete and
correct copies of (i) all documents referred to in this Article III or in any
schedule hereto, and (ii) execution versions of all documents prepared in
connection with the proposed transaction involving Apollo Investment Fund IV,
L.P., Apollo Overseas Partners IV, L.P., Ares Leveraged Investment Fund, L.P.,
Ares Leveraged Investment Fund II, L.P., Parande, S.A.S., GRP II, L.P., GRP II
Partners, L.P., Pequot Private Equity Fund II, L.P. and Internet Grocery
Partners, L.P.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company as follows:
SECTION 4.1. Authorization; Enforceability; No Violations Authorization;
Enforceability; No Violations.
(a) The Purchaser is duly organized and validly existing in good
standing as a corporation under the laws of its jurisdiction of
organization and has all requisite corporate power and authority to own its
properties and assets and to carry on its business as it is now being
conducted. The Purchaser has the corporate power to execute, deliver and
perform the terms and provisions of the Documents and has taken all
necessary corporate action to authorize the execution, delivery and
performance by it of such Documents and to consummate the transactions
contemplated hereby and thereby. No other corporate proceedings on the part
of the Purchaser is necessary therefor.
(b) The Purchaser has duly executed and delivered this Agreement and
will duly execute and deliver the other Documents to which it is a party.
This Agreement constitutes, and the other Documents to which the Purchaser
is a party, when executed and delivered by the Purchaser, and, assuming the
due execution by the other parties hereto and thereto, will constitute the
legal, valid and binding obligations of the Purchaser, enforceable against
the Purchaser in accordance with their terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights generally
and by general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law).
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SECTION 4.2. Consents. No consent, authorization or order of, or filing or
registration with, any Governmental Authority or other person is required to
be obtained or made by the Purchaser for the execution, delivery and
performance by the Purchaser of this Agreement or any of the other Documents
or the consummation of any of the transactions contemplated hereby or thereby
other than those required for a Closing that will have been made or obtained
on or prior to such Closing.
SECTION 4.3. Private Placement.
(a) The Purchaser understands that (i) the offering and sale of the
Securities by the Company to the Purchaser is intended to be exempt from
registration under the Securities Act pursuant to section 4(2) thereof, and
(ii) there is no existing public or other market for the Securities.
(b) The Securities to be acquired by the Purchaser pursuant to this
Agreement are being acquired for its own account and without a view to
making a distribution thereof in violation of the Securities Act, without
prejudice, however, to its right to sell or otherwise dispose of all or any
part of such Securities in compliance with the provisions of the Securities
Act and applicable state securities or "blue sky" laws.
(c) The Purchaser has sufficient knowledge and experience in financial
and business matters so as to be capable of evaluating the merits and risks
of its investment in the Securities and the Purchaser is capable of bearing
the economic risks of such investment, including a complete loss of its
investment in the Securities.
(d) The Purchaser is an "accredited investor," as such term is defined
in Regulation D under the Securities Act.
(e) The Purchaser acknowledges that the Company and, for purposes of the
opinions to be delivered to the Purchaser pursuant to Section 7.2(n)
hereof, Sidley & Austin will rely on the accuracy and truth of its
representations in this Section 4.3, and the Purchaser hereby consents to
such reliance.
(f) The Purchaser has had the opportunity to ask questions of, and
receive answers from, representatives of the Company concerning the Company
and the terms and conditions of this transaction, as well as to obtain any
information requested by the Purchaser. Any questions raised by the
Purchaser concerning the transaction have been answered to the satisfaction
of the Purchaser. The Purchaser's decision to enter into the transactions
contemplated hereby is based in part on the answers to such questions as
the Purchaser has raised concerning the transaction and on the Purchaser's
own evaluation of the risks and merits of the purchase and the Company's
proposed business activities.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1. Operation of Business.
(a) Except as contemplated hereby or as consented to in writing by the
Purchaser, between the date hereof and the Final Closing Date, and
thereafter for so long as the Purchaser, together with its Affiliates, or
any Permitted Transferee, beneficially owns Threshold Securities, the
Company shall, and shall cause each of the Subsidiaries to: (i) in all
material respects carry on their respective businesses in, and not enter
into any material transaction other than in accordance with, the regular
and ordinary course (including related Internet ventures), (ii) use their
commercially reasonable efforts to preserve intact their business
organizations, (iii) keep available the services of their officers and
employees, and (iv) preserve their relationships with customers, suppliers
and others having material business dealings with them, and (v) maintain,
in all material respects, its assets and properties and keep its books in
accordance with present practices in a condition suitable for its current
use.
(b) Between the date hereof and the Final Closing Date, and thereafter
for so long as the Purchaser, together with its Affiliates, or any
Permitted Transferee, beneficially owns Threshold Securities, except as
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provided for herein, or contemplated hereby, and except as consented to or
approved by the Purchaser, the Company shall not, and shall not permit any
of the Subsidiaries to, take any action that would reasonably be expected
to cause any of the representations and warranties made by the Company in
this Agreement not to remain true and correct as if made at and as of each
Closing Date.
(c) Notwithstanding Section 5.2, the Company and Purchaser shall
cooperate and take all actions reasonably necessary to appoint, within ten
Business Days from the date hereof, as Chief Executive Officer the person
selected by the Purchaser and reasonably satisfactory to the Company, on
terms and conditions mutually satisfactory to the Company and the
Purchaser. The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, without the approval of the
Purchaser, terminate the employment of, amend the employment terms or
reduce the responsibility or authority of the Chief Executive Officer.
(d) The Company shall use its reasonable best efforts to enter into
employment agreements (with incentive compensation plans) with the key
employees who are of vice president level or above identified on the
employment term sheet provided by the Purchaser to Thomas L. Parkinson and
Andrew B. Parkinson on or about the date hereof, on the terms and
conditions set forth in such term sheet.
SECTION 5.2. Negative Covenants. Without limiting the generality of Section
5.1, and, except as otherwise expressly permitted or required by this
Agreement or set forth in Schedule 5.2, between the date hereof and the Final
Closing Date, and thereafter for so long as the Purchaser, together with its
Affiliates, or any Permitted Transferee, beneficially owns Threshold
Securities, the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of the Purchaser, except to
the extent that any of the restrictions set forth below are also restrictions
contained in the Credit Agreement in effect as of the date hereof, the Company
shall only be restricted herein to the extent the Company is restricted from
taking such action in the Credit Agreement.
(a) (i) declare, set aside or pay any dividends on (whether in cash,
shares of capital stock of the Company, or other property), or make any
other actual, constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make any payments to shareholders of the
Company in their capacity as such, except Series B Preferred Stock and
dividends payable to the Company declared by any of the Company's
Subsidiaries, (ii) split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock or (iii) other
than in connection with the liquidation of Split Pea, purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
Subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities or set apart money
or other property for any mandatory purchase or analogous fund for the
redemption, purchase or acquisition of any shares of capital stock of the
Company (other than shares of Series B Preferred Stock that are redeemed
according to their terms);
(b) authorize, issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock or other voting securities or
equity equivalent or any securities convertible into or exchangeable or
exercisable for, or any rights, warrants or options to acquire, any such
shares or voting securities or convertible securities or equity equivalent
or any phantom stock or stock appreciation rights or enter into any
agreement or contract with respect to the sale or issuance of any of such
securities; other than (i) any issuance of Common Stock upon exercise of
any options or warrants outstanding on the date hereof, (ii) the issuance
of stock options pursuant to employee stock option plans providing for the
issuance of shares of Common Stock in an aggregate amount not to exceed
2,600,000 shares and the issuance of Common Stock upon exercise thereof
(iii) the issuance of 500,000 warrants to the McLane Group and the issuance
of Common Stock upon exercise thereof and (iv) the issuance of shares of
Common Stock to employees under the Company's employee stock purchase plan
in effect as of the date hereof.
(c) amend its Charter or Bylaws, the Certificate of Designation or the
Rights Agreement or equivalent governing documents;
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(d) acquire or agree to acquire by merging with, or by purchasing a
material amount of assets of or equity in, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets other than (i) inventory in the ordinary course of business or
assets having a purchase price not in excess of $100,000 individually or
$500,000 in the aggregate;
(e) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets, other than sales of inventory in
the ordinary course of business, or which involve assets having a current
value not in excess of $100,000 individually or $500,000 in the aggregate
or allow any properties or assets (including, without limitation,
Intellectual Property) to become subject to any Lien other than a Permitted
Lien;
(f) incur any indebtedness for borrowed money in excess of $100,000 in
any calendar year or guarantee any such indebtedness or issue or sell any
debt securities or guarantee any debt securities of others, or make any
loans, advances or capital contributions to, or investments, in each case
in excess of $100,000 in the aggregate in any calendar year in, any other
person other than a wholly owned subsidiary, enter into any "keep-well" or
other agreement to maintain any financial state and condition of another
person or enter into any arrangement having the economic effect of any of
the foregoing;
(g) grant any severance or termination pay not currently required to be
paid under existing severance plans or enter into or adopt, or materially
amend any existing, severance plan, agreement or arrangement, or enter into
or materially amend any employee benefit plan except as required by
Applicable Law, or enter into, materially amend or terminate any employment
or consulting agreement, except, in each case as required by Applicable
Law;
(h) enter into any contract or commitment with respect to capital
expenditures other than expenditures within a capital budget approved by
the Purchaser for a calendar year or capital expenditures not in excess of
$100,000 in the aggregate in any calendar year;
(i) except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of this
Agreement or as required under Applicable Law, make a material amendment or
modification of the compensation, bonus or fringe benefits of any of its
directors, officers or employees of the Company or any of its Subsidiaries;
(j) agree to the settlement of any material claim or litigation;
(k) make or rescind any material tax election or settle or compromise
any material tax liability;
(l) except as required by Applicable Law or GAAP, make any change in its
method of accounting or accounting policies;
(m) except as set forth on the Schedules hereto, accelerate the payment,
right to payment or vesting of any bonus, severance, profit sharing,
retirement, deferred compensation, stock option, insurance or other
compensation or benefits;
(n) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations in the ordinary course of business and
consistent with past practice;
(o) enter into any agreement, understanding or commitment that
significantly restrains, limits or impedes the Company's or any of its
Subsidiaries' ability to compete with or conduct any business or line of
business, including, but not limited to, geographic limitations on the
Company's or any of its Subsidiaries' activities;
(p) materially modify, amend or terminate any Commitment or waive any of
its rights or claims thereunder or enter into any contract, agreement,
commitment or arrangement that, if in existence on the date hereof, would
be a Commitment;
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(q) establish, adopt, enter into, amend or terminate any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees,
except, in the case of collective bargaining, pension or retirement
arrangements, or trusts, as required by Applicable Law;
(r) execute any new lease or sublease for real property requiring
payments in excess of $100,000 in any calendar year, or cancel, modify,
terminate or amend any lease or sublease for real property;
(s) close any distribution center, office or other premises of the
Company or any of its Subsidiaries;
(t) adopt or enter into a plan of complete or partial liquidation,
dissolution, winding up, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
Subsidiaries, other than liquidations, dissolutions, mergers,
consolidations, restructurings, recapitalizations, or other reorganizations
involving only wholly-owned Subsidiaries of the Company and no other
person;
(u) plan, announce, implement or effect any reduction in force, lay-off,
early retirement program, severance program or other program or effort
concerning the termination of employment of employees of the Company or its
Subsidiaries;
(v) fail to maintain its Intellectual Property as currently maintained,
or allow any material Intellectual Property to expire or to become
abandoned, canceled or otherwise terminated;
(w) commence or terminate the employment of, or materially amend the
employment terms of, or change the responsibilities or duties of, the
Chairman, Chief Executive Officer, President, Chief Operating Officer,
Chief Financial Officer or Chief Technology Officer or any other executive
officer of the Company;
(x) transfer, license, sell or otherwise dispose of any materially
Intellectual Property or Software;
(y) enter into any agreement, arrangement or transaction with or for the
benefit of any person who is an Affiliate of the Company;
(z) in any way change the preferences, rights or powers with respect to
the Series B Preferred Stock, so as to affect the Series B Preferred Stock
adversely;
(aa) create any Subsidiary;
(bb) cause or permit the number of directors of the Company to be
greater than 11;
(cc) take any action including, without limitation, the adoption of any
shareholder rights plan or amendments to its Charter, Bylaws or other
governing documents, which would, directly or indirectly, restrict or
impair the ability of the Purchaser to vote, or otherwise to exercise the
rights and receive the benefits of a stockholder with respect to,
securities of the Company that may be acquired or controlled by the
Purchaser; or
(dd) agree to any restriction on the Company's ability to satisfy its
obligations under the Certificate of Designation to holders of Series B
Preferred Stock or the Company's ability to honor the exercise of any
rights of the holders of the Series B Preferred Stock;
(ee) increase the number of authorized shares of Series B Preferred
Stock or authorize the issuance of or issue any shares of the Series B
Preferred Stock (other than the issuance of additional shares of Series B
Preferred Stock to be paid as dividends on the Series B Preferred Stock
pursuant to the terms of the Certificate of Designation); and
(ff) agree, in writing or otherwise, to take any of the foregoing
actions.
SECTION 5.3. Access to Books and Records. Upon reasonable notice, the
Company shall afford, and shall cause each of the Subsidiaries to afford, to
the Purchaser and the Purchaser's accountants, counsel and representatives
full access to all the Company's and the Subsidiaries' properties, books,
contracts, commitments,
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records (including, but not limited to, tax returns), employees, customers,
suppliers and accountants and, shall furnish promptly to the Purchaser (a) a
copy of each report, schedule and other document filed or received by the
Company or any of the Subsidiaries pursuant to the requirements of federal or
state securities laws, and (b) all other information concerning the Company's
and the Subsidiaries' business, properties and personnel as the Purchaser may
reasonably request, provided that no investigation or receipt of information
pursuant to this Section 5.3 shall affect any representation or warranty of
the Company or the conditions to the obligations of the Purchaser.
SECTION 5.4. Agreement to Take Necessary and Desirable Actions. The Company
shall execute and deliver the Documents and such other documents,
certificates, agreements and other writings and take such other actions as may
be necessary, desirable or reasonably requested by the Purchaser in order to
consummate or implement as expeditiously as practicable the transactions
contemplated hereby.
SECTION 5.5. Compliance with Conditions; Commercially Reasonably
Efforts. The Company shall use its commercially reasonable efforts to cause
all of the obligations imposed upon it in this Agreement to be duly complied
with and to cause all conditions precedent to the obligations of the Company
and the Purchaser to be satisfied. Upon the terms and subject to the
conditions of this Agreement, the Company shall use its commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable consistent with
Applicable Law to consummate and make effective in the most expeditious manner
practicable the transactions contemplated hereby.
SECTION 5.6. Consents and Approvals. The Company shall (a) use its
commercially reasonable efforts to obtain all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all other
persons, firms or corporations required in connection with the execution,
delivery and performance by them of this Agreement, any other Document or any
of the transactions contemplated hereby or thereby, and (b) diligently assist
and cooperate with the Purchaser in preparing and filing all documents
required to be submitted by the Purchaser to any Governmental Authority in
connection with such transactions and in obtaining any governmental consents,
waivers, authorizations or approvals which may be required to be obtained by
the Purchaser in connection with such transactions (which assistance and
cooperation shall include, without limitation, timely furnishing to the
Purchaser all information concerning the Company and its Subsidiaries that
counsel to the Purchaser determines is required to be included in such
documents or would be helpful in obtaining any such required consent, waiver,
authorization or approval).
SECTION 5.7. Stockholder Approval. The Company shall (a) as soon as
practicable, but not later than 30 days after the date hereof, prepare and
file a proxy statement with the Commission with respect to the holding of a
stockholders' meeting (the "Stockholder Meeting") for the purpose of obtaining
stockholder approval ("Stockholder Approval") of, amongst other things, (i)
the issuance of the Series B Preferred Stock and Warrants to the extent
required by Applicable Law and NASD rules and regulations, (ii) the amendment
and restatement of the Company's Certificate of Incorporation in a manner
reasonably satisfactory to the Purchaser and to reflect the corporate
governance provided for herein, and (iii) more generally, if requested by the
Purchaser, the approval of this Agreement, the other Documents and the
transactions contemplated hereby and thereby, (b) promptly call and give
notice of such meeting following the Commission's clearance of such proxy
statement and (c) on or before the fortieth (40th) day following the
Commission's clearance of such proxy statement, convene and hold such meeting.
The Company shall use its commercially reasonable best efforts to obtain such
Stockholder Approval, including, but not limited to, responding promptly to
the Commission's comments in order to obtain clearance of such proxy
statement. The Company shall, through its Board of Directors, recommend to its
stockholders that Stockholder Approval be given, and the Company shall use its
best efforts to cause each member of the Company's Board of Directors and all
other Key Stockholders to vote their shares of Common Stock to approve the
items set forth in clause (a) of this Section 5.7. The Company shall otherwise
use its best efforts to obtain the requisite vote of its stockholders to
obtain the Stockholder Approval. The Company shall afford the Purchaser and
its counsel an opportunity to review and comment upon any description of the
Purchaser or its Affiliates, this Agreement, the other Documents or the
transactions contemplated hereby and thereby set
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forth in such proxy statement (including all drafts or amendments thereto).
The Purchaser shall provide the Company with all necessary information
reasonably requested with respect to itself and its Affiliates solely for
inclusion by the Company in such proxy statement. The Company shall notify the
Purchaser promptly of the receipt of any comments from the Commission or its
staff and of any request by the Commission or its staff for amendments or
supplements to such proxy statement or for additional information and will
supply the Purchaser with copies of all correspondence between the Company or
any of its representatives, on the one hand, and the Commission or its staff,
on the other hand, with respect to such proxy statement. If at any time prior
to such stockholders meeting there shall occur any event that would be
required, under the Exchange Act and the rules and regulations thereunder, to
be set forth in an amendment or supplement to such proxy statement, the
Company will promptly prepare and mail to its stockholders such an amendment
or supplement.
SECTION 5.8. Tax Treatment of Preferred Stock. The Company covenants and
agrees not to take any action inconsistent with the Series B Preferred Stock
being considered common stock for U.S. Federal income tax purposes.
SECTION 5.9. Other Activities of Purchaser. Nothing contained in this
Agreement or any other agreement of the Company shall be deemed to prohibit
the Purchaser or any of its Affiliates from forming or investing in other
entities engaged in activities similar to, or competitive with, those of the
Company, or from competing with the Company or any of its Subsidiaries;
provided, however, in no event shall this provision override any restriction
contained in the Services Agreement.
SECTION 5.10. HSR Act Filings.
(a) As promptly as practicable after the date hereof but in any event no
later than 10 Business Days thereafter, the Company shall file all reports
and documents as may be necessary to comply with the HSR Act. The Company
shall cooperate with and assist the Purchaser and take such action as may
be reasonably required and as permitted under law in connection with such
filings (including cooperating with additional requests for information,
documents and interviews of officers and personnel by either of the
antitrust enforcement agencies).
(b) The Company shall use commercially reasonable efforts to resolve
such objections, if any, as may be asserted under any antitrust law with
respect to the transactions contemplated by this Agreement. If any
administrative, judicial or legislative action or proceeding is instituted
(or threatened to be instituted) challenging any transaction contemplated
by this Agreement as violative of any antitrust law, the Company shall, (i)
cooperate with and assist the Purchaser to contest and resist any such
action or proceeding, and to have vacated, lifted, reversed or overturned
any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) that is in effect and that restricts, prevents or
prohibits consummation of the transactions as contemplated by this
Agreement, including, without limitation, by pursuing all reasonable
avenues of administrative and judicial appeal.
SECTION 5.11. No Solicitation.
(a) From the date hereof until the Closing Date, or the Final Closing
Date if the Purchaser elects to have more than one Closing, the Company
shall not and shall cause its Affiliates and each of their respective
officers, directors, employees, auditors, agents, representatives,
consultants, advisors, investment bankers, attorneys, accountants and other
agents (collectively, "Representatives") not to, directly or indirectly,
(i) initiate, solicit or entertain offers from, negotiate with or in any
manner knowingly encourage, discuss, accept, or consider any proposal of
any other person relating to (w) the acquisition of capital stock of the
Company or any of its Subsidiaries, securities convertible into or
exchangeable for shares of capital stock of the Company or any of its
Subsidiaries, (x) the acquisition of the Company's or any of its
Subsidiaries' assets or business, in whole or in part, whether directly or
indirectly, through purchase, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or otherwise, (y) the
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incurrence of indebtedness for borrowed money by the Company or any of its
Subsidiaries, or (z) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent, delay or dilute
the benefits to the Purchaser of the transactions contemplated hereby,
including, without limitation, by taking any action that would make Section
203 of the DGCL or the Rights Agreement inapplicable to an Alternative
Transaction (other than the transactions contemplated by this Agreement,
sales of inventory in the ordinary course and shares issued upon the
exercise of existing stock options) (any of the foregoing being an
"Alternative Transaction"), (ii) initiate, participate engage in, or agree
to initiate, participate or engage in negotiations or discussions
concerning, or provide to any person or entity any information or data
relating to the Company or any Subsidiary, or otherwise cooperate with or
assist or participate in, facilitating or encouraging, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to
lead to an Alternative Transaction, (iii) in connection with any
Alternative Transaction, require it to abandon, terminate or fail to
consummate the transactions contemplated by this Agreement or the other
Documents, (iv) grant any waiver or release under or amend any standstill,
confidentiality or similar agreement entered into by the Company or any of
its Affiliates or representatives; (v) agree to, approve or recommend any
Alternative Transaction, or (vi) take any other action inconsistent with
the obligations and commitments assumed by the Company pursuant to this
Section 5.11; provided, however, that nothing contained herein shall limit
the ability of the Company to comply with Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act; and provided further that if, in
respect of an offer, proposal or inquiry relating to a possible Alternative
Transaction from a third party or entity made after the date hereof which
has not been solicited or encouraged in violation of clause (i) or (ii)
above, the Board of Directors of the Company determines in good faith,
after consultation with counsel, that its fiduciary duties so require, the
Company and its Representatives may participate or engage in discussions or
negotiations with such third party or entity concerning such Alternative
Transaction, or provide such third party with information or data relating
to the Company or any Subsidiary, in each case for purposes of complying
with its disclosure obligations to its stockholders in connection with the
Stockholders' Meeting. The Company shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations by the
Company, its Affiliates or their respective Representatives with any person
conducted heretofore with respect to any of the foregoing. Without limiting
the foregoing, it is agreed that any violation of the restrictions set
forth in this Section 5.11 by any Representative of the Company or any of
its Affiliates whether or not such person is purporting to act on behalf of
the Company or any of its Affiliates, shall constitute a breach of this
Section 5.11 by the Company.
(b) From the date hereof until the Closing Date, or the Final Closing
Date if the Purchaser elects to have more than one Closing, neither the
Board of Directors of the Company nor any committee thereof shall (i)
withdraw or modify the approval or recommendation by such Board of
Directors or such committee of this Agreement, the other Documents or any
of the transactions contemplated hereby or thereby, (ii) approve or
recommend any Alternative Transaction or (iii) cause or permit the Company
or any Affiliate to enter into any letter of intent, agreement in principle
or other arrangement or agreement with respect to an Alternative
Transaction.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.11, the Company shall promptly
(but in any event within 24 hours of receipt or occurrence thereof),
(i) advise the Purchaser orally and in writing of any request for
information with respect to, or any inquiry or proposal regarding any
Alternative Transaction, or of any information received from Tribune or
Nevis in respect of a request for information directed to such stockholder
with respect to, or of any inquiry or proposal regarding any Alternative
Transaction, (ii) advise the Purchaser of the terms and conditions of such
request or inquiry, and (iii) provide to the Purchaser copies of any
written documentation material to understanding or evaluating such request,
Alternative Transaction or inquiry (the "Alternative Transaction
Documentation") which is received by the Company from the person (or from
any Representatives of such person) making such Alternative Transaction,
inquiry or proposal and the identity of the person making any such request,
Alternative Transaction or such inquiry or proposal. The Company shall (x)
keep the Purchaser fully informed of the status and material details
(including amendments or proposed amendments) of any such request or
Alternative Transaction, (y) keep the Purchaser fully informed as to the
material details of
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any information requested, and (z) provide to the Purchaser within one day
of receipt thereof all copies of any additional Alternative Transaction
Documentation received by the Company from the person (or from any
Representatives of such person) making such Alternative Transaction,
inquiry or proposal. The Company shall promptly provide to the Purchaser
any information concerning the Company provided to any other person in
connection with any Alternative Transaction which was not previously
provided to the Purchaser.
(d) The Company shall immediately request each person which has
heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any portion thereof to return or
destroy all confidential information heretofore furnished to such person by
or on behalf of the Company and the Company shall use its commercially
reasonable efforts to have such information returned.
SECTION 5.12. Use of Proceeds. The Company shall use the proceeds from the
sale of Securities hereunder first to repay any indebtedness owing pursuant to
the Credit and Security Agreements and thereafter for the development of
distribution facilities, advertising and marketing expenses and general
corporate purposes.
SECTION 5.13. Reduction of Capital. In the event that at any time the
Company has insufficient "surplus" and "net profits" required under Section
170 of the DGCL to declare dividends on the shares of Series B Preferred Stock
in accordance with the terms of the Certificate of Designation, the Company
shall reduce its capital by transferring a portion of the capital to surplus
to the maximum extent permitted under Section 244 of the DGCL.
SECTION 5.14. Amendment of Bylaws. Prior to first Closing Date, or if there
is only one Closing, the Final Closing Date, the Company shall amend its
bylaws in a manner reasonably satisfactory to the Purchaser and to reflect the
corporate governance provided for herein.
SECTION 5.15. Transfer Agent; CUSIP. Prior to the effective date of any
registration statement covering the Securities, the Company shall (i) appoint
a transfer agent and registrar for the Securities, (ii) provide the transfer
agent with printed certificates for the Securities in a form eligible for
deposit with The Depository Trust Company, and (iii) provide a CUSIP number
for the Securities.
SECTION 5.16. Notification of Certain Matters. The Company shall promptly
notify the Purchaser of the occurrence or non-occurrence of any fact or event
which has caused or could reasonably likely cause (x) any representation or
warranty made by it in this Agreement or the other Documents to be untrue or
inaccurate in any material respect at any time or (y) any covenant, condition
or agreement under this Agreement or the other Documents not to be complied
with or satisfied by it in any material respect; provided, however, that no
such notification shall modify the representations or warranties of any party
or the conditions to the obligations of any party hereunder. The Company shall
promptly notify the Purchaser of any notice or other communication from any
third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement or
the other Documents.
SECTION 5.17. Malloy Shares. If the Company purchases less than 311,891
shares of Common Stock from William M. Malloy, the Company and the Purchaser
agree to equitably adjust (i) the conversion price of the Shares, such that on
conversion of all the Shares only, the Purchaser shall beneficially own 51% of
the aggregate issued and outstanding shares of Common Stock, and (ii) the
exercise price of the Warrants, such that on exercise of all the Warrants
only, the Purchaser shall beneficially own 25% of the aggregate issued and
outstanding shares of Common Stock.
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ARTICLE VI
COVENANTS OF THE PURCHASER
SECTION 6.1. Agreement to Take Necessary and Desirable Actions. The
Purchaser agrees to execute and deliver each of the Documents and such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary, desirable or reasonably requested by the Company
in order to consummate or implement as expeditiously as practicable the
transactions contemplated hereby.
SECTION 6.2. Compliance with Conditions; Commercially Reasonable
Efforts. The Purchaser will use its commercially reasonable efforts to cause
all of the obligations imposed upon it in this Agreement to be duly complied
with, and to cause all conditions precedent to the obligations of the Company
and the Purchaser to be satisfied. Upon the terms and subject to the
conditions of this Agreement, the Purchaser shall use its commercially
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable consistent with
Applicable Law to consummate and make effective in the most expeditious manner
practicable the transactions contemplated hereby.
SECTION 6.3. HSR Act Filings.
(a) As promptly as practicable after the date hereof but in any event no
later than 10 Business Days thereafter, the Purchaser shall file all
reports and documents as may be necessary to comply with the HSR Act. The
Purchaser shall cooperate with and assist the Company and take such action
as may be reasonably required and as permitted under law in connection with
such filings (including cooperating with additional requests for
information, documents and interviews of officers and personnel by either
of the antitrust enforcement agencies).
(b) The Purchaser shall use commercially reasonable efforts to resolve
such objections, if any, as may be asserted under any antitrust law with
respect to the transactions contemplated by this Agreement. If any
administrative, judicial or legislative action or proceeding is instituted
(or threatened to be instituted) challenging any transaction contemplated
by this Agreement as violative of any antitrust law, the Purchaser shall
cooperate with and assist the Company to contest and resist any such action
or proceeding, and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary, preliminary
or permanent) that is in effect and that restricts, prevents or prohibits
consummation of the transactions as contemplated by this Agreement,
including, without limitation, by pursuing all reasonable avenues of
administrative and judicial appeal.
SECTION 6.4. Confidential Information. The Purchaser acknowledges that the
information being provided under Section 5.3 may be material non-public
information and hereby covenants and agrees to keep, and cause its Affiliates
and representatives to keep, confidential any information identified by the
Company as confidential, in a writing delivered to the Purchaser unless (a)
such information becomes generally available to the public (other than as a
result of a breach of this provision by the Purchaser), (b) such information
was available to the Purchaser on a non-confidential basis from a source
(other than the Company or its representatives) that, to the Purchaser's
knowledge, is not and was not prohibited from disclosing such information to
the Purchaser by a contractual, legal or fiduciary obligation or (c) the
Purchaser is required by law to disclose such information; provided, that in
an event specified in clause (c), the Purchaser shall provide the Company with
prompt prior written notice of such required disclosure, the Purchaser shall
disclose only that portion of the confidential information that the Purchaser
is advised by counsel is legally required. The Purchaser agrees that it will
comply, and will cause its representatives to comply, with all U.S. securities
laws applicable to the receipt of material non-public information and
restrictions on trading in securities when in possession of such information.
The Purchaser agrees not to use any confidential information in violation of
any law.
SECTION 6.5. Notification of Certain Matters. From the date hereof through
the Final Closing Date, the Purchaser shall promptly notify the Company of the
occurrence or non-occurrence of any fact or event of which the Company is
aware which has caused or could reasonably likely cause (x) any representation
or
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warranty made by it in this Agreement or the other Documents to be untrue or
inaccurate in any material respect at any time or (y) any covenant, condition
or agreement under this Agreement or the other Documents not to be complied
with or satisfied by it in any material respect; provided, however, that no
such notification shall modify the representations or warranties of any party
or the conditions to the obligations of any party hereunder. The Purchaser
shall promptly notify the Company of any notice or other communication from
any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement or
the other Documents.
SECTION 6.6. Restrictions on Mergers. During the one-year period beginning
on the date hereof, the Purchaser, and its Affiliates, and its Permitted
Transferees shall not propose, or vote any securities in favor of, a merger,
reorganization, recapitalization or other similar transaction involving the
Company that would result in the elimination of the outstanding shares of
Common Stock other than the shares held beneficially by the Purchaser, its
Affiliates and its Permitted Transferees, unless any such transaction is
approved by an independent committee of the Board of Directors of the Company.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
SECTION 7.1. Conditions to the Company's Obligations. The obligations of
the Company hereunder required to be performed on each Closing Date with
respect to the Purchaser shall be subject, at its election, to the
satisfaction or waiver (which waiver, if so requested by the Purchaser, shall
be made in writing), at or prior to the Closing occurring on such Closing
Date, of the following conditions:
(a) The representations and warranties of the Purchaser contained in
this Agreement shall be true and correct in all material respects on and as
of such Closing Date.
(b) The Purchaser shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in this Agreement, to be performed and complied with
by the Purchaser at or prior to such Closing Date.
(c) All material governmental and regulatory approvals and clearances
and all third-party consents necessary for the consummation of the
transactions contemplated by the Documents to occur on such Closing Date
shall have been obtained and shall be in full force and effect, the
consummation of such transactions does not and will not contravene any
Applicable Law, except to the extent any contravention or contraventions,
individually or in the aggregate, could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(d) The Purchaser shall have delivered to the Company a certificate,
executed by the Purchaser or on its behalf by a duly authorized
representative, dated as of such Closing Date, certifying that each of the
conditions specified in this Section 7.1 has been satisfied with respect to
the Purchaser.
(e) All documents, instruments, agreements and arrangements relating to
the transactions contemplated by the Documents shall be reasonably
satisfactory to the Company, shall have been executed and delivered by the
parties thereto and no party to any of the foregoing (other than the
Company) shall have breached any of its material obligations thereunder.
SECTION 7.2. Conditions to The Purchaser's Obligations. The obligations of
the Purchaser hereunder required to be performed at each Closing shall be
subject, at its election, to the satisfaction or waiver (which waiver, if so
requested by the Company, shall be made in writing), at or prior to the
Closing, of the following conditions:
(a) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects when made and
on and as of such Closing Date.
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(b) The Company shall have performed in all material respects all
obligations and agreements, and complied in all material respects with all
covenants, contained in this Agreement and the other Documents, to be
performed and complied with by it at or prior to such Closing Date, and
there shall exist no Event of Default (as defined in the Credit Agreement)
under the Credit and Security Agreements.
(c) The Company shall have entered into or caused to become effective
such agreements and governing documents as the Purchaser may deem
reasonably appropriate to effect the provisions of the Voting Agreement,
and each of such agreements and documents shall be in full force and
effect.
(d) The Company's Board of Directors shall consist of not more than 11
directors. If immediately following the subject Closing, the Purchaser
would beneficially own securities of the Company that constitute, or if
exercised, exchanged or converted into Common Stock would constitute, at
least 33 1/3% of the aggregate issued and outstanding Common Stock,
provided that the Purchaser has given notice to the Company at least two
Business Day's prior to a Closing (without duplication) of its Purchaser
Nominees, the Company shall have appointed a total of six of such Purchaser
Nominees (or such lessor number as provided by the Purchaser) to serve as
members of the Company's Board of Directors.
(e) All Documents and all documents, instruments, agreements and
arrangements relating to the transactions contemplated by the Documents
shall be reasonably satisfactory to the Purchaser, shall have been executed
and delivered by the parties thereto, be in full force and effect and no
party to any of the foregoing (other than the Purchaser) shall have
breached any of its material obligations thereunder.
(f) (i) Since December 31, 1999, no change, occurrence or development
shall have occurred, been threatened or become known to the Purchaser that
could reasonably be expected to have a Material Adverse Effect, (ii) the
Purchaser shall not have become aware of any information or other matter
relating to the Company (x) of which the Company (but not the Purchaser)
had knowledge on or prior to the date of this Agreement, (y) that, in the
Purchaser's reasonable judgment, is inconsistent with any information or
other matter relating to the Company disclosed to the Purchaser by the
Company or any of its representatives prior to the date of this Agreement,
and (z) would have been viewed by the Purchaser, in its reasonable
judgment, as having materially and adversely altered the total mix of
information made available to the Purchaser prior to the date of this
Agreement. For purposes of this Section 7.2(f), the Company shall be deemed
to have "knowledge" of a particular fact or other matter if (I) any
individual who is serving, or who has at any time served, as a director,
officer or management-level employee of the Company is actually aware of
such fact or other matter; or (II) a prudent individual serving as a
director, officer or management-level employee of the Company could be
expected to discover or otherwise become aware of such fact or other matter
in the diligent exercise of his or her duties in such capacity. There shall
have been no material adverse development in any pending litigation that in
the reasonable good faith judgment of the board of directors of the
Purchaser, after consultation with legal counsel, could reasonably be
likely to result in a material adverse judgment against the Company
resulting in damages (after taking into account any recoveries under
available insurance) in an amount in excess of $3,000,000.
(g) Since December 31, 1999, the business of the Company shall have been
operated in compliance with all Applicable Laws, except where the failure
to do so could not reasonably be expected to have a Material Adverse
Effect.
(h) There shall be no litigation, proceeding or other action seeking an
injunction or other restraining order, damages or other relief from a
Governmental Authority pending or threatened which, in the reasonable
judgment of the Purchaser, would materially adversely affect the
consummation of the transactions contemplated by the Documents on the terms
contemplated hereby and thereby and there shall be no litigation,
proceeding or other action (including, without limitation, relating to
environmental matters or the Benefit Plans) pending or threatened against
the Company or its Subsidiaries which could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(i) During the seven-calendar-day period ending on such Closing Date,
(A) trading in securities generally on the New York Stock Exchange or the
American Stock Exchange or the over-the-counter market
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shall not have been suspended and minimum prices shall not have been
established on either of such exchanges or such market by such exchange or
by the Commission, and (B) a general banking moratorium shall not have been
declared by Federal or New York or California authorities.
(j) All registration rights agreements with the Company shall have been
amended to provide that no other person will exercise any demand or piggy
back registration rights without the prior written consent of the
Purchaser.
(k) All governmental and regulatory approvals and clearances and all
third-party consents necessary for the consummation of all of the
transactions contemplated by the Documents to occur on such Closing Date
shall have been obtained and shall be in full force and effect, and the
Purchaser shall be reasonably satisfied that the consummation of such
transactions does not and will not contravene any Applicable Law, except to
the extent any contravention or contraventions, individually or in the
aggregate, could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(l) The Company shall have delivered to the Purchaser a certificate,
executed by it or on its behalf by a duly authorized representative, dated
as of such Closing Date, certifying that each of the conditions (other than
any condition the fulfillment of which is subject to the reasonable
satisfaction of the Purchaser) specified in this Section 7.2 has been
satisfied.
(m) Sidley & Austin, counsel to the Company, shall have delivered to the
Purchaser an opinion, dated such Closing Date, addressed to the Purchaser,
substantially in the form attached as Exhibit J hereto.
(n) The Purchaser shall have received delivery of the Securities as set
forth hereunder.
(o) The Company shall have delivered to the Purchaser certificates of
the appropriate public officials to the effect that each of the Purchaser
and its Subsidiaries is a validly existing corporation in good standing in
its jurisdiction of organization dated not more than 5 days prior to the
Closing Date.
(p) The Company shall have delivered to the Purchaser a certificate of
the Secretary of the Company (i) certifying that a true and correct copy of
the Charter, Bylaws and all resolutions of the Board of Directors
authorizing the execution and delivery of this Agreement and each Document
to which the Company is a party and authorizing the performance by the
Company of the transactions contemplated hereby and thereby is attached
thereto and (ii) containing the incumbency and specimen signature of each
of the officers of the Company.
(q) The Company shall have taken all necessary action so that at least
two thirds of the Company's then current Board of Directors shall have
approved the election of the Purchaser Nominees.
(r) William M. Malloy shall not have revoked the Malloy Agreement with
respect to the waiver of discrimination claims contained in such agreement
or if such agreement has been revoked, a substitute agreement containing
substantially similar terms shall have been entered into by William M.
Malloy and the Company.
(s) The Purchaser shall have received a complete and correct signed copy
of the written opinions confirming the oral opinions of Wasserstein and
Houlihan Lokey referred to in Section 3.29.
(t) The Purchaser shall have received such other certificates,
instruments and documents in furtherance of the transactions contemplated
by this Agreement or the other Documents as it may reasonably request.
ARTICLE VIII
INFORMATION; DIRECTORS; RESERVATION OF STOCK
SECTION 8.1. Access to Information. As long as the Purchaser, together with
its Affiliates, or Permitted Transferees, beneficially owns Threshold
Securities, upon the request of the Purchaser, the Company shall afford
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the Purchaser and its accountants, counsel and other representatives full
access to all of the properties, books, contracts, commitments, and records
(including, but not limited to, tax returns), employees, customers, suppliers
and accountants of the Company and its Subsidiaries. The Purchaser will, and
will cause its agents to, conduct any such investigations on reasonable
advance notice, during normal business hours, with reasonable numbers of
persons and in such a manner as not to interfere unreasonably with the normal
operations of the Company and its Subsidiaries.
SECTION 8.2. Information Rights of Purchaser. As long as the Purchaser,
together with its Affiliates, or Permitted Transferees, beneficially owns
Threshold Securities, the Company shall furnish to the Purchaser, the
following:
(a) Monthly Reports. As soon as available, but not later than 30 days
after the end of each fiscal month (or 45 days in the case of the report
for the month of April 2000), beginning with the report for the month of
April 2000, a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such period and consolidated statements of
income of the Company and its Subsidiaries for such period and for the
period commencing at the end of the previous fiscal year and ending with
the end of such period, setting forth, in each case, in comparative form
the corresponding figures for the corresponding period of the preceding
fiscal year, and including comparisons to the budget or business plan and
an analysis of the variances from the budget or plan, all prepared in
accordance with GAAP (except for the absence of footnotes, and quarter-end
and year-end adjustments).
(b) Quarterly Reports. As soon as available, but not later than 45 days
after the end of each quarterly accounting period, (i) a consolidated
balance sheet of the Company and its Subsidiaries as of the end of such
period and consolidated statements of income, cash flows and changes in
stockholders' equity for such quarterly accounting period and for the
period commencing at the end of the previous fiscal year and ending with
the end of such period, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal
year, and including comparisons to the budget or business plan and an
analysis of the variances from the budget or plan, all prepared in
accordance with GAAP, subject to normal year-end adjustments and the
absence of footnote disclosure, and (ii) a report by management of the
Company of the operating and financial highlights of the Company and its
Subsidiaries for such period, which shall include (x) a comparison between
operating and financial results and budget and (y) an analysis of the
operations of the Company and its Subsidiaries for such period.
(c) Annual Audit. As soon as available, but not later than 90 days after
the end of each fiscal year of the Company, audited consolidated financial
statements of the Company and its Subsidiaries, which shall include
statements of income, cash flows and changes in stockholders' equity for
such fiscal year and a balance sheet as of the last day thereof, each
prepared in accordance with GAAP, and accompanied by the report of a "Big
5" firm of independent certified public accountants selected by the
Company's Board of Directors. The Company and its Subsidiaries shall
maintain a system of accounting sufficient to enable its accountants to
render the report referred to in this Section 8.2(c).
(d) Notice of Litigation, Disputes and Adverse Changes. Prompt notice
of:
(i) each material legal action, suit, arbitration or other
administrative or governmental investigation or proceeding (whether
federal, state, local or foreign) instituted or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries
(or of any occurrence or dispute which involves a reasonable likelihood
of any such action, suit, arbitration, investigation or proceeding
being instituted), and
(ii) any other occurrence or change of circumstance relating to the
Company which, in either such case, could reasonably be expected to
materially and adversely affect the Company's condition (financial or
otherwise), properties, assets, liabilities, business or operations
(except for any changes that are the effect or result of economic
factors generally affecting the economy as a whole).
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(e) Miscellaneous. Promptly upon becoming available, each of the
following:
(i) copies of all financial statements, reports, press releases,
notices, proxy statements and other documents sent by the Company or
its Subsidiaries to its stockholders generally or released to the
public and copies of all regular and periodic reports, if any, filed by
the Company or its Subsidiaries with the Commission, any securities
exchange or NASDAQ;
(ii) notification in writing of the existence of any default, which
continues uncured for a period of more than 10 days thereafter, under
any material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of their assets are bound;
(iii) upon request, copies of all reports prepared for or delivered
to the management of the Company or its Subsidiaries by its
accountants; and
(iv) upon request, any other information reasonably requested.
SECTION 8.3. Information Rights. Without duplication of any document or
information provided pursuant to Section 8.2, as long as the Purchaser
beneficially owns any shares of Common Stock, the Company shall provide to the
Purchaser the following:
(a) as soon as available, but not later than 45 days after the end of
each quarterly accounting period, a Quarterly Report on Form 10-Q or, if
the Company does not then file quarterly reports with the Commission, the
documents referred to in Section 8.2(b);
(b) as soon as available, but not later than 90 days after the end of
each fiscal year, an Annual Report on Form 10-K or, if the Company does not
then file annual reports with the Commission, the audited consolidated
financial statements referred to in Section 8.2(c); and
(c) simultaneously with any distribution of any document to the
stockholders of the Company generally, any such document so distributed.
SECTION 8.4. Directors.
(a) At all times, the Company shall use its reasonable best efforts to
ensure that the Company's Board of Directors shall consist of not more than
11 directors.
(b) (i) As of the date hereof, the Company shall have appointed three
Purchaser Nominees to be directors of the Company. (ii) As long as the
Purchaser beneficially owns securities of the Company that constitute, or
if converted into Common Stock would constitute, at least 70% of the
aggregate issued and outstanding Common Stock, the Company shall use its
reasonable best efforts to ensure that a total of seven Purchaser Nominees
are members of the Company's Board of Directors. For the purposes of this
clause (ii), the Previously Issued Warrants and the Warrants shall not be
included in the calculation of the Purchaser's beneficial ownership. (iii)
As long as the Purchaser beneficially owns securities of the Company that
constitute, or if exercised, exchanged or converted into Common Stock would
constitute, at least 33 1/3% but no less than 70% of the aggregate issued
and outstanding Common Stock, the Company shall use its reasonable best
efforts to ensure that a total of six Purchaser Nominees are members of the
Company's Board of Directors. (iv) As long as the Purchaser beneficially
owns securities of the Company that constitute, or if exercised, exchanged
or converted into Common Stock would constitute, at least 10% but no less
than 33 1/3% of the aggregate issued and outstanding Common Stock, the
Company shall use its reasonable best efforts to ensure that a total of
three Purchaser Nominees are members of the Company's Board of Directors.
For the purposes of clauses (iii) and (iv) of this Section 8.4(b), the
Previously Issued Warrants and the Warrants shall be included in the
calculation of the Purchaser's beneficial ownership. Notwithstanding the
foregoing, as long as any loan or commitment is outstanding under the
Credit Agreement, the Company shall use its reasonable best efforts to
ensure that no less than a total of three Purchaser Nominees are members of
the Company's Board of Directors. The Company and the Board of Directors
may not take any action, without due cause, to remove the Purchaser
Nominees serving as directors of the Company.
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(c) The Company shall ensure that the Board of Directors (and the
Company's nominating committee, if any) shall recommend the inclusion of
the Purchaser Nominees such persons in the slate of nominees recommended to
stockholders for election as directors at each annual meeting of
stockholders of the Company.
(d) The Board of Directors shall appoint Purchaser Nominees to serve on
each committee of the Board of Directors in at least the same proportions
that the number of Purchaser Nominees serving on the Board of Directors
bears to the total number of directors then comprising the Board of
Directors, provided, however, that the Company and the Purchaser shall
cooperate in order to comply with any NASD rules or regulations (or the
rules and regulations of any national exchange on which the Company's
Common Stock is traded) relating to director independence on committees.
(e) If at any time, a vacancy is created on the Board of Directors by
reason of the incapacity, death, removal or resignation of any Purchaser
Nominees, then the Board of Directors shall appoint an individual
designated by the Purchaser to fill such vacancy until the next meeting of
stockholders.
(f) The Company shall provide the Purchaser Nominees serving as
directors notice of each meeting of the Board of Directors at the same time
and in the same manner as other members of the Board of Directors.
(g) The Purchaser Nominees serving as directors shall be entitled to
compensation and indemnification rights consistent with those of other
directors of the Company, including, without limitation, any rights to
participate in stock option or similar plans. At all times on and after the
date hereof, the Company shall be a party to and comply with
indemnification agreements (in such form as is currently available to the
Company's directors or such other form mutually satisfactory to the
Purchaser and the Company) with each of the nominees of the Purchaser
serving as directors. The Company shall at all times maintain a directors'
and officers' insurance policy covering the Company's directors and
officers that provides, in the aggregate, at least $10,000,000 of liability
coverage and, in any event, substantially no less coverage than the policy
covering the current directors of the Company as of the date of this
Agreement.
(h) The provisions of this Section 8.4 shall be further effected
pursuant to an amendment to the Company's Bylaws in a form acceptable to
the Purchaser, which shall not be further amended by the Board of Directors
in a manner that, individually or in the aggregate, adversely affects the
Purchaser.
(i) If at any time the Board of Directors shall consist of more than 11
Directors or the number of Purchaser Nominees serving as directors of the
Company (or members of committees) shall be less than the number required
pursuant to this Section 8.4 and the requirement that the Company appoint
such number of Purchaser Nominees as directors of the Company does not
violate Applicable Laws or NASD rules or regulations (or the rules or
regulations of any national exchange on which the Company's Common Stock is
traded), then for all purposes of the Documents, the Company shall be
deemed to have failed to comply in a material respect with its agreements
contained in this Agreement; provided, however, if the number of Purchaser
Nominees is less than the number required pursuant to this Section 8.4
solely because of the resignation, death or incapacity of a Purchaser
Nominee, then the Company shall not have failed to comply with its
agreements contained in this Agreement.
(j) The Purchaser and its Affiliates shall vote the Securities and any
shares of Common Stock it owns in favor of the appointment of the Purchaser
Nominees to the Board of Directors.
SECTION 8.5. Reservation of Common Stock. Prior to any Closing Date, the
Company shall reserve and keep available out of its authorized but unissued
Common Stock, the number of shares required for issuance upon the conversion
of the Series B Preferred Stock and the exercise of the Warrants being
purchased at such Closing (including any additional shares which may become so
issuable by reason of the operation of anti-dilution provisions of the
Certificate of Designation and the Warrants).
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Survival; Indemnification.
(a) All representations, warranties, covenants and agreements (except
covenants and agreements which are expressly required to be performed and
are performed in full on or before a Closing Date) contained in this
Agreement shall be deemed made at each Closing as if made at such time and
shall survive such Closing for two years, except that (i) with respect to
claims asserted pursuant to this Section 9.1 before the expiration of the
applicable representation or warranty, such claims shall survive until the
date they are finally liquidated or otherwise resolved, (ii) Sections 3.10,
3.15 and 3.16 shall survive until the end of the applicable statute of
limitations (as waived, tolled or amended), and (iii) Section 3.2 and this
Section 9.1 shall survive indefinitely. All statements as to factual
matters contained in any certificate, document or other instrument executed
and delivered by the parties pursuant hereto shall be deemed to be
representations, warranties and covenants by such party hereunder. No claim
may be commenced under this Section 9.1 (or otherwise) following expiration
of the applicable period of survival, and upon such expiration the
Indemnifying Party shall be released from all liability with respect to
claims under each such section not theretofore made by the Indemnified
Party. A claim shall be made or commenced hereunder by the Indemnified
Party delivering to the Indemnifying Party a written notice specifying in
reasonable detail the nature of the claim, the amount claimed (if known or
reasonably estimable), and the factual basis for the claim.
(b) (i) The Company agrees to indemnify and hold harmless the Purchaser,
its Affiliates, and their respective officers, directors, employees and
duly authorized agents and each of their affiliates and each other person
controlling the Purchaser or any of their Affiliates within the meaning of
either section 15 of the Securities Act or section 20 of the Exchange Act
and any partner of any of them from and against all losses, claims, damages
or liabilities resulting from any claim, lawsuit or other proceeding by any
person to which any party indemnified under this clause may become subject
which is related to or arises out of (A) the transactions contemplated by
this Agreement and the other Documents, whether or not consummated, (B) any
breach of, or failure to perform any of the representations, warranties,
covenants or agreements made in any of the Documents by the Company or (C)
any action or omission of the Company or any of its Subsidiaries in
connection with the transactions contemplated hereby or by the other
Documents, and will reimburse the Purchaser and any other party indemnified
under this clause for all reasonable out-of-pocket expenses (including,
without limitation, reasonable counsel fees and disbursements) incurred by
the Purchaser or any such other party indemnified under this clause and
further agrees that the indemnification and reimbursements commitments
herein shall apply whether or not the Purchaser or any such other party
indemnified under this clause is a formal party to any such lawsuits,
claims or other proceedings. The foregoing provisions are expressly
intended to cover, without limitation, reimbursement of legal and other
expenses incurred in a deposition or other discovery proceeding.
(ii) Notwithstanding the foregoing clause (i), the Company shall not
be liable to any party otherwise entitled to indemnification pursuant
thereto: (A) in respect of any loss, claim, damage, liability or
expense to the extent the same is determined, in final judgment by a
court having jurisdiction, to have resulted from the gross negligence
or willful misconduct of such party or (B) for any settlement effected
by such party without the written consent of the Company, which consent
shall not be unreasonably withheld.
(c) If a person entitled to indemnity hereunder (an "Indemnified Party")
asserts that any party hereto (the "Indemnifying Party") has become
obligated to the Indemnified Party pursuant to Section 9.1(b), or if any
suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Indemnifying Party may become obligated
to the Indemnified Party hereunder, the Indemnified Party agrees to notify
the Indemnifying Party promptly and to cooperate with the Indemnifying
Party, at the Indemnifying
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Party's expense, to the extent reasonably necessary for the resolution of
such claim or in the defense of such suit, action or proceeding, including
making available any information, documents and things in the possession of
the Indemnified Party which are reasonably necessary therefor.
Notwithstanding the foregoing notice requirement, the right to
indemnification hereunder shall not be affected by any failure to give, or
delay in giving, notice unless, and only to the extent that, the rights and
remedies of the Indemnifying Party shall have been prejudiced as a result
of such failure or delay.
(d) In fulfilling its obligations under this Section 9.1, after
providing each Indemnified Party with a written acknowledgment of any
liability under this Section 9.1 as between such Indemnified Party and the
Indemnifying Party, the Indemnifying Party shall have the right to
investigate, defend, settle or otherwise handle, with the aforesaid
cooperation, any claim, suit, action or proceeding brought by a third party
in such manner as the Indemnifying Party may in its sole discretion deem
appropriate; provided, however, that (i) counsel retained by the
Indemnifying Party is reasonably satisfactory to the Indemnified Party and
(ii) the Indemnifying Party shall not, except with the consent of the
Indemnified Party, enter into any settlement that does not include as an
unconditional term thereof the giving by the person or persons asserting
such claim to all Indemnified Parties of an unconditional release from all
liability with respect to such claim or consent to entry of any judgment.
Notwithstanding anything to the contrary contained herein, the Indemnifying
Party may retain one firm of counsel to represent all Indemnified Parties
in such claim, action or proceeding; provided, however, that in the event
that the defendants in, or targets of, any such claim, action or proceeding
include more than one Indemnified Party, and any Indemnified Party shall
have reasonably concluded, based on the opinion of its own counsel, that
there may be one or more legal defenses available to it which are in
conflict with those available to any other Indemnified Party, then such
Indemnified Party may employ separate counsel to represent or defend it or
any other person entitled to indemnification and reimbursement hereunder
with respect to any such claim, action or proceeding in which it or such
other person may become involved or is named as defendant and the
Indemnifying Party shall pay the reasonable fees and disbursement of such
counsel. Notwithstanding the Indemnifying Party's election to assume the
defense or investigation of such claim, action or proceeding, the
Indemnified Party shall have the right to employ separate counsel at the
expense of the Indemnifying Party and to direct the defense or
investigation of such claim, action or proceeding if (A) in the written
opinion of counsel to the Indemnified Party, use of counsel of the
Indemnifying Party's choice could reasonably be expected to give rise to a
conflict of interest, or (B) the Indemnifying Party shall not have employed
counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party within a reasonable time after notice of the assertion of
any such claim or institution of any such action or proceeding. In all
other situations, the Indemnified Party shall have the right to participate
in the defense or investigation of such claim, action or proceeding if the
Indemnifying Party shall authorize the Indemnified Party to employ separate
counsel at the Indemnifying Party's expense or if the fees and expenses of
counsel for the Indemnified Party shall be borne by the Indemnified Party.
If the Indemnifying Party does not notify the Indemnified Party within
30 days after the receipt of the Indemnified Party's notice of a claim of
indemnity hereunder that it elects to undertake the defense thereof, the
Indemnified Party shall have the right to contest, settle or compromise the
claim but shall not thereby waive any right to indemnity therefor pursuant
to this Agreement.
(e) If for any reason (other than the gross negligence or willful
misconduct referred to in subclause (b)(ii) above) the foregoing
indemnification by the Company is unavailable to any Indemnified Party or
is insufficient to hold it harmless as and to the extent contemplated by
subclauses (b), (c) and (d) above, then the Company shall contribute to the
amount paid or payable by such Indemnified Party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect
the relative benefits received by the Company and its Affiliates, on the
one hand, and the Purchaser and any other applicable Indemnified Party, as
the case may be, on the other hand, as well as any other relevant equitable
considerations.
SECTION 9.2. Notices. All notices, demands, requests, consents, approvals
or other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served, delivered by a reputable air courier
service with
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tracking capability, with charges prepaid, or transmitted by hand delivery or
facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice. Notice shall be
deemed given on the date of service or transmission if personally served or
transmitted by facsimile. Notice otherwise sent as provided herein shall be
deemed given on the next Business Day following delivery of such notice to a
reputable air courier service.
If to the Company, to it at:
Peapod, Inc.
9933 Woods Drive
Skokie, IL 60077
Attention: Andrew Parkinson, Chairman
Facsimile: (847) 583-9495
with a copy (which shall not constitute notice) to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attn: Christine A. Leahy, Esq.
Facsimile: (312) 853-7036
if to the Purchaser:
Koninklijke Ahold N.V.
c/o The Stop and Shop Supermarket Company
1385 Hancock Street
Quincy, MA 02169
Attn: David Kramer, Esq.
Facsimile: (617) 770-6013
and:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
and a copy (which shall not constitute notice) to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Maureen S. Brundage, Esq./John M. Reiss, Esq.
Facsimile: (212) 354-8113
SECTION 9.3. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by, and construed in accordance
with, the laws of the State of New York, and each party hereto submits to the
non-exclusive jurisdiction of the state and federal courts within the County
of New York in the State of New York. Any legal action or proceeding with
respect to this Agreement may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York
and, by execution and delivery of this Agreement, the Company hereby accepts
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the
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aforesaid courts. The Company further irrevocably consents to the service of
process out of any of the aforementioned courts in any action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Company at its address set forth in Section 9.2, such service
to become effective seven days after such mailing. Nothing herein shall affect
the right of the Purchaser to serve process in any of the matters permitted by
law or to commence legal proceedings or otherwise proceed against the Company
in any other jurisdiction. The Company hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 9.4. Termination; Fees.
(a) This Agreement may be terminated in accordance with the next two
sentences. This Agreement may be terminated by (i) by mutual agreement of
the parties at any time, (ii) by either party if the Stockholder Approval
is not obtained on or prior to the seventh month anniversary of the date
hereof, or (iii) by either party, if the Company's stockholders vote
against this Agreement and the transactions contemplated hereby at the
Stockholders' Meeting. Termination pursuant to the foregoing clauses (i),
(ii) or (iii) notwithstanding, Sections 3, 4, (for the purposes of Section
9.1), 5, 6.4, 8 and 9 hereof shall remain in effect. No termination of this
Agreement shall affect any party's liability for willful breach of this
Agreement.
(b) If this Agreement is terminated by the Purchaser in accordance with
clauses (ii) or (iii) of Section 9.4(a), and the Purchaser shall have voted
in favor of this Agreement and the transactions contemplated hereby at the
Stockholders' Meeting, all securities of the Company held by it (and
eligible to vote, it being understood that the Purchaser shall have no
obligation to exercise any Warrants) as of the record date for such
Stockholders' Meeting, on the day next succeeding the date of such
termination, the Company shall (x) reimburse the Purchaser in immediately
available funds for the out-of-pocket expenses of the Purchaser (including,
without limitation, printing fees, filing fees and fees and expenses of its
legal and financial advisors and all fees and expenses payable to any
financing sources) related to this Agreement or the other Documents, the
transactions contemplated hereby and thereby and any related financing and
(y) pay to the Purchaser in immediately available funds an amount equal to
$1,000,000.
SECTION 9.5. Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties or their Affiliates, whether oral or written,
with respect to the subject matter hereof, including, without limitation, the
letter dated April 4, 2000 from the Purchaser to the Company, together with
the letter in response dated April 4, 2000 from the Company to the Purchaser,
and the letter agreement, dated March 28, 2000, entered into by the Company
with Ahold USA, Inc.
SECTION 9.6. Modifications and Amendments. No amendment, modification or
termination of this Agreement shall be binding upon any other party unless
executed in writing by the parties hereto intending to be bound thereby.
SECTION 9.7. Waivers and Extensions. Any party to this Agreement may waive
any right, breach or default which such party has the right to waive, provided
that such waiver will not be effective against the waiving party unless it is
in writing, is signed by such party, and specifically refers to this
Agreement. Waivers may be made in advance or after the right waived has arisen
or the breach or default waived has occurred. Any waiver may be conditional.
No waiver of any breach of any agreement or provision herein contained shall
be deemed a waiver of any preceding or succeeding breach thereof nor of any
other agreement or provision herein contained. No waiver or extension of time
for performance of any obligations or acts shall be deemed a waiver or
extension of the time for performance of any other obligations or acts.
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SECTION 9.8. Titles and Headings; Interpretation. Titles and headings of
sections of this Agreement are for convenience only and shall not affect the
construction of any provision of this Agreement. Where any representation or
warranty contained in this Agreement is expressly qualified by reference to
the best knowledge of the Company, the Company confirms that it has made due
and diligent inquiry as to the matters that are the subject of such
representations and warranties.
SECTION 9.9. Exhibits and Schedules. Each of the annexes, exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
SECTION 9.10. Expenses; Brokers. The Company shall pay or cause to be paid,
whether or not any Closing occurs hereunder, all reasonable out-of-pocket fees
and expenses incurred by the Purchaser and its respective Affiliates, in
connection with the transactions contemplated by this Agreement, the other
Documents and all matters related thereto (including, without limitation, HSR
Act filing fees, and reasonable fees and disbursements of counsel and
consultants). Each of the parties represents to the others that neither it nor
any of its Affiliates has used a broker or other intermediary, in connection
with the transactions contemplated by this Agreement for whose fees or
expenses any other party will be liable and respectively agrees to indemnify
and hold the others harmless from and against any and all claims, liabilities
or obligations with respect to any such fees or expenses asserted by any
person on the basis of any act or statement alleged to have been made by such
party or any of its Affiliates.
SECTION 9.11. Press Releases and Public Announcements. All press releases
and similar public announcements relating to the transactions contemplated by
the Documents shall be made only if mutually agreed upon by the Company and
the Purchaser, except to the extent that such disclosure is, in the opinion of
counsel, required by law or by stock exchange regulation; provided that any
such required disclosure shall only be made by one party, to the extent
consistent with law, after consultation with the other party.
SECTION 9.12. Assignment; No Third Party Beneficiaries. This Agreement and
the rights, duties and obligations hereunder may not be assigned or delegated
by either the Company or the Purchaser without the prior written consent of
the other; provided that the Purchaser may assign or delegate its rights,
duties and obligations hereunder to a Permitted Transferee, provided, however,
to the extent rights in this Agreement are subject to the Purchaser owning a
minimum amount of capital stock of the Company, the Permitted Transferee will
not be entitled to exercise such rights unless it owns such minimum amount of
capital stock. Except as provided in the preceding sentence, any assignment or
delegation of rights, duties or obligations hereunder made without the prior
written consent of the other party hereto shall be void and of no effect. This
Agreement and the provisions hereof shall be binding upon and shall inure to
the benefit of each of the parties and their respective successors and
permitted assigns. This Agreement is not intended to confer any rights or
benefits on any persons that are not party hereto other than as expressly set
forth in Section 9.1.
SECTION 9.13. Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term
or provision hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a
part of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and enforceable.
SECTION 9.14. Counterparts; Facsimile. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument. All
documents and closing deliveries for the transactions contemplated by this
Agreement and the other Documents may be delivered by a party at the Closing
via facsimile; provided, that, the originally executed signature pages and
original documents are delivered to the appropriate parties within two (2)
Business Days following the Closing.
SECTION 9.15. Further Assurances. Each party hereto, upon the request of
any other party hereto, shall do all such further acts and execute,
acknowledge and deliver all such further instruments and documents as may
44
<PAGE>
be necessary or desirable to carry out the transactions contemplated by this
Agreement, including, in the case of the Company, such acts, instruments and
documents as may be necessary or desirable to convey and transfer to the
Purchaser the Shares to be purchased by it hereunder.
SECTION 9.16. Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto of any
other rights or the seeking of any remedies against the other party hereto.
* * *
45
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PEAPOD, INC.
a Delaware corporation
By: /s/ Andrew B. Parkinson
---------------------------
Name: Andrew B. Parkinson
-------------------------
Title: Chairman
-------------------------
KONINKLIJKE AHOLD N.V.
a Netherlands corporation
By: /s/ Ton van Tielraden
----------------------------
Name: Ton van Tielraden
--------------------------
Title: Senior Vice President and
General Counsel
-------------------------
Purchase Agreement
S-1
<PAGE>
SCHEDULE I
Series B Preferred Stock and Warrants to be Purchased
<TABLE>
<CAPTION>
Security Number Purchase Price
-------- ---------- -------------------
<S> <C> <C>
Warrants (Credit Agreement)..................... 3,566,667 $ 100
Shares of Series B Preferred Stock.............. 726,371 $72,637,024
Warrants (Preferred Stock)...................... 32,894,270 No additional price
above price of
Shares of Series B
Preferred Stock
</TABLE>
Purchase Agreement
S I-1
<PAGE>
Exhibit 99.2
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
PEAPOD, INC.
and
KONINKLIJKE AHOLD NV
----------------
Dated as of April 14, 2000
----------------
$20,000,000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
SECTION 1. Amount and Terms of Credit.................................... 1
1.01 Commitment..................................................... 1
1.02 Notice of Borrowing............................................ 1
1.03 Conversions.................................................... 2
1.04 Interest....................................................... 2
1.05 Interest Periods............................................... 2
SECTION 2. Commitment.................................................... 3
2.01 [Reserved]..................................................... 3
Voluntary Termination or Reduction of Unutilized Total
2.02 Commitment..................................................... 3
2.03 Mandatory Prepayments and Commitment Reductions................ 3
SECTION 3. Payments...................................................... 4
3.01 Voluntary Prepayments.......................................... 4
3.02 Method and Place of Payment.................................... 4
3.03 Net Payments................................................... 4
SECTION 4A. Conditions Precedent to Initial Loans........................ 5
4A.01 Execution of Agreement......................................... 5
4A.02 Fees........................................................... 5
4A.03 Officer's Certificate.......................................... 5
4A.04 Opinions of Counsel............................................ 5
4A.05 Adverse Change, etc............................................ 5
4A.06 Litigation..................................................... 6
4A.07 Approvals...................................................... 6
4A.08 Transaction Documents.......................................... 6
4A.09 Previous Bridge Loan; Security Documents....................... 6
4A.10 Security Documents............................................. 6
4A.11 Warrants....................................................... 7
4A.12 Split Pea Software Liquidation................................. 7
SECTION 4B. Conditions Precedent to All Loans............................ 7
4B.01 No Default; Representations and Warranties..................... 7
4B.02 Notice of Borrowing............................................ 7
4B.03 Restrictions on Loans.......................................... 7
4B.04 Security Documents............................................. 7
4B.05 Second Opinion of Counsel...................................... 7
SECTION 5. Representations, Warranties and Agreements.................... 8
5.01 Borrower Status................................................ 8
5.02 Power and Authority............................................ 8
5.03 No Violation................................................... 8
5.04 Litigation..................................................... 8
5.05 Use of Proceeds; Margin Regulations............................ 8
5.06 Approvals...................................................... 9
5.07 Investment Company Act......................................... 9
5.08 Public Utility Holding Company Act............................. 9
5.09 True and Complete Disclosure................................... 9
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
5.10 Financial Condition; Financial Statements; Projections, etc..... 9
5.11 Security Interests.............................................. 10
5.12 Compliance with Statutes, etc................................... 10
5.13 Tax Returns and Payments........................................ 10
5.14 Subsidiaries.................................................... 10
5.15 Representations and Warranties in Transaction Documents......... 10
5.16 Patents, etc.................................................... 10
SECTION 6. Affirmative Covenants.......................................... 11
6.01 Information Covenants........................................... 11
6.02 Books, Records and Inspections.................................. 12
6.03 Payment of Taxes................................................ 12
6.04 Existence; Franchises........................................... 12
6.05 Compliance with Statutes, etc................................... 13
6.06 Good Repair..................................................... 13
6.07 End of Fiscal Years; Fiscal Quarters............................ 13
6.08 Use of Proceeds................................................. 13
6.09 Corporate Formalities........................................... 13
6.10 Compliance with Environmental Laws.............................. 13
6.11 Performance of Obligations...................................... 13
SECTION 7. Negative Covenants............................................. 13
7.01 Business........................................................ 14
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc.......... 14
7.03 Liens........................................................... 14
7.04 Indebtedness.................................................... 15
7.05 Capital Expenditures............................................ 15
7.06 Advances, Investments and Loans................................. 15
7.07 Dividends, etc.................................................. 15
7.08 Transactions with Affiliates.................................... 16
7.09 Prohibition on Creation of Subsidiaries......................... 16
SECTION 8. Events of Default.............................................. 16
8.01 Payments........................................................ 16
8.02 Representations, etc............................................ 16
8.03 Covenants....................................................... 16
8.04 Default Under Other Agreements.................................. 16
8.05 Bankruptcy, etc................................................. 16
8.06 Security Documents.............................................. 17
8.07 Judgments....................................................... 17
8.08 Change of Control............................................... 17
8.09 Transaction Documents........................................... 17
SECTION 9. Definitions.................................................... 17
SECTION 10. Miscellaneous................................................. 23
10.01 Payment of Expenses, etc........................................ 23
10.02 Right of Setoff................................................. 24
10.03 Notices......................................................... 24
10.04 Assignments..................................................... 24
10.05 No Waiver; Remedies Cumulative.................................. 24
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
10.06 Calculations; Computations..................................... 24
10.07 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL; WAIVER OF CERTAIN CLAIMS........................... 25
10.08 Counterparts................................................... 25
10.09 Effectiveness.................................................. 26
10.10 Headings Descriptive........................................... 26
10.11 Amendment or Waiver............................................ 26
10.12 Survival....................................................... 26
</TABLE>
<TABLE>
<C> <S>
SCHEDULE I Existing Liens
SCHEDULE 5.04 Litigation
SCHEDULE 5.10(b) Material Adverse Changes since December 31, 1999
</TABLE>
<TABLE>
<C> <S>
EXHIBIT A Form of Opinion of Sidley & Austin
Form of Amended and Restated Collateral Assignment of Intellectual
EXHIBIT B Property
EXHIBIT C Form of Amended and Restated Security Agreement
</TABLE>
(iii)
<PAGE>
CREDIT AGREEMENT, dated as of April 14, 2000, among PEAPOD, INC., a
Delaware corporation (the "Borrower") and KONINKLIJKE AHOLD NV (the "Lender").
Unless otherwise defined herein, all capitalized terms used herein and defined
in Section 9 are used herein as so defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth herein, the
Lender is willing to make available to the Borrower the credit facilities
provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitment. (a) Subject to and upon the terms and conditions set forth
herein, the Lender agrees to make a revolving loan or revolving loans (each
such term loan a "Loan" and together with any revolving loans made pursuant to
clause (i) of this Section 1.01 collectively, the "Loans") to the Borrower,
which Loans (i) shall be incurred by the Borrower pursuant to one or more
drawings, at any time and from time to time during the period commencing on
the Initial Borrowing Date and ending on the Maturity Date, (ii) shall, unless
the Lender is unable to determine the Eurodollar Rate, at the option of the
Borrower, be incurred and maintained as and/or converted into Base Rate Loans
or Eurodollar Loans, (iii) may be repaid and reborrowed in accordance with the
provisions hereof and (iv) shall not exceed the Commitment in aggregate
principal amount at any one time outstanding.
(b) The Borrower may not (i) incur Loans in excess of $3,000,000 (exclusive
of Loans made to repay the Term Note or other obligations owing to the Lender
or its Affiliates) in principal amount in any calendar month (or such greater
amount as the Lender and the Borrower shall agree), (ii) incur Loans more than
four times in any calendar month and (iii) incur Loans in excess of the amount
of the budgeted cash flow requirements of the Borrower for its operations for
the two week period following the Borrowing thereof, as set forth in a budget
provided by the Borrower to the Lender and reasonably acceptable to the
Lender; provided, however, it being understood that the Lender shall not
object to the amount of the Borrowing request on the Second Borrowing Date to
the extent such request is for an amount not to exceed $1,500,000.
1.02 Notice of Borrowing. (a) Whenever the Borrower desires to incur Loans,
the Borrower shall give the Lender at its Notice Office, prior to 12:00 Noon
(New York time), at least three Business Days' (one Business Day's in the case
of a Borrowing of Base Rate Loans) prior written notice (or telephonic notice
promptly confirmed in writing) of each Borrowing of Loans to be made
hereunder. Each such notice shall specify (i) the aggregate principal amount
of the Loans to be made pursuant to such Borrowing, (ii) the date of such
Borrowing (which shall be a Business Day), (iii) whether the respective
Borrowing shall consist of Base Rate Loans or (to the extent permitted)
Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially
applicable thereto and (iv) the proposed use of the proceeds of such Loans.
The Notice of Borrowing will certify that the use of the proceeds of the Loan,
and the timing of the use thereof, are in accordance with the cash flow budget
for the following two weeks provided by the Borrower to the Lender.
(b) The proceeds of the initial Loans hereunder shall be applied first (i)
to repay all principal, accrued interest and the amounts owing under or
evidenced by the Term Note or (ii) for the acquisition by the Lender of the
Term Note (and in the case of such acquisition, the Term Note shall be deemed
amended, restated and superseded hereby and the amount paid by the Lender to
acquire the Term Note shall constitute a Loan hereunder). The proceeds of the
Loans referred to in this Section 1.02(b) shall be remitted by the Lender
directly to the holder of the Term Note and the Borrower hereby directs such
disposition of such proceeds.
(c) Subject to the terms and conditions of this Agreement and except as
otherwise provided in Section 1.02(b) and elsewhere herein, the Lender shall
make the proceeds of each requested Loan (other than Loans to
1
<PAGE>
repay obligations owing to the Lender or its Affiliates, which may be applied
directly to such obligations) available to the Borrower by 2:00 p.m. (New York
time) on the requested date of such borrowing in immediately available funds
to the Borrower's account at the Northern Trust Company, Chicago, Illinois
pursuant to the following wire transfer instructions: ABA #071000152; For
Credit to 65781; FBO: Peapod, Inc.
1.03 Conversions. The Borrower shall have the option, unless the Lender is
unable to determine the Eurodollar Rate, to convert on any Business Day
occurring on or after the Initial Borrowing Date (but in no event may there be
more than one conversion in any one month) all of the outstanding principal
amount of Loans made pursuant to one or more Borrowings into a Borrowing or
Borrowings of another Type of Loan. In no event may less than all of the Base
Rate Loans be converted to Eurodollar Loans.
1.04 Interest. (a) The unpaid principal amount of each Base Rate Loan shall
bear interest from the date of the Borrowing thereof until the earlier of (i)
the maturity (whether by acceleration or otherwise) of such Base Rate Loan and
(ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to
Section 1.03, at a rate per annum which shall at all times be the Applicable
Base Rate Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear interest
for each interest period thereof from the date of the Borrowing until the
earlier of (i) maturity (whether by acceleration or otherwise) of such
Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate
Loan at a rate per annum which shall at all times be the Applicable Eurodollar
Margin plus the relevant Eurodollar Rate.
(c) All overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable
hereunder shall, in each case, bear interest at a rate per annum equal to the
Base Rate in effect from time to time plus the sum of (i) 2% and (ii) the
Applicable Base Rate Margin, provided that no Loan shall bear interest after
maturity (whether by acceleration or otherwise) at a rate per annum less than
2% plus the rate of interest applicable thereto at maturity. Interest which
accrues under this Section 1.04(c) shall be payable on demand.
(d) Interest shall accrue from and including the date of any Borrowing to,
but excluding the date of, any repayment thereof and shall be payable monthly
in arrears on the last Business Day of each month and on any repayment,
prepayment or conversion (on the amount repaid, prepaid or converted) and at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in accordance with
Section 10.06(b).
(f) The Lender's determination of any interest rate shall, absent manifest
error, be final and conclusive and binding on both parties.
1.05 Interest Periods. (a) At the time the Borrower gives a notice of
borrowing or notice of conversion (which must be given three Business Days
prior to the requested conversion) in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans the Borrower shall have the right to
elect, by giving the Lender written notice thereof (or telephonic notice
promptly confirmed in writing), the Interest Period applicable to such
Borrowing, which Interest Period shall, at the option of the Borrower, be a
one or three month period. Notwithstanding anything to the contrary contained
above:
(i) the initial Interest Period for any Borrowing of Eurodollar Loans
shall commence on the date of such Borrowing (including the date of any
conversion from a Borrowing of Base Rate Loans) and each Interest Period
occurring thereafter in respect of such Borrowing shall commence on the day
on which the next preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
2
<PAGE>
(iii) if any Interest Period would otherwise expire on a day which is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day; and
(iv) no Interest Period shall extend beyond the Maturity Date.
(b) If, prior to the third Business Day prior to the expiration of any
Interest Period, the Borrower has failed to elect a new Interest Period to be
applicable to the respective Borrowing of Eurodollar Loans as provided above,
the Borrower shall be deemed to have elected to convert such Borrowing into a
Borrowing of Base Rate Loans effective as of the expiration date of such
current Interest Period.
SECTION 2. Commitment.
2.01 [Reserved]
2.02 Voluntary Termination or Reduction of Unutilized Total
Commitment. Upon at least two Business Days' prior written notice (or
telephone notice promptly confirmed in writing) to the Lender at its Notice
Office, the Borrower shall have the right, at any time or from time to time,
without premium or penalty, to terminate or partially reduce the unutilized
Commitment in whole or in part.
2.03 Mandatory Prepayments and Commitment Reductions.
(A) Commitment Reductions:
(a) On the date of receipt thereof by the Borrower of Cash Proceeds from
any Asset Sale (other than Asset Sales not exceeding $250,000 in the aggregate
during the term of this Agreement), the Commitment shall be permanently
reduced by an amount equal to 100% of the Net Cash Proceeds from such Asset
Sale.
(b) On the date of the receipt thereof by the Borrower, the Commitment
shall be permanently reduced by an amount equal to 100% of the proceeds (net
of underwriting discounts, commissions and other reasonable costs associated
therewith) of the incurrence of any Indebtedness by the Borrower, other than
Indebtedness permitted by Section 7.04 as in effect on the date hereof.
(c) On the date of the receipt thereof by the Borrower, the Commitment
shall be permanently reduced by an amount equal to 100% of the cash proceeds
(net of underwriting discounts, commissions and other reasonable costs
associated therewith) of any sale or issuance of its equity (other than the
Preferred Stock and proceeds from the exercise of options not to exceed
$250,000 during any fiscal year) and 100% of any amount of cash received by
the Borrower in connection with any contribution to its capital.
(d) On the date of receipt thereof by the Borrower of cash proceeds from
any Recovery Event, the Commitment shall be permanently reduced by an amount
equal to 100% of the proceeds of such Recovery Event (after deducting
reasonable expenses in realizing such proceeds), provided that if the Borrower
intends to use such insurance proceeds or condemnation award to replace or
repair the affected property, the Borrower may use such proceeds or awards
(not exceeding $500,000 in aggregate amount during the term of this Agreement)
to purchase such replacement property or make such repairs within 30 days
after such Recovery Event and shall deliver to the Lender written evidence of
the use of such proceeds or award for such purpose.
(e) The Commitment shall be terminated in full on the earliest to occur of:
(i) the Maturity Date, (ii) if the shareholders of the Borrower disapprove of
the sale of shares pursuant to the Securities Purchase Agreement, 45 days
after such disapproval, (iii) the fourth monthly anniversary of the Effective
Date, if the shareholders of the Borrower fail, within four months after the
Effective Date, to approve or disapprove the sale of securities pursuant to
the Securities Purchase Agreement, or (iv) the fourth monthly anniversary of
the Effective Date, if
3
<PAGE>
the purchase of all securities pursuant to the Securities Purchase Agreement
does not occur on or before such fourth monthly anniversary (other than by
reason of breach by the Purchaser (as defined in the Securities Purchase
Agreement) of its obligation under the Securities Purchase Agreement).
(B) Repayments and Prepayments:
(a) If on any date the aggregate outstanding principal amount of Loans
exceeds the Commitment as then in effect, the Borrower shall repay on such
date the principal of Loans in an aggregate amount equal to such excess.
(b) Notwithstanding anything to the contrary contained elsewhere in this
Agreement all then outstanding Loans shall be repaid in full on the Maturity
Date.
(c) The outstanding Loans shall be prepaid with the net proceeds received
by the Borrower from the issuance of the Preferred Stock, but such prepayment
shall not reduce the amount of the Commitment.
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have the right to prepay
Loans in whole or in part, without premium or penalty, from time to time on
the following terms and conditions: the Borrower shall give the Lender prior
to 12:00 noon (New York time) at the Notice Office at least one Business Day's
prior written notice (or telephonic notice promptly confirmed in writing) of
its intent to prepay the Loans and the amount of such prepayment.
3.02 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments under this Agreement shall be made to the Lender not
later than 12:00 P.M. (New York time) on the date when due and shall be made
in immediately available funds and in lawful money of the United States of
America at the Payment Office. Any payments under this Agreement which are
made later than 12:00 P.M. (New York time) shall be deemed to have been made
on the next succeeding Business Day. Whenever any payment to be made hereunder
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable during such
extension at the applicable rate in effect immediately prior to such
extension.
3.03 Net Payments. (a) All payments made by the Borrower will be made
without setoff, counterclaim or other defense. All such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any
political subdivision or taxing authority thereof or therein with respect to
such payments (but excluding, except as provided in the second succeeding
sentence, any tax imposed on or measured by the net income or net profits of
the Lender pursuant to the laws of the jurisdiction in which it is organized
or the jurisdiction in which the principal office or applicable lending office
of the Lender is located or any subdivision thereof or therein) and all
interest, penalties or similar liabilities with respect to such non-excluded
taxes, levies, imposts, duties, fees, assessments or other charges (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other
charges being referred to collectively as "Taxes"). If any Taxes are so levied
or imposed, the Borrower agrees to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts
due under this Agreement, after withholding or deduction for or on account of
any Taxes, will not be less than the amount provided for herein. If any
amounts are payable in respect of Taxes pursuant to the preceding sentence,
the Borrower agrees to reimburse the Lender, upon the written request of the
Lender, for taxes imposed on or measured by the net income or profits of the
Lender pursuant to the laws of the jurisdiction in which the Lender is
organized or in which the principal office or applicable lending office of the
Lender is located or under the laws of any political subdivision or taxing
authority of any such jurisdiction in which the Lender is organized or in
which the principal office or applicable lending office of the Lender is
located and for any withholding of taxes as the Lender shall determine in good
faith are payable by, or withheld from, the Lender, in respect of such amounts
so paid to or on behalf of the
4
<PAGE>
Lender pursuant to the preceding sentence and in respect of any amounts paid
to or on behalf of the Lender pursuant to this sentence. The Borrower will
furnish to the Lender within 45 days after the date the payment of any Taxes
is due pursuant to applicable law certified copies of tax receipts evidencing
such payment by the Borrower or, if the relevant taxing authority does not
issue such receipts, such other documents of payment as may be reasonably
satisfactory to the Lender. The Borrower agrees to indemnify, defend and hold
harmless the Lender, and reimburse the Lender upon its written request, for
the amount of any Taxes so levied or imposed and paid by the Lender and all
costs and expenses incurred in connection with same including, without
limitation, attorney's fees and interest and penalties on the Taxes.
(b) Nothwithstanding Section 3.03(a), the Borrower shall not be required to
make any payments to the Lender pursuant to Section 3.03(a) unless the Lender
complies with the following certification requirements:
(i) the Lender shall, no later than the Initial Borrowing Date, deliver
to the Borrower two accurate and complete signed originals of Internal
Revenue Service Form W-8ECI or any successor thereto (collectively, "Form
W-8ECI"), or two accurate and complete signed originals of Internal Revenue
Service Form W-8BEN or any successor thereto (collectively, "Form W-8BEN"),
as appropriate, in each case indicating that the Lender is on the date of
delivery thereof entitled to receive all payments under this Agreement free
from withholding of United States federal income tax;
(ii) the Lender shall deliver to the Borrower two further Form W-8ECIs
or Form W-8BENs, as appropriate, on or before the date that any such forms
expire or become obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower
(other than a change in law that renders such forms inapplicable or which
would prevent the Lender from duly completing and delivering any such form)
unless the Lender is precluded from delivering such forms; and
(iii) the Lender shall, to the extent it is legally entitled to do so
and the same would not be disadvantageous to it, promptly upon the
Borrower's reasonable request to that effect, and at the Borrower's cost
and expense, deliver to the Borrower such other forms or similar
documentation as may be required from time to time by any applicable law,
treaty, rule or regulation in order to establish the Lender's exemption
from withholding on payments under this Agreement.
SECTION 4A. Conditions Precedent to Initial Loans. The obligation of the
Lender to make Loans hereunder on the Initial Borrowing Date is subject, at
the time of the making of such Loans, to the satisfaction of each of the
following conditions:
4A.01 Execution of Agreement. On or prior to the Initial Borrowing Date,
this Agreement shall have become effective as provided in Section 10.09.
4A.02 Fees. On the Initial Borrowing Date, the Borrower shall have paid to
the Lender all Fees and expenses (including, without limitation, reasonable
fees and expenses of counsel) agreed upon by such parties to be paid on or
prior to such date.
4A.03 Officer's Certificate. On the Initial Borrowing Date, the Lender
shall have received a certificate dated such date signed by the President or
any Vice President of the Borrower stating that all of the applicable
conditions set forth in Sections 4A.05, 4A.06, 4A.07, and 4A.08 exist or have
been satisfied as of such date.
4A.04 Opinions of Counsel. On the Initial Borrowing Date, the Lender shall
have received an opinion, addressed to the Lender and dated the Initial
Borrowing Date, from Sidley & Austin, special counsel to the Borrower,
covering the matters contained in Exhibit A, which opinion shall be in form
and substance satisfactory to the Lender.
4A.05 Adverse Change, etc. On the Initial Borrowing Date, nothing shall
have occurred (and the Lender shall have not become aware of any facts or
conditions not previously known) which the Lender shall determine (a) has, or
is reasonably likely to have, a material adverse effect on the rights or
remedies of the Lender, or on
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the ability of the Lender to perform its obligations to the Borrower, or (b)
has, or is reasonably likely to have, a Material Adverse Effect.
4A.06 Litigation. On the Initial Borrowing Date, there shall be no actions,
suits or proceedings pending or threatened (a) with respect to this Agreement
or any other Document or the transactions contemplated hereby or thereby or
(b) which the Lender shall determine could reasonably be expected to (i) have
a Material Adverse Effect or (ii) have a material adverse effect on the rights
or remedies of the Lender hereunder or under any other Credit Document.
4A.07 Approvals. On or prior to the Initial Borrowing Date, all material
and necessary governmental and third party approvals intended to be obtained
on or prior to the Initial Borrowing Date in connection with the transactions
contemplated by this Agreement and the other Documents and otherwise referred
to herein or therein shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being taken
by any competent authority which restrains or prevents such transactions or
imposes, in the reasonable judgment of the Lender, materially adverse
conditions upon the consummation of such transactions. Additionally, there
shall not exist any judgment, order, injunction or other restraint issued or
filed or a hearing seeking injunctive relief or other restraint pending or
notified prohibiting or imposing materially adverse conditions upon, or
materially delaying, or making economically unfeasible, the consummation of
the transactions contemplated by this Agreement and the other Documents or
otherwise referred to herein or therein.
4A.08 Transaction Documents. On or prior to the Initial Borrowing Date, the
Borrower and an Affiliate of the Lender shall have executed the Securities
Purchase Agreement, and all of the Transaction Documents required by the terms
of the Securities Purchase Agreement to then be executed and the Borrower
shall be in compliance with all of its obligations thereunder.
4A.09 Previous Bridge Loan; Security Documents. On or prior to the Initial
Borrowing Date, all outstanding amounts owing under the Term Note shall, as
provided in Section 1.02(b), either be (x) repaid in full, and all security
interests and liens relating thereto terminated or assigned to the Lender or
(y) purchased or otherwise obtained by the Lender from such Affiliate (in
which case the Term Note shall be deemed amended and restated by this
Agreement, and be superseded hereby). On the Initial Borrowing Date, the
Borrower shall have no Indebtedness or preferred stock outstanding other than
as permitted by Section 7.04.
4A.10 Security Documents. (a) On the Initial Borrowing Date, the Borrower
shall have duly authorized, executed and delivered an Amended and Restated
Security Agreement in the form of Exhibit C (as modified, supplemented,
extended, renewed, replaced or amended from time to time in accordance with
the terms hereof and thereof, the "Security Agreement") covering all of the
Borrower's collateral described therein, in each case together with:
(i) executed copies of financing statements (Form UCC-1) in appropriate
form for filing under the UCC of each jurisdiction as may be necessary to
perfect the security interests purported to be created by the Security
Agreement;
(ii) certified copies of Requests for Information or Copies (Form UCC-
11), or equivalent reports, each of recent date listing all effective
financing statements that name the Borrower as debtor and that are filed in
the jurisdictions referred to in clause (i) above, together with copies of
such other financing statements that name the Borrower as debtor (none of
which shall cover the collateral described in the Security Agreement);
(iii) evidence of the completion of all other recordings and filings of,
or with respect to, the Security Agreement as may be necessary or, in the
opinion of the Lender, desirable to perfect the security interests intended
to be created by the Security Agreement (including, without limitation,
filings and registrations with respect to copyrights, patents and
trademarks); and
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(iv) evidence that all other actions necessary or, in the opinion of the
Lender, desirable to perfect and protect the security interests purported
to be created by the Security Agreement have been taken;
(b) On the Initial Borrowing Date, the Borrower shall have duly authorized,
executed and delivered a Collateral Assignment of Intellectual Property in the
form of Exhibit B (as modified, supplemented, extended, renewed, replaced or
amended from time to time in accordance with the terms hereof and thereof, the
"Intellectual Property Assignment") covering all of the Borrower's
intellectual property collateral described therein, in each case together
with:
(i) evidence of the completion of all recordings and filings of, or with
respect to, the Intellectual Property Assignment as may be necessary or, in
the opinion of the Lender, desirable to perfect the security interests
intended to be created by the Intellectual Property Assignment (including,
without limitation, filings and registrations with respect to copyrights,
patents and trademarks); and
(ii) evidence that all other actions necessary or, in the opinion of the
Lender, desirable to perfect and protect the security interests purported
to be created by the Intellectual Property Assignment have been taken.
4A.11 Warrants. On or prior to the Initial Borrowing Date, the Lender shall
have received warrants exerciseable into 3,566,667 shares of common stock (at
an exercise price of $3.00 per share and otherwise in the form of Exhibit I to
the Securities Purchase Agreement).
4A.12 Split Pea Software Liquidation. On or before the second Borrowing
Date, Split Pea Software, Inc. shall have been liquidated on terms and
conditions acceptable to the Lender.
SECTION 4B. Conditions Precedent to All Loans. The obligation of the Lender
to make Loans (including Loans on the Initial Borrowing Date) is subject, at
the time of the making of each such Loan, to the satisfaction of the following
conditions:
4B.01 No Default; Representations and Warranties. At the time of each such
Loan and also after giving effect to the incurrence of Loans on such date, (i)
there shall exist no Default or Event of Default, and (ii) all representations
and warranties contained herein and in the other Credit Documents in effect at
such time shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on the date
of such Loan (it being understood and agreed that any representation or
warranty which by its terms is made of a specified date shall be true and
correct in all material respects as of such specified date).
4B.02 Notice of Borrowing. Prior to the making of each Loan, the Lender
shall have received a notice of borrowing meeting the requirements of Section
1.02.
4B.03 Restrictions on Loans. The Borrower shall be in compliance with the
restrictions on the making of Loans described in Section 1.01(b).
4B.04 Security Documents. The Security Documents shall be in full force and
effect.
4B.05 Second Opinion of Counsel. On the Second Borrowing Date, the Lender
shall have received an opinion, addressed to the Lender and dated the Second
Borrowing Date, from Sidley & Austin, special counsel to the Borrower,
covering the creation and perfection of the security interests under the
Security Documents, which opinion shall be in form and substance satisfactory
to the Lender.
The acceptance of the proceeds of each Loan by the Borrower (occurring on
the Initial Borrowing Date and thereafter) shall constitute a representation
and warranty by the Borrower to the Lender that all the conditions specified
in Section 4A (with respect to the Loans on the Initial Borrowing Date) and in
this Section 4B (with respect to Loans on and after the Initial Borrowing
Date) and applicable to such Loans exist as of that time. All
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of the certificates, legal opinions and other documents and papers referred to
in Sections 4A and in this Section 4B, unless otherwise specified, shall be
delivered to the Lender at its Notice Office and shall be in form and
substance reasonably satisfactory to the Lender.
SECTION 5. Representations, Warranties and Agreements. In order to induce
the Lender to enter into this Agreement and to make the Loans provided for
herein, the Borrower makes the following representations and warranties to,
and agreements with, the Lender, all of which shall survive the execution and
delivery of this Agreement and the making of the Loans (with the occurrence of
the Effective Date and the incurrence by the Borrower of the Loans hereunder
on the Initial Borrowing Date being deemed to constitute a representation and
warranty that the matters specified in this Section 5 are true and correct in
all material respects on and as of each such date of such Loan unless such
representation and warranty expressly indicates that it is being made as of
any specific date, in which case such representation and warranty shall be
true and correct in all material respects as of such specific date):
5.01 Borrower Status. The Borrower (i) is a duly organized and validly
existing corporation in good standing under the laws of the jurisdiction of
its organization or formation and has the power and authority to own its
property and assets and to transact the business in which it is engaged and
(ii) has duly qualified and is authorized to do business and is in good
standing in all jurisdictions where it is required to be so qualified and
where the failure to be so qualified which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
5.02 Power and Authority. The Borrower has the power and authority to
execute, deliver and carry out and perform the terms and provisions of the
Documents to which it is a party and has taken all necessary action to
authorize the execution, delivery and performance of the Documents to which it
is a party. The Borrower has duly executed and delivered each Document to
which it is a party and each such Document constitutes the legal, valid and
binding obligation of the Borrower enforceable in accordance with its terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
generally affecting creditors' rights and by equitable principles (regardless
of whether enforcement is sought in equity or at law).
5.03 No Violation. Neither the execution, delivery and performance by the
Borrower of the Documents to which it is a party nor compliance by it with the
terms and provisions thereof, nor the consummation of the transactions
contemplated therein, (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with, or
result in any breach of, any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Security
Documents) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Borrower
pursuant to the terms of any indenture, mortgage, deed of trust, agreement or
other instrument to which the Borrower is a party or by which it or any of its
material property or assets are bound or to which it may be subject or (iii)
will violate any provision of the certificate of incorporation or by-laws (or
equivalent organizational documents) of the Borrower.
5.04 Litigation. Except as set forth in Schedule 5.04 hereto, in regards to
which there have been no material adverse developments since April 14, 2000,
there are no actions, suits or proceedings pending or, to the Borrower's
knowledge, threatened with respect to any Credit Document or with respect to
the Borrower that are reasonably likely to have a Material Adverse Effect or
that could reasonably be expected to have a Material Adverse Effect on the
rights or remedies of the Lender or on the ability of the Borrower to perform
its obligations to them hereunder, under the other Credit Documents to which
it is, or will be, a party. None of the litigation set forth in Schedule 5.04
could reasonably be expected to have a Material Adverse Effect.
5.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all Loans
shall be utilized (i) on the Initial Borrowing Date to effect the refinancing
of the bridge loan described in Section 4A.09 and (ii) after the Initial
Borrowing Date, for general corporate purposes.
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(b) Neither the making of any Loan hereunder, nor the use of the proceeds
thereof, will be used to purchase or carry any Margin Stock or to extend
credit for the purpose of purchasing or carrying any Margin Stock. Neither the
making of any Loan nor the use of the proceeds thereof will violate or be
inconsistent with the provisions of Regulations T, U or X of the Board of
Governors of the Federal Reserve System.
5.06 Approvals. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except for filings
that have been obtained or made on or prior to the Initial Borrowing Date and
which remain in full force and effect on the Initial Borrowing Date), or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with, (i) the
execution, delivery and performance of any Credit Document or (ii) the
legality, validity, binding effect or enforceability of any such Credit
Document.
5.07 Investment Company Act. The Borrower is not an "investment company" or
a company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
5.08 Public Utility Holding Company Act. The Borrower is not a "holding
company," or a "subsidiary company" of a "holding company," or an "affiliate"
of a "holding company" or of a "subsidiary company" of a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
5.09 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by or on behalf of the
Borrower in writing to the Lender for purposes of or in connection with this
Agreement or any transaction contemplated by the Documents is true and
accurate in all material respects on the date as of which such information is
dated or certified and not incomplete by omitting to state any material fact
necessary to make such information (taken as a whole) not misleading at such
time in light of the circumstances under which such information was provided.
There is no fact known to the Borrower or which would be reasonably likely to
have a Material Adverse Effect which has not been disclosed herein or in such
other documents, certificates and statements furnished to the Lender for use
in connection with the transactions contemplated hereby.
5.10 Financial Condition; Financial Statements; Projections, etc. (a) On
and as of the Initial Borrowing Date, on a pro forma basis after giving effect
to the incurrence of Loans and to all Indebtedness incurred, and to be
incurred, and Liens created, and to be created, by the Borrower in connection
therewith, (x) the sum of the assets, at a fair valuation, of the Borrower
taken as a whole will exceed its debts, (y) the Borrower will not have
incurred or intended to, or believe that they will, incur debts beyond their
ability to pay such debts as such debts mature and (z) the Borrower will not
have unreasonably small capital with which to conduct its business. For
purposes of this Section 5.10(a), "debt" means any liability on a claim, and
"claim" means (i) right to payment whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (ii) right to
an equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured. The amount of contingent liabilities at any time shall be
computed as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be expected
to become an actual or matured liability.
(b) Except as set forth in Schedule 5.10(b), since December 31, 1999,
nothing has occurred that has had or could reasonably be expected to have a
Material Adverse Effect.
(c) On and as of the Initial Borrowing Date, the budgets, projections and
pro forma financial information delivered to the Lender prior to the Initial
Borrowing Date have been prepared in good faith and based on reasonable
assumptions, and there are no statements or conclusions in the budgets and
projections which are based upon or include information known to the Borrower
to be misleading in any material respect or which fail to take into account
material information known to the Borrower regarding the matters reported
therein. On the
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Initial Borrowing Date, the Borrower believes that the Projections and pro
forma financial information are reasonable, it being recognized by the Lender,
however, that projections as to future events are not to be viewed as facts
and that the actual results during the period or periods covered by the
Projections may differ from the projected results and that the differences may
be material.
(d) The budgets and projections delivered to the Lender after the Initial
Borrowing Date (including each budget submitted pursuant to Section 1 in
connection with a Borrowing) will be prepared in good faith and based on
reasonable assumptions, and there will be no statements or conclusions therein
which are based upon or include information then known to the Borrower to be
misleading in any material respect or which fail to take into account material
information then known to the Borrower regarding the matters reported therein.
(e) As of the Initial Borrowing Date (i) there were no liabilities or
obligations with respect to the Borrower of a nature (whether absolute,
accrued, contingent or otherwise and whether or not due) which, either
individually or in aggregate, could reasonably be expected to be material to
the Borrower taken as a whole, and (ii) the Borrower does not know of any
basis for the assertion against it of any liability or obligation of any
nature whatsoever which, either individually or in the aggregate, could
reasonably be expected to be material to the Borrower.
5.11 Security Interests. On and after the Initial Borrowing Date, each of
the Security Documents creates, as security for the Obligations purported to
be secured thereby, a valid and enforceable perfected security interest in and
Lien on all of the Collateral subject thereto, superior to and prior to the
rights of all third Persons and subject to no other Liens (except (x) to the
extent expressly set forth in the Security Documents and (y) that the
Collateral may be subject to the security interests evidenced by Permitted
Liens).
5.12 Compliance with Statutes, etc. The Borrower is in compliance with all
applicable statutes, regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property,
except such noncompliances as could not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
5.13 Tax Returns and Payments. The Borrower has filed all federal and state
income tax returns and all other material tax returns, domestic and foreign,
required to be filed by it and has paid all federal and state income taxes and
all other material taxes and assessments payable by it which have become due,
except for those contested in good faith and adequately disclosed and fully
provided for on the financial statements of the Borrower in accordance with
GAAP. The Borrower has at all times paid, or has provided adequate reserves
(in the good faith judgment of the management of the Borrower) for the payment
of, all federal, state and material local and foreign income taxes applicable
for all prior fiscal years and for the current fiscal year to date. There is
no material action, suit, proceeding, investigation, audit or claim now
pending or, to the knowledge of the Borrower threatened by any authority
regarding any taxes relating to the Borrower. As of the Initial Borrowing
Date, the Borrower has not entered into an agreement or waiver or been
requested to enter into an agreement or waiver extending any statute of
limitations relating to the payment or collection of taxes of the Borrower, or
is aware of any circumstances that would cause the taxable years or other
taxable periods of the Borrower not to be subject to the normally applicable
statute of limitations.
5.14 Subsidiaries. Borrower has no Subsidiaries.
5.15 Representations and Warranties in Transaction Documents. Each of the
representations and warranties contained in the Transaction Documents is true
and correct (unless such representation and warranty shall be true and correct
as of a specific date, in which case such representation and warranty shall be
true and correct in all material respects as of such date).
5.16 Patents, etc. The Borrower possesses all material patents, trademarks,
service marks, trade names, copyrights and licenses, free from burdensome
restrictions, that are used for the operation of its business as presently
conducted.
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SECTION 6. Affirmative Covenants. The Borrower hereby covenants and agrees
that as of the Effective Date and thereafter for so long as this Agreement is
in effect and until the Commitment has terminated and the Loans, together with
interest, Fees and all other monetary Obligations incurred hereunder, are paid
in full:
6.01 Information Covenants. The Borrower will furnish to the Lender:
(a) Annual Financial Statements. Within 90 days after the close of each
fiscal year of the Borrower, the consolidated balance sheet of the Borrower,
as at the end of such fiscal year and the related consolidated statements of
income and retained earnings and of cash flows for such fiscal year, in each
case setting forth comparative consolidated figures for the preceding fiscal
year, and in the case of the consolidated financial statements, examined by
one (1) of the "Big-5" independent certified public accountants of recognized
national standing whose opinion shall not be qualified as to the scope of
audit, together with a certificate of such accounting firm stating that in the
course of its regular audit of the business of the Borrower, which audit was
conducted in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge of any Default or Event of Default
which has occurred and is continuing or, if in the opinion of such accounting
firm such a Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof.
(b) Quarterly Financial Statements. As soon as available and in any event
within 45 days after the close of each of the first three quarterly accounting
periods in each fiscal year of the Borrower, the consolidated balance sheet of
the Borrower, as at the end of such quarterly accounting period and the
related consolidated statements of income and retained earnings and of cash
flows for such quarterly accounting period and for the elapsed portion of the
fiscal year ended with the last day of such quarterly accounting period, and
where applicable, setting forth comparative consolidated figures for the
related periods in the prior fiscal year, all of which shall be certified by
the chief financial officer or controller of the Borrower, subject to changes
resulting from audit and normal year-end audit adjustments.
(c) Monthly Reports. As soon as practicable, and in any event within 30
days after the end of each monthly accounting period of each fiscal year of
the Borrower (other than the last monthly accounting period in such fiscal
year), monthly reports in a form reasonably satisfactory to the Lender, in
conformity with the requirements of the Section 8.2 (a) of the Securities
Purchase Agreement.
(d) Budgets. No later than the end of each fiscal year of the Borrower
commencing after the date hereof, a cash flow budget by month of the Borrower
for the following fiscal year in reasonable detail satisfactory to the Lender.
(e) Officer's Certificates. At the time of the delivery of the financial
statements provided for in Sections 6.01(a) (b) and (c), a certificate of the
chief financial officer of the Borrower to the effect that no Default or Event
of Default exists or, if any Default or Event of Default does exist,
specifying the nature and extent thereof, which certificate, in the case of
the certificate delivered pursuant to Sections 6.01(a) and (b), shall set
forth the calculations required to establish whether the Borrower was in
compliance with the provisions of Section 7.05 as at the end of such fiscal
quarter or year, as the case may be.
(f) Notice of Default or Litigation. Promptly, and in any event within five
Business Days after the Borrower obtains knowledge thereof, notice of (x) the
occurrence of any event which constitutes a Default or an Event of Default,
which notice shall specify the nature thereof, the period of existence thereof
and what action the Borrower proposes to take with respect thereto or (y) the
commencement of or any significant development in any litigation or
governmental proceeding pending against the Borrower which is likely to have a
Material Adverse Effect or is likely to have a material adverse effect on the
ability of the Borrower to perform its obligations hereunder, under any other
Credit Document or any Transaction Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy of each final
report or "management letter" submitted to the Borrower by its independent
accountants in connection with any annual, interim or special audit made by it
of the books of the Borrower.
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(h) Other Reports and Filings. Promptly after the filing or delivery
thereof, copies of all financial information, proxy materials and reports, if
any, which the Borrower shall publicly file with the SEC.
(i) Environmental Matters. Promptly after any senior or executive officer
of the Borrower obtains knowledge thereof, notice of one or more of the
following environmental matters, unless such environmental matters could not,
individually or when aggregated with all other such environmental matters, be
reasonably expected to have a Material Adverse Effect:
(i) any pending or threatened Environmental Claim against the Borrower
or any Real Property owned, leased or operated by the Borrower;
(ii) any condition or occurrence on or arising from any Real Property
owned, leased or operated by the Borrower that (a) results in noncompliance
by the Borrower with any applicable Environmental Law or (b) could
reasonably be expected to form the basis of an Environmental Claim against
the Borrower or any such Real Property;
(iii) any condition or occurrence on any Real Property owned, leased or
operated by the Borrower that could reasonably be expected to cause such
Real Property to be subject to any restrictions on the ownership,
occupancy, use or transferability by the Borrower of such Real Property
under any Environmental Law; and
(iv) the taking of any removal or remedial action in response to the
actual or alleged presence of any Hazardous Material on any Real Property
owned, leased or operated by the Borrower as required by any Environmental
Law or any governmental or other administrative agency; provided, that in
any event the Borrower shall deliver to the Lender all notices received by
the Borrower from any government or governmental agency under, or pursuant
to, CERCLA which identify the Borrower as potentially responsible parties
for remediation costs or which otherwise notify the Borrower of potential
liability under CERCLA. All such notices shall describe in reasonable
detail the nature of the claim, investigation, condition, occurrence or
removal or remedial action and the Borrower's response thereto.
(j) Other Information. From time to time, such other information or
documents (financial or otherwise) as the Lender may reasonably request.
6.02 Books, Records and Inspections. The Borrower will permit, upon
reasonable notice to the Borrower, officers and designated representatives of
the Lender to visit and inspect any of the properties or assets of the
Borrower in whomsoever's possession, and to examine the books of account of
the Borrower and discuss the affairs, finances and accounts of the Borrower
with, and be advised as to the same by, its and their officers and independent
accountants, all at such reasonable times and intervals and to such reasonable
extent as the Lender may desire.
6.03 Payment of Taxes. The Borrower will pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date
on which penalties attach thereto, and all lawful claims which, if unpaid,
might become a Lien not otherwise permitted pursuant to Section 7.03 or charge
upon any properties of the Borrower, provided that the Borrower shall not be
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper proceedings if payment of same is not a
condition precedent to being able to contest same and, if not such a
condition, if it has maintained adequate reserves with respect thereto in
accordance with GAAP.
6.04 Existence; Franchises. The Borrower will do or cause to be done, all
things necessary to preserve and keep in full force and effect its existence,
material rights, franchises, licenses, patents and authority, provided that
any transaction permitted by Section 7.02 or any failure which would not,
individually or in the aggregate, have a Material Adverse Effect will not
constitute a breach of this Section 6.04.
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6.05 Compliance with Statutes, etc. The Borrower will comply in all
material respects with all applicable statutes (including, without limitation,
all applicable Environmental Laws), regulations and orders of, and all
applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and the ownership of its
property except for such non-compliance which could not reasonably be expected
to have a Material Adverse Effect or could not reasonably be expected to have
a material adverse effect on the ability of the Borrower to perform its
obligations under any Credit Document and/or Transaction Document to which it
is a party.
6.06 Good Repair. The Borrower will ensure that its material properties and
equipment used or useful in its business in whomsoever's possession they may
be, are kept, in all material respects, in good repair, working order and
condition, normal wear and tear excepted.
6.07 End of Fiscal Years; Fiscal Quarters. The Borrower will, for financial
reporting and tax purposes, cause (i) each of its fiscal years to end on
December 31 of each year and (ii) each of its fiscal quarters to end on March
31, June 30, September 30 and December 31 of each year.
6.08 Use of Proceeds. All proceeds of the Loans shall be used as provided
in Section 5.05.
6.09 Corporate Formalities. The Borrower will satisfy customary corporate
formalities, including the holding of regular board of directors' and
shareholders' meetings and the maintenance of corporate offices and records.
6.10 Compliance with Environmental Laws. (a) The Borrower will comply with
all Environmental Laws applicable to the ownership or use of its Real Property
now or hereafter owned, leased or operated by the Borrower except such non-
compliances as could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and will promptly pay or cause to
be paid all costs and expenses incurred in connection with such compliance,
and will keep or cause to be kept all such Real Property free and clear of any
Liens imposed pursuant to such Environmental Laws. The Borrower will not
generate, use, treat, store, release or dispose of, or permit the generation,
use, treatment, storage, Release or disposal of Hazardous Materials on any
Real Property now or hereafter owned, leased or operated by the Borrower, or
transport or permit the transportation of Hazardous Materials to or from any
such Real Property, except for Hazardous Materials generated, used, treated,
stored, released or disposed of at any such Real Properties in compliance in
all material respects with all applicable Environmental Laws and reasonably
required in connection with the operation, use and maintenance of the business
or operations of the Borrower.
(b) At any time that the Borrower gives notice to the Lender pursuant to
Section 6.01(i), then at the reasonable written request of the Lender, the
Borrower will provide, at the sole expense of the Borrower, an environmental
site assessment report concerning any Real Property owned, leased or operated
by the Borrower, prepared by an environmental consulting firm reasonably
approved by the Lender, indicating the presence or absence of Hazardous
Materials and the potential cost of any removal or remedial action in
connection with such Hazardous Materials on such Real Property. If the
Borrower fails to provide the same within ninety (90) days after such request
was made, the Lender may order the same, the cost of which shall be borne by
the Borrower, and the Borrower shall grant and hereby grant to the Lender and
its agents access to such Real Property and specifically grant the Lender an
irrevocable non-exclusive license, subject to the rights of tenants, to
undertake such an assessment at any reasonable time upon reasonable notice to
the Borrower, all at the sole and reasonable expense of the Borrower.
6.11 Performance of Obligations. The Borrower will perform all of its
obligations under the terms of each material agreement, contract or instrument
by which it is bound, except such non-performances as could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 7. Negative Covenants. The Borrower hereby covenants and agrees
that as of the Effective Date and thereafter for so long as this Agreement is
in effect and until the Commitment has terminated and the Loans, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:
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7.01 Business. The Borrower will not engage (directly or indirectly) in any
business other than the type of business in which the Borrower is engaged on
the Effective Date and reasonable extensions thereof.
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc. The Borrower
will not wind up, liquidate or dissolve its affairs, or enter into any
transaction of merger or consolidation, or sell or otherwise dispose of all or
any part of its property or assets (other than inventory in the ordinary
course of business), or enter into any sale-leaseback transactions, or
purchase, lease or otherwise acquire all or any part of the property or assets
of any Person (other than purchases of inventory in the ordinary course of
business), or agree to do any of the foregoing at any future time, except that
the following shall be permitted:
(a) Capital Expenditures to the extent within the limitations set forth in
Section 7.05;
(b) the investments, acquisitions and transfers or dispositions of
properties permitted pursuant to Section 7.06;
(c) the Borrower may lease (as lessee) real or personal property in the
ordinary course of business (so long as such lease does not create a
Capitalized Lease Obligation not otherwise permitted by Section 7.04(b); and
(d) the transactions contemplated by the Transaction Documents.
7.03 Liens. The Borrower will not create, incur, assume or suffer to exist
any Lien upon or with respect to any property or assets of any kind (real or
personal, tangible or intangible) of the Borrower whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable or notes with
recourse to the Borrower) or assign any right to receive income, or file or
permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute; provided
that the provisions of this Section 7.03 shall not prevent the creation,
incurrence, assumption or existence of the following (with such Liens
described below being herein referred to as "Permitted Liens"):
(a) Liens for taxes, assessments or governmental charges or rules not yet
due or Liens for taxes, assessments or governmental charges or rules being
contested in good faith and by appropriate proceedings for which adequate
reserves (in the good faith judgment of the management of the Borrower) have
been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower imposed by law
which were incurred in the ordinary course of business and do not secure
indebtedness for borrowed money, such as carriers', warehousemen's and
mechanics' Liens, statutory landlord's Liens, and other similar Liens arising
in the ordinary course of business, and (x) which do not in the aggregate
materially detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the Borrower taken
as a whole or (y) which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the forfeiture or
sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to the Security Documents or other Liens
in favor of the Lender;
(d) Liens in existence on the Initial Borrowing Date which are listed, and
the property subject thereto described, in Schedule I, but only to the
respective date, if any, set forth in such Schedule I for the removal,
replacement and termination of any such Liens, plus renewals, replacements,
refinancings and extensions of such Liens to the extent set forth on Schedule
I;
(e) Liens arising from judgments, decrees or attachments (or securing of
appeal bonds with respect thereto) in circumstances not constituting an Event
of Default under Section 8.09, provided that no cash or property (other than
proceeds of insurance payable by reason of such judgments, decrees or
attachments) is deposited or delivered to secure any respective judgment or
award, or any appeal bond in respect thereof, the fair market value of which
exceeds $10,000;
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(f) Liens (other than any Lien imposed by ERISA) incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security, or to secure the
performance of tenders, statutory obligations, surety bonds (other than appeal
bonds), bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations incurred in the ordinary course of
business (exclusive of obligations in respect of the payment for borrowed
money), provided that the aggregate amount of deposits at any time pursuant to
this clause (f) shall not exceed $25,000;
(g) easements, rights-of-way, restrictions, minor defects or irregularities
in title and other similar charges or encumbrances not interfering in any
material respect with the ordinary conduct of the business of the Borrower;
and
(h) Liens arising from UCC financing statements regarding operating leases
and Liens securing Capitalized Lease Obligations permitted by this Agreement.
7.04 Indebtedness. The Borrower will not contract, create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other Credit
Documents;
(b) Capitalized Lease Obligations of the Borrower provided that the
aggregate amount of Indebtedness incurred pursuant to this clause (b) after
the date hereof shall not exceed $400,000 at any time; and
(c) A letter of credit in a stated amount not to exceed $1,200,000.
7.05 Capital Expenditures. The Borrower will not incur Capital Expenditures
in any fiscal year of the Borrower in excess of the lesser of (i) $2,000,000
or (ii) the amount set forth in the most recent cash flow budget for such year
provided by the Borrower to the Lender and acceptable to the Lender.
7.06 Advances, Investments and Loans. The Borrower will not, directly or
indirectly, lend money or give credit or make advances to any Person, or
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any other Person, or
purchase or own a futures contract or otherwise become liable for the purchase
or sale of currency or other commodities at a future date in the nature of a
futures contract, or hold cash or Cash Equivalents (each of the foregoing an
"Investment" and, collectively, "Investments"), except that the following
shall be permitted:
(a) the Borrower may acquire and hold accounts receivables owing it, if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms;
(b) loans and advances to employees in an aggregate principal amount not to
exceed $100,000 at any time outstanding shall be permitted; and
(c) the Borrower may hold cash in deposit accounts in the ordinary course
of business and Cash Equivalents provided that so long as any Loan is
outstanding such cash and Cash Equivalents may not be in excess of $500,000
(other than such cash and Cash Equivalents representing proceeds of a Loan
pending the application thereof).
7.07 Dividends, etc. The Borrower will not authorize, declare or pay any
dividends (other than dividends payable solely in capital stock of the
Borrower) or return any capital to its stockholders or authorize or make any
other distribution, payment or delivery of property or cash to its
stockholders as such, or redeem, retire, purchase or otherwise acquire,
directly or indirectly, for a consideration, any shares of any class of its
capital stock now or hereafter outstanding (or any warrants for or options or
stock appreciation rights in respect of any of such shares), or set aside any
funds for any of the foregoing purposes, as the case may be, now or hereafter
outstanding (or any options or warrants or stock appreciation rights issued by
such Person with respect to its capital stock) (all of the foregoing
"Dividends"), other than payments of Dividends on the Preferred Stock.
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7.08 Transactions with Affiliates. The Borrower will not enter into any
transaction or series of transactions after the Initial Borrowing Date whether
or not in the ordinary course of business, with any Affiliate of the Borrower;
provided, that the foregoing restrictions shall not apply to (i) advances to
employees of the Borrower to the extent permitted by Section 7.06(b), (ii)
employment arrangements (including arrangements made with respect to bonuses)
entered into in the ordinary course of business, or (iii) the transactions
contemplated by the Transaction Documents.
7.09 Prohibition on Creation of Subsidiaries. The Borrower shall not be
permitted to establish, create or acquire any Subsidiary or Subsidiaries.
SECTION 8. Events of Default. Upon the occurrence of any of the following
specified events (each an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in the payment when due of
any principal of any Loan or (ii) default, and such default shall continue
unremedied for three or more Business Days, in the payment after notice of any
interest on the Loans or any Fees or any other amounts owing hereunder or
under any other Credit Document; or
8.02 Representations, etc. Any representation, warranty or statement made
by the Borrower herein or in any other Document or in any statement or
certificate delivered or required to be delivered pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made
or deemed made; or
8.03 Covenants. The Borrower shall (a) default in the due performance or
observance by it of any term, covenant or agreement contained in Section
6.01(e)(x) or Section 7, or (b) default in the due performance or observance
by it of any term, covenant or agreement (other than those referred to in
Section 8.01, 8.02 or clause (a) of this Section 8.03) contained in this
Agreement and such default shall continue unremedied for a period of 10 days
after notice to the Borrower by the Lender; or
8.04 Default Under Other Agreements. (a) The Borrower shall (i) default in
any payment with respect to any Indebtedness (other than the Obligations)
beyond the period of grace, if any, applicable thereto or (ii) default in the
observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing
or relating thereto, or any other event shall occur or condition exist, the
effect of which default or other event or condition is to cause, or to permit
the holder or holders of such Indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause, any such Indebtedness to become due prior to
its stated maturity or (b) any such Indebtedness of the Borrower shall be
declared to be due and payable, or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated maturity thereof,
provided that it shall not constitute a Default or an Event of Default
pursuant to this Section 8.04 unless the principal amount of any one issue of
such Indebtedness exceeds $250,000 in the aggregate; or
8.05 Bankruptcy, etc. The Borrower shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Borrower
and the petition is not controverted within 30 days, or is not dismissed
within 60 days, after commencement of the case; or a custodian (as defined in
the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of the Borrower; or the Borrower commences
any other proceeding under any reorganization, arrangement, adjustment of
debt, relief of debtors, dissolution, insolvency or liquidation or similar law
of any jurisdiction whether now or hereafter in effect relating to the
Borrower; or there is commenced against the Borrower any such proceeding which
remains undismissed for a period of 60 days; or the Borrower is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any
such case or proceeding is entered; the Borrower suffers any appointment of
any custodian or the like for it or any substantial part of its property to
continue undischarged or unstayed for a period of 60 days; or the Borrower
makes a general assignment for the benefit of creditors; or any corporate
action is taken by the Borrower for the purpose of effecting any of the
foregoing; or
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8.06 Security Documents. At any time after the execution and delivery
thereof, any of the Security Documents shall cease to be in full force and
effect, or shall cease to give the Lender the Liens, rights, powers and
privileges purported to be created thereby superior to and prior to the rights
of all third Persons (except as permitted by Section 7.03), and subject to no
other Liens (except as permitted by Section 7.03), or the Borrower shall
default in the due performance or observance of any term, covenant or
agreement on its part to be performed or observed pursuant to any such
Security Document and such default shall continue beyond the period of grace,
if any, specifically applicable thereto pursuant to the terms of such Security
Document; or
8.07 Judgments. One or more judgments or decrees shall be entered against
the Borrower involving a liability in the aggregate (not paid or fully covered
by a reputable and solvent insurance company) and such judgments and decrees
either shall be final and non-appealable or shall not be vacated, discharged
or stayed or bonded pending appeal for any period of 30 consecutive days, and
the aggregate amount of all such judgments equals or exceeds $250,000; or
8.08 Change of Control. A Change of Control shall occur; or
8.09 Transaction Documents. The Borrower shall default in the observance or
performance in any material respect of any Transaction Document; provided,
however if such default is capable of being cured such default shall not have
been remedied within 30 days of such default;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Lender may by written notice to the
Borrower, take any or all of the following actions, without prejudice to the
rights of the Lender, to enforce its claims against the Borrower, except as
otherwise specifically provided for in this Agreement (provided that, if an
Event of Default specified in Section 8.05 shall occur with respect to the
Borrower, the result which would occur upon the giving of written notice by
the Lender as specified in clauses (i) and (ii) below shall occur
automatically without the giving of any such notice): (i) declare the
Commitment terminated, whereupon the Commitment shall forthwith terminate
immediately; (ii) declare the principal of and any accrued interest in respect
of all Loans and all Obligations owing hereunder to be, whereupon the same
shall become, forthwith due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower;
and (iii) enforce any or all of the Liens and security interests created
pursuant to the Security Documents.
SECTION 9. Definitions. As used herein, the following terms shall have the
meanings herein specified unless the context otherwise requires. Defined terms
in this Agreement shall include in the singular number the plural and in the
plural the singular:
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including, but not limited to, all
directors and officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control
a corporation if such Person possesses, directly or indirectly, the power (i)
to vote 5% or more of the securities having ordinary voting power for the
election of directors of such corporation or (ii) to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise. Notwithstanding
the foregoing, for purposes of this Agreement, neither the Lender nor its
Affiliates shall be deemed Affiliates of the Borrower.
"Agreement" shall mean this Credit Agreement, as the same may be from time
to time modified, amended and/or supplemented.
"Applicable Base Rate Margin" shall mean 2.00%.
"Applicable Eurodollar Margin" shall mean 3.00%.
"Asset Sale" shall mean the sale, transfer or other disposition by the
Borrower to any Person of any asset of the Borrower (other than sales,
transfers or other dispositions (i) in the ordinary course of business of
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inventory or (ii) made in connection with the purchase by the Borrower of
replacement equipment pursuant to Section 2.11(c) of the Security Agreement in
an amount not exceeding $500,000 during the term of this Agreement).
"Bankruptcy Code" shall have the meaning provided in Section 8.05.
"Base Rate" at any time shall mean the higher of (i) the rate which is 1/2
of 1% in excess of the Federal Funds Rate and (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.04(a).
"Borrower" shall have the meaning provided in the preamble of this
Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan by the Borrower
from the Lender on a given date (or resulting from conversions on a given
date).
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York or Boston, Massachusetts a legal holiday or a day
on which banking institutions are authorized by law or other governmental
actions to close and (ii) with respect to all notices and determinations in
connection with, and payments of principal and interest on, Eurodollar Loans,
any day which is a Business Day described in clause (i) and which is also a
day for trading by and between banks in U.S. dollar deposits in the interbank
Eurodollar market.
"Capital Expenditures" shall mean, for any period, the aggregate of all
expenditures (whether paid in cash or accrued as liabilities and including in
all events all amounts expended or capitalized under Capital Leases but
excluding any amount representing capitalized interest) by the Borrower during
that period that, in conformity with GAAP, are or are required to be included
in the property, plant or equipment reflected in the consolidated balance
sheet of the Borrower.
"Capital Lease" as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" as applied to any Person, shall mean all
obligations under Capital Leases of such Person or any of its Subsidiaries in
each case taken at the amount thereof accounted for as liabilities in
accordance with GAAP.
"Cash Equivalents" shall mean, as to any Person, (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (ii) marketable direct obligations issued
by any state of the United States or any political subdivision of any such
state or any public instrumentality thereof maturing within six months from
the date of acquisition thereof and, at the time of acquisition, having one of
the two highest ratings obtainable from either Standard & Poor's Ratings
Services or Moody's Investors Service, Inc., (iii) Dollar denominated time
deposits and certificates of deposit of any commercial bank having, or which
is the principal banking subsidiary of a bank holding company having, a long-
term unsecured debt rating of at least "A" or the equivalent thereof from
Standard & Poor's Ratings Services or "A2" or the equivalent thereof from
Moody's Investors Service, Inc. with maturities of not more than six months
from the date of acquisition by such Person, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iii) above, (v) commercial paper issued by
any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by Standard & Poor's Ratings Services or at least P-1 or
the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing not more than six months after the date of acquisition by such Person
and (vi) investments in
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money market funds substantially all of whose assets are comprised of
securities of the types described in clauses (i) through (v) above.
"Cash Proceeds" shall mean, with respect to any Asset Sale, the aggregate
cash payments (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with such Asset Sale, but only as
and when so received) received by the Borrower from such Asset Sale.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 et seq.
"Change of Control" shall mean (i) any Person or group (as such term is
used under the Exchange Act) of Persons (other than the Lender or its
Affiliates) owns (beneficially or of record) more than 15% of the voting
equity interest in the Borrower's capital stock, assuming the exercise of all
securities exercisable, convertible or exchangeable for or into common equity
interests held by such Person or group, and (ii) during any period of 12
consecutive calendar months after the Effective Date, individuals who at the
beginning of such period constituted the Board of Directors of the Borrower
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the stockholders or members, as the case may
be, of the Borrower was approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of such Board of Directors then in
office.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of
this Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Commitment" shall mean $20,000,000, as the same may be reduced or
terminated pursuant to Sections 2.02, 2.03 or 8.
"Contingent Obligations" shall mean, as to any Person, any obligation of
such Person guaranteeing or intending to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or (ii)
to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d) otherwise to
assure or hold harmless the owner of such primary obligation against loss in
respect thereof, provided, however, that the term Contingent Obligation shall
not include endorsements of instruments for deposit or collection in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof (assuming such Person is required to perform thereunder) as
determined by such Person in good faith.
"Credit Documents" shall mean this Agreement and, after the execution and
delivery thereof pursuant to the terms of this Agreement, each of the Security
Documents and any documents executed in connection therewith.
"Default" shall mean any event, act or condition which with notice or lapse
of time, or both, would constitute an Event of Default.
"Dividends" shall have the meaning provided in Section 7.07.
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"Documents" shall mean and include the Credit Documents and the Transaction
Documents.
"Effective Date" shall have the meaning provided in Section 10.09.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, directives, claims, liens,
notices of noncompliance or violation, investigations or proceedings relating
in any way to any Environmental Law or any permit issued, or any approval
given, under any such Environmental Law (hereafter, "Claims"), including,
without limitation, (a) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law, and (b) any
and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief in
connection with alleged injury or threat of injury to health, safety or the
environment due to the presence of Hazardous Materials.
"Environmental Law" shall mean any Federal, state, foreign or local
statute, law, rule, regulation, ordinance, code, guideline, written policy and
rule of common law now or hereafter in effect and in each case as amended, and
any judicial or administrative interpretation thereof, including any judicial
or administrative order, consent decree or judgment, relating to the
environment, employee health and safety or Hazardous Materials, including,
without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33
U.S.C. (S) 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. (S) 2601
et seq.; the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; the Safe Drinking
Water Act, 42 U.S.C. (S) 3803 et seq.; the Oil Pollution Act of 1990, 33
U.S.C. (S) 2701 et seq.; the Emergency Planning and the Community Right-to-
Know Act of 1986, 42 U.S.C. (S) 11001 et seq.; the Hazardous Material
Transportation Act, 49 U.S.C. (S) 1801 et seq. and the Occupational Safety and
Health Act, 29 U.S.C. (S) 651 et seq.; and any state and local or foreign
counterparts or equivalents, in each case as amended from time to time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to ERISA are to ERISA, as in effect at the date
of this Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.04(b).
"Eurodollar Rate" shall mean with respect to any Borrowing of Eurodollar
Loans for any Interest Period, the rate appearing on Page 3750 of the Telerate
Service (or on any successor or substitute page of such Service, or any
successor to or substitute for such Service, providing rate quotations
comparable to those currently provided on such page of such Service, as
determined by the Lender from time to time for purposes of providing
quotations of interest rates applicable to dollar deposits in the London
interbank market) at approximately 11:00 a.m., London time, two Business Days
prior to the commencement of such Interest Period, as the rate for dollar
deposits with a maturity comparable to such Interest Period.
"Event of Default" shall have the meaning provided in Section 8.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect on the date of this Agreement; it being
understood and agreed that determinations in accordance with GAAP for purposes
of Section 7.09, including defined terms as used therein, are subject (to the
extent provided therein) to Section 10.06(a).
"Hazardous Materials" shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that
contained electric fluid containing levels of polychlorinated biphenyls and/or
radon gas; (b) any chemicals, materials or substances defined as or included
in the definition of "hazardous substances," "hazardous waste,"
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"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," "toxic substances," "toxic pollutants," "contaminants," or
"pollutants," or words of similar meaning and regulatory effect, under any
applicable Environmental Law; and (c) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
governmental authority.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase
price of assets or services which in accordance with GAAP would be shown on
the liability side of the balance sheet of such Person, (iii) the face amount
of all letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, (vii) all net obligations
of such Person under interest rate hedging agreements and similar derivatives
agreement and (viii) all Contingent Obligations of such Person, provided that
Indebtedness shall not include trade payables, deferred revenue, taxes and
accrued expenses, in each case arising in the ordinary course of business.
"Initial Borrowing Date" shall mean the date upon which the initial
Borrowing of Loans occurs.
"Intellectual Property Assignment" shall have the meaning specified in
Section 4A.10(b).
"Interest Expense" shall mean, for any period, total interest expense
(including that attributable to Capital Leases in accordance with GAAP) of the
Borrower on a consolidated basis with respect to all outstanding Indebtedness
of the Borrower, including, without limitation, all capitalized interest.
"Interest Period" with respect to any Eurodollar Loan shall mean the
interest period applicable thereto, as determined pursuant to Section 1.05.
"Investment" shall have the meaning provided in Section 7.06.
"Leasehold" of any Person shall mean all of the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Lender" shall have the meaning provided in the preamble of this Agreement.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing, any conditional sale or other title retention agreement or any
lease in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on the
business, property, assets, liabilities, operations, condition (financial or
otherwise) or prospects of the Borrower.
"Maturity Date" shall mean April 14, 2003.
"Net Cash Proceeds" shall mean, with respect to any Asset Sale, the Cash
Proceeds resulting therefrom net of reasonable expenses of sale (including
payment of principal, premium and interest of other Indebtedness secured by
the assets the subject of the Asset Sale and required to be, and which is,
repaid under the terms thereof as a result of such Asset Sale), and
incremental taxes paid or payable as a result thereof.
"Net Income" shall mean, for any period, the net income (or loss) of the
Borrower on a consolidated basis for such period taken as a single accounting
period determined in conformity with GAAP, provided that there
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shall be excluded the income (or loss) of any Person in which any other Person
(other than the Borrower) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to the Borrower by
such Person during such period.
"Notice Office" shall mean the office of the Lender designated to the
Borrower in writing from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Lender pursuant to the terms of this Agreement or any other Credit Document.
"Payment Office" shall mean the office of the Lender designated to the
Borrower in writing from time to time.
"Permitted Liens" shall have the meaning provided in Section 7.03.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Preferred Stock" shall mean the Preferred Stock purchased by an Affiliate
of the Lender pursuant to the Securities Purchase Agreement.
"Prime Lending Rate" shall mean the rate which Bankers Trust Company
announces from time to time as its prime lending rate, the Prime Lending Rate
to change when and as such prime lending rate changes.
"RCRA" shall mean the Resource Conservation and Recovery Act, as amended,
42 U.S.C. (S) 6901 et seq.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by the Borrower of any cash
insurance proceeds or condemnation award payable (i) by reason of theft, loss,
physical destruction or damage or any other similar event with respect to any
property or asset of the Borrower (including without limitation, business
interruption insurance), or (ii) by reason of any condemnation, taking,
seizing or similar event with respect to any property or asset of the
Borrower.
"Regulation T, U and X" shall mean Regulations T, U and X of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"SEC" shall mean the Securities and Exchange Commission and any successor
thereto.
"Second Borrowing Date" shall mean the date upon which the second Borrowing
of Loans occurs.
"Securities Purchase Agreement" shall mean the Purchase Agreement by and
between the Borrower and the Lender, dated as of April 14, 2000.
"Security Agreement" shall have the meaning provided in Section 4A.10(b).
"Security Documents" shall mean the Security Agreement and the Intellectual
Property Assignment.
"Service Agreement" shall have the meaning provided in the Securities
Purchase Agreement.
"Subsidiary" of any Person shall mean and include (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of
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such corporation (irrespective of whether or not at the time stock of any
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by such
Person directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries, has more than a 50% equity interest at the
time. Unless otherwise expressly provided, all references herein to
"Subsidiary" shall mean a Subsidiary of the Borrower.
"Taxes" shall have the meaning provided in Section 3.03.
"Term Note" shall mean the note dated April 5th, 2000 made by the Borrower
to the order of BEW, Inc., an affiliate of the Lender.
"Transaction Documents" shall mean the Securities Purchase Agreement and
any other document or instrument entered into in connection therewith,
including without limitation the Preferred Stock and all other Documents (as
defined in the Securities Purchase Agreement).
"Type" shall mean any type of Loan determined with respect to the interest
option applicable thereto, i.e., a Base Rate Loan or Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code, as in effect from time to
time in the relevant jurisdiction.
SECTION 10. Miscellaneous.
10.01 Payment of Expenses, etc. The Borrower agrees to: (i) whether or not
the transactions herein contemplated are consummated, pay all reasonable out-
of-pocket costs and expenses of the Lender in connection with the negotiation,
preparation, execution and delivery of the Credit Documents and the documents
and instruments referred to therein and any amendment, waiver or consent
relating thereto (including, without limitation, the reasonable fees and
disbursements of White & Case LLP) and of the Lender in connection with the
enforcement of the Credit Documents and the documents and instruments referred
to therein (including, without limitation, the reasonable fees and
disbursements of counsel for the Lender); (ii) pay and hold the Lender
harmless from and against any and all present and future stamp and other
similar taxes with respect to the foregoing matters and save the Lender
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to the
Lender) to pay such taxes; and (iii) indemnify the Lender, its officers,
directors, employees, representatives and agents (each an "Indemnified
Person") from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses (collectively "Indemnified
Liabilities") incurred by any of them (whether asserted by the Borrower or
otherwise) as a result of, or arising out of, or in any way related to, or by
reason of, (a) any investigation, litigation or other proceeding (whether or
not the Lender is a party thereto) related to the entering into and/or
performance of any Credit Document or the use of the proceeds of any Loans
hereunder or the consummation of any transactions contemplated in any Credit
Document, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation, litigation or
other proceeding (but excluding (i) any such losses, liabilities, claims,
damages or expenses to the extent incurred by reason of the gross negligence
or willful misconduct of the Person to be indemnified, (ii) the reimbursement
of amounts paid by an Indemnified Person on any final, non-appealable judgment
in the Borrower's favor against such Indemnified Person by a court of
competent jurisdiction, or (iii) the reimbursement of amounts paid by an
Indemnified Person seeking indemnification in any settlement of any claim
constituting Indemnified Liabilities with a party other than the Borrower
which was effected by an Indemnified Person without the prior consent of the
Borrower, unless either (x) the Borrower has had reasonable opportunity to
defend such Indemnified Person against such claim and has not promptly and
diligently prosecuted such defense by counsel reasonably satisfactory to such
Indemnified Person or (y) the Borrower has failed to provide evidence
reasonably satisfactory to the Lender of the Borrower's financial ability to
satisfy its indemnity obligations hereunder in respect of such claim) or (b)
the actual or alleged
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presence of Hazardous Materials in the air, surface water, groundwater,
surface or subsurface of any Real Property owned or at any time operated by
the Borrower, the generation, storage, transportation or disposal of Hazardous
Materials at any location whether or not owned or operated by the Borrower,
the non-compliance of any Real Property owned or at any time operated by the
Borrower with federal, state and local laws, regulations, and ordinances
(including applicable permits thereunder) applicable to any such Real
Property, or any Environmental Claim asserted against the Borrower or any such
Real Property, including, in each case, without limitation, the reasonable
fees and disbursements of counsel and other consultants incurred in connection
with any such investigation, litigation or other proceeding (but excluding any
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). To the extent that the undertaking to indemnify, pay or hold
harmless the Lender set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Borrower shall make
the maximum contribution to the payment and satisfaction of each of the
indemnified liabilities which is permissible under applicable law.
10.02 Right of Setoff. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such
rights, if an Event of Default then exists, the Lender is hereby authorized at
any time or from time to time, without presentment, demand, protest or other
notice of any kind to the Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other Indebtedness at any time held
or owing by the Lender to or for the credit or the account of the Borrower
against and on account of the Obligations and liabilities of the Borrower to
the Lender under this Agreement or under any of the other Credit Documents,
and all other claims of any nature or description arising out of or connected
with this Agreement or any other Credit Document, irrespective of whether or
not the Lender shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured.
10.03 Notices. Except as otherwise expressly provided herein, all notices
and other communications provided for hereunder shall be in writing (including
facsimile communication) and mailed, faxed or delivered (a) if to the Lender,
at its address specified as the Notice Office and (b) if to the Borrower, at
the address specified next to the signature of the Borrower below. All such
notices and communications shall not be effective until received by the Lender
or the Borrower, as the case may be. Each party hereto may, by a notice to the
other party in accordance herewith, specify a different address for notices to
it hereunder.
10.04 Assignments. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto; provided, however, that the Borrower may not assign or
transfer any of its rights or obligations hereunder without the consent of the
Lender.
10.05 No Waiver; Remedies Cumulative. No failure or delay on the part of
the Lender in exercising any right, power or privilege hereunder or under any
other Credit Document and no course of dealing between the Borrower and the
Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and
remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Lender would otherwise have. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Lender to any other or further action in any
circumstances without notice or demand.
10.06 Calculations; Computations. (a) The financial statements to be
furnished to the Lender pursuant hereto shall be made and prepared in
accordance with GAAP, as in effect on the Initial Borrowing Date, consistently
applied throughout the periods involved (except as set forth in the notes
thereto or as otherwise disclosed in writing by the Borrower to the Lender),
provided that except as otherwise specifically provided herein, all
computations determining compliance with Section 7.09, including definitions
used therein shall utilize accounting principles and policies in accordance
with GAAP, as in effect on the Initial Borrowing Date.
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(b) All computations of interest and fees hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such
interest or fees are payable.
10.07 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY
TRIAL; WAIVER OF CERTAIN CLAIMS. (a) THIS AGREEMENT AND THE OTHER CREDIT
DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE
STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY
FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK JURISDICTION
OVER THE BORROWER, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT
IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURT LACKS JURISDICTION OVER
THE BORROWER. THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE BORROWER, AT ITS ADDRESS FOR NOTICES PURSUANT TO
SECTION 10.03, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.
THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF
PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY
ACTION OR PROCEEDING COMMENCED HEREUNDER OR UNDER ANY OTHER CREDIT DOCUMENT
THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE BORROWER IN ANY OTHER JURISDICTION.
(b) THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND
HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH
COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
(d) THE BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST THE LENDER, AND
HEREBY WAIVES, ANY CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE
DAMAGES IN CONNECTION WITH THIS AGREEMENT, OR ANY OTHER CREDIT DOCUMENT OR
TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
10.08 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Lender.
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10.09 Effectiveness. This Agreement shall become effective on the date (the
"Effective Date") on which each of the Borrower and the Lender shall have
signed a counterpart hereof (whether the same or different counterparts) and
shall have delivered (including by way of facsimile device) the same to the
Lender at its Notice Office.
10.10 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not
in any way affect the meaning or construction of any provision of this
Agreement.
10.11 Amendment or Waiver. Neither this Agreement nor any other Credit
Document nor any terms hereof or thereof may be changed, waived, discharged or
terminated unless such change, waiver, discharge or termination is in writing
signed by the Borrower and the Lender.
10.12 Survival. All indemnities set forth herein including, without
limitation, in Section 10.01 shall survive the execution and delivery and
termination of this Agreement and the making and repayment of the Loans.
* * *
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.
Address:
PEAPOD, INC.
9933 Woods Drive /s/ Andrew B. Parkinson
Skokie, IL 60077 By: ________________________________
fax no.: (847) 583-9494 Name: Andrew B. Parkinson
Attention: Andrew Parkinson Title: Chairman
KONINKLIJKE AHOLD NV
/s/ Ton van Tielraden
By: ________________________________
Name: Ton van Tielraden
Title: Senior Vice President and
General Counsel
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Exhibit 99.3
AMENDED AND RESTATED SECURITY AGREEMENT
dated as of April 5, 2000
by
PEAPOD, INC.
Debtor
to
BEW, Inc.
and
KONINKLIJKE AHOLD NV
each a Secured Party
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions...................................................... 1
Section 2. Collateral....................................................... 5
2.1 Grant of Security Interest........................................... 5
2.2 Perfection and Protection of Security Interest....................... 6
2.3 Location of Offices and Collateral................................... 6
2.4 Title to, Liens on, and Sale and Use of Collateral................... 7
2.5 Appraisals........................................................... 7
2.6 Access and Examination; Confidentiality.............................. 7
2.7 Collateral Reporting................................................. 8
2.8 Accounts............................................................. 8
2.9 Collection of Accounts; Payments..................................... 9
2.10 Inventory........................................................... 9
2.11 Equipment........................................................... 10
2.12 Assigned Contracts.................................................. 10
2.13 Documents, Instruments, and Chattel Paper........................... 11
2.14 Right to Cure....................................................... 11
2.15 Power of Attorney................................................... 11
2.16 The Secured Party's Rights, Duties and Liabilities.................. 11
Section 3. Information and Notices.......................................... 12
3.1 Information.......................................................... 12
3.2 Notices to Secured Party............................................. 12
Section 4. Events of Default................................................ 13
Section 5. Remedies......................................................... 13
5.1 Remedies of Secured Party............................................ 13
5.2 Debtor's Waiver of Rights............................................ 14
Section 6. Representations and Warranties................................... 14
6.1 Due Organization..................................................... 14
6.2 Valid Execution; Binding Effect...................................... 14
6.3 No Violation......................................................... 14
6.4 No Consents.......................................................... 14
6.5 Liens................................................................ 15
Section 7. Miscellaneous.................................................... 15
7.1 Cumulative Remedies; No Prior Recourse to Collateral................. 15
7.2 Illegality, Etc...................................................... 15
7.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS................... 15
7.4 WAIVER OF JURY TRIAL................................................. 16
7.5 WAIVER OF CERTAIN CLAIMS............................................. 16
7.6 Survival of Representations and Warranties........................... 16
7.7 Other Security and Guaranties........................................ 16
7.8 Fees and Expenses; Interest.......................................... 16
7.9 Notices.............................................................. 17
7.10 Waiver of Notices................................................... 17
7.11 Binding Effect...................................................... 17
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.12 Indemnity of the Secured Party by the Debtor...................... 17
7.13 Final Agreement; Amendments....................................... 17
7.14 Right of Setoff................................................... 18
7.15 Severability...................................................... 18
7.16 Section Headings.................................................. 18
7.17 Counterparts...................................................... 18
7.18 Release of Collateral............................................. 18
SCHEDULES
Schedule 1 Existing Permitted Liens
Schedule 2.3 Location of Offices and Collateral
</TABLE>
(ii)
<PAGE>
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of April 5, 2000 by
PEAPOD, Inc., a Delaware corporation (the "Debtor"), to BEW, Inc., a Delaware
corporation ("BEW") and KONINKLIJKE AHOLD NV ("Ahold").
R E C I T A L S:
A. BEW has made, and may hereafter make, loans in the aggregate principal
amount of U.S. $3,000,000 (collectively the "Term Loan") to the Debtor, such
Term Loan being evidenced by a promissory note dated April 5, 2000 made by the
Debtor to the order of BEW in the principal amount of U.S. $3,000,000 (as from
time to time amended, reissued or renewed, and any promissory note issued in
substitution therefor, the "Term Note").
B. To secure the Term Loan the Debtor executed and delivered to BEW a
Security Agreement dated as of April 5, 2000 (the "Existing Security
Agreement") pursuant to which the Debtor granted to BEW a security interest on
the Debtor's rights, title and interest in the property described therein.
C. Ahold may hereafter make additional loans to the Debtor in an aggregate
principal amount not exceeding, together with the Term Loan, U.S. $20,000,000
pursuant to, and on the terms and conditions set forth in, a Credit Agreement
(the "Credit Agreement") proposed to be entered into by Ahold with the Debtor,
which loans will be used first to repay the Term Note and all other
indebtedness evidenced by the Term Note (the Term Loan and all loans
outstanding under the Credit Agreement hereinafter collectively referred to as
the "Loans").
D. To induce BEW and Ahold (collectively and individually hereinafter
referred to as the "Secured Party") to make the Loans, the Debtor has agreed
to amend and restate the Existing Security Agreement in its entirety pursuant
hereto.
E. The execution and delivery by the Debtor of this Agreement is one of the
conditions to the willingness of the Secured Party to make the balance of the
Loans to the Debtor.
ACCORDINGLY, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and to induce the Secured Party to make and maintain the Loans
to the Debtor, the Existing Security Agreement is hereby amended and restated
to read in its entirety as follows:
Section 1. Definitions. (a) Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Term Note, the Collateral
Assignment or (upon the execution thereof) the Credit Agreement. In addition,
the following terms shall have the meanings specified for such terms below:
"Account Debtor" means each Person obligated in any way on or in connection
with an Account.
"Accounts" means all of the Debtor's now owned or hereafter acquired or
arising accounts (as such term is defined in the UCC), whether now existing or
hereafter arising, and any other rights to payment for the sale or lease of
goods or rendition of services, whether or not they have been earned by
performance.
"Assigned Contracts" means, collectively, all rights and remedies of the
Debtor, and all moneys and claims for money due or to become due to the
Debtor, under any contracts of the Debtor, and any amendments, supplements,
extensions, and renewals thereof, including without limitation all rights and
claims of the Debtor now or hereafter existing: (i) under any insurance,
indemnities, warranties, and guarantees provided for or arising out of or in
connection with any of the foregoing contracts; (ii) for any damages arising
out of or for breach or default under or in connection with any of the
foregoing contracts; (iii) to all other amounts from time to time paid or
payable under or in connection with any of the foregoing contracts; or (iv) to
exercise or enforce any and all covenants, remedies, powers and privileges
thereunder.
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"Attorney Costs" means and includes all reasonable fees, out-of-pocket
expenses and disbursements of any law firm or other external counsel engaged
by the Secured Party, the reasonable allocated cost of internal legal counsel
of the Secured Party and all reasonable out-of-pocket expenses and
disbursements of internal counsel of the Secured Party.
"Collateral" has the meaning specified in section 2.1.
"Collateral Assignment" means that certain Collateral Assignment of
Intellectual Property Agreement of even date herewith by and between Debtor
and the Secured Party, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Credit Documents" means the Credit Agreement (if executed by the Debtor
and Ahold), the Notes, the Collateral Assignment, this Agreement and all other
documents and instruments executed and delivered by the Debtor in connection
with, or to evidence or secure, the Obligations.
"Default" means an Event of Default or an event or circumstances which with
the giving of notice or lapse of time or both would be an Event of Default.
"Environmental Release" means a release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration of
Hazardous Materials into the indoor or outdoor environment or into or out of
any property, including the movement of Hazardous Materials through or in the
air, soil, surface water, ground water or other property.
"Equipment" means all of the Debtor's now owned and hereafter acquired
machinery, equipment, furniture, furnishings, fixtures, and other tangible
personal property (except Inventory), including without limitation motor
vehicles with respect to which a certificate of title has been issued, dies,
tools, jigs, and office equipment, as well as all of such types of property
leased by the Debtor and all of the Debtor's rights and interests with respect
thereto under such leases (including, without limitation, options to
purchase); together with all present and future additions and accessions
thereto, replacements therefor, component and auxiliary parts and supplies
used or to be used in connection therewith, and all substitutes for any of the
foregoing, and all manuals, drawings, instructions, warranties and rights with
respect thereto; wherever any of the foregoing is located.
"Financial Assets" means all of the Debtor's now owned or hereafter
acquired financial assets (as defined in the UCC).
"General Intangibles" means all of the Debtor's now owned or hereafter
acquired general intangibles (as defined in the UCC), including without
limitation the uniform resource locator, www.peapod.com, choses in action and
causes of action and all other intangible personal property of any Debtor of
every kind and nature (other than Accounts), including, without limitation,
all contract rights, corporate or other business records, Proprietary Rights,
inventions, designs, blueprints, plans, specifications, goodwill, computer
software, customer lists, registrations, licenses, franchises, tax refund
claims, any funds which may become due to the Debtor in connection with the
termination of any pension plan or other employee benefit plan or any rights
thereto and any other amounts payable to the Debtor from any pension plan or
other employee benefit plan, rights and claims against carriers and shippers,
rights to indemnification, business interruption insurance and proceeds
thereof, property, casualty or any similar type of insurance and any proceeds
thereof, proceeds of insurance covering the lives of key employees on which
the Debtor is beneficiary, and any letter of credit, guarantee, claim,
security interest or other security held by or granted to the Debtor.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
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"Inventory" means all of the Debtor's now owned and hereafter acquired
inventory (as such term is defined in the UCC) and any other goods,
merchandise, and other personal property, wherever located, to be furnished
under any contract of service or held for sale or lease, all returned goods,
raw materials, other materials and supplies of any kind, nature or description
which are or might be consumed in the Debtor's business or used in connection
with the packing, shipping, advertising, selling or finishing of such goods,
merchandise and such other personal property, and all documents of title or
other documents representing them.
"Investment Property" means all of the Debtor's now owned or hereafter
acquired investment property (as defined in the UCC) and includes each
Debtor's now owned or hereafter acquired rights, title and interests in and to
any and all: (a) securities, whether certificated or uncertificated, (b)
security entitlements, (c) securities accounts, (d) commodity contracts and
(e) commodity accounts (as such terms are defined in the UCC).
"Lien" means: (a) any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute, or contract, and including,
without limitation, a security interest, charge, claim, lien (including any
lien or charge arising from a mortgage or deed of trust), encumbrance, pledge,
hypothecation, assignment, deposit arrangement, agreement, security agreement,
conditional sale or trust receipt or a lease, consignment or bailment for
security purposes; and (b) to the extent not included under clause (a), any
reservation, exception, encroachment, easement, right-of-way, covenant,
condition, restriction, lease or other title exception or encumbrance
affecting property.
"Material Adverse Effect" means any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any such
change or effect) or fact or condition (or any development that, insofar as
can reasonably be foreseen, is likely to result in any fact or condition) that
is (a) materially adverse to the business, properties, assets, financial
condition or results of operations of the Debtor taken as a whole, or Debtor
and its Subsidiaries taken as a whole, as the case may be, or (b) a material
adverse change in, or a material adverse effect upon the Collateral; provided,
however, that (i) any adverse change, effect or development that is caused by
or results from conditions affecting the United States economy generally or
the economy of any nation or region in which the Debtor or its Subsidiaries
conducts business that is material to the business of the Debtor and its
Subsidiaries, taken as a whole, shall not be taken into account in determining
whether there has been (or whether there could reasonably be foreseen) a
"Material Adverse Effect" with respect to the Debtor, (ii) any adverse change,
effect or development that is caused by or results from conditions generally
affecting the industries in which the Debtor conducts its business shall not
be taken into account in determining whether there has been (or whether there
could reasonably be foreseen) a "Material Adverse Effect" with respect to the
Debtor, and (iii) any adverse change, effect or development that is caused by
or results from the announcement or pendency of this Agreement, the other
Credit Documents, the merger between the Debtor (or any of its affiliates) and
the Secured Party (or any of its affiliates), or the transactions contemplated
hereby shall not be taken into account in determining whether there has been
(or whether there could reasonably be foreseen) a "Material Adverse Effect"
with respect to the Debtor.
"Notes" means the Term Note and each other promissory note evidencing any
Loan.
"Obligations" means all present and future liabilities, obligations,
covenants, duties, and debts owing by the Debtor to the Secured Party under or
pursuant to or in connection with the Loans, the Notes, the Credit Agreement
(if executed by the Debtor and Ahold), this Agreement or any other Credit
Documents, whether or not evidenced by any note, or other instrument or
document, whether arising from an extension of credit, loan, advance,
guaranty, indemnification or otherwise, whether direct or indirect, absolute
or contingent, due or to become due, primary or secondary, as principal or
guarantor, and including, without limitation, all principal, interest,
charges, out-of-pocket expenses, fees, Attorney Costs, filing fees and any
other sums chargeable to the Debtor hereunder or under any of the other Credit
Documents.
"Permitted Liens" means:
(i) the Secured Party's Liens;
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(ii) Liens for taxes, provided that the payment of any such taxes which
are due and payable is being contested in good faith and by appropriate
proceedings diligently pursued, adequate financial reserves have been
established on the Debtor's books and records with respect thereto, and a
stay of enforcement of any such Lien is in effect;
(iii) Liens securing the claims or demands of materialmen, mechanics,
service providers, carriers, warehousemen, landlords and other like
Persons, provided that if any such Lien arises from the nonpayment of such
claims or demands when due, such claims or demands could not reasonably be
expected to have a Material Adverse Effect or are being contested in good
faith by appropriate proceedings diligently pursued, so long as adequate
financial reserves have been established on the Debtor's books with respect
thereto and a stay of enforcement of any such Lien is in effect;
(iv) reservations, exceptions, encroachments, easements, rights of way,
covenants, conditions, restrictions, leases, and other similar title
exceptions or encumbrances affecting any real estate of the Debtor;
provided that they do not in the aggregate materially detract from the
value of such real estate or materially interfere with its use in the
ordinary conduct of the Debtor's business;
(v) judgment, writs, warrants of attachment and other similar Liens
arising in connection with court proceedings, provided that any such
judgments, writs and warrants do not constitute an Event of Default under
the Term Note;
(vi) Liens described on Schedule 1 hereto;
(vii) Liens securing indebtedness that is incurred to pay or finance the
purchase price or cost of Equipment provided that (x) such Liens encumber
only the Equipment paid for or financed with the indebtedness so secured
and (y) such indebtedness does not exceed the acquisition cost of such
Equipment;
(viii) deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance or other types of social
security benefits or to secure the performance of bids, tenders, sales,
contracts (other than for repayment of borrowed money), surety, appeal and
performance bonds; provided that the foregoing do not in the aggregate
materially detract from the value of the Debtor's assets or property taken
as a whole or materially impair the use thereof in the operation of the
businesses taken as a whole;
(ix) leases or subleases granted to others in the ordinary course of
business which do not interfere in any material respect with the business
of the Debtor taken as a whole; and
(x) any interest or title of the lessor in the property subject to any
operating lease entered into by the Debtor or any of its Subsidiaries in
the ordinary course of business.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company or other entity of kind or any governmental authority or
political subdivision, agency, department or instrumentality thereof.
"Premises" means all land, together with all buildings, improvements and
fixtures thereon and all tenements, hereditaments and appurtenances belonging
or in any way appertaining thereto now owned or leased or hereafter acquired
or leased by the Debtor including, without limitation, any interest arising
from an option to purchase or lease any Premises or any portion thereof.
"Proprietary Rights" means all of the Debtor's now owned and hereafter
arising or acquired: licenses, franchises, permits, patents, patent rights,
copyrights and copyrights applications (including without limitation all
software and related documentation), works which are the subject matter of
copyrights, trademarks, service marks, trade names, trade styles, corporate
names, brand names, slogans, patent, trademark and service mark applications,
trade secrets and inventions, and all licenses and rights related to any of
the foregoing, and all other rights under any of the foregoing, all
extensions, renewals, reissues, divisions, continuations, and continuations-
in-part of any of the foregoing, all goodwill associated with the foregoing
and all rights to sue for past, present and future infringement of any of the
foregoing.
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"Secured Party's Liens" means any Lien granted to the Secured Party
pursuant to this Agreement or any other Credit Document or under applicable
law and which secures the Obligations.
"UCC" means the Uniform Commercial Code (or any successor statute) as in
effect from time to time in the State of New York or in any other state the
laws of which are required to be applied with respect to the creation,
validity, attachment, perfection or priority of the Secured Party's Liens.
(b) References herein to any party hereto shall include its successors and
permitted assigns; references herein to any statute shall include all
amendments thereto and all successors statute; and reference herein to
Sections or Schedules are to Sections of or Schedules to this Agreement unless
otherwise specified.
Section 2. Collateral.
2.1 Grant of Security Interest. (a) As security for all present and future
Obligations, the Debtor hereby grants to the Secured Party a continuing
security interest in, lien on, and right of set-off against, all personal
property and fixtures of the Debtor, including without limitation all of the
following property of the Debtor, whether now owned or existing or hereafter
acquired or arising, regardless of where located:
(i) all Accounts of the Debtor (including all credit enhancements
therefor);
(ii) all Inventory of the Debtor;
(iii) all Equipment of the Debtor (provided that (x) the Debtor shall
not be required to record the Secured Party's Lien on any certificate of
title relating to any motor vehicle unless requested to do so by the
Secured Party and (y) no such security interest shall extend to any item of
Equipment to the extent that such Equipment is subject to a Permitted Lien
to which the Secured Party's Liens thereon would be subordinate and which
prohibits the grant of such security interest to the Secured Party);
(iv) all Assigned Contracts, letter of credit, chattel paper, promissory
notes, instruments and documents of title of the Debtor; provided, that the
Collateral shall not include any Assigned Contract in respect of which the
grant of the security contemplated by this Agreement shall be prohibited by
its terms; provided, however, that upon the termination of such
prohibitions for any reason whatsoever, the provisions of this Section 2.1
shall be deemed to apply thereto automatically;
(v) all General Intangibles of the Debtor, including all Proprietary
Rights of the Debtor; provided, that the Collateral shall not include any
General Intangible in respect of which the grant of the security
contemplated by this Agreement shall be prohibited by its terms; provided,
however, that upon the termination of such prohibitions for any reason
whatsoever, the provisions of this Section 2.1 shall be deemed to apply
thereto automatically;
(vi) all Investment Property and Financial Assets of the Debtor;
(vii) to the extent not included in the foregoing, all claims which the
Debtor has against any other Person, including all amounts owing to the
Debtor by any Person for loans and advances made by the Debtor to such
Person;
(viii) all money, cash, cash equivalents, securities and other property
of any kind of the Debtor held directly or indirectly by, or under the
control of, the Secured Party or any affiliates thereof or by a bailee
thereof;
(ix) all deposit accounts, credits and balances of the Debtor with, and
other claims of the Debtor against, the Secured Party or any of its
affiliates;
(x) all books, records and other property related to or referring to any
of the foregoing, including, without limitation, books, records, account
ledgers, data processing records, computer software and other property at
any time evidencing or relating to any of the foregoing; and
(xi) all accessions to, substitutions for and replacements, products and
proceeds of any of the foregoing, including, but not limited to, proceeds
of any insurance policies, claims against third parties, and condemnation
or requisition payments with respect to all or any of the foregoing.
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All of the foregoing, and all other property of the Debtor in which the
Secured Party may at any time be granted a Lien to secure the Obligations, is
herein collectively referred to as the "Collateral."
(b) All of the Obligations shall be secured by all of the Collateral. The
Secured Party may in its sole discretion, (i) exchange, waive or release any
of the Collateral, and (ii) when any payment Event of Default exists (x) apply
Collateral and direct the order or manner of sale thereof as the Secured Party
may determine, and (y) settle, compromise, collect, or otherwise liquidate any
Collateral in any manner, all without affecting the Obligations or the Secured
Party's right to take any other action with respect to any other Collateral.
2.2 Perfection and Protection of Security Interest. (a) The Debtor shall,
at its expense, perform all steps requested by the Secured Party in writing at
any time to perfect, maintain, protect, and enforce the Secured Party's Liens,
including, without limitation: (i) executing and filing financing or
continuation statements, and amendments thereof, in form and substance
satisfactory to the Secured Party; (ii) delivering to the Secured Party the
originals of all instruments, documents, and chattel paper, and all other
Collateral of which the Secured Party determines it should have physical
possession in order to perfect and protect the Secured Party's security
interest therein, duly pledged, endorsed or assigned to the Secured Party
without restriction; provided, however, that if no Event of Default exists the
Secured Party will at the Debtor's request promptly, and in any event, within
5 days following receipt of request therefor, redeliver any such promissory
notes and instruments to the Debtor as the Debtor may reasonably require in
order to enforce its rights thereunder in the ordinary course of business;
(iii) delivering to the Secured Party warehouse receipts covering any portion
of the Collateral located in warehouses and for which warehouse receipts are
issued; (iv) placing notations on the Debtor's books of account to disclose
the Secured Party's security interest; (v) delivering to the Secured Party all
letters of credit on which the Debtor is named beneficiary and which provide
for or relates to payment of any Account; and (vi) taking such other steps as
are deemed reasonably necessary or desirable by the Secured Party to maintain
and protect the Secured Party's Liens. To the extent permitted by applicable
law, the Secured Party may file, without the Debtor's signature, one or more
financing statements disclosing the Secured Party's Liens or may sign any such
financing statements in the name of the Debtor. The Debtor agrees that a
carbon, photographic, photostatic, or other reproduction of this Agreement or
of a financing statement is sufficient as a financing statement.
(b) If any Collateral is at any time in the possession or control of any
warehouseman, bailee or the Debtor's agents or processors, then the Debtor
shall notify the Secured Party thereof and, if so requested by the Secured
Party, shall notify such Person of the Secured Party's security interest in
such Collateral and, during the existence of a Default upon the Secured
Party's request in writing, instruct such Person to hold all such Collateral
for the Secured Party's account subject to the Secured Party's instructions.
If at any time any Collateral is located on any facility of the Debtor which
is not owned by the Debtor, then the Debtor shall, at the written request of
the Secured Party, use commercially reasonable efforts (including without
limitation enforcing lease obligations) to obtain written waivers, in form and
substance satisfactory to the Secured Party, of all present and future Liens
to which the owner or lessor of such premises may be entitled to assert
against the Collateral.
(c) From time to time, the Debtor shall, upon the Secured Party's written
request, execute and deliver confirmatory written instruments pledging to the
Secured Party, the Debtor's interest in any item of Collateral, but the
Debtor's failure to do so shall not affect or limit the Secured Party's
security interest or the Secured Party's other rights in and to any
Collateral. So long as this Agreement is in effect and until all Obligations
have been fully satisfied, the Secured Party's Liens shall continue in full
force and effect in all Collateral.
2.3 Location of Offices and Collateral. The Debtor represents and warrants
to the Secured Party that: (a) as of the date hereof Schedule 2.3 is a correct
and complete list of the Debtor's chief executive office, the location of its
books and records, the locations of the Collateral, and the locations of all
of its other places of business of the Debtor; and (b) Schedule 2.3 correctly
identifies any of such facilities and locations that are not owned by the
Debtor. The Debtor covenants and agrees that it will not (i) maintain any
Collateral at any location other than those locations listed for the Debtor on
Schedule 2.3 or in transit to such locations, (ii) otherwise change or add to
any of such locations, or (iii) change the location of its chief executive
office from the location identified
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in Schedule 2.3, unless it gives the Secured Party at least thirty (30) days'
prior written notice thereof and executes any and all financing statements and
other documents that the Secured Party reasonably requests in writing in
connection therewith. The Debtor shall not in any event change its chief
executive office to a location outside the United States.
2.4 Title to, Liens on, and Sale and Use of Collateral. The Debtor
represents and warrants to the Secured Party and agrees with the Secured Party
that: (a) all of the Collateral is and will continue to be owned by the Debtor
free and clear of all Liens whatsoever, except for Permitted Liens; (b) the
Secured Party's Liens in the Collateral of the Debtor will not be subject to
any prior Lien, except Permitted Liens; (c) the Debtor will use, store, and
maintain the Collateral with all reasonable care and will use such Collateral
for lawful purposes only; and (d) the Debtor will not, without the Secured
Party's prior written approval, sell, or dispose of or permit the sale or
disposition of any of the Collateral except for sales of Inventory in the
ordinary course of business and sales of Equipment as permitted by Section
2.11(c). The inclusion of proceeds in the Collateral shall not be deemed to
constitute the Secured Party's consent to any sale or other disposition of the
Collateral except as expressly permitted herein.
2.5 Appraisals. [Intentionally Omitted]
2.6 Access and Examination; Confidentiality. (a) No more than once every
four (4) months (and at any time when a Default exists), the Secured Party may
at all reasonable times and upon reasonable notice, have access to, examine,
audit, make extracts from or copies of and inspect any or all of the Debtor's
records, files, and books of account and the Collateral, and discuss the
Debtor's affairs with the Debtor's officers, management and internal and
external auditors and accountants. The Debtor will deliver to the Secured
Party any instrument necessary for the Secured Party to obtain records from
any service bureau maintaining records for the Debtor. The Secured Party may,
at any time when a Default exists, and at the Debtor's expense, make copies of
all of the Debtor's books and records, or require the Debtor to deliver such
copies to the Secured Party. The Secured Party may, without expense to the
Secured Party, but (unless an Event of Default exists) without materially
disrupting the Debtor's business, use such of the Debtor's personnel,
supplies, and premises as may be reasonably necessary for maintaining or
enforcing the Secured Party's Liens. The Secured Party shall have the right,
at any time, in the Secured Party's name or in the name of a nominee of the
Secured Party, to verify with commercially reasonable frequency the validity,
amount or any other matter relating to the Accounts, Inventory or other
Collateral, by mail, telephone or otherwise.
(b) The Secured Party agrees to take normal and reasonable precautions and
exercise due care to maintain the confidentiality of all information
identified as "confidential" or "secret" by the Debtor and provided to or
obtained by the Secured Party or by or on behalf of the Debtor under this
Agreement or any other Credit Document, and neither the Secured Party nor any
of their respective Affiliates shall use any such information other than in
connection with or in enforcement of this Agreement and the other Credit
Documents, except to the extent that such information (i) was or becomes
generally available to the public other than as a result of disclosure by the
Secured Party, or (ii) was or becomes available on a nonconfidential basis
from a source other than the Debtor, provided that such source is not bound by
a confidentiality agreement with the Debtor known to the Secured Party;
provided, however, that the Secured Party may disclose such information (1) at
the request or pursuant to any requirement of any governmental authority to
which the Secured Party is subject or in connection with an examination of the
Secured Party by any such governmental authority; (2) pursuant to subpoena or
other court process; (3) when required to do so in accordance with the
provisions of any applicable requirement of law; (4) to the extent reasonably
required in connection with any litigation or proceeding (including, but not
limited to, any bankruptcy proceeding) to which the Secured Party, or their
respective affiliates may be party; provided that, to the extent practicable,
the Debtor has had reasonable notice of such litigation or proceeding and
shall be afforded a reasonable opportunity to raise its objections to
disclosure in such litigation or proceeding; (5) to the extent reasonably
required in connection with the exercise of any remedy hereunder or under any
other Credit Document; (6) to the Secured Party's independent auditors,
accountants, attorneys and other professional advisors; (7) to any affiliate
of the Secured Party and to any participant in or assignee of, or potential
participant in or assignee of, the Secured Party's rights and obligations
under the Note, provided that such affiliate,
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participant or assignee agrees to keep such information confidential to the
same extent required of the Secured Party hereunder; and (8) as expressly
permitted under the terms of any other document or agreement regarding
confidentiality to which a Debtor is party or is deemed party with the Secured
Party. The Secured Party shall have no liability for the breach by any other
Person of the provisions of this Section 2.6.]
2.7 Collateral Reporting. No more than once each quarter (and at any time
upon the Secured Party's request following the occurrence and during the
continuance of an Event of Default), the Debtor shall promptly provide the
Secured Party upon its written request with the following documents, in form
satisfactory to the Secured Party: (a) an aging of the Debtor's Accounts; (b)
Inventory reports; (c) copies of invoices in connection with the Debtor's
Accounts, customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with the Debtor's
Accounts and for Inventory and Equipment acquired by the Debtor, purchase
orders and invoices; (d) such other reports as to the Collateral as the
Secured Party shall reasonably request in writing from time to time; and (e)
with the delivery of each of the foregoing, a certificate of an officer of the
Debtor certifying the accuracy and completeness of the foregoing. If any of
the Debtor's records or reports of the Collateral are prepared by an
accounting service or other agent, the Debtor hereby authorizes such service
or agent to deliver such records, reports, and related documents to the
Secured Party, upon its written request following the occurrence and during
the continuance of an Event of Default.
2.8 Accounts. (a) The Debtor hereby represents and warrants to the Secured
Party, with respect to the Debtor's Accounts, that: (i) each existing Account
is, and each future Account will be, owned by the Debtor free and clear of all
Liens other than Permitted Liens, (ii) each existing Account represents, and
each future Account will represent, a bona fide sale or lease and delivery of
goods by the Debtor, or rendition of services by the Debtor, in the ordinary
course of the Debtor's business; (iii) each existing Account is, and each
future Account will be, for a liquidated amount payable by the Account Debtor
thereon on the terms set forth in the invoice therefor or in the schedule
thereof delivered to the Secured Party, without any offset, deduction,
defense, or counterclaim except those known to the Debtor and disclosed to the
Secured Party in accordance with this Agreement; (iv) no payment will be
received with respect to any Account, and no credit, discount, or extension,
or agreement therefor will be granted on any Account, except in the ordinary
course of business or as reported to the Secured Party in accordance with this
Agreement; (v) each copy of any invoice relating to an Account and delivered
to the Secured Party by the Debtor will be a genuine copy of the original
invoice sent to the Account Debtor named therein; and (vi) all goods described
in each invoice will have been delivered to the Account Debtor and all
services described in each invoice will have been performed.
(b) The Debtor shall not re-date any invoice or sale or make sales on
extended dating beyond that customary in the Debtor's business or extend or
modify any Account except in the ordinary course of business. If the Debtor
becomes aware of any matter adversely affecting the collectibility of any
Account or Accounts of any Account Debtor involving in the aggregate an amount
greater than $50,000, including information regarding the Account Debtor's
creditworthiness, the Debtor will promptly so advise the Secured Party.
(c) The Debtor shall not accept any promissory note or other instrument in
excess of $100,000 in aggregate amount or maturing more than 12 months after
the issuance date thereof, except a check or other instrument for the
immediate payment of money, with respect to any Account without the Secured
Party's written consent, and the Debtor shall notify the Secured Party of any
such promissory notes in excess of $100,000 delivered to the Debtor in respect
of any Account; provided that if an Event of Default exists, the Debtor shall
not accept any such note or instrument (regardless of amount) without the
consent of the Secured Party. Any such note or instrument shall be considered
as evidence of the Account and not payment thereof and the Debtor will
promptly deliver any such instrument in excess of $100,000 (and, if an Event
of Default exists, all such notes and instruments) to the Secured Party,
endorsed by the Debtor to the Secured Party in a manner satisfactory in form
and substance to the Secured Party. Regardless of the form of presentment,
demand or notice of protest with respect thereto, the Debtor shall remain
liable on any such note or instrument pledged by it to the Secured Party, up
to the amount of the outstanding Obligations, until such instrument is paid in
full.
(d) The Debtor shall notify the Secured Party promptly of all disputes and
claims with any Account Debtors in excess of $50,000, individually, or
$100,000 in the aggregate for all Account Debtors, and the Debtor agrees
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to settle, contest, or adjust such dispute or claim at no expense to the
Secured Party. No discount, credit or allowance shall be granted to any such
Account Debtor without the Secured Party's prior written consent, except for
discounts, credits and allowances made or given in the ordinary course of the
Debtor's business when no Event of Default exists hereunder. The Secured Party
may, at all times when an Event of Default exists, settle or adjust disputes
and claims directly with Account Debtors for amounts and upon terms which the
Secured Party, shall consider advisable and, in all cases, the Secured Party
will credit the Obligations with only the net amounts received by the Secured
Party in payment of any Accounts of the Debtor.
(e) If an Account Debtor returns any Inventory to the Debtor when no Event
of Default exists, then the Debtor shall, to the extent consistent with past
practice, promptly determine the reason for such return and shall issue a
credit memorandum to the Account Debtor in the appropriate amount. The Debtor
shall immediately report to the Secured Party any return involving an amount
in excess of $100,000. Each such report shall indicate the reasons for the
returns and the locations and condition of the returned Inventory. All
returned Inventory shall be subject to the Secured Party's Liens thereon.
2.9 Collection of Accounts; Payments. Beginning on or after the Maturity
Date, (a) until the Secured Party notifies the Debtor to the contrary, the
Debtor shall make collection of all Accounts and other Collateral for the
Secured Party, shall receive all payments as the Secured Party's trustee, and
shall, if so requested in writing by the Secured Party, immediately deliver
all payments in their original form duly endorsed in blank to the Secured
Party or, during the existence of a Default if so requested in writing by the
Secured Party, shall deposit the same into a blocked deposit account
established for the Debtor at a bank acceptable to the Secured Party and
subject to documentation reasonably acceptable to the Secured Party. When an
Event of Default exists, if the Debtor is so requested in writing by the
Secured Party, the Debtor shall establish a lock-box service for collections
of Accounts at a bank acceptable to the Secured Party and pursuant to
documentation reasonably satisfactory to the Secured Party. If such lock-box
service is established, the Debtor shall instruct all Account Debtors to make
all payments directly to the address established for such service. If,
notwithstanding such instructions, the Debtor receives any proceeds of
Accounts, it shall receive such payments as the Secured Party's trustee, and
shall immediately deliver such payments to the Secured Party in their original
form duly endorsed in blank. All collections received in any such lock-box or
blocked deposit account or directly by the Secured Party, and all funds in any
blocked deposit account to which such collections are deposited shall be
subject to the Secured Party's sole control. The Secured Party or the Secured
Party's designee may, at any time when an Event of Default exists, notify
Account Debtors that the Accounts have been assigned to the Secured Party and
of the Secured Party's security interest therein, and may collect them
directly and charge the collection costs and out-of-pocket expenses to the
Debtor. So long as an Event of Default has occurred and is continuing, the
Debtor, at the Secured Party's written request, shall execute and deliver to
the Secured Party such documents as the Secured Party shall require to grant
the Secured Party access to any post office box in which collections of
Accounts are received.
(b) If sales of Inventory are made for cash, the Debtor shall, if so
requested by the Secured Party in writing, immediately deliver to the Secured
Party or deposit into a blocked deposit account the cash which the Debtor
receives.
(c) All payments (including funds received by the Secured Party at a bank
designated by it) received by the Secured Party on the Accounts of the Debtor
or as proceeds of other Collateral solely in an amount up to the then
aggregate amount of the Obligations will be the Secured Party's sole property
for its benefit and will be credited to the Obligations (conditional upon
final collection upon receipt by the Secured Party), and any excess thereof
shall be the sole property of the Debtor and shall be immediately delivered to
and/or deposited for the account of, the Debtor.
2.10 Inventory. The Debtor represents and warrants to the Secured Party and
agrees with the Secured Party that all of the Inventory owned by the Debtor is
and will be held for sale or lease, or to be furnished in connection with the
rendition of services, in the ordinary course of the Debtor's business, and is
and will be fit for such purposes. The Debtor will keep its Inventory in good
and marketable condition, at its own expense. The
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Debtor will not, without the prior written consent of the Secured Party (which
consent shall not be unreasonably withheld), acquire or accept any Inventory
on consignment or approval. The Debtor agrees that all Inventory, if any,
produced by any Debtor in the United States will be produced in accordance
with the Federal Fair Labor Standards Act of 1938, as amended, and all rules,
regulations, and orders thereunder. The Debtor will conduct a physical count
of the Inventory at least once per fiscal year (and at any time upon the
Secured Party's request following the occurrence and during the continuance of
an Event of Default), without materially disrupting the business, at such
other times as the Secured Party reasonably requests in writing. The Debtor
will not, without the Secured Party's written consent (which consent shall not
be unreasonably withheld), sell any Inventory on a bill-and-hold, guaranteed
sale, sale or return, sale on approval, consignment, or other repurchase or
return basis.
2.11 Equipment. (a) The Debtor represents and warrants to the Secured Party
and agrees with the Secured Party that all of the Equipment owned by the
Debtor that is material to the day-to-day operations of the Debtor's business
is and will be used or held for use in the Debtor's business, and is and will
be fit for such purposes. The Debtor shall keep and maintain its Equipment in
good operating condition and repair (ordinary wear and tear excepted) and
shall make all necessary replacements thereof.
(b) The Debtor shall promptly inform the Secured Party of any material
additions to or deletions from the Equipment. The Debtor shall not permit any
Equipment to become a fixture with respect to real property or to become an
accession with respect to other personal property with respect to which real
or personal property the Secured Party does not have a first priority Lien.
The Debtor will not, without the Secured Party's prior written consent (which
consent shall not be unreasonably withheld), alter or remove any identifying
symbol or number on any of the Debtor's Equipment constituting Collateral.
(c) The Debtor shall not, without the Secured Party's prior written
consent, sell, lease as a lessor, or otherwise dispose of any of the Debtor's
Equipment; provided, however, that the Debtor may dispose of Equipment to the
extent permitted by the Term Note and the Credit Agreement (if the same is
executed by the Debtor and Ahold); and provided, further, that the Debtor may
dispose of obsolete, unusable or non-useful Equipment without the Secured
Party's consent, subject to the conditions set forth in the next sentence. In
the event any of such Equipment is sold, transferred or otherwise disposed of
pursuant to the second proviso contained in the immediately preceding
sentence, (1) if such sale, transfer or disposition is effected without
replacement of such Equipment, or such Equipment is replaced by Equipment
leased by the Debtor or by Equipment purchased by the Debtor subject to a
Permitted Lien, which replacement in either case, may occur up to thirty (30)
days following the date of such sale, transfer or disposition, then the Debtor
shall deliver all of the cash proceeds of any such sale, transfer or
disposition to the Secured Party, and (2) if such sale, transfer or
disposition is made in connection with the purchase by the Debtor of
replacement Equipment, then the Debtor shall use the proceeds of such sale,
transfer or disposition to purchase such replacement Equipment within thirty
(30) days after such disposition and shall deliver to the Secured Party
written evidence of the use of the proceeds for such purchase. All replacement
Equipment purchased by the Debtor shall be free and clear of all Liens except
Permitted Liens.
2.12 Assigned Contracts. The Debtor shall fully perform all of its
obligations under each of the Assigned Contracts, and shall enforce all of its
material rights and remedies thereunder. Without limiting the generality of
the foregoing, the Debtor shall take all action reasonably necessary or
appropriate, as determined solely by the Debtor, to permit, and shall not take
any action which would have any materially adverse effect upon, the full
enforcement of all indemnification rights under the Assigned Contracts. The
Debtor shall notify the Secured Party in writing, promptly after the Debtor
becomes aware thereof, of any event or fact which could give rise to a claim
by it for indemnification under any of the material Assigned Contracts, and
shall diligently pursue, as it deems appropriate, such right and report to the
Secured Party on all further developments with respect thereto. The Debtor
shall remit directly to the Secured Party for application to the Obligations
in such order as the Secured Party shall determine, all amounts received by
the Debtor as indemnification or otherwise pursuant to its Assigned Contracts.
If the Debtor shall fail after the Secured Party's demand to pursue diligently
any right under the material Assigned Contracts, or an Event of Default then
exists, the Secured Party may directly enforce such right in its own or the
Debtor's name and may enter into such settlements or other agreements with
respect
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thereto as the Secured Party, shall determine. In any suit, proceeding or
action brought by the Secured Party under any Assigned Contract for any sum
owing thereunder or to enforce any provision thereof, the Debtor shall
indemnify, defend and hold the Secured Party harmless from and against all
expense (including without limitation Attorney Costs), loss or damage suffered
by reason of any defense, setoff, counterclaims, recoupment, or reduction of
liability whatsoever of the obligor thereunder arising out of a breach by the
Debtor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing from the Debtor to or in favor of
such obligor or its successors. All obligations of the Debtor under an
Assigned Contract shall be and remain enforceable only against the Debtor and
shall not be enforceable against the Secured Party. Notwithstanding any
provision hereof to the contrary, the Debtor shall at all times remain liable
to observe and perform all of its material duties and obligations under the
Assigned Contracts, and the Secured Party's exercise of any of its rights with
respect to the Collateral shall not release the Debtor from any of such duties
and obligations. The Secured Party shall not be obligated to perform or
fulfill the Debtor's duties or obligations under the Assigned Contracts or to
make any payment thereunder, or to make any inquiry as to the nature or
sufficiency of any payment or property received by it thereunder or the
sufficiency of performance by any party thereunder, or to present or file any
claim, or to take any action to collect or enforce any performance, any
payment of any amounts, or any delivery of any property.
2.13 Documents, Instruments, and Chattel Paper. The Debtor represents and
warrants to the Secured Party that (a) all documents, instruments, and chattel
paper, if any, describing, evidencing, or constituting Collateral, and all
signatures and endorsements thereon, are and will be complete, valid, and
genuine in all material respects, and (b) all goods evidenced by such
documents, instruments, and chattel paper are and will be owned by the Debtor,
free and clear of all Liens other than Permitted Liens.
2.14 Right to Cure. The Secured Party may, in its discretion, pay any
amount or do any act required of the Debtor hereunder in order to preserve,
protect, maintain or enforce the Obligations of the Debtor, the Collateral or
the Secured Party's Liens therein, and which the Debtor fails to pay or do
after reasonable prior notice from the Secured Party (which in any event need
not be longer than 10 days), including, without limitation, payment of any
judgment against the Debtor, any insurance premium, any warehouse charge, any
finishing or processing charge, any landlord's claim, and any other Lien upon
or with respect to the Collateral. The Debtor shall immediately upon demand
reimburse the Secured Party for all payments that the Secured Party makes
under this Section 2.14 and all out-of-pocket costs and expenses that the
Secured Party pays or incurs in connection with any action taken by the
Secured Party hereunder with respect to the Obligations or the Collateral, and
such reimbursement obligation shall be added to the Debtor's Obligations. Any
payment made or other action taken by the Secured Party under this Section
2.14 shall be without prejudice to any right to assert an Event of Default
under Credit Document and to proceed thereafter as herein provided.
2.15 Power of Attorney. During the existence of a Default, the Debtor
hereby appoints the Secured Party and the Secured Party's designee as the
Debtor's attorney, with power: (a) to endorse the Debtor's name on any checks,
notes, acceptances, money orders, or other forms of payment or security that
come into the Secured Party's possession; (b) to sign the Debtor's name on any
invoice, bill of lading, warehouse receipt or other document of title relating
to any Collateral, on drafts against customers, on assignments of Accounts, on
notices of assignment, financing statements and other public records; (c) so
long as there exists any Event of Default, to notify the post office
authorities to change the address for delivery of the Debtor's mail to an
address designated by the Secured Party and to receive, open and dispose of
all mail addressed to the Debtor; (d) to send requests for verification of
Accounts to customers or Account Debtors; (e) to clear Inventory through
customs in the Debtor's name, the Secured Party's name or the name of the
Secured Party's designee, and to sign and deliver to customs officials powers
of attorney in the Debtor's name for such purpose; and (f) to do all things
necessary to carry out this Agreement. The Debtor ratifies and approves all
acts of such attorney. The Secured Party will not be liable for any acts or
omissions or for any error of judgment or mistake of fact or law except for
its gross negligence or willful misconduct. This power, being coupled with an
interest, is irrevocable until this Agreement has been terminated and the
Obligations have been fully satisfied.
2.16 The Secured Party's Rights, Duties and Liabilities. The Debtor assumes
all responsibility and liability arising from or relating to the use, sale or
other disposition of the Collateral. Neither the Secured Party,
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nor any of its officers, directors, employees or agents, shall be liable or
responsible in any way for the safekeeping of any of the Collateral, or for any
loss or damage thereto, or for any diminution in the value thereof, or for any
act of default of any warehouseman, carrier, forwarding agency or other person
whomsoever, all of which shall be at the Debtor's sole risk except that in the
case of any Collateral in the Secured Party's possession, the Secured Party
shall use the same degree of care in the respect thereto as it uses with
respect to its own property. The Obligations shall not be affected by any
failure of the Secured Party to take any steps to perfect the Secured Party's
Liens or to collect or realize upon the Collateral, nor shall loss of or damage
to the Collateral release any Debtor from any of the Obligations. So long as
there exists any Event of Default, the Secured Party may (but shall not be
required to), without notice to or consent from the Debtor, sue upon or
otherwise collect, extend the time for payment of, modify or amend the terms
of, compromise or settle for cash, credit, or otherwise upon any terms, grant
other indulgences, extensions, renewals, compositions, or releases, and take or
omit to take any other action with respect to the Collateral, any security
therefor, any agreement relating thereto, any insurance applicable thereto, or
any Person liable directly or indirectly in connection with any of the
foregoing, without discharging or otherwise affecting the liability of the
Debtor for the Obligations or under this Agreement, any other Credit Document
or any other agreement now or hereafter existing between the Secured Party and
the Debtor.
Section 3. Information and Notices.
3.1 Information. The Debtor shall promptly deliver to the Secured Party all
such information regarding the financial and business affairs, operations,
and/or conditions of the Debtor as the Secured Party shall reasonably request
in writing, and shall notify its accountants and auditors that the Secured
Party is authorized to obtain such information directly from them.
3.2 Notices to Secured Party. The Debtor shall notify the Secured Party, in
writing, of the following matters at the following times:
(a) Promptly, and in any event within five (5) days, after becoming
aware of any Event of Default.
(b) Promptly, and in any event within five (5) days, after becoming
aware of any material adverse change in the Collateral.
(c) Promptly, and in any event within five (5) days, after becoming
aware of any pending or threatened action, suit, proceeding, or
counterclaim by any Person, or any pending or threatened investigation by a
Governmental Authority which may have a material adverse effect on the
Collateral.
(d) Promptly, and in any event within five (5) days, after becoming
aware of any pending or threatened strike, work stoppage, unfair labor
practice claim, or other labor dispute affecting any Debtor or any of its
Subsidiaries in a manner which could reasonably be expected to have a
material adverse effect on the Collateral.
(e) Promptly, and in any event within five (5) days, after becoming
aware of any violation of any law, statute, regulation, or ordinance of a
governmental Authority affecting the Debtor or any Subsidiary or affiliate
thereof which could reasonably be expected to have a material adverse
effect on the Collateral.
(f) Promptly, and in any event within five (5) days, after receipt of
any notice of any violation by the Debtor or any Subsidiary thereof of any
Environmental Law which could reasonably be expected to have a material
adverse effect on the Collateral or that any Governmental Authority has
asserted that the Debtor or any Subsidiary thereof is not in compliance
with any Environmental Law or is investigating the Debtor's or such
Subsidiary's compliance therewith.
(g) Promptly, and in any event within five (5) days, after receipt of
any written notice that the Debtor or any Subsidiary thereof is or may be
liable to any Person as a result of an Environmental Release or threatened
Environmental Release of any Hazardous Materials or that the Debtor or any
Subsidiary thereof is subject to investigation by any Governmental
Authority evaluating whether any remedial action is needed to respond to an
Environmental Release or threatened Environmental Release of any Hazardous
Materials which, in either case, is reasonably likely to give rise to
liability in excess of $100,000 or have a material adverse effect on the
Collateral.
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(h) Promptly, and in any event within five (5) days, after receipt of
any written notice of the imposition of any Environmental Lien against any
property of the Debtor or any of its Subsidiaries which could reasonably be
expected to have a material adverse effect on the Debtor or the Collateral.
(i) Any change in the Debtor's name, state of incorporation, or form of
organization, trade names or styles under which the Debtor will sell
Inventory or create Accounts, or to which instruments in payment of
Accounts may be made payable, in each case at least thirty (30) days prior
thereto.
Each notice given under this Section 3 shall describe the subject matter
thereof in reasonable detail, and shall set forth the action that the Debtor
has taken or proposes to take with respect thereto.
Section 4. Events of Default. The occurrence of any one or more of the
following events or circumstance shall constitute an "Events of Default"
hereunder:
(a) the Debtor shall fail to pay in full when due any amount payable by
the Debtor hereunder or under any other Credit Document, subject to
applicable cure periods as may be agreed upon, if any;
(b) the Debtor shall default in the performance or observance of any
other covenant, agreement or obligation of the Debtor hereunder and such
default shall continue for 30 days after the Debtor receives notice thereof
from the Secured Party;
(c) any representation or warranty made or deemed to be made by the
Debtor hereunder or under any other Credit Document or any certificate,
financial statement or report furnished by the Debtor pursuant hereto or
thereto shall prove to be untrue in any material respect when made, deemed
made or furnished;
(d) this Agreement shall cease to be in full force and effect or the
Debtor shall assert that this Agreement, the Note or any other Credit
Document to which the Debtor is a party is not binding upon it; or
(e) there shall occur any Event of Default under (and as defined in) the
Note or (if executed by the Debtor and Ahold) the Credit Agreement or any
other Credit Document.
Section 5. Remedies.
5.1 Remedies of Secured Party. Except to the extent otherwise provided in
the Credit Agreement (if executed by the Debtor and Ahold), upon the
occurrence and during the continuance of an Event of Default: (i) the Secured
Party shall have, in addition to all other rights hereunder or under any other
Credit Document, the rights and remedies of a secured party under the UCC and
other applicable law; (ii) the Secured Party may, at any time, take possession
of the Collateral and keep it on the Debtor's premises, at no cost to the
Secured Party, or remove any part of it to such other place or places as the
Secured Party may desire, or the Debtor shall, upon the Secured Party's
demand, at the Debtor's cost, assemble the Collateral and make it available to
the Secured Party at a place specified by the Secured Party; and (iii) the
Secured Party may sell and deliver any Collateral at public or private sales,
for cash, upon credit or otherwise, at such prices and upon such terms as the
Secured Party deems advisable, in its sole discretion, and may, if the Secured
Party deems it reasonable, postpone or adjourn any sale of the Collateral by
an announcement at the time and place of sale or of such postponed or
adjourned sale without giving a new notice of sale. Without in any way
requiring notice to be given in the following manner, the Debtor agrees that
any notice by the Secured Party of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the UCC or otherwise,
shall constitute reasonable notice to the Debtor if such notice is mailed by
registered or certified mail, return receipt requested, postage prepaid, or is
delivered personally against receipt, at least ten (10) days prior to such
action to the Debtor's address specified in or pursuant to Section 7.9. If any
Collateral is sold on terms other than payment in full at the time of sale, no
credit shall be given against the Obligations until the Secured Party receives
payment, and if the buyer defaults in payment, the Secured Party may resell
the Collateral without further notice to the Debtor. In the event the Secured
Party seeks to take possession of all or any portion of the Collateral by
judicial process, the Debtor irrevocably waives: (i) the posting of any bond,
surety or security with respect thereto which might otherwise be required;
(ii) any demand for possession prior to the commencement of any suit or action
to recover the Collateral; and (iii) any requirement that the Secured Party
retain possession and not dispose of any
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Collateral until after trial or final judgment. The Debtor agrees that the
Secured Party has no obligation to preserve rights to the Collateral or
marshal any Collateral for the benefit of any Person. The Secured Party is
hereby granted a license or other right to use, without charge, the Debtor's
labels, patents, copyrights, name, trade secrets, trade names, trademarks,
customer lists and advertising matter, or any similar property, in completing
production of, advertising or selling any Collateral, and the Debtor's rights
under all licenses and all franchise agreements shall inure to the Secured
Party's benefit for such purpose. The proceeds of sale shall be applied first
to all out-of-pocket expenses of sale, including without limitation attorneys'
fees, and then to the Obligations in whatever order the Secured Party elects.
The Secured Party will return any excess to the Debtor or as a court may
otherwise direct, and the Debtor shall remain liable for any deficiency.
5.2 Debtor's Waiver of Rights and Claims. If an Event of Default occurs,
the Debtor hereby waives all rights to notice and hearing prior to the
exercise by the Secured Party of the Secured Party's rights to repossess the
Collateral without judicial process or to replevy, attach or levy upon the
Collateral without notice or hearing. The Debtor also waives all claims,
damages and demands against the Lender arising out of the repossession,
retention or sale of the Collateral or any part or parts thereof, except any
such claims, damages and demands arising out of the gross negligence or
willful misconduct of the Lender.
Section 6. Representations and Warranties. The Debtor represents and
warrants to the Secured Party that:
6.1 Due Organization. The Debtor (a) is a corporation duly incorporated and
validly existing, in good standing, under the laws of its State of
incorporation, (ii) has the power and authority to own its property and assets
and to transaction the business in which it is engaged and (c) is duly
qualified and authorized to engage in business in each jurisdiction where the
ownership by it of property or the conduct by it of business makes such
qualification and authorization necessary, except where the failure to be so
qualified and authorized would not have a Material Adverse Effect.
6.2 Valid Execution; Binding Effect. The Debtor has the power to execute,
deliver and perform this Agreement and each of the other Credit Documents to
which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of this Agreement. The Debtor
has duly executed and delivered this Agreement, and this Agreement constitutes
its legal, valid and binding obligations enforceable in accordance with its
terms, subject, as to enforceability, to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general principals
of equity (regardless of whether enforcement is sought in a proceeding in
equity or at law).
6.3 No Violation. Neither the execution, delivery or performance by the
Debtor of this Agreement or of any other Credit Documents to which it is a
party, nor compliance by it with the terms and provisions hereof or thereof,
will (i) violate any provision of the certificate or articles of incorporation
or By-Laws of the Debtor, (ii) contravene any material provision of any law,
statute, rule or regulation or any order, writ, injunction or decree of any
court or Governmental Authority or (iii) conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien (other than the Secured
Party's Liens) upon any of the property or assets of the Debtor pursuant to
the terms of any agreement, contract or instrument to which the Debtor is a
party or by which it or any of its property or assets is bound or to which it
may be subject.
6.4 No Consents. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by, any
Governmental Authority is required to authorize, or is otherwise required in
connection with (other than as have heretofore been obtained or made), (i) the
execution, delivery and performance by the Debtor of this Agreement or (b) the
legality, validity, binding effect or enforceability of this Agreement or the
Liens granted hereunder, except for the filing of UCC financing statements and
continuation statements with respect thereto in all jurisdictions specified by
the UCC, and the filing of all necessary recording instruments in respect of
the Debtor's intellectual property with the appropriate recording office.
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6.5 Liens. This Agreement creates, in favor of the Secured Party, a valid
and (upon filing of UCC financing statements and other instruments with
respect thereto) perfected security interest in all Collateral owned by the
Debtor, subject to no other Liens (other than Permitted Liens).
Section 7. Miscellaneous.
7.1 Cumulative Remedies; No Prior Recourse to Collateral. The enumeration
herein of the Secured Party's rights and remedies is not intended to be
exclusive, and such rights and remedies are in addition to and not by way of
limitation of any other rights or remedies that the Secured Party may have
under any other Credit Document or under the UCC or other applicable law. The
Secured Party shall have the right, in its sole discretion, to determine which
rights and remedies are to be exercised and in which order. The exercise of
one right or remedy shall not preclude the exercise of any others, all of
which shall be cumulative. The Secured Party may, without limitation, proceed
directly against the Debtor to collect the Obligations without any prior
recourse to the Collateral, or any other obligor on the Obligations. No
failure to exercise and no delay in exercising, on the part of the Secured
Party, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.
7.2 Illegality, Etc.. The illegality or unenforceability of the Note or any
other Credit Document or any instrument or agreement referred to herein shall
not in any way affect or impair the legality or enforceability of this
Agreement.
7.3 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS. (a) THIS AGREEMENT
SHALL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ITS CHOICE OF LAW RULES THAT WOULD MAKE THE LAWS OF ANY OTHER
JURISDICTION APPLICABLE TO THIS AGREEMENT; PROVIDED THAT PERFECTION ISSUES
UNDER ARTICLE 9 OF THE UCC MAY, TO THE EXTENT REQUIRED BY SAID ARTICLE 9, BE
DETERMINED UNDER APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN
ARTICLES 9 OF THE UCC.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK (AND SHALL BE BROUGHT BY THE DEBTOR ONLY IN SAID
COURTS), AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT THE DEBTOR CONSENTS,
FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION
OF THOSE COURTS (AND ALL APPELLATE COURTS THEREFROM) IN ANY SUCH ACTION OR
PROCEEDING. THE DEBTOR IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH COURTS IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. NOTWITHSTANDING THE FOREGOING, THE SECURED PARTY SHALL HAVE
THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST THE DEBTOR OR ITS PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTION WHICH THE SECURED PARTY DEEMS
NECESSARY OR APPROPRIATE IN ORDER TO COLLECT THE OBLIGATIONS OR REALIZE ON THE
COLLATERAL OR OTHER SECURITY FOR THE OBLIGATIONS.
(c) THE DEBTOR HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON
IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE DEBTOR AT ITS
ADDRESS SET FORTH IN OR PURSUANT TO SECTION 7.9, AND SERVICE SO MADE SHALL BE
DEEMED TO BE COMPLETED FIVE (5) BUSINESS DAYS AFTER THE SAME
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SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS POSTAGE PREPAID. NOTHING
CONTAINED HEREIN SHALL AFFECT THE RIGHT OF SECURED PARTY TO SERVE LEGAL
PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.
7.4 WAIVER OF JURY TRIAL. THE DEBTOR HEREBY WAIVES ITS RIGHT TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED
TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. WITHOUT LIMITING THE FOREGOING, THE DEBTOR FURTHER AGREES THAT ITS
RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY
ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO
CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER CREDIT
DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS.
7.5 WAIVER OF CERTAIN CLAIMS. THE DEBTOR AGREES THAT IT WILL NOT ASSERT
AGAINST THE SECURED PARTY, AND HEREBY WAIVES, ANY CLAIM FOR CONSEQUENTIAL,
INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR
ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
7.6 Survival of Representations and Warranties. All of the Debtor's
representations and warranties contained in this Agreement shall survive the
execution, delivery, and acceptance thereof by the parties, notwithstanding
any investigation by the Secured Party or its agents.
7.7 Other Security and Guaranties. The Secured Party may, without notice or
demand and without affecting the Debtor's obligations hereunder, from time to
time: (a) take from any Person and hold collateral (other than the Collateral)
for the payment of all or any part of the Obligations and exchange, enforce or
release such collateral or any part thereof; and (b) accept and hold any
endorsement or guaranty of payment of all or any part of the Obligations and
release or substitute any such endorser or guarantor, or any Person who has
given any Lien in any other collateral as security for the payment of all or
any part of the Obligations, or any other Person in any way obligated to pay
all or any part of the Obligations.
7.8 Fees and Expenses; Interest. (a) The Debtor agrees, to pay to the
Secured Party, on demand, all reasonable costs and out-of-pocket expenses that
the Secured Party pays or incurs in connection with the administration (after
the occurrence and during the continuance of an Event of Default), enforcement
and termination of this Agreement, including, without limitation: (i) costs
and out-of-pocket expenses (including Attorneys Costs) paid or incurred to
obtain payment of the Obligations, enforce the Secured Party's Liens, sell or
otherwise realize upon the Collateral, and otherwise enforce the provisions of
this Agreement or to defend any claims made or threatened against the Secured
Party arising out of the transactions contemplated hereby (including, without
limitation, preparations for and consultations concerning any such matters);
(ii) costs and out-of-pocket expenses (including Attorney Costs) for any
amendment, supplement, waiver or consent in connection with this Agreement;
(iii) costs and out-of-pocket expenses of lien searches; (iv) taxes, fees and
other charges for filing financing statements and continuations, and other
actions to perfect, protect, and continue the Secured Party's Liens; (v) sums
paid or incurred to pay any amount or take any action required of the Debtor
under this Agreement that the Debtor fails to pay or take; (vi) costs of
inspections, and verifications of the Collateral, including, without
limitation, travel, lodging, and meals for inspections of the Collateral and
the Debtor's operations by the Secured Party; (vii) costs and out-of-pocket
expenses of collecting checks and other items of payment, and establishing and
maintaining blocked accounts and lock boxes; and (viii) costs and expenses of
preserving and protecting the Collateral. The foregoing shall not be construed
to limit any other provisions of the Credit Documents regarding costs and out-
of-pocket expenses to be paid by the Debtor.
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(b) If the Debtor fails to pay when due any amount payable by it to the
Secured Party hereunder (including any reimbursement obligations of the Debtor
hereunder), after written notice thereof from the Secured Party, such unpaid
amount shall bear interest, payable by the Debtor on demand, at a rate per
annum equal to the rate borne by the Note on overdue amounts of principal.
7.9 Notices. Except as otherwise provided herein, all notices, demands and
requests that any party is required or elects to give to any other shall be in
writing and any such notice shall become effective (a) upon personal delivery
thereof, including, but not limited to, delivery by overnight mail and courier
service or (b) three (3) business days after it shall have been mailed by
United States mail, first class, certified or registered, with postage
prepaid, in each case addressed to the party to be notified as follows
(provided that no notice to the Secured party shall be effective until
actually received by it):
If to BEW:
BEW, Inc.
19 Skelley Ave.
Weymouth, MA 02189
Attention: Anne J. Longo
if to Ahold:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
if to the Debtor:
Peapod, Inc.
9933 Woods Drive
Skokie, Illinois 60077
Attention: Daniel Rabinowitz
or, as to any party, to such other address as such party shall designate for
itself by like notice to the other parties. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to the Persons designated above to receive copies shall not
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration or other communication.
7.10 Waiver of Notices. Unless otherwise expressly provided herein, the
Debtor waives presentment, protest and notice of demand or dishonor and
protest as to any instrument and notice of intent to accelerate the
Obligations, as well as any and all other notices to which it might otherwise
be entitled. No notice to or demand on the Debtor which the Secured Party may
elect to give shall, except as otherwise expressly provided herein, entitle
the Debtor to any or further notice or demand in the same, similar or other
circumstances.
7.11 Binding Effect. The provisions of this Agreement shall be binding upon
and inure to the benefit of the respective representatives, successors and
assigns of the parties hereto; provided, however, that no right or interest
herein or any obligation hereunder may be assigned by the Debtor without the
prior written consent of the Secured Party. The rights and benefits of the
Secured Party hereunder shall inure to the benefit of any successor thereto
and, if the Secured Party so agrees, to any Person acquiring any interest of
the Secured Party in the Obligations or any part thereof.
7.12 Indemnity of the Secured Party by the Debtor. [Intentionally Omitted]
7.13 Final Agreement; Amendments. This Agreement and the other Credit
Documents are intended by the Debtor and the Secured Party to be the final,
complete, and exclusive expression of the agreement between them. This
Agreement, together with the other Credit Documents, supersedes any and all
prior oral or written
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agreements relating to the subject matter hereof. No modification, rescission,
waiver, release, or amendment of any provision of this Agreement shall be
made, except by a written agreement signed by the Debtor and the Secured
Party.
7.14 Right of Setoff. In addition to any rights and remedies of the Secured
Party provided by law, the Secured Party is authorized at any time and from
time to time, without prior notice to the Debtor, any such notice being waived
by the Debtor to the fullest extent permitted by law, to set-off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held by, and other indebtedness at any time owing by, the Secured
Party to or for the credit or the account of the Debtor against any and all
Obligations owing to the Secured Party, now or hereafter existing,
irrespective of whether or not the Secured Party shall have made demand under
this Agreement or any Credit Document and although such Obligations may be
contingent or unmatured. The Secured Party agrees promptly to notify the
Debtor after any such set-off and application made by the Secured Party;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.
7.15 Severability. If any part of this Agreement is contrary to, prohibited
by or deemed invalid under any applicable law of any jurisdiction, such
provision shall, as to such jurisdiction, be inapplicable and deemed omitted
to the extent so contrary, prohibited or invalid, without invalidating the
remainder hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
7.16 Section Headings. Section headings used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
7.17 Counterparts. This Agreement may be executed in any number of
counterparts and by the Secured Party and the Debtor in separate counterparts,
each of which shall be an original, but all of which shall together constitute
one and the same agreement. Delivery by a party by facsimile transmission of a
counterpart of this Agreement signed by such party shall be effective as a
manual delivery by such party of such counterpart.
7.18 Release of Collateral. Upon payment in full of all the Obligations and
the termination of the Notes and (if the Credit Agreement is executed by the
Debtor and Ahold) the termination of all obligations the Secured Party to make
loans to the Debtor, the Secured Party at the request of the Debtor shall
promptly, and in any event within 2 Weeks after the request therefor, execute,
deliver and file such instruments as the Debtor shall reasonably request (and
at the Debtor's expense) in order to reassign, release or terminate its
security in the Collateral.
7.19 References. Unless and until the Credit Agreement is executed by Ahold
and the Debtor and loans are made to Debtor thereunder, all references to the
"Secured Party" shall be to BEW. Upon execution of the Credit Agreement by
Ahold and Debtor and the repayment of the Term Loan and all other indebtedness
owing to BEW by Debtor under the Credit Documents, all references herein to
the "Secured Party" (except in Sections 2.16, 7.3, 7.4, 7.5 and 7.8) shall
refer to Ahold; provided, however, in the event BEW is required to return any
such payments to Debtor or trustee or receiver therefor, all references to the
"Secured Party" shall again include BEW.
[Remainder of this page intentionally left blank; signature pages follow]
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IN WITNESS WHEREOF, each party hereto has executed and delivered this
Agreement by its duly authorized officer as of the date first written above.
Debtor
PEAPOD, INC.
/s/ Dan Rabinowitz
By: _________________________________
Name: Dan Rabinowitz
Title: Senior VP and Chief Financial
Officer
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IN WITNESS WHEREOF, each party hereto has executed and delivered this
Agreement by its duly authorized officer as of the date first written above.
Secured Party
BEW, Inc.
/s/ Anne J. Longo
By: _________________________________
Name: Anne J. Longo
Title: President
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IN WITNESS WHEREOF, each party hereto has executed and delivered this
Agreement by its duly authorized officer as of the date first written above.
Secured Party
Koninklijke Ahold NV
/s/ Ton van Tielraden
By: _________________________________
Name: Ton van Tielraden
Title: Senior Vice President and
General Counsel
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Exhibit 99.4
AMENDED AND RESTATED COLLATERAL ASSIGNMENT
OF INTELLECTUAL PROPERTY
AMENDED AND RESTATED COLLATERAL ASSIGNMENT OF INTELLECTUAL PROPERTY dated
as of April 14, 2000 by PEAPOD, Inc., a Delaware corporation (the "Assignor"),
to BEW, Inc., a Delaware corporation ("BEW") and KONINKLIJKE AHOLD NV
("Ahold").
WITNESSETH:
WHEREAS, BEW has made loans in the aggregate principal amount of U.S.
$3,000,000 (collectively, the "Term Loan") to the Assignor, such Term Loan
being evidenced by a promissory note dated April 5, 2000 made by the Assignor
to the order of the BEW in the principal amount of U.S. $3,000,000 (said
promissory note, as from time to time amended, reissued or renewed, and any
promissory note issued in substitution therefor, the "Term Note");
WHEREAS, to secure the Term Loan the Debtor executed and delivered to BEW a
Collateral Assignment of Intellectual Property dated as of April 10, 2000 (the
"Existing Assignment Agreement") pursuant to which the Assignor granted to BEW
a security interest on the Assignor's rights, title and interest in the
intellectual property described therein.
WHEREAS, Ahold may hereafter make loans to the Assignor in an aggregate
principal amount not exceeding, together with the Term Loan, $20,000,000
(collectively, together with the Term Loan, the "Loans") pursuant to, and on
the terms and conditions set forth in, a Credit Agreement (the "Credit
Agreement") of even date herewith being entered into concurrently herewith by
Ahold with the Assignor, which loans will be first used to repay the Term Note
and all other indebtedness evidenced by the Term Note (the Term Loan and all
loans outstanding under the Credit Agreement hereinafter collectively referred
to as the "Loans").
WHEREAS, to induce the BEW and Ahold (collectively and individually
hereinafter referred to as the "Assignee") to make and maintain the Loans, the
Assignor has agreed to amend and restate the Existing Security Agreement in
its entirety pursuant hereto.
WHEREAS, the execution and delivery by the Debtor of this Agreement is one
of the conditions to the willingness of the Secured Party to make the Loans to
the Debtor;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained and to induce the Assignee to make and maintain the
Loans to the Assignor, the Assignor and the Assignee agree hereby that the
Existing Assignment Agreement is amended and restated to read as follows:
1. DEFINITIONS
Terms used herein that are defined in the Term Note, Security Agreement and
(when executed and delivered by the Assignor and the Assignee or, as the case
may be, by the Assignor and an affiliate of the Assignee) the Credit Agreement
shall have the meanings assigned to them therein unless otherwise defined
herein. References to this "Collateral Assignment" shall mean this Collateral
Assignment of Intellectual Property, including all amendments, modifications
and supplements and any exhibits or schedules to any of the foregoing, and
shall refer to this Collateral Assignment as the same may be in effect at the
time such reference becomes operative.
As used herein:
"Obligations" means all present and future liabilities, obligations,
covenants, duties, and debts owing by the Assignor to the Assignee under or
pursuant to or in connection with the Collateral Assignment, the Term Note or
any other Credit Documents, whether or not evidenced by any note, or other
instrument or document, whether arising from an extension of credit, loan,
advance, guaranty, indemnification or otherwise, whether direct
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or indirect, absolute or contingent, due or to become due, primary or
secondary, as principal or guarantor, and including, without limitation, all
principal, interest, charges, out-of-pocket expenses, fees, and disbursements
of counsel, filing fees and any other sums chargeable to the Assignor
hereunder or under any of the other Credit Documents.
"Credit Documents" means this Collateral Assignment, the Security
Agreement, the Credit Agreement (if executed by the Assignor and the Assignee
or, as the case may be, by the Assignor and an affiliate of the Assignee), the
Term Note and any other document or all other documents and instruments
executed and delivered by the Assignor in connection with, or to evidence or
secure, the Obligations.
"Event of Default" has the meaning specified for such term in the Security
Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, governmental authority agency or instrumentality or any
other entity.
"Release Date" means the date on which the Loans, all interest thereon and
all other Obligations are irrevocably paid in full and all obligations or
commitments of the Assignee to make loans or extend credit to the Assignor are
terminated.
"Security Agreement" means that certain Amended and Restated Security
Agreement dated as of April 10, 2000 by and between Assignor and the Assignee,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.
2. ASSIGNMENT OF INTEREST
2.1 Patents, Trademarks, Copyrights and Other Intellectual Property. The
Assignor hereby grants, assigns and conveys to the Assignee, as security for
the full and prompt payment of the Obligations when due, a first priority
security interest in the entire right, title and interest of the Assignor in
and to all of its now owned, existing or filed or hereafter acquired, arising
or filed:
(a) (i) all patents and patent applications of the Assignor, including,
without limitation, those listed on Exhibit A hereto and the inventions and
improvements described and claimed therein, and patentable inventions and
methods of the Assignor, (ii) all reissues, divisions, continuations,
renewals, extensions, reexamination and continuations-in-part of any of the
foregoing, (iii) all income, royalties, damages or payments now and
hereafter due and/or payable to such Assignor under any of the foregoing
with respect to any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the
foregoing, (iv) the right of the Assignor to sue for past, present and
future infringements of any of the foregoing and (v) all rights of such
Assignor corresponding to any of the foregoing throughout the world
(collectively, the "Patents");
(b) (i) all trademarks, service marks, trademark and service mark
registrations, Internet and domain names, uniform resource locators
(including, without limitation, www.peapod.com) trade and business names
and trademark and service mark applications of the Assignor, including,
without limitation, those listed on Exhibit B hereto, (ii) all renewals of
any of the foregoing, (iii) all income, royalties, damages and payments now
or hereafter due and/or payable to such Assignor under any of the foregoing
or with respect to any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the
foregoing, (iv) the right of the Assignor to sue for past, present and
future infringements of any of the foregoing, (v) all rights of the
Assignor corresponding to any of the foregoing throughout the world, and
(vi) the goodwill of the Assignor's business connected with and symbolized
by any of the foregoing (collectively, the "Trademarks");
(c) all trade secrets and confidential business information of the
Assignor, including formulae and recipes, computations, systems, inventions
and methods (whether patentable or unpatentable and whether or not reduced
to practice), know-how, manufacturing and production processes, designs and
techniques,
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research and development information, specifications, drawings, designs,
plans, proposals, technical data, copyrightable work, financial, business,
and marketing plans, customer and supplier lists and information
(collectively, the "Trade Secrets");
(d) all copyrights, copyright applications (including, without
limitation, computer software, source and object code, databases and
related documentation) and other intellectual and proprietary property
rights of the Assignor, including, without limitation, those listed on
Exhibit C hereto (collectively, the "Other Intellectual Property Rights");
and
(e) to the extent assignable without causing a default thereunder, the
Assignor's rights in licenses and license agreements with any other Person
under or with respect to any patents, trademarks, trade secrets or other
intellectual property rights and licenses and license agreements of the
Assignor with any other Person under or with respect to any of the Patents,
Trademarks, Trade Secrets or Other Intellectual Property Rights (all
licenses and license agreements assigned to the Assignee pursuant hereto
herein collectively called the "Licenses").
All Patents, Trademarks, Trade Secrets, Licenses and Other Intellectual
Property herein collectively called the "Proprietary Rights"; provided, that
notwithstanding anything to the contrary contained herein, the Proprietary
Rights shall not include any Licenses or other agreements in respect of which
the grant of the security contemplated by this Agreement shall be prohibited
by its terms; provided, however, that upon the termination of such
prohibitions for any reason whatsoever, the provisions of this Section 2.1
shall be deemed to apply thereto automatically.
2.2 Restriction on Future Agreements. The Assignor agrees that until the
Release Date, the Assignor will not, without the Assignee's prior written
consent, enter into any agreement, including, without limitation, any license
agreement, that grants to any Person other than the Assignee rights to or
interests in any Proprietary Rights that is inconsistent with the Assignor's
obligations under this Collateral Assignment. The Assignor further agrees that
until the Release Date it will not take any action, or permit any action to be
taken by any affiliate of the Assignor or other Person subject to the
Assignor's control, including, without limitation, licensees, or fail to take
any action, that would affect the validity or enforcement of the rights
granted to the Assignee under this Collateral Assignment.
2.3 New Patents, Trademarks and Other Intellectual Property Rights. The
Assignor represents and warrants that the Patents, Trademarks and Other
Intellectual Property Rights listed in Exhibits A, B and C hereto are owned by
the Assignor and such Patents, Trademarks and Other Intellectual Property
Rights constitute all of the material Patents, Trademarks and Other
Intellectual Property Rights that the Assignor now owns which are registered
with the United States Patent and Trademark Office and the United States
Copyright Office or an accredited and appropriate domain name registrar, as
applicable. If, before the Release Date the Assignor shall (i) obtain any new
Patents, Trademarks, Other Intellectual Property Rights or Trade Secrets or
rights thereto or (ii) become entitled to the benefit of any new Patent,
Trademark, Trade Secret, License or Other Intellectual Property Rights, the
Assignor shall give to the Assignee prompt written notice thereof. Each
Assignor hereby authorizes the Assignee to modify this Collateral Assignment
by amending any or all the Exhibits attached hereto, as applicable, to include
any such Patents, Trademarks or Other Intellectual Property Rights.
2.4 Royalties and Terms. The Assignor hereby agrees that upon the
occurrence and during the continuance of an Event of Default, the Assignee, or
any designee of the Assignee, may, subject to applicable law and to any then
existing Licenses granted by such Assignor in respect of any Patent, Trademark
or Other Intellectual Property of such Assignor, use any or all of the
Patents, Trademarks, Trade Secrets, Licenses or Other Intellectual Property
Rights worldwide without any liability to such Assignor for royalties or other
related charges. The term of the assignments granted in this Section 2.4 shall
extend until the earlier of (i) the expiration of all rights under each of the
respective Patents, Trademarks, Trade Secrets and Licenses and Other
Intellectual Property Rights assigned hereunder or (ii) the Release Date.
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2.5 Reassignment to Assignor. On the Release Date, the Assignee shall
execute and deliver to the Assignor, at the Assignor's request and at such
Assignor's sole cost and expense, such releases, deeds, assignments and other
instruments as may be necessary to relinquish, without any representations or
warranties whatsoever (other than a representation that the Assignee has not
assigned or transferred the Proprietary Rights covered by such releases, or
its security interests therein, except as contemplated or permitted hereby or
by the other Credit Documents), all of the Assignee's rights in such of the
Proprietary Rights as shall not have been sold or disposed of pursuant to the
terms of this Collateral Assignment.
2.6 Duties of Assignors. Subject to the rights of the Assignee, until the
Release Date the Assignor shall (i) prosecute diligently any patent, trademark
or copyright application and licenses of the Assignor pending as of the date
hereof or thereafter, (ii) make application on unpatented but patentable
inventions of the Assignor and on trademarks and copyrights, as appropriate,
of the Assignor (iii) preserve and maintain all rights in the Proprietary
Rights of the Assignor and (iv) possess all Trade Secrets of the Assignor. Any
out-of-pocket expenses incurred in connection with such applications by the
Assignor shall be borne by the Assignor. The Assignor shall not abandon any
Patent, Trademark, Trade Secret, License, or Other Intellectual Property
Rights or the right to file any patent application unless the Assignor, in its
reasonable discretion, determines that to take such action in a particular
instance would be in the best commercial interest of the Assignor.
2.7 Assignee's Right to Sue. If an Event of Default shall have occurred and
be continuing, the Assignee shall have the right, but shall in no way be
obligated, to bring suit on behalf of the Assignor to enforce any of the
Assignor's rights in any Proprietary Rights in the event the Assignor declines
to bring such suit and, if the Assignee shall commence any such suit, the
Assignor shall, at the request of the Assignee, do any and all lawful acts and
execute any and all proper documents requested by the Assignee in aid of such
enforcement and the Assignor shall promptly pay, or reimburse and indemnify
the Assignee upon demand, for all reasonable out-of-pocket costs and expenses
incurred by the Assignee in the exercise of its rights under this Section 2.7.
2.8 Assignee Appointed Attorney-in-Fact. During the existence of a Default,
the Assignor appoints the Assignee or the Assignee's designee as its attorney-
in-fact to do all things necessary to carry out or enforce this Collateral
Assignment. The Assignor ratifies and approves to the fullest extent permitted
by law all acts of the Assignee as attorney-in-fact taken in accordance
herewith. The Assignee as attorney-in-fact will not be liable for any acts or
omissions, or for any error of judgment or mistake of fact or law, except for
gross negligence or willful misconduct. This power, being coupled with an
interest, is irrevocable until the Release Date.
3. FILINGS AND CONSENTS
The Assignor shall, at the cost and expense of the Assignor deliver to the
Assignee, upon the execution and delivery of this Collateral Assignment and at
any time and from time to time thereafter, such instruments and documents, in
form and substance satisfactory to the Assignee, and take such other action,
as the Assignee shall reasonably specify as being necessary or appropriate, in
the reasonable opinion of the Assignee, to perfect the Security interests and
other interests granted by the Assignor to the Assignee hereby in the
Proprietary Rights, including, without limitation, filings with the United
States Patent and Trademark Office and the Copyright Office of the United
States. The Assignor will also, at its own expense, from time to time
hereafter make, execute, endorse, acknowledge, file and/or deliver to the
Assignee all documents or instruments and take such further steps reasonably
requested by the Assignee to perfect Assignee's security interests in all
Proprietary Rights.
4. COVENANTS
The Assignor agrees that until the Release Date, unless the Assignee agrees
otherwise in writing: (a) the Assignor will, at its sole cost and expense,
warrant and defend the Proprietary Rights from any and all material claims and
demands of any other Person; (b) the Assignor will not grant, create or permit
to exist any Lien on any of the Proprietary Rights in favor of any other
Person; (c) the Assignor will pay, and indemnify and hold the Assignee
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to any
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Proprietary Rights, including (without limitation) claims of patent or
trademark or Other Intellectual Property Right infringement, and any claim of
unfair competition or antitrust violation, (i) provided that Assignor shall
not have any obligation hereunder with respect to such indemnification arising
from the Assignee's gross negligence or willful misconduct in the use,
assignment and sublicensing of the Patents, Trademarks and Licenses that are
covered by this Collateral Assignment; (ii) which is for reimbursement for
amounts paid by an Indemnified Person on any final, non-appealable judgment in
the Assignor's favor against the Assignee by a court of competent
jurisdiction; or (iii) which is for reimbursement of amounts paid by the party
seeking indemnification in any settlement with a party other than the Assignee
which has been properly effected by the Assignee without the prior consent of
the Assignor, unless either (x) the Assignor has had a reasonable opportunity
to assume responsibility and has not diligently prosecuted a defense of such
indemnified obligation; or (y) the Assignor has failed to provide reasonable
evidence of its financial ability to satisfy its indemnity obligations
hereunder; (d) the Assignor will not enter into any agreement that is
inconsistent in any material respect with the Assignor's obligations under
this Collateral Assignment; and (e) all Proprietary Rights of the Assignor
shall be subsisting, valid and enforceable in all material respects against
third Persons, except to the extent otherwise disclosed in writing to the
Assignor prior to the date hereof.
5. DEFAULT
5.1 Remedies. (a) Upon the occurrence and during the continuance of an
Event of Default, the Assignee, in addition to any rights and remedies under
the Credit Documents or applicable law, may, in its discretion:
(i) collect, receive, appropriate and realize upon all or any of the
Proprietary Rights or any part thereof;
(ii) enter, with or without process of law and without breach of the
peace, any premises where any of the Proprietary Rights or the books and
records related thereto are or may be located, and without charge or
liability to the Assignee seize and remove the Proprietary Rights (and
copies of the Assignor's books and records in any way relating to the
Proprietary Rights) from said premises and/or remain upon said premises and
use the same (together with said books and records) for the purpose of
collecting, preparing and disposing of the Proprietary Rights; or
(iii) sell or otherwise dispose of, including without limitation the
granting of licenses, any Proprietary Rights at public or private sale for
cash or credit.
(b) Upon the occurrence of an Event of Default, the Assignee, in its
discretion, may exercise any one or more of the rights and remedies accruing
to a secured party under the UCC as adopted in the relevant state or states
and any other applicable law upon default by a debtor. The Assignor recognizes
that in the event the Assignor fails to perform, observe or discharge any of
its obligations or liabilities under this Collateral Assignment, no remedy of
law will provide adequate relief to the Assignee, and the Assignor agrees that
the Assignee shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.
(c) Any notice required to be given by the Assignee of a sale, lease, other
disposition of any of the Proprietary Rights or any other intended action by
the Assignee, delivered by telex, facsimile transmission or overnight mail,
postage prepaid and duly addressed to the Assignor at its address set forth
beside its signature hereto, not less than ten (10) days prior to such
proposed action, shall constitute commercially reasonable and fair notice
thereof to the Assignor.
(d) Upon the occurrence of an Event of Default, the Assignee shall have the
right at any time and from time to time thereafter, in its discretion, without
notice thereof to the Assignor, to take control, in any manner, of any item of
payment for or proceeds of any of the Proprietary Rights.
(e) The Assignee may, if the Assignee deems it reasonable, postpone or
adjourn any sale of Proprietary Rights of the Assignor, or any part thereof,
from time to time by an announcement at the time and place of sale or by
announcement at the time and place of such postponed or adjourned sale,
without being required to give a new notice of sale.
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(f) All cash proceeds received by the Assignee in respect of any sale of,
collection from, or other realization upon all or any part of the Proprietary
Rights shall be applied (after payment of any amounts payable to the Assignee
as reimbursement for the costs and expenses incurred by it in connection with
the sale of any of the Proprietary Rights) by the Assignee against all or any
part of the Obligations in such order as the Assignee shall elect. Any surplus
of such cash or cash proceeds held by the Assignee and remaining after payment
in full of all the Obligations shall be paid over to the Assignor or to
whomsoever may be lawfully entitled to receive such surplus and any deficiency
remaining after application of such cash or cash proceeds to the Obligations
shall continue to be an Obligation of the Assignor, for which the Assignor
shall remain liable.
5.2 Waivers by Assignors. Except as otherwise provided for in this
Collateral Assignment and to the extent permitted under applicable law, the
Assignor waives (i) presentment, demand and protest and notice of presentment,
dishonor, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Obligations and of any
accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by the Assignee on which the Assignor may in any
way be liable and hereby ratifies and confirms whatever the Assignee may do in
this regard, (ii) all rights to notice and a hearing prior to the Assignee's
taking possession or control of, or to the Assignee's replevy, attachment or
levy upon, any of the Proprietary Rights or any bond or security that might be
required by any court prior to allowing the Assignee to exercise any of the
Assignee's remedies, and (iii) the benefit of all valuation, appraisal and
exemption laws. The Assignor acknowledges that it has been advised by its
counsel with respect to this Collateral Assignment and the transactions
evidenced by this Collateral Assignment.
5.3 Cumulative Remedies. All of the Assignee's rights and remedies with
respect to the Proprietary Rights, whether established hereby or by any of the
other Credit Documents, or by any other agreements or by law, shall be
cumulative and may be exercised singularly or concurrently. The Assignor
acknowledges and agrees that this Collateral Assignment is not intended to
limit or restrict in any way the rights and remedies of the Assignee under the
Term Note or any other Credit Document but rather is intended to facilitate
the exercise of such rights and remedies.
6. MISCELLANEOUS
6.1 Waivers. No course of dealing between the Assignor and the Assignee,
nor any failure to exercise, nor any delay in exercising, on the part of the
Assignee, any right, power or privilege hereunder, under the Term Note or
under any other Credit Document shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of
any other right, power or privilege.
6.2 Severability. The provisions of this Collateral Assignment are
severable, and if any clause or provision shall be held invalid and
unenforceable in whole or in part as to the Assignor in any jurisdiction, then
such invalidity or unenforceability shall affect only such clause or provision
or part thereof as to such Assignor in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of this Collateral Assignment in any jurisdiction.
6.3 Modification. This Collateral Assignment cannot be altered, amended or
modified in any way, except by a writing signed by the party to be charged
therewith.
6.4 Binding Effect; Benefits. This Collateral Assignment shall be binding
upon the Assignor and its successors and assigns, and shall inure to the
benefit of the Assignee and its successors and assigns. No Assignor may assign
its rights or obligations hereunder or its interest in any Proprietary Rights
without the consent of the Assignee.
6.5 Governing Law. This Collateral Assignment shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its choice of law rules which would make the laws of any other jurisdiction
applicable to this Collateral Assignment.
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6.6 Notices. (a) Any notice, demand or communication hereunder shall be
given in writing (including facsimile transmission) and mailed or delivered to
each party at its address set forth beside its signature hereto, or, as to any
party, at such other address as shall be designated by such party by a prior
notice to the other parties in accordance with the terms of this Section 6.6.
(b) Each notice hereunder shall be effective (i) five (5) business days
after such notice is mailed, by registered or certified mail, postage prepaid
(return receipt requested), (ii) upon delivery by hand or (iii) in the case of
any notice or communication by facsimile transmission, on the date when sent;
provided, however, that notices to the Assignee shall not be effective until
actually received by it.
6.7 Headings. The Section titles and headings in this Collateral Assignment
are and shall be without substantive meaning or context of any kind whatsoever
and are for convenience of reference only.
6.8 References. Unless and until the Credit Agreement is executed by Ahold
and the Assignor and loans are made to Assignor thereunder, all references to
the "Secured Party" shall be to BEW. Upon execution of the Credit Agreement by
Ahold and Assignor and the repayment of the Term Loan and all other
indebtedness owing to BEW by Assignor under the Credit Documents, all
references herein to the "Secured Party" (except in Section 6.5) shall refer
to Ahold; provided, however, in the event BEW is required to return any such
payments to Assignor or trustee or receiver therefor, all references to the
"Secured Party" shall again include BEW.
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IN WITNESS WHEREOF, the parties hereto have caused this Collateral
Assignment to be duly executed by their authorized officers on the day and year
first above written.
Address: Peapod, Inc.
9933 Woods Drive /s/ Dan Rabinowitz
Skokie, Illinois 60077 By __________________________________
Attention: Dan Rabinowitz Name: Dan Rabinowitz
Fax No.: (847) 583-9540 Title:Senior VP and Chief
Financial Officer
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IN WITNESS WHEREOF, the parties hereto have caused this Collateral
Assignment to be duly executed by their authorized officers on the day and year
first above written.
Address: BEW, Inc.
19 Skelley Ave. /s/ Anne J. Longo
Weymouth, MA 02189 By __________________________________
Attention: Anne J. Longo Name: Anne J. Longo
Fax No.: (617) 770-6013 Title:President
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IN WITNESS WHEREOF, the parties hereto have caused this Collateral
Assignment to be duly executed by their authorized officers on the day and year
first above written.
Address: Koninklijke Ahold NV
Albert Heijnweg 1 /s/ Robert G. Tobin
1507 EH Zaandam, The Netherlands By __________________________________
Attention: Ton van Tielraden, Esq. Name: Robert G. Tobin
Fax No.: (31-75) 659-8366 Title:
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Exhibit 99.5
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
among
PEAPOD, INC.,
and
KONINKLIJKE AHOLD N.V.
----------------
Dated as of
April 14, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<C> <S> <C>
ARTICLE I--DEFINITIONS.................................................... 1
Section 1.1. Definitions............................................. 1
ARTICLE II--REGISTRATION RIGHTS........................................... 3
Section 2.1. Shelf Registration...................................... 3
Section 2.2. Demand Registration..................................... 3
Section 2.3. Piggy-Back Registration................................. 4
Section 2.4. Reduction of Offering................................... 4
ARTICLE III--REGISTRATION PROCEDURES...................................... 6
Section 3.1. Filings; Information.................................... 6
Section 3.2. Registration Expenses................................... 9
ARTICLE IV--INDEMNIFICATION AND CONTRIBUTION.............................. 10
Section 4.1. Indemnification by the Company.......................... 10
Section 4.2. Indemnification by Holders of Registrable Securities.... 10
Section 4.3. Conduct of Indemnification Proceedings.................. 11
Section 4.4. Contribution............................................ 11
ARTICLE V--MISCELLANEOUS.................................................. 12
Section 5.1. Participation in Underwritten Registrations............. 12
Section 5.2. Distribution............................................ 13
Section 5.3. SEC Reporting........................................... 13
Section 5.4. Restrictions on Sale.................................... 13
Section 5.5. Notices................................................. 14
Section 5.6. Governing Law........................................... 14
Section 5.7. Entire Agreement........................................ 15
Section 5.8. Modifications and Amendments............................ 15
Section 5.9. Waivers and Extensions.................................. 15
Section 5.10. Titles and Headings..................................... 15
Section 5.11. Assignment.............................................. 15
Section 5.12. Severability............................................ 15
Section 5.13. Counterparts............................................ 15
Section 5.14. Further Assurances...................................... 15
Section 5.15. Remedies Cumulative; Specific Performance............... 15
Section 5.16. Other Registration Rights............................... 16
</TABLE>
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REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of April
14, 2000, by and among Peapod, Inc., a Delaware corporation (the "Company"),
and Koninklijke Ahold N.V., a public company with limited liability
incorporated under the laws of the Netherlands (the "Purchaser").
NOW, THEREFORE, the parties hereto hereby agree as follows.
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Additional Piggy-Back Holder" shall mean McLane Group, L.P.
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, in the case of a
person who is an individual, shall include (i) members of such specified
person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and
all beneficiaries of which are such specified person or members of such
person's immediate family as determined in accordance with the foregoing
clause (i). For the purposes of this definition, "control," when used with
respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.
Notwithstanding the foregoing, for purposes of this Agreement, the
Purchaser and its Affiliates shall not be deemed Affiliates of the Company.
"Agreement" shall have the meaning set forth in the Preamble.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
"Company" shall have the meaning set forth in the Preamble.
"Demanding Holder" shall have the meaning set forth in Section 2.2.
"Demand Notice" shall have the meaning set forth in Section 2.2.
"Demand Registration" shall have the meaning set forth in Section 2.2.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Final Closing" shall have the meaning set forth in the Purchase
Agreement.
"Holder" shall mean (i) the Purchaser, as the beneficial owner of
Registrable Securities and (ii) any other person (a) that is the beneficial
owner of Registrable Securities, and (b) to whom the registration rights
set forth herein have been assigned in accordance with Section 5.11;
provided, that a person shall be deemed the beneficial owner of Registrable
Securities if that person has the right to acquire such Registrable
Securities, whether or not such acquisition has been effected and
disregarding any legal restrictions upon the exercise of such right.
"Initiating Holders" shall have the meaning set forth in Section 2.2.
"Minimum Effective Period" shall mean (i) in the case of the Shelf
Registration, as long as Holders hold any of the Registrable Securities,
and (ii) in the case of a Demand Registration, a period of at least one
hundred eighty (180) days beyond the effective date thereof (or, in either
case, such shorter period as is required to complete the distribution of
the Registrable Securities included in such registration statement).
"NASD" shall have the meaning set forth in Section 3.1.
"Notices" shall have the meaning set forth in Section 5.5.
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"Outside Date" shall mean the date that is one hundred and twenty (120)
days after the date hereof or, if the Purchaser exercises any Warrants and
as a direct result of such exercise, the Stockholders Meeting (as defined
in the Purchase Agreement) is delayed, one hundred and twenty (120) days
plus the number of days of such delay after the date hereof.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Piggy-Back Registration" shall have the meaning set forth in Section
2.3.
"Piggy-Back Holders" shall have the meaning set forth in Section 2.3.
"Preemptive Rights" shall mean the rights of holders of Series B
Preferred Stock to purchase securities pursuant to Section 9 of the
Certificate of Designations relating to the Series B Preferred Stock.
"Purchaser" shall have the meaning set forth in the Preamble.
"Purchase Agreement" shall mean the purchase agreement, dated as of
April 14, 2000, by and between the Company and the Purchaser.
"Registrable Securities" shall mean (i) shares of Series B Preferred
Stock and Warrants issued and sold by the Company to the Purchaser pursuant
to the Purchase Agreement, (ii) any securities acquired by the Purchaser
pursuant to the exercise of its Preemptive Rights, (iii) shares of Common
Stock or any other security received or receivable upon conversion or
exercise of any Registrable Securities, (iv) any security received or
receivable as a dividend or other distribution with respect to any
Registrable Securities, (v) any security received in exchange for or in
replacement of any Registrable Securities, (vi) any security issued or
issuable with respect to any Registrable Securities as a result of a change
or reclassification of Registrable Securities or any capital reorganization
of the Company, and (vii) any security received or receivable by a holder
in respect of Registrable Securities as a result of a merger or
consolidation of the Company; provided, however, that "Registrable
Securities" shall not include (a) any securities sold to the public
pursuant to a registration statement or Rule 144 under the Securities Act
or any similar rule promulgated by the Commission thereunder, or (b) any
securities sold in a private transaction in which the transferor's rights
hereunder are not assigned in accordance with the requirements of Section
5.11; provided further, that the Company shall have no obligation to
register those Registrable Securities of the Holder with respect to which
the Company delivers to the Holder an opinion of counsel reasonably
satisfactory to such Holder and its counsel to the effect that the proposed
sale or disposition of such Registrable Securities for which registration
was requested does not require registration under the Securities Act and
may be sold pursuant to Rule 144(k) under the Securities Act (or any
successor provision thereto).
"register," "registered" and "registration" shall refer to a
registration of securities effected by preparing and filing a registration
statement in compliance with the Securities Act and the effectiveness of
such registration statement.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Selling Holder" means a Holder who sells or proposes to sell
Registrable Securities pursuant to any registration statement provided for
in this Agreement.
"Series B Preferred Stock" shall mean the Series B Convertible Preferred
Stock, par value $.01 per share, of the Company.
"Shares" shall mean, collectively, the Common Stock, the Series B
Preferred Stock and the Warrants. Whenever this Agreement refers to a
number or percentage of Shares, such number or percentage shall be
calculated as if, immediately prior to such calculation, all shares of
Series B Preferred Stock had been converted into, and all Warrants had been
exercised for, shares of Common Stock in accordance with their terms,
regardless of the existence of any restrictions on such conversion or
exercise.
"Shelf Registration" shall have the meaning set forth in Section 2.1.
"Warrants" shall mean the warrants to purchase Common Stock issued
pursuant to the Purchase Agreement.
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ARTICLE II
REGISTRATION RIGHTS
Section 2.1. Shelf Registration. Within forty-five (45) days of delivery of
a written notice by Holders of more than 50% of the Registrable Securities
which notice may be delivered at any time after the earlier to occur of (a)
the Final Closing or (b) the termination of the Purchase Agreement, the
Company shall prepare and file a shelf registration statement (the "Shelf
Registration") on Form S-3, or such other form as the Company may at the time
be eligible to use for the registration of securities under the Securities Act
providing for the sale by the Holders of all of their Registrable Securities
then outstanding, and all Registrable Securities issuable thereafter. The
Company may include in the Shelf Registration shares of Common Stock sold for
the account of the Company, but no other person.
Section 2.2. Demand Registration. (a) Request for Registration. At any
time, and from time to time, the Holders of more than fifty percent (50%) of
any type, class or series of Registrable Securities then outstanding shall
have the right, by written notice (a "Demand Notice") delivered to the
Company, to require the Company to register ("Demand Registration")
Registrable Securities having an aggregate offering price to the public in
excess of $5,000,000; provided, however, that (i) (x) until the earlier to
occur of the Outside Date or the date of the consummation of the Final
Closing, the Holders of Registrable Securities shall not have any right to
demand a Demand Registration, (y) in the period commencing on the Outside Date
and ending on the date of the consummation of the Final Closing, if the Final
Closing occurs, the Holders of Registrable Securities shall have the right to
demand four (4) Demand Registrations, and (z) at any time after the
consummation of the Final Closing, the Holders of Registrable Securities shall
have the right to demand an unlimited number of Demand Registrations, and (ii)
the Company shall not be required to effect a Demand Registration if within
six (6) months prior to the date of such Demand Notice a Demand Registration
pursuant to this Section 2.2(a) shall have been declared or ordered effective
by the Commission. The Holders who deliver a Demand Notice (the "Initiating
Holders") shall specify in the Demand Notice the number and type, class or
series of Registrable Securities to be registered and the intended methods of
disposition thereof.
The Company shall give written notice of any Demand Notice within ten (10)
days after the receipt thereof, to each Holder other than the Initiating
Holders. Within twenty (20) days after receipt of such notice, any such Holder
may request in writing that its Registrable Securities be included in such
registration, and the Company shall include in the Demand Registration the
Registrable Securities of all such Holders who request to be so included
(together with the Initiating Holders, the "Demanding Holders"), subject to
the provisions of Section 2.4. Each such request shall specify the number of
Registrable Securities proposed to be sold and the intended method of
disposition thereof.
(b) Effective Registration. A registration will be deemed to have been
effected as a Demand Registration if it has been declared effective by the
Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that a Demand
Registration will not be deemed to have been effected, and the Company shall
continue to be obligated to effect an additional Demand Registration, if (i)
after such registration has become effective, the offering of Registrable
Securities pursuant to such registration is or becomes the subject of any stop
order, injunction or other order or requirement of the Commission or any other
governmental or administrative agency (for any reason other than the acts or
omissions of the Demanding Holders), (ii) any court prevents or otherwise
limits the sale of Registrable Securities pursuant to such registration (for
any reason other than the acts or omissions of the Demanding Holders), (iii)
such registration does not remain effective for the Minimum Effective Period,
(iv) an event specified in clause (v), (vi) or (vii) of Section 3.1(d) occurs
that results in a delay of an underwritten offering and, as a direct result of
such delay, the managing underwriter(s) determine that the Registrable
Securities cannot be sold at the originally anticipated offering price, or (v)
after an event specified in clause (vi) of Section 3.1(d) occurs, Selling
Holders determine to withdraw a majority of the Registrable Securities
previously included in such registration.
(c) Withdrawal. The Demanding Holders may withdraw all or any part of their
Registrable Securities from a Demand Registration at any time (whether before
or after the filing or effective date of such Demand
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Registration) and, if all such Registrable Securities are withdrawn, may
withdraw the demand related thereto. If a registration statement is filed
pursuant to a Demand Registration, and subsequently a sufficient number of
Registrable Securities are withdrawn from the Demand Registration so that such
registration statement does not cover at least the required amount specified
by Section 2.2(a), the Company may (or shall, if requested by the Demanding
Holders) withdraw the registration statement and if such registration
statement is withdrawn prior to the consummation of the Final Closing, it will
count as a Demand Registration; provided that if the Demanding Holders bear
the expenses associated with such withdrawn registration statement, such
registration statement will not count as a Demand Registration and the Company
shall continue to be obligated to effect an additional Demand Registration. If
the Demanding Holders determine to bear such expenses, such expenses shall be
borne ratably by the Demanding Holder(s) whose withdrawal of Registrable
Securities resulted in such registration statement not covering the specified
required amounts.
(d) Selection of Underwriter. If the Demanding Holders so elect, the
offering of Registrable Securities pursuant to a Demand Registration shall be
in the form of an underwritten offering. The majority of the Demanding Holders
shall select one or more nationally recognized firms of investment bankers to
act as the book-running managing underwriter or underwriters in connection
with such offering and shall select any additional investment bankers and
managers to be used in connection with the offering; provided that such
investment bankers and managers must be reasonably satisfactory to the
Company.
Section 2.3. Piggy-Back Registration. If the Company proposes to file a
registration statement (a "Piggy-Back Registration") under the Securities Act
with respect to an offering or other sale of equity securities by the Company
for its own account or for the account of any holders of any class of its
equity securities (other than (i) a Demand Registration, (ii) a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by
the Commission), or (iii) a registration statement filed in connection with an
exchange offer or offering of securities solely to the Company's existing
securityholders), then the Company shall give written notice of such proposed
filing to the Holders as soon as practicable, in any event at least thirty
(30) days before the anticipated filing date, and such notice shall offer each
Holder the opportunity to include in such registration such number of
Registrable Securities as such Holder may request (which request shall specify
the Registrable Securities intended to be disposed of by such Holder and the
intended method of distribution thereof). Such Holders shall have twenty (20)
days after receipt of such notice from the Company to make such request. All
Holders requesting inclusion in the Piggy-Back Registration are referred to
herein as "Piggy-Back Holders".
Any Holder shall have the right to withdraw its request for inclusion of
its Registrable Securities in any Piggy-Back Registration by giving written
notice to the Company of its request to withdraw prior to the date on which
the registration statement becomes effective. The Company may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective,
provided that the Company shall reimburse the Piggy-Back Holders for all
reasonable out-of-pocket expenses (including counsel fees and expenses)
incurred prior to such withdrawal.
No Piggy-Back Registration shall relieve the Company of its obligation to
effect any Demand Registration or a Shelf Registration, and no failure to
effect a Piggy-Back Registration or complete the sale of securities in
connection therewith shall relieve the Company of any other obligation under
this Agreement (including, without limitation, the Company's obligations under
Sections 3.2 and 4.1).
Section 2.4. Reduction of Offering. (a) Demand Registration. The Company
may include in a Demand Registration Registrable Securities for the account of
the Demanding Holders and shares of Common Stock for the account of the
Company or other stockholders exercising contractual piggy-back registration
rights or other stockholders, on the same terms and conditions as the
Registrable Securities are included therein for the account of the Demanding
Holders; provided, however, that (i) if the managing underwriter(s) of any
underwritten offering that is the subject of such Demand Registration have
informed the Company in writing that in their
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opinion the total number of securities that the Demanding Holders, the Company
and any other stockholders intend to include in such offering exceeds the
number which can be sold in such offering within a price range acceptable to
the Holders of a majority of the Registrable Securities requested to be
included therein, then (x) the number of Shares to be offered for the account
of any stockholders other than the Demanding Holders shall be reduced (to
zero, if necessary) pro rata in proportion to the respective number of Shares
requested to be registered by such stockholders, and (y) thereafter, if
necessary, the number of Shares to be offered for the account of the Company
shall be reduced (to zero, if necessary), to the extent necessary to reduce
the total number of Shares requested to be included in such offering to the
number of Shares, if any, recommended by such managing underwriter(s) (and if
the number of Shares to be offered for the account of stockholders other than
the Demanding Holders and for the account of the Company has been reduced to
zero, and the number of Shares requested to be included in such offering by
the Demanding Holders exceeds the number of Shares recommended by such
managing underwriter(s), then the number of Shares to be offered for the
account of the Demanding Holders shall be reduced pro rata in proportion to
the respective number of Shares requested to be registered by the Demanding
Holders) and (ii) if the offering that is the subject of such Demand
Registration is not underwritten, only Demanding Holders, and no other party
(including the Company), shall be permitted to include securities in such
Demand Registration unless the Demanding Holders owning a majority of the
Shares included in such Demand Registration consent in writing to the
inclusion of such securities therein.
(b) Piggy-Back Registration. (i) Notwithstanding anything to the contrary
contained herein, if the managing underwriter(s) of any underwritten offering
that is the subject of a Piggy-Back Registration have informed the Company in
writing that in their opinion the total number of Shares that the Company, the
Piggy-Back Holders and any other persons desiring to participate in such
registration intend to include in such offering exceeds the number which can
be sold in such offering without materially and adversely affecting the
marketability of the offering, then (x) the number of Shares to be offered for
the account of all other persons (other than the Company, the Piggy-Back
Holders, the Additional Piggy-Back Holder and any securityholder(s) for whom
such registration constitutes an exercise of their demand registration rights)
that have requested to include Shares in such registration shall be reduced
(to zero, if necessary) pro rata in proportion to the respective number of
Shares requested to be included, (y) thereafter, if necessary, the number of
Shares to be offered for the account of the Company (if any) shall be reduced
(to zero, if necessary), and (z) thereafter, if necessary, the number of
Shares to be offered for the account of Piggy-Back Holders and Additional
Piggy-Back Holder shall be reduced (to zero, if necessary) pro rata in
proportion to the respective number of Shares requested to be included, to the
extent necessary to reduce the total number of Shares requested to be included
in such offering to the number of Shares, if any, that such managing
underwriter(s) believe can be included without materially and adversely
affecting the success of the offering; provided that, if such registration
contemplates an "over-allotment option" on the part of underwriters, to the
extent such over-allotment option is exercised and Holders of the Registrable
Securities were excluded from registering any of the Registrable Securities
they requested be included in such registration pursuant to the cutback
provisions of this Section 2.4(b), then the over-allotment option shall be
fulfilled through the registration and sale of such excluded Registrable
Securities.
(ii) If the managing underwriter(s) of any underwritten offering that is
the subject of a Piggy-Back Registration notify the Company that the kind of
securities that the Piggy-Back Holders intend to include is such as to
materially and adversely affect the success of such offering, then (x) the
Company shall afford the Piggy-Back Holders the opportunity to exercise,
convert or exchange such securities for or into Common Stock concurrently with
the consummation of such offering and include such shares of Common Stock in
such offering, in which case such shares of Common Stock shall be included
subject to clause (i) above, and (y) if one or more Piggy-Back Holders do not
so exercise, convert or exchange such securities, such securities to be
included in such offering by such Piggy-Back Holders shall be reduced as
described in clause (i) above or if such reduction would, in the judgment of
the managing underwriter(s), be insufficient to substantially eliminate the
adverse effect that inclusion of such securities requested to be included
would have on such offering, such securities will be excluded from such
offering.
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ARTICLE III
REGISTRATION PROCEDURES
Section 3.1. Filings; Information. Whenever the Company is required to
effect or cause the registration of Registrable Securities pursuant to Section
2.1 or Section 2.2, the Company will use its reasonable best efforts to effect
the registration of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable, and in
connection with any such request:
(a) The Company will as expeditiously as possible prepare and file with
the Commission a registration statement on any form for which the Company
then qualifies or which counsel for the Company shall deem appropriate and
which form shall be available for the sale of the Registrable Securities to
be registered thereunder in accordance with the intended method of
distribution thereof, and use its reasonable best efforts to cause such
filed registration statement to become and remain effective for the Minimum
Effective Period; provided, however, that the Company may postpone the
filing of a registration statement, or suspend sales under an effective
shelf registration statement, for a period of not more than thirty (30)
days if the Company furnishes to each Selling Holder a certificate signed
by the Chairman of the Board stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for the Company to file a registration
statement, or permit sales to be made under an effective shelf registration
statement, at such time because (i) it would interfere with any proposed or
pending material transaction or (ii) the Company would be required to
disclose material non-public information that the Company has a bona fide
business purpose for not disclosing; provided, further, that the Company
shall only be entitled to postpone a filing or suspend sales once in any
twelve-month period. If the Company postpones the filing of a registration
statement, or suspends sales under an effective shelf registration
statement, it shall promptly notify the Holders in writing when the events
or circumstances permitting such postponement or suspension have ended. In
the event of any suspension of sales under any registration statement
pursuant to this Section 3.1(a), the Company shall extend the period during
which such registration statement shall be maintained effective by the
number of days in such suspension period.
(b) The Company will promptly prepare and file with the 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 continuously effective (subject to paragraph (a) and
the penultimate paragraph of this Section 3.1) for the Minimum Effective
Period 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 each Selling Holder included in such registration statement.
(c) The Company will, at least fifteen (15) days prior to filing a
registration statement or prospectus or any amendment or supplement
thereto, furnish to each Selling Holder, counsel representing such Selling
Holders, and each underwriter, if any, of the Registrable Securities
covered by such registration statement copies of such registration
statement as proposed to be filed, together with exhibits thereto, which
documents will be subject to review and comment by the foregoing as
promptly as practicable, but in any event within ten (10) days after
delivery, and thereafter furnish to such Selling Holder, counsel and
underwriter, if any, for their review and comment such number of copies of
such registration statement, each amendment and supplement thereto (in each
case, including all exhibits thereto and documents incorporated by
reference therein), the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents or
information as such Selling Holder, counsel or underwriter may reasonably
request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder.
(d) After the filing of the registration statement, the Company will
promptly notify each Selling Holder of Registrable Securities covered by
such registration statement, and confirm such notice in writing, (i) when a
prospectus or any prospectus supplement or post-effective amendment has
been filed and, with respect to a registration statement or any post-
effective amendment, when the same has become effective, (ii) of any
request by the Commission or any other Federal or state governmental
authority for amendments or supplements to a registration statement or
related prospectus or for additional information, (iii) of the
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issuance by the Commission or any other Federal or state governmental
authority of any stop order suspending the effectiveness of a registration
statement or any order preventing or suspending the use of any prospectus
or the initiation of any proceedings for that purpose, (iv) if, at any time
when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities, the representations
and warranties of the Company contained in any agreement contemplated by
Section 3.1(h) (including any underwriting agreement) cease to be true and
correct in any material respect, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (vi) of the happening of any event which makes any
statement made in such registration statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or which requires the making of any changes
in a registration statement, prospectus or documents incorporated therein
by reference so that, in the case of the registration statement, it will
not contain any 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, and that, in the case of the prospectus,
it will not contain any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. After the filing
of the registration statement, the Company will promptly furnish to each
Selling Holder and the managing underwriter, without charge, at least one
signed copy of the registration statement.
(e) The Company will use its reasonable best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky
laws of such jurisdictions in the United States as any Selling Holder, the
managing underwriters, if any, or their respective counsel reasonably (in
light of such Selling Holder's intended plan of distribution) request, and
(ii) cause such Registrable Securities to be registered with or approved by
such other governmental agencies or authorities in the United States as may
be necessary by virtue of the business and operations of the Company and do
any and all other acts and things that may be reasonably necessary or
advisable to enable such Selling Holder to consummate the disposition of
the Registrable Securities owned by such Selling Holder; provided that the
Company will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this paragraph (e) or (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(f) The Company will promptly use its reasonable best efforts to prevent
the entry, or obtain the withdrawal, of any order suspending the
effectiveness of a registration statement, or the lifting of any suspension
of the qualification (or exemption from qualification) of any Registrable
Securities for sale in any jurisdiction.
(g) Upon the occurrence of any event contemplated by clause (vi) of
Section 3.1(d), the Company will (i) promptly prepare a supplement or post-
effective amendment to such registration statement or a supplement to the
related prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, such
prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) promptly make available to each Selling
Holder any such supplement or amendment.
(h) The Company will enter into customary agreements (including, if
applicable, an underwriting agreement in customary form) and take such
other actions as are reasonably required in order to expedite or facilitate
the disposition of such Registrable Securities. All of the representations,
warranties and covenants of the Company to or for the benefit of such
underwriters shall also be made to and for the benefit of such Selling
Holders. None of such agreements shall increase the potential liability of
the Selling Holders beyond that otherwise provided in Article IV of this
Agreement.
(i) The Company will make available to each Selling Holder (and will
deliver to their counsel) and each underwriter, if any, copies of all
correspondence between the Commission and the Company, its counsel or
auditors and will also make available for inspection by any Selling Holder,
any underwriter
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participating in any disposition pursuant to such registration statement
and any attorney, accountant or other professional retained by any such
Selling Holder or underwriter (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents and properties
of the Company (collectively, the "Records") as shall be reasonably
necessary to enable them to exercise their due diligence responsibility,
and cause the Company's officers and employees to supply all information
reasonably requested by any Inspectors in connection with such registration
statement. Records which the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are confidential shall
not be disclosed by the Inspectors unless (i) the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in such
registration statement or (ii) the disclosure or release of such Records is
requested or required pursuant to oral questions, interrogatories, requests
for information or documents or a subpoena or other order from a court of
competent jurisdiction or other process; provided that prior to any
disclosure or release pursuant to clause (ii), the Inspectors shall provide
the Company, to the extent possible, with prompt notice of any such request
or requirement so that the Company may seek an appropriate protective order
or waive such Inspectors' obligation not to disclose such Records; and,
provided further, that if failing the entry of a protective order or the
waiver by the Company permitting the disclosure or release of such Records,
the Inspectors, upon advice of counsel, are compelled to disclose such
Records, the Inspectors may disclose that portion of the Records which
counsel has advised the Inspectors that the Inspectors are compelled to
disclose. Each Selling Holder agrees that information obtained by it solely
as a result of such inspections (not including any information obtained
from a third party who, insofar as is known to the Selling Holder after
reasonable inquiry, is not prohibited from providing such information by a
contractual, legal or fiduciary obligation to the Company) shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company or its Affiliates unless and
until such information is made generally available to the public other than
as a result of disclosure by such Selling Holder in breach of this
provision. Each Selling Holder further agrees that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its
expense, to undertake appropriate action to prevent disclosure of the
Records deemed confidential.
(j) In the case of an underwritten offering, the Company will furnish to
each Selling Holder and to each underwriter, a signed counterpart,
addressed to such Selling Holder or underwriter, of (i) an opinion or
opinions of outside counsel to the Company, and (ii) a comfort letter or
comfort letters from the Company's independent certified public accountants
(and if necessary, any other independent certified public accountants of
any subsidiary of the Company or of any business acquired by the Company
for which financial statements and/or financial data are, or are required
to be, included in the registration statement), each in customary form and
covering such matters of the type customarily covered by opinions or
comfort letters, as the case may be, as the Selling Holders or the managing
underwriter therefor reasonably requests.
(k) The Company will otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
available to its securityholders, as soon as reasonably practicable, an
earnings statement covering a period of 12 months, beginning on the first
day of any fiscal quarter next succeeding the effective date of the
registration statement, which earnings statement shall cover such twelve
month period and shall satisfy the provisions of Section 11(a) of the
Securities Act.
(l) If requested by the Selling Holders owning a majority of the Shares
that constitute Registrable Securities included in such registration
statement, the Company will use its reasonable best efforts (a) to cause
any class of Registrable Securities to be listed on a national securities
exchange (if such securities are not already so listed) and on each
additional national securities exchange on which similar securities issued
by the Company are then listed (if any), if the listing of such Registrable
Securities is then permitted under the rules of such exchange or (b) to
secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within
the meaning of Rule 11Aa2-1 of the Commission or, failing that, to secure
NASDAQ authorization for such Registrable Securities and, without limiting
the generality of the foregoing, to arrange for at least two market makers
to register as such with respect to such Registrable Securities with the
National Association of Securities Dealers, Inc. (the "NASD").
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(m) In connection with an underwritten offering, the Company will
participate, to the extent reasonably requested by the managing underwriter
for the offering or the Selling Holders, in customary efforts to sell the
securities under the offering, including, without limitation, participating
in "road shows"; provided that the Company shall not be obligated so to
participate in more than one such offering pursuant to a Shelf Registration
or a Demand Registration in any 12-month period.
The Company may require each Selling Holder to promptly furnish in writing
to the Company such information regarding the distribution of the Registrable
Securities by such Selling Holder as the Company may from time to time
reasonably request and such other information as may be legally required in
connection with such registration including, without limitation, all such
information as may be requested by the Commission or the NASD. The Company may
exclude from such registration any Holder who fails to provide such
information.
Each Selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in clauses (iii),
(v) and (vi) of Section 3.1(d), such Selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering such Registrable Securities until such Selling Holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
3.1(g), and, if so directed by the Company, such Selling Holder will deliver
to the Company (at the Company's expense) all copies, other than permanent
file copies, then in such Selling Holder's possession of the most recent
prospectus covering such Registrable Securities at the time of receipt of such
notice. In the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective by the number of days during the period from and including the date
of the giving of notice pursuant to clause (iii), (v) or (vi) of Section
3.1(d) to the date when the Company shall make available to the Selling
Holders a prospectus supplemented or amended to conform with the requirements
of Section 3.1(g).
In connection with any Piggy-Back Registration that includes Registrable
Securities, the Company will take the actions contemplated by paragraphs (c),
(d), (e), (f), (g), (i), (j), (k) and (l) above.
Section 3.2. Registration Expenses. In connection with the Shelf
Registration, every Demand Registration and every Piggy-Back Registration that
includes Registrable Securities, the Company shall pay the following
registration expenses incurred in connection with such registration (the
"Registration Expenses"): (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws and of determination
of eligibility of the Registrable Securities for investment under the laws of
such jurisdiction as the managing underwriters or Holders of a majority of the
Registrable Securities being sold may designate (including reasonable fees and
disbursements of counsel in connection therewith), (iii) printing expenses
(including printing certificates for the Registrable Securities to be sold and
the prospectuses), messenger and delivery expenses, duplication, word
processing, and telephone expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties, the expenses of any annual
audit or quarterly review, the expense of any liability insurance) and all
fees and expenses incident to the performance of or compliance with this
Agreement by the Company, (v) the fees and expenses incurred in connection
with the listing of the Registrable Securities, (vi) fees and disbursements of
counsel for the Company and fees and expenses for independent certified public
accountants retained by the Company (including the expenses of any comfort
letters or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested pursuant to
Section 3.1(j)), reasonable fees and disbursements of all underwriters
(excluding discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry professionals relating to the
distribution of the Registrable Securities), (vii) the fees and expenses of
any special experts retained by the Company in connection with such
registration, (viii) reasonable fees and expenses of one firm of counsel for
the Holders, which counsel shall be chosen by Holders of a majority of the
Shares included in such registration statement, and (ix) fees and
disbursements of any transfer agent for the Registrable Securities. The
Company shall have no obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities.
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ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1. Indemnification by the Company. The Company agrees to
indemnify, to the fullest extent permitted by law, and hold harmless each
Selling Holder, its partners, officers, directors, employees and agents, and
each person, if any, who controls such Selling Holder within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, together
with the partners, officers, directors, employees and agents of such
controlling person (collectively, the "Controlling Persons"), from and against
any loss, claim, damage, liability, reasonable attorneys' fee, cost or expense
and costs and expenses (including, without limitation, costs of preparation
and attorneys' fees and disbursements) of investigating and defending any such
claim (collectively, the "Damages"), joint or several, and any action in
respect thereof to which such Selling Holder, its partners, officers,
directors, employees or agents, or any such Controlling Person may become
subject under the Securities Act or otherwise, insofar as such Damages (or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus relating to the Registrable Securities or
any preliminary prospectus, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are based upon
information furnished in writing to the Company by a Selling Holder or
underwriter expressly for use therein, and shall reimburse each Selling
Holder, its partners, officers, directors, employees and agents, and each such
Controlling Person for any legal and other expenses reasonably incurred by
that Selling Holder, its partners, officers, directors, employees and agents,
or any such Controlling Person in investigating or defending or preparing to
defend against any such Damages or proceedings; provided, however, that the
Company shall not be liable to any Selling Holder to the extent that (a) any
such Damages arise out of or are based upon an untrue statement or omission
made in any preliminary prospectus if (i) such offering does not involve an
underwriter, (ii) such Selling Holder was informed by the Company of such
untrue statement or omission and such Selling Holder was provided copies of
the final prospectus by the Company and was informed by the Company of the
correction therein of the untrue statement or omission, but such Selling
Holder failed to send or deliver a copy of the final prospectus with or prior
to the delivery of written confirmation of the sale by such Selling Holder to
the person asserting the claim from which such Damages arise, and (iii) the
final prospectus would have corrected such untrue statement or such omission;
or (b) any such Damages arise out of or are based upon an untrue statement or
omission in any prospectus if (i) such offering does not involve an
underwriter, (ii) such untrue statement or omission is corrected in an
amendment or supplement to such prospectus, and (iii) such Selling Holder was
informed by the Company of such untrue statement or omission and, having
previously been furnished by or on behalf of the Company with copies of such
prospectus as so amended or supplemented sufficiently prior to the sale of
Registrable Securities and informed by the Company of the correction therein
of the untrue statement or omission, such Selling Holder thereafter fails to
deliver such prospectus as so amended or supplemented prior to or concurrently
with the sale of a Registrable Security to the person asserting the claim from
which such Damages arise. The Company also agrees to indemnify any
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution of the Registrable Securities,
their respective officers and directors and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
the Selling Holders provided in this Section 4.1.
Section 4.2. Indemnification by Holders of Registrable Securities. Each
Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company, its officers, directors, employees and agents and each
person, if any, who controls the Company within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act, together with the
partners, officers, directors, employees and agents of such controlling
person, to the same extent as the foregoing indemnity from the Company to such
Selling Holder, but only with reference to information related to such Selling
Holder, or its plan of distribution, furnished in writing by such Selling
Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to such Selling Holder's
Registrable Securities, or any amendment or supplement thereto, or any
preliminary prospectus. In case any action or proceeding shall be brought
against the Company or its officers, directors, employees or agents or any
such controlling person or its partners, officers, directors, employees or
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agents, in respect of which indemnity may be sought against such Selling
Holder, such Selling Holder shall have the rights and duties given to the
Company, and the Company or its officers, directors, employees or agents,
controlling person, or its partners, officers, directors, employees or agents,
shall have the rights and duties given to such Selling Holder, under Section
4.1. Each Selling Holder also agrees to indemnify and hold harmless each other
Selling Holder and any underwriters of the Registrable Securities, and their
respective officers and directors and each person who controls each such other
Selling Holder or underwriter on substantially the same basis as that of the
indemnification of the Company provided in this Section 4.2. The Company shall
be entitled to receive indemnities from underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, to the same extent as provided above, with respect to
information so furnished in writing by such persons specifically for inclusion
in any prospectus or registration statement. In no event shall the liability
of any Selling Holder be greater in amount than the dollar amount of the net
proceeds received by such Selling Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
Section 4.3. Conduct of Indemnification Proceedings. Promptly after receipt
by any person in respect of which indemnity may be sought pursuant to Section
4.1 or 4.2 (an "Indemnified Party") of notice of any claim or the commencement
of any action, the Indemnified Party shall, if a claim in respect thereof is
to be made against the person against whom such indemnity may be sought (an
"Indemnifying Party"), notify the Indemnifying Party in writing of the claim
or the commencement of such action, provided that the failure to notify the
Indemnifying Party shall not relieve it from any liability except to the
extent that the Indemnifying Party is materially prejudiced as a result of
such failure. If any such claim or action shall be brought against an
Indemnified Party, and it shall notify the Indemnifying Party thereof, the
Indemnifying Party shall be entitled to participate therein, and, to the
extent that it wishes, jointly with any other similarly notified Indemnifying
Party, to assume the defense thereof with counsel reasonably satisfactory to
the Indemnified Party; provided, that the Indemnifying Party acknowledges, in
a writing in form and substance reasonably satisfactory to such Indemnified
Party, such Indemnifying Party's liability for all Damages of such Indemnified
Party to the extent specified in, and in accordance with, this Article IV.
After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided that the
Indemnified Party shall have the right to employ separate counsel to represent
the Indemnified Party and its controlling persons who may be subject to
liability arising out of any claim in respect of which indemnity may be sought
by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the retention of such counsel or (ii) in the reasonable
judgment of such Indemnified Party, representation of both parties by the same
counsel would be inappropriate due to actual or potential conflicts of
interest between them, it being understood, however, that the Indemnifying
Party shall not, in connection with any one such claim or action or separate
but substantially similar or related claims or actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all Indemnified
Parties. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of any claim or pending or threatened
proceeding in respect of which the 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 arising out of such claim or proceeding.
Whether or not the defense of any claim or action is assumed by the
Indemnifying Party, such Indemnifying Party will not be subject to any
liability for any settlement made without its consent, which consent will not
be unreasonably withheld.
Section 4.4. Contribution. If the indemnification provided for in this
Article IV is unavailable to the Indemnified Parties in respect of any Damages
referred to herein, then each 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 Damages (i) as between the Company and
the Selling Holders, on the one hand, and the underwriters, on the other, in
such proportion as is appropriate to reflect the relative benefits received by
the
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Company and the Selling Holders, on the one hand, and the underwriters, on the
other, from the offering of the Registrable Securities, or if such allocation
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits but also the relative fault of the
Company and the Selling Holders, on the one hand, and of the underwriters, on
the other, in connection with the statements or omissions which resulted in
such Damages, as well as any other relevant equitable considerations, and (ii)
as between the Company, on the one hand, and each Selling Holder, on the
other, in such proportion as is appropriate to reflect the relative fault of
the Company and of each Selling Holder in connection with such statements or
omissions, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Selling Holders, on the one
hand, and the underwriters, on the other, shall be deemed to be in the same
proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the
Company and the Selling Holders 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. The relative fault of the Company
and the Selling Holders, on the one hand, and of the underwriters, on the
other, 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 and the Selling Holders or by the underwriters. The relative fault
of the Company, on the one hand, and of each Selling Holder, on the other,
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 such
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation (even if the Selling Holders were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the Damages referred to in the immediately preceding paragraph 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 or defending any such action or claim. Notwithstanding the
provisions of this Section 4.4, no underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities underwritten by it and distributed to the public were
offered 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 no Selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Selling Holder were offered
to the public (less underwriting discounts and commissions) exceeds the amount
of any Damages which such Selling Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. Each
Selling Holder's obligation to contribute pursuant to this Section 4.4 is
several and not joint.
The indemnity, contribution and expense reimbursement obligations contained
in this Article IV are in addition to any liability any Indemnifying Party may
otherwise have to an Indemnified Party or otherwise. The provisions of this
Article IV shall survive, notwithstanding any transfer of the Registrable
Securities by any Holder or any termination of this Agreement.
ARTICLE V
MISCELLANEOUS
Section 5.1. Participation in Underwritten Registrations. No person may
participate in any underwritten registration hereunder unless such person (a)
agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements, and (b)
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timely completes and executes all questionnaires, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and this Agreement; provided that (i) no Selling
Holder shall be required to make any representations or warranties except
those which are customary for a selling holder of securities, and (ii) the
liability of each Selling Holder to any underwriter under such underwriting
agreement will be limited to liability arising from material misstatements or
omissions in the relevant registration statement or the relevant prospectus
regarding such Selling Holder and its intended method of distribution that
were based upon information furnished in writing by such Selling Holder to the
Company expressly for use therein and any such liability shall not exceed an
amount equal to the amount of net proceeds such Selling Holder derives from
such registration.
Section 5.2. Distribution. During such time as any Selling Holder may be
engaged in a distribution (within the meaning of Regulation M promulgated
under the Exchange Act) of the Registrable Securities, such Selling Holder
shall comply with Regulation M and pursuant thereto it shall, among other
things; (i) not engage in any stabilization activity in connection with the
securities of the Company in contravention of such regulation.
Section 5.3. SEC Reporting. (a) Rules 144 and 144A. The Company shall
timely file any reports required to be filed by it under the Securities Act
and the Exchange Act and, if at any time the Company is not required to file
such reports, the Company will, upon the request of any Holder or prospective
purchaser from such Holder, make available such information necessary to
permit sales pursuant to Rule 144A, and shall take such further action as any
Holder may reasonably request, all to the extent required from time to time to
enable Holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144 or Rule 144A under the Securities Act, as such Rules may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the
Commission. Upon the request of any Holder, the Company will deliver to such
Holder a written statement as to whether it has complied with such
requirements.
(b) S-3 Eligibility. The Company shall use its best efforts to maintain its
eligibility to use Form S-3 under the Securities Act.
Section 5.4. Restrictions on Sale. (a) By the Company. The Company agrees,
and shall use its best efforts to cause its Affiliates to agree, (i) not to
effect any public sale or distribution of any equity securities, or any
securities convertible into or exchangeable or exercisable for such
securities, during the 7 days prior to, and during the 90-day period beginning
on, the effective date of any registration statement (except as part of such
registration statement) filed by the Company, in the case of an underwritten
offering, if, and to the extent, reasonably requested by the managing
underwriter or underwriters, and (ii) to use its best efforts to ensure that
any agreement entered into after the date hereof pursuant to which the Company
issues or agrees to issue any privately placed securities (other than to
officers or employees) shall contain a provision under which holders of such
securities agree not to effect any sale or distribution of any such securities
during the periods described in (i) above, in each case, including a sale
pursuant to Rule 144 or Rule 144A under the Securities Act (except as part of
any such registration, if permitted); provided, however, that the provisions
of this paragraph shall not prevent (x) the conversion or exchange of any
securities pursuant to their terms into or for other securities or (y) the
issuance of any securities to employees of the Company or pursuant to any
employee plan.
(b) By the Holders. Each Holder agrees, and shall use its best efforts to
cause its Affiliates to agree, not to effect any public sale or distribution
of any equity securities, or any securities convertible into or exchangeable
or exercisable for such securities, during the 7 days prior to, and during the
90-day period beginning on, the effective date of any registration statement
(except as part of such registration statement) filed by the Company, in the
case of an underwritten offering if, and to the extent, reasonably requested
by the managing underwriter(s); provided that all executive officers and
directors of the Company agree to similar restrictions, which the Company will
use its reasonable best efforts to enforce and provided further that the
Company informs such Holder of the expected effective date at least fifteen
(15) days prior thereto. Notwithstanding the provisions of the preceding
sentence, a Holder may sell any or all of its Registrable Securities in a
private sale.
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Section 5.5. Notices. All notices, demands, requests, consents, approvals
or other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served, delivered by a reputable air courier
service with tracking capability, with charges prepaid, or transmitted by hand
delivery or facsimile, addressed as set forth below, or to such other address
as such party shall have specified most recently by written notice. Notice
shall be deemed given on the date of service or transmission if personally
served or transmitted by facsimile. Notice otherwise sent as provided herein
shall be deemed given on the next business day following delivery of such
notice to a reputable air courier service.
If to the Company, to it at:
Peapod, Inc.
9933 Woods Drive
Skokie, IL 60077
Attention: Andrew Parkinson, Chairman
Facsimile: (847) 583-9495
with a copy (which shall not constitute notice) to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attn: Christine A. Leahy
Facsimile: (312) 853-7036
if to the Purchaser:
Koninklijke Ahold N.V.
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
and a copy (which shall not constitute notice) to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Maureen S. Brundage, Esq./John M. Reiss, Esq.
Facsimile: (212) 354-8113
If to any other Holder, to it at the address(es) or facsimile number(s)
set forth in the notice referred to in Section 5.11 with respect to such
Holder.
Section 5.6. Governing Law. This Agreement and the rights and obligations
of the parties hereunder shall be governed by, and construed in accordance
with, the laws of the State of New York, and each party hereto submits to the
non-exclusive jurisdiction of the state and federal courts within the County
of New York in the State of New York. Any legal action or proceeding with
respect to this Agreement may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York
and, by execution and delivery of this Agreement, each party hereto hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each party hereto
further irrevocably consents to the service of process out of any of the
aforementioned courts in any action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such party at its
address set forth in Section 5.5, such service to become effective seven days
after such mailing. Nothing herein shall affect the right of either party to
serve process in any of the matters permitted by law or to commence legal
proceedings or otherwise proceed against the other party in any other
jurisdiction. Each party hereto hereby irrevocably waives any objection which
it
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may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
brought in the courts referred to above and hereby further irrevocably waives
and agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient
forum.
Section 5.7. Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to the
subject matter hereof, including, without limitation, the Letter Agreement.
Section 5.8. Modifications and Amendments. No amendment, modification or
termination of this Agreement shall be binding upon any other party unless
executed in writing by (a) the Company and (b) by the Holders of a majority of
the Shares held by all Holders that constitute Registrable Securities.
Section 5.9. Waivers and Extensions. Any party to this Agreement may waive
any right, breach or default which such party has the right to waive, provided
that such waiver will not be effective against the waiving party unless it is
in writing, is signed by such party, and specifically refers to this
Agreement. Waivers may be made in advance or after the right waived has arisen
or the breach or default waived has occurred. Any waiver may be conditional.
No waiver of any breach of any agreement or provision herein contained shall
be deemed a waiver of any preceding or succeeding breach thereof nor of any
other agreement or provision herein contained. No waiver or extension of time
for performance of any obligations or acts shall be deemed a waiver or
extension of the time for performance of any other obligations or acts.
Section 5.10. Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of
any provision of this Agreement.
Section 5.11. Assignment. This Agreement and the rights, duties and
obligations hereunder may not be assigned or delegated by the Company. This
Agreement and the rights, duties and obligations hereunder may be assigned or
delegated by any Holder to a transferee or assignee of Registrable Securities;
provided, however, that the Company shall not be obligated to recognize any
such assignment or delegation, and such transferee or assignee shall not
become a Holder, unless (a) the Company has received written notice of the
name and address of such transferee or assignee and of the Registrable
Securities with respect to which such assignment and/or delegation has been
made, and (b) such transferee or assignee agrees to be bound by this Agreement
as if such transferee or assignee was an original Purchaser. This Agreement
and the provisions hereof shall be binding upon and shall inure to the benefit
of each of the parties and their respective successors and permitted assigns.
Section 5.12. Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term
or provision hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a
part of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and enforceable.
Section 5.13. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
Section 5.14. Further Assurances. Each party hereto, upon the request of
any other party hereto, shall take all such further acts and execute,
acknowledge and deliver all such further instruments and documents as may be
necessary or desirable to carry out the transactions contemplated by this
Agreement.
Section 5.15. Remedies Cumulative; Specific Performance. The remedies
provided herein shall be cumulative and shall not preclude the assertion by
any party hereto of any other rights or the seeking of any remedies against
the other party hereto. In the event of a breach or a threatened breach by any
party to this
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Agreement of its obligations under this Agreement, any party injured or to be
injured by such breach will be entitled to specific performance of its rights
under this Agreement or to injunctive relief, in addition to being entitled to
exercise all rights provided in this Agreement and granted by law. The parties
agree that the provisions of this Agreement shall be specifically enforceable,
it being agreed by the parties that the remedy at law, including monetary
damages, for breach of any such provision will be inadequate compensation for
any loss and that any defense or objection in any action for specific
performance or injunctive relief that a remedy at law would be adequate is
waived.
Section 5.16. Other Registration Rights. Without the written consent of the
Holders of a majority of the Shares held by all Holders that constitute
Registrable Securities, the Company shall not grant to any person the right to
request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subject to the prior rights of
the Holders of Registrable Securities set forth herein, and are not otherwise
in conflict or inconsistent with the provisions of, this Agreement.
* * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Peapod, Inc.
a Delaware corporation
/s/ Andrew B. Parkinson
By: _________________________________
Name: Andrew B. Parkinson
Title: Chairman
Koninklijke Ahold N.V.
/s/ Ton van Tielraden
By: _______________________________
Name: Ton van Tielraden
Title: Senior Vice President and
General Counsel
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<PAGE>
Exhibit 99.6
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUPPLY AND SERVICES AGREEMENT
between
PEAPOD, INC.
and
KONINKLIJKE AHOLD N.V.
----------------
Dated as of
April 14, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS AND CONSTRUCTION............................... 1
1.01 Definitions................................................. 1
1.02 Construction................................................ 3
ARTICLE II WHOLESALE SUPPLY............................................ 3
2.01 Agreement to Purchase....................................... 3
2.02 Price, Cost and Other Charges............................... 4
2.03 Returns, Refunds and Credits to Customers................... 4
2.04 Title to Products; Risk of Loss............................. 4
ARTICLE III WAREROOMS; IMPLEMENTATION AND CLOSURE....................... 5
3.01 Warerooms................................................... 5
3.02 Slot Settings............................................... 5
3.03 Expansion and Establishment of Warerooms.................... 5
3.04 Relocation or Closure of Existing Warerooms................. 5
3.05 Configuration and Build Out................................. 5
ARTICLE IV PERFORMANCE OF SERVICES..................................... 5
4.01 Service Level and Productivity.............................. 5
4.02 Provision of Services....................................... 6
4.03 Employees and Staff Support................................. 6
ARTICLE V SUPPLIER INCENTIVE ARRANGEMENT.............................. 6
5.01 Supplier Incentive Fee...................................... 6
ARTICLE VI FULFILLMENT SERVICES........................................ 6
6.01 Fulfillment Services........................................ 6
6.02 Costs....................................................... 6
ARTICLE VII DELIVERY SERVICES........................................... 6
7.01 Delivery Services........................................... 6
7.02 Costs....................................................... 6
7.03 Delivery Charges............................................ 7
ARTICLE VIII FIELD OPERATIONS SERVICES................................... 7
8.01 Field Operations Services................................... 7
8.02 Costs....................................................... 7
ARTICLE IX OVERHEAD SERVICES........................................... 7
9.01 Overhead Services........................................... 7
9.02 Costs....................................................... 7
ARTICLE X PAYMENTS BY THE CUSTOMERS................................... 7
10.01 Payment by Customers........................................ 7
10.02 Coupons..................................................... 8
10.03 Books and Records........................................... 8
ARTICLE XI ADVERTISING AND MARKETING................................... 8
11.01 Advertising and Marketing................................... 8
11.02 Trademark................................................... 9
11.03 Quality Control............................................. 9
11.04 Customer Data............................................... 9
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TABLE OF CONTENTS
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ARTICLE XII BILLING AND PAYMENTS....................................... 9
12.01 Invoicing.................................................. 9
12.02 Additional Gross........................................... 10
12.03 Payment.................................................... 10
12.04 Disputes................................................... 10
12.05 Payment Matters............................................ 10
ARTICLE XIII EXCLUSIVITY RIGHTS......................................... 10
13.01 Exclusivity Rights......................................... 10
ARTICLE XIV TERM; TERMINATION.......................................... 11
14.01 Term....................................................... 11
14.02 Renewal.................................................... 11
14.03 Early Termination.......................................... 11
14.04 Sums Due................................................... 11
14.05 Effect of Termination...................................... 11
ARTICLE XV FORCE MAJEURE.............................................. 12
15.01 Force Majeure.............................................. 12
ARTICLE XVI LIABILITY; INDEMNIFICATION................................. 12
16.01 Consequential and Other Damages............................ 12
16.02 Liability.................................................. 12
16.03 Disclaimer................................................. 12
ARTICLE XVII TECHNOLOGY PARTNERSHIP AGREEMENT........................... 12
17.01 Technology................................................. 12
ARTICLE XVIII BRANDING................................................... 13
18.01 Branding................................................... 13
ARTICLE XIX MISCELLANEOUS.............................................. 13
19.01 Confidentiality............................................ 13
19.02 Notices.................................................... 13
19.03 Amendments and Waivers..................................... 14
19.04 Expenses................................................... 14
19.05 Parties in Interest........................................ 14
19.06 WAIVER OF JURY TRIAL....................................... 14
19.07 Counterparts............................................... 14
19.08 Governing Law and Jurisdiction............................. 14
19.09 Assignment................................................. 15
19.10 Table of Contents, Captions................................ 15
19.11 Entire Agreement........................................... 15
19.12 Severability............................................... 15
19.13 Third Party Beneficiaries.................................. 15
19.14 No Strict Construction..................................... 15
EXHIBITS
Exhibit A--List of Existing States
Exhibit B--Form of License Agreement
Exhibit C--Incentive Fee
Exhibit D--Fulfillment Services
Exhibit E--Delivery Services
Exhibit F--Field Operations Services
Exhibit G--Overhead Services
Exhibit H--Peapod Partnership Opportunity Document
</TABLE>
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<PAGE>
SUPPLY AND SERVICES AGREEMENT
SUPPLY AND SERVICES AGREEMENT (this "Agreement") dated as of April 14, 2000
between Peapod, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), and Koninklijke Ahold N.V., a public
company with limited liability organized and existing under the laws of the
Netherlands (the "Supplier").
WITNESSETH:
WHEREAS, the Company is engaged in the online retail food and other
merchandise shopping business in certain markets in the United States; and
WHEREAS, the Supplier, through its Affiliates, is involved in the retail
food and other merchandise and food supply business in certain markets in the
United States; and
WHEREAS, the Company has issued a Promissory Note dated April 5, 2000 in
favor of BEW, Inc., a Delaware corporation ("BEW"), an Affiliate of the
Supplier, and entered into a Security Agreement dated April 7, 2000 with BEW
(as amended, the "Note and Security Agreement"), pursuant to which BEW has
advanced $3,000,000 to the Company; and
WHEREAS, in connection with the Note and Security Agreement, the Company
has issued a warrant dated April 10, 2000 in favor of the Supplier, to acquire
100,000 shares of common stock, par value $0.01 per share, of the Company (the
"Common Stock"); and
WHEREAS, the Company is entering into simultaneously herewith Credit and
Security Agreements with the Supplier to refinance the Note and Security
Agreement and to provide to the Company a $20 million revolving credit
facility and will receive in connection therewith a warrant to acquire
3,566,667 shares of Common Stock; and
WHEREAS, the Company is entering into simultaneously herewith a Purchase
Agreement dated as of April 14, 2000 (the "Purchase Agreement") with the
Supplier pursuant to which the Supplier has agreed to purchase from the
Company, and the Company has agreed to sell to the Supplier, subject to the
terms and conditions set forth therein, 19,369,873 shares of Series B
Convertible Preferred Stock of the Company and warrants to purchase 32,894,270
shares of Common Stock; and
WHEREAS, the Company wishes to purchase from the Supplier all of its
requirements of perishable and nonperishable goods, and to obtain certain
other services, for the Company's online business within the states listed in
Exhibit A attached hereto, and the Supplier is willing to supply such
requirements and provide such services to the Company, in each case on the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.01 Definitions.
The following terms, as used herein, shall have the following meanings:
"Accounting Referee" shall have the meaning set forth in Section 12.04.
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"Actual Costs" shall mean all costs of supplies used in the provision of
Services, all Labor Costs, all risk and general liability insurance costs and
any other actual costs and expenses associated with the performance of the
Services.
"Additional Gross" shall mean the amount of any additional coop allowances,
allowances for slotting, scan buydowns and rebates for annual contracts
granted to the Supplier by vendors or manufacturers on the purchase of
perishables and groceries by the Supplier from such vendors or manufacturers.
"Additional Gross Credit" shall have the meaning set forth in Section
12.02.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control," when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing. Notwithstanding the foregoing, for purposes of
this Agreement, the Company shall not be deemed an Affiliate of the Supplier.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Ahold Facility" shall mean any Retail Store, warehouse, operational
facility or any other building in which a Wareroom is, or may be, established
pursuant to this Agreement.
"Base Price" shall have the meaning set forth in Section 2.02(a).
"BEW" shall have the meaning set forth in the recitals to this Agreement.
"Business Day" shall mean any day except a Saturday, a Sunday or any other
day on which commercial banks are required or authorized to close in Chicago,
Illinois, Chantilly, Virginia or New York, New York.
"Common Stock" shall have the meaning set forth in the recitals to this
Agreement.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Credit and Security Agreements" shall have the meaning set forth in the
Purchase Agreement.
"Credit Statement" shall have the meaning set forth in Section 12.02.
"Delivery Services" shall have the meaning set forth in Section 7.01.
"Existing State" shall have the meaning set forth in Section 13.01(a).
"Field Operations Services" shall have the meaning set forth in Section
8.01.
"Fulfillment Services" shall have the meaning set forth in Section 6.01.
"Invoice" shall have the meaning set forth in Section 12.01.
"Labor Costs" shall mean all labor related costs associated with the
performance of Services, including, without limitation, salaries, workers'
compensation, labor benefits, labor fringe benefits, healthcare and other
welfare benefits claim costs.
"License Agreement" shall mean the master license agreement relating to
Warerooms entered into by and between the Company and the Supplier in
substantially the form attached hereto as Exhibit B.
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"New State" shall have the meaning set forth in Section 13.01(b).
"Note and Security Agreement" shall have the meaning set forth in the
recitals to this Agreement.
"Out of Stocks" shall mean, with respect to each Wareroom, the difference
on a weekly basis between the Products ordered by the customers of the Company
being serviced from such Wareroom and the Products actually delivered to such
customers as reflected on the Company's invoices to such customers.
"Overhead Services" shall have the meaning set forth in Section 9.01.
"Person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Products" shall have the meaning set forth in Section 2.01.
"Purchase Agreement" shall have the meaning set forth in the recitals to
this Agreement.
"Retail Store" shall mean any retail store operated by the Supplier or any
of its Affiliates.
"Services" shall mean the Fulfillment Services, the Delivery Services, the
Field Operations Services, the Overhead Services and any other services
provided by the Supplier hereunder.
"SKU" shall mean stock keeping unit.
"Software License" shall have the meaning set forth in Section 17.01.
"Supplier" shall mean Koninklijke Ahold N.V. or, in respect of any Services
to be rendered hereunder, unless the context otherwise requires, any Affiliate
thereof or third party that may be designated from time to time by Koninklijke
Ahold N.V. to provide any such Services.
"Trademarks" shall mean the trademarks, service marks, trade dress, logos
and other indicia of origin or standard of quality used by the Supplier in
connection with its Products, Services or the operation of its business.
"Wareroom" shall have the meaning set forth in Section 3.01.
"Warehouse and Transportation Charge" shall have the meaning set forth in
Section 2.02(c).
1.02 Construction. The captions or headings in this Agreement are for
convenience of reference only and in no way define, limit or describe the
scope or intent of any provisions, Articles or Sections of this Agreement. All
references in this Agreement to particular Articles or Sections are references
to the Articles or Sections of this Agreement, unless some other references
are clearly indicated. All accounting terms not specifically defined in this
Agreement shall be construed in accordance with the generally accepted
accounting principles as in effect on the date hereof. In this Agreement,
unless the context otherwise requires, (i) words describing the singular
number shall include the plural and vice versa, (ii) words denoting any gender
shall include all genders and (iii) the word "including" shall mean "including
without limitation." In interpreting and enforcing this Agreement, each of the
representations and warranties set forth in this Agreement shall be given
independent effect and shall not be deemed superseded or modified by any other
such representation or warranty.
ARTICLE II
WHOLESALE SUPPLY
2.01 Agreement to Purchase. (a) The Company agrees to purchase from the
Supplier, and the Supplier agrees to sell to the Company, all of the Company's
requirements of perishables and non-perishables (collectively, the "Products")
for the Company's online business within the States listed in Exhibit A
attached
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hereto. The Supplier shall make available to the Company those Products whose
selection and procurement are comparable in quality and value with the
Supplier's existing supermarket business and/or are appropriate for the
Company's business, as determined by the Supplier in its sole discretion;
provided that the Company shall have the right to reasonably object to such
determination.
(b) Product Mix. The Supplier shall provide the Company from time to time
with the Product mix for the Company's online business in each Existing State;
provided that the Company shall have the right to reasonably object to such
determination. The Company may also recommend to the Supplier the inclusion in
the Product mix for the Company's online business in a particular Existing
State of additional SKUs not carried by the Supplier, which SKUs, subject to
approval by the Supplier, shall be included in the Product mix for such
Existing State.
2.02 Price, Cost and Other Charges. Within each Product category supplied
by the Supplier under this Agreement, the Company shall pay the Supplier the
Base Price for such Products plus additional costs, upcharges and fees, and
minus allowances, related to such Products as set forth below:
(a) Base Price. The base price for each Product (the "Base Price") shall
be the manufacturer's or vendor's published price in the bracket in which
the Supplier normally purchases such item for its Retail Stores.
(b) Allowances. The Supplier shall deduct from the Base Price per SKU,
to the extent reasonably possible, the full amount of all off-invoice and
billback allowances.
(c) Warehouse and Transportation Charge. For the stocking of the
Products in the warehouses of the Supplier and/or its Affiliates and the
transportation of such Products from such warehouses or from vendors'
warehouses, as the case may be, to the various Warerooms, the Company shall
pay the Supplier a fixed charge (the "Warehouse and Transportation Charge")
equal to the charge usually paid by the Supplier's Retail Stores for such
central warehouse and transportation services, calculated in accordance
with the Supplier's usual standards and practices.
(d) Other Costs. The Company shall pay any other reasonable costs
relating to the supply of the Products by the Supplier to the Company
pursuant to this Agreement.
2.03 Returns, Refunds and Credits to Customers. (a) Returns. The Supplier
will accept Products returned by the Company's customers either (i) to the
delivery driver upon delivery of other Products to such customers or (ii) at
any of the Supplier's Retail Stores. The Company shall be responsible for any
Product returned by a customer due to damage or spoilage during delivery and
for any Product that cannot be resold at a normal retail price. Accordingly,
the Company shall be charged for such returned Products in accordance with the
provisions of Article XII below. The Company shall have no responsibility for
any Product returned by a customer otherwise than due to damage or spoilage
that can be sold at a normal retail price. Accordingly, the Company shall
receive an instore credit for such returned Products in accordance with the
provisions of Article XII below.
(b) Drivers' Credits to Customers. The Supplier may grant customers
credit "at the door" on future purchases of Products from the Company as
appropriate based upon a standard agreed upon by the Company and the
Supplier from time to time which shall be in accordance with the Company's
past practices. The cumulative amount of such credits shall be charged on a
weekly basis to the Company in accordance with the provisions of Article
XII below. The Supplier will submit to the Company any documentation on
such credits reasonably requested by the Company.
2.04 Title to Products; Risk of Loss. The Company will obtain title to the
Products ordered by its customers immediately upon removal of such Products
from the Warerooms for delivery to the Company's customers. The Products shall
be held at the Company's risk and expenses with respect to loss and damage
from any cause, including Acts of God and force majeure, spoilage and
shrinkage, and taxes and charges of any kind from such time as the Products
are removed from the Warerooms for delivery to the Company's customers until
such time as the Products are actually delivered to such customers.
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ARTICLE III
WAREROOMS; IMPLEMENTATION AND CLOSURE
3.01 Warerooms. The Supplier shall provide the Company with warerooms
(each, a "Wareroom", and collectively, the "Warerooms") (i) of approximately
7,000 square feet each, (ii) suitable for the performance by the Supplier of
the Services hereunder, and (iii) located initially in the premises of the
Ahold Facilities to be designated by the Supplier as promptly as practicable
after the date hereof, but in no event later than 30 days after the date
hereof. As promptly as practicable after the date hereof, the Company and the
Supplier shall enter into the License Agreement in substantially the form
attached hereto as Exhibit B for the provision of such Warerooms by the
Supplier to the Company in connection with the performance of the Services
hereunder.
3.02 Slot Settings. Slot settings (i.e., delivery windows) which determine
the number of orders for each Wareroom shall be controlled and reallocated by
the Company. The Company shall not close or reduce the slot setting of any
Wareroom without the consent of the Supplier unless reported late deliveries
(other than those from customers who were provided notice by the Supplier that
such deliveries would be late) originating from such Wareroom in any week
exceed three percent (3%) of the total number of orders actually delivered to
customers of the Company from such Wareroom during such week.
3.03 Expansion and Establishment of Warerooms. The parties shall meet
annually for purposes of determining Wareroom budgeting and capital
expenditures, including plans for the expansion of existing Warerooms and the
establishment of new Warerooms. If the parties fail to agree with respect to
any such matters, the unresolved matter will be discussed between the Chief
Executive Officers of the Company and of the Supplier (or its nominee) and, if
they fail to reach agreement, such unresolved matter will be determined by the
Chief Executive Officer of the Supplier (or its nominee) in his sole
discretion and such determination shall be binding on the parties hereto.
3.04 Relocation or Closure of Existing Warerooms. The Supplier may, in its
sole discretion, relocate to another Ahold Facility or close an existing
Wareroom; provided, however, that the Supplier shall give the Company at least
90 days prior written notice of its intention to do so and shall discuss with
the Company any reasonable objection of the Company to such relocation or
closure. Notwithstanding the foregoing, it is understood and agreed that the
Supplier's determination as to such relocation or closure shall be final and
binding. Within 90 days of the Supplier's delivery of such written notice to
the Company, the Company and the Supplier shall agree on a schedule for the
relocation or closure, which in no event shall be more than 180 days from the
date of the Company's receipt of such notice of such relocation or closure, as
the case may be, of such Wareroom. In the event a Wareroom is to be closed,
the Supplier shall use reasonable efforts to provide the Company with an
alternative reasonably acceptable to the Company to service the customers
formerly serviced from such closed Wareroom.
3.05 Configuration and Build Out. The Supplier and the Company shall
cooperate in configuring the Warerooms in a commercially reasonable manner for
the safe, productive and efficient performance of the Services hereunder. The
Company shall be responsible for the cost of all of the equipment relating to
the provision of the Fulfillment Services and the Delivery Services. The
Supplier shall be responsible for the cost of all of the equipment normally
used in the daily operation of its Retail Stores including, but not limited
to, meat slicers, wrappers and other specialty food preparation supplies.
ARTICLE IV
PERFORMANCE OF SERVICES
4.01 Service Level and Productivity. The Supplier and the Company agree
that the service level for the Products supplied by the Company under this
Agreement for each Wareroom shall be an Out of Stocks level of no greater than
5%. If the Supplier fails to meet this level, the Supplier shall assign on a
full-time basis a field
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supervisor to reduce the Out of Stocks level to or below the level provided
above, at no additional charge to the Company.
4.02 Provision of Services. The Company understands and agrees that the
Supplier shall have the right, in its sole discretion, to use Affiliates
and/or third parties selected by the Supplier for the supply of the Products
and/or the provision of any of the Services hereunder.
4.03 Employees and Staff Support. The Supplier agrees that it shall be
responsible for determining and shall use its reasonable efforts to maintain
sufficient personnel levels to supply the Products and perform the Services
under this Agreement.
ARTICLE V
SUPPLIER INCENTIVE ARRANGEMENT
5.01 Supplier Incentive Fee. The Company shall pay to the Supplier an
incentive fee as set forth, and according to the terms and conditions
included, in Exhibit C attached hereto.
ARTICLE VI
FULFILLMENT SERVICES
6.01 Fulfillment Services. The Supplier or its nominee shall provide to the
Company fulfillment and store services (the "Fulfillment Services") as
described, and according to the terms and conditions included, in Exhibit D
attached hereto. The parties shall cooperate with each other to ensure
appropriate coordination of such Fulfillment Services. The Company shall
provide the Supplier daily in a timely manner with all information necessary
for the performance by the Supplier or its nominees of such Fulfillment
Services, including without limitation, all information relating to slot
settings and smart flow incentives.
6.02 Costs. The Company shall bear all of the Actual Costs incurred by the
Supplier or its nominee in connection with the performance and provision of
the Fulfillment Services hereunder as described in, and in accordance with the
terms and conditions of, Exhibit D attached hereto. Such Actual Costs shall be
charged to the Company on an actual or fixed basis as provided in Exhibit D
attached hereto. The Company and the Supplier shall work together to reduce
the Actual Costs incurred in connection therewith. The calculation and
allocation of the Actual Costs shall be made on the same basis and in the same
manner as is used in calculating and allocating costs and expenses charged by
the Supplier or its relevant Affiliate to its Retail Stores for Fulfillment
Services.
ARTICLE VII
DELIVERY SERVICES
7.01 Delivery Services. Based on the orders collected by the Company from
its online customers for the purchase of Products, the Supplier or its nominee
shall coordinate locally the delivery of such Products to the homes or offices
of the Company's customers (the "Delivery Services") as described, and
according to the terms and conditions included, in Exhibit E attached hereto.
The Company shall provide the Supplier or its nominee daily in a timely manner
with all information necessary for the performance by the Supplier or its
nominee of such Delivery Services, including without limitation, all
customers, delivery and pre-routing information. The parties shall cooperate
with each other to ensure appropriate coordination of such Delivery Services.
7.02 Costs. The Company shall bear all of the Actual Costs incurred by the
Supplier or its nominee in connection with the performance and provision of
the Delivery Services hereunder as described in, and in
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accordance with the terms and conditions of, Exhibit E attached hereto. Such
Actual Costs shall be charged to the Company on an actual or fixed basis as
provided in Exhibit E attached hereto. The Company and the Supplier shall work
together to reduce the Actual Costs incurred in connection therewith. Labor
Costs shall be allocated to the Company for all delivery personnel used in the
provision of the Delivery Services.
7.03 Delivery Charges. The Company shall establish the amounts to be
charged to its customers for the delivery of Products to such customers,
including pricing for particular delivery times, subject to approval by the
Supplier.
ARTICLE VIII
FIELD OPERATIONS SERVICES
8.01 Field Operations Services. The Supplier or its nominee shall provide
to the Company field operations services (the "Field Operations Services") as
described, and according to the terms and conditions included, in Exhibit F
attached hereto. The parties shall cooperate with each other to ensure
appropriate coordination of such Field Operations Services.
8.02 Costs. The Company shall bear all of the Actual Costs incurred by the
Supplier or its nominee in connection with the performance and provision of
the Field Operations Services hereunder as described in, and in accordance
with the terms and conditions of, Exhibit F attached hereto. Such Actual Costs
shall be charged to the Company on an actual or fixed basis as provided in
Exhibit F attached hereto. The Company and the Supplier shall work together to
reduce the Actual Costs incurred in connection therewith. The calculation and
allocation of the Actual Costs shall be made on the same basis and in the same
manner as is used in calculating and allocating costs and expenses charged by
the Supplier or its relevant Affiliate to its Retail Stores for Field
Operations Services.
ARTICLE IX
OVERHEAD SERVICES
9.01 Overhead Services. The Supplier or its nominee shall provide to the
Company, upon the Company's request, intercompany overhead services (the
"Overhead Services") as described, and according to the terms and conditions
included, in Exhibit G attached hereto. The parties shall cooperate with each
other to ensure appropriate coordination of such Overhead Services.
9.02 Costs. The Company shall bear all of the Actual Costs incurred by the
Supplier or its nominee in connection with the performance and provision of
the Overhead Services hereunder as described in, and in accordance with the
terms and conditions of, Exhibit G attached hereto. Such Actual Costs shall be
charged to the Company on an actual or fixed basis as provided in Exhibit G
attached hereto. The Company and the Supplier shall work together to reduce
the Actual Costs incurred in connection therewith. The calculation and
allocation of the Actual Costs shall be made on the same basis and in the same
manner as is used in calculating and allocating costs and expenses charged by
the Supplier or its relevant Affiliate to its Retail Stores for Overhead
Services.
ARTICLE X
PAYMENTS BY THE CUSTOMERS
10.01 Payment by Customers. (a) Collection of Payment. The parties hereby
agree that it shall be the Company's responsibility to collect payment from
its customers for Products delivered thereto.
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(b) Payment by Credit Card. If the Company accepts credit card payments
from its customers, it shall be responsible for and shall pay all credit card
costs associated with such payment. The Supplier shall use its reasonable
efforts to include the Company in its credit and exchange program.
(c) Payment by Checks. If the Company accepts payment by checks from its
customers upon delivery of the Products by the Supplier to such customers, the
Supplier shall collect such checks according to the payment information
provided to it by the Company, and use its reasonable efforts to submit such
collected checks on a daily basis to the Company for clearance and payment,
which shall be the sole responsibility of the Company.
(d) Payment by Electronic Funds Transfer. If the Company accepts payment by
electronic funds transfer from its customers, it shall be responsible for and
shall pay all costs associated with such payment.
10.02 Coupons. (a) Collection of Coupons by the Supplier. The Supplier may
collect coupons from the Company's customers upon delivery of the Products by
the Supplier to such customers, and shall submit such collected coupons to the
Company on a weekly basis in order for the Company, which shall be responsible
for the clearance of such coupons. Any doubling of coupons or other credit for
coupons of an amount in excess of the face amount therefor shall be the
responsibility of the Company.
(b) Offer of Coupons by the Supplier. The Supplier may, if agreed to by the
Company, offer and distribute coupons to the Company's customers upon delivery
of the Product for future purchases.
(c) Electronic Coupons. The Company may offer electronic coupons to its
customers, which are funded by vendors or at the Company's own expense.
10.03 Books and Records. (a) Obligation to Maintain Records. The Company
shall maintain detailed accounting records according to standard accounting
practices. The Company will periodically provide monthly to the Supplier any
documentation or other information on such accounting, cash payment and
reconciliation records as reasonably requested by the Supplier.
(b) Right to Review Records. Up to two (2) times during each calendar year,
the Supplier, or its nominees, shall have the right, upon reasonable notice to
the Company, to examine and audit the books and records of the Company
relating to the sale of the Products by the Company to its customers and
reflecting such information as is reasonably necessary to accurately verify
the payments due to the Supplier pursuant to this Agreement. The Supplier's
exercise of the foregoing right by itself or through its nominee shall not
unduly interfere with the Company's business operations. The Supplier shall
provide to the Company a copy of the results of any such examination or audit,
and the parties shall promptly agree upon an appropriate adjustment to
compensate for any errors or omissions disclosed by such audit. Should an
audit disclose an error or omission by the Company resulting in an
underpayment of 5% or more of the amount due, the Company shall promptly
reimburse the Supplier for the reasonable out-of-pocket costs of the audit. If
as a result of any such examination or audit, any error or omission with
respect to any Invoice or Credit Statement is disclosed, the Company shall
have the right to raise objections thereto notwithstanding the provisions of
Section 12.03.
ARTICLE XI
ADVERTISING AND MARKETING
11.01 Advertising and Marketing. (a) The Company shall be primarily
responsible for all advertising, marketing, sales or sales support efforts,
including without limitation, management and support for customer acquisition
and retention, including in-bound telemarketing, point of sale promotions,
direct mail, mass media and such other marketing programs as the Company and
the Supplier shall mutually deem appropriate from time to time. The parties
acknowledge that the Supplier has a substantial interest in protecting its
brand and that, therefore, all marketing efforts and planning processes must
be approved by the Supplier's marketing representative prior to the execution
thereof. The Supplier shall cooperate, to the extent reasonably requested,
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with the Company with respect to such efforts. The Company will make available
to the Supplier certain space on the Company's online service for use in
promoting instore marketing programs. The financial and other terms associated
with the content development, display and related consumer behavior feedback
will be mutually established by the parties on a case-by-case basis.
(b) The Company hereby acknowledges and agrees that the Supplier's
motivation for entering into this Agreement is to expand its existing customer
base and not merely replace existing customers' method of procuring Products.
Accordingly, the Company shall use its reasonable best efforts to market and
promote the Products in a manner intended to expand the Supplier's existing
customer base.
(c) The Company and the Supplier shall agree on an annual marketing plan
for the offer of Products online.
11.02 Trademark. The Supplier hereby grants to the Company a limited, non-
exclusive, non-transferable, royalty-free, right and license to use the
Trademarks in the United States of America, solely in connection with the
Company's advertising, marketing, promotion and sale of Products supplied by
the Supplier hereunder. Such license shall extend to affixation of the
Trademarks on the Company's web sites and on packaging and promotional
literature. Without the express prior written consent of the Supplier, the
Company shall not change the form or use of the Trademarks in any respect from
the form and manner approved in writing by the Supplier from time to time, nor
shall the Company use the Trademarks in connection with the promotion,
marketing, advertising or sale of any product or service other than as
licensed hereunder, in connection with the SKUs permitted by Section 13.01(a).
The Company shall have no rights of ownership in the Trademarks and shall not
make any filing for registration of any of the Trademarks on its own behalf or
in its own name. The Company's use of the Trademarks shall inure solely to the
benefit of the Supplier and the goodwill appurtenant to the Trademarks shall
belong exclusively to the Supplier. The Company shall not contest or otherwise
attack or act in a manner inconsistent with the Supplier's right, title and
interest in or to the Trademarks licensed hereunder.
11.03 Quality Control. During the term of this Agreement, the Supplier
shall have the right at all times to establish, and to require the Company's
adherence to, quality control standards governing the preparation,
distribution, commercialization and quality of products and services sold
under the Trademarks. The Supplier shall also have the right to establish and
to require the Company's adherence to standards governing the manner of
display of the Trademarks for any and all uses licensed hereunder. Upon
request, the Company shall provide the Supplier representative specimens of
all web sites, advertising and other materials upon which the Company uses the
Trademarks, for purposes of determining whether the Trademarks are being used
in accordance with the applicable standards. If, in its sole discretion, the
Supplier determines that any Trademarks are not being used in accordance with
such applicable standards, upon five (5) days prior written notice, the
Company will either cease use of the Trademarks at issue or modify such use so
as to comply with such applicable standards. The Supplier shall provide to the
Company a quarterly report on food safety inspection matters with respect to
the Warerooms.
11.04 Customer Data. It is understood and agreed by the parties that during
the term of this Agreement the Supplier and the Company shall have joint
access and full use of any and all information and data collected from
customers by the Company in connection with the online offer of the Products
by the Company; provided that the Supplier's and the Company's use of such
information shall be subject to the Company's and Supplier's standard privacy
policies (which, at a minimum, shall prohibit the selling of any such
information to third parties, unless otherwise agreed by the Company and the
Supplier ) and any applicable laws and regulations.
ARTICLE XII
BILLING AND PAYMENTS
12.01 Invoicing. Not later than Wednesday of each week, the Supplier shall
deliver to the Company an invoice covering the supply and purchase of
Products, the performance of Services during the preceding week and any
instore credit due to the Company for returned Products pursuant to Section
2.03 below (each such
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invoice, an "Invoice"). Each Invoice shall itemize in reasonable detail the
Base Price for each category of Products purchased by the Company, the costs
and expenses incurred by the Supplier in connection with the purchase of such
Products and the performance of such Services during such preceding week. In
connection therewith, each party shall provide the other all relevant
information reasonably requested to permit the Supplier to prepare, and the
Company to review, each Invoice.
12.02 Additional Gross. The Company shall receive a credit (the "Additional
Gross Credit") from the Supplier equal to the portion of any Additional Gross
allocable to sales or performance of any particular Product by the Company to
its customers during each four-week period. The Supplier shall deliver to the
Company each month a statement (the "Credit Statement") setting forth the
aggregate Additional Gross Credit for the preceding month and itemizing in
reasonable detail the Additional Gross Credit for each category of Products.
The Supplier shall credit the aggregate Additional Gross Credit as a deduction
to the amount due by the Company under a subsequent Invoice.
12.03 Payment. The Company shall have a period of seven (7) days after the
receipt of each Invoice to confirm the accuracy of such Invoice or Credit
Statement, as the case may be, and to present in writing to the Supplier
notice of any objection the Company may have with respect to any aspect
thereof. Unless the Company objects within such seven (7) day period, such
Invoice or Credit Statement, as the case may be, shall be binding on the
Company and the Supplier. The Company shall pay to the Supplier any amount
payable with respect to each Invoice, including any disputed amount, by wire
transfer of immediately available funds within seven (7) days of the receipt
of each Invoice.
12.04 Disputes. If the Company raises any objection with respect to an
Invoice or Credit Statement within the relevant period provided in Section
12.03 or any objection to any other statement delivered by the Supplier to the
Company pursuant hereto, the Company and the Supplier shall use their
reasonable best efforts to resolve such dispute. If the Company and the
Supplier fail to resolve such dispute within thirty (30) days and the amount
in dispute is 5% of the total amount of the Invoice or the Credit Statement,
then the disputed items shall be resolved by an independent accounting firm
designated by the Supplier (the "Accounting Referee"). The Accounting Referee
shall be directed to resolve the dispute within thirty (30) days of having the
matter being referred to it. The decision of the Accounting Referee shall be
final and binding on the Supplier and the Company. The fees and expenses of
the Accounting Referee shall be borne by the Company unless the Accounting
Referee makes a material change to the relevant Invoice, Credit Statement or
other statement as prepared by the Supplier, in which case such fees and
expenses shall be borne by the Supplier.
12.05 Payment Matters. If any payment hereunder is in default, the Supplier
shall have the right (which rights shall be non-exclusive, cumulative of and
additional to all other remedies) to defer further deliveries and the
provision of other Services until all payments in default have been made.
ARTICLE XIII
EXCLUSIVITY RIGHTS
13.01 Exclusivity Rights. (a) Subject to the terms and conditions of this
Agreement, the Supplier shall be the sole and exclusive supplier of Products
and provider of Services to the Company for each State set forth in Exhibit A
(the "Existing States"). Notwithstanding the foregoing, if SKUs not carried by
the Supplier have been added to the Product mix in any Existing State in
compliance with the provisions of Section 2.01(b), the Company shall have the
right to obtain the supply of such SKUs for its online business in such
Existing States from any third party that the Company may select and which is
reasonably acceptable to the Supplier.
(b) In the event the Supplier proposes to provide the Products and Services
contemplated hereunder in a State in which the Company is providing online
shopping other than an Existing State, the Supplier shall provide written
notice to the Company of such proposal, specifying (i) the State that will be
serviced (the "New State"), (ii) whether such Products and Services are
proposed to be provided through the opening of one or more
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Warerooms in Ahold Facilities, or arrangements with a third-party, and (iii)
the date on which the Supplier proposes to commence the provision of the
Products and Services to the Company for such New State. Within 180 days of
receipt of such notice, the Company shall terminate all existing supply and
services agreements for the Company's online business in the New States with
Persons other than the Supplier for the New State, unless otherwise agreed to
by the Supplier. The Company and the Supplier agree that on the date specified
in clause (iii) above, the New State shall be deemed to be included in Exhibit
A and to be part of the Existing States.
(c) Subject to the terms and conditions of this Agreement, the Company
shall have the exclusive right to select a third party to act as the supplier
of Products and provider of Services to the Company in any State other than
Existing or New States. The Supplier may use its reasonable efforts to assist
the Company in negotiations with any such third parties. The Company hereby
agrees and covenants to use its reasonable efforts to amend any existing
agreement to include, and to include in any future agreement, with a third
party for the supply of Products and the provision of Services to the Company
provisions according to which the Company shall have the right to terminate
such agreement at any time before the expiration of its scheduled term upon
the delivery to the other party of no more than 180 days' prior notice.
ARTICLE XIV
TERM; TERMINATION
14.01 Term. This Agreement shall become effective on the date hereof and
shall continue for a term of five (5) years from the date hereof unless
earlier terminated in accordance with the terms described below.
14.02 Renewal. (a) This Agreement shall be automatically renewed at the end
of the initial term specified in Section 14.01 for successive periods of one
year, unless earlier terminated (i) in accordance with Section 14.03 or (ii)
by one party at any time by delivering notice to such effect to the other
party at least 180 days prior to the proposed termination date.
(b) Notwithstanding any provisions herein to the contrary, the Supplier
shall have the unilateral right to cause this Agreement to be renewed at the
end of the initial term for another five-year term by delivering written
notice to such effect to the Company at least 180 days prior to the end of the
initial term, in which event the term will renew for said five-year period
without any need for any further action by the parties hereto.
14.03 Early Termination. (a) Either party may terminate this Agreement upon
90 days written notice to the other party in the event of a breach by the
other party of a material term of this Agreement, the License Agreement or any
of the Documents (as defined in the Purchase Agreement), provided that the
breaching party shall not have cured such breach within 30 days after
receiving such notice.
(b) If Stockholder Approval (as defined in the Purchase Agreement) is not
obtained on or prior to the seven-month anniversary of the date hereof, the
Supplier may terminate this Agreement upon 30 days' prior notice to the
Company.
14.04 Sums Due. In the event of a termination of this Agreement, the
Supplier shall be entitled to all outstanding amounts due from the Company up
to the date of termination under this Article XIV.
14.05 Effect of Termination. Termination or expiration of this Agreement
shall not act as a waiver of any breach of this Agreement and shall not act as
a release of either party for any liability or obligation incurred under this
Agreement through the effective date of such termination or expiration. In
addition, upon termination or expiration of this Agreement, the Supplier and
the Company shall continue to be entitled to joint access and full use of any
and all information and data collected from customers by the Company in
connection with the online offer of the Products; provided that the Supplier's
and the Company's use of such information shall be subject to the Company's
and Supplier's standard privacy policies (which, at a minimum, shall prohibit
the
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selling of any such information to third parties, unless otherwise agreed by
the Company and the Supplier ) and any applicable laws and regulations.
ARTICLE XV
FORCE MAJEURE
15.01 Force Majeure. Any delay or failure of either party to perform
hereunder solely as a result of a labor organization or dispute, governmental
action, allocations or restrictions on quantities or supplies available to the
Supplier established by producers or manufacturers, riots, insurrection, war,
adverse weather, act of God interrupting the Supplier's activities or
affecting any of the Ahold Facilities or any other event or condition outside
of such party's control shall not constitute a breach of this Agreement.
ARTICLE XVI
LIABILITY; INDEMNIFICATION
16.01 Consequential and Other Damages. The Supplier shall not be liable,
whether in contract, in tort (including negligence and strict liability), or
otherwise, for any special, indirect, incidental or consequential damages
whatsoever, which in any way arise out of, relate to, or are a consequence of,
its performance or nonperformance hereunder, or the provision of or failure to
supply any Product or provide any Service hereunder.
16.02 Liability. (a) Limitation of Liability. In any event, the liability
of the Supplier with respect to this Agreement or anything done in connection
herewith, including but not limited to, the performance or breach hereof, or
from the sale, delivery, provision or use of any Product or Service or
documentation or data provided under or covered by this Agreement, whether in
contract, tort (including negligence or strict liability) or otherwise, shall
not exceed $100,000, except in the event of gross negligence or willful
misconduct.
(b) Product Liability. Notwithstanding any provision to the contrary
contained herein, with respect to Product liability claims, the parties shall
look to the manufacturer of such Products for any and all defense, indemnity
or hold harmless claims unless there is clear proof that such claims are the
result of an act or omission by the counter-party, in which case the
provisions of this Section 17.02 shall apply.
16.03 Disclaimer. The Services and Products provided and the Trademarks
licensed hereunder are provided and licensed on an "AS, IS" basis, and
Supplier hereby disclaims any and all express or implied warranties
(including, without limitation, warranties of fitness for a particular
purpose, merchantability, title, non-infringement, any implied warranties
arising out of a particular course of performance, dealing or trade usage) to
the extent permitted under applicable law.
ARTICLE XVII
TECHNOLOGY PARTNERSHIP AGREEMENT
17.01 Technology. The Company and the Supplier agree to use their
reasonable best efforts to enter into, within fifteen (15) Business Days
following execution of this Agreement, a Technology Partnership Agreement that
is currently being negotiated generally in accordance with the terms of the
Peapod Partnership Opportunity document attached hereto as Exhibit H. The
parties acknowledge and agree that the Company is hereby granting to the
Supplier a royalty free, world-wide and perpetual right to use all the
Company's proprietary application software, exclusive of third parties in the
Existing States (the "Software License"), and at the Supplier's request, the
Company shall execute such documents as may be necessary to confirm said
grant. Notwithstanding the foregoing, in the event the Stockholder Approval
(as defined in the Purchase Agreement ) is not obtained on or prior to the
seven-month anniversary of the date hereof, the parties hereto agree that the
Software License shall automatically be amended without any further action by
the parties to limit the grant to the Supplier to a right to
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use on a non-exclusive basis all of the Company's proprietary software in the
Existing States for a term not to exceed two years and for a fee of $250,000
per six-month period payable in advance by the Supplier to the Company. In
such event, the Supplier agrees to use its reasonable efforts to obtain the
right to use alternative software as promptly as practicable.
ARTICLE XVIII
BRANDING
18.01 Branding. The parties hereto agree that the Products shall be offered
to the customers of the Company in a co-branded format using both the
Supplier's and its Affiliates' brands and the Company's brand, but with
primary emphasis on the brands of the Supplier and its Affiliates.
ARTICLE XIX
MISCELLANEOUS
19.01 Confidentiality. (a) The Company acknowledges that the disclosure to
third parties of Product costs and retail, vendors' or manufacturers'
information or other non-public information obtained by the Company in
connection with the performance and implementation of this Agreement could
have a substantial adverse effect on the Supplier. The Company agrees to
maintain such information in strict confidence.
(b) The Supplier acknowledges that the disclosure to third parties of non-
public information obtained by the Supplier in connection with the performance
and implementation of this Agreement could have a substantial adverse effect
on the Company. The Supplier agrees to maintain such information in strict
confidence.
19.02 Notices. All notices, demands, requests, consents, approvals or other
communications required or permitted to be given hereunder or which are given
with respect to this Agreement shall be in writing and shall be personally
served, delivered by a reputable air courier service with tracking capability,
with charges prepaid, or transmitted by hand delivery or facsimile, addressed
as set forth below, or to such other address as such party shall have
specified most recently by written notice. Notice shall be deemed given on the
date of service or transmission if personally served or transmitted by
facsimile. Notice otherwise sent as provided herein shall be deemed given on
the next Business Day following delivery of such notice to a reputable air
courier service.
If to the Company, to it at:
Peapod, Inc.
9933 Woods Drive
Skokie, IL 60077
Attention: Andrew Parkinson, Chairman
Facsimile: (847) 583-9495
with a copy (which shall not constitute notice) to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, IL 60603
Attn: Christine A. Leahy
Facsimile: (312) 853-7036
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If to the Supplier, to it at:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
and a copy (which shall not constitute notice) to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: Maureen S. Brundage, Esq./John M. Reiss, Esq.
Facsimile: (212) 354-8113
All such notices, requests and other communications shall be deemed received
on the date of receipt by the recipient thereof if received prior to 5:00 p.m.
in the place of receipt and such day is a Business Day. Otherwise, any such
notice, request or communication shall be deemed not to have been received
until the next succeeding Business Day in the place of receipt.
19.03 Amendments and Waivers. Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each party to this Agreement, or in
the case of a waiver, by the party against whom the waiver is to be effective.
No failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
19.04 Expenses. All costs and expenses incurred in connection with the
preparation and negotiation of this Agreement shall be paid in accordance with
the terms and condition set forth in Section 9.10 of the Purchase Agreement.
19.05 Parties in Interest. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
19.06 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT.
19.07 Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
19.08 Governing Law and Jurisdiction. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts
made and to be performed wholly within such State and without regard to the
conflict of law provisions thereof, and each party hereto submits to the non-
exclusive jurisdiction of the state and federal courts within the County of
New York in the State of New York. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, each party hereto hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each party hereto further irrevocably
consents to the service of process out of any of the aforementioned courts in
any action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth in
Section 12.01, such service to become effective seven days after such mailing.
Nothing herein shall affect
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the right of the Supplier to serve process in any of the matters permitted by
law or to commence legal proceedings or otherwise proceed against the Company
in any other jurisdiction. Each party hereto hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
19.09 Assignment. This Agreement may not be assigned by either party
without the prior written consent of the other party. Any purported assignment
without such consent shall be void and of no effect; provided, however, that
the Supplier shall have the right to assign this Agreement to any Affiliates
or contract with a third party to supply the Products and/or to provide any of
the Services hereunder without the prior written consent of the Company. The
Supplier and the Company acknowledge that the Supplier may delegate the
supplying of the Products and/or the performance of any Services to be
provided under this Agreement to its Affiliates that normally performs such
Services.
19.10 Table of Contents, Captions. The table of contents and article and
section captions used herein are for reference purposes only, and shall not in
any way affect the meaning or interpretation of this Agreement.
19.11 Entire Agreement. This Agreement, including the exhibits, schedules
and other documents referred to herein which form a part hereof contain the
entire understanding of the parties hereto with respect to the subject matter
contained herein and therein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.
19.12 Severability. In case any provision in this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions hereof will not in any way be affected or impaired
thereby.
19.13 Third Party Beneficiaries. Each party hereto intends that this
Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
19.14 No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event any ambiguity
or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by all parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.
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.
/s/ Andrew B. Parkinson
By __________________________________
Name: Andrew B. Parkinson
Title: Chairman
Koninklijke Ahold N.V.
/s/ Ton Van Tielraden
By __________________________________
Name: Ton Van Tielraden
Title: Senior Vice President and
General Counsel
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EXHIBIT 99.7
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VOTING AGREEMENT
among
THE STOCKHOLDERS NAMED HEREIN
and
KONINKLIJKE AHOLD N.V.
----------------
Dated as of
April 14, 2000
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<PAGE>
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made as of April 14, 2000, by
and among Thomas L. Parkinson, Andrew B. Parkinson, Trygve E. Myhren, Robert
S. Goodale, Tasso H. Coin, Seth L. Pierrepont, Mark VanStekelenburg, Drayton
McLane (each a "Stockholder" and collectively, the "Stockholders", each such
Stockholder acting in his capacity as a stockholder of PEAPOD, INC., a
Delaware corporation (the "Company") and not as an officer or director of the
Company) and KONINKLIJKE AHOLD N.V., a public company with limited
incorporated liability incorporated under the laws of the Netherlands (the
"Purchaser").
WITNESSETH:
WHEREAS, the Company proposes to enter into a Purchase Agreement, dated as
of April 14, 2000 (the "Purchase Agreement") with the Purchaser, providing for
the sale by the Company of shares of its Series B Convertible Preferred Stock,
par value $.01 per share ("Series B Preferred Stock"), and certain warrants
(the "Warrants") to purchase shares of Common Stock, par value $.01 per share
(the "Common Stock"), of the Company to the Purchaser; and
WHEREAS, the Purchase Agreement contemplates the purchase by the Purchaser
of the Series B Preferred Stock and the Warrants in one or more closings, but
not to exceed three (3) (each, a "Closing"), with each Closing subject to
certain conditions, including the approval by the holders of the outstanding
shares of Common Stock of the Purchase Agreement and other Documents (as
defined below) and the transactions contemplated thereby; and
WHEREAS, as a condition to the willingness of the Purchaser to enter into
the Purchase Agreement, and as an inducement to the Purchaser to do so, each
Stockholder has agreed for the benefit of the Company as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Affiliate" shall mean, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person and, in the case of a
person who is an individual, shall include (i) members of such specified
person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and
all beneficiaries of which are such specified person or members of such
person's immediate family as determined in accordance with the foregoing
clause (i). For the purposes of this definition, "control" when used with
respect to any person means the power to direct the management and policies
of such person (in particular the voting and disposition of shares of
Common Stock held directly or indirectly by such person), directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "affiliated," "controlling" and "controlled"
have meanings correlative to the foregoing. Notwithstanding the foregoing,
neither the Purchaser nor any of its Affiliates shall be deemed Affiliates
of the Company for purposes of this Agreement.
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall have the meaning set forth in Section
3.7(a).
"Amended and Restated Bylaws" shall mean the Amended and Restated By-
Laws of the Company.
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"Amended and Restated Certificate of Incorporation" shall mean the
Amended and Restated Certificate of Incorporation of the Company.
"beneficial owner" of a security shall mean any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has (i) the power to vote, or to direct the voting of, such
security or (ii) the power to dispose, or to direct the disposition of,
such security, or the ability to acquire such voting or dispositive power.
"Certificate of Designations" shall mean the Certificate of Designations
relating to the Series B Preferred Stock.
"Closing" shall have the meaning set forth in the Recitals.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Recitals.
"Credit and Security Agreements" shall have the meaning set forth in the
Purchase Agreement.
"Documents" shall mean (i) this Agreement, (ii) the Purchase Agreement,
(iii) the Warrants, (iv) the Certificate of Designations, (v) the
Registration Rights Agreement, (vi) the Services Agreement, (vii) the
Institutional Stockholders Voting Agreement, (viii) the Joint Development
and License Agreement and (ix) the Credit and Security Agreements.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Authority" shall mean any foreign, Federal, state or local
court or governmental or regulatory authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations and any similar
state acts.
"Institutional Stockholders Voting Agreement" shall mean the Voting
Agreement, dated as of the date hereof, by and among the Purchaser, Tribune
National Marketing Company and Nevis Capital Management, Inc.
"Joint Development and License Agreement" shall have the meaning set
forth in the Purchase Agreement.
"Lien" shall mean any pledge, lien, claim, restriction, charge or
encumbrance of any kind.
"Notices" shall have the meaning set forth in Section 4.6.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Purchase Agreement" shall have the meaning set forth in the Recitals.
"Purchaser" shall have the meaning set forth in the Recitals.
"Registration Rights Agreement" shall mean the registration rights
agreement to be entered into by the Company and the Purchaser pursuant to
the Purchase Agreement.
"Rights Agreement" shall have the meaning set forth in the Purchase
Agreement.
"Securities" shall mean all shares of Common Stock (and all other shares
or securities issued or issuable in respect thereof) together with the
associated Rights (as defined in the Rights Agreement) as of the date
hereof and hereafter acquired.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Services Agreement" shall mean the services agreement to be entered
into by the Company and the Purchaser or one of its Affiliates pursuant to
the Purchase Agreement.
"Stockholder" or "Stockholders" shall have the meaning set forth in the
Preamble.
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"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such person, by a subsidiary of such person, or by such person and
one or more subsidiaries of such person, (b) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, or (c) any other person (other than a
corporation) in which such person, a subsidiary of such person or such
person and one or more subsidiaries of such person, directly or indirectly,
at the date of determination thereof, has (i) at least a majority ownership
interest, (ii) the power to elect or direct the election of the directors
or other governing body of such person, or (iii) the power to direct or
cause the direction of the affairs or management of such person. For
purposes of this definition, a person is deemed to own any capital stock or
other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of
any purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Termination Date" shall have the meaning set forth in Section 4.3.
"Warrants" shall have the meaning set forth in the Recitals.
ARTICLE II
COVENANTS OF THE STOCKHOLDERS
Section 2.1 Agreement to Vote. At any meeting of the stockholders of the
Company held on or prior to the Termination Date (as defined in Section 4.3),
however called, and at every adjournment or postponement thereof, or in
connection with any written consent of the holders of any class or classes of
the capital stock of the Company prior to the Termination Date, each
Stockholder shall vote and cause each of its controlled Affiliates to vote all
of the Securities with respect to which it has the right to vote or direct the
vote (as of the record date for such meeting of stockholders), (a) in favor of
the Purchase Agreement, the other Documents and all of the transactions
contemplated by the Purchase Agreement and the other Documents, all matters
requiring approval of stockholders under the listing requirements of the
Nasdaq Stock Market in connection with such transactions, and any actions
required in furtherance hereof, including, without limitation, (i) the
issuance of the Series B Preferred Stock and Warrants at the Closings, (ii)
the amendment and restatement of the Amended and Restated Certificate of
Incorporation to read in its entirety as set forth in the Purchase Agreement,
and (iii) the election of the directors nominated by the Purchaser to the
Board of Directors of the Company who are in the class of directors to be
voted upon at the Company's Stockholder's Meeting (as defined in the Purchase
Agreement), (b) against any Alternative Transaction, (c) except as otherwise
agreed to in writing in advance by the Purchaser, against the following
actions (other than the transactions contemplated by the Purchase Agreement or
any of the other Documents): (i) any extraordinary corporate transaction, such
as a merger, consolidation or other business combination involving the Company
or any of its Subsidiaries; (ii) a sale, lease or transfer of substantially
all of the assets of the Company or any of its Subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
any of its Subsidiaries; (iii) (A) any change in the persons who constitute
the board of directors of the Company inconsistent with the composition of the
board of directors as contemplated by the Documents; (B) any change in the
present capitalization of the Company or any amendment of the Amended and
Restated Certificate of Incorporation or the Amended and Restated Bylaws; (C)
any other material change in the Company's corporate structure or business; or
(D) any other action or agreement that, directly or indirectly, is
inconsistent with or that could reasonably be expected, directly or
indirectly, to impede, interfere with, delay, postpone or materially adversely
affect the transactions contemplated by the Purchase Agreement and the other
Documents and (d) in favor of the Purchaser's nominees to the Board of
Directors as contemplated by the Purchase Agreement. None of the Stockholders
shall enter into, or permit any of its controlled Affiliates to enter into,
any agreement or understanding with any person prior to the Termination Date,
directly or indirectly, to vote, grant any proxy or power of attorney, give
instructions or enter into a voting agreement with respect to the voting of
his or its Securities in any manner inconsistent with the preceding sentence.
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Section 2.2 Proxies and Voting Agreements. (a) Each Stockholder has
revoked, and caused its controlled Affiliates to revoke, any and all previous
proxies granted with respect to his or its Securities with respect to the
matters set forth in Section 2.1.
(b) Prior to the Termination Date, each of the Stockholders shall not, and
shall cause each of its controlled Affiliates not to, directly or indirectly,
except as contemplated hereby, grant any proxies or powers of attorney with
respect to their Securities, deposit any of their Securities into a voting
trust or enter into a voting agreement with respect to any of their
Securities, in each case with respect to the matters set forth in Section 2.1.
Section 2.3 Irrevocable Proxy. Concurrently with the execution of this
Agreement, each Stockholder shall deliver, and shall cause each of its
Affiliates to deliver, to Ton van Tielraden a proxy in the form attached
hereto as Exhibit A, which, prior to the Termination Date, shall be
irrevocable to the extent provided by the Delaware General Corporation Law,
covering such Stockholder's or Affiliate's Securities. Each Stockholder shall
take further action or execute such other instruments as may be reasonably
necessary to effectuate the intent of this proxy.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
ADDITIONAL COVENANTS OF THE STOCKHOLDERS
Each Stockholder represents, warrants and covenants to the Company, as to
himself that:
Section 3.1 Ownership. Each Stockholder is the record and beneficial owner
of the equity securities of the Company listed beside such Stockholder's name
on Schedule I attached hereto as of the date hereof. The equity securities set
forth beside the name of each Stockholder on Schedule I constitute all of the
shares of capital stock of the Company owned of record or beneficially by such
Stockholder as of the date hereof. All of such securities are issued and
outstanding, and except as set forth on Schedule II attached hereto, such
Stockholder does not own, of record or beneficially, any warrants, options or
other rights to acquire any shares of capital stock of the Company. The
securities listed beside each such Stockholder's name on Schedule I attached
hereto and the certificates representing such securities are now, and at all
times during the term hereof will be, held by such Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and clear of
all Liens, proxies, voting trusts or other agreement, arrangement or
restriction with respect to the voting of such securities that would prohibit
such Stockholder from complying with Section 2.1 hereof with respect to such
securities (other than as contemplated by this Agreement).
Section 3.2 Authority; No Conflicts. Each Stockholder has the authority and
has been duly authorized by all necessary action (including consultation,
approval or other action by or with any other person), to execute, deliver and
perform this Agreement and consummate the transactions contemplated hereby.
Such actions by such Stockholder require no action by, or in respect of, or
filing with, any Governmental Authority with respect to such Stockholder other
than any required filings under Section 13 of the Exchange Act. None of the
execution and delivery of this Agreement by such Stockholder, the consummation
by such Stockholder of the transactions contemplated hereby or compliance by
such Stockholder with any of the provisions hereof shall (A) conflict with or
result in any breach of or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Stockholder is a party or
by which such Stockholder or any of such Stockholder's properties or assets
may be bound, or (B) violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to such Stockholder or any of
such Stockholder's properties or assets.
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Section 3.3 Binding Effect. This Agreement has been duly executed and
delivered by such Stockholder and is the valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and
by equitable principles to which the remedies of specific performance and
injunctive and similar forms of relief are subject.
Section 3.4 No Finder's Fees. Except as disclosed pursuant to the Purchase
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of such Stockholder.
Section 3.5 Reliance by the Purchaser. Each Stockholder understands and
acknowledges that the Purchaser is entering into the Purchase Agreement in
reliance upon such Stockholder's execution and delivery of this Agreement.
Section 3.6 Commercially Reasonable Efforts. Prior to the Termination Date,
each Stockholder, in his or her capacity as a stockholder of the Company,
shall use commercially reasonable efforts to assist and cooperate with the
Company in doing, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner practicable, the transactions
contemplated by the Documents, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Authorities and the making of all necessary registrations and filings
(including any necessary filings under the HSR Act, if any) and the taking of
all reasonable steps as may be necessary to obtain an approval or waiver from,
or to avoid an action or proceeding by, any Governmental Authority, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging any of the Documents or the
consummation of any of the transactions contemplated by any of the Documents,
including seeking to have any stay or temporary restraining order entered by
any court or other Governmental Authority vacated or reversed, and (iv) the
execution and delivery of any additional instruments necessary to consummate
the transactions contemplated by, and to fully carry out the purposes of, the
Documents.
Section 3.7 No Solicitation; Restrictions on Transfers. (a) Prior to the
Termination Date, such Stockholder, in his capacity as a stockholder of the
Company, shall not, and shall not permit any of its controlled Affiliates or
representatives to, directly or indirectly, (i) initiate, solicit or entertain
offers from, negotiate with or in any manner knowingly encourage, discuss,
accept, or consider any proposal of any other person relating to (w) the
acquisition of the capital stock of the Company, or any Subsidiary, securities
convertible into or exchangeable for shares of capital stock of the Company or
any Subsidiary, (x) the acquisition of the Company's assets or business, in
whole or in part, whether directly or indirectly, through purchase, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or otherwise, (y) the incurrence of indebtedness by the Company or
any Subsidiary, or (z) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent, delay or dilute the
benefits to the Purchaser of the transactions contemplated by the Documents
(other than the transactions contemplated by the Purchase Agreement, sales of
inventory in the ordinary course, and shares issued upon the exercise of
existing stock options or warrants, and the shares permitted to be sold by
each Stockholder pursuant to the proviso in Section 3.7(c)) (any of the
foregoing being an "Alternative Transaction"), (ii) initiate, participate,
engage in, or agree to initiate, participate or engage in negotiations or
discussions concerning, or provide to any person or entity any information or
data relating to the Company or any Subsidiary, or otherwise cooperate with or
assist or participate in, knowingly facilitating or encouraging, any inquiries
or the making of any proposal that constitutes an Alternative Transaction,
(iii) in connection with any Alternative Transaction, require the Company to
abandon, terminate or fail to consummate the transactions contemplated by the
Documents, (iv) grant any waiver or release under or amend any standstill,
confidentiality or similar agreement entered into by the Company or any of his
Affiliates or representatives; (v) agree to, approve or recommend any
Alternative Transaction, or (vi) take any other action inconsistent with the
obligations and commitments assumed by such Stockholder and its controlled
Affiliates
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pursuant to this Agreement. Such Stockholder shall, and shall cause his
controlled Affiliates to, immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) Prior to the Termination Date, such Stockholder shall, and shall cause
his Affiliates to promptly (but in any event within twenty-four (24) hours of
receipt or occurrence thereof) advise the Company and the Purchaser orally and
in writing of any request for information directed to him with respect to, or
of any inquiry or proposal regarding any Alternative Transaction directed to
him, the material terms and conditions of such proposal and the identity of
the person making such proposal and provide to the Purchaser copies of any
written documentation provided to such Stockholder by such person making such
proposal or by any representative of such person that is material to
understanding or evaluating such request, Alternative Transaction or inquiry
which is received by it from the person (or from any representatives of such
person) making such Alternative Transaction, inquiry or proposal. Each
Stockholder and its Affiliates will keep the Company and the Purchaser fully
informed of any such proposal.
(c) Prior to the Termination Date, such Stockholder shall not (i) directly
or indirectly, offer for sale, sell, transfer, tender, pledge, encumber,
assign or otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the offer for sale,
transfer, tender, pledge, encumbrance, assignment or other disposition of, any
or all of the securities listed beside its name on Schedules I and II attached
hereto or any interest therein or any shares of Common Stock issuable upon the
exercise of stock options or warrants; (ii) except as contemplated by this
Agreement, grant any proxies or powers of attorney, deposit any such
securities into a voting trust or enter into a voting agreement with respect
to any such securities; or (iii) take any action that would make any
representation or warranty of such Stockholder contained herein untrue or
incorrect or have the effect of preventing such Stockholder from performing
such Stockholder's obligations under this Agreement; provided however, that
each of Tasso H. Coin and Seth L. Pierrepont shall each be permitted to sell,
transfer or otherwise dispose of up to 100,000 shares in one or more
transactions, during any period of ninety (90) consecutive days from the date
hereof through the Termination Date.
(d) Andrew Parkinson and Thomas Parkinson shall not, for a period of two
(2) years from the date hereof (i) directly or indirectly, offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, transfer, tender, pledge,
encumbrance assignment or other disposition of, more than 10,000 shares of the
Company in any fiscal quarter and (ii) except as contemplated by this
Agreement, grant any proxies or powers of attorney, deposit such shares into a
voting trust or enter into a voting agreement with respect to any such shares;
provided, however, that each of Andrew Parkinson and Thomas Parkinson may
transfer or assign such shares held by each in the Company to their respective
children or to a trust for the sole benefit of their respective children so
long as Andrew Parkinson or, as the case may be, Thomas Parkinson continue to
be employed by the Company.
Section 3.8 Releases. Each Stockholder hereby fully, unconditionally and
irrevocably releases, effective as of the first Closing, any and all claims
and causes of action that such Stockholder has or may have against the Company
or any Subsidiary or any present or former director, officer, employee or
agent of the Company or any Subsidiary arising or resulting from or relating
to any act, omission, event or occurrence prior to the date hereof.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
Section 4.2 Specific Performance. Each Stockholder agrees that the
Purchaser would be irreparably damaged if for any reason such Stockholder
fails to perform any of such Stockholder's obligations under this
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Agreement, and that the Purchaser would not have an adequate remedy at law for
money damages in such event. Accordingly, the Purchaser shall be entitled to
seek specific performance and injunctive and other equitable relief to enforce
the performance of this Agreement by each Stockholder. This provision is
without prejudice to any other rights that the Purchaser may have against such
Stockholder for any failure to perform its obligations under this Agreement.
Section 4.3 Amendments; Termination. Neither this Agreement, nor any of the
terms or provisions contained herein, may be waived, modified or amended
without the prior written consent of the Purchaser, which consent may be
withheld in the sole and absolute discretion of any Purchaser. No amendment,
modification or termination of this Agreement shall be binding upon any other
party unless executed in writing by the parties hereto intending to be bound
thereby. This Agreement shall terminate, except with respect to liability for
prior breaches thereof, upon the earlier to occur of (i) May 1, 2000 if the
Purchase Agreement has not yet been entered into, (ii) immediately following
the Stockholder Meeting (as defined in the Purchase Agreement), and (iii) the
expiration of the seven-month period commencing on the date hereof (the date
of the earliest of such events being the "Termination Date"); provided that,
the provisions of Section 2.1(c)(iii)(A); Section 2.1(d) and Section 3.7(d)
shall survive any termination of this Agreement pursuant to Section 4.3(ii) if
Stockholder Approval (as defined in the Purchase Agreement) is obtained at the
Stockholder Meeting.
Section 4.4 Successors and Assigns. This Agreement and the rights, duties
and obligations hereunder may not be assigned or delegated by any Stockholder
without the prior written consent of the Purchaser. Except as provided in the
preceding sentence, any assignment or delegation of rights, duties or
obligations hereunder made without the prior written consent of the Purchaser
shall be void and of no effect. This Agreement and the provisions hereof shall
be binding upon and shall inure to the benefit of each of the parties and
their respective successors and permitted assigns.
Section 4.5 Certain Events. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Securities of such Stockholder
and, except with respect to the Securities transferred in accordance with
Section 3.7(c), shall be binding upon any person to which legal or beneficial
ownership of such shares shall pass, whether by operation of law or otherwise.
Section 4.6 Notices. All notices, demands, requests, consents, approvals or
other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served, delivered by a reputable air courier
service with tracking capability, with charges prepaid, or transmitted by hand
delivery or facsimile, addressed as set forth below, or to such other address
as such party shall have specified most recently by written notice. Notice
shall be deemed given on the date of service or transmission if personally
served or transmitted by facsimile. Notice otherwise sent as provided herein
shall be deemed given on the next business day following delivery of such
notice to a reputable air courier service (a) if to any Stockholder, to it at
the address(es) or facsimile number(s) set forth on Schedule III hereto, with
a copy to the Company at 9933 Woods Drive, Skokie, Illinois 60077, Attention:
Andrew Parkinson, and (b) if to the Purchaser, to it at the following contact
information:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
with a copy (which shall not constitute notice) to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attn.: Maureen S. Brundage, Esq. / John M. Reiss, Esq.
Facsimile: (212) 354-8113
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Section 4.7 Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York, and each party hereto submits to the non-
exclusive jurisdiction of the state and federal courts within the County of
New York in the State of New York. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, each party hereto hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each party hereto further irrevocably
consents to the service of process out of any of the aforementioned courts in
any action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth in
Section 4.6, such service to become effective seven days after such mailing.
Nothing herein shall affect the right of the Purchaser to serve process in any
of the matters permitted by law or to commence legal proceedings or otherwise
proceed against any of the Stockholders in any other jurisdiction. Each party
hereto hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement
Section 4.8 Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to the
subject matter hereof.
Section 4.9 Waivers and Extensions. Subject to Section 4.3, any party to
this Agreement may waive any right, breach or default which such party has the
right to waive, provided that such waiver will not be effective against the
waiving party unless it is in writing, is signed by such party and the
Purchaser, and specifically refers to this Agreement. Waivers may be made in
advance or after the right waived has arisen or the breach or default waived
has occurred. Any waiver may be conditional. No waiver of any breach of any
agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof nor of any other agreement or provision
herein contained. No waiver or extension of time for performance of any
obligations or acts shall be deemed a waiver or extension of the time for
performance of any other obligations or acts.
Section 4.10 Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of
any provision of this Agreement.
Section 4.11 Exhibits and Schedules. Each of the annexes, exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
Section 4.12 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled.
Section 4.13 Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term
or provision hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a
part of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and enforceable.
Section 4.14 Counterparts; Facsimile. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument. This
Agreement may be delivered by a party via facsimile; provided, that, the
originally executed signature pages and original documents are delivered to
the appropriate parties within two (2) business days.
Section 4.15 Further Assurances. Each party hereto, upon the request of any
other party hereto, shall do all such further acts and execute, acknowledge
and deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement.
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<PAGE>
Section 4.16 Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto, including
any Purchaser, of any other rights or the seeking of any remedies against any
other party hereto.
IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be duly executed as of the day and year first above written.
Koninklijke Ahold N.V.
/s/ Ton Van Tielraden
By: _________________________________
Name: Ton Van Tielraden
Title: Senior Vice President and
General Counsel
/s/ Thomas L. Parkinson _________
Thomas L. Parkinson
/s/ Andrew B. Parkinson _________
Andrew B. Parkinson
/s/ Trygve E. Myhren ____________
Trygve E. Myhren
/s/ Robert S. Goodale ___________
Robert S. Goodale
/s/ Tasso H. Coin _______________
Tasso H. Coin
/s/ Seth L. Pierrepont _____________
Seth L. Pierrepont
/s/ Mark Vanstekelenburg ________
Mark Vanstekelenburg
/s/ Drayton McLane _______________
Drayton McLane
H-9
<PAGE>
EXHIBIT A
TO
VOTING AGREEMENT
IRREVOCABLE PROXY
The undersigned stockholder of Peapod, Inc., a Delaware corporation (the
"Company"), hereby irrevocably (to the fullest extent provided by law, but
subject to automatic termination and revocation as provided below) appoints
Ton van Tielraden, the attorney and proxy of the undersigned, with full power
of substitution and resubstitution, to the full extent of the undersigned's
rights with respect to the shares of capital stock of the Company that the
undersigned owns or has the right to vote or direct the voting of, as of the
record date for the 2000 Annual Meeting of Stockholders of the Company and any
adjournments thereof (the "Shares"), and any and all other shares or
securities having voting rights issued or issuable with respect thereof on or
after the date hereof, until the Termination Date specified in the Voting
Agreement referred to below. Upon the execution hereof, all prior proxies
given by the undersigned with respect to the Shares and any and all other
shares or securities issued or issuable in respect thereof on or after the
date hereof as to matters covered hereby are hereby revoked except as set
forth in the Voting Agreement and no subsequent proxies will be given as to
the matters covered hereby prior to the Termination Date. This proxy is
irrevocable (to the fullest extent provided by law, but subject to automatic
termination and revocation as provided below), coupled with an interest and is
granted in connection with the Voting Agreement, dated as of April 14, 2000
(the "Voting Agreement"), by and among Koninklijke Ahold N.V., a public
company with limited liability incorporated under the laws of the Netherlands
(the "Purchaser"), the undersigned stockholder and other stockholders named
therein, and is granted in consideration of the Purchaser entering into the
Purchase Agreement referred to therein. Capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed thereto
in the Voting Agreement.
The attorney and proxy named above is hereby empowered at any time prior to
the Termination Date to exercise all voting and other rights of the
undersigned at any meeting of the stockholders of the Company held on or prior
to the Termination Date, however called, and at every adjournment or
postponement thereof prior to the Termination Date, to vote all of the Shares,
(a) in favor of the Purchase Agreement, the other Documents and all of the
transactions contemplated by the Purchase Agreement and the other Documents,
all matters requiring approval of stockholders under the listing requirements
of the Nasdaq Stock Market in connection with such transactions, and any
actions required in furtherance hereof, including, without limitation, (i) the
issuance of the Series B Preferred Stock and Warrants at the Closings, (ii)
the amendment and restatement of the Amended and Restated Certificate of
Incorporation to read in its entirety as set forth in the Purchase Agreement,
and (iii) the election of the directors nominated by the Purchaser to the
Board of Directors of the Company who are in the class of directors to be
voted upon at the 2000 Annual Meeting of Stockholders of the Company, (b)
against any Alternative Transaction, (c) except as otherwise agreed to in
writing in advance by the Purchaser, against the following actions (other than
the transactions contemplated by the Purchase Agreement or any of the other
Documents): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of
its Subsidiaries; (ii) a sale, lease or transfer of substantially all of the
assets of the Company or any of its Subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or any of its
Subsidiaries; (iii) (A) any change in the persons who constitute the board of
directors of the Company inconsistent with the composition of the board of
directors as contemplated by the Documents; (B) any change in the present
capitalization of the Company or any amendment of the Amended and Restated
Certificate of Incorporation or the Amended and Restated Bylaws; (C) any other
material change in the Company's corporate structure or business; or (D) any
other action or agreement that, directly or indirectly, is inconsistent with
or that could reasonably be expected, directly or indirectly, to impede,
interfere with, delay, postpone or materially adversely affect the
transactions contemplated by the Purchase Agreement and the other Documents
and (d) in favor of the Purchaser's nominees to the Board of Directors as
contemplated by the Purchase Agreement.
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This proxy is expressly limited to the matters set forth above and the
undersigned stockholder may vote the Shares (or grant one or more proxies to
vote the Shares) on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned. Notwithstanding the foregoing, this
proxy shall automatically terminate with respect to any shares transferred by
the undersigned to a third party in accordance with the proviso of Section
3.7(c) of the Voting Agreement, upon such transfer.
This proxy is irrevocable, but shall automatically terminate and be revoked
and be of no further force and effect on and after the Termination Date.
By: _________________________________
Name:
Dated: April 14, 2000
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<PAGE>
EXHIBIT 99.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
VOTING AGREEMENT
among
THE STOCKHOLDERS NAMED HEREIN
and
KONINKLIJKE AHOLD N.V.
----------------
Dated as of
April 14, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made as of April 14, 2000, by
and among Tribune National Marketing Company, a Delaware corporation
("Tribune"), Nevis Capital Management, Inc., a Maryland corporation ("Nevis")
(each a "Stockholder" and collectively, the "Stockholders", each such
Stockholder acting in its capacity as a stockholder of Peapod, Inc., a
Delaware corporation (the "Company")) and Koninklijke Ahold N.V., a public
company with limited liability incorporated under the laws of the Netherlands
(the "Purchaser").
WITNESSETH:
WHEREAS, the Company proposes to enter into a Purchase Agreement, dated as
of April 14, 2000 (the "Purchase Agreement") with the Purchaser, providing for
the sale by the Company of shares of its Series B Convertible Preferred Stock,
par value $.01 per share ("Series B Preferred Stock"), and certain warrants
(the "Warrants") to purchase shares of Common Stock, par value $.01 per share
(the "Common Stock"), of the Company to the Purchaser; and
WHEREAS, the Purchase Agreement contemplates the purchase by the Purchaser
of the Series B Preferred Stock and the Warrants in one or more closings, but
not to exceed three (3) (each, a "Closing"), with each Closing subject to
certain conditions, including the approval by the holders of the outstanding
shares of Common Stock of the Purchase Agreement and other Documents (as
defined below) and the transactions contemplated thereby; and
WHEREAS, as a condition to the willingness of the Purchaser to enter into
the Purchase Agreement, and as an inducement to the Purchaser to do so, each
Stockholder has agreed for the benefit of the Company as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Affiliate" shall mean, with respect to any specified person, any other
person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified person and, in the case of a
person who is an individual, shall include (i) members of such specified
person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and
all beneficiaries of which are such specified person or members of such
person's immediate family as determined in accordance with the foregoing
clause (i). For the purposes of this definition, "control" when used with
respect to any person means the power to direct the management and policies
of such person (in particular the voting and disposition of shares of
Common Stock held directly or indirectly by such person), directly or
indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "affiliated," "controlling" and "controlled"
have meanings correlative to the foregoing. Notwithstanding the foregoing,
neither the Purchaser nor any of its Affiliates shall be deemed Affiliates
of the Company for purposes of this Agreement.
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall have the meaning set forth in Section
3.7(a).
"Amended and Restated Bylaws" shall mean the Amended and Restated By-
Laws of the Company.
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"Amended and Restated Certificate of Incorporation" shall mean the
Amended and Restated Certificate of Incorporation of the Company.
"beneficial owner" of a security shall mean any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship,
or otherwise has (i) the power to vote, or to direct the voting of, such
security or (ii) the power to dispose, or to direct the disposition of,
such security, or the ability to acquire such voting or dispositive power.
"Certificate of Designations" shall mean the Certificate of Designations
relating to the Series B Preferred Stock.
"Closing" shall have the meaning set forth in the Recitals.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Recitals.
"Credit and Security Agreements" shall have the meaning set forth in the
Purchase Agreement.
"Documents" shall mean (i) this Agreement, (ii) the Purchase Agreement,
(iii) the Warrants, (iv) the Certificate of Designations, (v) the
Registration Rights Agreement, (vi) the Services Agreement, (vii) the
Individual Stockholders Voting Agreement, (viii) the Joint Development and
License Agreement, and (ix) the Credit and Security Agreements.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Governmental Authority" shall mean any foreign, Federal, state or local
court or governmental or regulatory authority.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and applicable rules and regulations and any similar
state acts.
"Individual Stockholders Voting Agreement" shall mean the Voting
Agreement, dated as of the date hereof, by and among the Purchaser and the
stockholders of the Company named therein.
"Joint Development and License Agreement" shall have the meaning set
forth in the Purchase Agreement.
"Lien" shall mean any pledge, lien, claim, restriction, charge or
encumbrance of any kind.
"Nevis" shall have the meaning set forth in the Recitals.
"Notices" shall have the meaning set forth in Section 4.6.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Purchase Agreement" shall have the meaning set forth in the Recitals.
"Purchaser" shall have the meaning set forth in the Recitals.
"Registration Rights Agreement" shall mean the registration rights
agreement to be entered into by the Company and the Purchaser pursuant to
the Purchase Agreement.
"Rights Agreement" shall have the meaning set forth in the Purchase
Agreement.
"Securities" shall mean all shares of Common Stock (and all other shares
or securities issued or issuable in respect thereof) together with the
associated Rights (as defined in the Rights Agreement) as of the date
hereof and hereafter acquired.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
"Services Agreement" shall mean the services agreement to be entered
into by the Company and the Purchaser or one of its Affiliates pursuant to
the Purchase Agreement.
"Stockholder" or "Stockholders" shall have the meaning set forth in the
Preamble.
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"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such person, by a subsidiary of such person, or by such person and
one or more subsidiaries of such person, (b) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, or (c) any other person (other than a
corporation) in which such person, a subsidiary of such person or such
person and one or more subsidiaries of such person, directly or indirectly,
at the date of determination thereof, has (i) at least a majority ownership
interest, (ii) the power to elect or direct the election of the directors
or other governing body of such person, or (iii) the power to direct or
cause the direction of the affairs or management of such person. For
purposes of this definition, a person is deemed to own any capital stock or
other ownership interest if such person has the right to acquire such
capital stock or other ownership interest, whether through the exercise of
any purchase option, conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Termination Date" shall have the meaning set forth in Section 4.3.
"Tribune" shall have the meaning set forth in the Recitals.
"Warrants" shall have the meaning set forth in the Recitals.
ARTICLE II
COVENANTS OF THE STOCKHOLDERS
Section 2.1 Agreement to Vote. At any meeting of the stockholders of the
Company held on or prior to the Termination Date (as defined in Section 4.3),
however called, and at every adjournment or postponement thereof, or in
connection with any written consent of the holders of any class or classes of
the capital stock of the Company prior to the Termination Date, each
Stockholder shall vote and cause each of its controlled Affiliates to vote all
of the Securities with respect to which it has the right to vote or direct the
vote (as of the record date for such meeting of stockholders), (a) in favor of
the Purchase Agreement, the other Documents and all of the transactions
contemplated by the Purchase Agreement and the other Documents, all matters
requiring approval of stockholders under the listing requirements of the
Nasdaq Stock Market in connection with such transactions, and any actions
required in furtherance hereof, including, without limitation, (i) the
issuance of the Series B Preferred Stock and Warrants at the Closings, (ii)
the amendment and restatement of the Amended and Restated Certificate of
Incorporation to read in its entirety as set forth in the Purchase Agreement,
and (iii) the election of the directors nominated by the Purchaser to the
Board of Directors of the Company who are in the class of directors to be
voted upon at the Company's Stockholder's Meeting (as defined in the Purchase
Agreement), (b) against any Alternative Transaction, and (c) except as
otherwise agreed to in writing in advance by the Purchaser, against the
following actions (other than the transactions contemplated by the Purchase
Agreement or any of the other Documents): (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or any of its Subsidiaries; (ii) a sale, lease or
transfer of substantially all of the assets of the Company or any of its
Subsidiaries, or a reorganization, recapitalization, dissolution or
liquidation of the Company or any of its Subsidiaries; (iii) (A) any change in
the persons who constitute the board of directors of the Company inconsistent
with the composition of the board of directors as contemplated by the
Documents; (B) any change in the present capitalization of the Company or any
amendment of the Amended and Restated Certificate of Incorporation or the
Amended and Restated Bylaws; (C) any other material change in the Company's
corporate structure or business; or (D) any other action or agreement that,
directly or indirectly, is inconsistent with or that could reasonably be
expected, directly or indirectly, to impede, interfere with, delay, postpone
or materially adversely affect the transactions contemplated by the Purchase
Agreement and the other Documents. None of the Stockholders shall enter into,
or permit any of its controlled Affiliates to enter into, any agreement or
understanding with any person prior to the Termination Date, directly or
indirectly, to vote, grant any proxy or power of attorney, give instructions
or enter into a voting agreement with respect to the voting of his or its
Securities in any manner inconsistent with the preceding sentence.
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Section 2.2 Proxies and Voting Agreements. (a) Each Stockholder has
revoked, and caused its controlled Affiliates to revoke, any and all previous
proxies granted with respect to his or its Securities with respect to the
matters set forth in Section 2.1.
(b) Prior to the Termination Date, each of the Stockholders shall not, and
shall cause each of its controlled Affiliates not to, directly or indirectly,
except as contemplated hereby, grant any proxies or powers of attorney with
respect to their Securities, deposit any of their Securities into a voting
trust or enter into a voting agreement with respect to any of their
Securities, in each case with respect to the matters set forth in Section 2.1.
Section 2.3 Irrevocable Proxy. Concurrently with the execution of this
Agreement, each Stockholder shall deliver, and shall cause each of its
Affiliates to deliver, to Ton van Tielraden a proxy in the form attached
hereto as Exhibit A, which, prior to the Termination Date, shall be
irrevocable to the extent provided by the Delaware General Corporation Law,
covering such Stockholder's or Affiliate's Securities. Each Stockholder shall
take further action or execute such other instruments as may be reasonably
necessary to effectuate the intent of this proxy.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND
ADDITIONAL COVENANTS OF THE STOCKHOLDERS
Each Stockholder represents, warrants and covenants to the Company, as to
itself that:
Section 3.1 Ownership. Each Stockholder is the record and beneficial owner
of the equity securities of the Company listed beside such Stockholder's name
on Schedule I attached hereto as of the date hereof. The equity securities set
forth beside the name of each Stockholder on Schedule I constitute all of the
shares of capital stock of the Company owned of record or beneficially by such
Stockholder as of the date hereof. All of such securities are issued and
outstanding, and except as set forth on Schedule II attached hereto, such
Stockholder does not own, of record or beneficially, any warrants, options or
other rights to acquire any shares of capital stock of the Company. The
securities listed beside each such Stockholder's name on Schedule I attached
hereto and the certificates representing such securities are now, and at all
times during the term hereof will be, held by such Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and clear of
all Liens, proxies, voting trusts or other agreement, arrangement or
restriction with respect to the voting of such securities that would prohibit
such Stockholder from complying with Section 2.1 hereof with respect to such
securities (other than as contemplated by this Agreement and other than
securities held by Nevis for the account of any client in the event that such
client terminates its arrangement with Nevis with respect to such securities).
Section 3.2 Authority; No Conflicts. Each Stockholder has the authority and
has been duly authorized by all necessary action (including consultation,
approval or other action by or with any other person), to execute, deliver and
perform this Agreement and consummate the transactions contemplated hereby.
Such actions by such Stockholder require no action by, or in respect of, or
filing with, any Governmental Authority with respect to such Stockholder other
than any required filings under Section 13 of the Exchange Act. None of the
execution and delivery of this Agreement by such Stockholder, the consummation
by such Stockholder of the transactions contemplated hereby or compliance by
such Stockholder with any of the provisions hereof shall (A) conflict with or
result in any breach of or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which such Stockholder is a party or
by which such Stockholder or any of such Stockholder's properties or assets
may be bound, or (B) violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to such Stockholder or any of
such Stockholder's properties or assets.
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Section 3.3 Binding Effect. This Agreement has been duly executed and
delivered by such Stockholder and is the valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and
by equitable principles to which the remedies of specific performance and
injunctive and similar forms of relief are subject.
Section 3.4 No Finder's Fees. Except as disclosed pursuant to the Purchase
Agreement, no broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of such Stockholder.
Section 3.5 Commercially Reasonable Efforts. Prior to the Termination Date,
each Stockholder, in its capacity as a stockholder of the Company, shall use
commercially reasonable efforts to assist and cooperate with the Company in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by the Documents (other than the Services Agreement), including
(i) the obtaining of all necessary actions or nonactions, waivers, consents
and approvals from Governmental Authorities and the making of all necessary
registrations and filings (including any necessary filings under the HSR Act,
if any) and the taking of all reasonable steps as may be necessary to obtain
an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Authority, (ii) the obtaining of all necessary consents,
approvals or waivers from third parties, (iii) the defending of any lawsuits
or other legal proceedings, whether judicial or administrative, challenging
any of the Documents (other than the Services Agreement) or the consummation
of any of the transactions contemplated by any of the Documents (other than
the Services Agreement), including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Authority vacated
or reversed, and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry
out the purposes of, the Documents (other than the Services Agreement).
Section 3.6 No Solicitation; Restrictions on Transfers. (a) Prior to the
Termination Date, such Stockholder, in its capacity as a stockholder of the
Company, shall not, and shall not permit any of its controlled Affiliates or
representatives to, directly or indirectly, (i) initiate, solicit or entertain
offers from, negotiate with or in any manner knowingly encourage, discuss,
accept, or consider any proposal of any other person relating to (w) the
acquisition of the capital stock of the Company, or any Subsidiary, securities
convertible into or exchangeable for shares of capital stock of the Company or
any Subsidiary, (x) the acquisition of the Company's assets or business, in
whole or in part, whether directly or indirectly, through purchase, merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or otherwise, (y) the incurrence of indebtedness by the Company or
any Subsidiary, or (z) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent, delay or dilute the
benefits to the Purchaser of the transactions contemplated by the Documents
(other than the transactions contemplated by the Purchase Agreement or sales
of inventory in the ordinary course) (any of the foregoing being an
"Alternative Transaction"), (ii) initiate, participate, engage in, or agree to
initiate, participate or engage in negotiations or discussions concerning, or
provide to any person or entity any information or data relating to the
Company or any Subsidiary, or otherwise cooperate with or assist or
participate in, knowingly facilitating or encouraging, any inquiries or the
making of any proposal that constitutes an Alternative Transaction, (iii) in
connection with any Alternative Transaction, require the Company to abandon,
terminate or fail to consummate the transactions contemplated by the
Documents, (iv) grant any waiver or release under or amend any standstill,
confidentiality or similar agreement entered into by the Company or any of its
Affiliates or representatives; (v) agree to, approve or recommend any
Alternative Transaction, or (vi) take any other action inconsistent with the
obligations and commitments assumed by such Stockholder and its controlled
Affiliates pursuant to this Agreement. Such Stockholder shall, and shall cause
his controlled Affiliates to, immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) Prior to the Termination Date, such Stockholder shall, and shall cause
its Affiliates to promptly (but in any event within twenty-four (24) hours of
receipt or occurrence thereof) advise the Company orally and in
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writing of any request for information directed to such Stockholder with
respect to, or of any inquiry or proposal regarding any Alternative
Transaction directed to such Stockholder, the material terms and conditions of
such proposal and the identity of the person making such proposal and provide
to the Company copies of any written documentation material to understanding
or evaluating such request, Alternative Transaction or inquiry which is
received by the Company (or from the person or from any representatives of
such person) making such Alternative Transaction, inquiry or proposal. Each
Stockholder and its Affiliates will keep the Company fully informed of any
such proposal.
(c) Such Stockholder shall not (i) directly or indirectly, offer for sale,
sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding with
respect to or consent to the offer for sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of the securities
listed beside its name on Schedules I and II attached hereto or any interest
therein or any shares of Common Stock issuable upon the exercise of stock
options or warrants (other than in the event that any client of Nevis
terminates its arrangements with Nevis); (ii) except as contemplated by this
Agreement, grant any proxies or powers of attorney, deposit any such
securities into a voting trust or enter into a voting agreement with respect
to any such securities; or (iii) take any action that would make any
representation or warranty of such Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling such Stockholder from
performing such Stockholder's obligations under this Agreement. Nevis shall
not terminate any client account that holds equity securities of the Company.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
Section 4.2 Specific Performance. Each Stockholder agrees that the
Purchaser would be irreparably damaged if for any reason such Stockholder
fails to perform any of such Stockholder's obligations under this Agreement,
and that the Purchaser would not have an adequate remedy at law for money
damages in such event. Accordingly, the Purchaser shall be entitled to seek
specific performance and injunctive and other equitable relief to enforce the
performance of this Agreement by each Stockholder. This provision is without
prejudice to any other rights that the Purchaser may have against such
Stockholder for any failure to perform its obligations under this Agreement.
Section 4.3 Amendments; Termination. Neither this Agreement, nor any of the
terms or provisions contained herein, may be waived, modified or amended
without the prior written consent of the Purchaser, which consent may be
withheld in the sole and absolute discretion of any Purchaser. No amendment,
modification or termination of this Agreement shall be binding upon any other
party unless executed in writing by the parties hereto intending to be bound
thereby. This Agreement shall terminate, except with respect to liability for
prior breaches thereof, upon the earlier to occur of (i) May 1, 2000 if the
Purchase Agreement has not yet been entered into, (ii) immediately following
the Stockholder Meeting (as defined in the Purchase Agreement), and (iii) the
expiration of the seven-month period commencing on the date hereof (the date
of the earliest of such events being the "Termination Date").
Section 4.4 Successors and Assigns. This Agreement and the rights, duties
and obligations hereunder may not be assigned or delegated by any Stockholder
without the prior written consent of the Purchaser. Except as provided in the
preceding sentence, any assignment or delegation of rights, duties or
obligations hereunder made without the prior written consent of the Purchaser
shall be void and of no effect. This Agreement and the provisions hereof shall
be binding upon and shall inure to the benefit of each of the parties and
their respective successors and permitted assigns.
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<PAGE>
Section 4.5 Certain Events. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to the Securities of such Stockholder
and shall be binding upon any person to which legal or beneficial ownership of
such shares shall pass, whether by operation of law or otherwise.
Section 4.6 Notices. All notices, demands, requests, consents, approvals or
other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served, delivered by a reputable air courier
service with tracking capability, with charges prepaid, or transmitted by hand
delivery or facsimile, addressed as set forth below, or to such other address
as such party shall have specified most recently by written notice. Notice
shall be deemed given on the date of service or transmission if personally
served or transmitted by facsimile. Notice otherwise sent as provided herein
shall be deemed given on the next business day following delivery of such
notice to a reputable air courier service (a) if to any Stockholder, to it at
the address(es) or facsimile number(s) set forth on Schedule III hereto, with
a copy to the Company at 9933 Woods Drive, Skokie, Illinois 60077, Attention:
Andrew Parkinson, and (b) if to the Purchaser, to it at the following contact
information:
with a copy (which shall not constitute notice) to:
Koninklijke Ahold NV
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
Attention: Ton van Tielraden, Esq.
Facsimile: (31-75) 659-8366
with a copy (which shall not constitute notice) to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attn.: Maureen S. Brundage, Esq. / John M. Reiss, Esq.
Facsimile: (212) 354-8113
Section 4.7 Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by, and construed in accordance with,
the laws of the State of New York, and each party hereto submits to the non-
exclusive jurisdiction of the state and federal courts within the County of
New York in the State of New York. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, each party hereto hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each party hereto further irrevocably
consents to the service of process out of any of the aforementioned courts in
any action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth in
Section 4.6, such service to become effective seven days after such mailing.
Nothing herein shall affect the right of the Purchaser to serve process in any
of the matters permitted by law or to commence legal proceedings or otherwise
proceed against any of the Stockholders in any other jurisdiction. Each party
hereto hereby irrevocably waives any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement
Section 4.8 Entire Agreement. This Agreement (including all agreements
entered into pursuant hereto and all certificates and instruments delivered
pursuant hereto and thereto) constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements, representations, understandings, negotiations and
discussions between the parties, whether oral or written, with respect to the
subject matter hereof.
Section 4.9 Waivers and Extensions. Subject to Section 4.3, any party to
this Agreement may waive any right, breach or default which such party has the
right to waive, provided that such waiver will not be effective against the
waiving party unless it is in writing, is signed by such party and the
Purchaser, and specifically refers
I-7
<PAGE>
to this Agreement. Waivers may be made in advance or after the right waived
has arisen or the breach or default waived has occurred. Any waiver may be
conditional. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof nor of any other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts shall be deemed a
waiver or extension of the time for performance of any other obligations or
acts.
Section 4.10 Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of
any provision of this Agreement.
Section 4.11 Exhibits and Schedules. Each of the annexes, exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
Section 4.12 Attorneys' Fees. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such party may be
entitled.
Section 4.13 Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term
or provision hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a
part of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and enforceable.
Section 4.14 Counterparts; Facsimile. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, and all of
which taken together shall constitute one and the same instrument. This
Agreement may be delivered by a party via facsimile; provided, that, the
originally executed signature pages and original documents are delivered to
the appropriate parties within two (2) business days.
Section 4.15 Further Assurances. Each party hereto, upon the request of any
other party hereto, shall do all such further acts and execute, acknowledge
and deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement.
Section 4.16 Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto, including
any Purchaser, of any other rights or the seeking of any remedies against any
other party hereto.
IN WITNESS WHEREOF, the Company and the Stockholders have caused this
Agreement to be duly executed as of the day and year first above written.
Koninklijke Ahold N.V.
/s/ Ton van Tielraden
By: _________________________________
Name: Ton van Tielraden
Title: Senior Vice President and
General Counsel
Tribune National
Marketing Company
/s/ Mark W. Hianik
By: _________________________________
Name: Mark W. Hianik
Title: Assistant Secretary
Nevis Capital Management, Inc.
/s/ David R. Wilmerding
By: _________________________________
Name: David R. Wilmerding
Title: President
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<PAGE>
EXHIBIT A
TO
VOTING AGREEMENT
IRREVOCABLE PROXY
The undersigned stockholder of Peapod, Inc., a Delaware corporation (the
"Company"), hereby irrevocably (to the fullest extent provided by law, but
subject to automatic termination and revocation as provided below) appoints
Ton van Tielraden, the attorney and proxy of the undersigned, with full power
of substitution and resubstitution, to the full extent of the undersigned's
rights with respect to the shares of capital stock of the Company that the
undersigned owns or has the right to vote or direct the voting of, as of the
record date for the 2000 Annual Meeting of Stockholders of the Company and any
adjournments thereof (the "Shares"), and any and all other shares or
securities having voting rights issued or issuable with respect thereof on or
after the date hereof, until the Termination Date specified in the Voting
Agreement referred to below. Upon the execution hereof, all prior proxies
given by the undersigned with respect to the Shares and any and all other
shares or securities issued or issuable in respect thereof on or after the
date hereof as to matters covered hereby are hereby revoked except as set
forth in the Voting Agreement and no subsequent proxies will be given as to
the matters covered hereby prior to the Termination Date. This proxy is
irrevocable (to the fullest extent provided by law, but subject to automatic
termination and revocation as provided below), coupled with an interest and is
granted in connection with the Voting Agreement, dated as of April 14, 2000
(the "Voting Agreement"), by and among Koninklijke Ahold N.V., a public
company with limited liability incorporated under the laws of the Netherlands
(the "Purchaser"), the undersigned stockholder and other stockholders named
therein, and is granted in consideration of the Purchaser entering into the
Purchase Agreement referred to therein. Capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed thereto
in the Voting Agreement.
The attorney and proxy named above is hereby empowered at any time prior to
the Termination Date to exercise all voting and other rights of the
undersigned at any meeting of the stockholders of the Company held on or prior
to the Termination Date, however called, and at every adjournment or
postponement thereof prior to the Termination Date, to vote all of the Shares,
(a) in favor of the Purchase Agreement, the other Documents and all of the
transactions contemplated by the Purchase Agreement and the other Documents,
all matters requiring approval of stockholders under the listing requirements
of the Nasdaq Stock Market in connection with such transactions, and any
actions required in furtherance hereof, including, without limitation, (i) the
issuance of the Series B Preferred Stock and Warrants at the Closings, (ii)
the amendment and restatement of the Amended and Restated Certificate of
Incorporation to read in its entirety as set forth in the Purchase Agreement,
and (iii) the election of the directors nominated by the Purchaser to the
Board of Directors of the Company who are in the class of directors to be
voted upon at the 2000 Annual Meeting of Stockholders of the Company, (b)
against any Alternative Transaction, and (c) except as otherwise agreed to in
writing in advance by the Purchaser, against the following actions (other than
the transactions contemplated by the Purchase Agreement or any of the other
Documents): (i) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or any of
its Subsidiaries; (ii) a sale, lease or transfer of substantially all of the
assets of the Company or any of its Subsidiaries, or a reorganization,
recapitalization, dissolution or liquidation of the Company or any of its
Subsidiaries; (iii) (A) any change in the persons who constitute the board of
directors of the Company inconsistent with the composition of the board of
directors as contemplated by the Documents; (B) any change in the present
capitalization of the Company or any amendment of the Amended and Restated
Certificate of Incorporation or the Amended and Restated Bylaws; (C) any other
material change in the Company's corporate structure or business; or (D) any
other action or agreement that, directly or indirectly, is inconsistent with
or that could reasonably be expected, directly or indirectly, to impede,
interfere with, delay, postpone or materially adversely affect the
transactions contemplated by the Purchase Agreement and the other Documents.
This proxy is expressly limited to the matters set forth above and the
undersigned stockholder may vote the Shares (or grant one or more proxies to
vote the Shares) on all other matters.
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Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This proxy is irrevocable, but shall automatically terminate and be revoked
and be of no further force and effect on and after the Termination Date.
By: _________________________________
Name:
Dated: April 14, 2000
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<PAGE>
Exhibit 99.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANT
to Purchase Common Stock of
PEAPOD, INC.,
a Delaware corporation
----------------
Warrant No. B-1
Original Issue Date: April 10, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1.DEFINITIONS........................................................... 1
2.EXERCISE OF WARRANT................................................... 5
2.1 Manner of Exercise............................................. 5
2.2 Payment of Taxes............................................... 6
2.3 Fractional Shares.............................................. 6
2.4 Reduced Exercise Price......................................... 10
3.TRANSFER, DIVISION AND COMBINATION.................................... 7
3.1 Transfer....................................................... 7
3.2 Division and Combination....................................... 7
3.3 Expenses....................................................... 7
4.ANTIDILUTION PROVISIONS............................................... 7
4.1 Upon Issuance of Common Stock.................................. 7
4.2 Upon Acquisition of Common Stock............................... 7
4.3 Provisions Applicable to Adjustments........................... 8
4.4 Upon Stock Dividends or Splits................................. 9
4.5 Upon Combinations.............................................. 9
Upon Reclassifications, Reorganizations, Consolidations or
4.6 Mergers....................................................... 9
4.7 Deferral in Certain Circumstances.............................. 9
4.8 Other Anti-Dilution Provisions................................. 10
4.9 Appraisal Procedure............................................ 10
4.10 Adjustment of Number of Shares Purchasable..................... 10
4.11 Exceptions..................................................... 10
4.12 Notice of Adjustment of Exercise Price......................... 10
4.13 Other Dilutive Events.......................................... 10
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF
EXPIRATION........................................................... 11
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY............................... 11
7.NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS......... 12
7.1 Notices of Corporate Actions................................... 12
7.2 Taking of Record............................................... 12
7.3 Closing of Transfer Books...................................... 12
8.TRANSFER RESTRICTIONS................................................. 12
8.1 Restrictions on Transfers...................................... 12
8.2 Restrictive Legends............................................ 13
8.3 Termination of Securities Law Restrictions..................... 13
9.LOSS OR MUTILATION.................................................... 14
10.OFFICE OF THE COMPANY................................................. 14
11.FINANCIAL AND BUSINESS INFORMATION.................................... 14
12.DILUTION FEE.......................................................... 15
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
13.MISCELLANEOUS.......................................................... 15
13.1 Nonwaiver....................................................... 15
13.2 Notice Generally................................................ 15
13.3 Indemnification................................................. 15
13.4 Limitation of Liability......................................... 15
13.5 Remedies........................................................ 16
13.6 Successors and Assigns.......................................... 16
13.7 Amendment....................................................... 16
13.8 Severability.................................................... 16
13.9 Headings........................................................ 16
13.10 GOVERNING LAW; JURISDICTION..................................... 16
13.11 WAIVER OF JURY TRIAL............................................ 26
ANNEX A--SUBSCRIPTION FORM
ANNEX B--ASSIGNMENT FORM
</TABLE>
ii
<PAGE>
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THE WARRANTS REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF,
AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES AND
REGULATIONS THEREUNDER AND THIS WARRANT. THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF SHALL BE ENTITLED TO THE BENEFITS RELATING TO
THIS WARRANT OF ALL FUTURE AGREEMENTS TO BE ENTERED INTO WITH THE PURCHASER OR
ITS AFFILIATES.
Warrant No. B-1
WARRANT
TO PURCHASE 100,000 SHARES OF COMMON STOCK
(SUBJECT TO ADJUSTMENT) OF
PEAPOD, INC.
THIS IS TO CERTIFY THAT Koninklijke Ahold NV, a company organized under the
laws of The Netherlands, (the "Purchaser") or its registered assigns, is
entitled, at any time prior to the Expiration Date (such term, and certain
other capitalized terms used herein being hereinafter defined), to purchase
from Peapod, Inc., a Delaware corporation (the "Company"), 100,000 shares of
the Common Stock of the Company (subject to adjustment as provided herein), at
a purchase price per share equal to $3.00 (the initial "Exercise Price"),
subject to adjustment as provided herein.
1. DEFINITIONS
As used in this Warrant (including the Subscription Form), the following
terms have the respective meanings set forth below:
"Additional Warrants" shall mean warrants issued to the Purchaser in
connection with the provision of a credit facility by the Purchaser and
warrants issued to the Purchaser in connection with the purchase of Preferred
Stock by the Purchaser.
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, shall include (a) in
the case of a person who is an individual, (i) members of such specified
person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified person or members of such person's
immediate family as determined in accordance with the foregoing clause (i),
and (b) any person that directly or indirectly owns more than 5% of any class
of capital stock or other interest of such specified person. For the purposes
of this definition, "control," when used with respect to any person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, for
purposes of this Warrant, the Purchaser and its Affiliates shall not be deemed
Affiliates of the Company.
"After-Tax Basis" when referring to a payment that is required hereunder
(the "target amount"), shall mean a total payment (the "total amount") that,
after deduction of all federal, state and local taxes that are required to be
paid by the recipient in respect of the receipt or accrual of such total
amount, is equal to the target amount.
"Agreed Rate" shall mean the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s
base rate.
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<PAGE>
"Appraisal Procedure" if applicable, shall mean the following procedure to
determine the fair market value, as to any security, for purposes of the
definition of "Fair Value" or the fair market value, as to any other property
(in either case, the "valuation amount"). The valuation amount shall be
determined in good faith by the Board of Directors; provided, however, that if
the Majority Warrant Holders disagree with such valuation amount within a
reasonable period of time (not to exceed twenty (20) days after notice
thereof) the valuation amount shall be determined by an investment banking
firm of national recognition, which firm shall be reasonably acceptable to the
Board of Directors and the Majority Warrant Holders. If the Board of Directors
and the Majority Warrant Holders are unable to agree upon an acceptable
investment banking firm within ten (10) days after the date either party
proposed that one be selected, the investment banking firm will be selected by
an arbitrator located in New York City, New York, selected by the American
Arbitration Association (or if such organization ceases to exist, the
arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of
his appointment) from a list, jointly prepared by the Board of Directors and
the Majority Warrant Holders, of not more than six investment banking firms of
national standing in the United States, of which no more than three may be
named by the Board of Directors and no more than three may be named by the
Majority Warrant Holders. The arbitrator may consider, within the ten-day
period allotted, arguments from the parties regarding which investment banking
firm to choose, but the selection by the arbitrator shall be made in its sole
discretion from the list of six. The Board of Directors and the Majority
Warrant Holders shall submit their respective valuations and other relevant
data to the investment banking firm, and the investment banking firm shall as
soon as practicable thereafter make its own determination of the valuation
amount. The final valuation amount for purposes hereof shall be the average of
the two valuation amounts closest together, as determined by the investment
banking firm, from among the valuation amounts submitted by the Company and
the Majority Warrant Holders and the valuation amount calculated by the
investment banking firm. The determination of the final valuation amount by
such investment-banking firm shall be final and binding upon the parties. The
Company shall pay the fees and expenses of the investment banking firm and
arbitrator (if any) used to determine the valuation amount. If required by any
such investment banking firm or arbitrator, the Company shall execute a
retainer and engagement letter containing reasonable terms and conditions,
including, without limitation, customary provisions concerning the rights of
indemnification and contribution by the Company in favor of such investment
banking firm or arbitrator and its officers, directors, partners, employees,
agents and Affiliates.
"Appraised Value" per share of Common Stock as of a date specified herein
shall mean the value of such a share as of such date as determined by an
investment bank of nationally recognized standing selected jointly by the
Majority Warrant Holders and the Company. If the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then
the Company and the Majority Warrant Holders shall each choose one such
investment bank and the respective chosen firms shall jointly select a third
investment bank, which shall make the determination. The Company shall pay the
costs and fees of each such investment bank (including any such investment
bank selected by the Majority Warrant Holders), and the decision of the
investment bank making such determination of Appraised Value shall be final
and binding on the Company and all affected Holders of Warrants or Warrant
Stock. Such Appraised Value shall be determined as a pro rata portion of the
value of the Company taken as a whole, based on the higher of (A) the value
derived from a hypothetical sale of the entire Company as a going concern by a
willing seller to a willing buyer (neither acting under any compulsion) and
(B) the liquidation value of the entire Company. No discount shall be applied
on account of (i) any Warrants or Warrant Stock representing a minority
interest, (ii) any lack of liquidity of the Common Stock or the Warrants,
(iii) the fact that the Warrants or Warrant Stock may constitute "restricted
securities" for securities law purposes, (iv) the existence of any call option
or (v) any other grounds.
"Book Value" per share of Common Stock as of a date specified herein shall
mean the consolidated book value of the Company and its Subsidiaries as of
such date divided by the number of shares of Common Stock Outstanding on such
date. Such book value shall be determined in accordance with GAAP, except that
there shall be no reduction in such book value by reason of any amount that
may be required either as an offset to or reserve against retained earnings or
as a deduction from book value as a result of the issuance, existence,
anticipated exercise of, or anticipated cost to the Company of the repurchase
of, any of the Warrants.
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<PAGE>
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Common Stock of the Company, par value $0.01
per share, as constituted on the Original Issue Date, and any capital stock
into which such Common Stock may thereafter be changed, and shall also include
(i) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other class of stock of the Company and which is not
subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.6 hereof) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.6 hereof.
"Company" shall mean Peapod, Inc., a Delaware corporation, and any
successor corporation.
"Current Market Price" shall mean as of any specified date the average of
the Daily Market Price of one share of the Common Stock for the shorter of (x)
the 10 consecutive Business Days immediately preceding such date or (y) the
period commencing on the Business Day next following the first public
announcement by the Company of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 4 below and ending on such date.
"Daily Market Price" shall mean, with respect to one share of Common Stock
and for any Business Day: (i) if the Common Stock is then listed on a national
securities exchange or is authorized for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of
Common Stock, regular way, on such day on the principal stock exchange or
market system on which such Common Stock is then listed or authorized for
quotation, or, if no such sale takes place on such day, the average of the
closing bid and asked prices for one share of Common Stock on such day as
reported on such stock exchange or market system or (ii) if the Common Stock
is not then listed or authorized for quotation on any national securities
exchange or designated as a National Market System security on NASDAQ but is
traded over-the-counter, the average of the closing bid and asked prices for
one share of Common Stock as reported on NASDAQ or the Electronic Bulletin
Board or in the National Daily Quotation Sheets, as applicable.
"Designated Office" shall have the meaning set forth in Section 10 hereof.
"Dilution Fee" shall have the meaning set forth in Section 12 hereof.
"Dilution Fee Payment Date" shall have the meaning set forth in Section 12
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Securities" shall have the meaning set forth in Section 4.11
hereof.
"Exercise Date" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Notice" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at any
date herein specified, the initial Exercise Price set forth in the preamble of
this Warrant, as adjusted from time to time pursuant to Sections 2.4 and 4
hereof.
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<PAGE>
"Expiration Date" shall mean the tenth anniversary of the Original Issue
Date.
"Fair Value" per share of Common Stock as of any specified date shall mean
(A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if the Common Stock is not publicly traded on such
date, (1) the fair market value per share of Common Stock as determined in
good faith by the Board of Directors of the Company and set forth in a written
notice to each Holder or (2) if the Majority Warrant Holders object in writing
to such price as determined by the Board of Directors within thirty (30) days
after receiving notice of same, the Appraised Value per share as of such date.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to
time, consistently applied.
"Holder" shall mean (a) with respect to this Warrant, the person in whose
name the Warrant set forth herein is registered on the books of the Company
maintained for such purpose and (b) with respect to any other Warrant or
shares of Warrant Stock, the person in whose name such Warrant or Warrant
Stock is registered on the books of the Company maintained for such purpose.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Majority Warrant Holders" shall mean, with respect to a given
determination, the Holders of Warrants and Additional Warrants representing
the right to acquire more than fifty percent (50%) of the Common Stock
underlying all of the then outstanding Warrants and Additional Warrants.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Opinion of Counsel" shall mean a written opinion of outside counsel
experienced in Securities Act matters chosen by the Holder of this Warrant or
Warrant Stock issued upon the exercise hereof and reasonably acceptable to the
Company.
"Original Issue Date" shall mean the date on which this Warrant was issued,
as set forth on the cover page of this Warrant.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean convertible preferred stock of the Company.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 8.2(a)
hereof.
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"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Share Withholding Option" shall have the meaning set forth in Section
2.1(c) hereof.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such person, by a subsidiary of such person, or by such person and
one or more subsidiaries of such person, (b) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, or (c) any other person (other than a
corporation) in which such person, a subsidiary of such person or such person
and one or more subsidiaries of such person, directly or indirectly, at the
date of determination thereof, has (i) at least a majority ownership interest,
(ii) the power to elect or direct the election of the directors or other
governing body of such person, or (iii) the power to direct or cause the
direction of the affairs or management of such person. For purposes of this
definition, a person is deemed to own any capital stock or other ownership
interest if such person has the right to acquire such capital stock or other
ownership interest, whether through the exercise of any purchase option,
conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest therein, which would constitute a "sale" thereof or a transfer of
a beneficial interest therein within the meaning of the Securities Act.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of all or a portion of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of
the date of such exercise.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, this Warrant or any other
such Warrant. All Warrants shall at all times be identical as to terms and
conditions, except as to the number of shares of Common Stock for which they
may be exercised and their date of issuance.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. (a) From and after the Original Issue Date and
until 5:00 P.M., New York time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder shall (i)
deliver to the Company at its Designated Office a written notice of the
Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of
Common Stock to be purchased, together with this Warrant and (ii) pay to the
Company the Warrant Price in accordance with Section 2.1(c) (the date on which
both such delivery and payment shall have first taken place being hereinafter
sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be
in the form of the subscription form appearing at the end of this Warrant as
Annex A, duly executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt by the Company of such Exercise Notice, Warrant and
payment (if applicable), the Company shall, as promptly as practicable, and in
any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate
or certificates representing the aggregate number of full shares of Common
Stock issuable upon such exercise, together with cash in lieu of any fraction
of a share, as hereafter provided. The stock certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as the exercising Holder shall reasonably request in the
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Exercise Notice and shall be registered in the name of the Holder or, subject
to Section 8 below, such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised, and such stock
certificate or certificates shall be deemed to have been issued, and the
Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of the shares evidenced by such stock
certificate or certificates for all purposes, as of the Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the Holder
by one or more of the following methods: (i) by delivery of a certified or
official bank check in the amount of such Warrant Price payable to the order
of the Company, (ii) by instructing the Company to withhold a number of shares
of Warrant Stock then issuable upon exercise of this Warrant with an aggregate
Fair Value equal to such Warrant Price (the "Share Withholding Option"), (iii)
by surrendering to the Company shares of Common Stock previously acquired by
the Holder with an aggregate Fair Value equal to such Warrant Price, (iv) by
surrendering to the Company dividends due and owing by the Company to the
Holder equal to such Warrant Price, or (v) by providing to the Company goods
or services with a fair value determined by the Board of Directors equal to
such Warrant Price (or if the Majority Warrant Holders object in writing to
such determination within thirty (30) days after receiving notice of same, as
determined by an independent expert of national recognition in the relevant
industry, which expert shall be reasonably acceptable to the Board of
Directors and the Majority Warrant Holders, and if the Board of Directors and
the Majority Warrant Holders are unable to agree upon an acceptable
independent expert within ten (10) days after the date either party proposed
that one be selected, the independent expert will be selected by an arbitrator
located in New York City, New York, selected by the American Arbitration
Association (or if such organization ceases to exist, the arbitrator shall be
chosen by a court of competent jurisdiction)). In the event of any withholding
of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii)
above where the number of shares whose Fair Value is equal to the Warrant
Price is not a whole number, the number of shares withheld by or surrendered
to the Company shall be rounded up to the nearest whole share and the Company
shall make a cash payment to the Holder based on the incremental fraction of a
share being so withheld by or surrendered to the Company in an amount
determined in accordance with Section 2.3 hereof.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical to this Warrant. Notwithstanding any provision herein to
the contrary, the Company shall not be required to register shares of Common
Stock in the name of any person who acquired this Warrant (or part hereof) or
any shares of Warrant Stock otherwise than in accordance with this Warrant.
(e) All Warrants delivered for exercise shall be canceled by the Company.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued, fully
paid and nonassessable, issued without violation of any preemptive rights and
free and clear of all Liens (other than any created by actions of the Holder).
The Company shall pay all expenses in connection with, and all issuance,
transfer, stamp and other similar taxes and other governmental charges that
may be imposed with respect to, the issue or delivery thereof, unless such tax
or charge is imposed by law upon the Holder, in which case such taxes or
charges shall be paid by the Holder and the Company shall reimburse the Holder
therefor on an After-Tax Basis. The Company shall not, however, be required to
pay any tax or governmental charge which may be payable in respect of any
Transfer involved in the issue and delivery of shares of Common Stock issuable
upon exercise of this Warrant in a name other than that of the Holder of the
Warrants to be exercised, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount
of any such tax, or has established to the satisfaction of the Company that
such tax has been paid.
2.3 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay to such Holder an amount in
cash equal to such fraction multiplied by the Fair Value.
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3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Section 8 hereof, each transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the Designated Office, together with a written
assignment of this Warrant in the form of Annex B hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
described in Section 2.2 in connection with the making of such transfer. Upon
such surrender and delivery and, if required, such payment, the Company shall,
subject to Section 8, execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned in compliance with
Section 8, may be exercised by the new Holder for the purchase of shares of
Common Stock without having a new Warrant issued.
3.2 Division and Combination. Subject to compliance with the applicable
provisions of this Warrant including, without limitation, Section 8, this
Warrant may be divided or combined with other Warrants upon presentation
hereof at the Designated Office, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with the applicable
provisions of this Warrant as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant
or Warrants in exchange for the Warrant or Warrants to be divided or combined
in accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than pursuant to Section 2.2 hereof) any new Warrant or
Warrants required to be issued under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at the Designated
Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4. The Company agrees that, at the election of the
Holder, the antidilution provisions in this Section 4 shall be revised to
conform to antidilution provisions in warrants issued in connection with the
provision of a credit facility by the Purchaser or the purchase of Preferred
Stock by the Purchaser. The Holder agrees that, at the election of the
Company, the exceptions to the antidilution provisions in Section 4.11 shall
be revised to conform to the exceptions to the antidilution provisions in
warrants issued in connection with the provision of a credit facility by the
Purchaser or the purchase of Preferred Stock by the Purchaser.
4.1 Upon Issuance of Common Stock. If the Company shall, at any time or
from time to time after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock, or options
to purchase or rights to subscribe for such convertible or exchangeable
securities, other than shares of Preferred Stock issued to the Purchaser or
Excluded Securities, without consideration or for consideration per share less
than either (a) the Exercise Price or (b) the Fair Value of the Common Stock,
in each case, in effect immediately prior to the issuance of such Common Stock
or securities, then such Exercise Price shall forthwith be adjusted to a price
equal to the lower of (x) the Exercise Price in effect immediately prior
thereto, or (y) the lowest consideration per share for which such shares of
Common Stock or such options, rights or convertible or exchangeable securities
are issued (plus the additional consideration required to be paid upon
exercise, exchange or conversion of such options, rights or convertible or
exchangeable securities).
4.2 Upon Acquisition of Common Stock. If the Company or any Subsidiary
shall, at any time or from time to time after the Original Issuance Date,
directly or indirectly, redeem, purchase or otherwise acquire (a) any
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shares of Common Stock for a consideration per share greater than the Fair
Value of shares of Common Stock immediately prior to such event, or (b) any
options to purchase or rights to subscribe for Common Stock, securities by
their terms convertible into or exchangeable for Common Stock (other than
shares of Preferred Stock issued to the Purchaser that are redeemed according
to their terms), or options to purchase or rights to subscribe for such
convertible or exchangeable securities, in either case, for a consideration
per share of Common Stock for which such options, rights or convertible or
exchangeable securities are exercisable, convertible or exchangeable, that is
greater than the amount, if any, by which the Fair Value of shares of Common
Stock immediately prior to such event exceeds the per share exercise,
exchange, subscription, conversion or purchase price applicable to such
options, rights or convertible or exchangeable securities, then, in the case
of (a) or (b), the Exercise Price shall forthwith be lowered to a price equal
to the price obtained by multiplying:
(i) the Exercise Price in effect immediately prior to such event, by
(ii) a fraction of which (x) the denominator shall be the Fair Value per
share of Common Stock immediately prior to such event and (y) the numerator
shall be the result of dividing:
(A) (1) the product of (a) the number of shares of Common Stock
outstanding on a fully-diluted basis and (b) the Fair Value per share
of Common Stock, in each case, immediately prior to such event, minus
(2) the aggregate consideration paid by the Company in such event, by
(B) the number of shares of Common Stock outstanding on a fully-
diluted basis immediately prior to such event, minus the number of
shares of Common Stock purchased or acquired, or for which the options,
rights or convertible or exchangeable securities acquired were
exercisable, convertible or exchangeable.
For purposes of this Section 4, "fully diluted basis" shall be determined
in accordance with the treasury method of GAAP and Section 4.3.
4.3 Provisions Applicable to Adjustments. For the purposes of any
adjustment of an Exercise Price pursuant to Sections 4.1 and 4.2, the
following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a public
offering or private placement, the consideration shall be deemed to be the
amount of cash paid therefor before deducting therefrom any discounts,
commissions or placement fees payable by the Company to any underwriter or
placement agent in connection with the issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the Fair Value thereof as determined in accordance with the
Appraisal Procedure.
(iii) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, except for
shares of Preferred Stock issued to the Purchaser or options to acquire
Excluded Securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in
subparagraphs (i) and (ii) above), if any, received by the Company upon
the issuance of such options or rights plus the minimum purchase price
provided in such options or rights for the Common Stock covered
thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange of any such convertible
or exchangeable securities or upon the exercise of options to purchase
or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities, options, or rights were issued
and for a consideration equal to the consideration received by the
Company for any such securities and related options or rights
(excluding any cash received on account
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of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in paragraphs (i) and (ii) above);
(C) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights or
conversions of or exchanges for such securities, other than a change
resulting from the antidilution provisions thereof, the applicable
Exercise Price shall forthwith be readjusted to such Exercise Price as
would have been obtained had the adjustment made upon the issuance of
such options, rights or securities not converted prior to such change
or options or rights related to such securities not converted prior to
such change been made upon the basis of such change;
(D) upon the expiration of any such options or the termination of
any rights, convertible securities or exchangeable securities, the
applicable Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been in effect at the time of such
expiration or termination had such options, rights, convertible
securities or exchangeable securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued;
and
(E) no further adjustment of the Exercise Price adjusted upon the
issuance of any such options, rights, convertible securities or
exchangeable securities shall be made as a result of the actual
issuance of Common Stock on the exercise of any such rights or options
or any conversion or exchange of any such securities.
4.4 Upon Stock Dividends or Splits. If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is increased
by a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, or to be affected by such subdivision or split-up, the Exercise
Price shall be appropriately decreased so that the number of shares of Common
Stock purchasable on exercise of the Warrants shall be increased in proportion
to such increase in outstanding shares.
4.5 Upon Combinations. If, at any time after the Original Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, following the record date to determine shares affected by
such combination, the Exercise Price shall be appropriately increased so that
the number of shares of Common Stock purchasable on exercise of each of the
Warrants shall be decreased in proportion to such decrease in outstanding
shares.
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers. In
the event of any capital reorganization of the Company, any reclassification
of the stock of the Company (other than a change in par value or from par
value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), or any
consolidation or merger of the Company with or into another corporation (where
the Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock), each Warrant shall after such
reorganization, reclassification, consolidation, or merger be exercisable for
the kind and number of shares of stock or other securities or property of the
Company or of the successor corporation resulting from such consolidation or
surviving such merger, if any, to which the holder of the number of shares of
Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon exercise of
such Warrant would have been entitled upon such reorganization,
reclassification, consolidation or merger. The provisions of this clause shall
similarly apply to successive reorganizations, reclassifications,
consolidations, or mergers.
4.7 Deferral in Certain Circumstances. In any case in which the provisions
of this Section 4 shall require that an adjustment shall become effective
immediately after a record date of an event, the Company may defer until the
occurrence of such event issuing to the Holder of any Warrant exercised after
such record date and before the occurrence of such event the shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event and issuing to such Holder only the shares of capital stock issuable
upon such exercise before giving effect to such adjustments; provided,
however, that the Company shall deliver to such Holder an appropriate
instrument or due bills evidencing such Holder's right to receive such
additional shares.
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4.8 Other Anti-Dilution Provisions. If the Company has issued or issues any
securities on or after the Original Issuance Date containing provisions
protecting the holder or holders thereof against dilution in any manner more
favorable to such holder or holders thereof than those set forth in this
Section 4, such provisions (or any more favorable portion thereof) shall be
deemed to be incorporated herein as if fully set forth in this Warrant and, to
the extent inconsistent with any provision of this Warrant, shall be deemed to
be substituted therefor.
4.9 Appraisal Procedure. In any case in which the provisions of this
Section 4 shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Exercise Price, the Company may
defer until the completion of the Appraisal Procedure and the determination of
the adjustment (1) issuing to the Holder of any Warrant exercised after the
date of the event that requires the adjustment and before completion of the
Appraisal Procedure and the determination of the adjustment, the shares of
capital stock issuable upon such exercise by reason of the adjustment required
by such event and issuing to such Holder only the shares of capital stock
issuable upon such exercise before giving effect to such adjustment and (2)
paying to such Holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 2.3 above; provided, however, that the
Company shall deliver to such holder an appropriate instrument or due bills
evidencing such holder's right to receive such additional shares or cash.
4.10 Adjustment of Number of Shares Purchasable. Upon any adjustment of the
Exercise Price as provided in Section 4.1, 4.2, 4.4, 4.5 or 4.6, the Holders
of the Warrants shall thereafter be entitled to purchase upon the exercise
thereof, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof
by the Exercise Price resulting from such adjustment.
4.11 Exceptions. Section 4 shall not apply to (i) any issuance of Common
Stock upon exercise of any options or warrants outstanding on the Original
Issuance Date, (ii) the issuance of shares of Common Stock in an aggregate
amount not to exceed 500,000 shares (subject to adjustment on the same basis
as is the number of shares for which this Warrant is exercisable as a result
of an event specified in Section 4.4, 4.5 or 4.6) upon exercise of options or
warrants that have been approved by the Board of Directors, or any issuance of
such options or warrants, (iii) in addition to options and warrants referred
to in clause (ii) of this Section 4.11, options or warrants to purchase shares
of Common Stock issued pursuant to an employee stock option plan or employee
stock incentive plan approved by the Board of Directors and the Company's
stockholders on or after the date on which the Holder has representatives
constituting at least a majority of the Board of Directors of the Company, or
any shares of Common Stock issued upon exercise of such options or warrants
(the securities referred to in clauses (i), (ii) and (iii) being collectively
referred to as "Excluded Securities"), (iv) any issuance of Common Stock in an
underwritten public offering at a price per share at least equal to the
Exercise Price then in effect if the underwriting discount does not exceed 7%,
or (v) the issuance of Preferred Stock and warrants to the Purchaser that is
contemplated by the letter dated April 4, 2000 from the Purchaser to the
Company.
4.12 Notice of Adjustment of Exercise Price. Whenever the Exercise Price is
adjusted as herein provided:
(i) the Company shall compute the adjusted Exercise Price in accordance
with this Section 4 and shall prepare a certificate signed by the Company's
independent accounting firm, setting forth the adjusted Exercise Price and
showing in reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed at each office or agency
maintained for such purpose or exercise of Warrants; and
(ii) a notice stating that the Exercise Price has been adjusted and
setting forth the adjusted Exercise Price shall forthwith be prepared by
the Company, and as soon as practicable after it is prepared, such notice
shall be mailed by the Company at its expense to all Holders at their last
addresses as they shall appear in the stock register.
4.13 Other Dilutive Events. If any corporate action shall occur as to which
the provisions of this Section 4 are not strictly applicable but as to which
the failure to make any adjustment would adversely affect the purchase rights
or value represented by the Warrants in accordance with the essential intent
and principles of this
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Section 4 (which are to place the Holder in a position as nearly equal as
possible to the position the Holder would have occupied had the Holder
purchased shares of Common Stock on the date hereof) then, in each such case,
the Company shall appoint a firm of independent certified public accountants
of recognized national standing (which may be the regular auditors of the
Company) to give their opinion upon the adjustment, if any, on a basis
consistent with the essential intent and principles established in this
Section 4, necessary to preserve, without dilution, the purchase rights
represented by the Warrants. Upon receipt of such opinion, the Company will
promptly mail a copy thereof to the Holders and will make the adjustments
described therein; provided that no such adjustment will increase the Exercise
Price or decrease the number of shares of Common Stock obtainable as otherwise
determined pursuant to this Section 4.
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF EXPIRATION
(a) The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization,
reclassification, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other similar voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company shall take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, free and clear of all Liens, and shall use
its best efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
(b) The Company shall deliver to each Holder of Warrants on or before six
months prior to the tenth anniversary of the Original Issue Date, but no
earlier than nine months prior to the tenth anniversary of the Original Issue
Date, advance notice of such tenth anniversary and of the anticipated
Expiration Date. If the Company fails to fulfill in a timely manner the notice
obligation set forth in the prior sentence, it shall provide such notice as
soon as possible thereafter.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens. Before
taking any action that would result in an adjustment in the number of shares
of Common Stock for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction over such action. If any shares of Common Stock
required to be reserved for issuance upon exercise of Warrants require
registration or qualification with any governmental authority under any
federal or state law (other than under the Securities Act or any state
securities law) before such shares may be so issued, the Company will in good
faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
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7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1 Notices of Corporate Actions.
In case:
(a) the Company shall take an action or an event shall occur, that
would require an Exercise Price adjustment pursuant to Section 4; or
(b) the Company shall grant to the holders of its Common Stock
rights or warrants to subscribe for or purchase any shares of capital
stock of any class; or
(c) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock),
or of any consolidation, merger or share exchange to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer for
all or a portion of the outstanding shares of Common Stock (or shall
amend any such tender offer to change the maximum number of shares being
sought or the amount or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained
for such purpose, and shall cause to be mailed to all Holders of Warrants at
their last addresses as they shall appear in the stock register, at least 30
days prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the
date on which such tender offer commenced, the date on which such tender offer
is scheduled to expire unless extended, the consideration offered and the
other material terms thereof (or the material terms of the amendment thereto).
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Exercise
Price and the number and kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon exercise of the Warrants. Neither the failure to
give any such notice nor any defect therein shall affect the legality or
validity of any action described in clauses (a) through (e) of this Section
7.1.
7.2 Taking of Record. In the case of all dividends or other distributions
by the Company to the holders of its Common Stock with respect to which any
provision of any Section hereof refers to the taking of a record of such
holders, the Company will in each such case take such a record and will take
such record as of the close of business on a Business Day.
7.3 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1 Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be transferred,
sold, assigned, exchanged, mortgaged, pledged, hypothecated or otherwise
disposed of or encumbered except in compliance with the provisions of the
Securities Act, the rules
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and regulations thereunder and this Warrant. Each certificate, if any,
evidencing such shares of Restricted Common Stock issued upon any such
Transfer, other than in a public offering pursuant to an effective
registration statement, shall bear the restrictive legend set forth in Section
8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 8.2(b), unless the Company determines that, or the
Holder delivers to the Company an Opinion of Counsel to the effect that, such
legend is not required for the purposes of compliance with the Securities Act.
Holders of the Warrants or the Restricted Common Stock, as the case may be,
shall not be entitled to Transfer such Warrants or such Restricted Common
Stock except in accordance with this Section 8.1.
8.2 Restrictive Legends.
(a) Except as otherwise provided in this Section 8, each certificate for
Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any
such certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED,
HYPOTHECATED OF OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE
WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS
OF, THE ACT AND THE RULES AND REGULATIONS THEREUNDER."
(b) Except as otherwise provided in this Section 8, each Warrant shall
be stamped or otherwise imprinted with a legend in substantially the
following form:
"NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. THE WARRANT
REPRESENTED BY THIS CERTIFICATE AND THE STOCK ISSUABLE UPON EXERCISE
HEREOF MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED,
PLEDGED, HYPOTHECATED OF OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT
COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY THE
PROVISIONS OF, THE ACT, THE RULES AND REGULATIONS THEREUNDER AND THIS
WARRANT."
8.3 Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1 upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2(a) and (b) shall terminate as to
any particular Warrant or shares of Restricted Common Stock when the Company
shall have received from the Holder thereof an Opinion of Counsel to the
effect that such legend is not required in order to ensure compliance with the
Securities Act. Whenever the restrictions imposed by Section 8.1 shall
terminate as to this Warrant, as herein above provided, the Holder hereof
shall be entitled to receive from the Company, at the expense of the Company,
a new Warrant with no restrictive legend, and none of the Warrants issued upon
registration of transfer, division or combination of, or in substitution for,
such Warrant or Warrants shall have any similar restrictive legend endorsed
thereon. Whenever the restrictions imposed by this Section shall terminate as
to any share of Restricted Common Stock, as herein above provided, the Holder
thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 8.2(a).
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9. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of the Holder shall be a sufficient indemnity) and, in case of
mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, however, that, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company
for cancellation.
10. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in
this Warrant. Such Designated Office shall initially be the office of the
Company at 9933 Woods Drive, Skokie, Illinois 60077. The Company may from time
to time change the Designated Office to another office of the Company or its
agent within the United States by notice given to all registered Holders at
least ten (10) Business Days prior to the effective date of such change.
11. FINANCIAL AND BUSINESS INFORMATION
If at any time prior to the Expiration Date, the Company is not required to
file reports under Section 13 or 15(d) of the Exchange Act, the Company shall
furnish to Holders of Warrants the following:
(a) Quarterly Reports. As soon as available, but not later than 45 days
after the end of each quarterly accounting period, (A) a consolidated balance
sheet of the Company as of the end of such period and consolidated statements
of income, cash flows and changes in stockholders' equity for such quarterly
accounting period and for the period commencing at the end of the previous
fiscal year and ending with the end of such period, setting forth in each case
in comparative form the corresponding figures for the corresponding period of
the preceding fiscal year, all prepared in accordance with generally accepted
accounting principles consistently applied, subject to normal year-end
adjustments and the absence of footnote disclosure, and (B) a report by
management of the Company of the operating and financial highlights of the
Company and its Subsidiaries for such period, which shall include an analysis
of the operations of the Company and its Subsidiaries for such period.
(b) Annual Reports. As soon as available, but not later than 90 days after
the end of each fiscal year of the Company, audited consolidated financial
statements of the Company, which shall include statements of income, cash
flows and changes in stockholders' equity for such fiscal year and a balance
sheet as of the last day thereof, each prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by the
report of a "Big 5" firm of independent certified public accountants selected
by the Company's Board of Directors (the "Accountants"). The Company and its
Subsidiaries shall maintain a system of accounting sufficient to enable its
Accountants to render the report referred to in this Section 11(b).
(c) Miscellaneous. Promptly upon becoming available, each of the following:
(i) notification in writing of the existence of any default under any
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of their assets are bound;
(ii) upon request, copies of all reports prepared for or delivered to
the management of the Company or its Subsidiaries by its accountants; and
(iii) upon request, any other routinely collected financial or other
information available to management of the Company or its Subsidiaries
(including, without limitation, routinely collected statistical data).
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<PAGE>
The Company shall comply with any written request from any Holder that the
Company not provide such Holder with any of the foregoing information for any
period of time.
12. DILUTION FEE
In the event any dividends are declared with respect to the Common Stock,
the Holder of this Warrant as of the record date established by the Board of
Directors for such dividend shall be entitled to receive as a dilution fee
(the "Dilution Fee") an amount (whether in the form of cash, securities or
other property) equal to the amount (and in the form) of the dividends that
such Holder would have received had this Warrant been exercised for purchase
of Common Stock immediately prior to the record date of such dividend, such
Dilution Fee to be payable on the payment date of the dividend established by
the Board of Directors (the "Dilution Fee Payment Date"). The record date for
any such Dilution Fee shall be the record date for the applicable dividend,
and any such Dilution Fee shall be payable to the persons in whose name this
Warrant is registered at the close of business on the applicable record date.
13. MISCELLANEOUS
13.1 Nonwaiver. No course of dealing or any delay or failure to exercise
any right hereunder on the part of the Company or the Holder shall operate as
a waiver of such right or otherwise prejudice the rights, powers or remedies
of such person.
13.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or by reputable air
courier service with tracking capability and charges prepaid or by facsimile,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon the
exercise hereof, at its last known address appearing on the books of the
Company maintained for such purpose;
(b) if to the Company, at the Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) Business Days
after the same shall have been deposited in the United States mail, or one (1)
Business Day after the same shall have been sent by Federal Express or another
recognized overnight courier service.
13.3 Indemnification. If the Company fails to make, when due, any payments
provided for in this Warrant, the Company shall pay to the Holder hereof (a)
interest at the Agreed Rate on any amounts due and owing to such Holder and
(b) such further amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees and
expenses incurred by such Holder in collecting any amounts due hereunder. The
Company shall indemnify, save and hold harmless the Holder hereof and the
Holders of any Warrant Stock issued upon the exercise hereof from and against
any and all liability, loss, cost, damage, reasonable attorneys' and
accountants' fees and expenses, court costs and all other out-of-pocket
expenses incurred in connection with or arising from any default hereunder by
the Company. This indemnification provision shall be in addition to the rights
of such Holder or Holders to bring an action against the Company for breach of
contract based on such default hereunder.
13.4 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall
give rise to any liability of such Holder to pay the Exercise Price for any
Warrant Stock other than pursuant to an exercise of this Warrant or any
liability as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
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<PAGE>
13.5 Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to
being entitled to exercise its rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights provided
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
13.6 Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1
and 8.2, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and to the extent applicable, all Holders of shares of Warrant Stock
issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
13.7 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the
Company and the Majority Warrant Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may
be purchased upon exercise of such Warrant (before giving effect to any
adjustment as provided therein) without the written consent of the Holder
thereof.
13.8 Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
13.9 Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
13.10 GOVERNING LAW; JURISDICTION. (a) IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT WITH RESPECT TO
THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE
HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION
OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY
OF THIS WARRANT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS PROVIDED PURSUANT TO SECTION 13.2, SUCH SERVICE TO
BECOME EFFECTIVE SEVEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE HOLDER OF THIS WARRANT TO SERVE PROCESS IN ANY OF THE MATTERS
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION. THE COMPANY HEREBY IRREVOCABLY WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS WARRANT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
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<PAGE>
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT HERETO.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
Peapod, Inc.
/s/ Andrew B. Parkinson
By: _________________________________
Name: Andrew B. Parkinson
Title: Chairman
Attest:
/s/ Dan Rabinowitz
By: _________________________________
Name: Dan Rabinowitz
Title: Secretary
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<PAGE>
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned Holder of this Warrant irrevocably exercises this Warrant
for the purchase of shares Common Stock of Peapod, Inc. and herewith
makes payment of the Warrant Price as follows (check one or more of the
following):
[_]by delivery herewith of a certified or official bank check in the amount
of such Warrant Price payable to the order of the Company;
[_]hereby instructs the Company to withhold a number of shares of Warrant
Stock then issuable upon exercise of this Warrant with an aggregate Fair
Value equal to such Warrant Price;
[_]herewith surrenders to the Company shares of Common Stock previously
acquired by the Holder with an aggregate Fair Value equal to such
Warrant Price; or
[_]herewith surrenders to the Company dividends due and owing by the
Company to the Holder equal to such Warrant Price; or
[_]by providing to the Company goods or services with a fair value equal to
such Warrant Price;
all at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased
(and any securities or other property issuable upon such exercise) be issued
in the name of and delivered to whose address is
and, if such shares of Common Stock shall not include all of
the shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned.
_____________________________________
(Name of Registered Owner)
_____________________________________
(Signature of Registered Owner)
_____________________________________
(Street Address)
_____________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatsoever.
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<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
<TABLE>
<CAPTION>
Name and
Address
of No. of Shares of
Assignee Common Stock
-------- ----------------
<S> <C>
</TABLE>
and does hereby irrevocably constitute and appoint attorney-in-
fact to register such transfer onto the books of Peapod, Inc. maintained for
the purpose, with full power of substitution in the premises.
Dated: ______________________________ Print Name:
_____________________________________
Signature: __________________________
Witness: ____________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
Exhibit 99.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANT
to Purchase Common Stock of
PEAPOD, INC.,
a Delaware corporation
----------------
Warrant No. B-2
Original Issue Date: April 14, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THE WARRANTS REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF,
AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES AND
REGULATIONS THEREUNDER AND THIS WARRANT.
Warrant No. B-2
WARRANT
TO PURCHASE 3,566,667 SHARES OF COMMON STOCK
(SUBJECT TO ADJUSTMENT) OF
PEAPOD, INC.
THIS IS TO CERTIFY THAT KONINKLIJKE AHOLD N.V., (the "Purchaser") or its
registered assigns, is entitled, at any time prior to the Expiration Date
(such term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from Peapod, Inc., a Delaware corporation (the
"Company"), 3,566,667 shares of the Common Stock of the Company (subject to
adjustment as provided herein), at a purchase price per share equal to $3.00
(the initial "Exercise Price"), subject to adjustment as provided herein.
1. DEFINITIONS
As used in this Warrant (including the Subscription Form), the following
terms have the respective meanings set forth below:
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, shall include (a) in
the case of a person who is an individual, (i) members of such specified
person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified person or members of such person's
immediate family as determined in accordance with the foregoing clause (i),
and (b) any person that directly or indirectly owns more than 5% of any class
of capital stock or other interest of such specified person. For the purposes
of this definition, "control," when used with respect to any person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, for
purposes of this Warrant, the Purchaser and its Affiliates shall not be deemed
Affiliates of the Company.
"After-Tax Basis" when referring to a payment that is required hereunder
(the "target amount"), shall mean a total payment (the "total amount") that,
after deduction of all federal, state and local taxes that are required to be
paid by the recipient in respect of the receipt or accrual of such total
amount, is equal to the target amount.
"Agreed Rate" shall mean the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s
base rate.
"Appraisal Procedure" if applicable, shall mean the following procedure to
determine the fair market value, as to any security, for purposes of the
definition of "Fair Value" or the fair market value, as to any other property
(in either case, the "valuation amount"). The valuation amount shall be
determined in good faith by the Board of Directors; provided, however, that if
the Majority Warrant Holders disagree with such valuation amount within
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<PAGE>
a reasonable period of time (not to exceed twenty (20) days after notice
thereof) the valuation amount shall be determined by an investment banking
firm of national recognition, which firm shall be reasonably acceptable to the
Board of Directors and the Majority Warrant Holders. If the Board of Directors
and the Majority Warrant Holders are unable to agree upon an acceptable
investment banking firm within ten (10) days after the date either party
proposed that one be selected, the investment banking firm will be selected by
an arbitrator located in New York City, New York, selected by the American
Arbitration Association (or if such organization ceases to exist, the
arbitrator shall be chosen by a court of competent jurisdiction). The
arbitrator shall select the investment banking firm (within ten (10) days of
his appointment) from a list, jointly prepared by the Board of Directors and
the Majority Warrant Holders, of not more than six investment banking firms of
national standing in the United States, of which no more than three may be
named by the Board of Directors and no more than three may be named by the
Majority Warrant Holders. The arbitrator may consider, within the ten-day
period allotted, arguments from the parties regarding which investment banking
firm to choose, but the selection by the arbitrator shall be made in its sole
discretion from the list of six. The Board of Directors and the Majority
Warrant Holders shall submit their respective valuations and other relevant
data to the investment banking firm, and the investment banking firm shall as
soon as practicable thereafter make its own determination of the valuation
amount. The final valuation amount for purposes hereof shall be the average of
the two valuation amounts closest together, as determined by the investment
banking firm, from among the valuation amounts submitted by the Company and
the Majority Warrant Holders and the valuation amount calculated by the
investment banking firm. The determination of the final valuation amount by
such investment-banking firm shall be final and binding upon the parties. The
Company shall pay the fees and expenses of the investment banking firm and
arbitrator (if any) used to determine the valuation amount. If required by any
such investment banking firm or arbitrator, the Company shall execute a
retainer and engagement letter containing reasonable terms and conditions,
including, without limitation, customary provisions concerning the rights of
indemnification and contribution by the Company in favor of such investment
banking firm or arbitrator and its officers, directors, partners, employees,
agents and Affiliates.
"Appraised Value" per share of Common Stock as of a date specified herein
shall mean the value of such a share as of such date as determined by an
investment bank of nationally recognized standing selected jointly by the
Majority Warrant Holders and the Company. If the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then
the Company and the Majority Warrant Holders shall each choose one such
investment bank and the respective chosen firms shall jointly select a third
investment bank, which shall make the determination. The Company shall pay the
costs and fees of each such investment bank (including any such investment
bank selected by the Majority Warrant Holders), and the decision of the
investment bank making such determination of Appraised Value shall be final
and binding on the Company and all affected Holders of Warrants or Warrant
Stock. Such Appraised Value shall be determined as a pro rata portion of the
value of the Company taken as a whole, based on the higher of (A) the value
derived from a hypothetical sale of the entire Company as a going concern by a
willing seller to a willing buyer (neither acting under any compulsion) and
(B) the liquidation value of the entire Company. No discount shall be applied
on account of (i) any Warrants or Warrant Stock representing a minority
interest, (ii) any lack of liquidity of the Common Stock or the Warrants,
(iii) the fact that the Warrants or Warrant Stock may constitute "restricted
securities" for securities law purposes, (iv) the existence of any call option
or (v) any other grounds.
"Book Value" per share of Common Stock as of a date specified herein shall
mean the consolidated book value of the Company and its Subsidiaries as of
such date divided by the number of shares of Common Stock Outstanding on such
date. Such book value shall be determined in accordance with GAAP, except that
there shall be no reduction in such book value by reason of any amount that
may be required either as an offset to or reserve against retained earnings or
as a deduction from book value as a result of the issuance, existence,
anticipated exercise of, or anticipated cost to the Company of the repurchase
of, any of the Warrants.
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed.
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<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Common Stock of the Company, par value $0.01
per share, as constituted on the Original Issue Date, and any capital stock
into which such Common Stock may thereafter be changed, and shall also include
(i) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other class of stock of the Company and which is not
subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.6 hereof) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.6 hereof.
"Company" shall mean Peapod, Inc., a Delaware corporation, and any
successor corporation.
"Current Market Price" shall mean as of any specified date the average of
the Daily Market Price of one share of the Common Stock for the shorter of (x)
the 10 consecutive Business Days immediately preceding such date or (y) the
period commencing on the Business Day next following the first public
announcement by the Company of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 4 below and ending on such date.
"Daily Market Price" shall mean, with respect to one share of Common Stock
and for any Business Day: (i) if the Common Stock is then listed on a national
securities exchange or is authorized for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of
Common Stock, regular way, on such day on the principal stock exchange or
market system on which such Common Stock is then listed or authorized for
quotation, or, if no such sale takes place on such day, the average of the
closing bid and asked prices for one share of Common Stock on such day as
reported on such stock exchange or market system or (ii) if the Common Stock
is not then listed or authorized for quotation on any national securities
exchange or designated as a National Market System security on NASDAQ but is
traded over-the-counter, the average of the closing bid and asked prices for
one share of Common Stock as reported on NASDAQ or the Electronic Bulletin
Board or in the National Daily Quotation Sheets, as applicable.
"Designated Office" shall have the meaning set forth in Section 10 hereof.
"Dilution Fee" shall have the meaning set forth in Section 12 hereof.
"Dilution Fee Payment Date" shall have the meaning set forth in Section 12
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Securities" shall have the meaning set forth in Section 4.11
hereof.
"Exercise Date" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Notice" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at any
date herein specified, the initial Exercise Price set forth in the preamble of
this Warrant, as adjusted from time to time pursuant to Sections 2.4 and 4
hereof.
"Expiration Date" shall mean the tenth anniversary of the Original Issue
Date.
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"Fair Value" per share of Common Stock as of any specified date shall mean
(A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if the Common Stock is not publicly traded on such
date, (1) the fair market value per share of Common Stock as determined in
good faith by the Board of Directors of the Company and set forth in a written
notice to each Holder or (2) if the Majority Warrant Holders object in writing
to such price as determined by the Board of Directors within thirty (30) days
after receiving notice of same, the Appraised Value per share as of such date.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to
time, consistently applied.
"Holder" shall mean (a) with respect to this Warrant, the person in whose
name the Warrant set forth herein is registered on the books of the Company
maintained for such purpose and (b) with respect to any other Warrant or
shares of Warrant Stock, the person in whose name such Warrant or Warrant
Stock is registered on the books of the Company maintained for such purpose.
"HSR Approval" shall mean the expiration of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
applicable rules and regulations and any similar state acts applicable to the
issuance of Series B Preferred Stock as contemplated by the Purchase
Agreement.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Majority Warrant Holders" shall mean, with respect to a given
determination, the Holders of Warrants, the holders of the Previously Issued
Warrants and the holders of the Warrants (Preferred Stock) representing the
right to acquire more than fifty percent (50%) of the Common Stock underlying
all of the then outstanding Warrants, the Previously Issued Warrants and the
Warrants (Preferred Stock).
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Opinion of Counsel" shall mean a written opinion of outside counsel
experienced in Securities Act matters chosen by the Holder of this Warrant or
Warrant Stock issued upon the exercise hereof and reasonably acceptable to the
Company.
"Original Issue Date" shall mean the date on which this Warrant was issued,
as set forth on the cover page of this Warrant.
"Outside Date" shall mean the date that is one hundred and twenty (120)
days after the date hereof or, if the Holder exercises this Warrant or the
Warrants (Preferred Stock) and as a direct result of such exercise, the
Stockholders Meeting (as defined in the Purchase Agreement) is delayed, one
hundred and twenty (120) days plus the number of days of such delay after the
date hereof.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
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"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean convertible preferred stock of the Company.
"Previously Issued Warrants" shall mean the Warrant dated April 10, 2000
issued by the Company to the Purchaser, and all warrants issued upon transfer,
division or combination of, or in substitution for, such warrant or any other
such warrant.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of April
14, 2000, by and between the Company and the Purchaser.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 8.2(a)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series B Preferred Stock" shall mean the Series B Preferred Stock to be
authorized pursuant to the Certificate of Designation in the form attached as
Exhibit I to the Purchase Agreement.
"Share Withholding Option" shall have the meaning set forth in Section
2.1(c) hereof.
"Stockholder Approval" shall mean the approval by the Company's
stockholders of the issuance of the shares of Series B Preferred Stock and the
Warrants, and the other transactions contemplated pursuant to the Purchase
Agreement.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such person, by a subsidiary of such person, or by such person and
one or more subsidiaries of such person, (b) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, or (c) any other person (other than a
corporation) in which such person, a subsidiary of such person or such person
and one or more subsidiaries of such person, directly or indirectly, at the
date of determination thereof, has (i) at least a majority ownership interest,
(ii) the power to elect or direct the election of the directors or other
governing body of such person, or (iii) the power to direct or cause the
direction of the affairs or management of such person. For purposes of this
definition, a person is deemed to own any capital stock or other ownership
interest if such person has the right to acquire such capital stock or other
ownership interest, whether through the exercise of any purchase option,
conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest therein, which would constitute a "sale" thereof or a transfer of
a beneficial interest therein within the meaning of the Securities Act.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of all or a portion of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of
the date of such exercise.
"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, this Warrant or any other
such Warrant. All Warrants shall at all times be identical as to terms and
conditions, except as to the number of shares of Common Stock for which they
may be exercised and their date of issuance.
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"Warrants (Preferred Stock)" shall mean the Warrant (Preferred Stock)
issued by the Company to the Purchaser pursuant to the Purchase Agreement, and
all warrants issued upon transfer, division or combination of, or in
substitution for, such warrant or any other such warrant.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. (a) From and after the Original Issue Date and
until 5:00 P.M., New York time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder shall (i)
deliver to the Company at its Designated Office a written notice of the
Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of
Common Stock to be purchased, together with this Warrant and (ii) pay to the
Company the Warrant Price in accordance with Section 2.1(c) (the date on which
both such delivery and payment shall have first taken place being hereinafter
sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be
in the form of the subscription form appearing at the end of this Warrant as
Annex A, duly executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt by the Company of such Exercise Notice, Warrant and
payment (if applicable), the Company shall, as promptly as practicable, and in
any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate
or certificates representing the aggregate number of full shares of Common
Stock issuable upon such exercise, together with cash in lieu of any fraction
of a share, as hereafter provided. The stock certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as the exercising Holder shall reasonably request in the
Exercise Notice and shall be registered in the name of the Holder or, subject
to Section 8 below, such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised, and such stock
certificate or certificates shall be deemed to have been issued, and the
Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of the shares evidenced by such stock
certificate or certificates for all purposes, as of the Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the Holder
by one or more of the following methods: (i) by delivery of a certified or
official bank check in the amount of such Warrant Price payable to the order
of the Company, (ii) by instructing the Company to withhold a number of shares
of Warrant Stock then issuable upon exercise of this Warrant with an aggregate
Fair Value equal to such Warrant Price (the "Share Withholding Option"), (iii)
by surrendering to the Company shares of Common Stock previously acquired by
the Holder with an aggregate Fair Value equal to such Warrant Price, (iv) by
surrendering to the Company dividends due and owing by the Company to the
Holder equal to such Warrant Price, or (v) by providing to the Company goods
or services with a fair value as specified in any contract pursuant to which
such goods or services are provided or, if not specified, as determined by the
Board of Directors equal to such Warrant Price (or if the Majority Warrant
Holders object in writing to such determination within thirty (30) days after
receiving notice of same, as determined by an independent expert of national
recognition in the relevant industry, which expert shall be reasonably
acceptable to the Board of Directors and the Majority Warrant Holders, and if
the Board of Directors and the Majority Warrant Holders are unable to agree
upon an acceptable independent expert within ten (10) days after the date
either party proposed that one be selected, the independent expert will be
selected by an arbitrator located in New York City, New York, selected by the
American Arbitration Association (or if such organization ceases to exist, the
arbitrator shall be chosen by a court of competent jurisdiction)). In the
event of any withholding of Warrant Stock or surrender of Common Stock
pursuant to clause (ii) or (iii) above where the number of shares whose Fair
Value is equal to the Warrant Price is not a whole number, the number of
shares withheld by or surrendered to the Company shall be rounded up to the
nearest whole share and the Company shall make a cash payment to the Holder
based on the incremental fraction of a share being so withheld by or
surrendered to the Company in an amount determined in accordance with Section
2.3 hereof.
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(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical to this Warrant. Notwithstanding any provision herein to
the contrary, the Company shall not be required to register shares of Common
Stock in the name of any person who acquired this Warrant (or part hereof) or
any shares of Warrant Stock otherwise than in accordance with this Warrant.
(e) All Warrants delivered for exercise shall be canceled by the Company.
(f) On the date of exercise of the Warrants the Company shall use
commercially reasonable efforts to satisfy all the conditions set forth in
Section 7.2 of the Purchase Agreement other than the condition set forth in
Section 7.2(n), provided that if the Company shall have used its commercially
reasonable efforts to satisfy such conditions and such conditions shall not
have been satisfied, the Holder shall have no rights or remedies arising as a
result of such failure.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued, fully
paid and nonassessable, issued without violation of any preemptive rights and
free and clear of all Liens (other than any created by actions of the Holder).
The Company shall pay all expenses in connection with, and all issuance,
transfer, stamp and other similar taxes and other governmental charges that
may be imposed with respect to, the issue or delivery thereof, unless such tax
or charge is imposed by law upon the Holder, in which case such taxes or
charges shall be paid by the Holder and the Company shall reimburse the Holder
therefor on an After-Tax Basis. The Company shall not, however, be required to
pay any tax or governmental charge which may be payable in respect of any
Transfer involved in the issue and delivery of shares of Common Stock issuable
upon exercise of this Warrant in a name other than that of the Holder of the
Warrants to be exercised, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount
of any such tax, or has established to the satisfaction of the Company that
such tax has been paid.
2.3 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay to such Holder an amount in
cash equal to such fraction multiplied by the Fair Value.
2.4 Reduced Exercise Price. On the Outside Date, in the event that the HSR
Approval or the Stockholders Approval shall not have been obtained, the
Exercise Price shall be reduced to an amount equal to 50% of the Exercise
Price in effect immediately prior to the Outside Date.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Section 8 hereof, each transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the Designated Office, together with a written
assignment of this Warrant in the form of Annex B hereto duly executed by the
Holder or its agent or attorney and funds sufficient to pay any transfer taxes
described in Section 2.2 in connection with the making of such transfer. Upon
such surrender and delivery and, if required, such payment, the Company shall,
subject to Section 8, execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned in compliance with
Section 8, may be exercised by the new Holder for the purchase of shares of
Common Stock without having a new Warrant issued.
3.2 Division and Combination. Subject to compliance with the applicable
provisions of this Warrant including, without limitation, Section 8, this
Warrant may be divided or combined with other Warrants upon
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presentation hereof at the Designated Office, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by the Holder or its agent or attorney. Subject to compliance with the
applicable provisions of this Warrant as to any transfer which may be involved
in such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than pursuant to Section 2.2 hereof) any new Warrant or
Warrants required to be issued under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at the Designated
Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1 Upon Issuance of Common Stock. If the Company shall, at any time or
from time to time after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock, or options
to purchase or rights to subscribe for such convertible or exchangeable
securities, other than shares of Series B Preferred Stock issued to the
Purchaser or Excluded Securities, without consideration or for consideration
per share less than either (a) the Exercise Price or (b) the Fair Value of the
Common Stock, in each case, in effect immediately prior to the issuance of
such Common Stock or securities, then such Exercise Price shall forthwith be
adjusted to a price equal to the lower of (x) the Exercise Price in effect
immediately prior thereto, or (y) the lowest consideration per share for which
such shares of Common Stock or such options, rights or convertible or
exchangeable securities are issued (plus the additional consideration required
to be paid upon exercise, exchange or conversion of such options, rights or
convertible or exchangeable securities).
4.2 Upon Acquisition of Common Stock. If the Company or any Subsidiary
shall, at any time or from time to time after the Original Issuance Date,
directly or indirectly, redeem, purchase or otherwise acquire (a) any shares
of Common Stock for a consideration per share greater than the Fair Value of
shares of Common Stock immediately prior to such event, or (b) any options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock (other than shares of Series
B Preferred Stock issued to the Purchaser that are redeemed according to their
terms), or options to purchase or rights to subscribe for such convertible or
exchangeable securities, in either case, for a consideration per share of
Common Stock for which such options, rights or convertible or exchangeable
securities are exercisable, convertible or exchangeable, that is greater than
the amount, if any, by which the Fair Value of shares of Common Stock
immediately prior to such event exceeds the per share exercise, exchange,
subscription, conversion or purchase price applicable to such options, rights
or convertible or exchangeable securities, then, in the case of (a) or (b),
the Exercise Price shall forthwith be lowered to a price equal to the price
obtained by multiplying:
(i) the Exercise Price in effect immediately prior to such event, by
(ii) a fraction of which (x) the denominator shall be the Fair Value
per share of Common Stock immediately prior to such event and (y) the
numerator shall be the result of dividing:
(A) (1) the product of (a) the number of shares of Common Stock
outstanding on a fully-diluted basis and (b) the Fair Value per share
of Common Stock, in each case, immediately prior to such event, minus
(2) the aggregate consideration paid by the Company in such event, by
(B) the number of shares of Common Stock outstanding on a fully-
diluted basis immediately prior to such event, minus the number of
shares of Common Stock purchased or acquired, or for which the options,
rights or convertible or exchangeable securities acquired were
exercisable, convertible or exchangeable.
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For purposes of this Section 4, "fully diluted basis" shall be determined
in accordance with the treasury method of GAAP and Section 4.3.
4.3 Provisions Applicable to Adjustments. For the purposes of any
adjustment of an Exercise Price pursuant to Sections 4.1 and 4.2, the
following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a public
offering or private placement, the consideration shall be deemed to be the
amount of cash paid therefor before deducting therefrom any discounts,
commissions or placement fees payable by the Company to any underwriter or
placement agent in connection with the issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a consideration
in whole or in part other than cash, the consideration other than cash
shall be deemed to be the Fair Value thereof as determined in accordance
with the Appraisal Procedure.
(iii) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, except for
shares of Series B Preferred Stock issued to the Purchaser or options to
acquire Excluded Securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in
subparagraphs (i) and (ii) above), if any, received by the Company upon
the issuance of such options or rights plus the minimum purchase price
provided in such options or rights for the Common Stock covered
thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange of any such convertible
or exchangeable securities or upon the exercise of options to purchase
or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities, options, or rights were issued
and for a consideration equal to the consideration received by the
Company for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received
by the Company upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in paragraphs (i) and
(ii) above);
(C) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights or
conversions of or exchanges for such securities, other than a change
resulting from the antidilution provisions thereof, the applicable
Exercise Price shall forthwith be readjusted to such Exercise Price as
would have been obtained had the adjustment made upon the issuance of
such options, rights or securities not converted prior to such change
or options or rights related to such securities not converted prior to
such change been made upon the basis of such change;
(D) upon the expiration of any such options or the termination of
any rights, convertible securities or exchangeable securities, the
applicable Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been in effect at the time of such
expiration or termination had such options, rights, convertible
securities or exchangeable securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued;
and
(E) no further adjustment of the Exercise Price adjusted upon the
issuance of any such options, rights, convertible securities or
exchangeable securities shall be made as a result of the actual
issuance of Common Stock on the exercise of any such rights or options
or any conversion or exchange of any such securities.
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4.4 Upon Stock Dividends or Splits. If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is increased
by a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, or to be affected by such subdivision or split-up, the Exercise
Price shall be appropriately decreased so that the number of shares of Common
Stock purchasable on exercise of the Warrants shall be increased in proportion
to such increase in outstanding shares.
4.5 Upon Combinations. If, at any time after the Original Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, following the record date to determine shares affected by
such combination, the Exercise Price shall be appropriately increased so that
the number of shares of Common Stock purchasable on exercise of each of the
Warrants shall be decreased in proportion to such decrease in outstanding
shares.
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers. In
the event of any capital reorganization of the Company, any reclassification
of the stock of the Company (other than a change in par value or from par
value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), any sale or
transfer to another Person of the property of the Company as an entirety or
substantially as an entirety, or any consolidation or merger of the Company
with or into another corporation (where the Company is not the surviving
corporation or where there is a change in or distribution with respect to the
Common Stock), each Warrant shall after such reorganization, reclassification,
consolidation, transfer or merger be exercisable for the kind and number of
shares of stock or other securities or property of the Company or of the
successor corporation resulting from such consolidation, transfer or surviving
such merger, if any, to which the holder of the number of shares of Common
Stock deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation or merger) upon exercise of such Warrant would
have been entitled upon such reorganization, reclassification, consolidation,
transfer or merger. The provisions of this clause shall similarly apply to
successive reorganizations, reclassifications, consolidations, transfers, or
mergers.
Notwithstanding anything contained in this Agreement to the contrary, in
the event that the Company shall effect any of the transactions described in
this Section 4.6, each person (other than the Company) which may be required
to issue a new Warrant as provided above shall assume by written instrument
delivered to, and reasonably satisfactory to, the Majority Warrant Holders (i)
the obligations of the Company under this Agreement (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing
obligations of the Company under this Agreement) and (ii) the obligation to
deliver to all Holders such new Warrants as, in accordance with the foregoing
provisions of this Section 4.6, such Holders may be entitled to receive, and
such Person shall have similarly delivered to such Holders an opinion of
counsel for such Person, which counsel shall be reasonably satisfactory to the
Majority Warrant Holders, stating that this Agreement shall thereafter
continue in full force and effect and that the terms hereof (including,
without limitation, all of the provisions of this Section 4.6, shall be
applicable to the stock, securities, cash or property which such person may be
required to deliver upon any exercise of any of the Warrants or such new
Warrant or the exercise of any rights pursuant hereto.
4.7 Deferral in Certain Circumstances. In any case in which the provisions
of this Section 4 shall require that an adjustment shall become effective
immediately after a record date of an event, the Company may defer until the
occurrence of such event issuing to the Holder of any Warrant exercised after
such record date and before the occurrence of such event the shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event and issuing to such Holder only the shares of capital stock issuable
upon such exercise before giving effect to such adjustments; provided,
however, that the Company shall deliver to such Holder an appropriate
instrument or due bills evidencing such Holder's right to receive such
additional shares.
4.8 Other Anti-Dilution Provisions. If the Company has issued or issues any
securities on or after the Original Issuance Date containing provisions
protecting the holder or holders thereof against dilution in any
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manner more favorable to such holder or holders thereof than those set forth
in this Section 4, such provisions (or any more favorable portion thereof)
shall be deemed to be incorporated herein as if fully set forth in this
Warrant and, to the extent inconsistent with any provision of this Warrant,
shall be deemed to be substituted therefor.
4.9 Appraisal Procedure. In any case in which the provisions of this
Section 4 shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Exercise Price, the Company may
defer until the completion of the Appraisal Procedure and the determination of
the adjustment (1) issuing to the Holder of any Warrant exercised after the
date of the event that requires the adjustment and before completion of the
Appraisal Procedure and the determination of the adjustment, the shares of
capital stock issuable upon such exercise by reason of the adjustment required
by such event and issuing to such Holder only the shares of capital stock
issuable upon such exercise before giving effect to such adjustment and (2)
paying to such Holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 2.3 above; provided, however, that the
Company shall deliver to such holder an appropriate instrument or due bills
evidencing such holder's right to receive such additional shares or cash.
4.10 Adjustment of Number of Shares Purchasable. Upon any adjustment of the
Exercise Price as provided in Section 4.1, 4.2, 4.4, 4.5 or 4.6, the Holders
of the Warrants shall thereafter be entitled to purchase upon the exercise
thereof, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof
by the Exercise Price resulting from such adjustment.
4.11 Exceptions. Section 4 shall not apply to (i) any issuance of Common
Stock upon exercise of any options or warrants outstanding on April 14, 2000,
(ii) the issuance of shares of Common Stock, in an aggregate amount not to
exceed 500,000 shares to McLane Group, L.P., (iii) the issuance of shares of
Common Stock, in an aggregate amount not to exceed 2,600,000 shares upon
exercise of options or warrants that have been approved by the Board of
Directors, or any issuance of such options or warrants, (iv) shares of Common
Stock issued pursuant to the Company's current employee stock purchase plan in
an amount not to exceed 114,000 shares (the securities referred to in clauses
(i), (ii), (iii) and (iv) being collectively referred to as "Excluded
Securities"), (iv) any issuance of Common Stock in an underwritten public
offering at a price per share at least equal to the Exercise Price then in
effect if the underwriting discount does not exceed 7%, or (v) the issuance of
Series B Preferred Stock and Warrants (Preferred Stock) to the Purchaser
pursuant to the Purchase Agreement.
4.12 Notice of Adjustment of Exercise Price. Whenever the Exercise Price is
adjusted as herein provided:
(i) the Company shall compute the adjusted Exercise Price in accordance
with this Section 4 and shall prepare a certificate signed by the Company's
independent accounting firm, setting forth the adjusted Exercise Price and
showing in reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed at each office or agency
maintained for such purpose or exercise of Warrants; and
(ii) a notice stating that the Exercise Price has been adjusted and
setting forth the adjusted Exercise Price shall forthwith be prepared by
the Company, and as soon as practicable after it is prepared, such notice
shall be mailed by the Company at its expense to all Holders at their last
addresses as they shall appear in the stock register.
4.13 Other Dilutive Events. If any event occurs as to which the provisions
of this Section 4 are not strictly applicable or, if strictly applicable,
would not fairly and adequately protect the conversion rights of the Holders
in accordance with the essential intent and principles of such provisions,
then the Board of Directors shall make such adjustments in the application of
such provisions, in accordance with such essential intent and principles, as
shall be reasonably necessary to protect such purchase rights as aforesaid;
provided that no such adjustment will increase the Exercise Price or decrease
the number of shares of Common Stock obtainable as otherwise determined
pursuant to this Section 4.
J-11
<PAGE>
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF EXPIRATION
(a) The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization,
reclassification, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other similar voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company shall take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, free and clear of all Liens, and shall use
its best efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
(b) The Company shall deliver to each Holder of Warrants on or before six
months prior to the tenth anniversary of the Original Issue Date, but no
earlier than nine months prior to the tenth anniversary of the Original Issue
Date, advance notice of such tenth anniversary and of the anticipated
Expiration Date. If the Company fails to fulfill in a timely manner the notice
obligation set forth in the prior sentence, it shall provide such notice as
soon as possible thereafter.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens. Before
taking any action that would result in an adjustment in the number of shares
of Common Stock for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction over such action. If any shares of Common Stock
required to be reserved for issuance upon exercise of Warrants require
registration or qualification with any governmental authority under any
federal or state law (other than under the Securities Act or any state
securities law) before such shares may be so issued, the Company will in good
faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1 Notices of Corporate Actions.
In case:
(a) the Company shall take an action or an event shall occur, that
would require an Exercise Price adjustment pursuant to Section 4; or
(b) the Company shall grant to the holders of its Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class; or
(c) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or
of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
J-12
<PAGE>
(e) the Company or any Subsidiary shall commence a tender offer for all
or a portion of the outstanding shares of Common Stock (or shall amend any
such tender offer to change the maximum number of shares being sought or
the amount or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained
for such purpose, and shall cause to be mailed to all Holders of Warrants at
their last addresses as they shall appear in the stock register, at least 30
days prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the
date on which such tender offer commenced, the date on which such tender offer
is scheduled to expire unless extended, the consideration offered and the
other material terms thereof (or the material terms of the amendment thereto).
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Exercise
Price and the number and kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon exercise of the Warrants. Neither the failure to
give any such notice nor any defect therein shall affect the legality or
validity of any action described in clauses (a) through (e) of this Section
7.1.
7.2 Taking of Record. In the case of all dividends or other distributions
by the Company to the holders of its Common Stock with respect to which any
provision of any Section hereof refers to the taking of a record of such
holders, the Company will in each such case take such a record and will take
such record as of the close of business on a Business Day.
7.3 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1 Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be transferred,
sold, assigned, exchanged, mortgaged, pledged, hypothecated or otherwise
disposed of or encumbered except in compliance with the provisions of the
Securities Act, the rules and regulations thereunder and this Warrant. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon any such Transfer, other than in a public offering pursuant to an
effective registration statement, shall bear the restrictive legend set forth
in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 8.2(b), unless the Company determines
that, or the Holder delivers to the Company an Opinion of Counsel to the
effect that, such legend is not required for the purposes of compliance with
the Securities Act. Holders of the Warrants or the Restricted Common Stock, as
the case may be, shall not be entitled to Transfer such Warrants or such
Restricted Common Stock except in accordance with this Section 8.1.
8.2 Restrictive Legends.
(a) Except as otherwise provided in this Section 8, each certificate for
Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
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<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS
OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT AND THE
RULES AND REGULATIONS THEREUNDER."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAW. THE WARRANT REPRESENTED BY THIS
CERTIFICATE AND THE STOCK ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS
OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES
AND REGULATIONS THEREUNDER AND THIS WARRANT."
8.3 Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1 upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2(a) and (b) shall terminate as to
any particular Warrant or shares of Restricted Common Stock when the Company
shall have received from the Holder thereof an Opinion of Counsel to the
effect that such legend is not required in order to ensure compliance with the
Securities Act. Whenever the restrictions imposed by Section 8.1 shall
terminate as to this Warrant, as herein above provided, the Holder hereof
shall be entitled to receive from the Company, at the expense of the Company,
a new Warrant with no restrictive legend, and none of the Warrants issued upon
registration of transfer, division or combination of, or in substitution for,
such Warrant or Warrants shall have any similar restrictive legend endorsed
thereon. Whenever the restrictions imposed by this Section shall terminate as
to any share of Restricted Common Stock, as herein above provided, the Holder
thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 8.2(a).
9. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of the Holder shall be a sufficient indemnity) and, in case of
mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, however, that, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company
for cancellation.
10. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in
this Warrant. Such Designated Office shall initially be the office of the
Company at 9933 Woods Drive, Skokie, Illinois 60077. The Company may from time
to time change the Designated Office to another office of the Company or its
agent within the United States by notice given to all registered Holders at
least ten (10) Business Days prior to the effective date of such change.
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<PAGE>
11. FINANCIAL AND BUSINESS INFORMATION
If at any time prior to the Expiration Date, the Company is not required to
file reports under Section 13 or 15(d) of the Exchange Act, the Company shall
furnish to Holders of Warrants the following:
(a) Quarterly Reports. As soon as available, but not later than 45 days
after the end of each quarterly accounting period, (A) a consolidated
balance sheet of the Company as of the end of such period and consolidated
statements of income, cash flows and changes in stockholders' equity for
such quarterly accounting period and for the period commencing at the end
of the previous fiscal year and ending with the end of such period, setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all prepared in
accordance with generally accepted accounting principles consistently
applied, subject to normal year-end adjustments and the absence of footnote
disclosure, and (B) a report by management of the Company of the operating
and financial highlights of the Company and its Subsidiaries for such
period, which shall include an analysis of the operations of the Company
and its Subsidiaries for such period.
(b) Annual Reports. As soon as available, but not later than 90 days
after the end of each fiscal year of the Company, audited consolidated
financial statements of the Company, which shall include statements of
income, cash flows and changes in stockholders' equity for such fiscal year
and a balance sheet as of the last day thereof, each prepared in accordance
with generally accepted accounting principles, consistently applied, and
accompanied by the report of a "Big 5" firm of independent certified public
accountants selected by the Company's Board of Directors (the
"Accountants"). The Company and its Subsidiaries shall maintain a system of
accounting sufficient to enable its Accountants to render the report
referred to in this Section 11(b).
(c) Miscellaneous. Promptly upon becoming available, each of the
following:
(i) notification in writing of the existence of any default under
any material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of their assets are bound;
(ii) upon request, copies of all reports prepared for or delivered
to the management of the Company or its Subsidiaries by its
accountants; and
(iii) upon request, any other routinely collected financial or other
information available to management of the Company or its Subsidiaries
(including, without limitation, routinely collected statistical data).
The Company shall comply with any written request from any Holder that the
Company not provide such Holder with any of the foregoing information for any
period of time.
12. DILUTION FEE
In the event any dividends are declared with respect to the Common Stock,
as of the record date established by the Board of Directors the Company shall
pay the Holder of this Warrant as a dilution fee (the "Dilution Fee") an
amount (whether in the form of cash, securities or other property) equal to
the amount (and in the form) of the dividends that such Holder would have
received had this Warrant been exercised for purchase of Common Stock
immediately prior to the record date of such dividend, such Dilution Fee to be
payable on the payment date of the dividend established by the Board of
Directors (the "Dilution Fee Payment Date"). The record date for any such
Dilution Fee shall be the record date for the applicable dividend, and any
such Dilution Fee shall be payable to the persons in whose name this Warrant
is registered at the close of business on the applicable record date.
13. MISCELLANEOUS
13.1 Nonwaiver. No course of dealing or any delay or failure to exercise
any right hereunder on the part of the Company or the Holder shall operate as
a waiver of such right or otherwise prejudice the rights, powers or remedies
of such person.
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<PAGE>
13.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or by reputable air
courier service with tracking capability and charges prepaid or by facsimile,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon
the exercise hereof, at its last known address appearing on the books of
the Company maintained for such purpose;
(b) if to the Company, at the Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) Business Days
after the same shall have been deposited in the United States mail, or one (1)
Business Day after the same shall have been sent by Federal Express or another
recognized overnight courier service.
13.3 Indemnification. If the Company fails to make, when due, any payments
provided for in this Warrant, the Company shall pay to the Holder hereof (a)
interest at the Agreed Rate on any amounts due and owing to such Holder and
(b) such further amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees and
expenses incurred by such Holder in collecting any amounts due hereunder. The
Company shall indemnify, save and hold harmless the Holder hereof and the
Holders of any Warrant Stock issued upon the exercise hereof from and against
any and all liability, loss, cost, damage, reasonable attorneys' and
accountants' fees and expenses, court costs and all other out-of-pocket
expenses incurred in connection with or arising from any default hereunder by
the Company. This indemnification provision shall be in addition to the rights
of such Holder or Holders to bring an action against the Company for breach of
contract based on such default hereunder.
13.4 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall
give rise to any liability of such Holder to pay the Exercise Price for any
Warrant Stock other than pursuant to an exercise of this Warrant or any
liability as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
13.5 Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to
being entitled to exercise its rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights provided
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
13.6 Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1
and 8.2, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and to the extent applicable, all Holders of shares of Warrant Stock
issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
13.7 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the
Company and the Majority Warrant Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may
be purchased upon exercise of such Warrant (before giving effect to any
adjustment as provided therein) without the written consent of the Holder
thereof.
13.8 Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
J-16
<PAGE>
13.9 Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
13.10 GOVERNING LAW; JURISDICTION. (a) IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT WITH RESPECT TO
THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE
HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION
OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY
OF THIS WARRANT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS PROVIDED PURSUANT TO SECTION 13.2, SUCH SERVICE TO
BECOME EFFECTIVE SEVEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE HOLDER OF THIS WARRANT TO SERVE PROCESS IN ANY OF THE MATTERS
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION. THE COMPANY HEREBY IRREVOCABLY WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS WARRANT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT HERETO.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
Peapod, Inc.
/s/ Andrew B. Parkinson
By: _________________________________
Name: Andrew B. Parkinson
Title: Chairman
Attest:
/s/ Dan Rabinowitz
By: _________________________________
Name: Dan Rabinowitz
Title: Secretary
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<PAGE>
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned Holder of this Warrant irrevocably exercises this Warrant
for the purchase of shares Common Stock of Peapod, Inc. and herewith
makes payment of the Warrant Price as follows (check one or more of the
following):
[_]by delivery herewith of a certified or official bank check in the amount
of such Warrant Price payable to the order of the Company;
[_]hereby instructs the Company to withhold a number of shares of Warrant
Stock then issuable upon exercise of this Warrant with an aggregate Fair
Value equal to such Warrant Price;
[_]herewith surrenders to the Company shares of Common Stock previously
acquired by the Holder with an aggregate Fair Value equal to such
Warrant Price;
[_]herewith surrenders to the Company dividends due and owing by the
Company to the Holder equal to such Warrant Price; or
[_]by providing to the Company goods or services with a fair value equal to
such Warrant Price;
all at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased
(and any securities or other property issuable upon such exercise) be issued
in the name of and delivered to whose address is
and, if such shares of Common Stock shall not include
all of the shares of Common Stock issuable as provided in this Warrant, that a
new Warrant of like tenor and date for the balance of the shares of Common
Stock issuable hereunder be delivered to the undersigned.
-------------------------------------
(Name of Registered Owner)
-------------------------------------
(Signature of Registered Owner)
-------------------------------------
(Street Address)
-------------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all of the rights
of the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
<TABLE>
<CAPTION>
Name and
Address
of No. of Shares of
Assignee Common Stock
- -------- ----------------
<S> <C>
</TABLE>
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer onto the books of Peapod, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: Print Name:
----------------
Signature: __________________________
Witness: ____________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
J-19
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS........................................................... 1
2. EXERCISE OF WARRANT................................................... 8
2.1 Manner of Exercise................................................. 8
2.2 Payment of Taxes................................................... 10
2.3 Fractional Shares.................................................. 10
2.4 Reduced Exercise Price............................................. 11
3. TRANSFER, DIVISION AND COMBINATION.................................... 11
3.1 Transfer........................................................... 11
3.2 Division and Combination........................................... 11
3.3 Expenses........................................................... 11
3.4 Maintenance of Books............................................... 11
4. ANTIDILUTION PROVISIONS............................................... 11
4.1 Upon Issuance of Common Stock...................................... 12
4.2 Upon Acquisition of Common Stock................................... 12
4.3 Provisions Applicable to Adjustments............................... 13
4.4 Upon Stock Dividends or Splits..................................... 14
4.5 Upon Combinations.................................................. 15
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers. 15
4.7 Deferral in Certain Circumstances.................................. 16
4.8 Other Anti-Dilution Provisions..................................... 16
4.9 Appraisal Procedure................................................ 16
4.10 Adjustment of Number of Shares Purchasable......................... 16
4.11 Exceptions......................................................... 17
4.12 Notice of Adjustment of Exercise Price............................. 17
4.13 Other Dilutive Events.............................................. 17
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF
EXPIRATION........................................................... 18
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY............................... 18
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS......... 19
7.1 Notices of Corporate Actions....................................... 19
7.2 Taking of Record................................................... 20
7.3 Closing of Transfer Books.......................................... 20
8. TRANSFER RESTRICTIONS................................................. 20
8.1 Restrictions on Transfers.......................................... 20
8.2 Restrictive Legends................................................ 21
8.3 Termination of Securities Law Restrictions......................... 21
9. LOSS OR MUTILATION.................................................... 22
10. OFFICE OF THE COMPANY................................................. 22
11. FINANCIAL AND BUSINESS INFORMATION.................................... 22
12. DILUTION FEE.......................................................... 23
</TABLE>
J-20
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
13. MISCELLANEOUS.......................................................... 24
13.1 Nonwaiver.......................................................... 24
13.2 Notice Generally................................................... 24
13.3 Indemnification.................................................... 24
13.4 Limitation of Liability............................................ 25
13.5 Remedies........................................................... 25
13.6 Successors and Assigns............................................. 25
13.7 Amendment.......................................................... 25
13.8 Severability....................................................... 25
13.9 Headings........................................................... 26
13.10 GOVERNING LAW; JURISDICTION........................................ 26
ANNEX A SUBSCRIPTION FORM
ANNEX B ASSIGNMENT FORM
</TABLE>
J-21
<PAGE>
Exhibit 99.11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANT
to Purchase Common Stock of
PEAPOD, INC.,
a Delaware corporation
----------------
Warrant No. [ ]
Original Issue Date: [ ], 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. DEFINITIONS......................................................... 1
2. EXERCISE OF WARRANT................................................. 6
2.1 Manner of Exercise.............................................. 6
2.2 Payment of Taxes................................................ 7
2.3 Fractional Shares............................................... 7
2.4 Reduced Exercise Price.......................................... 7
3. TRANSFER, DIVISION AND COMBINATION.................................. 7
3.1 Transfer........................................................ 7
3.2 Division and Combination........................................ 8
3.3 Expenses........................................................ 8
3.4 Maintenance of Books............................................ 8
4. ANTIDILUTION PROVISIONS............................................. 8
4.1 Upon Issuance of Common Stock................................... 8
4.2 Upon Acquisition of Common Stock................................ 8
4.3 Provisions Applicable to Adjustments............................ 9
4.4 Upon Stock Dividends or Splits.................................. 10
4.5 Upon Combinations............................................... 10
4.6 Upon Reclassifications, Reorganizations, Consolidations or
Mergers............................................................. 10
4.7 Deferral in Certain Circumstances............................... 11
4.8 Other Anti-Dilution Provisions.................................. 11
4.9 Appraisal Procedure............................................. 11
4.10 Adjustment of Number of Shares Purchasable..................... 11
4.11 Exceptions..................................................... 11
4.12 Notice of Adjustment of Exercise Price......................... 11
4.13 Other Dilutive Events.......................................... 12
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF
EXPIRATION......................................................... 12
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY............................. 12
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS....... 13
7.1 Notices of Corporate Actions.................................... 13
7.2 Taking of Record................................................ 13
7.3 Closing of Transfer Books....................................... 13
8. TRANSFER RESTRICTIONS............................................... 14
8.1 Restrictions on Transfers....................................... 14
8.2 Restrictive Legends............................................. 14
8.3 Termination of Securities Law Restrictions...................... 14
9. LOSS OR MUTILATION.................................................. 15
10. OFFICE OF THE COMPANY............................................... 15
11. FINANCIAL AND BUSINESS INFORMATION.................................. 15
12. DILUTION FEE........................................................ 16
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
13. MISCELLANEOUS........................................................ 16
13.1 Nonwaiver....................................................... 16
13.2 Notice Generally................................................ 16
13.3 Indemnification................................................. 16
13.4 Limitation of Liability......................................... 16
13.5 Remedies........................................................ 17
13.6 Successors and Assigns.......................................... 17
13.7 Amendment....................................................... 17
13.8 Severability.................................................... 17
13.9 Headings........................................................ 17
13.10 GOVERNING LAW; JURISDICTION.................................... 17
ANNEX A SUBSCRIPTION FORM
ANNEX B ASSIGNMENT FORM
</TABLE>
ii
<PAGE>
NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. THE WARRANTS REPRESENTED BY THIS
CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF,
AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES AND
REGULATIONS THEREUNDER AND THIS WARRANT.
Warrant No. [ ]
WARRANT
TO PURCHASE 32,894,270 SHARES OF COMMON STOCK
(SUBJECT TO ADJUSTMENT) OF
PEAPOD, INC.
THIS IS TO CERTIFY THAT KONINKLIJKE AHOLD N.V., (the "Purchaser") or its
registered assigns, is entitled, at any time prior to the Expiration Date
(such term, and certain other capitalized terms used herein being hereinafter
defined), to purchase from Peapod, Inc., a Delaware corporation (the
"Company"), 32,894,270 shares of the Common Stock of the Company (subject to
adjustment as provided herein), at a purchase price per share equal to $3.75
(the initial "Exercise Price"), subject to adjustment as provided herein.
1. DEFINITIONS
As used in this Warrant (including the Subscription Form), the following
terms have the respective meanings set forth below:
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, shall include (a) in
the case of a person who is an individual, (i) members of such specified
person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified person or members of such person's
immediate family as determined in accordance with the foregoing clause (i),
and (b) any person that directly or indirectly owns more than 5% of any class
of capital stock or other interest of such specified person. For the purposes
of this definition, "control," when used with respect to any person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "affiliated," "controlling" and "controlled" have
meanings correlative to the foregoing. Notwithstanding the foregoing, for
purposes of this Warrant, the Purchaser and its Affiliates shall not be deemed
Affiliates of the Company.
"After-Tax Basis" when referring to a payment that is required hereunder
(the "target amount"), shall mean a total payment (the "total amount") that,
after deduction of all federal, state and local taxes that are required to be
paid by the recipient in respect of the receipt or accrual of such total
amount, is equal to the target amount.
"Agreed Rate" shall mean the rate of interest announced publicly by
Citibank, N.A. in New York, New York, from time to time, as Citibank, N.A.'s
base rate.
"Appraisal Procedure" if applicable, shall mean the following procedure to
determine the fair market value, as to any security, for purposes of the
definition of "Fair Value" or the fair market value, as to any other property
(in either case, the "valuation amount"). The valuation amount shall be
determined in good faith by the Board
N-1
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of Directors; provided, however, that if the Majority Warrant Holders disagree
with such valuation amount within a reasonable period of time (not to exceed
twenty (20) days after notice thereof) the valuation amount shall be
determined by an investment banking firm of national recognition, which firm
shall be reasonably acceptable to the Board of Directors and the Majority
Warrant Holders. If the Board of Directors and the Majority Warrant Holders
are unable to agree upon an acceptable investment banking firm within ten (10)
days after the date either party proposed that one be selected, the investment
banking firm will be selected by an arbitrator located in New York City, New
York, selected by the American Arbitration Association (or if such
organization ceases to exist, the arbitrator shall be chosen by a court of
competent jurisdiction). The arbitrator shall select the investment banking
firm (within ten (10) days of his appointment) from a list, jointly prepared
by the Board of Directors and the Majority Warrant Holders, of not more than
six investment banking firms of national standing in the United States, of
which no more than three may be named by the Board of Directors and no more
than three may be named by the Majority Warrant Holders. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The
Board of Directors and the Majority Warrant Holders shall submit their
respective valuations and other relevant data to the investment banking firm,
and the investment banking firm shall as soon as practicable thereafter make
its own determination of the valuation amount. The final valuation amount for
purposes hereof shall be the average of the two valuation amounts closest
together, as determined by the investment banking firm, from among the
valuation amounts submitted by the Company and the Majority Warrant Holders
and the valuation amount calculated by the investment banking firm. The
determination of the final valuation amount by such investment-banking firm
shall be final and binding upon the parties. The Company shall pay the fees
and expenses of the investment banking firm and arbitrator (if any) used to
determine the valuation amount. If required by any such investment banking
firm or arbitrator, the Company shall execute a retainer and engagement letter
containing reasonable terms and conditions, including, without limitation,
customary provisions concerning the rights of indemnification and contribution
by the Company in favor of such investment banking firm or arbitrator and its
officers, directors, partners, employees, agents and Affiliates.
"Appraised Value" per share of Common Stock as of a date specified herein
shall mean the value of such a share as of such date as determined by an
investment bank of nationally recognized standing selected jointly by the
Majority Warrant Holders and the Company. If the Company and the Majority
Warrant Holders cannot agree on a mutually acceptable investment bank, then
the Company and the Majority Warrant Holders shall each choose one such
investment bank and the respective chosen firms shall jointly select a third
investment bank, which shall make the determination. The Company shall pay the
costs and fees of each such investment bank (including any such investment
bank selected by the Majority Warrant Holders), and the decision of the
investment bank making such determination of Appraised Value shall be final
and binding on the Company and all affected Holders of Warrants or Warrant
Stock. Such Appraised Value shall be determined as a pro rata portion of the
value of the Company taken as a whole, based on the higher of (A) the value
derived from a hypothetical sale of the entire Company as a going concern by a
willing seller to a willing buyer (neither acting under any compulsion) and
(B) the liquidation value of the entire Company. No discount shall be applied
on account of (i) any Warrants or Warrant Stock representing a minority
interest, (ii) any lack of liquidity of the Common Stock or the Warrants,
(iii) the fact that the Warrants or Warrant Stock may constitute "restricted
securities" for securities law purposes, (iv) the existence of any call option
or (v) any other grounds.
"Book Value" per share of Common Stock as of a date specified herein shall
mean the consolidated book value of the Company and its Subsidiaries as of
such date divided by the number of shares of Common Stock Outstanding on such
date. Such book value shall be determined in accordance with GAAP, except that
there shall be no reduction in such book value by reason of any amount that
may be required either as an offset to or reserve against retained earnings or
as a deduction from book value as a result of the issuance, existence,
anticipated exercise of, or anticipated cost to the Company of the repurchase
of, any of the Warrants.
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed.
N-2
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean the Common Stock of the Company, par value $0.01
per share, as constituted on the Original Issue Date, and any capital stock
into which such Common Stock may thereafter be changed, and shall also include
(i) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of any Common Stock upon any
reclassification thereof which is also not preferred as to dividends or
liquidation over any other class of stock of the Company and which is not
subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.6 hereof) received by or
distributed to the holders of Common Stock of the Company in the circumstances
contemplated by Section 4.6 hereof.
"Company" shall mean Peapod, Inc., a Delaware corporation, and any
successor corporation.
"Current Market Price" shall mean as of any specified date the average of
the Daily Market Price of one share of the Common Stock for the shorter of (x)
the 10 consecutive Business Days immediately preceding such date or (y) the
period commencing on the Business Day next following the first public
announcement by the Company of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 4 below and ending on such date.
"Daily Market Price" shall mean, with respect to one share of Common Stock
and for any Business Day: (i) if the Common Stock is then listed on a national
securities exchange or is authorized for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of
Common Stock, regular way, on such day on the principal stock exchange or
market system on which such Common Stock is then listed or authorized for
quotation, or, if no such sale takes place on such day, the average of the
closing bid and asked prices for one share of Common Stock on such day as
reported on such stock exchange or market system or (ii) if the Common Stock
is not then listed or authorized for quotation on any national securities
exchange or designated as a National Market System security on NASDAQ but is
traded over-the-counter, the average of the closing bid and asked prices for
one share of Common Stock as reported on NASDAQ or the Electronic Bulletin
Board or in the National Daily Quotation Sheets, as applicable.
"Designated Office" shall have the meaning set forth in Section 10 hereof.
"Dilution Fee" shall have the meaning set forth in Section 12 hereof.
"Dilution Fee Payment Date" shall have the meaning set forth in Section 12
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Securities" shall have the meaning set forth in Section 4.11
hereof.
"Exercise Date" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Notice" shall have the meaning set forth in Section 2.1 hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of Common Stock at any
date herein specified, the initial Exercise Price set forth in the preamble of
this Warrant, as adjusted from time to time pursuant to Sections 2.4 and 4
hereof.
N-3
<PAGE>
"Expiration Date" shall mean the tenth anniversary of the Original Issue
Date.
"Fair Value" per share of Common Stock as of any specified date shall mean
(A) if the Common Stock is publicly traded on such date, the Current Market
Price per share or (B) if the Common Stock is not publicly traded on such
date, (1) the fair market value per share of Common Stock as determined in
good faith by the Board of Directors of the Company and set forth in a written
notice to each Holder or (2) if the Majority Warrant Holders object in writing
to such price as determined by the Board of Directors within thirty (30) days
after receiving notice of same, the Appraised Value per share as of such date.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to
time, consistently applied.
"Holder" shall mean (a) with respect to this Warrant, the person in whose
name the Warrant set forth herein is registered on the books of the Company
maintained for such purpose and (b) with respect to any other Warrant or
shares of Warrant Stock, the person in whose name such Warrant or Warrant
Stock is registered on the books of the Company maintained for such purpose.
"HSR Approval" shall mean the expiration of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
applicable rules and regulations and any similar state acts applicable to the
issuance of Series B Preferred Stock as contemplated by the Purchase
Agreement.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of any
jurisdiction).
"Majority Warrant Holders" shall mean, with respect to a given
determination, the Holders of Warrants, the holders of the Previously Issued
Warrants and the holders of the Warrants (Credit Agreement) representing the
right to acquire more than fifty percent (50%) of the Common Stock underlying
all of the then outstanding Warrants, the Previously Issued Warrants and the
Warrants (Credit Agreement).
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting
system.
"Opinion of Counsel" shall mean a written opinion of outside counsel
experienced in Securities Act matters chosen by the Holder of this Warrant or
Warrant Stock issued upon the exercise hereof and reasonably acceptable to the
Company.
"Original Issue Date" shall mean the date on which this Warrant was issued,
as set forth on the cover page of this Warrant.
"Outside Date" shall mean the date that is one hundred and twenty (120)
days after the date hereof or, if the Holder exercises this Warrant or the
Warrants (Credit Agreement) and as a direct result of such exercise, the
Stockholders Meeting (as defined in the Purchase Agreement) is delayed, one
hundred and twenty (120) days plus the number of days of such delay after the
date hereof.
N-4
<PAGE>
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any Subsidiary, and shall include all shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock" shall mean convertible preferred stock of the Company.
"Previously Issued Warrants" shall mean the Warrant dated April 10, 2000
issued by the Company to the Purchaser, and all warrants issued upon transfer,
division or combination of, or in substitution for, such warrant or any other
such warrant.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of April
14, 2000, by and between the Company and the Purchaser.
"Restricted Common Stock" shall mean shares of Common Stock which are, or
which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 8.2(a)
hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series B Preferred Stock" shall mean the Series B Preferred Stock to be
authorized pursuant to the Certificate of Designation in the form attached as
Exhibit I to the Purchase Agreement.
"Share Withholding Option" shall have the meaning set forth in Section
2.1(c) hereof.
"Stockholder Approval" shall mean the approval by the Company's
stockholders of the issuance of the shares of Series B Preferred Stock and the
Warrants, and the other transactions contemplated pursuant to the Purchase
Agreement.
"subsidiary" shall mean, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such person, by a subsidiary of such person, or by such person and
one or more subsidiaries of such person, (b) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, or (c) any other person (other than a
corporation) in which such person, a subsidiary of such person or such person
and one or more subsidiaries of such person, directly or indirectly, at the
date of determination thereof, has (i) at least a majority ownership interest,
(ii) the power to elect or direct the election of the directors or other
governing body of such person, or (iii) the power to direct or cause the
direction of the affairs or management of such person. For purposes of this
definition, a person is deemed to own any capital stock or other ownership
interest if such person has the right to acquire such capital stock or other
ownership interest, whether through the exercise of any purchase option,
conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Transfer" shall mean any disposition of any Warrant or Warrant Stock or of
any interest therein, which would constitute a "sale" thereof or a transfer of
a beneficial interest therein within the meaning of the Securities Act.
"Warrant Price" shall mean an amount equal to (i) the number of shares of
Common Stock being purchased upon exercise of all or a portion of this Warrant
pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of
the date of such exercise.
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"Warrants" shall mean this Warrant and all warrants issued upon transfer,
division or combination of, or in substitution for, this Warrant or any other
such Warrant. All Warrants shall at all times be identical as to terms and
conditions, except as to the number of shares of Common Stock for which they
may be exercised and their date of issuance.
"Warrants (Credit Agreement)" shall mean the Warrant (Credit Agreement)
issued by the Company to the Purchaser pursuant to the Purchase Agreement, and
all warrants issued upon transfer, division or combination of, or in
substitution for, such warrant or any other such warrant.
"Warrant Stock" generally shall mean the shares of Common Stock issued,
issuable or both (as the context may require) upon the exercise of Warrants.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. (a) From and after the Original Issue Date and
until 5:00 P.M., New York time, on the Expiration Date, the Holder of this
Warrant may from time to time exercise this Warrant, on any Business Day, for
all or any part of the number of shares of Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, the Holder shall (i)
deliver to the Company at its Designated Office a written notice of the
Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of
Common Stock to be purchased, together with this Warrant and (ii) pay to the
Company the Warrant Price in accordance with Section 2.1(c) (the date on which
both such delivery and payment shall have first taken place being hereinafter
sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be
in the form of the subscription form appearing at the end of this Warrant as
Annex A, duly executed by the Holder or its duly authorized agent or attorney.
(b) Upon receipt by the Company of such Exercise Notice, Warrant and
payment (if applicable), the Company shall, as promptly as practicable, and in
any event within five (5) Business Days thereafter, execute (or cause to be
executed) and deliver (or cause to be delivered) to the Holder a certificate
or certificates representing the aggregate number of full shares of Common
Stock issuable upon such exercise, together with cash in lieu of any fraction
of a share, as hereafter provided. The stock certificate or certificates so
delivered shall be, to the extent possible, in such denomination or
denominations as the exercising Holder shall reasonably request in the
Exercise Notice and shall be registered in the name of the Holder or, subject
to Section 8 below, such other name as shall be designated in the Exercise
Notice. This Warrant shall be deemed to have been exercised, and such stock
certificate or certificates shall be deemed to have been issued, and the
Holder or any other person so designated to be named therein shall be deemed
to have become a holder of record of the shares evidenced by such stock
certificate or certificates for all purposes, as of the Exercise Date.
(c) Payment of the Warrant Price shall be made at the option of the Holder
by one or more of the following methods: (i) by delivery of a certified or
official bank check in the amount of such Warrant Price payable to the order
of the Company, (ii) by instructing the Company to withhold a number of shares
of Warrant Stock then issuable upon exercise of this Warrant with an aggregate
Fair Value equal to such Warrant Price (the "Share Withholding Option"), (iii)
by surrendering to the Company shares of Common Stock previously acquired by
the Holder with an aggregate Fair Value equal to such Warrant Price, (iv) by
surrendering to the Company dividends due and owing by the Company to the
Holder equal to such Warrant Price, or (v) by providing to the Company goods
or services with a fair value as specified in any contract pursuant to which
such goods or services are provided or, if not specified, as determined by the
Board of Directors equal to such Warrant Price (or if the Majority Warrant
Holders object in writing to such determination within thirty (30) days after
receiving notice of same, as determined by an independent expert of national
recognition in the relevant industry, which expert shall be reasonably
acceptable to the Board of Directors and the Majority Warrant Holders, and if
the Board of Directors and the Majority Warrant Holders are unable to agree
upon an acceptable independent expert within ten (10) days after the date
either party proposed that one be selected, the independent expert will be
N-6
<PAGE>
selected by an arbitrator located in New York City, New York, selected by the
American Arbitration Association (or if such organization ceases to exist, the
arbitrator shall be chosen by a court of competent jurisdiction)). In the
event of any withholding of Warrant Stock or surrender of Common Stock
pursuant to clause (ii) or (iii) above where the number of shares whose Fair
Value is equal to the Warrant Price is not a whole number, the number of
shares withheld by or surrendered to the Company shall be rounded up to the
nearest whole share and the Company shall make a cash payment to the Holder
based on the incremental fraction of a share being so withheld by or
surrendered to the Company in an amount determined in accordance with Section
2.3 hereof.
(d) If this Warrant shall have been exercised in part, the Company shall,
at the time of delivery of the certificate or certificates representing the
shares of Common Stock being issued, deliver to the Holder a new Warrant
evidencing the rights of the Holder to purchase the unpurchased shares of
Common Stock called for by this Warrant. Such new Warrant shall in all other
respects be identical to this Warrant. Notwithstanding any provision herein to
the contrary, the Company shall not be required to register shares of Common
Stock in the name of any person who acquired this Warrant (or part hereof) or
any shares of Warrant Stock otherwise than in accordance with this Warrant.
(e) All Warrants delivered for exercise shall be canceled by the Company.
(f) On the date of exercise of the Warrants the Company shall use
commercially reasonable efforts to satisfy all the conditions set forth in
Section 7.2 of the Purchase Agreement other than the condition set forth in
Section 7.2(n), provided that if the Company shall have used its commercially
reasonable efforts to satisfy such conditions and such conditions shall not
have been satisfied, the Holder shall have no rights or remedies arising as a
result of such failure.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the exercise
of this Warrant pursuant to the terms hereof shall be validly issued, fully
paid and nonassessable, issued without violation of any preemptive rights and
free and clear of all Liens (other than any created by actions of the Holder).
The Company shall pay all expenses in connection with, and all issuance,
transfer, stamp and other similar taxes and other governmental charges that
may be imposed with respect to, the issue or delivery thereof, unless such tax
or charge is imposed by law upon the Holder, in which case such taxes or
charges shall be paid by the Holder and the Company shall reimburse the Holder
therefor on an After-Tax Basis. The Company shall not, however, be required to
pay any tax or governmental charge which may be payable in respect of any
Transfer involved in the issue and delivery of shares of Common Stock issuable
upon exercise of this Warrant in a name other than that of the Holder of the
Warrants to be exercised, and no such issue or delivery shall be made unless
and until the person requesting such issue has paid to the Company the amount
of any such tax, or has established to the satisfaction of the Company that
such tax has been paid.
2.3 Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share that the Holder of one or more Warrants, the rights under
which are exercised in the same transaction, would otherwise be entitled to
purchase upon such exercise, the Company shall pay to such Holder an amount in
cash equal to such fraction multiplied by the Fair Value.
2.4 Reduced Exercise Price. On the Outside Date, in the event that the HSR
Approval or the Stockholders Approval shall not have been obtained, the
Exercise Price shall be reduced to an amount equal to 50% of the Exercise
Price in effect immediately prior to the Outside Date.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Section 8 hereof, each transfer of
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the Designated Office, together with a written
assignment of this Warrant in the form of Annex B hereto duly executed by the
Holder or its agent or attorney and funds sufficient
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to pay any transfer taxes described in Section 2.2 in connection with the
making of such transfer. Upon such surrender and delivery and, if required,
such payment, the Company shall, subject to Section 8, execute and deliver a
new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned and this Warrant shall promptly be cancelled. A Warrant, if properly
assigned in compliance with Section 8, may be exercised by the new Holder for
the purchase of shares of Common Stock without having a new Warrant issued.
3.2 Division and Combination. Subject to compliance with the applicable
provisions of this Warrant including, without limitation, Section 8, this
Warrant may be divided or combined with other Warrants upon presentation
hereof at the Designated Office, together with a written notice specifying the
names and denominations in which new Warrants are to be issued, signed by the
Holder or its agent or attorney. Subject to compliance with the applicable
provisions of this Warrant as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant
or Warrants in exchange for the Warrant or Warrants to be divided or combined
in accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than pursuant to Section 2.2 hereof) any new Warrant or
Warrants required to be issued under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at the Designated
Office, books for the registration and transfer of the Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this Warrant is exercisable
and the Exercise Price shall be subject to adjustment from time to time as set
forth in this Section 4.
4.1 Upon Issuance of Common Stock. If the Company shall, at any time or
from time to time after the Original Issuance Date, issue any shares of Common
Stock, options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock, or options
to purchase or rights to subscribe for such convertible or exchangeable
securities, other than shares of Series B Preferred Stock issued to the
Purchaser or Excluded Securities, without consideration or for consideration
per share less than either (a) the Exercise Price or (b) the Fair Value of the
Common Stock, in each case, in effect immediately prior to the issuance of
such Common Stock or securities, then such Exercise Price shall forthwith be
adjusted to a price equal to the lower of (x) the Exercise Price in effect
immediately prior thereto, or (y) the lowest consideration per share for which
such shares of Common Stock or such options, rights or convertible or
exchangeable securities are issued (plus the additional consideration required
to be paid upon exercise, exchange or conversion of such options, rights or
convertible or exchangeable securities).
4.2 Upon Acquisition of Common Stock. If the Company or any Subsidiary
shall, at any time or from time to time after the Original Issuance Date,
directly or indirectly, redeem, purchase or otherwise acquire (a) any shares
of Common Stock for a consideration per share greater than the Fair Value of
shares of Common Stock immediately prior to such event, or (b) any options to
purchase or rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock (other than shares of Series
B Preferred Stock issued to the Purchaser that are redeemed according to their
terms), or options to purchase or rights to subscribe for such convertible or
exchangeable securities, in either case, for a consideration per share of
Common Stock for which such options, rights or convertible or exchangeable
securities are exercisable, convertible or exchangeable, that is greater than
the amount, if any, by which the Fair Value of shares of Common Stock
immediately prior to such event exceeds the per share exercise, exchange,
subscription, conversion or purchase price applicable to such options, rights
or convertible or exchangeable securities, then, in the case of (a) or (b),
the Exercise Price shall forthwith be lowered to a price equal to the price
obtained by multiplying:
(i) the Exercise Price in effect immediately prior to such event, by
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(ii) a fraction of which (x) the denominator shall be the Fair Value per
share of Common Stock immediately prior to such event and (y) the numerator
shall be the result of dividing:
(A) (1) the product of (a) the number of shares of Common Stock
outstanding on a fully-diluted basis and (b) the Fair Value per share
of Common Stock, in each case, immediately prior to such event, minus
(2) the aggregate consideration paid by the Company in such event, by
(B) the number of shares of Common Stock outstanding on a fully-
diluted basis immediately prior to such event, minus the number of
shares of Common Stock purchased or acquired, or for which the options,
rights or convertible or exchangeable securities acquired were
exercisable, convertible or exchangeable.
For purposes of this Section 4, "fully diluted basis" shall be determined
in accordance with the treasury method of GAAP and Section 4.3.
4.3 Provisions Applicable to Adjustments. For the purposes of any
adjustment of an Exercise Price pursuant to Sections 4.1 and 4.2, the
following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash in a public
offering or private placement, the consideration shall be deemed to be the
amount of cash paid therefor before deducting therefrom any discounts,
commissions or placement fees payable by the Company to any underwriter or
placement agent in connection with the issuance and sale thereof.
(ii) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the Fair Value thereof as determined in accordance with the
Appraisal Procedure.
(iii) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, except for
shares of Series B Preferred Stock issued to the Purchaser or options to
acquire Excluded Securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in
subparagraphs (i) and (ii) above), if any, received by the Company upon
the issuance of such options or rights plus the minimum purchase price
provided in such options or rights for the Common Stock covered
thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange of any such convertible
or exchangeable securities or upon the exercise of options to purchase
or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities, options, or rights were issued
and for a consideration equal to the consideration received by the
Company for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received
by the Company upon the conversion or exchange of such securities or
the exercise of any related options or rights (the consideration in
each case to be determined in the manner provided in paragraphs (i) and
(ii) above);
(C) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights or
conversions of or exchanges for such securities, other than a change
resulting from the antidilution provisions thereof, the applicable
Exercise Price shall forthwith be readjusted to such Exercise Price as
would have been obtained had the adjustment made upon the issuance of
such options, rights or securities not converted prior to such change
or options or rights related to such securities not converted prior to
such change been made upon the basis of such change;
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(D) upon the expiration of any such options or the termination of
any rights, convertible securities or exchangeable securities, the
applicable Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been in effect at the time of such
expiration or termination had such options, rights, convertible
securities or exchangeable securities, to the extent outstanding
immediately prior to such expiration or termination, never been issued;
and
(E) no further adjustment of the Exercise Price adjusted upon the
issuance of any such options, rights, convertible securities or
exchangeable securities shall be made as a result of the actual
issuance of Common Stock on the exercise of any such rights or options
or any conversion or exchange of any such securities.
4.4 Upon Stock Dividends or Splits. If, at any time after the Original
Issuance Date, the number of shares of Common Stock outstanding is increased
by a stock dividend payable in shares of Common Stock or by a subdivision or
split-up of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, or to be affected by such subdivision or split-up, the Exercise
Price shall be appropriately decreased so that the number of shares of Common
Stock purchasable on exercise of the Warrants shall be increased in proportion
to such increase in outstanding shares.
4.5 Upon Combinations. If, at any time after the Original Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, following the record date to determine shares affected by
such combination, the Exercise Price shall be appropriately increased so that
the number of shares of Common Stock purchasable on exercise of each of the
Warrants shall be decreased in proportion to such decrease in outstanding
shares.
4.6 Upon Reclassifications, Reorganizations, Consolidations or Mergers. In
the event of any capital reorganization of the Company, any reclassification
of the stock of the Company (other than a change in par value or from par
value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), any sale or
transfer to another Person of the property of the Company as an entirety or
substantially as an entirety, or any consolidation or merger of the Company
with or into another corporation (where the Company is not the surviving
corporation or where there is a change in or distribution with respect to the
Common Stock), each Warrant shall after such reorganization, reclassification,
consolidation, transfer or merger be exercisable for the kind and number of
shares of stock or other securities or property of the Company or of the
successor corporation resulting from such consolidation, transfer or surviving
such merger, if any, to which the holder of the number of shares of Common
Stock deliverable (immediately prior to the time of such reorganization,
reclassification, consolidation or merger) upon exercise of such Warrant would
have been entitled upon such reorganization, reclassification, consolidation,
transfer or merger. The provisions of this clause shall similarly apply to
successive reorganizations, reclassifications, consolidations, transfers, or
mergers.
Notwithstanding anything contained in this Agreement to the contrary, in
the event that the Company shall effect any of the transactions described in
this Section 4.6, each person (other than the Company) which may be required
to issue a new Warrant as provided above shall assume by written instrument
delivered to, and reasonably satisfactory to, the Majority Warrant Holders (i)
the obligations of the Company under this Agreement (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing
obligations of the Company under this Agreement) and (ii) the obligation to
deliver to all Holders such new Warrants as, in accordance with the foregoing
provisions of this Section 4.6, such Holders may be entitled to receive, and
such Person shall have similarly delivered to such Holders an opinion of
counsel for such Person, which counsel shall be reasonably satisfactory to the
Majority Warrant Holders, stating that this Agreement shall thereafter
continue in full force and effect and that the terms hereof (including,
without limitation, all of the provisions of this Section 4.6, shall be
applicable to the stock, securities, cash or property which such person may be
required to deliver upon any exercise of any of the Warrants or such new
Warrant or the exercise of any rights pursuant hereto.
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4.7 Deferral in Certain Circumstances. In any case in which the provisions
of this Section 4 shall require that an adjustment shall become effective
immediately after a record date of an event, the Company may defer until the
occurrence of such event issuing to the Holder of any Warrant exercised after
such record date and before the occurrence of such event the shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event and issuing to such Holder only the shares of capital stock issuable
upon such exercise before giving effect to such adjustments; provided,
however, that the Company shall deliver to such Holder an appropriate
instrument or due bills evidencing such Holder's right to receive such
additional shares.
4.8 Other Anti-Dilution Provisions. If the Company has issued or issues any
securities on or after the Original Issuance Date containing provisions
protecting the holder or holders thereof against dilution in any manner more
favorable to such holder or holders thereof than those set forth in this
Section 4, such provisions (or any more favorable portion thereof) shall be
deemed to be incorporated herein as if fully set forth in this Warrant and, to
the extent inconsistent with any provision of this Warrant, shall be deemed to
be substituted therefor.
4.9 Appraisal Procedure. In any case in which the provisions of this
Section 4 shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Exercise Price, the Company may
defer until the completion of the Appraisal Procedure and the determination of
the adjustment (1) issuing to the Holder of any Warrant exercised after the
date of the event that requires the adjustment and before completion of the
Appraisal Procedure and the determination of the adjustment, the shares of
capital stock issuable upon such exercise by reason of the adjustment required
by such event and issuing to such Holder only the shares of capital stock
issuable upon such exercise before giving effect to such adjustment and (2)
paying to such Holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 2.3 above; provided, however, that the
Company shall deliver to such holder an appropriate instrument or due bills
evidencing such holder's right to receive such additional shares or cash.
4.10 Adjustment of Number of Shares Purchasable. Upon any adjustment of the
Exercise Price as provided in Section 4.1, 4.2, 4.4, 4.5 or 4.6, the Holders
of the Warrants shall thereafter be entitled to purchase upon the exercise
thereof, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof
by the Exercise Price resulting from such adjustment.
4.11 Exceptions. Section 4 shall not apply to (i) any issuance of Common
Stock upon exercise of any options or warrants outstanding on April 14, 2000,
(ii) the issuance of shares of Common Stock, in an aggregate amount not to
exceed 500,000 shares to McLane Group, L.P., (iii) the issuance of shares of
Common Stock, in an aggregate amount not to exceed 2,600,000 shares upon
exercise of options or warrants that have been approved by the Board of
Directors, or any issuance of such options or warrants, (iv) shares of Common
Stock issued pursuant to the Company's current employee stock purchase plan in
an amount not to exceed 114,000 shares (the securities referred to in clauses
(i), (ii), (iii) and (iv) being collectively referred to as "Excluded
Securities"), (iv) any issuance of Common Stock in an underwritten public
offering at a price per share at least equal to the Exercise Price then in
effect if the underwriting discount does not exceed 7%, or (v) the issuance of
Series B Preferred Stock to the Purchaser pursuant to the Purchase Agreement.
4.12 Notice of Adjustment of Exercise Price. Whenever the Exercise Price is
adjusted as herein provided:
(i) the Company shall compute the adjusted Exercise Price in accordance
with this Section 4 and shall prepare a certificate signed by the Company's
independent accounting firm, setting forth the adjusted Exercise Price and
showing in reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed at each office or agency
maintained for such purpose or exercise of Warrants; and
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(ii) a notice stating that the Exercise Price has been adjusted and
setting forth the adjusted Exercise Price shall forthwith be prepared by
the Company, and as soon as practicable after it is prepared, such notice
shall be mailed by the Company at its expense to all Holders at their last
addresses as they shall appear in the stock register.
4.13 Other Dilutive Events. If any event occurs as to which the provisions
of this Section 4 are not strictly applicable or, if strictly applicable,
would not fairly and adequately protect the conversion rights of the Holders
in accordance with the essential intent and principles of such provisions,
then the Board of Directors shall make such adjustments in the application of
such provisions, in accordance with such essential intent and principles, as
shall be reasonably necessary to protect such purchase rights as aforesaid;
provided that no such adjustment will increase the Exercise Price or decrease
the number of shares of Common Stock obtainable as otherwise determined
pursuant to this Section 4.
5. NO IMPAIRMENT; REGULATORY COMPLIANCE AND COOPERATION; NOTICE OF EXPIRATION
(a) The Company shall not by any action, including, without limitation,
amending its charter documents or through any reorganization,
reclassification, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other similar voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company shall take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common Stock
upon the exercise of this Warrant, free and clear of all Liens, and shall use
its best efforts to obtain all such authorizations, exemptions or consents
from any public regulatory body having jurisdiction thereof as may be
necessary to enable the Company to perform its obligations under this Warrant.
(b) The Company shall deliver to each Holder of Warrants on or before six
months prior to the tenth anniversary of the Original Issue Date, but no
earlier than nine months prior to the tenth anniversary of the Original Issue
Date, advance notice of such tenth anniversary and of the anticipated
Expiration Date. If the Company fails to fulfill in a timely manner the notice
obligation set forth in the prior sentence, it shall provide such notice as
soon as possible thereafter.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Original Issue Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of the Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock issuable pursuant to the terms hereof, when issued upon
exercise of this Warrant with payment therefor in accordance with the terms
hereof, shall be duly and validly issued and fully paid and nonassessable, not
subject to preemptive rights and shall be free and clear of all Liens. Before
taking any action that would result in an adjustment in the number of shares
of Common Stock for which this Warrant is exercisable or in the Exercise
Price, the Company shall obtain all such authorizations or exemptions thereof,
or consents thereto, as may be necessary from any public regulatory body or
bodies having jurisdiction over such action. If any shares of Common Stock
required to be reserved for issuance upon exercise of Warrants require
registration or qualification with any governmental authority under any
federal or state law (other than under the Securities Act or any state
securities law) before such shares may be so issued, the Company will in good
faith and as expeditiously as possible and at its expense endeavor to cause
such shares to be duly registered.
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7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS
7.1 Notices of Corporate Actions.
In case:
(a) the Company shall take an action or an event shall occur, that would
require an Exercise Price adjustment pursuant to Section 4; or
(b) the Company shall grant to the holders of its Common Stock rights or
warrants to subscribe for or purchase any shares of capital stock of any
class; or
(c) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or
of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(e) the Company or any Subsidiary shall commence a tender offer for all
or a portion of the outstanding shares of Common Stock (or shall amend any
such tender offer to change the maximum number of shares being sought or
the amount or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained
for such purpose, and shall cause to be mailed to all Holders of Warrants at
their last addresses as they shall appear in the stock register, at least 30
days prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, share
exchange, sale, transfer, dissolution, liquidation or winding up, or (z) the
date on which such tender offer commenced, the date on which such tender offer
is scheduled to expire unless extended, the consideration offered and the
other material terms thereof (or the material terms of the amendment thereto).
Such notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Exercise
Price and the number and kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon exercise of the Warrants. Neither the failure to
give any such notice nor any defect therein shall affect the legality or
validity of any action described in clauses (a) through (e) of this Section
7.1.
7.2 Taking of Record. In the case of all dividends or other distributions
by the Company to the holders of its Common Stock with respect to which any
provision of any Section hereof refers to the taking of a record of such
holders, the Company will in each such case take such a record and will take
such record as of the close of business on a Business Day.
7.3 Closing of Transfer Books. The Company shall not at any time, except
upon dissolution, liquidation or winding up of the Company, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
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8. TRANSFER RESTRICTIONS
The Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 8.
8.1 Restrictions on Transfers. Neither this Warrant nor any shares of
Restricted Common Stock issued upon the exercise hereof shall be transferred,
sold, assigned, exchanged, mortgaged, pledged, hypothecated or otherwise
disposed of or encumbered except in compliance with the provisions of the
Securities Act, the rules and regulations thereunder and this Warrant. Each
certificate, if any, evidencing such shares of Restricted Common Stock issued
upon any such Transfer, other than in a public offering pursuant to an
effective registration statement, shall bear the restrictive legend set forth
in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the
restrictive legend set forth in Section 8.2(b), unless the Company determines
that, or the Holder delivers to the Company an Opinion of Counsel to the
effect that, such legend is not required for the purposes of compliance with
the Securities Act. Holders of the Warrants or the Restricted Common Stock, as
the case may be, shall not be entitled to Transfer such Warrants or such
Restricted Common Stock except in accordance with this Section 8.1.
8.2 Restrictive Legends.
(a) Except as otherwise provided in this Section 8, each certificate for
Warrant Stock initially issued upon the exercise of this Warrant, and each
certificate for Warrant Stock issued to any subsequent transferee of any such
certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS
OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT AND THE
RULES AND REGULATIONS THEREUNDER."
(b) Except as otherwise provided in this Section 8, each Warrant shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"NEITHER THIS WARRANT NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE SECURITIES LAW. THE WARRANT REPRESENTED BY THIS
CERTIFICATE AND THE STOCK ISSUABLE UPON EXERCISE HEREOF MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OF
OTHERWISE DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS
OF, AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE ACT, THE RULES
AND REGULATIONS THEREUNDER AND THIS WARRANT."
8.3 Termination of Securities Law Restrictions. Notwithstanding the
foregoing provisions of this Section 8, the restrictions imposed by Section
8.1 upon the transferability of the Warrants and the Restricted Common Stock
and the legend requirements of Section 8.2(a) and (b) shall terminate as to
any particular Warrant or shares of Restricted Common Stock when the Company
shall have received from the Holder thereof an Opinion of Counsel to the
effect that such legend is not required in order to ensure compliance with the
Securities Act. Whenever the restrictions imposed by Section 8.1 shall
terminate as to this Warrant, as herein above provided, the Holder hereof
shall be entitled to receive from the Company, at the expense of the Company,
a new Warrant with no restrictive legend, and none of the Warrants issued upon
registration of transfer, division or combination of, or in substitution for,
such Warrant or Warrants shall have any similar restrictive legend endorsed
thereon. Whenever the restrictions imposed by this Section shall terminate as
to any share of Restricted Common Stock, as herein above provided, the Holder
thereof shall be entitled to receive from the Company, at the Company's
expense, a new certificate representing such Common Stock not bearing the
restrictive legend set forth in Section 8.2(a).
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9. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and an indemnity reasonably satisfactory to it (it
being understood that the written indemnification agreement of or affidavit of
loss of the Holder shall be a sufficient indemnity) and, in case of
mutilation, upon surrender and cancellation hereof, the Company will execute
and deliver in lieu hereof a new Warrant of like tenor to such Holder;
provided, however, that, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company
for cancellation.
10. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency, which may be the principal executive offices of
the Company (the "Designated Office"), where the Warrants may be presented for
exercise, registration of transfer, division or combination as provided in
this Warrant. Such Designated Office shall initially be the office of the
Company at 9933 Woods Drive, Skokie, Illinois 60077. The Company may from time
to time change the Designated Office to another office of the Company or its
agent within the United States by notice given to all registered Holders at
least ten (10) Business Days prior to the effective date of such change.
11. FINANCIAL AND BUSINESS INFORMATION
If at any time prior to the Expiration Date, the Company is not required to
file reports under Section 13 or 15(d) of the Exchange Act, the Company shall
furnish to Holders of Warrants the following:
(a) Quarterly Reports. As soon as available, but not later than 45 days
after the end of each quarterly accounting period, (A) a consolidated balance
sheet of the Company as of the end of such period and consolidated statements
of income, cash flows and changes in stockholders' equity for such quarterly
accounting period and for the period commencing at the end of the previous
fiscal year and ending with the end of such period, setting forth in each case
in comparative form the corresponding figures for the corresponding period of
the preceding fiscal year, all prepared in accordance with generally accepted
accounting principles consistently applied, subject to normal year-end
adjustments and the absence of footnote disclosure, and (B) a report by
management of the Company of the operating and financial highlights of the
Company and its Subsidiaries for such period, which shall include an analysis
of the operations of the Company and its Subsidiaries for such period.
(b) Annual Reports. As soon as available, but not later than 90 days after
the end of each fiscal year of the Company, audited consolidated financial
statements of the Company, which shall include statements of income, cash
flows and changes in stockholders' equity for such fiscal year and a balance
sheet as of the last day thereof, each prepared in accordance with generally
accepted accounting principles, consistently applied, and accompanied by the
report of a "Big 5" firm of independent certified public accountants selected
by the Company's Board of Directors (the "Accountants"). The Company and its
Subsidiaries shall maintain a system of accounting sufficient to enable its
Accountants to render the report referred to in this Section 11(b).
(c) Miscellaneous. Promptly upon becoming available, each of the following:
(i) notification in writing of the existence of any default under any
material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which any of their assets are bound;
(ii) upon request, copies of all reports prepared for or delivered to
the management of the Company or its Subsidiaries by its accountants; and
(iii) upon request, any other routinely collected financial or other
information available to management of the Company or its Subsidiaries
(including, without limitation, routinely collected statistical data).
N-15
<PAGE>
The Company shall comply with any written request from any Holder that the
Company not provide such Holder with any of the foregoing information for any
period of time.
12. DILUTION FEE
In the event any dividends are declared with respect to the Common Stock,
as of the record date established by the Board of Directors the Company shall
pay the Holder of this Warrant as a dilution fee (the "Dilution Fee") an
amount (whether in the form of cash, securities or other property) equal to
the amount (and in the form) of the dividends that such Holder would have
received had this Warrant been exercised for purchase of Common Stock
immediately prior to the record date of such dividend, such Dilution Fee to be
payable on the payment date of the dividend established by the Board of
Directors (the "Dilution Fee Payment Date"). The record date for any such
Dilution Fee shall be the record date for the applicable dividend, and any
such Dilution Fee shall be payable to the persons in whose name this Warrant
is registered at the close of business on the applicable record date.
13. MISCELLANEOUS
13.1 Nonwaiver. No course of dealing or any delay or failure to exercise
any right hereunder on the part of the Company or the Holder shall operate as
a waiver of such right or otherwise prejudice the rights, powers or remedies
of such person.
13.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or communication hereunder to be made pursuant to the
provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered in person with receipt acknowledged or by reputable air
courier service with tracking capability and charges prepaid or by facsimile,
addressed as follows:
(a) if to any Holder of this Warrant or of Warrant Stock issued upon the
exercise hereof, at its last known address appearing on the books of the
Company maintained for such purpose;
(b) if to the Company, at the Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval, declaration, delivery or other communication hereunder
shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) Business Days
after the same shall have been deposited in the United States mail, or one (1)
Business Day after the same shall have been sent by Federal Express or another
recognized overnight courier service.
13.3 Indemnification. If the Company fails to make, when due, any payments
provided for in this Warrant, the Company shall pay to the Holder hereof (a)
interest at the Agreed Rate on any amounts due and owing to such Holder and
(b) such further amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees and
expenses incurred by such Holder in collecting any amounts due hereunder. The
Company shall indemnify, save and hold harmless the Holder hereof and the
Holders of any Warrant Stock issued upon the exercise hereof from and against
any and all liability, loss, cost, damage, reasonable attorneys' and
accountants' fees and expenses, court costs and all other out-of-pocket
expenses incurred in connection with or arising from any default hereunder by
the Company. This indemnification provision shall be in addition to the rights
of such Holder or Holders to bring an action against the Company for breach of
contract based on such default hereunder.
13.4 Limitation of Liability. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no
enumeration herein of the rights or privileges of the Holder hereof, shall
give rise to any liability of such Holder to pay the Exercise Price for any
Warrant Stock other than pursuant to an exercise of this Warrant or any
liability as a stockholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
N-16
<PAGE>
13.5 Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to
being entitled to exercise its rights granted by law, including recovery of
damages, shall be entitled to specific performance of its rights provided
under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees, in an action for specific
performance, to waive the defense that a remedy at law would be adequate.
13.6 Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1
and 8.2, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the permitted
successors and assigns of the Holder hereof. The provisions of this Warrant
are intended to be for the benefit of all Holders from time to time of this
Warrant and to the extent applicable, all Holders of shares of Warrant Stock
issued upon the exercise hereof (including transferees), and shall be
enforceable by any such Holder.
13.7 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the
Company and the Majority Warrant Holders, provided that no such Warrant may be
modified or amended to reduce the number of shares of Common Stock for which
such Warrant is exercisable or to increase the price at which such shares may
be purchased upon exercise of such Warrant (before giving effect to any
adjustment as provided therein) without the written consent of the Holder
thereof.
13.8 Severability. Wherever possible, each provision of this Warrant shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
13.9 Headings. The headings used in this Warrant are for the convenience of
reference only and shall not, for any purpose, be deemed a part of this
Warrant.
13.10 GOVERNING LAW; JURISDICTION. (a) IN ALL RESPECTS, INCLUDING ALL
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT WITH RESPECT TO
THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE
HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION
OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY
OF THIS WARRANT, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT
OF ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE
COMPANY AT ITS ADDRESS PROVIDED PURSUANT TO SECTION 13.2, SUCH SERVICE TO
BECOME EFFECTIVE SEVEN DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF THE HOLDER OF THIS WARRANT TO SERVE PROCESS IN ANY OF THE MATTERS
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION. THE COMPANY HEREBY IRREVOCABLY WAIVES
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH
THIS WARRANT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
N-17
<PAGE>
(c) THE COMPANY HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR WITH RESPECT HERETO.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and its corporate seal to be impressed hereon and attested by its Secretary or
an Assistant Secretary.
Peapod, Inc.
By: _________________________________
Name:
Title:
Attest:
By: _________________________________
Name:
Title:
N-18
<PAGE>
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned Holder of this Warrant irrevocably exercises this Warrant
for the purchase of shares Common Stock of Peapod, Inc. and herewith
makes payment of the Warrant Price as follows (check one or more of the
following):
[_]by delivery herewith of a certified or official bank check in the amount
of such Warrant Price payable to the order of the Company;
[_]hereby instructs the Company to withhold a number of shares of Warrant
Stock then issuable upon exercise of this Warrant with an aggregate Fair
Value equal to such Warrant Price;
[_]herewith surrenders to the Company shares of Common Stock previously
acquired by the Holder with an aggregate Fair Value equal to such
Warrant Price;
[_]herewith surrenders to the Company dividends due and owing by the
Company to the Holder equal to such Warrant Price; or
[_]by providing to the Company goods or services with a fair value equal to
such Warrant Price;
all at the price and on the terms and conditions specified in this Warrant and
requests that certificates for the shares of Common Stock hereby purchased
(and any securities or other property issuable upon such exercise) be issued
in the name of and delivered to whose address is and,
if such shares of Common Stock shall not include all of the shares of Common
Stock issuable as provided in this Warrant, that a new Warrant of like tenor
and date for the balance of the shares of Common Stock issuable hereunder be
delivered to the undersigned.
_____________________________________
(Name of Registered Owner)
_____________________________________
(Signature of Registered Owner)
_____________________________________
(Street Address)
_____________________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
N-19
<PAGE>
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all of the rights
of the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
<TABLE>
<CAPTION>
Name and
Address
of No. of Shares of
Assignee Common Stock
-------- ----------------
<S> <C>
</TABLE>
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer onto the books of Peapod, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated: Print Name: _________________________
-------------------------------------
Signature: __________________________
Witness: ____________________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
N-20
<PAGE>
Exhibit 99.12
CERTIFICATE OF DESIGNATIONS
OF
SERIES B CONVERTIBLE
PREFERRED STOCK
OF
PEAPOD, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
PEAPOD, INC., a Delaware corporation (the "Company"), hereby certifies that
the following resolution was duly approved and adopted by the Board of
Directors of the Company at a meeting duly held on April 13, 2000, which
resolution remains in full force and effect on the date hereof:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Company (the "Board of Directors") by the
provisions of the Amended and Restated Certificate of Incorporation of the
Company (the "Certificate of Incorporation") and its Restated By-Laws (the
"Bylaws"), and in accordance with Section 151 of the General Corporation Law
of the State of Delaware, there is hereby created, out of the 5,000,000 shares
of Preferred Stock, par value $0.01 per share, of the Company authorized and
unissued in Article Fourth of the Certificate of Incorporation (the "Preferred
Stock"), a series of the Preferred Stock consisting of 4,500,000 shares, which
series shall have the following powers, designations, preferences and
relative, participating, optional or other rights, and the following
qualifications, limitations and restrictions (in addition to any powers,
designations, preferences and relative, participating, optional or other
rights, and any qualifications, limitations and restrictions, set forth in the
Certificate of Incorporation which are applicable to the Preferred Stock):
Section 1. Designation of Amount. The 4,500,000 shares of Preferred Stock
shall be designated the "Series B Convertible Preferred Stock" (the "Series B
Preferred Stock"), par value $0.01 per share and the authorized number of
shares constituting such series shall be 4,500,000.
Section 2. Certain Definitions,
Unless the context otherwise requires, the terms defined in this Section 1
shall have, for all purposes of this resolution, the meanings specified (with
terms defined in the singular having comparable meanings when used in the
plural).
"Additional Dividend Payment Date" shall have the meaning set forth in
Section 3(g).
"Additional Dividends" shall have the meaning set forth in Section 3(g).
"Affiliate" shall mean, with respect to any person, any other person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, in the case of a
person who is an individual, shall include (i) members of such specified
person's immediate family (as defined in Instruction 2 of Item 404(a) of
Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all
beneficiaries of which are such specified person or members of such person's
immediate family as determined in accordance with the foregoing clause (i).
For the purposes of this definition, "control," when used with respect to any
person means the power to direct the management and policies of such person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "affiliated," "controlling" and
"controlled" have meanings correlative to the foregoing. Notwithstanding the
foregoing, for purposes of this Certificate of Designations, the Purchaser and
its Affiliates shall not be deemed Affiliates of the Company.
K-1
<PAGE>
"Appraisal Procedure" if applicable, shall mean the following procedure to
determine the fair market value, as to any security, for purposes of the
definition of "Fair Market Value" or the fair market value, as to any other
property (in either case, the "valuation amount"). The valuation amount shall
be determined in good faith by the Board of Directors; provided, however, that
if the Requisite Holders disagree with such valuation amount within a
reasonable period of time (not to exceed twenty (20) days after notice
thereof), the valuation amount shall be determined by an investment banking
firm of national recognition, which firm shall be reasonably acceptable to the
Board of Directors and the Requisite Holders. If the Board of Directors and
the Requisite Holders are unable to agree upon an acceptable investment
banking firm within ten (10) days after the date either party proposed that
one be selected, the investment banking firm will be selected by an arbitrator
located in New York City, New York, selected by the American Arbitration
Association (or if such organization ceases to exist, the arbitrator shall be
chosen by a court of competent jurisdiction). The arbitrator shall select the
investment banking firm (within ten (10) days of its appointment) from a list,
jointly prepared by the Board of Directors and the Requisite Holders, of not
more than six investment banking firms of national standing in the United
States, of which no more than three may be named by the Board of Directors and
no more than three may be named by the Requisite Holders. The arbitrator may
consider, within the ten-day period allotted, arguments from the parties
regarding which investment banking firm to choose, but the selection by the
arbitrator shall be made in its sole discretion from the list of six. The
Board of Directors and the Requisite Holders shall submit their respective
valuations and other relevant data to the investment banking firm, and the
investment banking firm shall as soon as practicable thereafter make its own
determination of the valuation amount. The final valuation amount for purposes
hereof shall be the average of the two valuation amounts closest together, as
determined by the investment banking firm, from among the valuation amounts
submitted by the Company and the Requisite Holders and the valuation amount
calculated by the investment banking firm. The determination of the final
valuation amount by such investment-banking firm shall be final and binding
upon the parties. The Company shall pay the fees and expenses of the
investment banking firm and arbitrator (if any) used to determine the
valuation amount. If required by any such investment banking firm or
arbitrator, the Company shall execute a retainer and engagement letter
containing reasonable terms and conditions, including, without limitation,
customary provisions concerning the rights of indemnification and contribution
by the Company in favor of such investment banking firm or arbitrator and its
officers, directors, partners, employees, agents and affiliates.
"Business Day" shall mean a day other than a Saturday, Sunday or day on
which banking institutions in New York are authorized or required to remain
closed.
"Change of Control" shall mean the occurrence of any of the following
events:
(i) the adoption or approval by the Board of Directors of the Company of
a plan or proposal relating to the sale or other disposition of all or
substantially all of the assets of the Company;
(ii) the adoption or approval by the Board of Directors of the Company
of a plan or proposal relating to the liquidation, dissolution or winding
up of the Company;
(iii) the acquisition by any individual, entity or group (other than a
group including the Purchaser), including any "person," within the meaning
of Section 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 more than 50% of the then outstanding shares of Common Stock;
(iv) the first day on which the individuals (other than the Preferred
Stock Directors) who are members of the Board of Directors as of April 14,
2000 (collectively, the "Incumbent Board") cease for any reason to
constitute a majority of the Board of Directors; provided that any
individual who becomes a director of the Company subsequent to April 14,
2000, whose appointment or nomination for election by the Company's
stockholders, was approved by the vote of at least a majority 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 of Directors shall not be deemed to be a member
of the Incumbent Board;
K-2
<PAGE>
(v) the 30th consecutive day on which the Common Stock is no longer
listed for trading on a United States national securities exchange or
authorized for quotation in the NASDAQ Stock Market; or
(vi) the Company shall have failed to comply in any material respect
with any of its agreements contained in any of the Documents, provided,
that, if such failure to comply is capable of being cured, 30 days shall
have elapsed since such failure to comply and such failure shall not have
been cured.
"Change of Control Election" shall have the meaning set forth in Section
6(a).
"Change of Control Redemption Price" shall have the meaning set forth in
Section 6(a).
"Common Stock" shall mean the common stock, par value $.01 per share, of
the Company.
"Conversion Date" shall have the meaning set forth in Section 8(e).
"Conversion Price" shall have the meaning set forth in Section 8(b).
"Credit and Security Agreements" shall have the meaning set forth in the
Purchase Agreement.
"Daily Market Price" shall mean, with respect to one share of Common Stock
and for any Business Day: (i) if the Common Stock is then listed on a national
securities exchange or is authorized for quotation on NASDAQ and is designated
as a National Market System security, the last sale price of one share of
Common Stock, regular way, on such day on the principal stock exchange or
market system on which such Common Stock is then listed or authorized for
quotation, or, if no such sale takes place on such day, the average of the
closing bid and asked prices for one share of Common Stock on such day as
reported on such stock exchange or market system or (ii) if the Common Stock
is not then listed or authorized for quotation on any national securities
exchange or designated as a National Market System security on NASDAQ but is
traded over-the-counter, the average of the closing bid and asked prices for
one share of Common Stock as reported on NASDAQ or the Electronic Bulletin
Board or in the National Daily Quotation Sheets, as applicable.
"Dividend Rate" shall have the meaning set forth in Section 3(a).
"Documents" shall mean the Purchase Agreement, the Warrants, the
Registration Rights Agreement, the Services Agreement, the Certificate of
Incorporation, the Bylaws, the Credit and Security Agreements, the Joint
Development and Licensing Agreement, the Voting Agreements and this
Certificate of Designations.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exercise Period" shall have the meaning set forth in Section 6(a).
"Event of Non-Compliance" shall mean (i) any failure of the Company or the
Board of Directors to comply with Section 7 of this Certificate of
Designations, Article VIII of the Bylaws of the Company, (ii) any failure of
the Company or the Board of Directors to comply with Section 3 of this
Certificate of Designations or any failure of the Board of Directors of the
Company to declare a quarterly dividend payment provided for in Section 3(a)
or to pay such dividend on the dividend payment date provided therefor in
Section 3(b), (iii) any failure of the Company or the Board of Directors to
comply with Section 5, 6, 8 or 9 of this Certificate of Designations;
provided, that a failure to give a notice within a specified time period shall
be deemed an Event of Non-Compliance only until such notice is given (unless
the delay in giving such notice adversely affects the ability of the person to
whom such notice was given to exercise the rights with respect to which such
notice was given) (iv) any other failure of the Company to comply in any
material respect with any of its agreements in any of the Documents; provided,
however, that if any such failure to comply is capable of being cured, 30 days
shall have elapsed since such failure has not been cured or (v) any obligation
of the Company, whether as principal,
K-3
<PAGE>
guarantor, surety or other obligor, for the payment of indebtedness for
borrowed money in excess of $10,000,000 (x) shall become or shall be declared
due and payable prior to the expressed maturity thereof, or (y) shall not be
paid when due or within any grace period for the payment thereof, and such
default shall remain uncured for 30 days.
"Excluded Securities" shall have the meaning set forth in Section 8(d).
"Fair Market Value" shall mean, as of any specified date and as to any
security, the Ten Day Average of the closing prices of such security's sales
on all domestic securities exchanges on which such security may at the time be
listed, or, if there have been no sales on any such exchange on any day
included in the Ten Day Average, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if on any day
included in the Ten Day Average, such security is not so listed, the average
of the representative bid and asked prices quoted in the NASDAQ Stock Market
as of 4:00 P.M., New York City time, on such day, or, if on any day included
in the Ten Day Average such security is not quoted in the NASDAQ Stock Market,
the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar or successor organization (and in each such case
excluding any trades that are not bona fide, arm's length transactions). If at
any time such security is not listed on any domestic securities exchange or
quoted in the NASDAQ Stock Market or the domestic over-the-counter market, the
"Fair Market Value" of such security shall be the fair market value thereof as
determined in accordance with the Appraisal Procedure, using any appropriate
valuation method, assuming an arms-length sale to an independent party. In
determining the fair market value of Common Stock, a sale of all of the issued
and outstanding Common Stock will be assumed, without giving regard to the
lack of liquidity of such stock due to any restrictions (contractual or
otherwise) applicable thereto or any discount for minority interests and
assuming the conversion or exchange of all securities then outstanding that
are convertible into or exchangeable for Common Stock and the exercise of all
rights and warrants then outstanding and exercisable to purchase shares of
such stock or securities convertible into or exchangeable for shares of such
stock; provided, however that such assumption will not include those
securities, rights and warrants convertible into Common Stock where the
conversion, exchange or exercise price per share is greater than the fair
market value; provided, further, however, that fair market value shall be
determined with regard to the relative priority of each class or series of
Common Stock (if more than one class or series exists.) "Fair Market Value"
means with respect to property other than securities, the "fair market value"
determined in accordance with the Appraisal Procedure.
"GAAP" shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect from time to
time, consistently applied.
"HSR Approval" shall mean the expiration of all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
applicable rules and regulations and any similar state acts applicable to the
issuance of Series B Preferred Stock as contemplated by the Documents.
"Joint Development and Licensing Agreement" shall have the meaning set
forth in the Purchase Agreement.
"Liquidation Preference" shall have the meaning set forth in Section 4.
"New Securities" shall mean any shares of capital stock of the Company,
whether or not now authorized, and securities of any type whatsoever that are,
or may become, convertible into or exchangeable or exercisable for shares of
capital stock, other than (i) Excluded Securities; (ii) the Series B Preferred
Stock (or the Common Stock issuable upon conversion thereof); (iii) the
Warrants (and Common Stock issuable upon exercise thereof); (iv) securities
issued pursuant to the Company's bona fide acquisition of another corporation
by merger, purchase of substantially all assets or other reorganization, which
acquisition has been approved by the Board of Directors; and (v) securities
issued in connection with any stock split, stock dividend or recapitalization
of the Company for which an adjustment is made to the terms of conversion of
the Series B Preferred Stock hereunder.
K-4
<PAGE>
"Original Issuance Date" shall mean, with respect to any shares of Series B
Preferred Stock, the date of issuance of such shares.
"Outside Date" shall mean the date that is one hundred and twenty (120)
days after the date hereof or, if the Purchaser exercises any Warrants and as
a direct result of such exercise, the Stockholders Meeting (as defined in the
Purchase Agreement) is delayed, one hundred and twenty (120) days plus the
number of days of such delay after the date hereof.
"Permitted Transferee" shall mean, with respect to any person, any other
person.
"person" shall mean any individual, partnership, corporation, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof, or other entity.
"Preferred Stock Director" shall have the meaning set forth in Section
7(b).
"Previously Issued Warrant" shall mean the warrant, dated as of April 10,
2000, issued by the Company in favor of the Purchaser for 100,000 shares of
Common Stock.
"Pro Rata Amount" shall mean, at any time, with respect to any holder of
shares of Series B Preferred Stock, the ratio of (i) the number of shares of
Common Stock held by such holder (on a fully-diluted basis), to (ii) the total
number of shares of Common Stock of the Company outstanding (on a fully-
diluted basis), in the case of both clauses (i) and (ii), including all
outstanding securities convertible into or exchangeable or exercisable for
Common Stock on an as-converted or exercised basis (including, but not limited
to, the Series B Preferred Stock and outstanding options and warrants
exercisable for Common Stock).
"Purchase Agreement" shall mean the Purchase Agreement, dated as of April
13, 2000, by and between the Company and the Purchaser.
"Purchaser" shall mean Koninklijke Ahold N.V., a public company with
limited liability incorporated under the laws of the Netherlands.
"Redemption Date" shall have the meaning set forth in Section 5.
"Redemption Price" shall have the meaning set forth in Section 5.
"Registration Rights Agreement" shall mean the registration rights
agreement to be entered into by the Company and the Purchaser pursuant to the
Purchase Agreement.
"Requisite Holders" shall mean the holders of at least a majority of the
then outstanding Shares.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Series B Preferred Stock" shall mean the Series B Preferred Stock
authorized hereby.
"Shares" shall mean, collectively, shares of converted Common Stock and
shares of Series B Preferred Stock. Whenever this Certificate refers to a
number or percentage of Shares, such number or percentage shall be calculated
as if, immediately prior to such calculation, all shares of Series B Preferred
Stock and all other convertible or exchangeable securities and all warrants
and options held by the Purchaser and its Permitted Transferees had been
converted into shares of Common Stock in accordance with their terms,
regardless of the existence of any restrictions on such conversion or
exercise.
"Stockholder Approval" shall mean the approval by the Company's
stockholders of the issuance of all shares of Series B Preferred Stock and
Warrants pursuant to the Purchase Agreement.
K-5
<PAGE>
"subsidiary" means, with respect to any person, (a) a corporation a
majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such person, by a subsidiary of such person, or by such person and
one or more subsidiaries of such person, (b) a partnership in which such
person or a subsidiary of such person is, at the date of determination, a
general partner of such partnership, or (c) any other person (other than a
corporation) in which such person, a subsidiary of such person or such person
and one or more subsidiaries of such person, directly or indirectly, at the
date of determination thereof, has (i) at least a majority ownership interest,
(ii) the power to elect or direct the election of the directors or other
governing body of such person, or (iii) the power to direct or cause the
direction of the affairs or management of such person. For purposes of this
definition, a person is deemed to own any capital stock or other ownership
interest if such person has the right to acquire such capital stock or other
ownership interest, whether through the exercise of any purchase option,
conversion privilege or similar right.
"Subsidiary" shall mean a subsidiary of the Company.
"Ten Day Average" means, with respect to any prices and in connection with
the calculation of Fair Market Value, the average of such prices over the ten
consecutive Business Days ending on the Business Day immediately prior to the
day as of which "Fair Market Value" is being determined.
"Voting Agreements" shall have the meaning set forth in the Purchase
Agreement.
"Warrants" shall have the meaning set forth in the Purchase Agreement.
Section 3. Dividends. (a) The holders of the outstanding shares of Series B
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds of the Company legally available therefor,
cumulative dividends, accumulating on a daily basis at the Dividend Rate from
the Original Issuance Date for such shares through and including the date on
which such dividends are paid. The "Dividend Rate" shall be (i) if either
Stockholder Approval or HSR Approval has not been obtained prior to the
Outside Date or there shall exist any Event of Non-Compliance, in each case,
12.5% per annum for all quarterly dividend periods commencing on or after the
Outside Date and ending on or before the date, if any, on which both
Stockholder Approval and HSR Approval have been obtained or, as the case may
be, commencing on the date of the occurrence of such Event of Non-Compliance
and ending on the date that such Event of Non-Compliance is cured and (ii) for
all other quarterly dividend periods, 8% per annum. The amount of any
dividends per share of Series B Preferred Stock for any full quarterly period
shall be computed by multiplying the Dividend Rate for such quarterly dividend
period by the Liquidation Preference per share and dividing the result by
four. Dividends payable on the shares of Series B Preferred Stock for any
period less than a full quarterly dividend period shall be computed on the
basis of a 360-day year of twelve 30-day months and the actual number of days
elapsed for any period less than one month.
(b) Dividends shall be payable in arrears on the last day of each of March,
June, September and December, commencing on June 30, 2000; provided that: (i)
if any such payment date is not a Business Day, then such dividend shall be
payable on the next Business Day, and (ii) accumulated and unpaid dividends
for any prior quarterly period may be paid at any time. Dividends shall
accumulate on shares of Series B Preferred Stock from their Original Issuance
Date and be cumulative whether or not earned or declared and whether or not
there are profits, surplus or other funds of the Company legally available for
the payment of dividends. Each such dividend shall be paid to the holders of
record of the Series B Preferred Stock as they shall appear on the stock
register of the Company on such record date, not exceeding forty-five (45)
days nor less than ten (10) days preceding any dividend payment date, as shall
be fixed by the Board of Directors of the Company or a duly authorized
committee thereof.
(c) [intentionally omitted]
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(d) Holders of shares of the Series B Preferred Stock shall be entitled to
full cumulative dividends, as herein provided, on the Series B Preferred Stock
and no additional amounts, except as set forth in paragraph (g) below. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series B Preferred Stock that may be
in arrears.
(e) Unless and until full cumulative dividends on the shares of Series B
Preferred Stock in respect of all past quarterly dividend periods have been
paid, and the full amount of dividends on the shares of Series B Preferred
Stock in respect of the then current quarterly dividend period shall have been
or are contemporaneously declared in full and sums set aside for the payment
thereof, (i) no dividends shall be paid or declared or set aside for payment
or other distribution upon the Common Stock, or any other capital stock of the
Company ranking junior to the Series B Preferred Stock as to dividends
(together with the Common Stock, "Junior Stock"), other than in shares of, or
warrants or rights to acquire, Junior Stock; and (ii) no shares of Junior
Stock or any other Securities of the Company or any warrants, rights, calls or
options (other than any cashless exercises of options or option buybacks)
exercisable for or convertible into a share of Junior Stock or any other
Securities of the Company shall be redeemed, retired, purchased or otherwise
acquired for any consideration (or any payment made to or available for a
sinking fund for the redemption of any such shares) by the Company or any
Subsidiary (except by conversion into or exchange for shares of Junior Stock).
(f) The terms "accumulated dividends," "accrued dividends," "dividends
accumulated," "dividends accrued" and "dividends in arrears," whenever used
herein with reference to shares of Series B Preferred Stock shall be deemed to
mean an amount which shall be equal to dividends thereon at the Dividend Rate
per share from the date or dates on which such dividends commence to
accumulate to the end of the then current quarterly dividend period for such
Preferred Stock (or, in the case of redemption, to the date of redemption),
whether or not earned or declared and whether or not assets for the Company
are legally available therefor, and if full dividends are not declared or
paid, then such dividends shall cumulate, with additional dividends thereon,
compounded quarterly, at the Dividend Rate, for each quarterly period during
which such dividends remain unpaid, less the amount of all such dividends
paid, or declared in full and sums set aside for the payment thereof, upon
such shares of Series B Preferred Stock.
(g) In the event any dividends are declared or paid with respect to the
Common Stock or any Junior Stock, the holders of the Series B Preferred Stock
as of the record date established by the Board of Directors for such dividend
shall be entitled to receive as additional dividends (the "Additional
Dividends") an amount (whether in the form of cash, securities or other
property) equal to the amount (and in the form) of the dividends that such
holder would have received had the Series B Preferred Stock been converted
into Common Stock as of the date immediately prior to the record date of such
dividend, such Additional Dividends to be payable on the payment date of the
dividend established by the Board of Directors (the "Additional Dividend
Payment Date"). The record date for any such Additional Dividends shall be the
record date for the applicable dividend, and any such Additional Dividends
shall be payable to the persons in whose name this Series B Preferred Stock is
registered at the close of business on the applicable record date.
(h) Notwithstanding anything to the contrary herein, in the event any
conversion, redemption or liquidation occurs as of a date other than on a
dividend payment date, the holders of Series B Preferred Stock shall be paid a
pro rata dividend equal to the dividend payable for that quarterly dividend
period multiplied by a fraction, the numerator of which is the number of days
that have elapsed since the last dividend payment date and the denominator of
which is the number of days in the quarterly dividend period in which the
conversion, redemption or liquidation occurs.
(i) Immediately prior to authorizing or making any distribution in
redemption or liquidation with respect to the Series B Preferred Stock (other
than a purchase or acquisition of Series B Preferred Stock pursuant to a
purchase or exchange offer made on the same terms to holders of all
outstanding Series B Preferred Stock), the Board of Directors shall, to the
extent of any funds legally available therefor, declare a dividend on the
Series B Preferred Stock payable on the distribution date in an amount equal
to any accumulated and unpaid dividends on the Series B Preferred Stock as of
such date.
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Section 4. Liquidation Preference. In the event of a liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary,
the holders of Series B Preferred Stock then outstanding shall be entitled to
receive out of the available assets of the Company, whether such assets are
stated capital or surplus of any nature, an amount on such date equal to the
greater of (a) $100 per share of Series B Preferred Stock (the "Liquidation
Preference") plus the amount of any accumulated and unpaid dividends as of
such date, calculated pursuant to Section 3 hereinabove, or (b) the amount
that holders of the Series B Preferred Stock would be entitled to receive if
they had converted all of their shares of Series B Preferred Stock into Common
Stock immediately prior to such liquidation, dissolution or winding up. Such
payment shall be made before any payment shall be made or any assets
distributed to the holders of any class or series of the Common Stock or any
other class or series of the Company's capital stock ranking junior as to
liquidation rights to the Series B Preferred Stock. If upon any such
liquidation, dissolution or winding up of the Company the assets available for
payment of the Liquidation Preference are insufficient to permit the payment
to the holders of the Series B Preferred Stock of the full preferential
amounts described in this paragraph, then all the remaining available assets
shall be distributed among the holders of the then outstanding Series B
Preferred Stock pro rata according to the number of then outstanding shares of
Series B Preferred Stock held by each holder thereof. The merger or
consolidation of the Company shall be considered a liquidation, dissolution or
winding up of the Company for purposes of this Section 4 (unless in connection
therewith the liquidation of the Company is specifically approved).
Section 5. Mandatory Redemption. On the eighth anniversary of the date
hereof (the "Redemption Date"), the Company shall redeem for cash all shares
of Series B Preferred Stock that are then outstanding and any shares of Series
B Preferred Stock then issuable in respect of accumulated but unpaid
dividends, in each case, at a redemption price per share equal to the
Liquidation Preference thereof plus the amount of any accumulated and unpaid
dividends as of such date ("Redemption Price"). Not more than sixty (60) nor
less than thirty (30) days prior to the Redemption Date, notice by first class
mail, postage prepaid, shall be given to each holder of record of the Series B
Preferred Stock, at such holder's address as it shall appear upon the stock
transfer books of the Company on such date. Each such notice of redemption
shall be irrevocable and shall specify the date that is the Redemption Date,
the Redemption Price, the identification of the shares to be redeemed, the
place or places of payment and that payment will be made upon presentation and
surrender of the certificate(s) evidencing the shares of Series B Preferred
Stock to be redeemed and that dividends on the shares of the Series B
Preferred Stock cease to accumulate on the Redemption Date. On or after the
Redemption Date, each holder of shares of Series B Preferred Stock shall
surrender the certificate evidencing such shares to the Company at the place
designated in such notice and shall thereupon be entitled to receive payment
of the Redemption Price in the manner set forth in the notice. If, on the
Redemption Date, funds in cash in an amount sufficient to pay the aggregate
Redemption Price for all outstanding shares of Series B Preferred Stock shall
be available therefor and shall have been irrevocably set aside and deposited
with a bank or trust company in trust for purposes of payment of such
Redemption Price, then, notwithstanding that the certificates evidencing any
shares so called for redemption shall not have been surrendered, the shares
shall no longer be deemed outstanding, the holders thereof shall cease to be
stockholders, and all rights whatsoever with respect to the shares so called
for redemption (except the right of the holders to receive the Redemption
Price upon surrender of their certificates therefor) shall terminate. If at
the Redemption Date, the Company does not have sufficient funds legally
available to redeem all the outstanding shares of Series B Preferred Stock,
the Company shall take all measures permitted under the Delaware General
Corporation Law to increase the amount of its capital and surplus legally
available, and the Company shall purchase as many shares of Series B Preferred
Stock as it may legally redeem, ratably from the holders thereof in proportion
to the number of shares held by them, and shall thereafter from time to time,
as soon as it shall have funds available therefor, redeem as many shares of
Series B Preferred Stock as it legally may until it has redeemed all of the
outstanding shares of Series B Preferred Stock.
Section 6. Optional Redemption.
(a) Change of Control. In the event that any Change of Control shall occur
at any time while any shares of Series B Preferred Stock are outstanding, each
holder of Series B Preferred Stock shall have the right to give
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<PAGE>
notice that it is exercising a Change of Control election (a "Change of
Control Election"), with respect to all or any number of such holder's shares
of Series B Preferred Stock, during the period (the "Exercise Period")
beginning on the 10th day and ending on the 30th day after the date of such
Change of Control. Upon any such election, the Company shall redeem for cash
each of such holder's shares to the extent permitted by applicable law, at a
redemption price per share equal to the Liquidation Preference thereof plus
the amount of accumulated and unpaid dividends as of the date of redemption,
plus an amount per share equal to the dividends that would have accumulated on
the Series B Preferred Stock, at the Dividend Rate then in effect, from the
date of redemption to and including the fifth anniversary of April 14, 2000
(the "Change of Control Redemption Price").
(b) On or before the tenth (10th) day after a Change of Control, the
Company shall mail to all holders of record of the Series B Preferred Stock at
their respective addresses as the same shall appear on the books of the
Company as of such date, a notice disclosing (i) the Change of Control, (ii)
the Change of Control Redemption Price per share of the Series B Preferred
Stock applicable hereunder, and (iii) the procedure which the holder must
follow to exercise the redemption right provided above. To exercise the Change
of Control Election, if applicable, a holder of the Series B Preferred Stock
must deliver during the Exercise Period written notice to the Company (or an
agent designated by the Company for such purpose) of the holder's exercise of
the Change of Control Election, accompanied by each certificate evidencing
shares of the Series B Preferred Stock with respect to which the Change of
Control Election is being exercised, duly endorsed for transfer. On or prior
to the fifth (5th) Business Day after expiration of the Exercise Period, the
Company shall accept for payment all shares of Series B Preferred Stock
properly surrendered to the Company (or an agent designated by the Company for
such purpose) during the Exercise Period for redemption in connection with the
exercise of the Change of Control Election and shall cause payment to be made
in cash for such shares of Series B Preferred Stock. If at the time of any
Change of Control, the Company does not have sufficient capital and surplus
legally available to purchase all of the outstanding shares of Series B
Preferred Stock, the Company shall take all measures permitted under the
Delaware General Corporation Law to increase the amount of its capital and
surplus legally available, and the Company shall offer in its written notice
of such Change of Control to purchase as many shares of Series B Preferred
Stock as it has capital and surplus legally available therefor, ratably from
the holders thereof in proportion to the total number of shares tendered, and
shall thereafter from time to time, as soon as it shall have capital and
surplus legally available therefor, offer to purchase as many shares of Series
B Preferred Stock as it has capital and surplus available therefor until it
has offered to purchase all of the outstanding shares of Series B Preferred
Stock.
(c) Optional Redemption by Company. At any time after the eighth
anniversary of April 14, 2000, the Company may, upon sixty (60) days notice to
the holders of the Series B Preferred Stock, redeem all, but not less than
all, of the then outstanding shares of Series B Preferred Stock for cash in an
amount per share equal to 103% of the Redemption Price.
(d) Status of Redeemed Shares. Any shares of Series B Preferred Stock which
shall at any time have been redeemed pursuant to Section 5 or 6 hereof shall,
after such redemption, have the status of authorized but unissued shares of
Preferred Stock, without designation as to series.
Section 7. Voting Rights. (a) Except as otherwise provided by applicable
law and in addition to any voting rights provided by law, the holders of
Series B Preferred Stock:
(i) shall be entitled to vote together with the holders of the Common
Stock as a single class on all matters submitted for a vote of holders of
Common Stock;
(ii) shall have such other voting rights as are specified in the
Certificate of Incorporation or as otherwise provided by Delaware General
Corporation Law; and
(iii) shall be entitled to receive notice of any stockholders' meeting
in accordance with the Certificate of Incorporation and Bylaws of the
Company.
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Each share of Series B Preferred Stock shall entitle the holder thereof to
cast one vote for each vote that such holder would be entitled to cast had
such holder converted its Series B Preferred Stock into shares of Common Stock
as of the date immediately prior to the record date for determining the
stockholders of the Company eligible to vote on any such matter.
(b) In addition to the other voting rights set forth herein, for so long as
the Purchaser shall own at least one share of Series B Preferred Stock and the
Purchaser and its Permitted Transferees collectively hold a number of Shares
that equals or exceeds the following percentages, the following provisions
shall apply:
(i) The holders of Series B Preferred Stock shall have the exclusive
right, voting as a single class, to elect the following number of directors
to serve on the Board of Directors (each such director is referred to as a
"Preferred Stock Director") in the event that the Purchaser and its
Permitted Transferees collectively beneficially own securities of the
Company that constitute, or if converted into Common Stock would constitute
the following percentages of the aggregate issued and outstanding Common
Stock: (w) less than 10%, no Preferred Stock Directors; (x) at least 10%
but less than 33 1/3%, three (3) Preferred Stock Directors (for the
purposes of this clause (x), the Previously Issued Warrant and the Warrants
shall be included in the calculation of the Purchaser's beneficial
ownership); (y) at least 33 1/3% but less than 70%, six (6) Preferred Stock
Directors (for the purposes of this clause (y), the Previously Issued
Warrant and the Warrants shall be included in the calculation of the
Purchaser's beneficial ownership); and (z) at least 70%, seven (7)
Preferred Stock Directors (for the purposes of this clause (z), the
Previously Issued Warrant and the Warrants shall not be included in the
calculation of the Purchaser's beneficial ownership); provided that, so
long as any loans or commitments made to the Company by the holders of
Series B Preferred Stock or any of their respective affiliates are
outstanding, the holders of Series B Preferred Stock shall have the
exclusive right, voting as a single class, to elect three (3) Preferred
Stock Directors. In any such election the holders of Series B Preferred
Stock shall be entitled to cast one vote per share of Series B Preferred
Stock held of record on the record date for the determination of the
holders of Series B Preferred Stock entitled to vote on such election. Each
of the initial Preferred Stock Directors shall be appointed by the Board of
Directors on or before April 14, 2000 and shall be apportioned by the Board
of Directors among the three classes of directors so as to ensure that no
one class has more than one director more than any other class; and
thereafter the Preferred Stock Directors shall be elected at the same time
as the other directors of the same class are elected. The Preferred Stock
Directors shall serve until the annual meeting of stockholders of the
Company at which the term of other directors of the same class expire or
until their respective successors shall be elected and shall qualify. Any
Preferred Stock Director may be removed by, and shall not be removed other
than by, the vote of the Requisite Holders, at a vote of the holders of
then outstanding shares of Series B Preferred Stock, voting as a separate
class, at a meeting called for such purpose or by written consent as
permitted by law and the Certificate of Incorporation and Bylaws of the
Company. If for any reason a vacancy exists in the Preferred Stock
Directors, by reason of death, resignation, retirement, disqualification,
removal or otherwise, such vacancy shall be filled by the holders of the
Series B Preferred Stock voting as a separate class in accordance with the
voting procedures set forth in this Section 7(b). The Preferred Stock
Directors shall be appointed by the Board of Directors to serve on each
committee of the Board of Directors in at least the same proportions that
the number of Preferred Stock Directors bears to the total number of
directors then comprising the Board of Directors.
(ii) The Company will not, and will not permit any of its Subsidiaries
to, directly or indirectly, without approval of the Requisite holders,
voting as a separate class, take action (or fail to take action) prohibited
by the Purchase Agreement.
Section 8. Conversion Rights.
(a) General. Subject to and upon compliance with the provisions of this
Section 8, the holders of the shares of Series B Preferred Stock shall be
entitled, at their option, at any time prior to the date fixed for redemption
of such shares, to convert all or any such shares of Series B Preferred Stock
into a number of fully
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paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share). The number of shares of Common
Stock to which a holder of Series B Preferred Stock shall be entitled upon
conversion shall be determined by dividing (i) the Liquidation Preference of
such Series B Preferred Stock (including shares issuable in respect of
accumulated but unpaid dividends), plus the amount of any accumulated but
unpaid dividends as of the Conversion Date by (ii) the Conversion Price in
effect at the close of business on the Conversion Date (determined as provided
in this Section 8).
(b) Conversion Price. The conversion price (the "Conversion Price") shall
initially be $3.75 per share of Preferred Stock, subject to adjustment from
time to time in accordance with Section 8(d).
(c) Fractions of Shares. No fractional shares of Common Stock shall be
issued upon conversion of shares of Series B Preferred Stock. If more than one
share of Series B Preferred Stock shall be surrendered for conversion at one
time by the same holder, the number of full shares of Common Stock to be
issued and which shall be computed on the basis of the aggregate number of
shares of Series B Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
any shares of Series B Preferred Stock, the Company shall pay a cash
adjustment in respect of such fractional share in an amount equal to the
product of such fraction multiplied by the Fair Market Value of one share of
Common Stock on the Conversion Date.
(d) Adjustments to Conversion Price. The Conversion Price shall be subject
to adjustment from time to time as follows:
(i) Upon Issuance of Common Stock. If the Company shall, at any time or
from time to time after April 14, 2000, issue any shares of Common Stock,
options to purchase or rights to subscribe for Common Stock, securities by
their terms convertible into or exchangeable for Common Stock, or options
to purchase or rights to subscribe for such convertible or exchangeable
securities, other than Series B Preferred Stock or Excluded Securities,
without consideration or for consideration per share less than either (x)
the Conversion Price in effect immediately prior to the issuance of such
Common Stock or securities or (y) the Daily Market Price of the Common
Stock on the Business Day on which the pricing of such issuance occurs,
then the Conversion Price shall forthwith be adjusted to a price equal to
the lower of (I) the Conversion Price in effect immediately prior thereto,
or (II) the lowest consideration per share for which such shares of Common
Stock or such options, rights or convertible or exchangeable securities are
issued (plus the additional consideration required to be paid upon
exercise, exchange or conversion of such options, rights or convertible or
exchangeable securities).
(ii) Upon Acquisition of Common Stock. If the Company or any Subsidiary
shall, at any time or from time to time after April 14, 2000, directly or
indirectly, redeem, purchase or otherwise acquire (x) any shares of Common
Stock for a consideration per share greater than the Fair Market Value of
the Common Stock immediately prior to such event, or (y) any options to
purchase or rights to subscribe for Common Stock, any securities by their
terms convertible into or exchangeable for Common Stock (other than shares
of Series B Preferred Stock that are redeemed according to their terms), or
any options to purchase or rights to subscribe for such convertible or
exchangeable securities, in either case, for a consideration per share of
Common Stock for which such options, rights or convertible or exchangeable
securities are exercisable, convertible or exchangeable, that is greater
than the amount, if any, by which the Fair Market Value of Common Stock
immediately prior to such event exceeds the per share exercise, exchange,
subscription, conversion or purchase price applicable to such options,
rights or convertible or exchangeable securities, then, in the case of (x)
or (y), the Conversion Price shall forthwith be lowered to a price equal to
the price obtained by multiplying:
(A) the Conversion Price in effect immediately prior to such event,
by
(B) a fraction of which (x) the denominator shall be the Fair Market
Value per share of Common Stock immediately prior to such event and (y)
the numerator shall be the result of dividing:
(a) (1) the product of (A) the number of shares of Common Stock
outstanding on a fully-diluted basis immediately prior to such
event and (B) the Fair Market Value per share of Common
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Stock, in each case immediately prior to such event, minus (2)
the aggregate consideration paid by the Company in such event, by
(b) the number of shares of Common Stock outstanding on a fully-
diluted basis immediately prior to such event, minus the number
of shares of Common Stock purchased or acquired, or for which
options, rights or convertible or exchangeable securities
purchased or acquired were exercisable, convertible or
exchangeable.
For purposes of this Section 8(d), "fully diluted basis" shall be
determined in accordance with the treasury method of GAAP and paragraph (iii)
of this Section 8(d).
(iii) For the purposes of any adjustment of a Conversion Price pursuant
to paragraphs (i) and (ii) of this Section 8(d), the following provisions
shall be applicable:
(1) In the case of the issuance of Common Stock for cash in a public
offering or private placement, the consideration shall be deemed to be
the amount of cash paid therefor before deducting therefrom any
discounts, commissions or placement fees payable by the Company to any
underwriter or placement agent in connection with the issuance and sale
thereof.
(2) In the case of the issuance of Common Stock for a consideration
in whole or in part other than cash, the consideration other than cash
shall be deemed to be the Fair Market Value thereof as determined in
accordance with the Appraisal Procedure.
(3) In the case of the issuance of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into
or exchangeable for Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, except for
Shares of Series B Preferred Stock or options to acquire Excluded
Securities:
(a) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subparagraphs (1) and (2) above), if any,
received by the Company upon the issuance of such options or
rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby;
(b) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange of any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such
securities, options, or rights were issued and for a
consideration equal to the consideration received by the Company
for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be
received by the Company upon the conversion or exchange of such
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in paragraphs (1) and (2) above);
(c) on any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or
rights or conversions of or exchanges for such securities, other
than a change resulting from the anti-dilution provisions
thereof, the applicable Conversion Price shall forthwith be
readjusted to such Conversion Price as would have been obtained
had the adjustment made upon the issuance of such options,
rights or securities not converted prior to such change or
options or rights related to such securities not converted prior
to such change been made upon the basis of such change;
(d) upon the expiration of any such options or the termination of
any rights, convertible securities or exchangeable securities,
the applicable Conversion Price shall forthwith be readjusted to
such Conversion Price as would have been in effect at the time
of such expiration or
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termination had such options, rights, convertible securities or
exchangeable securities, to the extent outstanding immediately
prior to such expiration or termination, never been issued; and
(e) no further adjustment of the Conversion Price adjusted upon the
issuance of any such options, rights, convertible securities or
exchangeable securities shall be made as a result of the actual
issuance of Common Stock on the exercise of any such rights or
options or any conversion or exchange of any such securities.
(iv) Upon Stock Dividends, Subdivisions or Splits. If, at any time after
April 14, 2000, the number of shares of Common Stock outstanding is
increased by a stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, following the
record date for the determination of holders of Common Stock entitled to
receive such stock dividend, or to be affected by such subdivision or
split-up, the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of Series B
Preferred Stock shall be increased in proportion to such increase in
outstanding shares.
(v) Upon Combinations. If, at any time after April 14, 2000, the number
of shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock into a smaller number of shares of
Common Stock, then, following the record date to determine shares affected
by such combination, the Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of Series B Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
(vi) Upon Reclassifications, Reorganizations, Consolidations or Mergers.
In the event of any capital reorganization of the Company, any
reclassification of the stock of the Company (other than a change in par
value or from par value to no par value or from no par value to par value
or as a result of a stock dividend or subdivision, split-up or combination
of shares), or any consolidation or merger of the Company with or into
another corporation (where the Company is not the surviving corporation or
where there is a change in or distribution with respect to the Common
Stock), each share of Series B Preferred Stock shall after such
reorganization, reclassification, consolidation, or merger be convertible
into the kind and number of shares of stock or other securities or property
of the Company or of the successor corporation resulting from such
consolidation or surviving such merger, if any, to which the holder of the
number of shares of Common Stock deliverable (immediately prior to the time
of such reorganization, reclassification, consolidation or merger) upon
conversion of such Series B Preferred Stock would have been entitled upon
such reorganization, reclassification, consolidation or merger. The
provisions of this clause shall similarly apply to successive
reorganizations, reclassifications, consolidations, or mergers.
Notwithstanding anything contained in this Certificate of Designations to
the contrary, in the event that the Company shall effect any of the
transactions described in this clause (vi), each person (other than the
Company) which may be required to issue a new share of Series B Preferred
Stock as provided above, shall assume by written instrument delivered to, and
reasonably satisfactory to, the Requisite Holders (i) the obligations of the
Company under this Certificate of Designations (and if the Company shall
survive the consummation of such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing
obligations of the Company under this Certificate of Designations) and (ii)
the obligation to deliver to all holders of Series B Preferred Stock such new
share of Series B Preferred Stock as, in accordance with the foregoing
provisions of this clause (vi), such holders of Series B Preferred Stock may
be entitled to receive, and such person shall have similarly delivered to such
holders of Series B Preferred Stock an opinion of counsel for such person,
which counsel shall be reasonably satisfactory to the Requisite Holders,
stating that this Certificate of Designations shall thereafter continue in
full force and effect and that the terms hereof (including, without
limitation, all of the provisions of this clause (vi), shall be applicable to
the stock, securities, cash or property which such person may be required to
deliver upon any conversion of any of the Series B Preferred Stock or such new
share of Series B Preferred Stock or the exercise of any right pursuant
hereto.
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(vii) Deferral in Certain Circumstances. In any case in which the
provisions of this Section 8(d) shall require that an adjustment shall
become effective immediately after a record date of an event, the Company
may defer until the occurrence of such event (1) issuing to the holder of
any Series B Preferred Stock converted after such record date and before
the occurrence of such event the shares of capital stock issuable upon such
conversion by reason of the adjustment required by such event and issuing
to such holder only the shares of capital stock issuable upon such
conversion before giving effect to such adjustments, and (2) paying to such
holder any amount in cash in lieu of a fractional share of capital stock
pursuant to Section 8(c) above; provided, however, that the Company shall
deliver to such holder an appropriate instrument or due bills evidencing
such holder's right to receive such additional shares and such cash.
(viii) Other Anti-Dilution Provisions. (1) If the Company has issued or
issues any securities on or after April 14, 2000 containing provisions
protecting the holder or holders thereof against dilution in any manner
more favorable to such holder or holders thereof than those set forth in
this Section 8(d), such provisions (or any more favorable portion thereof)
shall be deemed to be incorporated herein as if fully set forth in this
Certificate of Designations and, to the extent inconsistent with any
provision of this Certificate of Designations, shall be deemed to be
substituted therefor; or (2) if any event occurs as to which the foregoing
provisions of this Section 8(d) are not strictly applicable or, if strictly
applicable, would not fairly and adequately protect the conversion rights
of the holders of the Series B Preferred Stock in accordance with the
essential intent and principles of such provisions, then the Board of
Directors shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as
shall be reasonably necessary to protect such purchase rights as aforesaid,
but in no event shall any such adjustment have the effect of increasing the
Conversion Price or decreasing the number of shares of Common Stock
issuable upon the conversion of the Series B Preferred Stock.
(ix) Appraisal Procedure. In any case in which the provisions of this
Section 8(d) shall necessitate that the Appraisal Procedure be utilized for
purposes of determining an adjustment to the Conversion Price, the Company
may defer until the completion of the Appraisal Procedure and the
determination of the adjustment (1) issuing to the holder of any share of
Series B Preferred Stock converted after the date of the event that
requires the adjustment and before completion of the Appraisal Procedure
and the determination of the adjustment, the shares of capital stock
issuable upon such conversion by reason of the adjustment required by such
event and issuing to such holder only the shares of capital stock issuable
upon such conversion before giving effect to such adjustment and (2) paying
to such holder any amount in cash in lieu of a fractional share of capital
stock pursuant to Section 8(c) above; provided, however, that the Company
shall deliver to such holder an appropriate instrument or due bills
evidencing such holder's right to receive such additional shares and such
cash.
(x) Exceptions. Section 8(d) shall not apply to (1) any issuance of
Common Stock upon exercise of any options or warrants outstanding on the
date hereof, (2) the issuance of shares of Common Stock in an aggregate
amount not to exceed 500,000 shares to McLane Group, L.P., (3) the issuance
of shares of Common Stock in an aggregate amount not to exceed 2,600,000
shares upon exercise of options or warrants that have been approved by the
Board of Directors, or any issuance of such options or warrants, (4) shares
of Common Stock issued pursuant to the Company's current employee stock
purchase plan in an amount not to exceed 114,000 shares (the securities
referred to in clauses (1), (2), (3) and (4) being collectively referred to
as "Excluded Securities"), or (5) any issuance of Common Stock in a widely
distributed underwritten public offering at a price per share at least
equal to the Conversion Price then in effect if the underwriting discount
does not exceed 7%.
(xi) On the Outside Date, in the event that the Company shall not have
obtained the HSR Approval, the Conversion Price shall be reduced to an
amount equal to 50% of the Conversion Price in effect immediately prior to
the Outside Date.
Notwithstanding the foregoing, in the case of shares of Series B Preferred
Stock called for redemption, conversion rights will expire at the close of
business on the redemption date unless the Company defaults in making the
payment due upon redemption.
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<PAGE>
(e) Exercise of Conversion Privilege. In order to exercise the conversion
privilege, the holder of any share of Series B Preferred Stock shall surrender
the certificate evidencing such share of Series B Preferred Stock, duly
endorsed or assigned to the Company in blank, at any office or agency of the
Company maintained for such purpose, accompanied by written notice to the
Company at such office or agency that the holder elects to convert such Series
B Preferred Stock or, if less than the entire amount thereof is to be
converted, the portion thereof to be converted. Series B Preferred Stock shall
be deemed to have been converted immediately prior to the close of business on
the date (the "Conversion Date") of surrender of such shares of Series B
Preferred Stock for conversion in accordance with the foregoing provisions,
and at such time the rights of the holder of such shares of Series B Preferred
Stock as a holder shall cease, and the person or persons entitled to receive
the Common Stock issuable upon conversion shall be treated for all purposes as
the record holder or holders of such Common Stock as and after such time. As
promptly as practicable on or after the Conversion Date, the Company shall
issue and shall deliver at any office or agency of the Company maintained for
the surrender of Series B Preferred Stock a certificate or certificates for
the number of full shares of Common Stock issuable upon conversion, together
with payment in lieu of any fraction of a share, as provided in Section 8(c).
In the case of any certificate evidencing shares of Series B Preferred Stock
which is converted in part only, upon such conversion the Company shall
execute and deliver a new certificate evidencing the number of shares of
Series B Preferred Stock that are not converted.
(f) Notice of Adjustment of Conversion Price. Whenever the Conversion Price
is adjusted as herein provided:
(i) the Company shall compute the adjusted Conversion Price in
accordance with Section 8(d) and shall prepare a certificate signed by the
Company's independent accounting firm setting forth the adjusted Conversion
Price and showing in reasonable detail the facts upon which such adjustment
is based, and such certificate shall forthwith be filed at each office or
agency maintained for such purpose for conversion of shares of Series B
Preferred Stock; and
(ii) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall forthwith be prepared by
the Company and, as soon as practicable after it is prepared, such notice
shall be mailed by the Company at its expense to all holders of Series B
Preferred Stock at their last addresses as they shall appear in the stock
register.
(g) Notice of Certain Corporate Action.
In case:
(i) the Company shall take an action, or an event shall occur, that
would require a Conversion Price adjustment pursuant to Section 8(d);
(ii) the Company shall grant to the holders of its Common Stock rights
or warrants to subscribe for or purchase any shares of capital stock of any
class;
(iii) of any reclassification of the Common Stock (other than a
subdivision or combination of the outstanding shares of Common Stock), or
of any consolidation, merger or share exchange to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company;
(iv) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or
(v) the Company or any Subsidiary shall commence a tender offer for all
or a portion of the outstanding shares of Common Stock (or shall amend any
such tender offer to change the maximum number of shares being sought or
the amount or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained
for such purpose, and shall cause to be mailed to all holders of Series B
Preferred Stock at their last addresses as they shall appear in the stock
register, at least 30 days prior to the applicable record, effective or
expiration date hereinafter specified, a notice
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<PAGE>
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution or granting of rights or warrants, or, if a record is
not to be taken, the date as of which the holders of Common Stock of record
who will be entitled to such dividend, distribution, rights or warrants are to
be determined, (y) the date on which such reclassification, consolidation,
merger, share exchange, sale, transfer, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up, or (z) the date on which such tender
offer commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material terms
thereof (or the material terms of the amendment thereto). Such notice shall
also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect of such action on the Conversion Price and
the number, kind or class of shares or other securities or property which
shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of the Series B Preferred Stock. Neither the
failure to give any such notice nor any defect therein shall affect the
legality or validity of any action described in clauses (i) through (v) of
this Section 8(g).
(h) Company to Reserve Common Stock. The Company shall at all times reserve
and keep available, free from preemptive rights, out of the authorized but
unissued Common Stock or out of the Common Stock held in treasury, for the
purpose of effecting the conversion of Series B Preferred Stock, the full
number of shares of Common Stock then issuable upon the conversion of all
outstanding shares of Series B Preferred Stock. Before taking any action that
would cause an adjustment reducing the conversion price below the then par
value (if any) of the shares of Common Stock deliverable upon conversion of
the Series B Preferred Stock, the Company will take any corporate action that,
in the opinion of its counsel, is necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of Common Stock
at such adjusted conversion price.
(i) Taxes on Conversions. The Company will pay any and all original
issuance, transfer, stamp and other similar taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
Series B Preferred Stock pursuant hereto. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Common Stock in a name other
than that of the holder of the share(s) of Series B Preferred Stock to be
converted, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.
Section 9. Preemptive Rights. (a) Each holder of Series B Preferred Stock
shall have the right to purchase its Pro Rata Amount of any New Securities
that the Company may, from time to time, propose to sell and issue. In the
event the Company proposes to issue any New Securities, it shall give all
holders of Series B Preferred Stock written notice, at their last addresses as
they shall appear in the stock register, at least 20 Business Days before such
issuance, describing the type of New Securities, the price and number of
shares (or principal amount) and the general terms upon which the Company
proposes to issue the same. Each such holder shall have 20 Business Days from
the date of receipt of any such notice to agree to purchase up to the amount
of New Securities equal to such holder's Pro Rata Amount of such New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company, at its principal office or such other
address as may be specified by the Company in its written notice to the
holders, of such holder's intention to purchase such New Securities at the
initial closing of the sale of New Securities and the number of such New
Securities that such holder intends to purchase.
(b) In the event a holder of Series B Preferred Stock fails to exercise in
full its right of participation within said 20 Business Day period as set
forth in Section 9(a) above, the Company shall have thirty (30) days
thereafter to sell additional amounts of New Securities respecting which such
holder's option was not exercised, at the price and upon the terms specified
in the Company's notice. The Company shall not issue or sell any additional
amounts of New Securities after the expiration of such 30-day period without
first offering such securities to the holders of Series B Preferred Stock in
the manner provided above.
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<PAGE>
(c) The rights set forth in this Section 9, including the notice provisions
relating thereto, may be waived by the Requisite Holders.
Section 10. Event of Non-Compliance.
Upon the occurrence of any Event of Non-Compliance, the Company shall give
the holders of Series B Preferred Stock prompt notice of such occurrence and
shall use reasonable commercial efforts to cure promptly such Event of Non-
Compliance.
Section 11. Indemnification and Insurance. (a) The Company shall indemnify
its directors to the fullest extent authorized or permitted by law, as now or
hereafter in effect, and such right to indemnification shall continue as to a
person who has ceased to be a director of the Company and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the Company shall not be obligated to indemnify any director
(or his or her heirs, executors or personal or legal representatives) in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board
of Directors. The right to indemnification conferred by this Section 11 shall
include the right to be paid by the Company the expenses incurred in defending
or otherwise participating in any proceeding in advance of its final
disposition. The rights to indemnification and to the advance of expenses
conferred in this Section 11 shall not be exclusive of any other right which
any person may have or hereafter acquire under the Company's Certificate of
Incorporation or Bylaws, any statute, agreement, vote of stockholders or
disinterested directors or otherwise. Any repeal or modification of this
Section 11 or this Certificate of Designations shall not adversely affect any
rights to indemnification and to the advancement of expenses of a director of
the Company existing at the time of such repeal or modification with respect
to any acts or omissions occurring prior to such repeal or modification.
(b) The Company shall purchase and maintain insurance on behalf of any
person who is or was a director of the Company against any liability asserted
against such person and incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the Company would
have the power or the obligation to indemnify such person against such
liability under the provisions of Section 11(a). Such insurance shall be in
amounts and on other terms as are customary for corporations similar in size
to the Company.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designations
to be signed by , its , and attested by , its Secretary, this
day of , 2000.
By: _________________________________
Name:
Title:
Attested:
By: _________________________________
Secretary
K-17
<PAGE>
Exhibit 99.13
PROMISSORY NOTE
U.S. $3,000,000.00 Dated: April 5, 2000
FOR VALUE RECEIVED, the undersigned, PEAPOD, INC. , a Delaware corporation
(the "Borrower"), HEREBY UNCONDITIONALLY PROMISES TO PAY to the order of BEW,
Inc., a Delaware corporation (the "Lender"), or its registered and permitted
assigns, in lawful money of the United States of America the principal sum of
THREE MILLION AND NO/100 U.S. DOLLARS (U.S. $3,000,000.00), such amount
representing the original aggregate principal amount of two term loans
evidenced hereby, one in the principal amount of U.S. $2,000,000.00 made on
April 5, 2000 and the other in the principal amount of U.S. $1,000,000.00 made
on April 10, 2000 (collectively, the "Term Loan") owed by the Borrower to the
Lender pursuant to this Promissory Note and that certain Letter, dated as of
April 4, 2000 by and between the Borrower and the Lender (as amended as of the
date hereof, the "Letter Agreement").
The Borrower promises to pay all principal due hereunder in one (1)
installment, payable on May 19, 2000 (the "Maturity Date"). The Borrower
promises to pay interest on the unpaid principal amount of the Term Loan from
the date hereof (or as to any portion of the Term Loan advanced after the date
hereof, from the date so advanced) until such principal amount is paid in full
on the Maturity Date. Interest shall be computed on the basis of a year of 365
days and actual days elapsed at a per annum rate equal to nine percent (9.00%).
The Borrower shall prepay the Term Loan with the cash proceeds (after
deducting reasonable out-of-pocket expenses) from any equity issuances by, or
capital contributions to, the Borrower or any of its Subsidiaries (other than
up to U.S. $100,000.00 of such proceeds from the exercise of employee options),
from any incurrences of Indebtedness by the Borrower or any of its Subsidiaries
and from any asset sales by the Borrower or any of its Subsidiaries (other than
asset sales not exceeding $100,000.00 and other than sales of inventory in the
ordinary course of business consistent with past practice).
The indebtedness evidenced hereby may be prepaid in whole or in part at any
time and from time to time without premium or penalty.
All payments of principal and interest in respect of this Promissory Note
shall be made payable to the Lender in lawful money of the United States of
America for the Lender's account at Fleet Bank, 100 Federal St., Boston, MA
02106, Re: Payment for Peapod, Inc. Term Loan, or at such other place as shall
be designated by the Lender for such purpose.
This Promissory Note is the Term Note referred to in, and is entitled to the
benefits of, and all amounts due hereunder are secured pursuant to the terms of
an Amended and Restated Security Agreement (as from time to time amended,
supplemented or restated, (the "Security Agreement") among the Borrower, the
Lender and Koninklijke Ahold NV and a Collateral Assignment of Intellectual
Property (as from time to time amended, supplemented or restated, the
"Intellectual Property Assignment" and, collectively, together with the
Security Agreement the "Security Documents") between the Borrower and the
Lender. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Security Agreement.
THE BORROWER WAIVES ANY AND ALL REQUIREMENTS OF DEMAND, PRESENTMENT,
PROTEST, NOTICE OF DISHONOR OR FURTHER NOTICE OF ANY KIND IN CONNECTION WITH
THIS PROMISSORY NOTE.
Should any payment of principal or interest become due and payable on any
day other than a Business Day ("Business Day" being any day not a Saturday,
Sunday or legal holiday in Chicago, Illinois), the maturity thereof shall be
extended to the next succeeding Business Day and interest shall continue to
accrue at the applicable rate until such payment is made.
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Should the indebtedness represented by this Promissory Note or any part
hereof be collected at law or in equity or in bankruptcy, receivership or
other court proceeding, or should this Promissory Note be placed in the hands
of attorneys for collection after default, Borrower agrees to pay, in addition
to the principal, interest due and payable hereon and any other sums due and
payable hereon, all costs of collecting or attempting to collect this
Promissory Note, including reasonable attorneys' fees and expenses (including
those incurred in connection with any appeal).
This Promissory Note shall not require the payment nor permit the
collection of interest or any late payment charge in excess of the maximum
rate permitted by law. If any excess interest or late payment charge in such
respect is provided for under this Promissory Note or shall be adjudicated to
provide for such terms, neither Borrower nor its successors or assigns shall
be obligated to pay such interest or late payment charge in excess of the
maximum amount permitted by law, and the right to demand the payment of any
such excess shall be and hereby is waived. In the event Lender shall collect
monies which are deemed to constitute interest which would increase the
effective interest rate to a rate in excess of the maximum rate permitted by
law, all such sums deemed to constitute interest in excess of the maximum rate
permitted by law shall, upon such determination, at the option of Lender, be
returned to Borrower or credited against the principal balance of Borrower's
obligation then outstanding under this Promissory Note. This provision shall
control any other provision of this Promissory Note.
Upon the occurrence of any of the following events (each an "Event of
Default"): (i) the Borrower shall (a) fail to pay the principal amount of the
Term Loan when due or (b) fail to pay interest on the Term Loan or any other
amount due hereunder; (ii) if any representation or warranty made by the
Borrower herein, in any Security Document or with respect to the obligations
of the Borrower evidenced hereby shall be false or misleading in any material
respect when made or deemed made; (iii) if the Borrower shall fail to perform
or observe any other term or condition binding upon it hereunder or in the
Letter Agreement or in any Security Document; or (iv) (a) if the Borrower
shall generally not pay its debts as such debts become due or shall make a
general assignment for the benefit of creditors; (b) if any proceeding shall
be instituted by or, unless dismissed within thirty (30) days, against, the
Borrower seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency, or relief of debtors generally, or seeking the entry
of an order for relief or for the appointment of a receiver, trustee,
custodian, or other similar officer for it or for any part of its assets; or
(c) if the Borrower shall take any action to authorize any of the actions set
forth in subclauses (iv) (a) and (iv) (b) of this paragraph; then the Lender
may, without demand, notice or legal process of any kind, declare the
outstanding principal amount of the Term Loan together with all accrued and
unpaid interest thereon and all other amounts due hereunder (collectively, the
"Indebtedness") to be, whereupon the Indebtedness shall become, immediately
due and payable; provided, however, that upon the occurrence of any Event of
Default specified in subclause (iv) of this paragraph, the Indebtedness shall
automatically become due and payable.
The Borrower hereby represents and warrants on and as of the date hereof
that: (i) it has the requisite power and authority to execute, deliver, and
perform its obligations under this Promissory Note, each Security Document and
the Letter Agreement and has taken all necessary action to authorize the same,
and such execution, delivery, and performance do not violate or contravene its
organizational documents or any law, regulation, agreement, writ, or order
applicable to or binding upon it; and (ii) this Promissory Note, each Security
Document and the Letter Agreement have been duly executed and delivered, and
constitute the legal, valid, and binding obligation of the Borrower,
enforceable against the Borrower in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.
The Borrower further agrees to indemnify and hold harmless the Lender (and
its subsequent assigns), and each affiliate thereof and each director,
officer, employee, agent or representative thereof (each, an "indemnified
person") in connection with any losses, claims, damages, liabilities or other
expenses (whether asserted by the Borrower or any third party) to which such
indemnified persons may become subject, insofar as such losses,
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claims, damages, liabilities (or actions or other proceedings commenced or
threatened in respect thereof) or other expenses arise out of or in any way
relate to or result from this Promissory Note or any Security Document, the
extensions of credit contemplated hereby or any lien or security interest
granted under any Security Document, or in any way arise from any use or
intended use of the Term Loan or the proceeds thereof, and the Borrower agrees
to reimburse each indemnified person for any legal or other expenses incurred
in connection with investigating, defending or participating in any such loss,
claim, damage, liability or action or other proceeding (whether or not such
indemnified person is a party to any action or proceeding out of which
indemnified expenses arise) (all of the foregoing, collectively, the
"indemnified liabilities" and each an "indemnified liability"), provided that
the Borrower shall have no obligation hereunder to indemnify any indemnified
person (i) for any loss, claim, damage, liability or expense which resulted
primarily from the gross negligence or willful misconduct of such indemnified
person; (ii) which is for reimbursement of amounts paid by an indemnified
person on any final, non-appealable judgment in the Borrower's favor against
an indemnified person by a court of competent jurisdiction; or (iii) which is
for reimbursement of amounts paid by the party seeking indemnification in any
settlement of any claim constituting an indemnified liability with a party
other than the Borrower which has properly effected by an indemnified person
without the prior consent of the Borrower, unless either (x) the Borrower has
had a reasonable opportunity to defend such indemnified person against such
claim and has not promptly and diligently prosecuted such defense by counsel
reasonably satisfactory to such indemnified person or (y) the Debtor has
failed to provide evidence reasonably satisfactory to the Lender of the
Borrower's financial ability to satisfy its indemnity obligations hereunder in
respect of such claim. All amounts owing to the Lender or other indemnified
person pursuant to this paragraph shall be paid by the Borrower promptly
following any demand by the person or entity entitled to such payment pursuant
to the terms of this paragraph. None of the Lender or its subsequent permitted
assigns shall be responsible or liable to the Borrower or any other person for
damages which may be alleged as a result of this Promissory Note. The
provisions of this paragraph shall survive repayment of the Term Loan and all
other Obligations.
All payments made by, or on behalf of, the Borrower hereunder will be made
without setoff, counterclaim or other defense.
THIS PROMISSORY NOTE SHALL BE INTERPRETED, GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. THE BORROWER
HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
UNDER OR WITH RESPECT HERETO.
Any legal action or proceeding with respect to this Promissory Note or any
Security Document may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Promissory Note, the Borrower hereby accepts
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Borrower further irrevocably
consents to the service of process out of any of the aforementioned courts in
any action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address designated
below, such service to become effective seven days after such mailing. Nothing
herein shall affect the right of the Lender or any holder of this Promissory
Note to serve process in any of the matters permitted by law or to commence
legal proceedings or otherwise proceed against the Borrower in any other
jurisdiction. The Borrower hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Promissory
Note brought in the courts referred to above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that any such action
or proceeding brought in any such court has been brought in an inconvenient
forum.
Neither the failure nor delay on the part of the Lender to exercise any
right, power or privilege under this Promissory Note and no course of dealing
between the Borrower and the Lender shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under
this Promissory Note preclude any other or further exercise thereof, or the
exercise of any other right, power or privilege. The rights
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and remedies herein expressly provided are cumulative and not exclusive of any
rights or remedies which the Lender would otherwise have. No notice to or
demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the right of the Lender to any other or further action in any
circumstances without notice or demand.
At any time and from time to time, the Borrower agrees that the Borrower
will cooperate with the Lender and will execute and deliver, or cause to be
executed and delivered, all such further instruments and documents, and will
take all such further actions, as the Lender may reasonably request in order
to carry out the provisions and purposes of this Promissory Note and each
Security Document.
Whenever in this Promissory Note reference is made to Lender or Borrower,
such reference shall be deemed to include, as applicable, a reference to their
respective successors and assigns; provided, that notwithstanding anything to
the contrary set forth herein, this Promissory Note shall not be pledged,
transferred or assigned by the Lender without the prior written consent of the
Borrower (other than affiliates of the Lender). The provisions of this
Promissory Note shall be binding upon and shall inure to the benefit of said
successors and assigns. Borrower's successors and assigns shall include,
without limitation, a receiver, trustee or debtor-in-possession of or for
Borrower.
The Borrower may not assign or delegate any of its obligations or
agreements hereunder. No amendment, modification or waiver of any provision of
this Promissory Note shall be effective unless it is in writing and signed by
the Lender and the Borrower.
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<PAGE>
This Promissory Note supersedes the Promissory Note dated April 5, 2000 in
the principal amount of U.S. $2,000,000.00 issued by the Borrower to the
Lender.
Peapod, Inc.
/s/ Dan Rabinowitz
By: _________________________________
Name: Dan Rabinowitz
Title: Senior VP and Chief Financial
Officer
Address: 9933 Woods Drive
Skokie, IL 60077
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