<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
STREAMLINE.COM, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7389 04-3187302
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Numbers) Identification No.)
</TABLE>
--------------------------
27 DARTMOUTH STREET
WESTWOOD, MASSACHUSETTS 02090
(781) 407-1900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
TIMOTHY A. DEMELLO
CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
STREAMLINE, INC.
27 DARTMOUTH STREET
WESTWOOD, MASSACHUSETTS 02090
(781) 407-1900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
WITH COPIES TO:
WAYNE D. BENNETT, ESQ. KEITH F. HIGGINS, ESQ.
BINGHAM DANA LLP ROPES & GRAY
150 FEDERAL STREET ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110 BOSTON, MASSACHUSETTS 02110
(617) 951-8000 (617) 951-7000
FACSIMILE NO. (617) 951-8736 FACSIMILE NO. (617) 951-7050
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
Common stock, $0.01 par value per share......................... $69,000,000 $19,182
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
The information contained in this prospectus is not complete and may be changed.
The underwriters may not confirm sales of these securities until the
registration statement filed with the Securities and Exchange Commission becomes
effective. This prospectus is not an offer to sell these securities, and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL , 1999
[ ] SHARES
[LOGO]
COMMON STOCK
Streamline.com, Inc. is offering shares of its common stock.
This is our initial public offering and no public market currently exists for
our shares. We have applied to have our common stock quoted on the Nasdaq
National Market under the symbol "SLNE." We estimate that the initial public
offering price will be between $ and $ .
-------------------
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
-----------------
<TABLE>
<CAPTION>
Per Share Total
----------------- ------
<S> <C> <C>
Public Offering Price $ $
Discounts and Commissions to Underwriters $ $
Proceeds to Streamline.com $ $
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
-------------------
NATIONSBANC MONTGOMERY SECURITIES LLC
PAINEWEBBER INCORPORATED
DAIN RAUSCHER WESSELS A DIVISION OF DAIN RAUSCHER
INCORPORATED
INTERNET DISTRIBUTION BY
E*TRADE SECURITIES
The date of this prospectus is , 1999
<PAGE>
[Outside Front Gate]
(Two frames with images and text. The first frame is labeled "The Customer" and
contains a picture of a mother and child; accompanying text explains that
consumers demand time-saving alternatives. The second frame is labeled "The
Problem" and contains the image of a child pushing a grocery cart through a
supermarket; accompanying text describes stressful, time-consuming demands.)
[Inside Front Cover]
(Under the heading "The Solution" is a series of pictures and text
circumscribing an oval with text in the center that describes the way in which
Streamline.com simplifies the lives of busy suburban families. Each image
indicates an advantage of using Streamline.com. Rotating clockwise around the
oval, the pictures are labeled "Pantry Replenishment", "Easy Ordering",
"Merchandising", "Warehousing", "Efficient Picking", "Packing", "Delivery",
"Unattended Delivery", each picture being accompanied by a brief list of
descriptive phrases. "Customer", "Merchandising", "Order Assembly", and
"Delivery" appear in the respective corners of the page.)
[Inside Back Cover]
(Under the heading "The Shopping Software", four screen shots labeled,
"Marketplace", "Compare", "Video" and "Personal Shopping List" highlight
features of Streamline.com's CD-ROM application.)
THE MARKS STREAMLINE-REGISTERED TRADEMARK- AND WE BRING IT ALL
HOME-REGISTERED TRADEMARK- ARE FEDERALLY REGISTERED U.S. SERVICE MARKS AND THE
MARKS DRO(SM), DON'T RUN OUT(SM) AND SIMPLE SOURCE(TM) ARE SUBJECT TO PENDING
APPLICATIONS FOR REGISTRATION. EACH OF THESE MARKS ARE THE PROPERTY OF
STREAMLINE. THIS PROSPECTUS CONTAINS TRADEMARKS, SERVICE MARKS AND TRADE NAMES
OF COMPANIES AND ORGANIZATIONS OTHER THAN STREAMLINE.
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS,
"STREAMLINE.COM," "STREAMLINE," "WE," "US" AND "OUR" REFER TO STREAMLINE.COM,
INC. AND ITS SUBSIDIARY, STREAMLINE MID-ATLANTIC, INC., UNLESS THE CONTEXT
OTHERWISE REQUIRES.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary......................................................................................... 4
Risk Factors............................................................................................... 7
Use of Proceeds............................................................................................ 16
Dividend Policy............................................................................................ 16
Capitalization............................................................................................. 17
Dilution................................................................................................... 18
Selected Consolidated Financial Data....................................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 21
Business................................................................................................... 31
Management................................................................................................. 47
Certain Transactions....................................................................................... 55
Principal Stockholders..................................................................................... 57
Description of Capital Stock............................................................................... 59
Shares Eligible for Future Sale............................................................................ 63
Underwriting............................................................................................... 64
Legal Matters.............................................................................................. 66
Experts.................................................................................................... 66
Additional Information..................................................................................... 66
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THIS ENTIRE PROSPECTUS CAREFULLY. UNLESS OTHERWISE INDICATED,
ALL INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES THAT THE UNDERWRITERS WILL
NOT EXERCISE THEIR OVER-ALLOTMENT OPTION. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS, WHICH INVOLVE RISKS AND UNCERTAINTIES. STREAMLINE'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED, ALL INFORMATION CONTAINED IN THIS PROSPECTUS REFLECTS AN AMENDMENT TO
STREAMLINE'S CERTIFICATE OF INCORPORATION WHICH WILL RESULT IN A 1-FOR-2 REVERSE
STOCK SPLIT OF STREAMLINE'S COMMON STOCK AND ALSO REFLECTS THE CONVERSION OF
STREAMLINE'S SERIES A, SERIES B, SERIES C AND SERIES D CONVERTIBLE PREFERRED
STOCK INTO COMMON STOCK.
STREAMLINE.COM, INC.
We simplify the lives of busy suburban families by providing them with
Internet-based ordering of a wide range of quality goods and services and
delivering these items directly to their homes. By eliminating frequent trips to
multiple physical stores, we significantly shorten and simplify the traditional
shopping needs of our customers, who increasingly demand time-saving lifestyle
solutions. We deliver our products and services to each customer through a
single weekly delivery. Our products, which we purchase directly from
wholesalers, distributors and manufacturers, include:
<TABLE>
<S> <C>
- brand-name groceries - fresh baked goods
- quality meats and seafood - freshly prepared meals
- fresh produce - health and beauty care products
- dairy products, including gourmet - cleaning supplies and other household
cheeses items
- sliced-to-order deli products - specialty pet food and supplies
- organic foods - fresh flowers
- frozen foods - stationery supplies and postage stamps
- kosher foods - seasonal items, including firewood,
charcoal and holiday products
</TABLE>
In addition, we offer a wide range of related services, such as:
<TABLE>
<S> <C>
- dry cleaning pick-up and delivery - package pick-up and delivery
- clothing alteration and repair - bottle and can redemption
- video and video game rental - shoe repair
- film processing and supplies - food and clothing drives
- bottled water and cooler delivery
</TABLE>
Our necessity-based product and service offerings, combined with the
frequency of ordering and delivery, create an opportunity to develop long-term
customer relationships. The Streamline customer tends to be a dual-income
household having at least one child and access to the Internet. During 1998, our
average customer placed approximately 40 orders and average product and service
revenue per order was $102. We also derive revenue from monthly subscription
fees and from advertising, research and marketing fees.
We have provided our products and services to suburban households in the
greater Boston area over the past several years and have developed a business
model that we intend to replicate in other markets across the country. This
model includes:
- an attractive, highly functional and user-friendly Internet-based ordering
process
- a consumer resource center, which is a strategically located,
multi-temperature zone, warehouse-based, dedicated fulfillment center
designed to efficiently aggregate a wide range of goods and services
4
<PAGE>
- a physical presence in the customer's home, which includes a
refrigerator/freezer and a compact storage unit, collectively referred to
as the Streamline box
- a highly targeted customer base of busy suburban families who value
time-saving Internet ordering and unattended home delivery
- an extensive database of customer purchase behavior information
- long-term relationships with leading global consumer packaged goods
companies
Streamline is recognized as a pioneer in the emerging consumer direct
marketplace. We have entered into strategic relationships with leading consumer
packaged goods companies and business partners to develop merchandising
programs. In addition, we are collaborating with Nordstrom, Inc., a significant
stockholder, on marketing opportunities. These strategic partnerships generally
provide Streamline with revenue as well as merchandising concepts and other
business opportunities to ensure the most effective use of our channels to the
consumer. Streamline is entering the third year of its working relationships
with the following consumer packaged goods companies:
- The Gillette Company
- Kraft Foods, Inc.
- Nestle USA, Inc.
- The Procter & Gamble Company
- Warner-Lambert Company
and has recently initiated relationships with:
- Campbell Soup Company
- Kimberly-Clark Corporation
- Mott's North America (a subsidiary of Cadbury Schweppes plc)
- Nabisco, Inc.
- The Pillsbury Company
- Ralston Purina Company
- Sargento Foods Inc.
We have further expanded our product and service offerings by establishing
alliances with other e-commerce companies, including barnesandnoble.com llc
(barnesandnoble.com), Cyberian Outpost, Inc. (Outpost.com), eToys Inc.
(eToys.com), Nordstrom.com, Inc. (Nordstrom.com) and PC Flowers and Gifts, Inc.
(PCFlowers.com).
Our objective is to be the leading consumer direct supplier of frequently
purchased goods and services. Our strategy to accomplish this objective
includes:
- expanding nationally by replicating our business model
- developing and strengthening our customer acquisition capabilities
- increasing revenue per customer
- maintaining and developing relationships with consumer packaged goods
companies, e-commerce companies and strategic investors
- maximizing operational efficiency
Streamline.com, Inc. is a Delaware corporation organized in 1993. Our
principal executive offices are located in Westwood, Massachusetts and our
telephone number is (781) 407-1900. Our website is located at
www.streamline.com. Information contained on our website is not incorporated by
reference into this prospectus and you should not consider such information a
part of this prospectus.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Streamline.com...................... shares
Common stock to be outstanding after this offering.......... shares
Use of proceeds............................................. For expansion and general
corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol...................... SLNE
</TABLE>
The common stock to be outstanding after this offering is based on shares
outstanding as of March 31, 1999 and excludes 1,999,714 shares of common stock
issuable upon the exercise of outstanding stock options and warrants at a
weighted average exercise price of $5.00 per share. See "Capitalization" and
Notes 9 and 10 to Consolidated Financial Statements.
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table contains summary consolidated financial data of
Streamline. You should read this information in conjunction with the
Consolidated Financial Statements and related Notes included elsewhere in this
prospectus.
Pro forma per share amounts in the table below reflect the conversion of all
issued and outstanding shares of preferred stock of Streamline into common stock
as if the shares had been converted immediately upon their issuance. See Note 2
to Consolidated Financial Statements. The pro forma as adjusted balance sheet
data in the table below reflects the sale of shares of common stock
offered hereby at the initial public offering price of $ per share, after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by Streamline.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue............................................... $ 922 $ 2,634 $ 6,946
Total operating expenses.................................... 2,811 11,134 17,383
Net loss.................................................... (1,846) (8,315) (11,373)
UNAUDITED PRO FORMA NET LOSS PER COMMON SHARE:
Basic and diluted......................................... $ (1.28)
Shares used in computing unaudited pro forma basic and
diluted net loss per common share....................... 8,918,465
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------
PRO FORMA
ACTUAL AS ADJUSTED
--------- -------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 12,593
Working capital..................................................... 12,061
Total assets........................................................ 20,066
Capital lease obligations, net of current portion................... 381
Redeemable convertible preferred stock.............................. 37,186
Stockholders' (deficit) equity...................................... $ (18,593)
</TABLE>
6
<PAGE>
RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE RISKS DESCRIBED BELOW BEFORE YOU DECIDE TO
BUY OUR COMMON STOCK. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING US. ADDITIONAL RISKS AND UNCERTAINTIES THAT WE DO NOT PRESENTLY
KNOW ABOUT OR THAT WE CURRENTLY BELIEVE ARE IMMATERIAL MAY ALSO ADVERSELY IMPACT
OUR BUSINESS. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN SUCH CASE,
THE TRADING PRICE OF OUR COMMON STOCK COULD FALL, AND YOU MAY LOSE ALL OR PART
OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS BASED ON OUR CURRENT
EXPECTATIONS, ASSUMPTIONS, ESTIMATES AND PROJECTIONS ABOUT STREAMLINE AND OUR
INDUSTRY THAT INVOLVE RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS
ARE USUALLY ACCOMPANIED BY WORDS SUCH AS "BELIEVE," "ANTICIPATE," "PLAN,"
"SEEK," "EXPECT," "INTEND" AND SIMILAR EXPRESSIONS. OUR ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS
BECAUSE OF FACTORS SUCH AS THE RISK FACTORS DISCUSSED BELOW. WE UNDERTAKE NO
OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON,
EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.
WE HAVE A LIMITED OPERATING HISTORY
Although we were founded in 1993, most of our revenue growth has occurred
over the past two years. Accordingly, we have a limited operating history on
which to base an evaluation of our business and prospects. Our prospects are
subject to the risks and uncertainties frequently encountered by companies in
the early stages of development, particularly companies in new and rapidly
evolving markets such as the consumer direct industry. These risks include, but
are not limited to, the lack of widespread acceptance of the Internet as a means
for purchasing products and services and difficulty in managing our growth. We
cannot be certain that we will successfully address these risks. The failure to
do so could have a material adverse effect on our business, financial condition
and results of operations.
Our extremely limited operating history and the uncertain nature of the
markets in which we compete make the prediction of future results of operations
difficult or impossible. Therefore, our recent revenue growth may not indicate
the rate of revenue growth, if any, that we can expect in the future.
WE HAVE EXPERIENCED A HISTORY OF LOSSES AND ANTICIPATE FUTURE LOSSES
We have never achieved profitability and, since inception, have incurred
significant net operating losses. At December 31, 1998, we had an accumulated
deficit of $23.5 million. Because we plan to make substantial expenditures in
connection with our planned expansion, we expect to continue to incur losses for
the foreseeable future. We also expect to increase our operating expenses
significantly as we expand our sales and marketing operations and continue to
develop our customer service infrastructure. To the extent that increased
revenues do not promptly result from these expenditures, our business, financial
condition and results of operations could be materially and adversely affected.
WE HAVE NOT SIGNIFICANTLY TESTED OUR ABILITY TO EXECUTE OUR EXPANSION STRATEGY
A critical part of our business strategy is the expansion of our operations
into new regional markets and within existing markets. To date, we have operated
only one facility in one regional market, and we have no experience operating in
any other region or managing multiple facilities. Our ability to expand
successfully will depend on a number of factors in each targeted regional
market, many of which are beyond our control. These factors include:
- acceptance of our product and service offerings
- identification and availability of appropriate and affordable sites for
our facilities
7
<PAGE>
- management of facility construction and development timing and costs
- ability to develop relationships with local and regional product and
service providers
- customer acquisition costs
- hiring and training of qualified personnel
- competition
- establishment of adequate management and information systems and financial
controls
- ability to profitably manage our growth
We cannot be sure that facilities in any new market will have operating results
similar to those of our current facility. In particular, our existing operations
are located in the Boston metropolitan area which an industry study cites as an
early adopter of consumer direct services and as having demographic
characteristics that are favorable for the acceptance of the consumer direct
industry.
Our ability to expand successfully and to manage our growth will also
require us to expand our operational, managerial and technical capabilities,
while maintaining a high level of quality and service at all times. Our failure
to effectively implement our expansion strategy would have a material adverse
effect on our business, financial condition and results of operations.
WE MAY HAVE DIFFICULTY RAISING ADDITIONAL CAPITAL
We will need additional financing over time, the amount and timing of which
will depend on a number of factors, including:
- the pace of our planned expansion into new markets
- our financial performance and results
- general market and economic conditions
We cannot be sure that we will be able to secure additional financing on
acceptable terms. Holders of any future debt instruments or preferred stock that
we may issue would have rights senior to those of the holders of our common
stock, and any future issuance of common stock would result in the dilution of
stockholders' equity interests.
WE RELY ON THE GROWTH OF E-COMMERCE AND THE INFRASTRUCTURE OF THE INTERNET
A majority of our customers place their orders over the Internet, and we
expect the percentage of customers who order our products and services via the
Internet to grow. Our future revenue and profit, if any, substantially depend on
the widespread acceptance and use of the Internet. However, the growth of the
Internet as a commercial medium may be sporadic for a number of reasons,
including potentially inadequate development of the necessary network
infrastructure or delayed development of enabling technologies and performance
improvements. If speed, quality or usage demands placed on the Internet continue
to increase, the infrastructure for the Internet may not be able to support
these demands. In addition, growth of the Internet could be delayed as a result
of the pace of development or adoption of new standards and protocols required
to handle increased levels of Internet activity, or due to increased
governmental regulation. Changes in or insufficient availability of
communications services to support the Internet also could result in slower
response times and adversely affect Internet usage generally and affect
Streamline's services in particular. Our future financial condition will be
materially adversely affected if:
- use of the Internet does not continue to grow or grows more slowly than
expected
8
<PAGE>
- the infrastructure for the Internet does not effectively support any
increased usage that may occur
- the Internet does not continue to grow in importance as a commercial
marketplace
Any change in the required Internet infrastructure, standards or protocols may
require us to incur substantial expenditures in order to adapt our services to
these changing or emerging technologies, which could have a material adverse
effect on our business, financial condition and results of operations.
INCREASED COMPETITION MAY RESULT IN DECREASED DEMAND FOR OUR PRODUCTS AND
SERVICES
The market for our products and services is extremely competitive. We
currently or potentially compete with several types of companies, including:
- traditional grocery stores, such as supermarkets and independent grocery
stores, warehouse clubs, drug stores and convenience stores, some of which
fulfill orders received by telephone, fax or the Internet
- various suppliers of other goods and services, including national and
regional chains and independently owned operations, such as dry cleaners,
video rental stores, prepared meal providers, bottled water delivery
companies, pet supply stores and photo labs
- various on-line providers of groceries and other products and services,
such as Peapod, Inc., Hannaford Bros. Cos.' HomeRuns, ShopLink
Incorporated, HomeGrocer.com, Inc., Beacon Home Direct, Inc. d/b/a
Scotty's Home Market, Net Grocer Inc. and Intelligent Systems for Retail,
Inc. d/b/a WebVan, some of which are affiliated with large national and
regional chains such as Hannaford Bros. Co. and Stop & Shop Supermarket
Co.
- other consumer direct or catalog retailers selling products or services
similar to those sold by Streamline
Many of our competitors are larger and have substantially greater resources than
we do. In addition, we believe that competition will intensify as more companies
offer competitive products and services through the consumer direct channel.
Streamline believes that the main competitive factors in our market are:
- range, quality and availability of products and services
- convenience, reliability and professionalism of delivery
- ease of ordering
- level and accessibility of information regarding products
- quality of customer service
- price
- general brand awareness
If any of our competitors surpass us or are perceived to have surpassed us with
respect to one or more of these factors, we may lose potential customers to
these competitors.
We must also compete to retain our existing customers. We aggressively
market our service to reduce customer attrition and increase the size and
frequency of customers' orders. However, there can be no assurance that these
marketing initiatives will be successful. High rates of customer attrition could
materially and adversely affect our business, financial condition and results of
operations.
9
<PAGE>
WE DEPEND ON CUSTOMER ACCEPTANCE OF DIRECT, UNATTENDED DELIVERY OF GOODS AND
SERVICES
We accept orders for products and services and then deliver them directly
into our customers' garages or another secure location on their property without
requiring that they be present at the time of delivery. Market acceptance of
home delivery of products and services remains uncertain, in part because of the
real or perceived risk of increased exposure to theft and other criminal
activity by delivery personnel or others who may obtain access to the customer's
private property. Streamline's success will depend to a substantial extent on
the willingness of consumers to increase their use of direct delivery of
products and to allow us to enter their property to make unattended deliveries.
The failure of either of these circumstances to occur could materially and
adversely affect our business, financial condition and results of operations.
DIFFICULTY DEVELOPING OUR BRAND WOULD LIMIT OUR ABILITY TO EXPAND OUR CUSTOMER
BASE AND RESULT IN INCREASED CUSTOMER ACQUISITION COSTS
We believe that establishing and maintaining brand identity is a critical
aspect of attracting and expanding our customer base. The importance of brand
recognition will increase with heightened local, regional and national
competition. Promotion and enhancement of our brand will depend largely on our
success in continuing to provide high quality products and services. If
customers do not perceive our product and service offerings to be comprehensive
and of high quality, or if we introduce new services or enter into new business
ventures that customers do not favorably receive, we will risk harming our
brand. If we fail to provide high quality goods and services or otherwise
promote and maintain our brand, or if we incur excessive expenses in an attempt
to promote and maintain our brand, our business, financial condition and results
of operations could be materially and adversely affected.
WE DEPEND SIGNIFICANTLY ON OUR SUPPLIERS TO MEET CUSTOMER DEMAND
We purchase the products and services that we offer from national, regional
and local suppliers. We intend to seek additional suppliers and will rely on
such relationships to allow us to expand the products and services we offer to
our customers. While we currently have favorable working relationships with our
suppliers, we cannot be sure that these relationships will continue in the
future. Additionally, we have no commitments from our suppliers that guarantee
the availability or pricing of products or services. If any product shortages
were to arise, suppliers may choose to allocate products to other retailers. If
any of these relationships were to terminate or expire, we could have difficulty
replacing the supply source in a timely manner. Additionally, if any of our
suppliers were to experience disruptions to their business, such as labor
disputes, supply shortages or distribution problems, or if they were to allocate
products and services ordered by Streamline to their other customers, we might
not be able to satisfactorily fulfill our customers' orders, which could
materially and adversely affect our business, financial condition and results of
operations.
OUR QUARTERLY OPERATING RESULTS FLUCTUATE BASED ON SEASONAL AND OTHER FACTORS
We may experience significant fluctuations in future quarterly operating
results from a number of factors, including:
- the timing and nature of expansion efforts in both new and existing
markets and related expenses
- the introduction of new products or services and customer response to
those introductions
- seasonal trends, such as lower ordering during family vacations
- changes in pricing policies or service offerings
10
<PAGE>
- our ability to establish and expand recognition of the Streamline brand
- our ability to attract new customers and retain existing customers
- our ability to manage inventory and fulfillment operations
- our ability to sustain or improve cost of revenue
- changes in the level of marketing and other operating expenses to support
future growth
- competitive factors
- general economic conditions
Consequently, quarterly revenue and operating results have varied in the
past and may fluctuate significantly in the future. Streamline believes that
period-to-period comparisons of results will not necessarily be meaningful and
you should not rely on them as an indication of future performance. Furthermore,
due to the foregoing factors, among others, it is likely that our future
quarterly operating results will not meet the expectations of securities
analysts or investors from time to time, which may adversely affect the price of
the common stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Selected Quarterly Results of Operations."
WE DEPEND ON OUR MARKETING AND PROMOTIONAL RELATIONSHIPS FOR ADDITIONAL REVENUE
We derive a portion of our revenue through marketing and promotional
relationships with consumer packaged goods companies, and we intend to continue
to enter into similar relationships with other business partners. If we are
unable to continue promoting Streamline to these companies as an effective means
of conducting marketing and promotional efforts, we could experience a
significant decrease in revenue and our business, financial condition and
results of operations could be materially and adversely affected.
COMPETITORS COULD LICENSE OR REPLICATE OUR TECHNOLOGY SYSTEMS
Although we have directed considerable time and expense toward developing
several of the systems that we use in operating our business, such as our CD-ROM
ordering application, we do not own a copyright or other rights that would
preclude competitors from either licensing systems or portions of systems
substantially similar or identical to ours or using our systems as a model for
developing their own. Therefore, our competitors may be able to take advantage
of the time and effort that we expended in developing these systems.
DIFFICULTY IN IMPLEMENTING OUR NEW FINANCIAL MANAGEMENT SYSTEM COULD DISRUPT OUR
OPERATIONS
We are in the process of implementing a new financial management system and
are integrating this new system with other existing systems in order to improve
our accounting, financial reporting and financial control capabilities. To date,
we have spent approximately $100,000 on this system and intend to make
additional capital expenditures of approximately $800,000 in 1999 to complete
the functional roll-out of this system. If we are unsuccessful in implementing
and integrating this new system on schedule and within budget, our business,
financial condition and results of operations could be materially and adversely
affected.
DISRUPTIONS IN OUR TECHNICAL SYSTEMS COULD HARM OUR BUSINESS
Streamline's ability to successfully receive, fill and deliver orders and
our ability to provide high-quality customer service largely depend on the
operation of our technical systems. These systems could be vulnerable to, among
other factors, disruptions caused by system failures, power losses,
communication problems, natural disasters, break-ins and similar problems.
Further, weaknesses in
11
<PAGE>
communications media, such as the Internet, may compromise the security of
confidential electronic information exchanged with customers. Any system
interruptions that result in the unavailability of our website or reduced order
fulfillment performance would reduce customer satisfaction and decrease the
volume of goods sold and the attractiveness of our product and service
offerings. To date, we have not experienced material disruption of service.
However, there can be no assurance that such problems will not occur in the
future.
WE DEPEND ON OUR KEY PERSONNEL AND QUALIFIED FUTURE HIRES TO IMPLEMENT OUR
EXPANSION STRATEGY
Our success will depend on the efforts and abilities of our senior
management and key employees, particularly Timothy A. DeMello, our founder,
Chairman, President and Chief Executive Officer. We do not have employment
contracts with any of our key personnel other than with Mr. DeMello and Mr.
Britt, our Vice President of Marketing and Merchandising, and do not maintain
key-man life insurance on any employees other than Mr. DeMello. If we cannot
retain existing key managers and employ additional qualified senior managers,
our business, financial condition and results of operations could be materially
and adversely affected. Furthermore, future expansion of our operations will
require us to attract, train and retain substantial numbers of new personnel.
Certain metropolitan markets into which we may wish to expand may have very
competitive labor markets. Additionally, as we expand in new and existing
markets, we may experience labor disputes or union organization attempts. These
factors could increase our operating expenses. If we are unable to recruit or
retain a sufficient number of qualified employees, or the costs of compensation
or employee benefits increase substantially, our business, financial condition
and results of operations could be materially and adversely affected.
OUR INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE
E-commerce is characterized by rapidly changing technology. To remain
competitive, we must continue to enhance and improve the responsiveness and
functionality of our software and systems. Our future success will depend upon
our ability to keep pace with technological developments. The development of new
services and the enhancement of existing services entails significant
technological risks. We may not successfully:
- maintain and improve our software and systems
- effectively use new technologies
- adapt our services to emerging industry standards
- develop, introduce and market service enhancements or new services
If we are unable, for technical or other reasons, to develop and introduce new
services or enhancements of existing services in a timely manner in response to
changing market conditions or customer requirements, or if new services do not
achieve market acceptance, our business, financial condition and results of
operations could be materially and adversely affected.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
Streamline's success and ability to compete substantially depend upon our
proprietary systems and technology. We rely on trademark and trade secret laws
to protect our proprietary rights. Streamline has been granted service mark
registrations for the marks STREAMLINE and WE BRING IT ALL HOME and has pending
registration applications for the marks DRO, DON'T RUN OUT and SIMPLE SOURCE.
Additionally, legal standards relating to the protection of intellectual
property rights in Internet-related industries are uncertain and still evolving.
As a result, the future viability or value of our intellectual property rights,
as well as those of other companies that conduct business over the Internet, is
unknown. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our
12
<PAGE>
service or obtain and use information that we regard as proprietary. Policing
unauthorized use of our proprietary rights is difficult. In addition, litigation
may be necessary in the future to enforce our intellectual property rights, to
protect our trade secrets or trademarks or to determine the validity and scope
of the proprietary rights of others. Litigation might result in substantial
costs and diversion of resources and management attention.
Furthermore, our business activities may infringe upon the proprietary
rights of others and other parties may assert infringement claims against us,
including claims that arise from directly or indirectly providing hyperlink text
links to websites operated by third parties. Moreover, from time to time, third
parties may allege infringement by us or our strategic partners on their
trademarks, service marks and other intellectual property rights. Such claims
and any resultant litigation could subject us to significant liability for
damages, might result in invalidation of our proprietary rights and, even if not
meritorious, could result in substantial costs and diversion of resources and
management attention and have a material adverse effect on our business,
financial condition and results of operations.
ALL OF OUR SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT
Many computer systems and other equipment with embedded control chips or
microprocessors use only two digits to represent the year, and could fail or
make miscalculations due to interpreting a date including "00" to mean 1900
rather than 2000. We are currently undergoing efforts to ensure that our
critical business systems will not fail or make miscalculations as a result of
the Year 2000 date change. Although we believe that the Year 2000 date change
will not adversely affect most of our internally developed and licensed
information technology, including our financial systems and accounting software,
we cannot assure you that the production systems of many of our strategic
business partners or suppliers will not be adversely affected. In addition, we
cannot be sure that we will not have to spend significantly more than we
currently anticipate on remediation efforts for our critical systems, or that
implementation of any contingency plans we develop to deal with problems
resulting from the Year 2000 date change will successfully avoid or alleviate
this problem. Any such failures could have a material adverse effect on our
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
WE DEPEND ON PRODUCT INFORMATION SUPPLIED BY THIRD PARTIES
We currently purchase and license from third parties graphical and textual
product information that we incorporate into our website and CD-ROM application.
We cannot assure you that third-party information of this type will continue to
be available to us on commercially reasonable terms, if at all. Any failure to
obtain this type of information in the future could significantly reduce the
appeal of our Internet-based ordering systems and could adversely affect our
business, financial condition and results of operations.
WE MAY CONTRACT WITH OTHER COMPANIES TO PROVIDE BUSINESS SERVICES TO US
Streamline personnel currently perform all of our consumer resource center
operations. In the future, we may seek to contract with other companies to
perform some of these activities. Should we choose to form these kinds of
business partnerships, we would rely on these partners to assist us in operating
our consumer resource centers and if any of these relationships were to
terminate, expire or experience disruptions, we could have difficulty replacing
these partners' services in a timely manner. Additionally, any such partners
might not perform to our standards of timeliness, quality and accuracy. As a
result, we might not be able to satisfactorily deliver our customers' orders,
which could materially and adversely affect our business, financial condition
and results of operations.
13
<PAGE>
E-COMMERCE SECURITY BREACHES COULD HARM US
The expansion and continued viability of e-commerce and related Internet
communications depends on secure transmission of confidential information. We
rely on encryption and authentication technology to effect secure transmission
of confidential information. Advances in computer capabilities, new discoveries
in the field of cryptography or other developments could result in a compromise
of the codes we use to protect customer transaction data. Any such compromise of
our security could have a material adverse effect on our business, financial
condition and results of operations. Concerns over the security of e-commerce
transactions and individual privacy may also inhibit the growth of the Internet
and other on-line services generally, especially as a means of conducting
commercial transactions.
WE FACE POTENTIAL PRODUCT LIABILITY CLAIMS
We cannot assure you that the products that we deliver will be free from
contaminants. Grocery and other related products occasionally contain
contaminants due to inherent defects in the products or improper handling. If
any of these products cause harm to any of our customers, we could be subject to
product liability lawsuits. If we are found liable under a product liability
claim, or even if we are not found liable but are required to defend ourselves
against such a claim, our customers may substantially reduce or even curtail
ordering products and services from us, which could have a material adverse
effect on our business, financial condition and results of operations.
WE COULD BE AFFECTED BY GOVERNMENT REGULATION OF THE INTERNET AND LEGAL
UNCERTAINTIES RELATING TO E-COMMERCE
Currently, few laws or regulations directly apply to commerce on or access
to the Internet and we are not subject to direct government regulation, other
than regulations applicable to businesses generally and food related businesses
in particular. However, a number of legislative and regulatory proposals
relating to e-commerce are under consideration by federal, state, local and
foreign governments and, as a result, a number of laws or regulations may be
adopted with respect to Internet user privacy, taxation, pricing, quality of
products and services, intellectual property ownership and consumer protection
generally. There is also uncertainty as to how existing laws in a number of
areas will be interpreted to apply to the Internet. The additional burdens
imposed by the adoption of new laws or the application of existing laws to the
Internet may decrease the growth in the use of the Internet, which could in turn
decrease the demand for our services, increase our costs of doing business or
otherwise have a material adverse effect on our business, financial condition
and results of operations.
WE WILL CONTINUE TO BE CONTROLLED BY OUR EXISTING STOCKHOLDERS AND THEY WILL BE
ABLE TO EFFECT IMPORTANT CORPORATE ACTIONS WITHOUT THE APPROVAL OF OTHER
STOCKHOLDERS
Upon completion of this offering, our principal stockholders will
beneficially own approximately % of our outstanding common stock. See
"Principal Stockholders." As a result, these stockholders, acting together, will
be able to control the outcome of all matters submitted for stockholder action,
including
- electing members to our board of directors
- approving significant change-in-control transactions
- determining the amount and timing of dividends paid to themselves and to
our public stockholders
- otherwise controlling our management and operations
14
<PAGE>
OUR STOCK PRICE MAY DECLINE AFTER THIS OFFERING AND MAY BE VOLATILE IN THE
FUTURE
The market for shares in newly public Internet-related companies is subject
to extreme price and volume fluctuations. These broad fluctuations may
materially and adversely affect the market price of our common stock. You may
not be able to resell any shares you buy from us at or above the initial public
offering price due to a number of factors, including:
- actual or anticipated fluctuations in our operating results
- changes in investors' and securities analysts' expectations as to our
future financial performance or changes in financial estimates of
securities analysts
- announcement of new products or product enhancements by us or our
competitors
- technological innovations by us or our competitors
- the operating and stock price performance of comparable companies
In addition, although our common stock will be quoted on the Nasdaq National
Market, an active trading market may not develop or sustain itself after this
offering.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT
Purchasers of common stock in this offering will incur immediate and
substantial dilution of $ in the net tangible book value per share of
common stock from the assumed initial public offering price of $ . See
"Dilution."
PROVISIONS OF OUR GOVERNING DOCUMENTS AND DELAWARE LAW COULD DISCOURAGE
ACQUISITION PROPOSALS OR DELAY A CHANGE IN CONTROL OF STREAMLINE
Our certificate of incorporation and by-laws contain anti-takeover
provisions, including those listed below, that could make it more difficult for
a third party to acquire control of us, even if that change in control would be
beneficial to stockholders:
- our board of directors has the authority to issue common stock and
preferred stock and to determine the price, rights and preferences of any
new series of preferred stock without stockholder approval
- our board of directors is divided into three classes, each serving
three-year terms
- supermajority voting is required to amend key provisions of our
certificate of incorporation and by-laws
- there are limitations on who can call special meetings of stockholders
- stockholders may not take action by written consent
- advance notice is required for nominations of directors and for
stockholder proposals
In addition, provisions of Delaware law and our stock option plans may also
discourage, delay or prevent a change of control of Streamline or unsolicited
acquisition proposals.
FUTURE SALES BY OUR EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT THE MARKET
PRICE OF OUR COMMON STOCK
Sales of our common stock in the public market following this offering could
adversely affect the market price of our common stock. Of the shares that
will be outstanding upon the consummation of this offering:
- all of the shares offered under this prospectus will be freely
tradeable in the public market
- approximately additional shares may be sold after the expiration of
180-day lock-up agreements
- approximately additional shares may be sold upon the exercise of
stock options after the expiration of 180-day lock-up agreements
15
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of shares in
this offering will be $ million ($ million if the underwriters'
over-allotment option is exercised in full), after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us and
assuming an initial public offering price of $ per share.
We will use the net proceeds of this offering primarily to finance the
expansion of our business. We also expect to use a portion of the net proceeds
for general corporate purposes, including working capital and capital
expenditures. A portion of the net proceeds may also be used for the acquisition
of businesses, products, services or technologies that are complementary to
those of Streamline. There currently are no active negotiations, understandings,
commitments or agreements with respect to any acquisition. Pending such uses, we
intend to invest the net proceeds from this offering in short-term,
investment-grade, interest-bearing securities.
DIVIDEND POLICY
We currently intend to retain earnings for the continued development and
expansion of our business. In the future, the terms of credit agreements or
other contractual provisions may impose restrictions or limitations on the
payment of dividends. In the absence of such restrictions or limitations, the
payment of any dividends will be at the discretion of our board of directors.
16
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Streamline as of
December 31, 1998: (1) on an actual basis; (2) on a pro forma basis to give
effect to the conversion of shares of preferred stock into common stock; and (3)
on a pro forma as adjusted basis to reflect the sale of common stock by
Streamline at an assumed initial public offering price of $ per share and the
application of the net proceeds therefrom. The historical information with
respect to the Series D preferred stock reflects the accrual of 3,288 shares of
Series D preferred stock as a dividend, which together with the 228,570 issued
and outstanding shares of Series D preferred stock, will convert into common
stock as of the closing of this offering. This table should be read in
conjunction with Streamline's Consolidated Financial Statements and the related
Notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -------------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT SHARE DATA)
Capital lease obligations, net of current portion........................... $ 381 $ 381
Redeemable convertible preferred stock:
Series A preferred stock, $1.00 par value; 50,000 shares issued and
outstanding; none issued and outstanding, pro forma and pro forma as
adjusted................................................................ 5,000 --
Series B preferred stock, $1.00 par value; 80,000 shares issued and
outstanding; none issued and outstanding, pro forma and pro forma as
adjusted................................................................ 8,000 --
Series C preferred stock, $1.00 par value; 10,000 shares issued and
outstanding; none issued and outstanding, pro forma and pro forma as
adjusted................................................................ 1,000 --
Series D preferred stock, $1.00 par value, 228,570 shares issued and
outstanding; none issued and outstanding, pro forma and pro forma as
adjusted................................................................ 23,186 --
----------
Total redeemable convertible preferred stock............................ 37,186 --
----------
Stockholders' (deficit) equity:
Common stock, $0.01 par value; 22,700,000 shares authorized, 50,000,000 as
adjusted; 3,699,539 shares issued and 3,665,539 outstanding actual,
13,236,453 issued and 13,202,453 outstanding pro forma, and
shares issued and outstanding pro forma as
adjusted................................................................ 37 132
Additional paid-in capital................................................ 5,060 42,151
Treasury stock, at cost................................................... (238) (238)
Accumulated deficit....................................................... (23,452) (23,452)
---------- -----------
Total stockholders' (deficit) equity.................................... (18,593) 18,593
---------- -----------
Total capitalization.................................................. $ 18,974 $ 18,974
---------- -----------
---------- -----------
</TABLE>
The common stock to be outstanding after this offering is based on shares
outstanding as of December 31, 1998 and
- 1,999,714 shares of common stock issuable upon the exercise of outstanding
stock options and warrants outstanding at March 31, 1999 at an average
exercise price of $5.00 per share
- 1,676,867 additional shares of common stock currently reserved for
issuance under Streamline's stock option and stock purchase plans. See
"Management--Stock Option Plans"
17
<PAGE>
DILUTION
As of December 31, 1998, Streamline had a pro forma net tangible book value
of $ , or $ per share of common stock after giving effect to the
conversion of all outstanding shares of preferred stock into common stock. Pro
forma net tangible book value per share is determined by dividing the net
tangible book value of Streamline (total tangible assets less total liabilities)
by the total number of shares of common stock outstanding after giving effect to
the conversion of preferred stock of Streamline. After taking into account the
sale of shares offered hereby by Streamline, the pro forma as adjusted net
tangible book value as of December 31, 1998, would have been $ , or
$ per share. The pro forma as adjusted net tangible book value
assumes that the proceeds to Streamline, net of underwriting discounts and
commissions and offering expenses will be approximately $ . Based on the
foregoing, there would be an immediate increase in net tangible book value to
existing stockholders attributable to new investors of $ per share
and an immediate dilution of $ per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........ $
Pro forma net tangible book value per share at
December 31, 1998.................................. $
Increase per share attributable to new investors.....
---------
Pro forma as adjusted net tangible book value per share
after this offering..................................
---------
Dilution per share to new investors.................... $
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis, as of December 31,
1998, after giving effect to the conversion of all outstanding shares of
preferred stock of Streamline (including the accrued dividend of 3,288 shares)
into 9,536,914 shares of common stock upon the closing of this offering (1)
shares of common stock purchased from Streamline, (2) the total
consideration paid to Streamline and (3) the average price per share paid by the
existing stockholders and by the new investors at an assumed initial public
offering price of $ per share. Underwriting discounts and commissions and
offering expenses have not been deducted.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------ ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................................... $ % $ % $
New investors..............................................
----------- --- --------- ---
Total.................................................. 100% 100%
----------- --- --------- ---
----------- --- --------- ---
</TABLE>
As of December 31, 1998, there were options outstanding to purchase a total
of 593,000 shares of common stock, at a weighted average exercise price of $3.88
per share and 882,500 additional shares reserved for future grants and issuances
under Streamline's stock option and stock purchase plans. Additionally, at
December 31, 1998, there were outstanding warrants to purchase a total of
788,714 shares of common stock at an average exercise price of $5.72 per share.
To the extent that any of these options or warrants are exercised, there will be
further dilution to new investors.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following historical selected consolidated financial data should be read
along with Streamline's Consolidated Financial Statements and related Notes
included elsewhere in this prospectus. The selected consolidated financial data
set forth below for each of the fiscal years ended December 31, 1996, 1997 and
1998 has been derived from consolidated financial statements of Streamline,
included elsewhere in this prospectus, which have been audited by
PricewaterhouseCoopers LLP, independent accountants. The selected financial data
for the fiscal year ended December 31, 1995 has been derived from financial
statements of Streamline, not appearing elsewhere in this prospectus, which have
been audited by PricewaterhouseCoopers LLP. The selected financial data for the
fiscal year ended December 31, 1994 has been derived from financial statements
of Streamline, not appearing elsewhere in this prospectus, which have been
audited by Arthur Andersen LLP, independent accountants. The pro forma as
adjusted balance sheet data and pro forma per share and share amounts have not
been audited. You should read this data along with the Consolidated Financial
Statements and related Notes and with Management's Discussion and Analysis of
Financial Condition and Results of Operations appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1997 1998
----------- ----------- ----------- ----------- -----------
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Product and service revenue, net............... $ 29 $ 128 $ 391 $ 1,815 $ 6,026
Subscription fees.............................. -- 6 20 98 391
Advertising, research and marketing fees....... -- -- 511 721 529
----------- ----------- ----------- ----------- -----------
Total revenue.................................... 29 134 922 2,634 6,946
----------- ----------- ----------- ----------- -----------
Operating expenses:
Cost of revenue................................ 24 128 391 2,098 4,992
Fulfillment center operations.................. -- -- 916 2,769 4,013
Sales and marketing............................ 4 59 441 1,428 1,479
Technology systems and development............. 4 7 78 1,673 3,002
General and administrative..................... 627 970 985 3,166 3,897
----------- ----------- ----------- ----------- -----------
Total operating expenses......................... 659 1,164 2,811 11,134 17,383
Loss from operations............................. (630) (1,030) (1,889) (8,500) (10,437)
Other income (expense), net...................... 7 (20) 43 (80) (330)
Loss before minority interest and extraordinary
item........................................... (623) (1,050) (1,846) (8,580) (10,767)
Minority interest in net loss of consolidated
subsidiary..................................... -- -- -- 265 138
----------- ----------- ----------- ----------- -----------
Loss before extraordinary item................... (623) (1,050) (1,846) (8,315) (10,629)
Dividends on preferred stock..................... -- -- 203 157 329
----------- ----------- ----------- ----------- -----------
Loss attributable to common stockholders before
extraordinary item............................. (623) (1,050) (2,049) (8,472) (10,958)
Extraordinary item--loss on early redemption of
debt........................................... -- -- -- -- 744
----------- ----------- ----------- ----------- -----------
Net loss attributable to common stockholders..... $ (623) $ (1,050) $ (2,049) $ (8,472) $ (11,702)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Basic and diluted loss per common share:
Loss per common share before extraordinary
item......................................... (0.23) (0.34) (0.62) (2.47) (3.11)
Net loss per common share...................... $ (0.23) $ (0.34) $ (0.62) $ (2.47) $ (3.32)
----------- ----------- ----------- ----------- -----------
Shares used in computing basic and diluted loss
per common share............................... 2,746,167 3,046,127 3,284,625 3,424,035 3,522,458
----------- ----------- ----------- ----------- -----------
Unaudited pro forma basic and diluted net loss
per common share............................... $ (1.28)
Shares used in computing unaudited pro forma
basic and diluted net loss per share........... 8,918,465
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, 1998
---------------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA AS
1994 1995 1996 1997 ACTUAL PRO FORMA(1) ADJUSTED(1)(2)
---------- ---------- ---------- ---------- ---------- ------------- -------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents......... $ 111 $ 34 $ 1,005 $ 1,446 $ 12,593 $ 12,593
Working capital (deficit)......... 56 (365) 978 330 12,061 12,061
Total assets...................... 162 289 3,618 7,897 20,066 20,066
Capital lease obligations, net of
current portion................. -- 64 325 334 381 381
Redeemable convertible preferred
stock........................... -- -- 5,203 14,000 37,186 --
Stockholders' equity (deficit).... 101 (186) (2,179) (8,398) (18,593) 18,593
</TABLE>
- ------------------------
(1) Reflects the conversion of all outstanding shares of preferred stock of
Streamline (including accrued dividends of 3,288 shares) into 9,536,914
shares of common stock upon the closing of this offering. See
"Capitalization."
(2) Adjusted to give effect to the sale of shares of common stock
offered by this prospectus at the initial public offering price of $
per share, after deducting the underwriting discounts and commissions and
estimated offering expenses payable by Streamline, and the anticipated
application of the net proceeds therefrom.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. STREAMLINE'S ACTUAL RESULTS COULD DIFFER MATERIALLY
FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS INCLUDING THOSE SET FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS
PROSPECTUS. YOU SHOULD READ THE FOLLOWING DISCUSSION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
Streamline simplifies the lives of busy suburban families by providing
Internet-based ordering and home delivery of a wide range of consumer goods and
services such as groceries, household goods, health and beauty care items, dry
cleaning, video rentals and film processing. Our typical customer tends to be a
dual income household with at least one child and access to the Internet. We
also provide consumer packaged goods companies insight into consumer Internet
purchasing behavior to help facilitate the development of their Internet
merchandising capabilities and to broaden other research and marketing programs.
Streamline has grown rapidly, with revenue increasing to $6.9 million in
1998 from $922,000 in 1996. During this same period, our net loss increased to
$11.4 million in 1998 from $1.8 million in 1996. We expect to continue to incur
losses as we increase expenditures in all areas of operations in order to
execute our business plan. In particular, we expect to incur costs related to:
- expanding into new markets
- increasing our sales and marketing efforts
- continuing our investment in technology
Due to our history of net operating losses, we currently pay no federal or
state income tax. As of December 31, 1998, we had federal and state net
operating loss carry forwards of approximately $22.6 million and $22.4 million,
respectively. We plan to use these net operating losses to offset future income
tax obligations unless federal or state tax law restrictions, such as those
related to an ownership change as defined in the Internal Revenue Code, limit us
from doing so.
HISTORY OF GROWTH
Streamline was founded in April 1993. From 1993 through 1995 we focused
primarily on testing the viability of the consumer home delivery market. We
developed our current business concept during that period.
In 1996 we began offering a full range of products and services to a test
group of approximately 100 customers. In October 1996 we completed the
development of our first consumer resource center in the greater Boston area and
commenced marketing our services.
In 1997 we focused on building our business by:
- expanding our product and service offerings
- negotiating wholesale supply of our products and services
- refining our consumer resource center operations
- developing our website and related ordering technology
- enhancing customer service
- increasing the number of customers served
21
<PAGE>
By the end of 1997 we expanded our customer base to approximately 900
customers and served 30 cities and towns in the greater Boston area. During 1997
we also launched the Consumer Learning Center, which provides consumer packaged
goods companies research and merchandising opportunities. Additionally, in 1997
we acquired substantially all of the assets of Shopping Alternatives, Inc., a
consumer direct company based in the Washington, D.C. area.
In 1998 we increased the number of cities and towns served by our consumer
resource center in the greater Boston area to 38 and continued to market our
services to prospective customers in those areas. As a result, we increased our
customer base to approximately 2,000 customers.
COMPONENTS OF REVENUE
Streamline has three primary sources of revenue. The majority of our revenue
is derived from sales of a broad range of consumer goods and services. Our
customers also pay us a monthly subscription fee of $30 which we prorate based
on the week of installation or discontinuance if services are provided for less
than a full month. In addition, we receive advertising, research and marketing
fees through arrangements with consumer packaged goods companies and e-commerce
companies. Revenue from products and services is recognized upon delivery to the
customer; subscription fees are recognized monthly; and advertising, research
and marketing fees are recognized over the life of the applicable arrangement or
as services are performed.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
total revenue of certain line items included in Streamline's consolidated
statement of income data:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Revenue:
Product and service revenue, net............................................... 42.4% 68.9% 86.7%
Subscription fees.............................................................. 2.2 3.7 5.6
Advertising, research and marketing fees....................................... 55.4 27.4 7.6
--------- --------- ---------
Total revenue................................................................ 100.0 100.0 100.0
Operating expenses:
Cost of revenue................................................................ 42.4 79.6 71.9
Fulfillment center operations.................................................. 99.4 105.1 57.8
Sales and marketing............................................................ 47.8 54.2 21.3
Technology systems and development............................................. 8.5 63.5 43.2
General and administrative..................................................... 106.9 120.2 56.1
--------- --------- ---------
Total operating expenses..................................................... 305.0 422.6 250.3
Loss from operations............................................................. (205.0) (322.6) (150.3)
Other income (expense), net...................................................... 4.7 (3.1) (4.8)
Loss before minority interest and extraordinary item............................. (200.3) (325.7) (155.0)
Minority interest in net loss of consolidated subsidiary......................... -- 10.1 2.0
Loss before extraordinary item................................................... (200.3) (315.6) (153.0)
Extraordinary item--loss on early redemption of debt............................. -- -- 10.7
--------- --------- ---------
Net loss......................................................................... (200.3)% (315.6)% (163.7)%
--------- --------- ---------
--------- --------- ---------
</TABLE>
1998 COMPARED TO 1997
TOTAL REVENUE. Total revenue increased to $6.9 million in 1998 from $2.6
million in 1997, an increase of 163.7%. This increase was primarily due to an
increase in total orders resulting from our expanded customer base.
22
<PAGE>
PRODUCT AND SERVICE REVENUE, NET. Sales of products and related services,
net of returns increased to $6.0 million in 1998 from $1.8 million in 1997, an
increase of 232.0%. Net product and service revenue as a percentage of total
revenue increased to 86.7% in 1998 from 68.9% in 1997. These increases were
principally due to:
- an increase in our customer base to approximately 2,000 at the end of 1998
from approximately 900 at the end of 1997, an increase of 122.2%,
primarily due to our marketing efforts to obtain new customers in the
greater Boston market
- a related increase in the number of invoices for product and service
revenue to approximately 59,000 in 1998 from approximately 19,000 in 1997,
an increase of 211.0%
- an increase in average product and service revenue per invoice to
approximately $102 in 1998 from approximately $99 in 1997, an increase of
4.0%, largely due to the expansion of our product and service offerings
SUBSCRIPTION FEES. Streamline customers pay a monthly subscription fee in
addition to amounts paid for the products and services we deliver to their
homes. Revenue from these fees increased to $391,000 in 1998 from $98,000 in
1997, an increase of 297.3% due to an increase in our customer base and the
timing of these customer acquisitions. Subscription fees as a percentage of
total revenue increased to 5.6% in 1998 from 3.7% in 1997. These increases
resulted from the growth in our customer base.
ADVERTISING, RESEARCH AND MARKETING FEES. Revenue from advertising,
research and marketing fees includes Consumer Learning Center membership fees
paid by consumer packaged goods companies for the opportunity to participate in
research and marketing programs. Fees from advertising, research and marketing
services decreased to $529,000 in 1998 from $721,000 in 1997, a decrease of
26.6%. Advertising, research and marketing fees as a percentage of total revenue
decreased to 7.6% in 1998 from 27.4% in 1997. These decreases are primarily due
to a reduction in the average dollar amount paid by participants resulting from
shorter membership periods.
TOTAL OPERATING EXPENSES. Total operating expenses increased to $17.4 million
or 250.3% of total revenue in 1998 from $11.1 million or 422.6% of total revenue
in 1997, an increase of 56.1%, largely due to:
- increased consumer resource center operational costs
- increased expenses related to technology systems and development
- increased sales and marketing expenses incurred to increase our customer
base
- increased general and administrative expenses incurred to support our
growing operations
COST OF REVENUE. The cost of revenue is comprised of the cost of products
and services sold to customers and the costs associated with generating
advertising, research and marketing fees. These costs increased to $5.0 million
or 71.9% of total revenue in 1998 from $2.1 million or 79.6% of total revenue in
1997, an increase of 138.0%, due to the increased order size and number of
customer orders, offset by cost reductions associated with higher purchase
volumes.
FULFILLMENT CENTER OPERATIONS. Expenses attributable to fulfillment center
operations increased to $4.0 million or 57.8% of total revenue in 1998 from $2.8
million or 105.1% of total revenue in 1997, an increase of 44.9%, due to the
increase in customer order volume. The cost of consumer resource center
operations includes all costs associated with installing the customer, managing
the facility and processing orders including salaries and wages, employee
benefits, facility rent, utility costs, vehicle expenses and order processing
fees.
SALES AND MARKETING. Sales and marketing includes general marketing
expenses and the sales and marketing costs associated with acquiring customers.
Sales and marketing expenses increased to
23
<PAGE>
$1.5 million or 21.3% of total revenue in 1998 from $1.4 million or 54.2% of
total revenue in 1997, an increase of 3.6%. As a result of increased customer
referrals and the more effective utilization of marketing channels, sales and
marketing expenses decreased as a percentage of total revenue.
TECHNOLOGY SYSTEMS AND DEVELOPMENT. Expenses attributable to technology
systems and development include costs associated with development of technology
prior to capitalization, maintenance, implementation of minor enhancements,
information system consultants and support personnel, and amortization of
purchased and capitalized software costs. Technology systems and development
increased to $3.0 million or 43.2% of total revenue in 1998 from $1.7 million or
63.5% of total revenue in 1997, an increase of 79.5%. Certain costs associated
with our website, on-line ordering, warehouse management and other enterprise
systems were capitalized during 1997 and 1998 and are being amortized over the
useful lives of the assets. In 1998 the increased expense is largely due to
increased amortization of these capitalized costs and costs associated with
maintaining, enhancing and integrating our technology systems.
GENERAL AND ADMINISTRATIVE. General and administrative costs include
corporate salaries and wages, employee benefits, corporate facility costs and
depreciation, amortization and general administrative expenses including office
equipment and supplies, telephone expenses, travel costs and legal, audit and
other consulting fees. General and administrative costs increased to $3.9
million or 56.1% of total revenue in 1998 from $3.2 million or 120.2% of total
revenue in 1997, an increase of 23.1%, primarily due to the addition of
management and administrative staff to support our growth.
OTHER INCOME (EXPENSE). Other expense increased to $330,000 in 1998 from
$80,000 in 1997, an increase of 311.0%, largely due to a $518,000 increase in
net interest expense resulting primarily from our issuance of senior discount
notes in 1998 offset by $182,000 of interest income we received primarily from
investing the proceeds of debt and equity financings completed during the year.
Other expense in 1997 was largely due to the losses incurred on the disposal of
fixed assets.
MINORITY INTEREST. The allocation of the net losses of our subsidiary,
Streamline Mid-Atlantic, Inc., to the minority interest decreased to $139,000 in
1998 from $265,000 in 1997. In 1998, we were allocated a percentage of net
losses in excess of our ownership percentage due to the minority interest being
allocated all of its allowable losses. In November 1998, we acquired the
remaining minority interest and will report 100% of the income or loss of this
subsidiary in our results of operations in future periods.
EXTRAORDINARY LOSS. We incurred an extraordinary loss of $744,000 in 1998
due to the early extinguishment of the senior discount notes issued in April
1998 and retired in September 1998. This loss included approximately $257,000
for a call premium, and $452,000 for the unamortized discount value associated
with the warrants to purchase common stock issued in connection with the senior
discount notes and $35,000 for the issuance of common shares and remaining
deferred financing costs.
1997 COMPARED TO 1996
TOTAL REVENUE. Total revenue increased to $2.6 million in 1997 from $922,000 in
1996, an increase of 185.8%. This increase was due to an increase in the number
of customers and orders in 1997.
PRODUCT AND SERVICE REVENUE, NET. Sales of products and related services,
net of returns increased to $1.8 million in 1997 from $391,000 in 1996, an
increase of 364.4%. Net product and service revenue as a percentage of total
revenue increased to 68.9% in 1997 from 42.4% in 1996. Due to active marketing
efforts, we increased our customer base to approximately 900 at the end of 1997
from approximately 100 households in 1996. The increase in our customer base
resulted in a greater number of orders in 1997.
SUBSCRIPTION FEES. Subscription fees increased to $98,000 in 1997 from
$20,000 in 1996, an increase of 395.1% primarily as a result of an increase in
the number of customers to approximately 900 by the
24
<PAGE>
end of 1997 from a pilot group of 100 in 1996. Subscription fees as a percentage
of total revenue increased to 3.7% in 1997 from 2.2% in 1996 due to this
increase in our customer base.
ADVERTISING, RESEARCH AND MARKETING FEES. Revenue from advertising,
research and marketing fees increased to $721,000 in 1997 from $511,000 in 1996,
an increase of 41.1%. These fees decreased, as a percentage of total revenue to
27.4% in 1997 from 55.4% in 1996. In 1997, we began offering research and
marketing programs to consumer packaged goods companies, whereas, in 1996 the
revenue from market research was a result of our non-recurring participation in
a third party research program while operating with our initial test group of
100 customers.
TOTAL OPERATING EXPENSES. Total operating expenses increased to $11.1 million
or 422.6% of total revenue in 1997 from $2.8 million or 305.0% of total revenue
in 1996, an increase of 296.1%, due to:
- an increase in the number of customers and orders
- an increase in costs related to consumer resource operations due to the
completion of our first consumer resource center
- increased sales and marketing expenses related to the expansion our
customer base
- an increase in general and administrative expenses as a result of
increasing our infrastructure to support expanded operations
COST OF REVENUE. The cost of revenue increased to $2.1 million or 79.6% of
total revenue in 1997 from $391,000 or 42.4% of total revenue in 1996, an
increase of 436.3%, due to the increase in customer orders and the increase in
costs associated with research and marketing programs.
FULFILLMENT CENTER OPERATIONS. In 1996 we completed construction of our
first facility in the greater Boston, Massachusetts area and began full
operations. Expenses attributable to fulfillment center operations increased to
$2.8 million or 105.1% of total revenue in 1997 from $916,000 or 99.4% of total
revenue in 1996, an increase of 202.3%, as a result of increased labor
associated with processing a higher order volume.
SALES AND MARKETING. Sales and marketing increased to $1.4 million or 54.2%
of total revenue in 1997 from $441,000 or 47.8% of total revenue in 1996, an
increase of 224.1%. We incurred higher customer acquisition expenses in 1997
because we ended our test phase and began actively marketing our service to new
customers. In 1997 we also began general promotional efforts.
TECHNOLOGY SYSTEMS AND DEVELOPMENT. Expenses attributable to technology
systems and development increased to $1.7 million or 63.5% of total revenue in
1997 from $78,000 or 8.5% of total revenue in 1996, due to the development and
implementation of our website, on-line ordering, warehouse management system and
other enterprise systems in 1997.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased to
$3.2 million or 120.2% of total revenue in 1997 from $1.0 million or 106.9% in
1996, an increase of 221.3% due to an increase in administrative salaries and
related benefits to support the growth in customers.
OTHER INCOME (EXPENSE). Other expense of $80,000 in 1997 was primarily due
to the losses incurred on the disposal of fixed assets. Other income of $43,000
in 1996 resulted primarily from the net interest income we received from
investing the proceeds of equity financings completed during the year offset by
leasing and other financing expenses.
MINORITY INTEREST. In 1997 we established a subsidiary, Streamline
Mid-Atlantic, Inc., which sold common stock to third parties and acquired
substantially all of the assets of Shopping Alternatives, Inc. in exchange for
shares of its common stock. These transactions created a minority interest in
our subsidiary, to which we allocated approximately 45% of the subsidiary's 1997
operating loss.
25
<PAGE>
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table presents unaudited quarterly consolidated statement of
operations data for each of the quarters during the fiscal years ended December
31, 1997 and 1998. In the opinion of management, this information has been
prepared on the same basis as the audited financial statements appearing
elsewhere in this prospectus, and all necessary adjustments, consisting only of
normal recurring adjustments, have been included in the amounts stated below to
present fairly the unaudited quarterly results. You should read the quarterly
data presented below in conjunction with the Consolidated Financial Statements
and related Notes appearing elsewhere in this prospectus.
The results of operations for any quarter are not necessarily indicative of
future quarterly results of operations. See "Risk Factors."
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1997 1997 1997 1997 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenue:
Product and service revenue,
net............................ $ 185 $ 340 $ 473 $ 817 $1,072
Subscription fees................ 9 16 27 46 76
Advertising, research and
marketing fees................. 135 270 271 45 53
------------- ------------- ------------- ------------- -------------
Total revenue...................... 329 626 771 908 1,201
Operating expenses:
Cost of revenue.................. 261 392 604 841 896
Fulfillment center operations.... 417 624 751 977 946
Sales and marketing.............. 338 357 390 343 285
Technology systems and
development.................... 125 405 528 615 636
General and administrative....... 425 893 904 944 963
------------- ------------- ------------- ------------- -------------
Total operating expenses........... 1,566 2,671 3,177 3,720 3,726
Loss from operations............... (1,237) (2,045) (2,406) (2,812) (2,525)
Other income (expense), net........ (8) (12) (87) 27 (40)
------------- ------------- ------------- ------------- -------------
Loss before minority interest and
extraordinary item............... $(1,245) $(2,057) $(2,493) $(2,785) $(2,565)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
PERCENTAGE OF REVENUE:
Revenue:
Product and service revenue,
net............................ 56.2% 54.3% 61.3% 90.0% 89.3%
Subscription fees................ 2.7 2.6 3.5 5.1 6.3
Advertising, research and
marketing fees................. 41.0 43.1 35.1 5.0 4.4
------------- ------------- ------------- ------------- -------------
Total revenue...................... 100.0 100.0 100.0 100.0 100.0
Operating expenses:
Cost of revenue.................. 79.3 62.6 78.3 92.6 74.6
Fulfillment center operations.... 126.7 99.7 97.4 107.6 78.8
Sales and marketing.............. 102.7 57.0 50.6 37.8 23.7
Technology systems and
development.................... 38.0 64.7 68.5 67.7 53.0
General and administrative....... 129.2 142.7 117.3 104.0 80.2
------------- ------------- ------------- ------------- -------------
Total operating expenses........... 476.0 426.7 412.1 409.7 310.2
------------- ------------- ------------- ------------- -------------
Loss from operations............... (376.0) (326.7) (312.1) (309.7) (210.2)
Other income (expense), net........ (2.4) (1.9) (11.3) 3.0 (3.3)
------------- ------------- ------------- ------------- -------------
Loss before minority interest and
extraordinary item............... (378.4)% (328.6)% (323.3)% (306.7)% (213.6)%
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
<CAPTION>
JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998
------------- ------------- -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Product and service revenue,
net............................ $1,401 $1,409 $2,144
Subscription fees................ 94 105 116
Advertising, research and
marketing fees................. 159 158 159
------------- ------------- -------------
Total revenue...................... 1,654 1,672 2,419
Operating expenses:
Cost of revenue.................. 1,206 1,164 1,726
Fulfillment center operations.... 1,009 946 1,112
Sales and marketing.............. 328 376 490
Technology systems and
development.................... 664 637 1,065
General and administrative....... 951 884 1,099
------------- ------------- -------------
Total operating expenses........... 4,158 4,007 5,492
Loss from operations............... (2,504) (2,335) (3,073)
Other income (expense), net........ (209) (206) 125
------------- ------------- -------------
Loss before minority interest and
extraordinary item............... $(2,713) $(2,541) $(2,948)
------------- ------------- -------------
------------- ------------- -------------
PERCENTAGE OF REVENUE:
Revenue:
Product and service revenue,
net............................ 84.7% 84.2% 88.6%
Subscription fees................ 5.7 6.3 4.8
Advertising, research and
marketing fees................. 9.6 9.5 6.6
------------- ------------- -------------
Total revenue...................... 100.0 100.0 100.0
Operating expenses:
Cost of revenue.................. 72.9 69.6 71.4
Fulfillment center operations.... 61.0 56.6 46.0
Sales and marketing.............. 19.8 22.5 20.3
Technology systems and
development.................... 40.1 38.1 44.0
General and administrative....... 57.5 52.9 45.4
------------- ------------- -------------
Total operating expenses........... 251.4 239.6 227.0
------------- ------------- -------------
Loss from operations............... (151.4) (139.6) (127.0)
Other income (expense), net........ (12.6) (12.3) 5.2
------------- ------------- -------------
Loss before minority interest and
extraordinary item............... (164.0)% (151.9)% (121.9)%
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
26
<PAGE>
Streamline's quarterly operating results have fluctuated significantly in
the past due to many factors beyond our control including seasonality.
Generally, the number of orders, as well as the total amount spent per order,
tends to decrease in July, August and during school breaks when many busy
suburban families vacation. This pattern is demonstrated by a comparison of
product and service revenue, net for the last three quarters of 1998. This
revenue remained stable in the second and third quarters of 1998 as opposed to
the 52.2% increase from the third quarter of 1998 to the fourth quarter of 1998.
Our operating results are likely to continue to fluctuate due to seasonality and
other factors, including:
- the ability to attract new customers and retain existing customers
- the timing and nature of the expansion of our business, and the amount of
operating costs and capital expenditures relating to such expansion of our
business
- our ability to manage inventory and fulfillment operations
- the introduction of new products and services and changes in the sales mix
of our product and service offerings
- the ability to maintain or reduce costs of revenue
- our ability to establish and expand recognition of the Streamline brand
- changes in pricing policies
- competitive factors
- general economic conditions
We may also experience significant fluctuations in revenue from our
advertising, research and marketing fees due to the timing and length of our
agreements with participants and affiliates. For example, the Consumer Learning
Center operated primarily in the first three quarters of 1997 and the last three
quarters of 1998 and therefore generated the majority of advertising, research
and marketing fees during those periods. We also expect that revenue from
customer acquisition and revenue sharing contracts with other e-commerce
companies may vary between quarters.
Cost of revenue as a percentage of total revenue has fluctuated between
quarters due to the timing of expenses related to the recognition of
advertising, research and marketing fees. The total costs of revenue as a
percentage of total revenue decreased from 79.7% in 1997 to 71.9% primarily as a
result of securing better wholesale prices from new and existing suppliers.
Expenses attributable to fulfillment center operations, which include the
fixed costs to operate our consumer resource center, as well as labor costs
associated with managing inventory and processing orders has increased over the
last eight quarters as a result of the increase in our order volume.
Sales and marketing expenses have increased for seven of the last eight
quarters as a result of increased marketing efforts to acquire additional
customers.
Technology and development expenses have increased over the last eight
quarters due to incurring costs to develop, enhance and maintain our ordering,
warehouse management, financial and customer information systems. These expenses
significantly increased in the fourth quarter due to the issuance of warrants
for common stock in lieu of payment for services related to the development of
our website and customer ordering systems. See Notes to the Consolidated
Financial Statements.
General and administrative expenses increased over the last eight quarters
primarily as a result of the addition of management and administrative staff and
related expenses to support our current and future growth.
27
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Streamline has financed its operations and capital requirements through the
sale of redeemable convertible preferred stock and the issuance of senior
discount notes.
Operating activities used cash of $9.4 million in 1998, $6.7 million in 1997
and $1.7 million in 1996 primarily due to the net losses incurred in each year.
Investing activities used cash of $2.1 million in 1998, $2.8 million in 1997 and
$2.0 million in 1996 primarily due to the purchase of property and equipment to
support the expansion of our operations, and costs associated with purchased and
capitalized software for our warehouse management, customer ordering, and
financial systems. Financing activities provided cash of $22.7 million in 1998,
$10.0 million in 1997, and $4.7 million in 1996 primarily through sales of
preferred stock which generated proceeds of $22.9 million in 1998, $9.0 million
in 1997, and $5.0 million in 1996. During 1998 we received $7.0 million in
connection with the issuance of senior discount notes. A portion of the proceeds
from our sale of preferred stock in September 1998 was used to retire the senior
discount notes.
We expect to incur operating losses in 1999 from our existing consumer
resource center and from the facility we have leased and plan to open in the
greater Washington, D.C. area in the fourth quarter of 1999. We have currently
budgeted expenditures in 1999 of approximately $4.0 million for costs associated
with leasehold improvements, equipment acquisitions and other asset purchases
related to our new facility. Additionally, we plan to continue to enhance our
technology by upgrading or replacing our financial, warehouse management and
customer information systems. We intend to finance these expenditures from
capital resources and future lease financing. We also plan to open new
facilities in 2000 and beyond which may or may not have similar capital
requirements due to size, configuration, location and other local market
conditions.
Pursuant to a letter agreement dated April 13, 1999, Nordstrom, Inc. has
agreed to provide us with financing of up to $10.0 million upon our request.
Nordstrom's commitment will terminate upon the closing of this offering or April
2000, whichever is earlier. The final terms of any such financing will be
determined at the time we request such financing, but will be similar to the
terms of the sale of the Series D preferred stock to Nordstrom in September
1998.
We currently believe that existing cash and short-term investments, together
with the net cash proceeds of this offering, will be sufficient to fund our
planned expansion and working capital needs for at least the next 18 months. We
expect that we will require additional capital financing to support our further
expansion.
We do not believe that inflation has had a material effect on Streamline's
operations during the three year period ended December 31, 1998.
ACQUISITIONS
In 1996 we incorporated our subsidiary Streamline Mid-Atlantic, Inc., for
the purpose of acquiring substantially all of the assets of Shopping
Alternatives, Inc., a consumer direct company based in the Washington, D.C.
area. In 1997 Streamline Mid-Atlantic sold approximately 45% of its common stock
to third parties. In November 1998 we acquired the outstanding minority interest
in Streamline Mid-Atlantic, Inc., and it once again became a wholly owned
subsidiary. In connection with these transactions we recorded $1.3 million of
goodwill which is being amortized on a straight-line basis over a five-year
term.
YEAR 2000 COMPLIANCE
The Year 2000 problem stems from the fact that many currently installed
computer systems include software and hardware products that are unable to
distinguish 21st century dates from those in the 20th century. As a result,
computer software and hardware used by many companies and governmental
28
<PAGE>
agencies may need to be upgraded to comply with Year 2000 requirements or risk
system failure or miscalculations causing disruptions to normal business
activities.
STATE OF READINESS
We have begun to assess the corporate systems and operations that we believe
could be affected by the Year 2000 problem. We have focused our Year 2000 review
on three areas:
- internal information technology infrastructure
- third-party compliance
- non-information technology systems
INTERNAL INFORMATION TECHNOLOGY INFRASTRUCTURE. Because our consumer and
business systems are essential to our business, financial condition and results
of operations, we began our assessment of these systems prior to other less
critical information technology systems. We use the following information
technology for our internal infrastructure:
- website and Internet ordering systems
- main enterprise systems (used for purchase orders, invoicing, shipping,
warehouse management and accounting)
- individual workstations, including personal computers
- network systems
We currently believe that all of our critical systems are Year 2000
compliant. We have received written assurance that our website, ordering systems
and main enterprise systems are Year 2000 compliant. In addition, we are in the
process of implementing a new financial system which is certified Year 2000
compliant by the vendor. We expect this system to be in place by the end of
1999. We are currently conducting Year 2000 compliance testing of our individual
workstations and network systems. To date, we have not discovered Year 2000
problems in these internal systems.
THIRD-PARTY COMPLIANCE. Streamline's material third party business
relationships include:
- customers who order products and services via the Internet, telephone and
fax
- vendors and suppliers who provide the goods and services that we offer to
our customers
We are unable to predict, and have not attempted to assess, the Year 2000
readiness of our customers or the systems they use to interact with Streamline.
Since our customers order our products and services via the Internet or by
telephone or fax, Streamline's operations would be materially adversely affected
if a significant number of customers were unable to use these devices to place
their orders.
Year 2000 disruptions in the systems or equipment used by our suppliers
could result in our being unable to obtain products and services in a timely
manner. We are in the process of developing a standard survey to help us assess
the Year 2000 readiness or our suppliers, but we have not yet begun to collect
information from these companies.
NON-INFORMATION TECHNOLOGY SYSTEMS. Some non-information technology systems
used in our business, such as HVAC and telephone systems, our truck fleet and
refrigeration and other equipment, may contain date-processing embedded
technology. The Year 2000 problem could cause failures in these assets which
could disrupt our operations. We are currently assessing the Year 2000 readiness
of many of these systems and equipment and expect to have identified and
corrected problems in critical items by September 1999.
29
<PAGE>
COSTS
Streamline's Year 2000 assessment, remediation and testing activities have
been conducted by internal personnel, and we have not recorded the amount of
employee time expended on these tasks. Accordingly, we are unable to determine
the cost of employee time devoted to Year 2000 matters. Until we have further
assessed the Year 2000 readiness of our internal systems and those of third
parties with whom we do business, we will be unable to estimate all of the costs
that we may incur in our Year 2000 compliance efforts. Streamline has funded and
will continue to fund these activities principally through cash flow.
CONTINGENCY PLAN
To date, we have not formulated contingency plans related to the failure of
our or a third-party's systems or equipment should they prove to not be Year
2000 compliant. However, we intend to develop contingency plans to address any
Year 2000 compliance problems that we discover through our ongoing assessment,
remediation and testing activities.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1, Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use. SoP 98-1 provides guidance on accounting for computer
software developed or obtained for internal use including the requirement to
capitalize specified costs and the related amortization of such costs.
Streamline does not expect the adoption of this standard to have a material
effect on our current capitalization policy.
In April 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-5, Reporting on the Costs of Start-Up Activities. Start-up
activities are defined broadly as those one-time activities related to opening a
new facility, introducing a new product or service, conducting business in a new
territory, conducting business with a new class of customer, commencing some new
operation or organizing a new entity. Under SoP 98-5, the cost of start-up
activities should be expensed as incurred. SoP 98-5 is effective for
Streamline's 1999 financial statements and we do not expect its adoption to have
a material effect on our business, financial condition or results of operations.
30
<PAGE>
BUSINESS
OVERVIEW
We simplify the lives of busy suburban families by providing them with
Internet-based ordering of goods and services, coupled with direct-to-the-home
delivery. We significantly shorten and simplify the traditional shopping needs
of our customers who increasingly demand time-saving lifestyle solutions. We
deliver our products and services to each customer through a single weekly
delivery. Our products include:
<TABLE>
<S> <C>
- brand-name groceries - fresh baked goods
- quality meats and seafood - freshly prepared meals
- fresh produce - health and beauty care products
- dairy products, including gourmet - cleaning supplies and other household items
cheeses
- sliced-to-order deli products - specialty pet food and supplies
- organic foods - fresh flowers
- frozen foods - stationery supplies and postage stamps
- kosher foods - seasonal items, including firewood,
charcoal and holiday products
</TABLE>
In addition, we offer a wide range of related services, such as:
<TABLE>
<S> <C>
- dry cleaning pick-up and delivery - package pick-up and delivery
- clothing alteration and repair - bottle and can redemption
- video and video game rental - shoe repair
- film processing and supplies - food and clothing drives
- bottled water and cooler delivery
</TABLE>
Our product and service offerings, combined with the frequency of ordering
and delivery, provide us the opportunity to develop long-term relationships with
customers.
INDUSTRY BACKGROUND
Consumer direct companies deliver groceries and other consumer products and
services, which consumers have ordered over the Internet or by telephone or fax,
directly to their homes. In a 1996 study, Andersen Consulting estimated that the
U.S. consumer direct market could generate approximately $60 billion in annual
sales in 2007. Several converging trends are driving this growth:
- demographic trends supporting the growth of the consumer direct industry
- growth of the Internet and e-commerce
- limitations of the traditional physical store model
DEMOGRAPHIC TRENDS SUPPORTING THE GROWTH OF THE CONSUMER DIRECT INDUSTRY
NFO Worldwide, Inc. analyzed a group of consumer direct users and profiled
such users as having the following characteristics, among others:
- 61% are dual income households
- 75% have at least one child under 18
- 88% use personal computers
- 40% use time-saving services such as house cleaning services
- 75% use time-saving devices such as mobile phones
31
<PAGE>
NFO and Andersen Consulting separately report that perceived time-saving is
one of the primary benefits driving usage of consumer direct channels. Andersen
Consulting has additionally found that consumer direct companies excel at
meeting the following needs of the busy consumer:
- simplicity
- more effective use of time
- pricing accuracy
- product quality
- minimal physical effort
GROWTH OF THE INTERNET AND E-COMMERCE
The Internet has become an increasingly significant global medium for
consumer commerce and now provides a powerful and efficient means for consumers
to order products and services. International Data Corporation estimates that 21
million U.S. households had Internet access in 1997 and expects this number to
grow to over 67 million by the end of 2002.
Growth in Internet usage among consumers has been fueled by a number of
factors, including:
- increased awareness of the Internet among consumers
- a large and increasing number of personal computers at home
- growing e-commerce activity due to increasing availability of information
and services on the Internet
- more readily available access to the Internet due to the proliferation of
service providers
- advances in the performance and speed of personal computers and modems
- improvements in network systems and infrastructure, including increased
bandwidth
- reduced security risks in conducting commercial transactions via the
Internet
The Internet is also dramatically affecting the manner in which companies
distribute goods and services. Specifically, the Internet allows consumer direct
companies to:
- reach a large national and local audience from a central location
- process business with reduced infrastructure investment and overhead
costs, along with greater economies of scale
- provide consumers with a broad selection of products and services,
increased information and enhanced convenience
As a result of both increased consumer Internet use and this increasing
selection of products and services, a growing number of consumers are
transacting business on the Internet, including buying groceries and other
consumer products. IDC estimates that in 1997 over 36% of Internet users
purchased consumer goods or services over the Internet and that 50% of Internet
users will make on-line purchases in 2002. IDC also estimates that consumer
purchases of goods and services over the Internet will increase from $4.3
billion in 1997 to $54.3 billion in 2002. For example, Jupiter Communications
estimates that consumers spent approximately $65 million in 1997 over the
Internet on grocery and health and beauty products, and that this market will
increase to approximately $4.7 billion by 2002. This estimated penetration still
represents less than one percent of the total dollars expended in 1997 on
grocery and health and beauty products through traditional U.S. retail channels.
32
<PAGE>
LIMITATIONS OF THE TRADITIONAL PHYSICAL STORE MODEL
LIMITED ABILITY TO MEET THE NEEDS OF BUSY CONSUMERS. Consumers are
increasingly time constrained. The increase in dual income families limits the
time available for routine activities, such as shopping, cooking and cleaning.
According to the U.S. Bureau of Labor Statistics, the number of dual income
households totaled 28.5 million in 1998, representing approximately 27.8% of the
total number of households in 1998 as reported by the U.S. Bureau of the Census.
According to Andersen Consulting, the typical consumer visits the supermarket
twice per week and each trip takes an average of 47 minutes excluding the time
required for driving to and from the store, parking, and loading and unloading
packages. The weekly time burden is even greater when one considers time spent
on other chores, such as picking up dry cleaning, returning videos and mailing
packages. According to the Food Marketing Institute, people with full time jobs
complete 50% of their shopping during the weekend.
ECONOMIC CONSTRAINTS. Traditional physical store models face significant
economic limitations due to costs associated with real estate, construction,
store set-up, inventory, and other fixed assets. As an example, according to the
FMI, 7% of a traditional grocery store's operating costs in 1997 were related to
real estate rental costs. Traditional physical store models also have high
ongoing expenses relating to personnel. As measured by the FMI, a traditional
grocery store's labor costs in 1997 typically represented 57% of its operating
costs. In addition, traditional physical stores are limited in their ability to
track critical customer purchasing and preference information and, therefore,
cannot predict customer demand with great accuracy. ACNielsen Corporation has
found that only 55% of customers participate in scannable card programs.
Therefore, these programs do not provide complete consumer purchase data.
Consequently, traditional physical stores, especially grocery stores, must carry
more inventory and, therefore, build or lease more space to warehouse and
display this inventory and employ more people to service this larger space. The
average supermarket currently stocks over 30,000 items and has grown from 31,000
square feet to 39,260 between 1990 and 1997.
Consumers are increasingly seeking a shopping solution which helps them to
save time while providing quality goods and services. Consumer direct companies
are using the Internet to satisfy this need while traditional physical stores
face fundamental constraints that limit their ability to meet these demands.
THE STREAMLINE SOLUTION
We have created a lifestyle solution for today's busy suburban family by
providing an efficient means of purchasing and receiving groceries and other
related products and services. We supply consumers with a simple, informative
and enjoyable Internet-based shopping experience by offering a targeted,
necessity-based range of products and services enhanced by weekly unattended
home delivery.
The principal benefits to our customers include:
- convenience and simplicity
- time savings
- access to detailed information about products and services
- competitive pricing
- personalized care and service
33
<PAGE>
Through key relationships with premier national, regional and local business
partners, we aggregate a wide range of products and services for our customers,
including:
<TABLE>
<CAPTION>
1997 ESTIMATED SAMPLE OF GEOGRAPHIC SCOPE
PRODUCT AND U.S. SALES STREAMLINE'S OF PARTNER'S
SERVICE (IN BILLIONS) BUSINESS PARTNERS OPERATIONS
- ----------------------------- ----------------- --------------------------- -----------------
<S> <C> <C> <C>
Groceries (dry and $ 475 SuperValu Operations, Inc. National
perishable)
Health and Beauty Care 49(1) Millbrook Corporation National
Prepared Meals 29 Legal Sea Foods, Inc. Local
S.E. Olson's Uptown Gourmet Regional
Specialty Pet Food and 11(1) Iams Company National
Supplies
Ralston Purina Company National
Video and Video Game Rentals 10 BlockBuster Videos, Inc. National
Dry Cleaning 6(2) Quest Dry Cleaning Inc. Local
Bottled Water and Cooler 4 Poland Spring Corporation Regional
Delivery (a subsidiary of Nestle
S.A.)
</TABLE>
- ------------------------
(1) Estimated 1998 annual sales.
(2) Estimated 1996 annual sales.
We estimate that our process allows customers to complete an entire order in
20 to 30 minutes per week from the comfort of their homes, thereby reducing
their need to make frequent trips to multiple traditional stores. NFO has
conducted research which concludes that 94% of Streamline customers consider us
to be their primary provider of groceries and other household goods and
services.
OUR VIRTUAL AND PHYSICAL CHANNELS
To deliver superior value to the consumer, Streamline has built two
dedicated pipelines direct to the home: a virtual channel using the Internet and
a physical channel using our direct delivery system.
(Diagram depicting the types of products and services delivered to
Streamline.com's customer resource center and indicating that there exists
two-way virtual and physical channels between Streamline.com and its customers.
The top half of the diagram contains two rows of pictures showing the types of
products and services that Streamline.com provides. On the left side, under the
heading "Product Offering" are pictures labeled "Fresh Baked Goods", "Quality
Meats and Seafood", "Cleaning Supplies and Household Items", "Freshly Prepared
Meals", "Brand Name Groceries", "Health and Beauty Care Products", "Specialty
Pet Food and Supplies", and "Fresh Produce". On the right side, under the
heading "Service Offering" are pictures labeled "Film Processing and Supplies",
"Video Rentals", "Dry Cleaning", "Stamps", "Fresh Flowers", "Bottled Water and
Cooler Delivery", "Package Pick-up and Delivery", and "Bottle and Can
Redemption". In the center of the diagram is a depiction of a building labeled
"The Consumer Resource Center". Arrows come down from the product and service
offerings toward the consumer resource center, and bi-directional vertical
arrows run between the consumer resource center and a picture of a two story
home. One bi-directional arrow is labeled "Virtual Channel" and is accompanied
by an image of a computer; the other is labeled "Physical Channel" and is
accompanied by an image of a truck bearing Streamline.com's logo.)
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<PAGE>
OUR VIRTUAL CHANNEL
Our virtual channel, which refers to the ongoing two-way exchange of
information through the Internet between our customers and us, is a central
element of the Streamline experience. Because our customers order frequently, we
use the ordering process as a way to gather and distribute information about the
products and services we provide. From the comfort of their homes, customers can
use our Internet-based ordering system to browse weekly specials, review and
compare product nutritional information and place orders. The Internet-based
ordering system also provides us a direct line of communication to our customers
and serves as an efficient means of collecting data on their ordering habits and
preferences. Currently, over 70% of our customers order via the Internet, and we
plan to migrate exclusively to Internet-based ordering.
<TABLE>
<CAPTION>
CUSTOMER USES STREAMLINE USES
- --------------------------------------------- ---------------------------------------------
<S> <C>
- - ordering products and services - collecting data on customer purchasing
behavior
- - browsing offerings by category and - promoting new products and services
searching
for particular items - alerting customers to special offers and
other
- - customizing a PERSONAL SHOPPING LIST of time-sensitive information
frequently ordered items - conducting market research
- - customizing a DON'T RUN OUT list to - responding to customer inquiries
automatically reorder items on a preset
schedule
- - providing feedback on customer service and
products and services
- - downloading and analyzing details of past
purchases
</TABLE>
Streamline's virtual channel enables us to create and manage high-value,
sustainable and long-term customer relationships. On average, we receive weekly
feedback from over 35% of our customers. We routinely collect and analyze
customer feedback and satisfaction levels to continually improve customer
satisfaction. We use this information to more efficiently serve the customer by
refining our understanding of the customer's product preferences, cross-category
purchasing behavior, attitudes and lifestyle.
Our virtual channel also creates a unique opportunity to market on a
one-to-one basis to a highly specific and demographically attractive group of
consumers and to encourage increased spending through our channel. Our virtual
channel can be used to deliver interactive, information-rich multimedia messages
targeted specifically to the consumer. We also promote our virtual channel to
consumer packaged goods companies and other strategic partners as a means of
delivering targeted marketing programs, including Internet advertising and
sampling programs. Historically, consumer packaged goods companies have garnered
much of their market information through traditional grocery store purchase
data. Streamline, however, can more comprehensively track purchasing data and
can provide consumer packaged goods companies with information on the
effectiveness of their marketing programs, without ever disclosing an individual
customer's personal information.
OUR PHYSICAL CHANNEL
We have created our own efficient, direct-to-the-customer distribution
channel comprised of:
- THE CONSUMER RESOURCE CENTER. Streamline's model consumer resource center
is a strategically located, multi-temperature zone, warehouse-based,
dedicated fulfillment center of approximately 100,000 square feet that is
designed to serve approximately 10,000 customers within a 15 to 20 mile
radius.
35
<PAGE>
- STREAMLINE'S DELIVERY FLEET. Streamline's uniformed drivers, or field
service representatives, deliver goods and services in leased refrigerated
trucks bearing Streamline's logo. Within these vehicles, secure containers
separate different types of products and services to ensure quality during
transport.
- THE STREAMLINE BOX. The Streamline box is a refrigerator/freezer with a
compact storage unit that is located in a secure area at the customer's
home, such as in a garage. The Streamline Box allows us to maintain the
separation of different types of products within proper temperature zones
even after delivery.
<TABLE>
<CAPTION>
CUSTOMER USES STREAMLINE USES
- ---------------------------------------------- -------------------------------------------
<S> <C>
- - aggregating multiple shopping trips - lowering facility operating costs
- - avoiding crowded stores - optimizing fleet utilization and time per
stop
- - eliminating stress of waiting for a delivery - promoting a weekly shopping pattern
person
- - maintaining chill chain for product quality - increasing order size and frequency
- - providing additional storage space - providing back haul capability that
allows for an expanded product offering
</TABLE>
The Streamline solution also addresses some of the limitations of the
traditional physical store model:
REDUCED REAL ESTATE, LABOR AND ADMINISTRATIVE EXPENSES. Streamline's model
consumer resource center is located in an industrial setting, as opposed to a
more expensive location, such as a strip mall or other retail location typical
of a traditional physical store. Additionally, our facilities do not require
display cases, cash registers, customer parking lots or other space-consuming
elements associated with the traditional physical store. We further reduce real
estate, labor and administrative expenses by consolidating goods and services
within a single operation, thereby eliminating much of the overhead that would
otherwise be required to provide similar products and services through separate
grocery stores, dry cleaners, video stores, pet supply stores, and other similar
stores.
MORE EFFECTIVE INVENTORY MANAGEMENT. Streamline has aggregated a targeted
offering of products and services which promote purchasing in high frequency
because of their consumable, renewable or disposable nature. By focusing on busy
suburban families, Streamline is able to tailor our assortment of products and
services so as to meet customer demand while reducing the number of
stock-keeping units, or SKUs, that we provide. Currently, we maintain
approximately 10,000 of the SKUs most commonly ordered by busy suburban
families, as opposed to a typical grocery store's offering of 30,000 SKUs. Our
targeted SKU assortment allows us to reduce inventory carrying costs, lower
operating costs, more accurately forecast demand and provide customers with a
more efficient ordering process.
MORE EFFECTIVE CUSTOMER INTERACTION. Customers place their orders by one of
two Internet-based ordering methods, a website or a CD-ROM application developed
with Intel Productions, or by telephone or fax. The Internet-based ordering
technology used by the majority of our customers allows Streamline to deliver
product information rapidly and conveniently while removing the need to
physically display products in a costly and inefficient manner. In addition to
saving customers from having to visit a number of different traditional physical
stores, we also provide our customers with a more efficient method of
purchasing.
36
<PAGE>
STREAMLINE'S STRATEGY
Streamline's objective is to become the leading national consumer direct
supplier of groceries and other related products and services to busy suburban
families. We intend to achieve this objective through the following principal
strategies:
EXPAND NATIONALLY BY REPLICATING OUR BUSINESS MODEL. Streamline seeks to
expand our business by establishing consumer resource centers in selected
markets across the country. We estimate that the top 20 markets in the U.S.
provide access to approximately 40% of the population. Eventually, we intend to
serve busy suburban families in nearly all of these markets by establishing
local operations based on our existing model of offering weekly unattended
deliveries from a consumer resource center.
Our strategy is to be the first consumer direct provider of groceries and
other related products and services in many of our target markets, which we
believe will provide us an opportunity to obtain as customers a considerable
portion of the busy suburban families in those areas. As we expand, we intend to
focus on increasing our brand recognition through targeted promotional and
marketing programs, individually and with existing and future strategic
partners. We expect that the increased brand awareness will accelerate our
customer acquisition rate as we enter new markets and expand within existing
markets.
We are currently in the process of opening our second market, in the
Washington, D.C. area, and are scouting locations in additional target markets.
Although not our primary expansion focus, we are also considering licensing our
business model and technologies to third parties for international
implementation. Additionally, we will consider opportunities to acquire or
invest in products, services or technologies complementary to our business if
any such opportunities arise. However, we have no present understandings,
commitments or agreements with respect to any acquisitions or investments, and
none are planned or under negotiation. See "Business--Expansion Strategy and
Market Selection."
DEVELOP AND STRENGTHEN OUR CUSTOMER ACQUISITION CAPABILITIES. The ability
to rapidly acquire customers while maintaining service quality is essential to
achieving and maintaining consumer resource center profitability as we implement
our expansion plans. Our strategy is to supplement our existing customer
acquisition programs by forming relationships with strategic partners with whom
we will be able to engage in joint marketing and other directed sales efforts.
We plan to implement and continue to develop a variety of co-marketing programs
that make use of Nordstrom's brand loyalty, existing customer relationships and
presence in many of our target markets. The goal of these programs, coupled with
our current advertising and customer referral programs, is to reduce our
customer acquisition costs and facilitate rapid customer acquisition in new and
existing markets.
INCREASE REVENUE PER CUSTOMER. We seek to increase the average size of our
customers' weekly orders by fulfilling a greater portion of their needs. Our
strategy is to increase penetration of the existing products and services we
offer and to introduce new product and service offerings. Streamline's
technology allows us to track customer purchasing data, both individually and in
the aggregate, to determine the types of products and services that a busy
suburban family is most likely to appreciate. We expect to use this data to help
us determine which new products and services should be added to our offerings
and whether to provide them directly or through strategic relationships with
other companies. By increasing the size and scope of our offerings, we seek to
expand our role as an aggregator and to capture the economic benefits associated
with providing products and services through a single consolidated operation,
rather than through a traditional multiple store format. Additionally, by
maintaining a high level of customer satisfaction with our offerings, we expect
that customers will increasingly use Streamline as the primary supplier of many
of the products and services they require.
MAINTAIN AND DEVELOP RELATIONSHIPS WITH CONSUMER PACKAGED GOODS COMPANIES,
E-COMMERCE COMPANIES AND STRATEGIC INVESTORS. The spending habits of our
customers and the level of interaction that they
37
<PAGE>
have with us, both via the Internet and through our physical channel, makes us
an effective conduit for accessing a customer base that is attractive to other
providers of goods and services. Consumer packaged goods companies compensate
Streamline for the opportunity to gain insight into consumer purchase behavior
and to conduct on-line merchandising programs. Additionally, we provide direct
links to websites maintained by select e-commerce companies offering items that
may be of interest to busy suburban families. We have also established strategic
relationships with several of our investors, such as Intel Corporation, General
Electric Capital Corporation and Nordstrom, Inc., in an effort to pursue
mutually beneficial business opportunities. We intend to continue to maintain
strong relationships with our existing strategic investors and to seek out
additional business opportunities.
MAXIMIZE OPERATIONAL EFFICIENCY. Our consumer resource center, located in
an industrial setting, allows us to create efficient operational processes. For
example, inventory is stocked according to movement and temperature requirements
rather than customer aesthetics which allows us to maximize pick and pack
efficiency. We also use customer purchasing data to maximize the efficiency of
our internal operations. By understanding the ordering patterns of our
customers, we are better able to capture and forecast real demand for our
products and services, which enables us to maintain lower inventory levels and
decrease inventory carrying costs. Additionally, our unattended delivery system,
through which we deliver orders to our customers at a fixed delivery time,
allows us to maximize fleet utilization and create routing efficiencies. We are
in the process of implementing route planning software to gain further
efficiencies in our physical channel. As we expand our operations, our strategy
is to centralize many functions such as customer acquisition, Internet-based
order taking, customer service and general administrative functions to lower
overall operating expenses.
DETAILS OF THE STREAMLINE PROCESS
Our process focuses on the ordering and delivery of quality goods and
services to the busy suburban family in a simple and efficient manner:
INITIAL CUSTOMER INSTALLATION. A Streamline representative visits each new
customer's home to install a Streamline box, consisting of a
refrigerator-freezer, for perishable and frozen items, and a shelving unit, used
for delivery and pick-up of dry goods, dry cleaning, video rentals and other
products. The Streamline box is located in the customer's garage or in another
secure location that does not give access to the interior of the customer's
home. Access to these secure locations is obtained through a keypad entry system
provided, installed and maintained by Streamline.
TAKING THE ORDER. Customers can place and modify their orders via the
Internet, or by telephone or fax, until 11:00 p.m. the evening before their
scheduled delivery day. Currently more than 70% of our customers order via the
Internet due to the convenience and broader functionality offered through an
on-line experience. We plan to migrate to exclusively Internet-based ordering
due to the accuracy and cost efficiencies gained by using such technology.
We provide each customer with an on-line personal shopping list. This list
of approximately 200 items is tailored to each customer and represents a
substantial majority of the items included in a typical weekly order.
Alternatively, the customer can simply select from any of the other products and
services we offer. A customer can add or delete items from the personal shopping
list at any time through our website or CD-ROM application. A customer can also
be prompted to order through our DON'T RUN OUT program which allows the customer
to automatically order items on a pre-defined cycle. For example, a customer can
indicate once through this program and have a half-gallon of milk delivered
every week or a five-pack of razor blades delivered every six weeks.
We have designed the website and CD-ROM application to be intuitive, fun and
easy to use. Customers can easily locate products by using the SHOP function
which categorizes products into groups, such as BAKERY, PET FOOD or PAPER GOODS,
or by using a robust, key-word search capability to
38
<PAGE>
locate items without knowing full product descriptions. The customer shopping
experience is further enhanced by an interactive marketing capability in our
CD-ROM application which allows targeted and relevant advertising and immediate
ordering of goods and services. For example, when ordering a BlockBuster Video,
an interactive promotion may ask if the customer would like to order popcorn;
with a click, we add popcorn to that week's order.
ASSEMBLING THE ORDER AT THE CONSUMER RESOURCE CENTER. Streamline's model
consumer resource center is outlined below.
THE CONSUMER RESOURCE CENTER
(Diagram indicating space allocation for consumer resource center. On the
left side, in the exterior space, are four trucks lined from top to bottom
placed in front of bay doors leading into the interior space; three trucks with
"Streamline.com" logos on them which are facing away (left) from the interior
space; one with "Supplier" on the side facing towards the interior space. The
interior space is divided into areas to indicate the activities conducted in
each location of the consumer resource center. Moving from left to right and top
to bottom, the spaces are designated as follows: ROW ONE: "Just-in-Time Items";
"Refrigerated Goods Picked and Staged"; "Frozen Goods Picked and Staged"; ROW
TWO: "Completed Orders Staged for Delivery"; "Dry Goods Picked"; ROW THREE:
"Fast Moving"; "Slow Moving". The remainder of the interior space is filled with
graphics representing the goods fitting into each category, with the exception
of the bottom right corner, which has been designated "Services Consolidated".)
Operations within the consumer resource center include:
- receiving, quality-checking and stocking of products
- preparing and picking customer orders and placing them in appropriate
containers
- loading the delivery fleet
- providing back haul services, such as video tape returns, dry cleaning,
film processing, shoe repair and bottle and can redemption
We receive inventory on a frequent basis to ensure availability and
freshness. Additionally, quality assurance personnel examine each perishable
item prior to order fulfillment to ensure that we provide only top-quality goods
to our customers. We also maintain quality and improve picking efficiency by
segregating products into a number of different areas in the consumer resource
center based on product characteristics, such as perishability, fragility,
temperature zone, odor and purchase frequency. Refrigerated and frozen goods are
maintained at appropriate temperatures, while household items, such as soap and
cleaning supplies, and service items, such as dry cleaning, are kept separate
from food items.
Since orders are received until 11:00 p.m. for delivery the next day, order
picking takes place overnight. We optimize the picking process by employing
traditional logistical techniques, such as segregating fast- and slow-moving
items. To maximize efficiency, our employees pick multiple customer orders at
one time, aided by a hand-held computerized device that directs them to pick
orders in the most efficient pattern while maintaining accuracy through bar
coding. Once the order is picked and consolidated in each customer's delivery
bins, we stage it for delivery in the morning. At that point, we assemble each
customer's grocery products with other items to be delivered, including products
that we receive each morning such as fresh baked goods and prepared meals.
ORDER FULFILLMENT AND DELIVERY. Once we have filled, assembled and staged
customer orders at the consumer resource center, we place them in refrigerated
trucks specially designed to ensure quality during delivery. Customers receive
their orders on a weekly schedule on a fixed day at any time from
39
<PAGE>
9:00 a.m. to 6:00 p.m. As a result, the delivery system allows for geographic
concentration, better load balancing and optimized route efficiency. To maintain
proper temperature and to properly separate incompatible items, such as a carton
of eggs and a frozen turkey, we separate our products and services in delivery
containers designated for certain types of items, including:
<TABLE>
<CAPTION>
TYPE OF CONTAINER SAMPLE CONTENTS
- ------------------------------------------------ ---------------------------------------------------
<S> <C>
bins for frozen products........................ ice cream; frozen vegetables
bins for refrigerated items..................... fresh meats, dairy products and seafood; prepared
meals
bins for ambient temperature food products...... baked goods, canned goods and other dry groceries
bins for ambient temperature non-food cleansers, detergents and health and beauty
products........................................ products
hanging bags or boxes........................... dry cleaning
flower boxes.................................... fresh flowers
individual items................................ bottled water and other bulk items
</TABLE>
By using a refrigerated truck and multi-temperature storage unit in the
customer's home, Streamline maintains the temperature integrity of a customer's
order better than if the customer purchased from a traditional retail
store--that is, refrigerated and frozen products are kept cool during the
delivery process, as opposed to being subject to differing temperature zones.
Our field service representatives are trained to bring quality customer
service direct to the home. Streamline's field service representatives are
uniformed and bonded and deliver to the customers in trucks that prominently
display our logo. Additionally, the Streamline box is equipped with a message
pad to facilitate communication between the customer and our field service
representative.
The Streamline box is combined with a weekly delivery cycle to provide an
in-home connection with the customer and allow back haul to enable Streamline to
expand its product offering to include renewable items such as dry cleaning and
video rentals. Streamline has also used its back haul capability to promote
community awareness through programs such as clothing and food drives to benefit
local organizations.
EXPANSION STRATEGY AND MARKET SELECTION
We intend to expand our business by establishing consumer resource centers
in selected markets across the country. We expect that we will be able to
centralize most of our operations, including order processing, customer service,
customer acquisition and general management and administration, in our corporate
headquarters, located in Westwood, Massachusetts. Our model consumer resource
center will require an estimated 150 to 200 employees, comprised of local
personnel to support its physical channel, along with a small management staff.
Our strategy is to have consumer resource centers in nearly all of what we
have identified as the top 20 markets in the U.S. for our service.
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<PAGE>
TOP 20 U.S. MARKETS
<TABLE>
<CAPTION>
NUMBER
OF HOUSEHOLDS
METROPOLITAN AREA (IN MILLIONS)
- --------------------------------------------- -----------------
<S> <C>
New York/New Jersey.......................... 7.0
Los Angeles.................................. 5.2
Chicago...................................... 3.2
Philadelphia................................. 2.7
San Francisco................................ 2.5
Boston....................................... 2.2
Washington, D.C.............................. 2.0
Dallas....................................... 2.0
Detroit...................................... 1.9
Houston...................................... 1.7
Atlanta...................................... 1.6
Seattle...................................... 1.6
Cleveland.................................... 1.5
Minneapolis.................................. 1.5
Tampa/St. Petersburg......................... 1.4
Miami........................................ 1.4
Denver....................................... 1.2
Sacramento................................... 1.1
Baltimore.................................... 1.0
Charlotte.................................... 0.8
- ------------------------
Source: The Lifestyle Market Analyst, 1999
</TABLE>
In assessing our expansion plans, we consider several factors in determining
the attractiveness of each target market, such as:
- number of households
- number of households with at least one child
- median income of households
- number of homeowners
- personal computer and Internet use
- strategic partnering opportunities
Our current development plan is to open a second consumer resource center,
in the Washington, D.C. area, in the fourth quarter of 1999. In addition,
Streamline plans to open consumer resource centers in new markets across the
U.S. while simultaneously expanding in existing markets with additional centers.
Specifically, we plan to open two to three additional facilities in 2000 with an
additional three to five facilities becoming operational in 2001. Although not
our primary expansion focus, we are also considering licensing our business
model and technologies to third parties for international implementation.
The number of consumer resource centers actually opened, as well as their
locations, will vary depending on a number of factors, including:
- regional acceptance of our products and services
41
<PAGE>
- the availability of appropriate and affordable sites for our facilities
- managing construction and obtaining local permits
- our ability to develop relationships with local and regional suppliers
- our ability to hire and train qualified personnel
- general economic and financial conditions
RELATIONSHIPS WITH CONSUMER PACKAGED GOODS COMPANIES
Streamline's business model has allowed us to develop strategic
relationships with a number of leading consumer packaged goods companies. These
companies compensate Streamline for the opportunity to gain insight into
consumer purchase behavior and to conduct on-line merchandising programs.
Additionally, since we deliver products to our customers with high frequency,
our physical channel provides an opportunity for consumer packaged goods
companies to conduct focused market research within particular demographic
groups consistent with the busy suburban family.
To strengthen our relationships with consumer packaged goods companies,
Streamline developed and sponsors the Consumer Learning Center, an on-site
research center designed to further develop the best thinking on consumer
behavior in the emerging consumer direct industry. Through the Consumer Learning
Center we work with each participant to:
- conduct quarterly research with a proprietary panel of consumers, located
throughout the U.S., who are selected because of their frequent use of
consumer direct services
- design, implement, and assess the effectiveness of marketing promotions at
Streamline
- solicit rich, qualitative feedback from Streamline customers through
quarterly focus groups
In addition to conducting research on the consumer direct industry,
Streamline provides Consumer Learning Center participants marketing and
promotional opportunities. Participants in the Consumer Learning Center pay
Streamline a membership fee.
Consumer Learning Center participants include the following:
<TABLE>
<S> <C>
- - Campbell Soup Company - Nestle USA, Inc.
- - The Gillette Company - The Pillsbury Company
- - Kimberly-Clark Corporation - The Procter & Gamble Company
- - Kraft Foods, Inc. - Ralston Purina Company
- - Mott's North America (a subsidiary of - Sargento Foods Inc.
Cadbury Schweppes plc) - Warner-Lambert Company
- - Nabisco Inc.
</TABLE>
OTHER ALLIANCES
We have recently formed alliances with e-commerce companies to expand our
product and service offerings. These alliances generally require the e-commerce
companies to make payments to us based on a percentage of revenue generated
through the alliance. Although we have not yet generated significant revenue
through these alliances, we believe that they will provide us with several key
benefits, including:
- generating additional revenue
- assisting in the building of our customer base
- enhancing awareness and expansion of the Streamline brand
42
<PAGE>
Streamline has alliances in place with the following:
<TABLE>
<CAPTION>
AFFILIATE SITES PRODUCTS SUPPLIED
- ------------------------------------ ------------------------------------
<S> <C>
barnesandnoble.com.................. books
eToys.com........................... toys
Nordstrom.com....................... clothing
Outpost.com......................... computer software and hardware
PCFlowers.com....................... flowers
</TABLE>
CUSTOMERS AND CUSTOMER ACQUISITION
Our target customers are busy suburban families, which tend to be
dual-income households having at least one child in the home and access to the
Internet and represent the top consuming households for our products and
services. These households have significant purchasing power, high levels of
education, sizable amounts of discretionary income, are comfortable using
technology. We believe they are the most valuable consumer segment in the
consumer direct channel in terms of potential profitability and willingness to
pay for time-saving alternatives. Approximately 85% of our current customer
households have at least one child in the home. During 1998, our average
customer placed approximately 40 orders and the average product and service
revenue per invoice was $102.
Currently, we generate leads primarily through direct mail campaigns, local
advertising and referrals. To better target our ideal customer, our advertising
and direct mailings focus on families and emphasize the time savings and
convenience provided by our service. We believe that we generate a significant
portion of our leads through referrals from existing customers. We have found
that our customers tend to refer potential customers from the same demographic
group--that is, busy suburban families. Moreover, customer referrals lower our
customer acquisition costs. For these reasons, we actively encourage customer
referrals by offering incentives for each new customer directed to us.
The following chart provides information, as of March 31, 1999, with respect
to the ten towns in the greater Boston area in which we have achieved greatest
market penetration:
<TABLE>
<CAPTION>
1990 PERCENTAGE
AVERAGE HOUSEHOLD APPROXIMATE OF HOUSEHOLDS
TOWN INCOME NUMBER OF HOUSEHOLDS SERVED BY STREAMLINE
- ------------------------------ ----------------- ----------------------- -----------------------
<S> <C> <C> <C>
Weston........................ $ 95,134 3,400 5.4%
Dover......................... 91,376 1,800 5.2
Wayland....................... 72,057 4,400 3.4
Sherborn...................... 93,925 1,500 3.3
Westwood...................... 58,559 4,800 3.0
Wellesley..................... 79,111 8,700 2.8
Medfield...................... 66,084 3,800 2.4
Sudbury....................... 79,092 5,400 2.3
Sharon........................ 61,692 6,200 1.5
Milton........................ 53,130 8,500 1.5
Source for average household income: 1990 U.S. Census
Source for number of households: U.S. Postal Service
</TABLE>
43
<PAGE>
We focus on developing relationships with strategic partners with whom we
will be able to engage in joint marketing and other directed sales efforts in an
attempt to reduce our customer acquisition costs. For example, in connection
with the opening of our facility in the Washington, D.C. area, we are working
with Nordstrom, Inc., as well as other area partners to determine ways to inform
their existing busy suburban family customers of Streamline's services. Although
we have no formal agreement with Nordstrom, Inc., we plan to implement and
continue to develop a variety of co-marketing programs that make use of
Nordstrom's brand loyalty, existing customer relationships and presence in many
of our target markets. For example, Nordstrom, Inc. has physical stores in 14 of
the top 20 U.S. markets, and distributes 60 million catalogs per year across all
major markets in the U.S. They also have a sizable in-store sales force and a
significant e-commerce initiative located at www.nordstrom.com.
CUSTOMER SERVICE
We have created a number of relationship management systems designed to
encourage feedback and promote issue resolution. We also maintain a
comprehensive customer service database that enables us to deliver personalized
customer service and to efficiently track customer requests for new products and
services.
Our customer service team is cross-trained and encouraged to address all
customer comments and inquiries, which we receive via the Internet, by telephone
and fax, and by messages left on Streamline boxes for our field representatives.
Each customer comment or inquiry, whether positive, negative or neutral, is
stored and categorized in our customer service database. We attempt to resolve
issues and answer questions at the first point of contact between us and the
customer, and in any event within 24 hours of initial contact.
TECHNOLOGY
Streamline employs both proprietary and commercially available licensed
technologies to integrate our various systems, including order-taking, inventory
control, warehouse management and customer service.
Streamline offers its customers two options for ordering via the Internet.
Customers can visit our website at www.streamline.com to review product and
service offerings, to revise their personal shopping list and DON'T RUN OUT
selections, and to place or revise their orders. The website offers high-quality
graphical representations of, and textual information regarding, our products
and services. The website also provides a two-way communication channel between
us and our customers.
In addition to our website, we have recently introduced a hybrid
CD-ROM/Internet application in order to deliver customers a graphic ordering
system designed to alleviate the bandwidth constraints experienced by many
Internet users. The CD-ROM is the result of over 18 months of development
efforts involving Streamline and Intel Corporation, with input and assistance
from consumer packaged goods companies. The CD-ROM provides a graphical
interface that is even more robust than that of our website. Among the
enhancements included in the CD-ROM application are the ability to:
- provide a side by side comparison of multiple products
- watch a cooking demonstration with audio
- receive pop-up ordering suggestions, such as the opportunity to buy hot
fudge topping while purchasing ice cream.
Streamline's systems and technology are continually reviewed, updated and
supported by in-house technicians, system administrators and outside consultants
and systems integration specialists.
44
<PAGE>
COMPETITION
Both the retail industry and the consumer direct industry are highly
competitive. Streamline currently or potentially competes with several types of
companies, including:
- traditional retail stores, including grocery stores, warehouse clubs, drug
stores and convenience stores, some of which fulfill orders received by
telephone, fax or the Internet
- various suppliers of other goods and services, both chains and
independently owned operations, such as dry cleaners, video rental stores,
prepared meal providers, bottled water delivery operations, pet supply
stores and photo labs
- various on-line providers of groceries and other products and services,
such as Peapod, Inc., Hannaford Bros. Cos.' HomeRuns, ShopLink
Incorporated, HomeGrocer.com, Inc., Beacon Home Direct, Inc. d/b/a
Scotty's Home Market, Net Grocer Inc. and Intelligent Systems for Retail,
Inc. d/b/a WebVan
- other consumer direct or catalog retailers of products or services
Streamline believes that the main competitive factors in our market are:
- range, quality and availability of products and services
- convenience, reliability and professionalism of delivery
- ease of ordering
- level and accessibility of information regarding products
- quality and responsiveness of customer service
- price
- general brand awareness
Many of our competitors are larger and have substantially greater resources
than we do. In addition, we believe that competition among consumer direct
suppliers of groceries and other products and services will continue to
intensify as new on-line suppliers and traditional retailers recognize the
potential of the consumer direct channel.
INTELLECTUAL PROPERTY
Streamline regards its copyrights, service marks, trademarks, trade dress,
trade secrets and similar intellectual property as critical to its success and
relies on trademark and copyright law, trade secret protection and
confidentiality and/or license agreements with its employees, clients, partners
and others to protect its proprietary rights. Streamline pursues the
registration of its trademarks and service marks in the U.S. and has applied for
the registration of certain of its trademarks and service marks. Streamline has
been granted service mark registrations for the marks STREAMLINE and WE BRING IT
ALL HOME and has pending registration applications for the marks DRO, DON'T RUN
OUT and SIMPLE SOURCE. Streamline has not sought trademark, service mark or
copyright protection outside of the U.S. Accordingly, satisfactory intellectual
property protection may not be available in each country where Streamline may
offer its products and services in the future.
EMPLOYEES
As of March 31, 1999, Streamline had 183 full-time and part-time employees,
which worked in corporate, selling general and administrative functions and in
our suburban Boston consumer resource center. Streamline also employs a limited
number of independent contractors and temporary employees
45
<PAGE>
on a periodic basis. None of Streamline's employees are represented by a labor
union and Streamline considers its labor relations to be good.
FACILITIES
Streamline is headquartered in Westwood, Massachusetts, where we lease
approximately 67,000 square feet of commercial space pursuant to a term lease
that expires on October 31, 2000, subject to a five-year renewal at Streamline's
option. These facilities are used for executive office space, including sales
and marketing and finance and administration, and for the operation of our
initial consumer resource center. We also maintain a facility in Gaithersburg,
Maryland where we lease an aggregate of approximately 93,000 square feet of
commercial space pursuant to a term lease that expires on October 1, 2007 with
respect to 56,000 square feet and on July 22, 2009 with respect to 37,000 square
feet. We believe that our current facilities will be adequate to meet our needs
in the Boston and Washington, D.C. areas for the remainder of the year. We
intend to acquire additional facilities in connection with our planned
expansion.
LEGAL PROCEEDINGS
Streamline is not a party to any material legal proceedings.
46
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND SELECTED KEY EMPLOYEES
The executive officers, directors and selected key employees of Streamline
as of March 31, 1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --------- -------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Timothy A. DeMello.................... 40 Chairman, President and Chief Executive
Officer
Terence W. Toran...................... 50 Chief Financial Officer
David K. Blakelock.................... 37 Vice President, Operations
Frank F. Britt........................ 32 Vice President, Marketing and Merchandising
Mary E. Wadlinger..................... 39 Vice President, Customer Quality
John Cagno............................ 40 Vice President, Information Technology
Mark A. Cohn(1)....................... 42 Director
Thomas A. Crowley(2).................. 50 Director
John P. Fitzsimons(2)................. 53 Director
Thomas O. Jones....................... 54 Director
J. Daniel Nordstrom(1)................ 36 Director
Faith B. Popcorn(1)................... 55 Director
OFFICERS AND SELECTED KEY EMPLOYEES
Lauren A. Farrell..................... 31 Associate Vice President and Controller
Gina L. Wilcox........................ 30 Associate Vice President, Strategic
Relations
Kevin M. Sheehan...................... 35 Vice President and General Manager,
Washington Market
Cathy Papoulias....................... 42 Vice President, Corporate Development
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
TIMOTHY A. DEMELLO is the founder, Chairman, President and CEO of
Streamline. Prior to launching Streamline in 1993, Mr. DeMello was founder,
President and CEO of Replica Corporation. Previously, Mr. DeMello served as Vice
President of L.F. Rothschild, Unterberg, Towbin from 1985 to 1987 and as Vice
President of Kidder Peabody & Company from 1981 to 1985. Mr. DeMello received a
Bachelor of Science degree in business from Babson College and currently sits on
its Board of Trustees. Mr. DeMello also sits on the Board of Trustees for the
Pan-Mass Challenge, a charitable foundation that raises money for cancer
research.
TERENCE W. TORAN has served as Streamline's Chief Financial Officer since
March 1999. From 1997 until joining Streamline, he served as Vice President,
Development of Carematrix Corp., a retirement living company. From 1996 to 1997,
Mr. Toran was a principal of Nassau Advisors, a management consulting and
development firm which he co-founded. From 1986 to 1996, he served in a number
of capacities for Marriott International, Inc., most recently as Senior Vice
President, Finance and Market Development--Food Services Division. While at
Marriott he also served as the Vice President, Finance and
Development--Retirement Living Division where he was responsible for the
national rollout of over 100 facilities. He also directed and controlled the
annual development plan for lodging and restaurant units. Mr. Toran received a
Masters of Business Administration from Amos Tuck School at Dartmouth College
and a Bachelor of Science degree in chemical engineering from Princeton
University.
47
<PAGE>
DAVID K. BLAKELOCK joined Streamline as Vice President, Operations in
January 1995. From April 1987 until he joined Streamline, Mr. Blakelock was a
consultant for Senn-Delaney Management Consultants, a unit of Arthur Andersen,
most recently managing the East Coast Distribution & Logistics Practice. Mr.
Blakelock received a Masters of Business Administration from the University of
Chicago and a Bachelor of Science degree in engineering from Union College.
FRANK F. BRITT joined Streamline in August 1996 as Vice President, Marketing
and Merchandising.
From February 1990 to August 1996, Mr. Britt was a senior manager in the
consumer products practice with Andersen Consulting's Strategic Services
Division. Prior to 1990, he worked in the Operations Management Practice at
Arthur D. Little, Inc. Mr. Britt holds a Bachelor of Science degree in marketing
and logistics from Syracuse University.
MARY E. WADLINGER joined Streamline in January 1997 as Director of
Operations and has served as Vice President, Customer Quality since May 1997.
From August 1989 until June 1996, Ms. Wadlinger was the Director of Process
Improvement at Melville Corporation, where she managed strategic re-engineering
efforts in customer service, merchandise allocation, logistics and store
operations for Marshall's, CVS Pharmacy and Kay-Bee Toys. Ms. Wadlinger received
her Bachelor of Science degree in finance from the University of Maine at Orono.
JOHN CAGNO has served as Vice President, Information Technology since
January 1999. From August 1996 to January 1999, Mr. Cagno was Vice President,
Information Services at Brookstone Company, Inc. He also served as Director,
Retail Information Systems at Reebok International Ltd. from January 1995 to
August 1996. From January 1994 to January 1995, Mr. Cagno was Director,
Information Systems at Nature Food Centre.
MARK A. COHN has served as a director of Streamline since June 1993. Mr.
Cohn founded Damark International, Inc. and has been its Chief Executive Officer
since 1986.
THOMAS A. CROWLEY has served as a director of Streamline since September
1997. Mr. Crowley has been Managing Director of GE Equity, a division of General
Electric Capital Corporation, since February 1998. Prior to his current
position, he served in a number of capacities at GE Capital since August 1987,
including Managing Director, Corporate Ventures from January 1996 to February
1998, Senior Vice President, Equity Capital Group from November 1994 to January
1996, and Senior Vice President, Corporate Finance Group from July 1991 to
November 1994.
JOHN P. FITZSIMONS has served as a director of Streamline since September
1998. Mr. Fitzsimons has been Senior Vice President, Director of Equities of
Reliance Insurance Company since February 1999. Prior to that time, he served as
Vice President, Director of Equities of Reliance Insurance Company.
THOMAS O. JONES has served as a director since January 1998. He was Chief
Information Officer of Streamline from March 1997 to December 1997. He has also
been President and CEO of Elm Square Technologies, Inc. since January 1994. Mr.
Jones was a Senior Lecturer at Harvard Business School from November 1991 to
June 1995 and at MIT Sloan School from September 1998 to December 1998.
J. DANIEL NORDSTROM has served as a director of Streamline since September
1998. In 1995, Mr. Nordstrom was appointed Co-President of Nordstrom, Inc.,
where he oversees the Direct Sales Division which he launched in 1993.
Previously, he served in several capacities at Nordstrom, Inc. Mr. Nordstrom
received his Masters of Business Administration degree from the University of
Washington in 1989.
FAITH B. POPCORN has served as a director of Streamline since June 1997. Ms.
Popcorn founded BrainReserve, Inc., a marketing consultancy company, in January
1974 and has been its chairman since that time.
LAUREN A. FARRELL joined Streamline as Controller in May 1996 and became an
Associate Vice President in December 1998. From December 1994 to May 1996, she
was Financial Reporting Manager
48
<PAGE>
at Saga International Holidays, Ltd., a direct marketing company in the travel
industry. Ms. Farrell was with American Auto Auction, Inc. as Controller from
October 1992 to December 1994 and previous to that assignment, she was a tax
consultant with Arthur Andersen. Ms. Farrell received a Bachelor of Science
degree from Bentley College. She is a certified public accountant.
GINA L. WILCOX joined Streamline as Director of Strategic Relations in
November 1996 and became Associate Vice President, Strategic Relations in
December 1998. From June 1995 until she joined Streamline, Ms. Wilcox was a
consultant in the consumer products practice with Andersen Consulting's
Strategic Services Division. Ms. Wilcox received her Masters of Business
Administration degree in 1995 from Harvard Business School.
KEVIN M. SHEEHAN joined Streamline in February 1997 and has served in
various positions, including Vice President and General Manager, Washington
Market since January 1999. Mr. Sheehan also served as President of Streamline
Mid-Atlantic, Inc. from February 1997 to May 1998. From April 1994 to February
1997, Mr. Sheehan was President and CEO of Shopping Alternatives, Inc., a
provider of home grocery shopping services based in the Washington, D.C. area.
CATHY PAPOULIAS joined Streamline as Vice President, Corporate Development
in February 1999. She was Vice President of Pendleton James Associates from
January 1997 to January 1999. In June 1995, Ms. Papoulias founded Spartan
Trading, an import trading company, acting as President until January 1997. From
March 1987 to August 1994, Ms. Papoulias served in several capacities with
ACNielsen Corporation, most recently as Vice President of Global Accounts.
BOARD OF DIRECTORS
Our charter and by-laws provide that the size of our board of directors
shall be determined by resolution of the board of directors.
The board of directors is divided into three classes, with the members of
the respective classes serving for staggered three-year terms. The first class
consists of Mr. Fitzsimons and Ms. Popcorn, the second of Mr. Crowley and Mr.
Jones, and the third of Mr. Cohn, Mr. DeMello and Mr. Nordstrom, with the
initial terms of the directors in these classes expiring upon the election and
qualification of the directors at the 2000, 2001 and 2002 annual meetings of
stockholders, respectively. At each annual meeting of stockholders, directors
will be re-elected or elected for full three-year terms. See "Description of
Capital Stock--Delaware Law and Certain Charter and Provisions."
Messrs. Crowley, Fitzsimons and Nordstrom were nominated and elected as
directors by the holders of our preferred stock in accordance with provisions of
our charter that will terminate upon the closing of this offering. They will
remain as directors until they resign or the stockholders elect their
replacements.
Our executive officers are appointed by the board of directors and serve
until their successors have been duly elected and qualified. There are no family
relationships among any of our executive officers or directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The compensation committee consists of Mr. Cohn, Mr. Nordstrom and Ms.
Popcorn. The compensation committee reviews and evaluates the salaries,
supplemental compensation and benefits of our officers, reviews general policy
matters relating to compensation and benefits of our employees and makes
recommendations concerning these matters to the board of directors. The
compensation committee is also authorized to administer our stock option and
stock purchase plans.
The audit committee consists of Messrs. Crowley and Fitzsimons. The audit
committee reviews with our independent accountants the scope and timing of its
audit services, the accountants' report on
49
<PAGE>
our financial statements following completion of their audit and our policies
and procedures with respect to internal accounting and financial controls. In
addition, the audit committee will make annual recommendations to the board of
directors for the appointment of independent accountants for the ensuing year.
DIRECTOR COMPENSATION
Directors of Streamline have not received compensation for their services as
directors. However, non-employee directors are reimbursed for travel expenses.
Streamline maintains directors' and officers' liability insurance and our
by-laws provide for mandatory indemnification of directors and officers to the
fullest extent permitted by Delaware law. In addition, the charter limits the
liability of directors to us or our stockholders for breaches of the directors'
fiduciary duties to the fullest extent permitted by Delaware law. See
"Description of Capital Stock--Certain Anti-Takeover, Limited Liability and
Indemnification Provisions." Under our director stock option plan, at the
discretion of the board of directors, non-employee directors are eligible to
receive options to purchase shares of common stock at the fair market value on
the date of grant. Currently, Mr. Cohn has an option to purchase 12,500 shares
of common stock at an exercise price of $1.50 per share and Ms. Popcorn has an
option to purchase 12,500 shares of common stock at an exercise price of $2.04
per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is currently comprised of Mr. Cohn, Mr. Nordstrom
and Ms. Popcorn. No member of the compensation committee has been an employee of
Streamline. No executive officer of Streamline serves as a member of the board
of directors or compensation committee of any other entity that has one or more
executive officers serving as a member of Streamline's board of directors or
compensation committee.
EMPLOYMENT AGREEMENTS
We have an employment agreement with Mr. DeMello, dated as of April 9, 1999,
providing for Mr. DeMello to be employed as our President and Chief Executive
Officer. Under the terms of the employment agreement, Mr. DeMello is to be paid
a base annual salary of $200,000, subject to increase from time to time by the
board of directors, and is eligible to receive an annual bonus at the discretion
of the board of directors which is not to exceed 50% of his then current base
salary. Mr. DeMello is also entitled to life insurance, health insurance and
other employee fringe benefits to the extent that we make benefits of this type
available to our other executive officers. Under the employment agreement, upon
the closing of this offering Mr. DeMello will receive stock options to purchase
250,000 shares of common stock at an exercise price equal to the initial public
offering price. These stock options become exercisable at the rate of 20% per
year over five years. If we terminate Mr. DeMello's employment without cause or
if he resigns for good reason, we must continue to pay his base salary and
benefits for a period of two years and any stock options and restricted stock
that he may have at the time will become immediately exercisable and fully
vested.
We have an employment agreement with Mr. Britt, dated as of July 1, 1996,
providing for Mr. Britt to be employed as our Vice President of Marketing and
Merchandising for a 12-month period, subject to automatic extension for
successive 12-month periods unless either party advises the other at least 60
days prior to the expiration of the current term of its desire not to extend the
term of employment. Under the terms of the employment agreement, Mr. Britt is to
be paid a base annual salary of not less than $100,000, subject to increase from
time to time by the board of directors following and based on annual reviews of
Mr. Britt's performance. The employment agreement also contains non-competition
and non-solicitation provisions that are intended to survive the termination of
employment for a period of 24 months.
50
<PAGE>
With the exception of Mr. DeMello and Mr. Britt, none of Streamline's
executive officers have an employment contract with Streamline and each of such
officers serves at the discretion of the board of directors. All of our
executive officers and key employees have signed non-disclosure agreements and
non-competition and non-solicitation agreements that extend for two years after
employment termination.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
of Streamline's chief executive officer and the three other most highly
compensated executive officers whose total salary and bonus exceeded $100,000
for the year ended December 31, 1998.
SUMMARY COMPENSATION TABLE FOR 1998
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION -------------------
------------------------ SECURITIES
NAME AND PRINCIPAL POSITION(S) SALARY BONUS UNDERLYING OPTIONS
- ----------------------------------------------------------- ----------- ----------- -------------------
<S> <C> <C> <C>
Timothy A. DeMello......................................... $ 157,385 -- --
Chairman, President and Chief Executive Officer
David K. Blakelock......................................... 109,908 $ 1,800 --
Vice President, Operations
Frank F. Britt............................................. 109,908 -- --
Vice President, Marketing and Merchandising
Mary E. Wadlinger.......................................... 102,442 1,800 35,000
Vice President, Customer Quality
</TABLE>
STOCK OPTION GRANTS
The following table contains information concerning the grants of options to
purchase common stock made in the year ended December 31, 1998 to each of the
officers named in the Summary Compensation Table. Stock options are generally
granted at 100% of the fair value of the common stock as determined by the board
of directors on the date of grant. In reaching the determination of fair value
at the time of each grant, the board of directors considers a range of factors,
including Streamline's current financial position; its recent revenue, results
of operations and cash flows; its assessment of Streamline's competitive
position in its markets and prospects for the future; the status of Streamline's
customer acquisition and marketing efforts; current valuations for comparable
companies; and the illiquidity of an investment in the common stock.
51
<PAGE>
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM(2)
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE DATE 5% 10%
- ---------------------------------- ------------- ----------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Timothy A. DeMello................ -- -- -- -- -- --
David K. Blakelock................ -- -- -- -- -- --
Frank F. Britt.................... -- -- -- -- -- --
Mary E. Wadlinger................. 35,000 29.23% $ 7.00 1/1/08 $ 67,689 $ 154,079
</TABLE>
- ------------------------
(1) Shares underlying options generally vest over a three-year period. See
"Management--Stock Option Plans."
(2) Assumes appreciation in the independently appraised value of the common
stock of 5% and 10% per year over the ten-year option period as mandated by
the rules and regulations of the Securities and Exchange Commission, and
does not represent Streamline's estimate or projection of the future value
of the common stock. The actual value realized may be greater or less than
the potential realizable values set forth in the table.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information concerning option holdings for
the year ended December 31, 1998 with respect to each of the officers named in
the Summary Compensation table.
1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR END AT YEAR END(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Timothy A. DeMello............................. -- -- -- --
David K. Blakelock............................. 100,000 12,500 $ $
Frank F. Britt................................. 50,000 37,500
Mary E. Wadlinger.............................. 16,666 33,334
</TABLE>
- ------------------------
(1) Value is determined by subtracting the exercise price from the proposed
initial offering price of the common stock, multiplied by the number of
shares underlying the options.
In the year ended December 31, 1998 none of the officers named in the
Summary Compensation Table exercised any options.
STOCK OPTION PLANS
1993 EMPLOYEE STOCK INCENTIVE PLAN
In June 1993, Streamline's board of directors and stockholders approved
Streamline's 1993 employee option plan, which provides for the grant of
incentive stock options and nonqualified stock options to employees (including
officers and employee directors), consultants and advisors. A maximum of
2,500,000 shares have been authorized for issuance pursuant to the employee
option plan. As of March 31, 1999, 49,633 shares had been issued upon exercise
of options granted under the employee
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option plan and options for 1,186,000 shares were outstanding. No participant in
the employee option plan may, in any year, be granted stock options or awards
with respect to more than 1,000,000 shares of common stock.
The board of directors administers the employee option plan and has the
authority to determine which eligible individuals are to receive options, the
terms of such options, the status of such options as incentive or nonqualified
stock options under the federal income tax laws, including the number of shares,
exercise prices and times at which the options become and remain exercisable and
the time, manner and form of payment upon exercise of an option. The exercise
price of options granted under the employee option plan may not be less than
100% of the fair market value of a share of common stock on the date of grant
(110% in the case of incentive stock options issued to an employee who at the
time of grant owns more than 10% of the combined voting power of all classes of
Streamline stock). The options become exercisable at such time or times as are
determined by the board of directors and expire after a specified period that
may not, in the case of incentive stock options, exceed ten years.
From and after the closing of this initial public offering, the compensation
committee shall determine the selection of a director or an officer as a
recipient of an option, the timing of the option grant, the exercise price of
the option and the number of shares subject to the option.
In the event of a consolidation, merger or sale of all or substantially all
of the assets of Streamline in which outstanding shares of common stock are
exchanged for securities, cash or other property of any other corporation or
business entity or in the event of a liquidation of Streamline, the board of
directors of Streamline, or the board of directors of any corporation assuming
the obligations of Streamline, may, in its discretion, provide that outstanding
options under the employee option plan be:
- assumed, or equivalent options substituted, by the acquiring or succeeding
corporation, or an affiliate thereof
- exercised within a specified period of time, at the end of which period
the options will terminate
- terminated in exchange for a cash payment
- exercised in full immediately prior to such event
With the consent of an option holder, the board of directors can cancel that
holder's options and replace them with new options (for the same or a different
number of shares) having a higher or lower exercise price per share than the
cancelled options or amend the terms of any option outstanding to provide for a
higher or lower exercise price per share. The board of directors may also, in
its sole discretion, accelerate the date or dates on which all or any particular
option or options granted under the employee option plan may be exercised or
extend the dates during which all, or any particular, option or options granted
under the employee option plan may be exercised.
The board of directors may amend or modify the employee option plan at any
time, subject to the rights of holders of outstanding options. The employee
option plan will terminate on June 9, 2007.
1993 DIRECTOR OPTION PLAN
In June 1993, Streamline's board of directors and stockholders approved the
1993 director option plan which provides for the grant of nonqualified stock
options to directors of Streamline who are not also employees of Streamline.
Options are granted under the director option plan at the discretion of the
board of directors at an exercise price equal to the fair market value of the
common stock on the date of grant, and have a term of five years.
In the event of a consolidation, merger or sale of all or substantially all
of the assets of Streamline in which outstanding shares of common stock are
exchanged for securities, cash or other property of
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any other corporation or business entity or in the event of a liquidation of
Streamline, the board of directors of Streamline, or the board of directors of
any corporation assuming the obligations of Streamline, may, in its discretion,
provide that outstanding options under the director option plan be:
- assumed, or equivalent options substituted, by the acquiring or succeeding
corporation, or an affiliate thereof
- exercised within a specified period of time, at the end of which period
the options will terminate
- terminated in exchange for a cash payment
- exercised in full immediately prior to such event
A maximum of 250,000 shares have been authorized for issuance pursuant to
the director option plan. As of March 31, 1999, 62,500 shares had been issued
upon exercise of options granted under the director option plan and options for
25,000 shares were outstanding.
1999 EMPLOYEE STOCK PURCHASE PLAN
In April 1999, Streamline's board of directors and stockholders approved the
1999 employee stock purchase plan, which enables eligible employees to acquire
shares of Streamline's common stock through payroll deductions. Our employee
stock purchase plan is intended to qualify as an employee stock purchase plan
under Section 423 of the Internal Revenue Code. The initial offering period will
start on the date of this prospectus and will end on December 31, 1999, unless
otherwise determined by the board of directors. Subsequent offerings under the
employee stock purchase plan are planned to start on January 1 and July 1 of
each year and end on June 30 and December 31 of each year. During each offering
period, an eligible employee may select a rate of payroll deduction of from 1%
to 10% of compensation, up to an aggregate of $12,500 in any offering period.
The purchase price for Streamline's common stock purchased under our employee
stock purchase plan is 85% of the lesser of the fair market value of the shares
on the first day or the last day of the offering period. An aggregate of 250,000
shares of common stock have been reserved for issuance under the employee stock
purchase plan.
401(K) PLAN
Streamline has established a tax-qualified cash or deferred profit sharing
plan or 401(k) plan covering all of Streamline's eligible full-time employees.
Streamline adopted the 401(k) plan effective January 1, 1997. Under the plan,
participants may elect to contribute, through salary reductions, up to 15% of
their annual compensation subject to a statutory maximum. Streamline does not
currently provide additional matching contributions under the 401(k) plan, but
may do so in the future. The 401(k) plan is designed to qualify under Section
401 of the Internal Revenue Code of 1986, as amended, so that contributions by
employees or by Streamline to the plan, and income earned on plan contributions,
are not taxable to employees until withdrawn from the 401(k) plan, and so that
contributions by Streamline, if any, will be deductible by Streamline when made.
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CERTAIN TRANSACTIONS
In May and June 1996, Reliance Insurance Company purchased a total of 50,000
shares of Streamline Series A cumulative convertible preferred stock for an
aggregate purchase price of $5.0 million. John P. Fitzsimons, a director of
Streamline, is a Senior Vice President, Director of Equities of Reliance.
In June and September 1997, Intel Corporation, PaineWebber Capital Inc.,
General Electric Capital Corporation and SAP America, Inc. each acquired 20,000
shares of Streamline Series B convertible preferred stock and Reliance acquired
10,000 shares of Streamline Series C convertible preferred stock, for an
aggregate purchase price of $9.0 million.
In April 1998, DDJ Canadian High Yield Fund and Mellon Bank, N.A., solely in
its capacity as Trustee for General Motors Employees Domestic Group Pension
Trust as directed by DDJ Capital Management, LLC and not in its individual
capacity, purchased senior discount notes and warrants of Streamline in 777
attached units. Streamline also issued an aggregate of 7,500 shares of common
stock to these purchasers in connection with the financing. DDJ Canadian High
Yield Fund purchased 222 units and Mellon Bank, N.A., solely in its capacity as
trustee as described above, purchased 555 units. The face amount of the senior
discount notes was approximately $7.8 million which resulted in proceeds to
Streamline of $7.0 million. The warrants have an exercise price of $7.00 per
share and were exercisable for up to 425,000 shares of common stock in the
aggregate, 225,000 of which were vested and 200,000 of which were subject to
vesting.
In September 1998, Nordstrom, Inc. acquired 228,570 shares of Series D
convertible preferred stock of Streamline for an aggregate purchase price of
approximately $22.9 million. J. Daniel Nordstrom, a director of Streamline, is
Co-President of Nordstrom, Inc.
In September 1998, in connection with the Series D financing, Streamline
repaid the $7.0 million principal amount of senior discount notes plus $591,000
which included accrued interest and redemption premium, amended the warrant
agreement with DDJ Canadian High Yield Fund and Mellon Bank, N.A., solely in its
capacity as trustee as described above, to fix the total number of shares
issuable upon exercise of the warrants to 225,000, and sold these parties a
total of 5,000 additional shares of common stock for nominal cash consideration.
Additionally, in September 1998, we repaid non-negotiable convertible promissory
notes with an aggregate principal amount of $600,000 plus accrued interest. The
notes accrued interest at a rate of 8% per annum and were convertible into
common stock. Mark A. Cohn, a director of Streamline, was repaid $100,000 plus
accrued interest of approximately $4,400. James Maxmin, a director of Streamline
until September 1998, was repaid $100,000 plus accrued interest of approximately
$4,500.
Thomas O. Jones, a director of Streamline, is the President of Elm Square
Technologies, Inc. On March 7, 1997, Streamline entered into a development and
consulting agreement with Elm Square whereby Elm Square committed to develop an
Internet ordering system and customer support database and also provide
technology consulting services to Streamline. Although the agreement terminated
according to its terms on December 31, 1997, an ongoing business relationship
continues between Elm Square and Streamline. During fiscal year 1998, Streamline
paid Elm Square approximately $1.7 million for software development,
implementation and consulting services. We continue to pay Elm Square
approximately $150,000 per month for ongoing services of this nature. In March
1997, in connection with the development agreement, Streamline issued Elm Square
a warrant to purchase 50,000 shares of common stock at a purchase price of $2.04
per share. In December 1998, Streamline issued Elm Square a warrant to purchase
an additional 100,000 shares of common stock at a purchase price of $4.00 per
share in connection with ongoing services provided by Elm Square.
Intel Corporation is a beneficial owner of more than 5% of Streamline's
Series B convertible preferred stock. On June 13, 1997, Streamline entered into
a development agreement with Intel,
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whereby Intel committed to develop a CD-ROM application for Streamline and
Streamline issued warrants for up to 142,857 shares of common stock, exercisable
at $7.00 per share. An additional 28,000 warrants, exercisable at $7.00 per
share, were issued to Intel in January 1998 in connection with ongoing
development efforts by Intel. All of Intel's warrants became fully vested in
July 1998 upon Intel's delivery of the final version of the application.
General Electric Capital Corporation is a beneficial owner of more than 5%
of Streamline's Series B convertible preferred stock, and Thomas A. Crowley, a
director of Streamline, is a Managing Director of Ventures of GE Capital. In
September 1997, we agreed to give GE Capital opportunities to provide us with
any future debt financing that we required and, in connection with these
proposed arrangements, we granted GE Capital warrants to purchase up to 142,857
shares of common stock. Of such warrants 25% are vested and exercisable at $7.00
per share and 75% vest in the event GE Capital provides a specified level of
future debt financing to Streamline by September 23, 1999 and are exercisable at
greater than or equal to $8.40 per share. On November 21, 1997, Streamline
entered into a 36 month lease with GE Capital for office furniture. Streamline
paid GE Capital approximately $82,000 in 1998 and $21,000 in the first quarter
of 1999 to lease such furniture. Streamline has entered into lease agreements
with Penske Truck Leasing, a subsidiary of GE Capital, for 60-month leases of 13
Streamline delivery vehicles. Streamline paid Penske approximately $116,000 in
1998 and $53,000 in the first quarter of 1999 to lease such trucks.
Reliance Insurance Company, Intel Corporation, PaineWebber Capital Inc.,
General Electric Capital Corporation, SAP America, Inc., DDJ Canadian High Yield
Fund, Mellon Bank, N.A. solely in its capacity as trustee as described above,
and Nordstrom, Inc. are entitled to certain registration rights with respect to
the common stock they will hold upon the closing of this offering and the common
stock they will hold upon the exercise of Streamline warrants. See "Description
of Capital Stock-- Registration Rights."
Pursuant to a letter agreement dated April 13, 1999, Nordstrom, Inc. has
agreed to provide us with financing of up to $10.0 million upon our request.
Nordstrom's commitment will terminate upon the closing of this offering or April
2000, whichever is earlier. The final terms of any such financing will be
determined at the time we request such financing but will be similar to the
terms of the sale of Series D preferred stock to Nordstrom in September 1998. We
issued Nordstrom a warrant to purchase 75,000 shares of common stock at an
exercise price of $7.00 per share in connection with this financing commitment.
For a description of other transactions and certain employment and other
arrangements between Streamline and certain of its directors and executive
officers, see "Management--Director Compensation" and "--Executive
Compensation."
We believe that all of the transactions set forth above that were
consummated with parties that may be deemed to be affiliated with us were made
on terms no less favorable to us than could have been obtained from unaffiliated
third parties. We will require that all future transactions with parties
affiliated with us, including loans between us and our officers, directors,
principal stockholders and their affiliates, be approved by a majority of the
board of directors, including a majority of independent and disinterested
directors, and that such transactions will need to be on terms no less favorable
to us than could be obtained from unaffiliated third parties.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of Streamline's common stock as of March 31, 1999, and as adjusted to
reflect the sale of shares offered hereby, by (1) each person known by
Streamline to own beneficially more than five percent of Streamline's common
stock, (2) each of Streamline's directors and each of the officers named in the
Summary Compensation Table, and (3) all current executive officers and directors
of Streamline as a group.
Unless otherwise indicated, each person named in the table has sole voting
power and investment power or shares such power with his or her spouse with
respect to all shares listed as owned by such person. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting or investment power with respect to the
securities. The number of shares of common stock outstanding used in calculating
the percentage for each listed person includes any shares the individual has the
right to acquire within 60 days of March 31, 1999, and assumes the conversion of
all outstanding shares of preferred stock into common stock of Streamline.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES BENEFICIALLY OWNED
BENEFICIALLY ----------------------------------
NAME OF BENEFICIAL OWNER OWNED BEFORE OFFERING AFTER OFFERING
- --------------------------------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Nordstrom, Inc....................................................... 5,989,641(1) 44.7% %
J. Daniel Nordstrom
1617 Sixth Avenue
Seattle, WA 98101
Reliance Insurance Company........................................... 2,597,615(2) 19.8
John P. Fitzsimons
55 East 52nd Street
New York, NY 10055
Timothy A. DeMello................................................... 1,926,000(3) 14.7
c/o Streamline.com, Inc.
27 Dartmouth Street
Westwood, MA 02090
Thomas A. Crowley.................................................... 321,428(4) 2.4
Faith B. Popcorn..................................................... 56,250(5) * *
Mark A. Cohn......................................................... 55,000(6) * *
Thomas O. Jones...................................................... 150,000(7) 1.1
David K. Blakelock................................................... 125,000(8) * *
Frank F. Britt....................................................... 87,500(8) * *
Mary E. Wadlinger.................................................... 33,333(8) * *
All executive officers and directors as a group (12 people).......... 11,341,767(9) 81.6% %
</TABLE>
- ------------------------
* Less than 1% of our outstanding common stock.
(1) Includes 5,714,250 shares beneficially owned by Nordstrom, Inc. and an
additional 75,000 shares issuable upon the exercise of a warrant owned by
Nordstrom. Also includes 200,391 shares of common stock issuable upon
conversion of shares of Series D preferred stock dividends expected to
accrue through May 31, 1999. Mr. Nordstrom, a director of Streamline, is
Co-President of Nordstrom. Although Mr. Nordstrom may be deemed to be a
beneficial holder of such shares, he disclaims all such beneficial ownership
except to the extent of his financial interest therein.
(2) Consists of shares beneficially owned by Reliance Insurance Company. Mr.
Fitzsimons, a director of Streamline, is the Senior Vice President, Director
of Equities of Reliance. Although Mr. Fitzsimons may be deemed to be a
beneficial holder of such shares, he disclaims all such beneficial ownership
except to the extent of his financial interest therein.
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(3) Includes an aggregate of 10,000 shares held in custody for Mr. DeMello's
children and an aggregate of 200,000 shares held in trusts with respect to
which Mr. DeMello or his children have a beneficial interest. Although Mr.
DeMello may be deemed to be a beneficial holder of such shares, he disclaims
all such beneficial ownership except to the extent of his financial interest
therein.
(4) Consists entirely of shares beneficially owned by General Electric Capital
Corporation, of which Mr. Crowley is the Managing Director of Ventures.
Includes 285,714 shares held by GE Capital and 35,714 shares issuable to GE
Capital upon the exercise of a stock purchase warrant exercisable within 60
days of March 31, 1999. Mr. Crowley disclaims beneficial ownership of the
shares held by GE Capital except to the extent of his financial interest
therein.
(5) Includes 6,250 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 1999 and 50,000 shares issuable upon the
exercise of a stock purchase warrant, exercisable within 60 days of March
31, 1999, held by BrainReserve, Inc., of which Ms. Popcorn is the founder
and Chief Executive Officer. Ms. Popcorn disclaims beneficial ownership of
the shares held by BrainReserve except to the extent of her financial
interest therein.
(6) Includes 12,500 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 1999.
(7) Consists entirely of shares issuable upon the exercise of stock purchase
warrants, exercisable within 60 days of March 31, 1999, held by Elm Square
Technologies, Inc., of which Mr. Jones is the President. Mr. Jones disclaims
beneficial ownership of the shares held by Elm Square except to the extent
of his financial interest therein.
(8) Consists entirely of shares issuable upon the exercise of options
exercisable within 60 days of March 31, 1999.
(9) Includes 264,583 shares issuable upon the exercise of options exercisable
within 60 days of March 31, 1999.
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DESCRIPTION OF CAPITAL STOCK
Effective as of the closing of this offering, the authorized capital stock
of Streamline will consist of 50,000,000 shares of common stock and 5,000,000
shares of preferred stock, each having a par value of $0.01 per share.
COMMON STOCK
As of March 31, 1999, there were 13,125,262 shares of common stock
outstanding and held of record by 164 stockholders, after giving effect to the
conversion of all outstanding shares of Series A convertible preferred stock,
Series B convertible preferred stock, Series C convertible preferred stock and
Series D convertible preferred stock upon the closing of this offering. Based
upon the number of shares of common stock outstanding as of that date and giving
effect to the issuance of the shares of common stock offered hereby
(assuming no exercise of the underwriters' over-allotment option), there will be
shares of common stock outstanding upon the closing of this
offering.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
such dividends, if any, as may be declared by the board of directors out of
funds legally available therefor, subject to any preferential dividend rights of
outstanding preferred stock. Upon the liquidation, dissolution or winding up of
Streamline, the holders of common stock are entitled to receive ratably the net
assets of Streamline available after the payment of all debts and other
liabilities, subject to the prior rights of any outstanding preferred stock.
Holders of the common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are, and the shares
offered by Streamline in this offering will be, when issued and paid for, fully
paid and non-assessable. The rights, preferences and privileges of holders of
common stock are subject to, and may be adversely affected by, the rights of the
holders of shares of any series of preferred stock that Streamline may designate
and issue in the future. Upon the closing of this offering, there will be no
shares of preferred stock outstanding.
PREFERRED STOCK
The board of directors is authorized, subject to certain limitations
prescribed by law, without further stockholder approval, from time to time to
issue up to an aggregate of 5,000,000 shares of preferred stock in one or more
series and to fix or alter the designations, preferences and rights, and any
qualifications, limitations or restrictions thereof, of the shares of each such
series, including the number of shares constituting any such series and the
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices and
liquidation preferences thereof. The issuance of preferred stock may have the
effect of delaying, deferring or preventing a change of control of Streamline.
Streamline has no present plans to issue any shares of preferred stock.
REGISTRATION RIGHTS
Under the terms of a Series A stock purchase agreement, dated as of May 15,
1996, and registration rights agreements, dated as of June 13, 1997, April 15,
1998 and September 18, 1998, certain investors, including certain affiliates of
directors of Streamline, who collectively hold approximately 9,467,221 shares of
common stock and warrants to purchase an additional 506,571 shares of common
stock as of March 31, 1999 will have certain "demand" rights to register those
shares under the Securities Act beginning 180 days after the date of this
prospectus.
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If requested by holders of common stock issued upon conversion of our Series
A preferred stock to register at least 100,000 shares or shares having a market
value of at least $1.0 million, then, subject to certain limitations, Streamline
must file a registration statement under the Securities Act covering all
registrable shares requested to be included. We are required to effect up to
three such demand registrations. We have the right to delay any such
registration for up to 60 days under certain circumstances, but will be
prohibited until 90 days after the effectiveness of such registration from
registering any other Streamline securities under the Securities Act, except in
connection with our employee benefit plans or a corporate reorganization. We
will bear all fees, costs and expenses of any of these demand registrations
other than underwriting discounts and commissions.
Under the registration rights agreement dated June 13, 1997, if requested by
holders of at least 30% of the common stock issued upon conversion of our Series
B and C preferred stock to register shares having a market value of at least
$2.0 million, then, subject to certain limitations, Streamline must file a
registration statement under the Securities Act covering all registrable shares
requested to be included. We are required to effect up to two such demand
registrations. Once Streamline is eligible to register shares using a short-form
registration statement, we will be required, if requested to do so by holders of
at least 20% of the common stock issued upon conversion of our Series B and C
preferred stock to register shares having a market value of at least $1.0
million. We have the right to delay any such registration for up to 90 days
under certain circumstances, but will be prohibited until 90 days after the
effectiveness of such registration from registering any other Streamline
securities under the Securities Act, except in connection with our employee
benefit plans or a corporate reorganization. We will bear all fees, costs and
expenses of any of these demand registrations other than underwriting discounts
and commissions.
The registration rights agreement dated April 15, 1998, requires us, if
requested by holders of at least 30% of the common stock issued upon conversion
of warrants issued by us in connection with our sale of senior discount notes
and other shares of common stock issued in connection with that transaction,
subject to certain limitations, to file a registration statement under the
Securities Act covering all registrable shares requested to be included. We are
required to effect up to two such demand registrations. Once Streamline is
eligible to register shares using a short-form registration statement, we will
be required, if requested to do so by holders of at least 20% of the common
stock issued upon conversion of warrants issued by us in connection with our
sale of senior discount notes and other shares of common stock issued in
connection with that transaction, to register shares having a market value of at
least $350,000. We have the right to delay any such registration for up to 90
days under certain circumstances, but will be prohibited until 90 days after the
effectiveness of such registration from registering any other Streamline
securities under the Securities Act, except in connection with our employee
benefit plans or a corporate reorganization. We will bear all fees, costs and
expenses of any of these demand registrations other than underwriting discounts
and commissions.
Under the registration rights agreement dated September 18, 1998, if
requested by holders of at least 30% of the common stock issued upon conversion
of our Series D preferred stock to register shares having a market value of at
least $2.0 million, then, subject to certain limitations, Streamline must file a
registration statement under the Securities Act covering all registrable shares
requested to be included. We are required to effect up to two such demand
registrations. Once Streamline is eligible to register shares using a short-form
registration statement, we will be required, if requested to do so by holders of
at least 20% of the common stock issued upon conversion of our Series D
preferred stock, to register shares having a market value of at least $1.0
million. We have the right to delay any such registration for up to 90 days
under certain circumstances, but will be prohibited until 90 days after the
effectiveness of such registration from registering any other Streamline
securities under the Securities Act, except in connection with our employee
benefit plans or a corporate reorganization. We will bear all fees, costs and
expenses of any of these demand registrations other than underwriting discounts
and commissions.
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In addition, under all of the agreements described above, holders of
registrable shares have certain "piggyback" registration rights. If Streamline
proposes to register any of its securities under the Securities Act other than
in connection with our employee benefit plans or a corporate reorganization,
then, subject to certain limitations, the holders of registrable shares may
require us to include all or a portion of their shares in such registration,
although the managing underwriter of any such offering has the right to limit
the number of shares in such registration. We will bear all fees, costs and
expenses of such registrations other than underwriting discounts and
commissions.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to certain exceptions, Section 203 prohibits a publicly
held Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a certain period of time. That period is three
years from the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained such status with the
approval of the board of directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes certain
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. Subject to certain exceptions, an "interested
stockholder" is a person who, together with his or her affiliates and
associates, owns, or owned within three years prior, 15% or more of the
corporation's voting stock.
Streamline's certificate of incorporation, also called its charter, and
by-laws provide for the division of the board of directors into three classes,
as nearly equal in size as possible, with each class beginning its three-year
term in different years. See "Management--Executive Officers, Directors and
Selected Key Employees." Any director may be removed only for cause by the vote
of a majority of the shares entitled to vote for the election of directors.
Our by-laws provide that for nominations for the board of directors or for
other business to be properly brought by a stockholder before a meeting of
stockholders, the stockholder must first have given timely notice of the matter
in writing to Streamline's secretary. To be timely, a notice of nominations or
other business to be brought before an annual meeting must be delivered between
120 days and 150 days prior to date one year after the date of the preceding
year's proxy statement. If the date of the current year's annual meeting is more
than 30 days before or 60 days after such anniversary, or if no proxy statement
was delivered to stockholders in connection with the preceding year's annual
meeting, a stockholder's notice will be timely if it is delivered not earlier
than 90 days prior to the current year's annual meeting and not later than 60
days prior to the annual meeting or 10 days following the date on which public
announcement of the date of the annual meeting is first made by Streamline,
whichever is later. With respect to special meetings, notice must generally be
delivered not more than 90 days prior to such meeting and not later than 60 days
prior to such meeting or 10 days following the day on which public announcement
of the date of the annual meeting is first made by Streamline, whichever is
later. The notice must contain, among other things, certain information about
the stockholder delivering the notice and, as applicable, background information
about each nominee or a description of the proposed business to be brought
before the meeting.
Our charter empowers the board of directors, when considering a tender offer
or merger or acquisition proposal, to take into account factors in addition to
potential economic benefits to stockholders. These factors may include:
- comparison of the proposed consideration to be received by stockholders in
relation to the market price of Streamline's capital stock, the estimated
current value of Streamline in a freely negotiated transaction and the
estimated future value of Streamline as an independent entity
- the impact of such a transaction on the employees, suppliers and clients
of Streamline and its effect on the communities in which Streamline
operates
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The provisions described above could make it more difficult for a third
party to acquire, or of discouraging a third party from acquiring control of
Streamline.
Our charter also provides that any action required or permitted to be taken
by the stockholders of Streamline may be taken only at duly called annual or
special meetings of the stockholders, and that special meetings may be called
only by the chairman of the board of directors, a majority of the board of
directors or the president of Streamline. However, holders of a majority of the
common stock entitled to vote on the election of directors may call a special
meeting for the purpose of filling a vacancy on the board of directors, and
holders of at least two-thirds of the common stock entitled to vote generally
may call a special meeting for any other purpose. These provisions could have
the effect of delaying until the next annual stockholders' meeting stockholder
actions that are favored by the holders of a majority of the common stock. These
provisions may also discourage another person or entity from making a tender
offer to Streamline stockholders for the common stock. This is because the
person or entity making the offer, even if it acquired a majority of the
outstanding voting securities of Streamline, would be unable to call a special
meeting of the stockholders or to take action by written consent. As a result,
any desired actions they would like to take, such as electing new directors or
approving a merger, would have to wait until the next duly called stockholders'
meeting.
The Delaware General Corporation Law provides that the affirmative vote of a
majority of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or by-laws, unless the corporation's
certificate of incorporation or by-laws, as the case may be, requires a greater
percentage. The charter requires the affirmative vote of the holders of at least
67% of the outstanding voting stock of Streamline to amend or repeal any of the
provisions of our charter described above, or to reduce the number of authorized
shares of common stock and preferred stock. The 67% vote is also required to
amend or repeal any of the provisions of our by-laws that are described above.
Our by-laws may also be amended or repealed by a majority vote of the board of
directors. The 67% stockholder vote would be in addition to any separate class
vote that might in the future be required pursuant to the terms of any preferred
stock that might be outstanding at the time any amendments are submitted to
stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is BankBoston, N.A.
62
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the common
stock. Upon completion of this offering, based upon the number of shares
outstanding at March 31, 1999, there will be shares of common stock
outstanding assuming the underwriters do not exercise their over-allotment
option, and no warrants or options are exercised. Of these shares, the
shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, except that any
shares purchased by "affiliates" of Streamline, as that term is defined in Rule
144 under the Securities Act, may generally only be sold in compliance with the
limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The outstanding shares of common stock not sold in this offering will be
deemed "restricted securities" under Rule 144 under the Securities Act. Of these
shares, are subject to 180-day lock-up agreements with the
representatives. Upon expiration of the lock-up agreements 180 days after the
date of this prospectus, all such shares will be available for sale in the
public market, subject to the provisions of Rule 144. Stockholders who are
parties to the lock-up agreement have agreed that for a period of 180 days after
the date of this prospectus, they will not sell, offer, contract or grant any
option to sell, pledge, transfer, establish an open put equivalent position or
otherwise dispose of any shares of common stock, any options to purchase shares
of common stock or any shares convertible into or exchangeable for shares of
common stock, owned directly by such persons or with respect to which they have
the power of disposition, without the prior written consent of NationsBanc
Montgomery Securities LLC.
In general, under Rule 144, beginning 90 days after the effective date of
this prospectus, a stockholder who has beneficially owned his or her restricted
securities for at least one year will be entitled to sell, within any
three-month period, a limited number of such shares. The number of shares may
not exceed the greater of 1% of the then outstanding shares of common stock or
the average weekly trading volume in the common stock during the four preceding
calendar weeks. In addition, under Rule 144(k), if a period of at least two
years has elapsed since the date restricted securities were acquired from
Streamline or an affiliate of Streamline, a stockholder who is not an affiliate
of Streamline at the time of sale and has not been an affiliate of Streamline
for at least three months prior to the sale will be entitled to sell the shares
immediately without restriction.
Securities issued in reliance on Rule 701, such as shares of common stock
acquired upon exercise of certain options granted under our stock option plans,
are also restricted and, beginning 90 days after the effective date of this
prospectus, may be sold by stockholders other than affiliates of Streamline
subject only to the manner of sale provisions of Rule 144 and by affiliates
under Rule 144 without compliance with its one-year holding period requirement.
WARRANTS AND OPTIONS
As of March 31, 1999, there were warrants and options outstanding to
purchase an aggregate of 1,999,714 shares of common stock, of which warrants and
options to purchase an aggregate of shares were exercisable. All of these
shares were subject to lock-up agreements.
We intend to file one or more registration statements on Form S-8 under the
Securities Act to register all shares of common stock issuable under our stock
option and stock purchase plans promptly following the closing of this offering.
Shares issued pursuant to such plans shall be, after the effective date of the
Form S-8 registration statements, eligible for resale in the public market
without restriction, subject to Rule 144 limitations applicable to affiliates
and the lock-up agreements noted above, if applicable.
63
<PAGE>
UNDERWRITING
Streamline is offering the shares of common stock described in this
prospectus through a number of underwriters. NationsBanc Montgomery Securities
LLC, PaineWebber Incorporated and Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated ("Dain Rauscher Wessels") are the representatives of the
underwriters. Streamline has entered into an underwriting agreement with the
representatives. Subject to the terms and conditions of the underwriting
agreement, Streamline has agreed to sell to the underwriters, and the
underwriters have each agreed to purchase the number of shares of common stock
listed next to its name in the following table.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------- ------------
<S> <C>
NationsBanc Montgomery Securities LLC.................................
PaineWebber Incorporated..............................................
Dain Rauscher Wessels.................................................
------------
Total.............................................................
------------
------------
</TABLE>
The underwriters initially will offer shares to the public at the price
specified on the cover page of this prospectus. The underwriters may allow to
some dealers a concession of not more than $ per share. The underwriters
also may allow, and any dealers may reallow, a concession of not more than
$ per share to some other dealers. If all the shares are not sold at the
initial public offering price, the underwriters may change the offering price
and the other selling terms. The common stock is offered subject to a number of
conditions, including:
- receipt and acceptance of our common stock by the underwriters
- the right to reject orders in whole or in part
Streamline has granted an option to the underwriters to buy up to
additional shares of common stock. These additional shares would cover sales of
shares by the underwriters which exceed the number of shares specified in the
table above. The underwriters have 30 days to exercise this option. If the
underwriters exercise this option, they will each purchase additional shares
approximately in proportion to the amounts specified in the table above.
Streamline and all holders of its stock prior to this offering, as well as
all holders of stock options and warrants, have entered into lock-up agreements
with the underwriters. Under those agreements, Streamline and those holders of
stock, options and warrants may not dispose of or hedge any Streamline common
stock or securities convertible into or exchangeable for shares of Streamline
common stock. These restrictions will be in effect for a period of 180 days
after the date of this prospectus. At any time and without notice, NationsBanc
Montgomery Securities LLC may, in its sole discretion, release all or some of
the securities from these lock-up agreements.
Streamline will indemnify the underwriters against liabilities, including
liabilities under the Securities Act. If Streamline is unable to provide this
indemnification, Streamline will contribute to payments the underwriters may be
required to make in respect of those liabilities.
In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include:
- short sales
- stabilizing transactions
- purchases to cover positions created by short sales
64
<PAGE>
Short sales involve the sale by the underwriters of a greater number of
shares than they are required to purchase in this offering. Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or
retarding a decline in the market price of the common stock while this offering
is in progress.
The underwriters also may impose a penalty bid. This means that if the
representatives purchase shares in the open market in stabilizing transactions
or to cover short sales, the representatives can require the underwriters that
sold those shares as part of this offering to repay the underwriting discount
received by them.
The underwriters may engage in activities that stabilize, maintain or
otherwise affect the price of the common stock, including:
- over-allotment
- stabilization
- syndicate covering transactions
- imposition of penalty bids
As a result of these activities, the price of the common stock may be higher
than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions on the Nasdaq National Market,
in the over-the-counter-market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed 5%
of the total number of shares of common stock offered by this prospectus.
Prior to this offering, there has been no public market for the common stock
of Streamline. The initial public offering price will be negotiated between
Streamline and the underwriters. Among the factors to be considered in such
negotiations are:
- the history of, and prospects for, Streamline and the industry in which it
competes
- the past and present financial performance of Streamline
- an assessment of Streamline's management
- the present state of Streamline's development
- the prospects for future earnings of Streamline
- the prevailing market conditions of the applicable U.S. securities market
at the time of this offering
- market valuations of publicly traded companies that Streamline and the
representatives believe to be comparable to Streamline
- other factors deemed relevant
An affiliate of PaineWebber Incorporated, a representative, is the
beneficial owner of approximately 285,714 shares of our common stock.
The underwriters, at our request, have reserved for sale to our employees,
affiliates and strategic partners at the initial public offering price up to
five percent of the shares being offered by this prospectus and up to
shares for sale to our customers. The sale of shares to our employees,
affiliates and strategic partners will be made by NationsBanc Montgomery
Securities LLC. We do not know if our employees, affiliates, strategic partners
or customers will choose to purchase all or any portion of these reserved
shares, but any purchases they do make will reduce the number of shares
65
<PAGE>
available to the general public. The sale of shares to our customers will be
made through individual brokerage accounts set up with E*TRADE Securities, the
Internet distributor for this offering. If all of these reserved shares are not
purchased, the underwriters will offer the remainder to the general public on
the same terms as the other shares offered by this prospectus.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for
Streamline by Bingham Dana LLP, Boston, Massachusetts and for the underwriters
by Ropes & Gray, Boston, Massachusetts.
EXPERTS
The consolidated balance sheets of Streamline at December 31, 1997 and 1998
and the consolidated statements of operations, stockholders' deficit and cash
flows for each of the three years in the period ended December 31, 1998 included
in this prospectus have been included herein in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission for the common stock we are offering by this prospectus.
This prospectus does not include all of the information contained in the
registration statement. You should refer to the registration statement and its
exhibits for additional information. Whenever we make reference in this
prospectus to any of our contracts, agreements or other documents, the
references are not necessarily complete and you should refer to the exhibits
attached to the registration statement for copies of the actual contract,
agreement or other document. When we complete this offering, we will also be
required to file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission.
You can read our Securities and Exchange Commission filings, including the
registration statement, over the Internet at the Securities and Exchange
Commission's web site at http://www.sec.gov. You may also read and copy any
document we file with the Securities and Exchange Commission at its public
reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549; Seven
World Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. You may also
obtain copies of these documents at prescribed rates by writing to the Public
Reference Section of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the Securities and Exchange Commission
at 1-800-SEC-0330 for further information on the operation of the public
reference facilities.
66
<PAGE>
STREAMLINE.COM, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets at December 31, 1997 and 1998.................................................. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1997 and 1998...................................................................................... F-4
Consolidated Statements of Stockholders' Deficit for the years ended
December 31, 1996, 1997 and 1998......................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998...................................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Streamline.com, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' deficit and of cash
flows present fairly, in all material respects, the financial position of
Streamline.com, Inc. and its subsidiary at December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 13, 1999
F-2
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
---------------------------- DECEMBER 31,
1997 1998 1998
------------- ------------- -------------
<S> <C> <C> <C>
(NOTE 2)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 1,445,943 $ 12,593,160 $ 12,593,160
Accounts receivable................................................ 76,656 87,779 87,779
Inventory.......................................................... 254,474 323,656 323,656
Prepaid expenses and other current assets.......................... 375,106 148,695 148,695
------------- ------------- -------------
Total current assets......................................... 2,152,179 13,153,290 13,153,290
Property and equipment, net........................................ 3,459,388 3,663,481 3,663,481
Purchased and capitalized software, net............................ 1,528,855 2,025,282 2,025,282
Goodwill, net of accumulated amortization.......................... 648,433 991,746 991,746
Other assets, net.................................................. 108,032 232,019 232,019
------------- ------------- -------------
Total assets................................................. $ 7,896,887 $ 20,065,818 $ 20,065,818
------------- ------------- -------------
------------- ------------- -------------
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Capital lease obligations.......................................... $ 197,155 $ 236,326 $ 236,326
Accounts payable................................................... 1,131,475 447,410 447,410
Accrued expenses................................................... 493,416 408,436 408,436
------------- ------------- -------------
Total current liabilities.................................... 1,822,046 1,092,172 1,092,172
------------- ------------- -------------
Long-term portion of capital lease obligations....................... 334,308 380,751 380,751
------------- ------------- -------------
Commitments and contingencies (Note 11)
Minority interest in consolidated subsidiary......................... 138,598 -- --
Redeemable convertible preferred stock (Note 7), ($1.00 par value);
Authorized: 300,000 at December 31, 1997, 680,000 at December 31,
1998 actual and pro forma
Issued and outstanding: 140,000 shares issued and outstanding at
December 31, 1997, 368,570 shares issued and outstanding at
December 31, 1998 actual, none at December 31, 1998 pro
forma.......................................................... 14,000,000 37,185,765 --
------------- ------------- -------------
Stockholders' (deficit) equity:
Common stock, $0.01 par value;
Authorized: 12,500,000 at December 31, 1997, 22,700,000 at
December 31, 1998 actual and pro forma
Issued and outstanding: 3,526,032 shares issued and 3,497,032
outstanding at December 31, 1997, 3,699,539 shares issued and
3,665,539 outstanding at December 31, 1998 actual and
13,236,453 shares issued and 13,202,453 outstanding at December
31, 1998 pro forma............................................. 35,260 36,995 132,365
Additional paid-in capital......................................... 3,848,768 5,060,436 42,150,831
Treasury stock, at cost: 29,000 shares at December 31, 1997, 34,000
shares at December 31, 1998 actual and pro forma................. (203,000) (238,000) (238,000)
Accumulated deficit................................................ (12,079,093) (23,452,301) (23,452,301)
------------- ------------- -------------
Total stockholders' (deficit) equity......................... (8,398,065) (18,592,870) 18,592,895
------------- ------------- -------------
Total liabilities, redeemable convertible preferred stock and
stockholders' (deficit) equity............................. $ 7,896,887 $ 20,065,818 $ 20,065,818
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1997 1998
------------- ------------- --------------
<S> <C> <C> <C>
Revenue:
Product and service revenue, net.................................. $ 390,801 $ 1,814,793 $ 6,025,573
Subscription fees................................................. 19,908 98,566 391,579
Advertising, research and marketing fees.......................... 511,000 721,000 529,138
------------- ------------- --------------
Total revenue....................................................... 921,709 2,634,359 6,946,290
------------- ------------- --------------
Operating expenses:
Cost of revenue................................................... 391,123 2,097,642 4,992,092
Fulfillment center operations..................................... 915,863 2,768,995 4,012,617
Sales and marketing............................................... 440,493 1,427,810 1,479,210
Technology systems and development................................ 78,327 1,672,870 3,002,514
General and administrative........................................ 985,400 3,166,552 3,896,756
------------- ------------- --------------
Total operating expenses............................................ 2,811,206 11,133,869 17,383,189
------------- ------------- --------------
Loss from operations.............................................. (1,889,497) (8,499,510) (10,436,899)
Other income (expense):
Interest income................................................... 74,744 58,148 239,992
Interest expense.................................................. (31,341) (50,659) (568,834)
Other............................................................. -- (87,914) (1,647)
------------- ------------- --------------
Total other income (expense), net................................... 43,403 (80,425) (330,489)
------------- ------------- --------------
Loss before minority interest and extraordinary item................ (1,846,094) (8,579,935) (10,767,388)
Minority interest in net loss of consolidated subsidiary............ -- 265,428 138,598
------------- ------------- --------------
Loss before extraordinary item...................................... (1,846,094) (8,314,507) (10,628,790)
Extraordinary item--loss on early redemption of debt................ -- -- 744,418
------------- ------------- --------------
Net loss............................................................ $ (1,846,094) $ (8,314,507) $ (11,373,208)
------------- ------------- --------------
------------- ------------- --------------
Dividends on preferred stock........................................ 202,900 157,264 328,765
Net loss attributable to common stockholders........................ $ (2,048,994) $ (8,471,771) $ (11,701,973)
------------- ------------- --------------
------------- ------------- --------------
Basic and diluted net loss per common share......................... $ (0.62) $ (2.47) $ (3.32)
Shares used in computing basic and diluted net loss per common
share............................................................. 3,284,625 3,424,035 3,522,458
Unaudited pro forma basic and diluted net loss per common share
(Note 2).......................................................... $ (1.28)
Shares used in computing unaudited pro forma basic and diluted net
loss per share.................................................... 8,918,465
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK
--------------------- ADDITIONAL TOTAL
$0.01 PAR PAID-IN TREASURY ACCUMULATED STOCKHOLDERS'
SHARES VALUE CAPITAL STOCK DEFICIT DEFICIT
---------- --------- ------------ ----------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995............. 3,284,625 $ 32,846 $ 1,699,420 $ $ (1,918,492) $ (186,226)
Dividends on preferred stock........... (202,900) (202,900)
Issuance of warrants for the purchase
of common stock in exchange for goods
and services......................... 56,100 56,100
Net loss............................... (1,846,094) (1,846,094)
---------- --------- ------------ ----------- -------------- --------------
Balance, December 31, 1996............. 3,284,625 32,846 1,552,620 (3,764,586) (2,179,120)
Sale of common stock................... 163,857 1,639 1,145,361 1,147,000
Dividends on preferred stock........... (157,264) (157,264)
Issuance of warrants for the purchase
of common stock in exchange for goods
and services......................... 738,326 738,326
Options exercised...................... 77,550 775 89,065 89,840
Repurchase of common stock (29,000
shares).............................. (203,000) (203,000)
Change in interest in consolidated
subsidiary........................... 480,660 480,660
Net loss............................... (8,314,507) (8,314,507)
---------- --------- ------------ ----------- -------------- --------------
Balance, December 31, 1997............. 3,526,032 35,260 3,848,768 (203,000) (12,079,093) (8,398,065)
Dividends on preferred stock........... (328,765) (328,765)
Issuance of warrants in connection with
notes payable........................ 525,300 525,300
Reduction in value of warrants granted
in 1997 in exchange for goods and
services............................. (67,462) (67,462)
Issuance of common stock and warrants
for the purchase of common stock in
exchange for goods and services...... 12,500 125 516,600 516,725
Options exercised...................... 34,583 346 61,563 61,909
Common stock issued to acquire minority
interest............................. 126,424 1,264 504,432 505,696
Treasury stock acquired in connection
with forgiveness of notes receivable
(5,000 shares)....................... (35,000) (35,000)
Net loss............................... (11,373,208) (11,373,208)
---------- --------- ------------ ----------- -------------- --------------
Balance, December 31, 1998............. 3,699,539 $ 36,995 $ 5,060,436 $ (238,000) $ (23,452,301) $ (18,592,870)
---------- --------- ------------ ----------- -------------- --------------
---------- --------- ------------ ----------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
STREAMLINE.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................................................. $(1,846,094) $(8,314,507) $(11,373,208)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization....................................... 157,490 674,202 1,532,413
Amortization of discount on notes payable........................... -- -- 525,300
Loss on disposal of fixed assets.................................... -- 86,372 120,044
Amortization of goodwill and other assets........................... -- 151,849 256,592
Issuance of warrants for the purchase of common stock in exchange
for consulting services........................................... 56,100 330,000 446,700
Minority interest in net loss of consolidated subsidiary............ -- (265,428) (138,598)
Changes in assets and liabilities
Accounts receivable............................................... (5,152) (67,995) (11,123)
Inventory......................................................... (175,959) (78,515) (69,182)
Prepaid expenses and other current assets......................... (45,778) (236,196) 226,411
Other assets...................................................... -- -- (182,796)
Accounts payable.................................................. 73,453 600,307 (684,065)
Accrued expenses.................................................. 55,813 428,730 (84,980)
----------- ------------ ------------
Net cash used in operating activities................................... (1,730,127) (6,691,181) (9,436,492)
----------- ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment................................... (1,904,447) (1,449,721) (833,275)
Additions to purchased and capitalized software....................... (48,544) (1,386,197) (1,237,847)
----------- ------------ ------------
Net cash used in investing activities................................... (1,952,991) (2,835,918) (2,071,122)
----------- ------------ ------------
Cash flows from financing activities:
Payments on notes receivable from related parties..................... (292,442) -- --
Proceeds from sale of common stock.................................... -- 1,147,000 100
Proceeds from sale of common stock of subsidiary...................... -- 400,000 --
Proceeds from sale of preferred stock................................. 5,000,000 9,000,000 22,857,000
Proceeds from the exercise of stock options........................... -- 89,840 61,909
Purchases of treasury stock........................................... -- (203,000) --
Dividend payments on preferred stock.................................. -- (360,164) --
Issuance of notes receivable.......................................... -- -- (35,000)
Proceeds from notes payable-related party............................. -- -- 600,000
Payments on notes payable-related party............................... -- -- (600,000)
Proceeds from notes payable........................................... -- -- 7,000,000
Payments on notes payable............................................. -- -- (7,000,000)
Principal payments on capital lease obligations....................... (53,745) (105,435) (229,178)
----------- ------------ ------------
Net cash provided by financing activities............................... 4,653,813 9,968,241 22,654,831
----------- ------------ ------------
Net increase in cash and cash equivalents............................... 970,695 441,142 11,147,217
Cash and cash equivalents, beginning of year............................ 34,106 1,004,801 1,445,943
----------- ------------ ------------
Cash and cash equivalents, end of year.................................. $ 1,004,801 $1,445,943 $ 12,593,160
----------- ------------ ------------
----------- ------------ ------------
Supplemental disclosure of cash flow information:
Cash paid for interest................................................ $ 31,000 $ 47,000 $ 495,000
Supplemental non-cash transactions:
Assets acquired with capital lease obligations........................ $ 340,000 $ 267,000 $ 315,000
Issuance of subsidiary's stock and warrants in connection with
acquisition
(Note 3)............................................................ -- 485,000 --
Assumption of liabilities in connection with acquisition (Note 3)..... -- 370,000 --
Issuance of common stock in connection with purchase of minority
interest
(Note 3)............................................................ -- -- 506,000
Issuance and remeasurement of warrants in connection with capitalized
assets (Note 10).................................................... -- 408,000 (34,000)
Issuance of warrants in connection with debt (Note 5)................. -- -- 525,000
Issuance of common stock for services provided........................ -- -- 35,000
Common stock received in consideration of note receivable (Note 8).... -- -- 35,000
Dividends accrued on preferred stock (Note 7)......................... 203,000 157,000 329,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Streamline.com, Inc. ("Streamline.com" or the "Company") was incorporated in
the state of Delaware in 1993 and provides Internet-based ordering and home
delivery of a wide range of goods and services to consumers. The Company seeks
to simplify the shopping chores of busy suburban families who place a high value
on their time and demand service excellence. The Company consolidates products
and services currently offered by various suppliers into a single weekly
delivery to its customers, thus minimizing their need to make frequent trips to
multiple physical stores. The Company currently provides its products and
services from a single service center in the greater Boston suburbs which it
intends to replicate in other markets nationwide. Additionally, the Company has
working relationships with various consumer packaged goods companies to perform
market research on consumer purchasing behavior.
The Company has incurred cumulative losses through December 31, 1998 of
approximately $23,452,000. The Company expects to incur additional losses and
require additional financing as it expands its service into new and existing
markets. The Company plans to obtain additional equity financing during 1999
through an initial public offering of its common stock. In April 1999, the
Company received a commitment from a current stockholder to provide financing of
up to $10,000,000 if the Company requires additional financing prior to the end
of April 2000 and if the offering contemplated in this registration statement
has not been consummated by that time. This financing, if it occurs, will be in
the form of a sale by the Company of Series D redeemable convertible preferred
stock (the "Series D"). The sale would be on terms substantially similar to the
Series D (See Note 7) except that the Company shall redeem such shares, two
years from the date of issuance, for the aggregate purchase price plus accrued
interest at a rate of 6% per annum. The difference between the total fair value
of such Series D on the date of redemption and the redemption amount paid will
remain outstanding as preferred stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. In 1998, the Company purchased the remaining
minority interest in its subsidiary (See Note 3). All significant intercompany
transactions have been eliminated.
REVENUE RECOGNITION
Product and service revenue is recognized upon delivery of goods and
services to the customer. Revenues from market research and interactive
marketing fees are recognized over the life of the contract or as the services
are performed. Subscription revenues are billed and recognized monthly.
CUSTOMER ACQUISITION COSTS AND PRE-OPENING COSTS
Customer acquisition costs and pre-opening costs are expensed as incurred.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less at the time of purchase to be cash
equivalents. The Company invests its excess cash in money market funds which are
subject to minimal credit and market risk. Cash equivalents at December 31, 1997
and 1998 included approximately $1,030,000 and $12,256,000, respectively, in
money
F-7
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
market funds. The Company's cash equivalents are classified as
available-for-sale and recorded at amortized cost which approximates fair value.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated over their
estimated useful lives of three to seven years using the straight-line method.
Assets held under capital leases are amortized over the shorter of the lease
life or the estimated useful life of the asset. Repairs and maintenance costs
are expensed as incurred. Upon retirement or sale, the cost of the assets
disposed and the related accumulated depreciation are removed from the accounts
and any resulting gain or loss is included in the results of operations.
PURCHASED SOFTWARE, CAPITALIZED SOFTWARE AND TECHNOLOGY SYSTEMS AND DEVELOPMENT
Purchased third party software and related implemention costs are recorded
at cost and are amortized over their estimated useful lives, typically three
years using the straight-line method. Internal and external costs incurred
related to the application development stage of internal use software are
capitalized and amortized over their estimated useful lives, typically three
years using the straight-line method. Amortization expense related to purchased
and capitalized software is included in technology systems and development
expense.
Technology development costs are charged to technology systems and
development expense as incurred. Technology development costs include internal
and external costs incurred in the development and enhancement of software used
internally or used in connection with services provided by the Company that do
not otherwise qualify for capitalization, the costs of maintenance and minor
enhancements and the costs associated with maintaining and supporting internal
information systems.
The Company capitalized approximately $49,000, $1,386,000 and $1,238,000 for
purchased and capitalized software for the years ended December 31, 1996, 1997
and 1998, respectively. Amortization expense for purchased and capitalized
software was approximately $13,000, $189,000 and $708,000 for years ended
December 31, 1996, 1997 and 1998, respectively.
GOODWILL
Goodwill is being amortized on a straight-line basis over a five-year term.
The Company evaluates the possible impairment of long-lived assets, including
goodwill, whenever events or changes in circumstances indicate that the carrying
value of the assets may not be recoverable. If such an event occurred, the
Company would prepare projections of future results of operations for the
remaining amortization period. If such projections indicate that the carrying
value would not be recoverable, the Company would reduce the carrying value of
the asset by the estimated excess of such value over projected income.
Accumulated amortization of goodwill as of December 31, 1997 and 1998 was
approximately $146,000 and $308,000, respectively.
YEAR 2000 COSTS
Costs of modifying computer software to ensure Year 2000 compliance are
expensed as incurred.
F-8
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING
The Company expenses costs related to advertising as incurred. Advertising
expense was approximately $43,000, $389,000 and $557,000 for the years ended
December 31, 1996, 1997 and 1998, respectively.
INVENTORY
The Company values all of its inventories at the lower of cost or market
value. Cost is determined on an average cost basis. All inventory items
represent finished goods.
INCOME TAXES
The Company provides for income taxes under the liability method which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax liabilities and assets are determined
based on the difference between financial statement and tax bases of assets and
liabilities, as measured by the current tax rates. Under this method, a
valuation allowance is required against net deferred tax assets if, based upon
the available evidence, it is more likely than not that some or all of the
deferred tax assets will not be realized.
Management periodically evaluates the recoverability of deferred tax assets
and the level of the adequacy of the valuation allowance. At such time as it is
determined that it is more likely than not that deferred tax assets are
realizable, the valuation allowance will be appropriately reduced.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company accounts for stock-based awards to employees using the intrinsic
value method as prescribed by Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, no compensation expense is recorded for options issued to employees
in fixed amounts with fixed exercise prices at least equal to the fair market
value of the Company's common stock at the date of grant. The Company has
adopted the disclosure only provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," (Note 9).
Stock-based awards, including warrants to non-employees are accounted for at
their fair value.
RISKS AND UNCERTAINTIES AND USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The Company has a limited operating history, has never achieved
profitability and is therefore subject to the risks and uncertainties such as
the uncertain nature of the markets in which the Company competes and the risk
that the Company may be unable to manage any future growth successfully.
In addition, the Company is subject to the risks encountered by companies
relying on the continued growth of on-line commerce and Internet infrastructure.
The risks include the use of the
F-9
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Internet as a viable commercial marketplace and the potentially inadequate
development of the necessary network infrastructure.
Finally, the Company has historically experienced seasonal fluctuations in
revenue. This pattern may be expected to continue and results of financial
operations within any fiscal year or fiscal quarter cannot be expected to be
representative.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK
The Company's financial instruments consist primarily of cash and cash
equivalents. As of December 31, 1998, these financial instruments carrying
values approximated fair value. Financial instruments which potentially subject
the Company to concentrations of credit risk consist principally of cash and
cash equivalents. The Company primarily invests its cash in a money market fund
with a highly rated financial institution. The Company has not experienced any
significant losses on its cash equivalents.
UNAUDITED PRO FORMA BALANCE SHEET
Upon the closing of the Company's initial public offering, such as the one
contemplated in the Registration Statement in which the accompanying financial
statements have been included, all of the outstanding shares of the preferred
stock will automatically convert into 9,454,722 shares of common stock. In
addition, the Company has elected to convert the accrued dividends on the Series
D into 3,288 shares of Series D which will convert into 82,192 shares of common
stock for a total conversion amount of 9,536,914 common shares. These
conversions have been reflected in the unaudited pro forma balance sheet as of
December 31, 1998.
NET LOSS PER SHARE
The Company computes basic and diluted net loss per share in accordance with
SFAS No. 128, "Earnings Per Share." Basic net loss per share is computed by
dividing net loss attributable to common stockholders by the weighted average
number of shares of common stock outstanding for the period. Diluted loss per
share does not differ from basic loss per share since potential common shares
from conversion of preferred stock, stock options and warrants are anti-dilutive
for all periods presented. The unaudited pro forma basic and diluted net loss
per share calculation assumes the conversion of all outstanding shares of
preferred stock into common shares, as if the shares had converted immediately
upon their issuance. As a result, dividends to preferred stockholders are not
included as an increase to net loss.
F-10
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic and diluted loss per share were calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------- PRO FORMA
1996 1997 1998 DECEMBER 31, 1998
------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
Numerator:
Loss before extraordinary item................ $ (1,846,094) $ (8,314,507) $ (10,628,790) $ (10,628,790)
Dividends on preferred stock.................. 202,900 157,264 328,765 --
------------- ------------- -------------- -----------------
Loss attributable to common stockholders
before extraordinary item................... (2,048,994) (8,471,771) (10,957,555) (10,628,790)
Extraordinary item............................ -- -- 744,418 744,418
------------- ------------- -------------- -----------------
Net loss attributable to common
stockholders................................ $ (2,048,994) $ (8,471,771) $ (11,701,973) $ (11,373,208)
------------- ------------- -------------- -----------------
------------- ------------- -------------- -----------------
Denominator:
Weighted average common shares outstanding.... 3,284,625 3,424,035 3,522,458 3,522,458
Weighted average assumed number of shares upon
conversion of preferred stock............... -- -- -- 5,396,007
------------- ------------- -------------- -----------------
Total weighted average number of shares......... 3,284,625 3,424,035 3,522,458 8,918,465
------------- ------------- -------------- -----------------
------------- ------------- -------------- -----------------
Basic and diluted net loss per common share:
Loss per common share before extraordinary
item........................................ $ (0.62) $ (2.47) $ (3.11) $ (1.19)
Extraordinary item............................ -- -- (0.21) (0.09)
------------- ------------- -------------- -----------------
Net loss per common share..................... $ (0.62) $ (2.47) $ (3.32) $ (1.28)
------------- ------------- -------------- -----------------
------------- ------------- -------------- -----------------
</TABLE>
Outstanding options of 450,500, 726,750 and 593,000 as of December 31, 1996,
1997 and 1998, respectively, were not included in the diluted loss per share
computation because their effect would be anti-dilutive. Outstanding warrants of
50,000, 435,714 and 788,714 as of December 31, 1996, 1997 and 1998,
respectively, were not included in the diluted loss per share calculation
because their effect would be anti-dilutive. In January and February 1999, the
Company granted approximately 466,000 options to purchase common stock at an
exercise price of $7.00 per share. In March 1999, the Company granted
approximately 153,000 options to purchase common stock at an exercise price of
$10.00 per share. These options granted in 1999 expire in 2009. In April 1999,
the Company authorized the issuance of 250,000 options to purchase common stock
to the Chairman, President and Chief Executive Officer upon the closing of the
initial public offering contemplated in this Registration Statement. The
exercise price of these options shall be equal to the price at which the Company
sells common shares in the initial public offering. In addition, in April 1999,
the Company granted 75,000 warrants to purchase common stock at an exercise
price of $7.00 per share. These warrants expire in April 2002.
COMPREHENSIVE INCOME
The Company has adopted SFAS No. 130, "Reporting for Comprehensive Income"
for the year ended December 31, 1998 which requires that changes in
comprehensive income be shown in a financial statement that is displayed with
the same prominence as other financial statements. The
F-11
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company's comprehensive loss is the same as the net loss presented for the years
ended December 31, 1996, 1997 and 1998.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee ("AcSEC") issued
Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use" ("SoP 98-1"). SoP 98-1 provides guidance
on accounting for computer software developed or obtained for internal use
including the requirement to capitalize specified costs and amortization of such
costs. SoP 98-1 is effective for the Company's fiscal 1999 financial statements
and the Company does not expect the adoption of this standard to have a material
effect on their current capitalization policy.
In April 1998, AcSEC issued SoP 98-5, "Reporting on the Costs of Start-Up
Activities." Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer, commencing some new operation or organizing a new entity.
Under SoP 98-5, the cost of start-up activities should be expensed as incurred.
SoP 98-5 is effective for the Company's fiscal 1999 financial statements and the
Company does not expect the adoption of this standard to have a material effect
on their current capitalization policy.
3. SUBSIDIARY AND MINORITY INTEREST
The Company established Streamline Mid-Atlantic, Inc. ("Mid-Atlantic") as a
wholly-owned subsidiary in February 1997, receiving 2,200,000 common shares of
Mid-Atlantic in exchange for $22,000 cash.
In February 1997, Mid-Atlantic issued 800,000 shares of common stock in a
private offering to third parties, in exchange for net proceeds of $400,000.
Mid-Atlantic acquired substantially all of the assets and liabilities of
Shopping Alternatives, Inc., a provider of home grocery shopping services. In
the same month, stockholders of Shopping Alternatives received 970,000 shares of
Mid-Atlantic common stock plus warrants to purchase 30,000 shares of
Mid-Atlantic common stock. The value ascribed to the warrants was nominal. In
accordance with the purchase method of accounting, the purchase price of
approximately $855,000, which includes approximately $370,000 of liabilities
assumed, was allocated first to the fair value of the net assets acquired from
Shopping Alternatives. The excess of the purchase price over the fair value of
the acquired assets of approximately $794,000 was recorded by Mid-Atlantic as
acquired goodwill, in the absence of other intangibles, to be amortized on a
straight-line basis over a period of five years. The accompanying financial
statements for the year ended December 31, 1997 reflect the resultant change in
interest of the Company's ownership of Mid-Atlantic from 100% to approximately
55%.
In November 1998, the Company acquired the outstanding minority ownership
interest of Mid-Atlantic in a single transaction in which minority stockholders
of Mid-Atlantic received 126,424 shares of the Company's common stock, $0.01 par
value, having a fair value of approximately $506,000 at the date of acquisition.
In accordance with the purchase method of accounting, the Company allocated the
purchase price first to the fair value of the net assets of Mid-Atlantic as of
the date of the transaction. The resulting total goodwill associated with
Mid-Atlantic, representing the excess of the purchase price over the fair value
of the acquired assets of approximately $1,300,000 at December 31, 1998, is
being amortized on a straight-line basis over a period of five years. Unaudited
pro forma combined results as
F-12
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SUBSIDIARY AND MINORITY INTEREST (CONTINUED)
if the acquisition had occurred at the beginning of either of the fiscal years
are not materially different than the results presented.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
USEFUL LIVES ---------------------------
IN YEARS 1997 1998
------------- ------------ -------------
<S> <C> <C> <C>
Computer equipment...................................................... 3-5 $ 740,117 $ 821,695
Equipment, furniture and fixtures....................................... 5-10 1,407,258 2,070,683
Vehicles................................................................ 5 264,626 589,168
Leasehold improvements.................................................. 5-10 1,673,029 1,631,510
------------ -------------
4,085,030 5,113,056
Accumulated depreciation and amortization............................... (625,642) (1,449,575)
------------ -------------
$ 3,459,388 $ 3,663,481
------------ -------------
------------ -------------
</TABLE>
At December 31, 1997 and 1998, the costs of fixed assets held under capital
leases and included above amounted to approximately $714,000 and $1,029,000,
respectively, and accumulated amortization related to such assets amounted to
approximately $150,000 and $338,000, respectively.
5. DEBT
In April 1998, the Company received proceeds of $7,000,000 in connection
with the issuance of Senior Discount Notes ("Discount Notes"). The Company
issued 777 units each consisting of a $10,000 aggregate principal amount of
Discount Notes and 546.88 warrants to purchase common stock. The $7,770,000 face
amount of the Discount Notes is due April 15, 2001. The Discount Notes bear
interest initially in the form of accretion in the principal amount outstanding
up to the face amount at the rate of 11% per annum until April 15, 1999.
Thereafter, the Discount Notes bear interest on the face amount at the rate of
12% per annum with interest payable semi-annually until maturity.
In conjunction with the issuance of the Discount Notes, the Company also
issued warrants for the purchase of up to a total of 425,000 shares of the
Company's common stock. Warrants to purchase 225,000 shares of common stock at
$7.00 per share vested immediately. The remaining 200,000 warrants vest
periodically at varying exercises prices until 2001 based upon the Company
obtaining certain amounts of financing. All of these warrants expire upon the
earlier of April 15, 2005 or five years after a public offering by the Company
raising at least $25,000,000. The Company recorded approximately $525,000 of
additional paid-in capital for the fair value of the warrants on the issuance
date as an additional discount associated with the Discount Notes.
On September 18, 1998, the Company redeemed all of the Discount Notes at a
price of $7,000,000 plus approximately $334,000 of interest and $257,000 for a
call premium with the proceeds from the issuance of the Company's Series D
Preferred Stock (Note 7). In addition, the Company modified the terms of the
warrants issued in connection with this debt such that the remaining unvested
warrants to purchase 200,000 shares of the common stock expired immediately in
exchange for the issuance of 5,000 shares of common stock for $100. The
redemption resulted in the Company recording an extraordinary loss on the
extinguishment of debt of approximately $744,000 including approximately
$257,000 for the call premium, approximately $452,000 for the unamortized
discount value associated
F-13
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DEBT (CONTINUED)
with the warrants and approximately $35,000 for the issuance of the common
shares and the remaining deferred financing costs.
6. RELATED PARTY TRANSACTIONS
During 1996, the Company redeemed notes payable in the principal amounts of
approximately $176,000 from its Chairman, President and Chief Executive Officer
and $122,000 from several other stockholders of the Company. These notes payable
were redeemed at par plus accrued interest.
During 1997, the Company paid consulting fees under an agreement with a
marketing firm, the Chief Executive Officer of which is a director of the
Company. Total fees paid under this agreement during 1997 were approximately
$338,000. Additionally during 1997, the Company issued warrants valued at
$25,000 to this firm for the purchase of 50,000 shares of the Company's common
stock at an exercise price of $2.04 per share with an expiration date in 2001.
During 1997, the Company repurchased 11,500 shares of its common stock from
its Chairman and Chief Executive Officer at a purchase price of $7.00 per share,
which the Company's Board of Directors determined to be the fair value of those
shares at the date of repurchase.
During 1997 and 1998, the Company paid fees for technology development and
consulting under an agreement with a firm, the Chief Executive Officer of which
is a current director and former officer of the Company. Fees paid by the
Company under this agreement totaled approximately $1,250,000 in 1997 and
$1,676,000 in 1998. In addition during 1997, the Company issued warrants valued
at approximately $330,000 to this firm for the purchase of 50,000 shares of the
Company's common stock at an exercise price of $2.04 per share with an
expiration date in 2007. During 1998, the Company issued additional warrants
valued at approximately $447,000 to this firm for the purchase of 100,000 shares
of its common stock at an exercise price of $4.00 per share with an expiration
date in 2003. The costs associated with these transactions have been recorded as
additions to capitalized software of approximately $595,000 and $683,000 for the
years ended December 31, 1997 and 1998, respectively and as technology systems
and development expense of $985,000 and $1,440,000 for the years ended December
31, 1997 and 1998, respectively.
During 1998, the Company issued convertible subordinated notes payable in
the amount of $200,000 to two directors of the Company, and $400,000 to five
stockholders of the Company, which were redeemed during 1998 at par value plus
accrued interest.
The Company has capital equipment lease arrangements with one of its
stockholders and affiliated entities. The Company paid approximately $33,000,
$69,000 and $198,000 in the years ended December 31, 1996, 1997 and 1998,
respectively under these capital lease arrangements. As of December 31, 1997 and
1998, amounts due to these related parties are $392,000 and $458,000,
respectively and have been included as capital lease obligations on the balance
sheet.
All warrant activity described in Note 10 during the years ended December
31, 1997 and 1998 was with stockholders of the Company.
F-14
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK
The following table reflects redeemable convertible preferred stock activity
from December 31, 1995 through December 31, 1998:
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D TOTAL
---------------------- ---------------------- ---------------------- --------------------- ---------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
----------- --------- ----------- --------- ----------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shares of Series A
issued.............. 50,000 $5,000,000 50,000
Accrual of Series A
dividends........... -- 202,900 --
----------- --------- ----------- --------- ----------- --------- --------- ---------- ---------
Balance at December
31, 1996............ 50,000 5,202,900 50,000
Shares of Series B
issued.............. -- -- 80,000 $8,000,000 80,000
Shares of Series C
issued.............. -- -- -- -- 10,000 $1,000,000 10,000
Accrual of Series A
dividends........... -- 157,264 -- -- -- -- --
Payment of Series A
dividends........... -- (360,164) -- -- -- -- --
----------- --------- ----------- --------- ----------- --------- ---------
Balance at December
31, 1997............ 50,000 5,000,000 80,000 8,000,000 10,000 1,000,000 140,000
Shares of Series D
issued.............. -- -- -- -- -- -- 228,570 $22,857,000 228,570
Accrual of Series D
dividends........... -- -- -- -- -- -- -- 328,765 --
----------- --------- ----------- --------- ----------- --------- --------- ---------- ---------
Balance at December
31, 1998............ 50,000 $5,000,000 80,000 $8,000,000 10,000 $1,000,000 228,570 $23,185,765 368,570
----------- --------- ----------- --------- ----------- --------- --------- ---------- ---------
----------- --------- ----------- --------- ----------- --------- --------- ---------- ---------
<CAPTION>
AMOUNT
----------
<S> <C>
Shares of Series A
issued.............. $5,000,000
Accrual of Series A
dividends........... 202,900
----------
Balance at December
31, 1996............ 5,202,900
Shares of Series B
issued.............. 8,000,000
Shares of Series C
issued.............. 1,000,000
Accrual of Series A
dividends........... 157,264
Payment of Series A
dividends........... (360,164)
----------
Balance at December
31, 1997............ 14,000,000
Shares of Series D
issued.............. 22,857,000
Accrual of Series D
dividends........... 328,765
----------
Balance at December
31, 1998............ $37,185,765
----------
----------
</TABLE>
At December 31, 1996, the Company had issued and outstanding 50,000 shares
of Series A redeemable cumulative convertible preferred stock, $1.00 par value,
(the "Series A") which entitled its holders to cumulative dividend rights
payable in either cash, shares of Series A or shares of common stock.
During 1997, the Company amended its certificate of incorporation to amend
the rights of the Series A and to create two new series of redeemable
convertible preferred stock, designated as Series B (the "Series B") and Series
C (the "Series C"). The Company is authorized to issue up to 100,000 shares of
each of these series of preferred stock, and each series has a par value of
$1.00 per share. These series of preferred stock are not cumulative as to
dividends. In connection with the amendment, the Company made a cash payment of
approximately $360,000 representing the total accrued dividends due to the
holders of the Series A, of which $203,000 and $157,000 of dividends were
accrued during the years ended December 31, 1996 and 1997, respectively. In
addition, the Company issued 80,000 and 10,000 shares of Series B and Series C,
respectively, for gross proceeds of $8,000,000 and $1,000,000, respectively.
During 1998, the Company amended its certificate of incorporation to amend
certain terms of Series A, Series B and Series C and authorize the issuance of
up to 380,000 shares of preferred stock designated as Series D. In September
1998, the Company issued 228,570 shares of Series D at $100 per share resulting
in gross proceeds of $22,857,000.
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<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
The significant characteristics of the Company's Series A, Series B, Series
C and Series D are summarized as follows:
REDEMPTION
The Company is required to redeem each series of preferred stock in the
amount of $100 per share plus accumulated and unpaid dividends in two equal
annual installments commencing on the fifth anniversary upon request by holders
of at least two-thirds of such series of preferred stock. Each holder of
preferred stock may elect immediate redemption upon the sale of substantially
all of the Company's capital stock or assets to a third party. Additionally, a
holder of Series D may elect redemption if the Company has violated certain
covenants. However, a stockholder is not entitled to elect redemption if that
holder or a Director nominated by the holder voted its shares in favor of the
sale. Future redemption requirements for the preferred stock are $2,500,000,
$7,000,000, $16,093,000, and $11,593,000 in the years ended December 31, 2001,
2002, 2003 and 2004 respectively, plus additional accrued dividends.
LIQUIDATION
In the event of any liquidation, dissolution, or winding-up of the Company,
the holders of the Series D are entitled to a liquidation preference of up to
$100 per share plus all accrued but unpaid dividends before any payments are
made to the holders of the Series A, Series B or Series C. After payments to the
Series D stockholders, the holders of the Series A, Series B or Series C shall
be entitled to receive a liquidation payment of $100 per share and any
accumulated and unpaid dividends. Any assets remaining after such liquidation
payment to the preferred stockholders will be available for distribution ratably
to common stockholders.
DIVIDENDS
The holders of Series D are entitled to cumulative dividend rights at a rate
of 5% per annum of the Series D liquidation preference. The dividend rights may
be payable in cash, as an addition to the liquidation preference or an issuance
of Series D shares at the discretion of the Company or any combination of the
foregoing. Series D accumulated dividends must be paid before dividends or
distributions are made to the holders of the Series A, Series B or Series C. The
Company must pay a dividend or distribution on the same terms and at the same or
equivalent rate on each share of Series A, Series B, Series C and Series D
whenever a dividend or distribution is declared or paid on any shares of the
common stock. At December 31, 1998, Series D stockholders are entitled to
cumulative dividends in arrears of approximately $329,000. The Company expects
to pay the dividends in arrears in the form of additional Series D shares and as
a result has included the accrued dividends in the redeemable convertible
preferred stock.
CONVERSION
The number of shares of common stock into which the Series A, Series B,
Series C and Series D may be convertible is determined by multiplying each share
by the quotient of $100 divided by the conversion price as follows: Series A -
approximately $2.04 per share; Series B and C - $7.00 per share; Series D -
$4.00 share. All unpaid dividends must be paid upon conversion.
F-16
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
Each share of Series A, Series B and Series C is convertible into the
Company's common stock at the option of the holder at any time prior to
redemption, or will be automatically converted upon the closing of a public
offering of the Company's common stock resulting in a price of at least $8.00
per share and gross proceeds of at least $25,000,000, subject to anti-dilution
provisions.
Each share of Series D is convertible into the Company's common stock at the
option of the holder at any time after the earlier of a conversion event or
March 18, 2000. A conversion event includes any transaction that would be deemed
a liquidation, Mr. DeMello's ceasing to be an officer, director or consultant of
the Company, certain actions by the Company without a prior affirmative vote by
a majority of the Series D stockholders, a change in persons constituting the
majority of the board of directors or a material adverse change in the Company's
business. Each Series D share will be automatically converted upon the closing
of the first sale of a public offering resulting in at least $25,000,000 of
gross proceeds for at least $8.00 per share, or upon a sale of the Company's
assets to a third party provided that an investment banker delivers an opinion
that deems the conversion is necessary to facilitate a successful public
offering.
VOTING
Holders of Series A, Series B, Series C and Series D do not have voting
rights but holders of Series A and Series C, voting together, and holders of
Series B, voting separately, have the right to elect one director of the
Company, or in lieu thereof, one individual as an observer at all meetings of
the Company's board of directors. Holders of Series D have the right to elect
one director of the Company and one individual as an observer at all meetings of
the Company's board of directors. The Company is required to request the consent
of the Series D stockholders before engaging in certain activities such as the
modification of the rights of the Series D stockholders, a merger or
acquisition, the declaration of dividends for all capital stock and the issuance
of common stock at a price less than $7.00 per share and more than $4.00 per
share.
8. STOCKHOLDERS' EQUITY
COMMON STOCK AND PREFERRED STOCK
The holders of common stock are entitled to one vote for each share held at
all meetings of the stockholders. Dividends on common stock may be paid out of
lawfully available funds as and when determined by the board of directors,
subject to any preferential dividend rights of preferred shareholders. In April
1999, the Company's board of directors adopted and the stockholders approved
effective upon the closing of an initial public offering, the authorized capital
stock of the Company will consist of 50,000,000 shares of common stock and
5,000,000 shares of preferred stock, each having a par value of $0.01 per share.
The board of directors is authorized, without further stockholder approval, to
fix or alter the relative rights, preferences, qualifications, limitations or
restrictions thereof, including any dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series.
TREASURY STOCK
During 1997, the Company repurchased 29,000 shares of its common stock from
certain employees and directors of the Company for a total of approximately
$203,000. During 1998, the Company
F-17
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' EQUITY (CONTINUED)
received 5,000 shares of common stock as consideration for payment of a $35,000
employee note receivable.
STOCK SPLIT
On April 8, 1999, the board of directors declared a 1-for-2 reverse stock
split of common stock. All common shares and per share amounts in the
consolidated financial statements and related footnotes have been restated to
reflect the effect of the reverse stock split for all periods presented.
9. STOCK OPTION PLAN AND EMPLOYEE STOCK PURCHASE PLAN
STOCK OPTION PLANS
On June 10, 1993, the Company adopted two stock option plans. The 1993
Employee Option Plan ("Employee Plan") initially allowed for the granting of
202,750 shares of either statutory or non-statutory options as defined by
Section 422 of the Internal Revenue Code. As of December 31, 1998, the Company
has authorized 1,500,000 shares to be issued in connection with the Employee
Plan. As of December 31, 1998, there were approximately 882,500 shares available
for future grants under the Employee Plan. In April 1999, the Company increased
the number of authorized shares to be issued under this plan to 2,500,000.
The Director Option Plan ("Director Option Plan") allows for the granting of
shares of non-statutory options and are not intended to meet the requirements of
Internal Revenue Code Section 422. An aggregate of 125,000 shares of common
stock have been reserved for issuance upon the exercise of options available
under the Director Option Plan. As of December 31, 1998, there were
approximately 37,500 shares available for future grants under the Director
Option Plan. In April 1999, the Company increased the number of authorized
shares to be issued under this plan to 250,000.
Options are generally granted at a price established by the board of
directors to be not less than the fair market value of the stock on the date of
grant. The options vest at various rates over periods up to three years and
expire up to ten years from the grant date for the Employee Option Plan and five
years from the grant date for the Director Option Plan.
The Company has adopted the disclosure only provisions of SFAS No. 123.
Accordingly, no compensation cost has been recognized for stock options granted
at or above fair value. Had compensation cost been determined based on the fair
value at the grant dates for awards in 1996, 1997 and 1998 consistent with the
provisions of SFAS No. 123, the Company's pro forma net loss attributable to
common stockholders and pro forma basic and diluted net loss per common share
for fiscal 1996, 1997 and 1998 would have been as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1997 1998
------------- ------------- --------------
<S> <C> <C> <C>
Net loss attributable to common stockholders
As reported....................................................... $ (2,048,994) $ (8,471,771) $ (11,701,973)
Pro forma......................................................... $ (2,105,094) $ (8,553,803) $ (11,782,638)
Basic and diluted net loss per common share
As reported....................................................... $ (0.62) $ (2.47) $ (3.32)
Pro forma......................................................... $ (0.64) $ (2.50) $ (3.35)
</TABLE>
F-18
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTION PLAN AND EMPLOYEE STOCK PURCHASE PLAN (CONTINUED)
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model to apply the minimum value method with
the following assumptions for grants in 1996, 1997 and 1998: no dividend yield;
no volatility; risk-free interest rates of 6.1% in 1996, 5.6% for 1997 and 5.3%
for 1998; and expected lives of five years for the Employee Plan and three years
for the Directors Plan. The weighted average fair value of options granted was
$0.31, $0.45, $0.14 per share for the years ended December 31, 1996, 1997 and
1998, respectively. All options granted during these periods were issued at
exercise prices in excess of the fair market value of the common stock.
Because the determination of the fair value of all options granted includes
vesting periods over several years and additional option grants may be made each
year, future effects on reported pro forma net income or net loss may differ
from the above pro forma disclosures.
The following table summarizes the activity in the Company's option plans at
December 31, 1996, 1997 and 1998, and changes during the years then ended:
<TABLE>
<CAPTION>
1996 1997 1998
---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- --------- ----------- ---------- -----------
Outstanding at beginning of year...................... 273,500 $ 1.60 450,500 $ 1.76 726,750 $ 2.84
Granted............................................. 180,000 2.00 398,750 3.62 119,750 6.76
Exercised........................................... -- -- (77,550) 1.16 (34,583) 1.80
Forfeited........................................... (3,000) 1.80 (44,950) 1.80 (218,917) 2.30
--------- ----- --------- ----- ---------- -----
Outstanding at end of year............................ 450,500 $ 1.76 726,750 $ 2.84 593,000 $ 3.88
--------- ----- --------- ----- ---------- -----
--------- ----- --------- ----- ---------- -----
Options exercisable at year-end..................... 151,000 $ 1.44 162,250 $ 1.84 307,415 $ 2.80
--------- ----- --------- ----- ---------- -----
--------- ----- --------- ----- ---------- -----
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998:
<TABLE>
<CAPTION>
TOTAL
NUMBER WEIGHTED AVERAGE NUMBER OF
OF OPTIONS REMAINING OPTIONS
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
- -------------------------------------------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$1.50............................................. 12,500 4.5 12,500
$1.80............................................. 142,000 6.2 129,500
$2.04............................................. 212,500 7.7 110,583
$4.00............................................. 2,000 9.8 666
$7.00............................................. 224,000 9.0 54,166
----------- -------- -----------
593,000 7.8 years 307,415
----------- -------- -----------
----------- -------- -----------
</TABLE>
In January and February 1999, the Company granted approximately 465,000
options to purchase common stock at an exercise price of $7.00 per share. In
March 1999, the Company granted approximately 153,000 options to purchase common
stock at an exercise price of $10.00 per share. In April 1999, the Company
authorized the issuance of 250,000 options to purchase common stock to the
Chairman, President and Chief Executive Officer upon the closing of the initial
public offering
F-19
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTION PLAN AND EMPLOYEE STOCK PURCHASE PLAN (CONTINUED)
contemplated in this Registration Statement. The exercise price of these options
shall be equal to the price at which the Company sells common shares in the
initial public offering.
EMPLOYEE STOCK PURCHASE PLAN
In April 1999, the Company's board of directors and stockholders approved
the 1999 Employee Stock Purchase Plan (the "1999 Purchase Plan"). The Company
has reserved 250,000 shares of common stock for issuance under the 1999 Purchase
Plan.
10. COMMON STOCK WARRANTS
The following table summarizes the activity related to warrants at December
31, 1996, 1997 and 1998, and changes during the years then ended:
<TABLE>
<CAPTION>
1996 1997 1998
---------------------- ---------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- --------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........................ 22,500 $ 1.80 50,000 $ 1.93 435,714 $ 5.28
Granted............................................... 27,500 2.04 385,714 5.72 553,000 6.46
Cancelled............................................. -- -- -- -- (200,000) 7.00
--------- --------- ----------
--------- --------- ----------
Outstanding at end of year............................ 50,000 $ 1.93 435,714 $ 5.28 788,714 $ 5.67
--------- --------- ----------
--------- --------- ----------
Warrants exercisable at year-end...................... 22,500 $ 1.80 193,929 $ 3.84 681,571 $ 5.46
--------- --------- ----------
--------- --------- ----------
</TABLE>
The weighted average fair value of warrants granted in 1996 were based upon
an estimated value of $2.04. The weighted average fair value of warrants granted
during 1997 and 1998 estimated on the date of grant using the Black-Scholes
option pricing model was $2.74 and $1.82, respectively. The fair value was
estimated using an expected volatility of 50% in 1997 and 80% in 1998, risk free
rates of 5.8% to 6.3% in 1997 and 4.1% to 5.5% in 1998 and the contractual term
of the warrant.
The following table summarizes information about warrants outstanding at
December 31, 1998:
<TABLE>
<CAPTION>
WEIGHTED
TOTAL AVERAGE
NUMBER REMAINING NUMBER OF
OF WARRANTS CONTRACTUAL WARRANTS
EXERCISE PRICE OUTSTANDING LIFE EXERCISABLE
- ------------------------------------------------------ ----------- ----------- -----------
<S> <C> <C> <C>
$1.80................................................. 22,500 2.0 22,500
2.04................................................. 127,500 4.7 127,500
4.00................................................. 100,000 5.0 100,000
7.00................................................. 538,714 4.1 431,572
----------- ----------- -----------
788,714 4.2 years 681,572
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
During 1996, the Company issued warrants for the purchase of a total of
27,500 shares of common stock at an exercise price of $2.04 per share with an
expiration date of 2001 in exchange for services
F-20
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMON STOCK WARRANTS (CONTINUED)
provided to the Company. The Company recorded the fair value of these warrants
as consulting expense.
During 1997, the Company issued warrants for the purchase of a total of
385,714 shares of its common stock at exercise prices ranging from $2.04 - $7.00
per share and expiration dates from 2001 through 2007. These warrants were
principally issued in lieu of cash consideration for services provided to the
Company. Certain of these warrants were issued with immediate vesting while some
of the warrants had vesting that was contingent on additional services being
provided. In 1997, in connection with the issuance of these warrants, the
Company recorded $330,000 of technology systems and development costs, $281,000
of capitalized software and $77,000 of deferred financing costs based upon the
appraised value of the warrants at the date of grant. As of December 31, 1997,
approximately 214,500 of these warrants were subject to vesting upon certain
conditions and are subject to adjustment until the measurement date is reached.
In 1998, the remeasurement of these warrants resulted in the Company reducing
capitalized software recorded in 1997 by approximately $67,000. As of December
31, 1998, 107,143 warrants granted in 1997 were subject to vesting upon certain
future events and no significant value has been ascribed to these unvested
warrants.
During 1998, the Company issued warrants for the purchase of a total of
553,000 shares of its common stock at exercise prices ranging from $4.00 - $7.00
per shares as described below.
Warrants for the purchase of 425,000 common shares were issued in connection
with the Discount Notes at an exercise price of $7.00 per share. These warrants
expire upon the earlier of April 15, 2005 or five years after a public offering
by the Company raising at least $25,000,000. In connection with the repayment of
the Discount Notes, the Company modified the terms of the warrants issued in
association with this debt such that the remaining unvested warrants to purchase
200,000 shares of the common stock expired immediately in exchange for the
issuance 5,000 shares of common stock for $100. (See Note 5).
In addition, the Company issued warrants for the purchase of a total of
100,000 shares of its common stock at an exercise price of $4.00 per share with
an expiration date in 2003 in exchange for services provided to the Company.
(See Note 6.)
The Company issued warrants for the purchase of 28,000 shares of common
stock at an exercise price of $7.00 per share which are all vested as of
December 31, 1998. These warrants expire in 2001. These warrants were
principally issued in lieu of cash consideration for services provided to the
Company. The Company recorded approximately $33,000 to capitalized software for
the fair value of the warrants.
F-21
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company leases its facilities and certain equipment under noncancellable
leases. Future minimum lease obligations at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31, LEASES LEASES
- -------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
1999................................................................ $ 924,000 $ 294,000
2000................................................................ 799,000 221,000
2001................................................................ 483,000 115,000
2002................................................................ 495,000 80,000
2003................................................................ 508,000 12,000
Thereafter.......................................................... 2,068,000 --
------------ ----------
Total future payments............................................... $ 5,277,000 722,000
------------ ----------
------------ ----------
Less: amount representing interest.................................. 105,000
----------
Present value of capital leases..................................... $ 617,000
----------
----------
</TABLE>
All capital lease obligations are fully collateralized by the equipment and
are at interest rates ranging from 7% to 18%.
Total rent expense for the years ended December 31, 1996, 1997 and 1998 was
approximately $299,000, $639,000 and $948,000, respectively.
12. INCOME TAXES
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
<S> <C> <C> <C>
1996 1997 1998
----------- ------------- -------------
Deferred provision
Federal.......................................... $ (628,000) $ (2,827,000) $ (3,867,000)
State............................................ (116,000) (521,000) (713,000)
Change in valuation allowance.................... 744,000 3,348,000 4,396,000
Other............................................ -- -- 184,000
----------- ------------- -------------
Total provision................................ $ -- $ -- $ --
----------- ------------- -------------
----------- ------------- -------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred tax assets are
approximately $4,809,000 and $9,205,000 as of December 31, 1997 and 1998,
respectively, which are primarily related to net operating losses. Realization
of total deferred tax assets is contingent upon the generation of future taxable
income. Due to the uncertainty of realization of these tax benefits, the Company
has provided a valuation allowance for the full amount of its deferred tax
assets.
F-22
<PAGE>
STREAMLINE.COM
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. INCOME TAXES (CONTINUED)
As of December 31, 1998, the Company had federal and state net operating
loss carryforwards of approximately $22,600,000 and state net operating losses
of approximately $22,400,000. The federal and state net operating loss
carryforwards begin to expire in 2008 and 1999, respectively.
Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership may have limited, or may limit in the future,
the amount of net operating loss carryforwards which could be utilized annually
to offset future taxable income and income tax liability. The amount of any
annual limitation is determined based upon the Company's value prior to an
ownership change.
13. RETIREMENT SAVINGS PLAN
In 1997, the Company adopted the Streamline 401(k) Plan (the "Plan") for its
employees, which has been qualified under Section 401(k) of the Internal Revenue
Code. Eligible employees are permitted to contribute to the Plan through payroll
deductions within statutory limitations and subject to any limitations included
in the Plan. To date, the Company has made no contributions to the Plan.
F-23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] SHARES
[LOGO]
COMMON STOCK
-------------------
Prospectus
, 1999
-------------------
NationsBanc Montgomery Securities LLC
PaineWebber Incorporated
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
INTERNET DISTRIBUTION BY
E*TRADE Securities
Until , 1999 (25 days after the date of this prospectus), all
dealers effecting transactions in our common stock, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the obligation of dealers to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses of the Registrant in connection with the issuance and distribution
of the securities being registered, other than the underwriting discount, are
estimated as follows:
<TABLE>
<CAPTION>
TOTAL
---------
<S> <C>
SEC Registration Fee............................................................... $ 19,182
NASD Fees.......................................................................... 7,400
Nasdaq Listing Fees................................................................ *
Printing and Engraving Expenses.................................................... *
Legal Fees and Expenses............................................................ *
Accountants' Fees and Expenses..................................................... *
Expenses of Qualification Under State Securities Laws, Including Attorneys' Fees... *
Transfer Agent and Registrar's Fees................................................ *
Miscellaneous Costs................................................................ *
---------
Total.......................................................................... *
---------
---------
</TABLE>
- ------------------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Section 145 of the Delaware General Corporation law empowers a Delaware
corporation to indemnify its officers and directors and certain other persons to
the extent and under the circumstances set forth therein.
The Amended and Restated Certificate of Incorporation of Streamline and the
Amended and Restated By-laws of the Registrant, copies of which are filed as
Exhibits 3.1 and 3.2, provide for indemnification of officers and directors of
the Registrant and certain other persons against liabilities and expenses
incurred by any of them in certain stated proceedings and under certain stated
conditions.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
From its inception April 1993 to March 1999, the Registrant has entered into
stock option agreements with certain employees, officers and consultants to the
Registrant pursuant to the Registrant's 1993 Employee Option Plan and 1993
Director Option Plan, each as amended, covering approximately 1,321,883 shares
of its common stock, of which 112,133 shares of common stock have been issued by
the Registrant upon exercise of such options. The purchase price under the
options is $1.50 to $10.00 based on the fair market value of the common stock on
the date of grant. These grants and sales were made in reliance upon Rule 701
promulgated under the Securities Act and are deemed to be exempt transaction as
sales of an issuer's securities pursuant to a written plan or contract relating
to the compensation of such individuals and upon Section 4(2) of the Securities
Act as transactions not involving any public offering.
In May and June 1996, the Registrant issued and sold a total of 50,000
shares of the Registrant's Series A cumulative convertible preferred stock (each
share of which is convertible into approximately 50 shares of common stock) at a
purchase price of $100 per share (approximately $2.04 per share on an
as-converted basis) to Reliance Insurance Company. The issuance and sales of
such shares of
II-1
<PAGE>
Series A cumulative convertible preferred stock were made in reliance upon Rule
506 of Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
In March through November 1997, the Registrant sold an aggregate of 148,857
shares of common stock at a purchase price of $7.00 per share to a group of new
and existing individual investors. The issuance and sale of such shares of
common stock were made in reliance on Rule 506 of Regulation D promulgated under
the Securities Act and Section 4(2).
On March 7, 1997, in connection with Streamline's entering into a
development agreement with Elm Square Technologies, Inc., Streamline issued Elm
Square a warrant to purchase 50,000 shares of common stock at a purchase price
of $2.04 per share. The issuance and sale of the warrant was made in reliance
upon Rule 506 of Regulation D promulgated under the Securities Act and Section
4(2) of the Securities Act.
In June and September 1997, the Registrant issued and sold an aggregate of
80,000 shares of the Registrant Series B Convertible Preferred Stock and 10,000
shares of the Registrant Series C convertible preferred stock to several
corporate investors (in each case, each share of which is convertible into
approximately 15 shares of common stock) for an aggregate of $9 million. The
issuance and sale of such shares of Series B and Series C convertible preferred
stock were made in reliance upon Rule 506 of Regulation D promulgated under the
Securities Act and Section 4(2) of the Securities Act.
On June 13, 1997, Streamline issued one of its corporate investors warrants
for up to 142,857 shares of common stock, exercisable at $7.00 per share, in
connection with a development agreement, and issued an additional 28,000
warrants, exercisable at $7.00 per share, in March 1998 in connection with
ongoing development efforts. The issuance and sale of such warrants were made in
reliance upon Rule 506 of Regulation D promulgated under the Securities Act and
Section 4(2) of the Securities Act.
In September 1997, Streamline issued General Electric Capital Corporation
warrants to purchase up to 142,857 shares of common stock, 25% of which are
vested and exercisable at $7.00 per share and 75% of which vest in the event GE
Capital provides a certain level of future debt financing to Streamline by
September 23, 1999 and are exercisable at greater than or equal to $4.20 per
share. The issuance and sale of such warrants were made in reliance upon Rule
506 of Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
In April 1998, two institutional investors purchased senior discount notes
and warrants of the Registrant in 777 attached units. The Registrant also issued
an aggregate of 7,500 shares of common stock to these purchasers in connection
with the financing. The aggregate principal amount of the senior discount notes
was $7,770,000 and the warrants have an exercise price of $7.00 per share and
were exercisable for up to 425,000 shares of common stock in the aggregate,
225,000 of which were vested and 200,000 of which were subject to vesting. In
September 1998, in connection with the Series D Preferred Stock financing, the
Registrant and the holders of the senior discount notes amended their warrant
agreement to fix the total number of shares issuable upon exercise of the
warrants to 225,000 and the Registrant sold these parties a total of 5,000
additional shares of common stock for nominal cash consideration. The issuance
and sales of the foregoing securities were made in reliance upon Rule 506 of
Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
In September 1998, the Registrant issued and sold 228,570 shares of Series D
convertible preferred stock (each share of which is convertible into 25 shares
of common stock) at a purchase price of $100 per share ($4.00 per share on an
as-converted basis) to Nordstrom, Inc. The issuance and sales of such shares of
Series D convertible preferred stock and Series C convertible preferred stock
were made in reliance upon Rule 506 of Regulation D promulgated under the
Securities Act and Section 4(2) of the Securities Act.
II-2
<PAGE>
In November 1998, in connection with an acquisition of minority interests in
Streamline Mid-Atlantic, Inc., a subsidiary of the Registrant, the Registrant
issued and sold 128,571 shares of common stock to the minority stockholders of
Mid-Atlantic. Each share of common stock of Mid-Atlantic issued and outstanding
immediately before the merger, other than shares owned by the Registrant were
converted and became 1/14(th) of one share of common stock of the Registrant.
The issuance and sales of such shares of common stock were made in reliance upon
Rule 504 of Regulation D promulgated under the Securities Act and Section 4(2)
of the Securities Act.
In December 1998, Streamline issued Elm Square a warrant to purchase an
additional 100,000 shares of common stock at a purchase price of $4.00 per share
in connection with ongoing services provided by Elm Square. The issuance and
sale of the warrant was made in reliance upon Rule 506 of Regulation D
promulgated under the Securities Act and Section 4(2) of the Securities Act.
In April 1999, Streamline issued Nordstrom a warrant to purchase 75,000
shares of common stock at a purchase price of $7.00 per share in connection with
Nordstrom's committing to provide financing of up to $10 million to Streamline.
The issuance and sale of the warrant was made in reliance upon Rule 506 of
Regulation D promulgated under the Securities Act and Section 4(2) of the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed as a part of this registration
statement:
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
**1.1 Proposed Form of Underwriting Agreement.
**3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant.
**3.2 Form of Amended and Restated By-Laws of the Registrant.
**4.1 Specimen Certificate for shares of the Registrant's common stock.
**5.1 Opinion of Bingham Dana LLP, counsel to the Registrant, regarding the legality of the shares of common
stock.
**10.1 1993 Employee Option Plan, as amended.
**10.2 1993 Director Stock Option Plan, as amended.
10.3 Series A Preferred Stock Purchase Agreement, dated as of May 15, 1996, by and among the Registrant and
the other parties thereto.
10.4 Stock Purchase Agreement, dated as of June 13, 1997, by and among the Registrant and the other parties
thereto.
10.5 Registration Rights Agreement, dated as of June 13, 1997, by and among the Registrant and the other
parties thereto, including instruments of adherence thereto.
+10.6 Development Agreement, dated as of June 13, 1997, by and between the Registrant and Intel Corporation,
as amended.
10.7 Warrant to purchase shares of the Registrant's common stock, issued to Intel Corporation, dated June
13, 1997.
10.8 Warrant to purchase shares of the Registrant's common stock, issued to Intel Corporation, dated as of
January 21, 1998.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.9 Waiver and Modification Agreement, dated as of September 23, 1997, by and among the Registrant and the
other parties thereto.
10.10 Warrant to Purchase shares of the Registrant's common stock issued to General Electric Capital
Corporation, dated as of September 23, 1997.
10.11 Form of Non-Negotiable Convertible Promissory Notes of the Registrant due October 1, 1998, dated as of
April 15, 1998, issued in the aggregate face amount of $600,000, issued by the Registrant.
10.12 Securities Purchase Agreement, dated as of April 15, 1998, by and among the Registrant and the other
parties thereto.
10.13 Warrant Agreement, dated as of April 15, 1998, by and among the Registrant and the other parties
thereto.
10.14 Registration Rights and Co-Sale Agreement, dated as of April 15, 1998, by and among the Registrant and
the other parties thereto.
10.15 Form of Senior Discount Subordinated Notes, dated as of April 15, 1998, in an aggregate face amount of
$7,770,000, issued by the Registrant.
10.16 Stock Purchase Agreement, dated as of September 18, 1998, by and between the Registrant and Nordstrom,
Inc.
10.17 Registration Rights Agreement, dated as of September 18, 1998, by and among the Registrant and
Nordstrom, Inc.
10.18 Letter agreement regarding registration rights, dated as of September 18, 1998, by and among the
Registrant and the other parties thereto.
10.19 Shareholders Agreement, dated as of September 18, 1998, by and among the Registrant, Nordstrom, Inc.
and certain officers of the Registrant.
10.20 Waiver and Modification Agreement, dated as of September 18, 1998, by and among the Registrant and the
other parties thereto.
10.21 Warrant Modification Agreement, dated as of September 18, 1998, by and among the Registrant and the
other parties thereto.
10.22 Letter Agreement, dated March 7, 1997, by and between the Registrant and Elm Square Technologies.
10.23 Warrant to purchase shares of the Registrant's common stock, issued to Elm Square Technologies, Inc.,
dated as of December 15, 1998.
10.24 Employment Agreement, dated as of July 1, 1996, by and between the Registrant and Frank F. Britt.
10.25 Letter Agreement, dated as of April 30, 1997, by and between the Registrant and BrainReserve, Inc.
10.26 Form of Streamline Consumer Learning Center Membership Agreement and Mutual Non-Disclosure Agreement.
10.27 Letter Agreement, dated as of January 30, 1997, by Welty-Leger Corporation.
10.28 Agreement and Plan of Merger and Reorganization, dated as of November 2, 1998, by and among the
Registrant and the other parties thereto.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.29 Westwood lease, dated as of August 18, 1995, as amended, by and between the Registrant and Mortimer B.
Zuckerman.
**10.30 Gaithersburg, Maryland lease, dated as of June 30, 1997, as amended, by and between the Registrant and
Manor Care, Inc.
**10.31 Form of Invention and Non-Disclosure Agreement between the Registrant and its executives and key
employees.
**10.32 Form of Non-Competition and Non-Solicitation Agreement between the Registrant and its executives and
key employees.
10.33 Employment Agreement, dated April 9, 1999, by and between the Registrant and Timothy A. DeMello.
10.34 Letter Agreement, dated as of April 13, 1999, by and between the Registrant and Nordstrom, Inc.
**10.35 Warrant to purchase shares of the Registrant's common stock, issued to Nordstrom, Inc.
**10.36 1999 Employee Stock Purchase Plan
**21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
**23.2 Consent of Bingham Dana LLP, counsel to the Registrant (included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page to Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
** To be filed by amendment.
+ Confidential treatment requested.
SCHEDULES
Schedules have been omitted because either they are not required, are not
applicable or the information is otherwise set forth in the Consolidated
Financial Statements and notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 hereof, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE>
The undersigned Registrant hereby undertakes:
(1) To provide the Underwriter at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such names as
required by the Underwriter to permit prompt delivery to each purchaser.
(2) That for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) That for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant, Streamline Inc., certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form S-1 and has duly caused
this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Westwood, Commonwealth of
Massachusetts, on this 15th day of April, 1999.
<TABLE>
<S> <C> <C>
STREAMLINE, INC.
By: /s/ TIMOTHY A. DEMELLO
-----------------------------------------
Timothy A. DeMello
CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
</TABLE>
II-7
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Timothy A. DeMello
and Terence W. Toran, and each of them severally, acting alone and without the
other, his/her true and lawful attorney-in-fact with full power of substitution
or resubstitution, for such person and in such person's name, place and stead,
in any and all capacities, to sign on such person's behalf, individually and in
each capacity stated below, any and all amendments, including post-effective
amendments to this Registration Statement, and to sign any and all additional
registration statements relating to the same offering of securities of the
Registration Statement that are filed pursuant to Rule 462(b) of the Securities
Act of 1933,and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman, President, Chief
/s/ TIMOTHY A. DEMELLO Executive Officer and
- ------------------------------ Director (Principal April 15, 1999
Timothy A. DeMello Executive Officer)
/s/ TERENCE W. TORAN Chief Financial Officer,
- ------------------------------ (Principal Financial and April 15, 1999
Terence W. Toran Accounting Officer)
/s/ MARK A. COHN
- ------------------------------ Director April 9, 1999
Mark A. Cohn
/s/ THOMAS A. CROWLEY
- ------------------------------ Director April 13, 1999
Thomas A. Crowley
/s/ JOHN P. FITZSIMONS
- ------------------------------ Director April 14, 1999
John P. Fitzsimons
/s/ THOMAS O. JONES
- ------------------------------ Director April 13, 1999
Thomas O. Jones
/s/ J. DANIEL NORDSTROM
- ------------------------------ Director April 14, 1999
J. Daniel Nordstrom
/s/ FAITH B. POPCORN
- ------------------------------ Director April 14, 1999
Faith B. Popcorn
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
**1.1 Proposed Form of Underwriting Agreement.
**3.1 Form of Amended and Restated Certificate of Incorporation of the Registrant.
**3.2 Form of Amended and Restated By-Laws of the Registrant.
**4.1 Specimen Certificate for shares of the Registrant's common stock.
**5.1 Opinion of Bingham Dana LLP, counsel to the Registrant, regarding the legality of the shares of common
stock.
**10.1 1993 Employee Option Plan, as amended.
**10.2 1993 Director Stock Option Plan, as amended.
10.3 Series A Preferred Stock Purchase Agreement, dated as of May 15, 1996, by and among the Registrant and
the other parties thereto.
10.4 Stock Purchase Agreement, dated as of June 13, 1997, by and among the Registrant and the other parties
thereto.
10.5 Registration Rights Agreement, dated as of June 13, 1997, by and among the Registrant and the other
parties thereto, including instruments of adherence thereto.
+10.6 Development Agreement, dated as of June 13, 1997, by and between the Registrant and Intel Corporation,
as amended.
10.7 Warrant to purchase shares of the Registrant's common stock, issued to Intel Corporation, dated June
13, 1997.
10.8 Warrant to purchase shares of the Registrant's common stock, issued to Intel Corporation, dated as of
January 21, 1998.
10.9 Waiver and Modification Agreement, dated as of September 23, 1997, by and among the Registrant and the
other parties thereto.
10.10 Warrant to Purchase shares of the Registrant's common stock issued to General Electric Capital
Corporation, dated as of September 23, 1997.
10.11 Form of Non-Negotiable Convertible Promissory Notes of the Registrant due October 1, 1998, dated as of
April 15, 1998, issued in the aggregate face amount of $600,000, issued by the Registrant.
10.12 Securities Purchase Agreement, dated as of April 15, 1998, by and among the Registrant and the other
parties thereto.
10.13 Warrant Agreement, dated as of April 15, 1998, by and among the Registrant and the other parties
thereto.
10.14 Registration Rights and Co-Sale Agreement, dated as of April 15, 1998, by and among the Registrant and
the other parties thereto.
10.15 Form of Senior Discount Subordinated Notes, dated as of April 15, 1998, in an aggregate face amount of
$7,770,000, issued by the Registrant.
10.16 Stock Purchase Agreement, dated as of September 18, 1998, by and between the Registrant and Nordstrom,
Inc.
10.17 Registration Rights Agreement, dated as of September 18, 1998, by and among the Registrant and
Nordstrom, Inc.
10.18 Letter agreement regarding registration rights, dated as of September 18, 1998, by and among the
Registrant and the other parties thereto.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
10.19 Shareholders Agreement, dated as of September 18, 1998, by and among the Registrant, Nordstrom, Inc.
and certain officers of the Registrant.
10.20 Waiver and Modification Agreement, dated as of September 18, 1998, by and among the Registrant and the
other parties thereto.
10.21 Warrant Modification Agreement, dated as of September 18, 1998, by and among the Registrant and the
other parties thereto.
10.22 Letter Agreement, dated March 7, 1997, by and between the Registrant and Elm Square Technologies.
10.23 Warrant to purchase shares of the Registrant's common stock, issued to Elm Square Technologies, Inc.,
dated as of December 15, 1998.
10.24 Employment Agreement, dated as of July 1, 1996, by and between the Registrant and Frank F. Britt.
10.25 Letter Agreement, dated as of April 30, 1997, by and between the Registrant and BrainReserve, Inc.
10.26 Form of Streamline Consumer Learning Center Membership Agreement and Mutual Non-Disclosure Agreement.
10.27 Letter Agreement, dated as of January 30, 1997, by Welty-Leger Corporation.
10.28 Agreement and Plan of Merger and Reorganization, dated as of November 2, 1998, by and among the
Registrant and the other parties thereto.
10.29 Westwood lease, dated as of August 18, 1995, as amended, by and between the Registrant and Mortimer B.
Zuckerman.
**10.30 Gaithersburg, Maryland lease, dated as of June 30, 1997, as amended, by and between the Registrant and
Manor Care, Inc.
**10.31 Form of Invention and Non-Disclosure Agreement between the Registrant and its executives and key
employees.
**10.32 Form of Non-Competition and Non-Solicitation Agreement between the Registrant and its executives and
key employees.
10.33 Employment Agreement, dated April 9, 1999, by and between the Registrant and Timothy A. DeMello.
10.34 Letter Agreement, dated as of April 13, 1999, by and between the Registrant and Nordstrom, Inc.
**10.35 Warrant to purchase shares of the Registrant's common stock, issued to Nordstrom, Inc.
**10.36 1999 Employee Stock Purchase Plan
**21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
**23.2 Consent of Bingham Dana LLP, counsel to the Registrant (included in Exhibit 5.1).
24.1 Power of Attorney (included in signature page to Registration Statement).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
** To be filed by amendment.
+ Confidential treatment requested.
<PAGE>
Exhibit 10.3
STREAMLINE, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
DATED MAY 15, 1996
BY AND AMONG
STREAMLINE, INC.,
RELIANCE INSURANCE COMPANY
AND
TIMOTHY A. DEMELLO
<PAGE>
-2-
This Agreement (the "Agreement") is made as of May 15, 1996 by and
among STREAMLINE, INC., a Delaware corporation having offices at 27 Dartmouth
Street, Westwood, Massachusetts 02090 ("Streamline"), RELIANCE INSURANCE
COMPANY, a Pennsylvania insurance corporation having offices at 55 East 52nd
Street, New York, New York 10055 ("Purchaser") and TIMOTHY A. DEMELLO
("Founder").
W I T N E S S E T H:
WHEREAS, Purchaser desires to purchase, and Streamline desires to sell,
on and subject to the terms and conditions of this Agreement, the number of
shares of Series A Cumulative Convertible Preferred Stock, $1.00 par value per
share, of Streamline ("Series A Cumulative Convertible Preferred Stock") as set
forth below;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the parties hereto agree as follows:
1. DEFINITIONS. The following terms shall have the meaning specified
when used herein, unless the context otherwise requires:
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the common stock, par value $0.01 per share, of
Streamline.
"CONVERSION- SHARES" means the shares of Common Stock issuable upon
conversion of the Shares.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, or any successor act, as
the same shall be in effect at the time.
"INITIATING HOLDER" means Purchaser or any other holder or holders of
Registrable Shares holding at least 30% of the outstanding shares of Series A
Cumulative Convertible Preferred Stock (or the Conversion Shares issued upon
conversion of such shares of Series A Cumulative Convertible Preferred Stock).
"INVESTMENT" means any direct or indirect transfer or delivery of cash,
stock or other assets of value in exchange for indebtedness, stock or other
security or ownership interest or asset.
<PAGE>
-3-
"PERSON" means any individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or government or other agency or
political subdivision thereof.
"REGISTRABLE SHARES" means the Conversion Shares, any other Common
Stock issued in respect of the Series A Cumulative Convertible Preferred Stock
(because of stock splits, stock dividends, reclassifications, recapitalizations
or similar events) and any other Common Stock owned by Purchaser or its
affiliates; provided, however, that shares of Common Stock which are Registrable
Shares cease to be Registrable Shares upon the sale thereof pursuant to an
effective Registration Statement or in accordance with the provisions of Rule
144 under the Securities Act.
"REGISTRATION EXPENSES" means all expenses incident to Streamline's
performance of or compliance with Section 9, including, without limitation, all
registration and filing fees, all fees and expenses of complying with securities
or blue sky laws (including reasonable fees and disbursement of counsel in
connection with blue sky qualifications of the Registrable Shares), rating
agency fees, all printing expenses, messenger and delivery expenses, internal
expenses (including, without limitation, all fees and expenses of its officers
and employees performing legal or accounting duties), the fees and expenses
incurred in connection with the listing of the securities, the fees and
disbursements of counsel for Streamline and of its independent public
accountants, including the expenses of any special audits required by or
incident to such performance and compliance, and the fees and expenses of
counsel for Purchaser (up to a maximum of $25,000 in any one registration), but
excluding any underwriting discounts and commissions applicable to the
Registrable Shares.
"REGISTRATION STATEMENT" means a registration statement filed by
Streamline with the SEC for a public offering and sale of Common Stock (other
than a registration statement on Form S-8 or Form S-4, or their successors, or
any other form for a similar limited purpose, or any registration statement
covering only securities proposed to be issued in exchange for securities or
assets of another corporation).
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, or any successor act, all as the
same shall be in effect at the time.
"SHARES" means the 50,000 shares of Series A Cumulative Convertible
Preferred Stock sold by Streamline to Purchaser pursuant to the terms hereof.
<PAGE>
-4-
"Subsidiary" means any corporation, association or other business
entity a majority (by number of votes) of the stock of any class or classes (or
equivalent interests) of which is at the time owned by Streamline or by one or
more Subsidiaries or by Streamline and one or more Subsidiaries, if the holders
of the stock of such class 6r classes (or equivalent interests) (a) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or persons performing similar functions) of such
business entity, even though the right so to vote has been suspended by the
happening of such a contingency, or (b) are at the time entitled, as such
holders, to vote for the election of a majority of the directors (or persons
performing similar functions) of such business entity, whether or not the right
so to vote exists by reason of the happening of a contingency.
2. AUTHORIZATION AND SALE OF SHARES; USE OF PROCEEDS.
2.1. AUTHORIZATION OF SHARES. Streamline has, or prior to the
Closing (as defined in Section 3) will have, duly authorized the sale
and issuance, pursuant to the terms of this Agreement, of the Shares,
having the rights, restrictions, privileges and preferences set forth
in the Certificate of Amendment to the Certificate of Incorporation, as
amended, of Streamline (the "Certificate of Amendment") attached hereto
as EXHIBIT A. Streamline has, or prior to the Closing will have,
adopted and filed the Certificate of Amendment with the Secretary of
State of Delaware.
2.2. SALE OF SHARES. Streamline agrees to issue and sell to
Purchaser and, subject to the terms and conditions set forth herein and
on the basis of the representations, warranties and agreements herein
contained, Purchaser agrees to purchase in two installments, on the
First Closing Date and the Second Closing Date (each as hereinafter
defined), the Shares for an aggregate purchase price of $5,000,000 (the
"Purchase Price").
2.3. USE OF PROCEEDS. Streamline will use the net proceeds
from the sale of the Shares to fund expenses associated with the
opening of Streamline's prototype consumer response center and for
general working capital purposes. No portion of the proceeds hereunder
will be used to pay any finder's fees.
3. THE FIRST CLOSING AND THE SECOND CLOSING. Purchaser shall purchase
the Shares in two installments as follows:
(a) The closing of the sale of 10,000 shares of Series A
Cumulative Convertible Preferred Stock (the "First Closing") shall
occur, subject to the satisfaction of the conditions set forth in
Section 7
<PAGE>
-5-
hereof, at the offices of Purchaser, 55 East 52nd Street, New York, New
York 10055, at 10:00 a.m., New York time, on May 15 , 1996, or at such
other place, time and date as Purchaser and Streamline may mutually
agree. The actual date on which the First Closing shall occur is
referred to herein as the "First Closing Date." At the First Closing,
Streamline shall deliver to Purchaser, against receipt of $1,000,000
(representing the amount of the Purchase Price payable on the First
Closing Date) by wire transfer of federal or same day funds to an
account of Streamline (details of which account shall be provided by
Streamline to Purchaser in writing not less than two business days
prior to the First Closing Date) or by such other method acceptable to
Streamline, a certificate or certificates in definitive form
representing the 10,000 shares of Series A Cumulative Convertible
Preferred Stock to be purchased by Purchaser on the First Closing Date,
registered in such name(s) as Purchaser may request (being Purchaser, a
Subsidiary of Purchaser or a nominee of either thereof) upon at least
24 hours prior notice to Streamline. If at the First Closing any of the
conditions specified in Section 7.1 shall not have been fulfilled,
Purchaser shall, at its election, be relieved of all of its obligations
hereunder without thereby waiving any other rights it may have by
reason of such failure or such nonfulfillment.
(b) The closing of the sale of 40,000 shares of Series A
Cumulative Convertible Preferred Stock (the "Second Closing"),
representing the balance of the Shares to be purchased by Purchaser,
shall occur, subject to the satisfaction of the conditions set forth in
Section 8 hereof, at the offices of Purchaser, 55 East 52nd Street, New
York, New York 10055 (or at such other place and time as Purchaser and
Streamline may mutually agree) on the date on which Streamline delivers
to Purchaser the 1995 Audited Financial Statements (as defined in
Section 9.1 hereof). The actual date on which the Second Closing shall
occur is referred to herein as the "Second Closing Date." At the Second
Closing, Streamline shall deliver to Purchaser, against receipt of
$4,000,000 (representing the amount of the Purchase Price payable on
the Second Closing Date) in the manner set forth in paragraph (a) of
this Section 3, a certificate or certificates in definitive form
representing the 40,000 shares of Series A Cumulative Convertible
Preferred Stock to be purchased by Purchaser on the Second Closing
Date, registered in such name(s) as Purchaser may request (being
Purchaser, a Subsidiary of Purchaser or a nominee of either thereof)
upon at least 24 hours prior notice to Streamline. If at the Second
Closing any of the conditions specified in Section 8.1 shall not have
been fulfilled, Purchaser shall, at its election, be relieved of
<PAGE>
-6-
all of its obligations hereunder without thereby waiving any other
rights it may have by reason of such failure or such nonfulfillment.
4. REPRESENTATIONS OF STREAMLINE. Streamline represents and warrants to
Purchaser as follows:
4.1. ORGANIZATION AND QUALIFICATION: CERTIFICATE OF
INCORPORATION. Streamline is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has all requisite power and authority (corporate and other) to
carry on its business as it is now being conducted and as proposed to
be conducted by it and to own all of its properties and assets.
Streamline is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the ownership of
its properties or the conduct of its business requires such
qualification, except where the failure to so qualify would not
materially adversely affect the operations or financial condition of
Streamline.
4.2. CAPITALIZATION. The authorized capital stock of
Streamline consists, or as of the Closing will consist, of (a)
25,000,000 shares of Common Stock, of which (i) 6,569,250 shares are
outstanding, (ii) 45,000 shares are issuable upon exercise of
outstanding warrants and (iii) 555,500 shares are reserved for issuance
upon exercise of outstanding stock options under Streamline's stock
option plans, and (b) 100,000 shares of Series A Cumulative Convertible
Preferred Stock (of which in excess of 50, 000 shares may only be
issued as dividends on Series A Cumulative Convertible Preferred Stock)
All of the issued and outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, and non-assessable. Except as
set forth in SCHEDULE 4.2 hereto, (i) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to
purchase or acquire shares of capital stock of Streamline is authorized
or outstanding, (ii) Streamline has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible
security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets
of Streamline and (iii) Streamline has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make
any other distribution in respect thereof. All of the issued and
outstanding shares of capital stock of Streamline have been offered,
issued and sold by Streamline in compliance with applicable federal and
state securities laws.
<PAGE>
-7-
4.3. SUBSIDIARIES. Streamline has no Subsidiaries and no
Investment in any other Person.
4.4. STOCKHOLDER LIST AND AGREEMENTS. Attached as SCHEDULE 4.4
is a true and complete list of the stockholders of Streamline, showing
the number of shares of Common Stock or other securities of Streamline
held by each stockholder as of the date of this Agreement and the
consideration paid to Streamline, if any, therefor. Except as provided
in this Agreement and the Certificate of Amendment, there are no
agreements, written or oral, between Streamline and any holder of its
capital stock, or, to the best of Streamline's knowledge, among any
holders of its capital stock, relating to the acquisition (including,
without limitation, rights of first refusal or pre-emptive rights),
disposition, registration under the Securities Act or voting of the
capital stock of Streamline.
4.5. ISSUANCE OF SHARES. The issuance, sale and delivery of
the Shares in accordance with the terms hereof have been duly
authorized by all necessary corporate action on the part of Streamline
and duly reserved for issuance and, when issued and paid for on the
Closing Date, will be validly issued, fully paid and non-assessable.
The issuance and delivery of the Conversion Shares have been duly
authorized by all necessary corporate action on the part of Streamline.
The Conversion Shares have been, and will at all times be, reserved for
issuance upon the conversion of the Shares and, when issued, will be
duly and validly authorized, validly issued, fully paid and
non-assessable.
4.6. AUTHORITY FOR AGREEMENT. Streamline has the power and
authority to execute and deliver this Agreement and all other
agreements or documents required to be executed by Streamline on or
prior to the Closing as contemplated herein (the "Ancillary
Agreements") and to consummate the transactions contemplated on its
part hereby and thereby. The execution, delivery and performance by
Streamline of this Agreement and the Ancillary Agreements and the
consummation by Streamline of the transactions contemplated on its part
hereby and thereby have been duly authorized by all necessary corporate
action. This Agreement and the Ancillary Agreements have been duly
executed and delivered by Streamline and constitute legal, valid and
binding obligations of Streamline, enforceable against Streamline in
accordance with their respective terms.
4.7. NON-CONTRAVENTION. The execution, delivery and performance
of the transactions contemplated by this Agreement and
<PAGE>
-8-
the Ancillary Agreements by Streamline will not violate Any provision
of law and will not conflict with or result in any breach of the
Certificate of Incorporation or By-Laws of Streamline (each as amended
to date) or the Certificate of Amendment, or conflict with, violate or
result (with the giving of notice or the lapse of time or both) in a
violation of the terms, conditions or provisions of, or constitute a
default under, or require a consent or waiver under, or result in the
creation or imposition of any lien, charge, pledge, security interest
or other encumbrance upon any property of Streamline pursuant to any
provision of, any indenture, lease, agreement or other instrument to
which Streamline is a party or by which it or any of its properties is
bound, or any decree, judgment, order, statute, rule or regulation
applicable to Streamline.
4.8. CONSENTS AND APPROVALS. Except for any notice or filing
subsequent to the Closing that may be required under applicable federal
or state securities or blue sky laws (which notice or filing, if
required, shall be timely made by Streamline), no authorization,
consent, approval or other order of, or registration, qualification,
designation, declaration or filing with, any governmental agency or
body is required for the valid authorization, execution, delivery and
performance of this Agreement, the valid authorization, issuance, sale
and delivery of the Shares or the other transactions to be consummated
at or prior to the Closing, other than such as will have been made or
obtained prior to, and shall be effective on and as of, the Closing;
PROVIDED that, with respect to Purchaser, such representation does not
relate to the nature of Purchaser's activities or to insurance
regulations applicable to Purchaser, but only to the effects the
Company's business activities would have upon any purchaser which was
purchasing the Shares. The offer and sale of the Shares to Purchaser
has been made in compliance with applicable federal and state
securities laws.
4.9. FINANCIAL STATEMENTS. (a) Streamline has previously
delivered to Purchaser (i) the audited balance sheet of Streamline as
of December 31, 1994 (the "Audited Balance Sheet") and the related
statements of operations, stockholders' equity and cash flows for the
fiscal year then ended (collectively, the "Audited Financial
Statements") and (ii) unaudited balance sheet of Streamline as of March
31, 1996 (the "Unaudited Balance Sheet") and the related statements of
operations, stockholders' equity and cash flows for the three-month
period then ended (collectively, the "Unaudited Financial Statements").
The Audited Financial Statements, the Unaudited Financial Statements
and the interim financial statements (the
<PAGE>
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"Interim Financial Statements") to be delivered pursuant to Subsection
9.2 hereof (collectively, the "Financial Statements") have been (or, in
the case of the Interim Financial Statements, will be) prepared in
accordance with generally accepted accounting principles applied
consistently with past practices (except in the case of the Unaudited
Financial Statements and the Interim Financial Statements, which do not
contain footnotes and are subject to year-end adjustments) and, in the
case of the Audited Financial Statements, have been certified without
qualification by Arthur Andersen LLP, Streamline's independent public
accountants, and, in the case of the Interim Financial Statements, have
been (or will be) certified by Streamline's chief financial officer.
The date of the Audited Balance Sheet is hereinafter referred to as the
"Balance Sheet Date."
(b) The Financial Statements fairly present, as of their
respective dates, the financial condition of Streamline and the results
of operations of Streamline's business and cash flows for the periods
indicated. The Financial Statements contain and reflect adequate
reserves, which are consistent with previous reserves taken, for all
reasonably anticipated material losses and costs and expenses. The
amounts shown as accrued for current and deferred income and other
taxes in the Financial Statements are sufficient for the payment of all
accrued and unpaid federal, state and local income taxes, interest,
penalties, assessments or deficiencies applicable to Streamline,
whether disputed or not, for the applicable period then ended and
periods prior thereto.
4.10. ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the
extent (a) reflected and reserved against in the Audited Balance Sheet,
(b) disclosed in SCHEDULE 4.10 attached hereto or (c) incurred in the
ordinary course of business after the Balance Sheet Date and not
material in amount, either individually or in the aggregate, Streamline
did not have any liability or obligation, secured or unsecured, whether
accrued, absolute, contingent, unasserted or otherwise, which is
material to the condition (financial or otherwise) of the assets,
properties, business or prospects of Streamline taken as a whole. For
purposes of this Subsection 4.10, "material" means any amount in excess
of $50,000.
4.11. FINANCIAL ADVISORS AND BROKERS. Streamline has not
employed any broker, finder, consultant, intermediary or advisor which
would be entitled to a broker's, finder's or similar fee or commission
from Streamline as a result of, or arising from, this transaction.
<PAGE>
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4.12. LITIGATION. There are no actions, proceedings or
investigations pending or threatened (or any basis therefor known to
Streamline) which question the validity of this Agreement or any action
taken or to be taken pursuant hereto, or which might result, either
individually or in the aggregate, in any material adverse change in the
business, operations, affairs, properties, assets or condition,
financial or otherwise, of Streamline, nor is there any litigation
pending or threatened (or any basis therefor known to Streamline)
against Streamline or any of its officers or employees by reason of the
past employment relationships of such officers or employees, the
proposed activities of Streamline or negotiations by Streamline and/or
any of its officers or employees with possible investors in Streamline.
4.13. TAX RETURNS AND PAYMENTS. All of the tax returns and
reports of Streamline required by law to be filed have been duly and
timely filed and all taxes shown due thereon have been paid. The
federal income tax returns of Streamline have never been audited by the
Internal Revenue Service. No deficiency assessment or proposed
adjustment of Streamline's federal income taxes is pending and
Streamline has no knowledge of any proposed liability for any tax to be
imposed upon its properties or assets, for which there is not an
adequate reserve reflected in the Audited Balance Sheet Neither
Streamline nor any of its stockholders has ever filed (a) an election
pursuant to Section 1362 of the Code that Streamline be taxed as an "S"
Corporation or (b) a consent pursuant to Section 341(f) of the Code
relating to collapsible corporations. Streamline's net operating losses
for federal income tax purposes, as set forth in the Financial
Statements, are not subject to any limitations imposed by Section 382
of the Code, and consummation of the transactions contemplated by this
Agreement or by any other agreement, understanding or commitment,
contingent or otherwise, to which Streamline is a party or by which it
is otherwise bound will not have the effect of limiting Streamline's
ability to use such net operating losses in full to offset such taxable
income.
4.14. PROPERTY AND ASSETS. Streamline has good title to all of
its material properties and assets, including all properties and assets
reflected in the Audited Balance Sheet, except those disposed of since
the date thereof in the ordinary course of business, and none of such
properties or assets is subject to any mortgage, pledge, lien, security
interest, lease, charge or encumbrance other than those the material
terms of which are described in the Audited Balance Sheet or in.
SCHEDULE 4.14
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4.15. INTELLECTUAL PROPERTY. Set forth on SCHEDULE 4.15 is a
true and complete list of all patents, patent applications, trademarks,
service marks, trademark and service mark applications, trade names,
copyright registrations and licenses presently used by Streamline or
necessary for the conduct of Streamline's business as conducted and as
proposed to be conducted, as well as any agreement under which
Streamline has access to any confidential information used or to be
used by it in its business (the "Intellectual Property Rights").
Streamline owns, or has the right to use under the agreements or upon
the terms described in SCHEDULE 4.15, all of the Intellectual Property
Rights, and has taken all actions reasonably necessary to protect the
Intellectual Property Rights. The business conducted or proposed by
Streamline does not and will not cause Streamline to infringe or
violate any of the patents, trademarks, service marks, trade names,
copyrights, licenses, trade secrets or other intellectual property
rights of any other Person. Streamline is not aware that any employee
is obligated under any contract (including any license, covenant or
commitment of any nature), or subject to any judgment, decree or order
of any court or administrative agency, that would conflict or interfere
with (i) the performance of such employee's duties as an employee of
Streamline, (ii) the use of such employee's best efforts to promote the
interests of Streamline or (iii) Streamline's business as conducted or
proposed to be conducted. No other Person (including without limitation
any prior employer of any employee of Streamline) has any right to or
interest in any inventions, improvements, discoveries or other
confidential information utilized by Streamline in its business.
4.16. INSURANCE. Streamline maintains valid policies of
workers' compensation insurance, directors and officers liability
insurance and insurance with respect to its properties and business of
the kinds and in the amounts not less than is customarily obtained by
corporations of established reputation engaged in the same or similar
business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability and other
risks. SCHEDULE 4.16 lists the insurance carried, the policy limits
thereof, the insurance companies issuing such policies and the annual
premiums paid therefor.
4.17. MATERIAL CONTRACTS AND OBLIGATIONS. SCHEDULE 4.17 sets
forth a list of all material agreements or commitments of any nature to
which Streamline is a party or by which it is bound, including without
limitation (a) each agreement which requires future expenditures by
Streamline in excess of $20,000 or which might result in payments to
Streamline in excess of $20,000, (b) all employment and
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consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase and similar plans and
arrangements, and distributor and sales representative agreements, (c)
any agreement with any stockholder, officer or director of Streamline
or any "affiliate" or "associate" of such Person (as such terms are
defined in the rules and regulations promulgated under the Securities
Act), including without limitation any agreement or other arrangement
providing for the furnishing of services by, rental of real or personal
property from, or otherwise requiring payments to, any such Person and
(d) any agreement relating to the Intellectual Property Rights.
Streamline has delivered to counsel to Purchaser copies of such of the
foregoing agreements as such counsel has requested. All of such
agreements and contracts are valid, binding and in full force and
effect with no defaults existing thereunder.
4.18. COMPLIANCE. Streamline has complied in all material
respects with all laws, regulations and orders applicable to its
present and proposed business, has all permits, licenses and other
governmental authorizations required for the conduct of its business
and the ownership of its properties and is, and has been, in compliance
therewith. There is no term or provision of Any mortgage, indenture,
contract, agreement or instrument to which Streamline is a party or by
which it or its properties is bound, or, to the best of Streamline's
knowledge, any provision of any state or federal judgment, decree,
order, statute, rule or regulation applicable to or binding upon
Streamline, which materially adversely affects or, in the future is
reasonably likely to materially adversely affect, the business,
prospects, assets or condition, financial or otherwise, of Streamline.
None of the activities or business of Streamline are, or cause
Streamline to be, and Streamline is not, in violation of any federal or
state law, rule, regulation or order, any term of its Certificate of
Incorporation or By-Laws (each as amended to date), the Certificate of
Amendment or any agreement or instrument the violation of which would
have a material adverse effect upon the condition (financial or
otherwise), business, property, prospective results of operations or
net worth of Streamline. To the best of Streamline's knowledge, no
employee of Streamline is in violation of any term of any contract or
covenant (either with Streamline or with another entity) relating to
employment, patents, proprietary information disclosure,
non-competition or non-solicitation.
4.19. ABSENCE OF CHANGES. Except as set forth on SCHEDULE
4.19, since the Balance Sheet Date, there has not been: (a) any change
in the assets, liabilities, financial condition or operations of
Streamline
<PAGE>
-13-
from that reflected in the Financial Statements, except changes in the
ordinary course of business that have not been, either individually or
in the aggregate, materially adverse; (b) any change (individually or
in the aggregate), except in the ordinary course of business, in the
contingent obligations of Streamline by way of guaranty, endorsement,
indemnity, warranty or otherwise; (c) any damage, destruction or loss,
whether or not covered by insurance, materially and adversely affecting
the properties or business of Streamline; (d) any waiver or compromise
by Streamline of a valuable right or of a material debt owed to it; (e)
any loans made by Streamline to its shareholders, employees, officers
or directors, other than, in the case of employees, travel advances
made in the ordinary course of business; (f) any increases in the
compensation of any of Streamline's employees, officers or directors;
(g) any declaration or any payment of any dividend or other
distribution of the assets of Streamline; (h) any issuance or a sale by
Streamline of any shares of Common Stock or other securities; (i) to
the best of Streamline's knowledge, any other event or condition of any
character that has materially and adversely affected Streamline's
business or prospects; or (j) any agreement or commitment by Streamline
to do any of the things described in this Section 4.19.
4.20. EMPLOYEES. All employees of Streamline with access to
confidential or proprietary information have executed and delivered
Nondisclosure and Development Agreements in the form of EXHIBIT B, and
all of such agreements are in full force and effect. None of the
employees of Streamline is represented by any labor union, and there is
no labor strike or other labor trouble pending with respect to
Streamline (including, without limitation, any organizational drive)
or, to the best of Streamline's knowledge, threatened.
4.21. ERISA. Streamline does not have or otherwise contribute
to or participate in any employee benefit plan subject to the Employee
Retirement Income Security Act of 1974.
4.22 BOOKS AND RECORDS. The minute books of Streamline contain
complete and accurate records of all meetings and other corporate
actions of its stockholders and its Board of Directors and committees
thereof. The stock ledger of Streamline is complete and reflects all
issuances, transfers, repurchases and cancellations of shares of
capital stock of Streamline.
4.22. DISCLOSURES. Neither this Agreement nor any Schedule or
Exhibit hereto, nor any report, certificate or instrument furnished to
<PAGE>
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Purchaser or its counsel in connection with the transactions
contemplated by this Agreement when read together, contains or will
contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which
they were made, not misleading. Streamline knows of no information or
fact which has or would have a material adverse effect on the business,
prospects, assets or condition, financial or otherwise, of Streamline
which has not been disclosed to Purchaser in writing.
5. REPRESENTATIONS OF THE FOUNDER. The Founder represents to Purchaser
as follows
5.1. CONFLICTS. The Founder is not, as a result of the nature
of the business conducted or proposed to be conducted by Streamline or
for any other reason, in violation of (i) any fiduciary or confidential
relationship, (ii) any term of any contract or covenant (either with
Streamline or another entity) relating to employment, patents,
proprietary information disclosure, non-competition or non-solicitation
or (iii) any other contract or agreement or any judgment, decree or
order of any court or administrative agency relating to or affecting
the right of the Founder to be employed by Streamline. No such
relationship, term, judgment, decree or order conflicts with the
Founder's obligations to use his best efforts to promote the
Streamline's interests nor does the execution and delivery of this
Agreement, nor the carrying on of Streamline's business as an officer
or key employee of Streamline, conflict with any such relationship,
term, judgment, decree or order.
5.2. LITIGATION. There is no action, suit or proceeding, or
governmental inquiry or investigation, pending or, to the best of the
Founder's knowledge, threatened against the Founder and, to the best of
the Founder's knowledge, there is no basis for any such action, suit
proceeding or governmental inquiry or investigation.
5.3. STOCKHOLDER AGREEMENTS. Except as set forth on Schedule
5.3 hereto or as contemplated or otherwise disclosed herein, the
Founder is not a party to and has no knowledge of any agreements,
written or oral, relating to the acquisition, disposition, registration
under the Securities Act or voting of the capital stock of Streamline.
5.4. DISCLOSURE. To the best of the Founder's knowledge,
neither this Agreement nor any Schedule or Exhibit hereto, nor any
report, certificate or instrument furnished to Purchaser or its counsel
in connection with the transactions contemplated by this Agreement
<PAGE>
-15-
when read together, contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary
in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading. The
Founder knows of no information or fact which has or would have a
material adverse effect on the business, prospects, assets or
condition, financial or otherwise, of Streamline which has not been
disclosed to Purchaser in writing.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to Streamline as follows:
6.1. ACQUISITION FOR INVESTMENT. Purchaser is acquiring the
Shares for its own account for investment and not with a view to any
sale or distribution thereof within the meaning of the Securities Act.
6.2. EXPERIENCE. Purchaser is an "accredited investor" as
defined in Rule 501 under the Securities Act, knowledgeable,
sophisticated and experienced in making investments, and is qualified
to make decisions with respect to investment in the Shares and has been
afforded the opportunity during the course of negotiating the
transactions contemplated by this Agreement to ask questions of and
secure such information from Streamline and its officers and directors
as it deems necessary to evaluate the merits of entering into the
Agreement. Purchaser represents that it has assets in excess of
$5,000,000.
7. CONDITIONS TO FIRST CLOSING.
7.1. CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's
obligation to purchase the 10,000 shares of Series A Cumulative
Convertible Preferred Stock to be purchased by Purchaser on the First
Closing Date is subject to the fulfillment, prior to or at the First
Closing, of each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Streamline contained in
Section 4 hereof and of the Founder contained in Section 5
hereof shall be true and correct on and as of the time of the
First Closing.
(b) PERFORMANCE; NO DEFAULT. Streamline shall have
performed all agreements and complied with all conditions
contained herein required to be performed or complied with by
it prior to or at the First Closing.
<PAGE>
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(c) COMPLIANCE CERTIFICATES. Purchaser shall have
received (i) a certificate, dated the First Closing Date,
signed by two officers of Streamline (which officers may be
the Chairman of the Board, the President, any Vice President
or the Treasurer of Streamline), certifying that the
conditions specified in Sections 7.1(a) (as they relate to
Streamline) and 7.1(b) have been fulfilled and (ii) a
certificate, dated the First Closing Date and signed by the
Founder, certifying that the conditions specified in Section
7.1(a) (as they relate to the Founder) have been fulfilled.
(d) OPINION OF COUNSEL. Purchaser shall have received
an opinion from Hale and Dorr, special counsel for Streamline,
dated the First Closing Date, in the form of EXHIBIT C hereto.
(e) All waivers and consents required to be obtained
by Streamline in connection with the transactions contemplated
hereby shall be reasonably satisfactory in substance and form
to Purchaser.
(f) Streamline shall have delivered to Purchaser:
(i) The Certificate of Incorporation of
Streamline, as amended to date, as
certified by the Secretary of State of
the State of Delaware;
(ii) Certificates, as of the most recent
practicable dates, as to the
corporate good standing of
Streamline issued by the Secretary
of State of the State of Delaware
and the Secretary of the State of
the Commonwealth of Massachusetts;
(iii) By-laws Of Streamline, as amended to
date, certified by its Secretary or
Assistant Secretary as of the First
Closing Date; and
(iv) Resolutions of the Board of
Directors of Streamline, authorizing
and approving all matters in
connection with this Agreement and
the transactions contemplated
hereby, certified by the Secretary
or Assistant Secretary of Streamline
as of the First Closing Date.
<PAGE>
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(g) OTHER MATTERS. All corporate and other
proceedings in connection with the transactions contemplated
by this Agreement and all documents and instruments incident
to such transactions shall be reasonably satisfactory in
substance and form to Purchaser and its counsel, and Purchaser
and its counsel shall have received all such counterpart
originals or certified or other copies of such documents as
they may reasonably request.
(h) NON-COMPETITION AND NON-SOLICITATION AGREEMENTS.
Each key employee of Streamline shall have entered into a
two-year Non-Competition and Non-Solicitation Agreement with
Streamline in the form of EXHIBIT D hereto.
(i) KEY MAN LIFE INSURANCE. Streamline shall have
obtained a key man life insurance policy on the life of the
Founder in the amount of $1,000,000, with proceeds under such
policy payable to Streamline.
(j) CERTIFICATE OF AMENDMENT. The Certificate of
Incorporation, as amended, of Streamline shall have been
amended in the form of the Certificate of Amendment.
7.2. CONDITIONS TO OBLIGATIONS OF STREAMLINE. The
representations and warranties of Purchaser contained in Section 6
hereof shall be true and correct on and as of the time of the First
Closing.
8. CONDITIONS TO SECOND CLOSING.
8.1. CONDITIONS TO OBLIGATIONS OF PURCHASER. Purchaser's
obligation to purchase the 40,000 shares of Series A Cumulative
Convertible Preferred Stock to be purchased by Purchaser on the Second
Closing Date is subject to the fulfillment, prior to or at the Second
Closing, of each of the following conditions:
(a) fulfillment of each of the conditions specified
in Section 7.1 hereof (PROVIDE that (i)the phrase "Second
Closing Date" shall replace the phrase "First Closing Date"
and the phrase "Second Closing" shall replace the phrase
"First Closing" throughout Section 7.1 and (ii) it is not
necessary for Streamline to fulfill the conditions set forth
in clauses (i), (iii) and (iv) of paragraph (f) under Section
7.1 unless the documents to be delivered pursuant to such
clauses are not identical to those
<PAGE>
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delivered to Purchaser at the First Closing pursuant to
clauses (i), (iii) and (iv) of paragraph (f) under Section
7.1).
8.2. CONDITIONS TO OBLIGATIONS OF STREAMLINE. The
representations and warranties of Purchaser contained in Section 6
hereof shall be true and correct on and as of the time of the Second
Closing.
9. COVENANTS OF STREAMLINE.
9.1. 1995 AUDITED FINANCIAL STATEMENTS. Within 30 days
following the First Closing, Streamline will deliver to Purchaser the
audited balance sheet of Streamline as of December 31, 1995 and the
related statements of operations, stockholders' equity and cash flows
for the fiscal year then ended (collectively, the "1995 Audited
Financial Statements").
9.2. FINANCIAL AND OTHER INFORMATION. Streamline will deliver
to Purchaser the following:
(a) as soon as available and in any event within 45
days after the end of the first, second and third quarterly
accounting periods in each fiscal year of Streamline, an
unaudited balance sheet of Streamline as at the end of such
period and the related unaudited statements of operations,
stockholders' equity and changes in cash flow of Streamline
for such period and (in the case of the second and third
quarterly periods) for the period from the beginning of the
current fiscal year to the end of such quarterly period,
setting forth in each case in comparative form the figures for
the corresponding periods of the previous fiscal year;
(b) as soon as available and in any event within 90
days after the end of each fiscal year of Streamline, an
audited balance sheet of Streamline as at the end of such
fiscal year and the related audited statement of operations,
stockholder's equity and changes in cash flow of Streamline
for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year, all
in reasonable detail and accompanied by the report thereon of
a firm of independent public-accountants of recognized
national standing selected by Streamline, which report (i)
shall state that the examination by such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards and (ii)
shall include the opinion of such accountants that such
financial
<PAGE>
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statements have been prepared in accordance with generally
accepted accounting principles consistent with those applied
in prior fiscal periods, except as otherwise specified in such
opinion;
(c) as soon as available and in any event within 30
days after the end of each month, an unaudited balance sheet
of Streamline as at the end of such month and the related
unaudited statements of operations, stockholders' equity and
changes in cash flows of Streamline for such month and for the
current fiscal year to the end of such month, setting forth in
comparative form Streamline's projected financial statements
for the corresponding periods for the current fiscal year;
(d) as soon as available, but in any event within 30
days after commencement of each new fiscal year, a business
plan and projected financial statements for such fiscal year;
and
(e) with reasonable promptness, such other notices,
information and data with respect to Streamline as Streamline
delivers to the holders of Common Stock, and such other
information and data as Purchaser may from time to time
reasonably request.
Notwithstanding the foregoing, Streamline's obligations to
deliver the information specified in paragraphs (c) and (d) shall
terminate once Streamline becomes subject to the reporting requirements
of Section 13 or 15(d) of the Exchange Act.
The foregoing financial statements shall be prepared on a
consolidated basis if Streamline then has any Subsidiaries. The
financial statements delivered pursuant to paragraphs (a) and (c) shall
be accompanied by a certificate of the chief financial officer of
Streamline stating that such statements have been prepared in
accordance with generally accepted accounting principles consistently
applied (except as noted) and fairly present the financial condition
and results of operations of Streamline at the date thereof and for the
periods covered thereby.
9.3. INSPECTION. (a) From and after the First Closing Date,
Streamline will permit any authorized representative of Purchaser to
visit and inspect any of the properties of Streamline, to examine its
and their books, reports, records and papers (and make copies thereof
and take extracts therefrom) and to discuss its and their affairs,
finances and accounts with, and to be advised as to the same by, its
<PAGE>
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and their officers, all at such reasonable times as Purchaser may
reasonably request during normal business hours and following
reasonable notice to Streamline.
(b) Streamline will permit any authorized
representative of Purchaser to attend all meetings of the Board of
Directors of Streamline, and shall, upon the written request of
Purchaser, provide Purchaser with such notice and other information
with respect to such meetings as are delivered to the directors of
Streamline. Upon the written request of Purchaser, Streamline shall
notify Purchaser, within ten days thereafter, of the taking of any
written action by the Board of Directors of Streamline in lieu of a
meeting thereof.
9.4. MATERIAL CHANGES AND LITIGATION. Streamline shall
promptly notify Purchaser of any material adverse change in the
business, prospects, assets or condition, financial or otherwise, of
Streamline and of any litigation or governmental proceeding or
investigation brought or, to the best of Streamline's knowledge,
threatened against, Streamline, or against any officer, director, key
employee or principal stockholder of Streamline materially adversely
affecting or which, if adversely determined, would materially adversely
affect its business, prospects, assets or condition, financial or
otherwise.
9.5. KEY MAN INSURANCE. For a period of five years after the
Closing Date, Streamline shall maintain term life insurance upon the
life of the Founder in the amount of $1,000,000, with the proceeds
payable exclusively to Streamline.
9.6. HART-SCOTT-RODINO FILING. Streamline will file and pay
all filing fees of Purchaser relating to any Hart-Scott-Rodino filing
required in order for Purchaser to convert the Shares into Common
Stock.
9.7. NONDISCLOSURE AGREEMENTS. Streamline shall require all
persons now or hereafter employed by Streamline who have access to
confidential and proprietary information of Streamline to enter into
Nondisclosure and Development Agreements substantially in the form of
EXHIBIT B, or such other form as may be approved by the Board of
Directors of Streamline.
<PAGE>
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9.8. NEGATIVE COVENANTS.
(a) So long as any shares of Series A Cumulative Convertible
Preferred Stock are outstanding, Streamline shall not, without the
prior written consent of Purchaser:
(i) Reserve for issuance under any stock option plans or
other compensatory plans, in excess of 1,000,000
shares of Common Stock;
(ii) Make (or permit any Subsidiary of Streamline to make)
any loan or advance to, or own any stock or other
securities of, any Subsidiary or other Person unless
it is wholly owned by Streamline;
(iii) Make any loan or advance to any person, including,
without limitation, any shareholder, employee,
officer or director of Streamline or any Subsidiary,
except advances and similar expenditures in the
ordinary course of business or under the terms of an
employee stock or option plan approved by the Board
of Directors; or
(iv) Guarantee directly or indirectly, any indebtedness
except for trade accounts of any Subsidiary arising
in the ordinary course of business.
(b) Streamline shall not, without the prior written
consent of Purchaser, amend the letter agreement between Streamline and
Andersen Consulting LLP dated May 13, 1996.
9.9. EXPENSES OF DIRECTOR. Streamline shall promptly reimburse
in full each director of Streamline who is not an employee of
Streamline and who was elected as a director by the holders of Series A
Cumulative Convertible Preferred Stock for all reasonable out-of-pocket
expenses incurred in attending each meeting of the Board of Directors
of Streamline or any committee thereof.
9.10. RESERVATION OF COMMON STOCK. Streamline shall reserve
and maintain a sufficient number of shares of Common Stock for issuance
upon conversion of all of the outstanding Shares.
9.11. TERMINATION OF COVENANTS. The covenants of Streamline
contained in Sections 9.3(b), 9.4, 9.7 and 9.8 shall terminate, and be
of no further force or effect, upon Streamline's first
<PAGE>
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public offering
of Common Stock, resulting in gross proceeds to Streamline of at least
$10,000,000 (and net proceeds of at least $9,000,000), at a price per
share of at least $5.00.
10. LEGEND.
Purchaser understands that the certificate or certificates evidencing
the Shares shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.
Purchaser also understands that Streamline will place a stop transfer
order on the Shares with the transfer agent.
11. REGISTRATION RIGHTS.
11.1. REGISTRATION ON REQUEST. (a) At any time after the
closing of Streamline's first underwritten public offering of shares of
Common Stock pursuant to a Registration Statement, upon the written
request of one or more Initiating Holders requeSting that Streamline
effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Shares (but not in amount less than
Registrable Shares representing the lesser of (x) 200,000 shares of
Common Stock and (y) Common Stock with an aggregate offering price,
based on the then current public market price, of at least $1,000,000)
and specifying the intended method of disposition thereof (including
without limitation the name of any proposed managing underwriter
selected by such Initiating Holders, which managing underwriter shall
be reasonably satisfactory to Streamline), Streamline will promptly
give written notice of such requested registration to all holders of at
least 30% of the Registrable Shares, and thereupon will use its best
efforts to effect the registration under the Securities Act of:
(i) the Registrable Shares which Streamline
has been so requested to register by such Initiating Holders;
and
<PAGE>
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(ii) l other Registrable Shares which Streamline
has been requested to register by the holders thereof by
written request given to Streamline within 10 business days
after the giving of such written notice by Streamline (which
request shall specify the intended method of disposition of
such Registrable Shares), all to the extent requisite to
permit the disposition (in accordance with the intended
methods thereof as aforesaid) of the Registrable Shares so to
be registered; PROVIDED that Streamline shall not be obligated
to effect more than three registrations at the request of
Initiating Holders for Registrable Shares pursuant to this
Section 11.1; and PROVIDED, FURTHER, that Streamline shall not
be required to effect any registration pursuant to this
Section 11.1 within 90 days after the effective date of any
other Registration Statement of Streamline requested
hereunder.
(b) Each registration requested pursuant to this Section 11.1
shall be effected by the filing of a Registration Statement on Form
S-3, if available and if not available, on such other form which is
available and suitable for a secondary offering of securities under the
Securities Act.
(c) Streamline shall not register securities for sale for its
own account or for the account of any other person (except (i) to the
extent inclusion of additional securities is required by a contract
existing prior to the date hereof) in any registration requested
pursuant to this Section 11.1 unless permitted to do so by the written
consent of Initiating Holders holding at least 66 2/3% in aggregate
principal amount (or in number of shares) of the Registrable Shares as
to which registration has been requested by the Initiating Holders
pursuant to this Section 11.1. If a registration is requested pursuant
to this Section 11.1, Streamline shall not file a Registration
Statement until after the effectiveness of the requested Registration
Statement nor have a Registration Statement declared effective for any
class of securities similar to the Registrable Shares for sale for its
own account or for the account of any other person (except to the
extent required by a contract existing prior to the date hereof) until
the expiration of 90 days after the effectiveness of any registration
requested pursuant to this Section 11.1, or such shorter period as may
be agreed to in writing by the managing underwriter, if any, used by
the Initiating Holders for the sale of the Registrable Shares.
(d) A registration requested pursuant to this Section 11.1
will not be deemed to have been effected unless it has become
effective.
<PAGE>
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(e) If at the time of any request to register Registrable
Shares pursuant to this Section 11.1, Streamline is engaged or has
fixed plans to engage within 30 days of the time of the request in a
registered public offering as to which the holders of Registrable
Shares may include Registrable Shares-or is engaged in any other
activity which, in the good faith determination of Streamline's Board
of Directors, would be adversely affected by the registration to the
material detriment of Streamline, then Streamline may at its option
direct that such request be delayed for a period not in excess of 60
days from the effective date of such offering or the date of
commencement of such other material activity, as the case may be, such
right to delay a request to be exercised by Streamline not more than
once in any two-year period.
(f) Streamline will pay all Registration Expenses in
connection with each such registration requested by Initiating Holders
pursuant to this Section 11.1.
11.2. PIGGYBACK AND INCIDENTAL REGISTRATION. (a) Subject to
the provisions of Section 11.4.3 hereof, if at any time Streamline
proposes to register any shares of Common Stock under the Securities
Act, whether or not for sale for its own account or for the account of
any stockholder (other than shares to be issued pursuant to (i)
Streamline's initial public offering to the public, (ii) an employee
compensation program or (iii) a merger, acquisition or similar
transaction) in a manner which would permit registration of Registrable
Shares for sale to the public under the Securities Act, it will each
such time give written notice to Purchaser and all holders of at least
30% of the Registrable Shares of its intention to do so and, upon the
written request of any holder of such Registrable Shares made within 10
business days after the receipt of any such notice (which request shall
specify the Registrable Shares intended to be disposed of by such
holder and the intended method of disposition thereof), Streamline will
use its best efforts to effect the registration under the Securities
Act of all Registrable Shares which Streamline has been so requested to
register by the holders thereof, to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Shares so to be registered; Provided that
if, at any time after giving written notice of its intention to
register any securities and prior to the effective date of the
Registration Statement filed in connection with such registration,
Streamline shall determine for any reason not to register such
securities, Streamline may, at its election, give written notice of
such determination to each holder of at least 30% of the Registrable
Shares
<PAGE>
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and, thereupon, shall be relieved of its obligation to register any
Registrable Shares in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection
therewith), without prejudice, however, to the rights of any holder of
Registrable Shares entitled to do so to request that such registration
be effected as a registration under Section 11.1.
(b) No registration effected under this Section 11.2 shall
relieve Streamline of its obligation to effect registrations upon
request under Section 11.1, except as otherwise expressly provided
therein.
(c) Streamline will pay all Registration Expenses in
connection with each registration of Registrable Shares requested
pursuant to this Section 11.2.
11.3. REGISTRATION PROCEDURES. If and whenever Streamline is
required to use its best efforts to effect the registration of any
Registrable Shares under the Securities Act as provided in Section 11.1
or 11.2, Streamline will, as expeditiously as possible:
(a) prepare and (in any event within 45 days after
the request for registration is made) file with the SEC a
Registration Statement with respect to such securities, and
use its best efforts to cause such Registration Statement to
become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities,
not to exceed six months (exclusive of any periods during
which sales cannot be made as a result of clauses (f) and (g)
hereof);
(b) prepare and file with the SEC such amendments to
such Registration Statement and supplements to the prospectus
contained therein as may be necessary to keep such
Registration Statement effective for such period as may be
reasonably necessary to effect the sale of such securities,
not to exceed six months (exclusive of any periods during
which sales cannot be made as a result of clauses (f) and (g)
hereof);
(c) furnish to the holders of Registrable Shares
participating in such registration and to the underwriters, if
any, of the securities being registered such reasonable number
of copies of the Registration Statement, preliminary
prospectus, final prospectus and such other documents as the
holders of such Registrable Shares or such underwriters may
reasonably request in order to facilitate the public offering
of the Registrable Shares;
<PAGE>
-26-
(d) use its best efforts to register or qualify the
Registrable Shares covered by such Registration Statement
under such state securities or blue sky laws of such
jurisdictions as the holders of such Registrable Shares or the
underwriters, if any, participating in such registration may
reasonably request, except that streamline shall not for any
purpose be required to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified
or execute a general consent to service of process in any
Jurisdiction (other than a consent to service of process
solely with respect to actions or proceedings arising out of
or in connection with the sale of the Registrable Shares);
(e) notify the holders of such Registrable Shares and
the underwriters, if any, participating in such registration
promptly after Streamline shall receive notice thereof, of the
time when such Registration Statement has become effective or
a supplement to any prospectus forming a part of such
Registration Statement has been filed;
(f) for a period of six months from the effective
date of the Registration Statement (or such longer period as
may be required pursuant to clause (a) or (b) hereof), prepare
and promptly file with the SEC and promptly (i) notify the
holders of such Registrable Shares and the underwriters, if
any, participating in such registration of the filing of such
amendment or supplement to such Registration Statement or
prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities
Act, any event shall have occurred as the result of which any
such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements
therein, in the light of the circumstances in which they were
made, not misleading, and (ii) advise such holders and such
underwriters that they are to cease making offers of such
Registrable Shares until receipt of revised prospectuses from
Streamline (which revised prospectuses shall be provided by
Streamline to the holders of Registrable Shares as promptly as
possible);
(g) advise the holders of such Registrable Shares and
the underwriters, if any, participating in such registration
promptly after Streamline shall receive notice or obtain
<PAGE>
-27-
knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such Registration
Statement or the initiation or threatening of any proceeding
for that purpose and promptly use its best efforts to prevent
the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued;
(h) furnish to holders of Registrable Shares and each
underwriter, if any, participating in such registration (i) an
opinion of counsel for Streamline, dated the closing date of
the offering in an offering that is underwritten, and the
effective date of the Registration Statement in an offering
that is not underwritten and (ii) a "comfort" letter signed by
the independent public accountants who have audited
Streamline's financial statements included in the Registration
Statement, in each case covering substantially the same
matters with respect to the Registration Statement (and the
prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters
delivered to the underwriters in underwritten public offerings
for securities;
(i) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make
available to its securities holders, as soon as reasonably
practicable, an earnings statement covering a period of at
least twelve months, but not more than eighteen months,
beginning after the effective date of the Registration
Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(j) use its best efforts to list the Registrable
Securities included in the Registration Statement on each
securities exchange, if any, on which the Common Stock is then
listed.
11.4. UNDERWRITTEN OFFERINGS.
11.4.1. UNDERWRITTEN OFFERINGS IN CONNECTION WITH
REGISTRATION ON REQUEST. Whenever a registration requested
pursuant to Section 11.1 is for an underwritten offering, only
Registrable Shares which are to be distributed by the
underwriters may be included in such registration; provided,
that shares of Common Stock owned by other holders may be
included in such registration with the consent of the
Initiating
<PAGE>
Holders and the managing underwriter. If the managing
underwriter shall determine that the amount of Registrable
Shares to be sold in any such underwritten offering should be
limited due to market conditions or otherwise, all securities
to be sold by the Initiating Holder who requested that the
Registration Statement be filed shall be included in the
offering and the number of shares to be sold for the accounts
of holders of shares having "piggy-back" registration rights
with respect to such offering shall be reduced proportionately
to an aggregate number acceptable to the managing underwriter,
if any (such proration to be made in the ratio of the total
number of shares proposed to be sold in such offering by such
holders to the actual number to be so sold in such offering).
Each holder of Registrable Shares who will have its number of
shares to be included in the offering reduced shall have the
right to withdraw its request for inclusion of any or all of
its Registrable Shares in the Registration Statement.
11.4.2. UNDERWRITING AGREEMENT IN CONNECTION WITH
REGISTRATIONS ON REQUEST. If requested by the underwriters for
any offering pursuant to a registration requested under
Section 11.1, Streamline shall enter into an underwriting
agreement with such underwriters for such offering, such
agreement to contain such representations and warranties by
Streamline and such other terms and provisions as are
customarily contained in agreements of this type, including,
without limitation, indemnities and rights to contribution to
the effect and to the extent provided in Sections 11.6 and
11.7, respectively. The holders of Registrable Shares to be
distributed by such underwriters shall be parties to such
underwriting agreement and the representations and warranties
by, and the other agreements on the part of, Streamline to and
for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Shares and the
conditions precedent to the obligations of such holders of
Registrable Shares under such underwriting agreement shall be
reasonably satisfactory to such holders of Registrable Shares.
Such holders of Registrable Shares shall not be required to
make any representations or warranties to Streamline or its
underwriters other than representations or warranties
regarding such holder, title to its securities and such
holder's intended method of distribution.
<PAGE>
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11.4.3. UNDERWRITTEN OFFERINGS IN CONNECTION WITH
"PIGGY-BACK" AND INCIDENTAL REGISTRATIONS. If at any time
Streamline proposes to register any of its securities under
the Securities Act for sale for its own account or for the
account of any security holder and such securities are to be
distributed by or through one or more underwriters, Streamline
will use its best efforts, if requested by any holder of
Registrable Shares, to arrange for such underwriters to
include the Registrable Shares to be offered and sold by such
holder among those to be distributed by such underwriters. The
holders of Registrable Shares to be distributed by such
underwriters shall be parties to the underwriting agreement
between Streamline and such underwriters and the
representations and warranties by, and the other agreements on
the part of, Streamline to and for the benefit of such
underwriters shall also be made to and for the benefit of such
holders of Registrable Shares and the conditions precedent to
the obligations of such holders of Registrable Shares under
such underwriting agreement shall be satisfactory to such
holders of Registrable Shares. Such holders of Registrable
Shares shall not be required to make any representations or
warranties to Streamline or its underwriters other than
representations or warranties regarding such holder, title to
its securities and such holder's intended method of
distribution but shall agree to the indemnities and rights to
contribution to the effect and to the extent provided in
Sections 11.6 and 11.7, respectively. Streamline may also
require that the Registrable Shares requested for inclusion
pursuant to this Section 11.4.3 be included in the offering on
the same financial terms as the securities otherwise being
sold through the underwriters. If in the good faith judgment
of the managing underwriter of such underwritten public
offering, the inclusion of any or all of the Registrable
Shares requested for inclusion pursuant to this Section 11.4.3
together with any other shares which have similar piggyback
registration rights (such shares and the Registrable Shares
being collectively referred to as the "Requested Stock") would
jeopardize the success of the offering, the number of shares
of Requested Stock otherwise to be included in the
underwritten public offering may be reduced pro rata (by
number of shares) among the holders thereof requesting such
registration or excluded in their entirety if so required by
such managing underwriter.
11.5. PREPARATION, REASONABLE INVESTIGATION. In connection
with the preparation and filing of each Registration
<PAGE>
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Statement registering Registrable Shares under the Securities Act,
Streamline will give the holders of such Registrable Shares so
registered and their underwriters, if any, and their respective counsel
and accountants, the opportunity to participate in the preparation of
such Registration Statement, each prospectus included therein or filed
with the SEC, and each amendment thereof or supplement thereto, and
will give each of them such reasonable access to its books and records
and such opportunities to discuss the business of Streamline with its
officers and the independent public accountants who have certified its
financial statements as shall be necessary, in the opinion of such
holders' and such underwriters respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act. Each
holder of such Registrable Shares shall furnish to Streamline such
information regarding such holder and the distribution proposed by such
holder as Streamline may reasonably request and as shall be required in
connection with any registration referred to in this Section 11.
11.6. INDEMNIFICATION.
(a) Streamline will indemnify and hold harmless each holder of
Registrable Shares which are included in a Registration Statement
pursuant to the provisions of Section 11.1 or 11.2 hereof, its
affiliates and their respective directors and officers, each other
Person who participates as an underwriter in any offering or sale of
Securities and each Person, if any, who controls such holder within the
meaning of the Securities Act, from and against, any and all loss,
damage, liability, cost and expense, including reasonable attorney's
fees and expenses, to which such holder or controlling person may
become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any
untrue statement or alleged untrue statement of any material fact
contained in such Registration Statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading; PROVIDED, HOWEVER, that Streamline will not be liable in
any such case to the extent that any such loss, damage, liability, cost
or expenses arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
reliance upon and in conformity with written information furnished
through an instrument duly executed by or on behalf of such holder or
<PAGE>
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such controlling person specifically stating that it is for use in the
preparation thereof.
(b) Each holder of Registrable Shares included in a
registration pursuant to the provisions of Sections 11.1 or 11.2 hereof
will indemnify and hold harmless Streamline, its directors and
officers, any controlling person and any underwriter from and against,
and will reimburse Streamline, its directors and officers, any
controlling person and any underwriter with respect to, any and all
loss, damage, liability, cost or expense to which Streamline or any
controlling person and/or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
Registration Statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in
each case to the extent that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon
and in conformity with written information furnished through an
instrument duly executed by or on behalf of such holder specifically
stating that it is for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (a) or (b) of this Section 11.6 of notice
of the commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the
indemnifying party of the commencement thereof, but the omission so to
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party unless such failure to give
notice shall materially prejudice the Indemnifying Party in the defense
of such claim. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate in,
and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, PROVIDED, HOWEVER,
if the defendants in any action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it
<PAGE>
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and/or other indemnified parties which are different from or in
addition to those available to the indemnified party, or if there is a
conflict of interest which would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified
party or parties have the right to select one separate counsel to
participate in the defense of such action on behalf of such indemnified
party or parties at the expense of the indemnifying party unless in the
reasonable judgment of the indemnified parties a conflict of interest
may exist among such indemnified parties, in which event Streamline
shall be obligated to pay the fees and expenses of such additional
counsel. An indemnified party may retain its own counsel in any such
action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the indemnified
party if the indemnifying party has assumed the defense of the action
with counsel reasonably satisfactory to the indemnified party. After
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the provisions of
said paragraph (a) or (b) for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation.
11.7. CONTRIBUTION. (a) If the indemnification provided for in
Section 11.6 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages
or liabilities referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities in such proportion as is
appropriate to reflect the relative fault of such indemnifying party
and indemnified parties in connection with the actions which resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or. alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, such statement
or omission has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party
as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include, subject to the limitations set forth
in Section 11.6,
<PAGE>
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any legal or other fees or expenses reasonably incurred by such party
in connection with any investigation or proceeding.
(b) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 11.7 were determined
by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. 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.
(c) If indemnification is available under Section 11.6 the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in Sections 11.6(a) and 11.6(b) without regard to the
relative fault of said indemnifying party or indemnified party or any
other equitable consideration provided for in this Section 11.7.
12. INDEMNIFICATION: CONTRIBUTION.
12.1. INDEMNIFICATION. (a) In addition to all other sums due
hereunder or provided for in this Agreement, each party hereto agrees
to hold harmless and indemnify (the "Indemnifying Party") the other
parties hereto and any of such party's affiliates and any director,
officer or controlling person of any of the foregoing within the
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act (individually referred to as an "Indemnified Person") from
and against any losses, claims, damages and, liabilities (including
reasonable attorneys' fees and expenses of investigation) incurred by
such Indemnified Person pursuant to any action, suit, proceeding or
investigation against any one or more of the Indemnifying Party and
such Indemnified Person, and arising out of or in connection with this
Agreement, or any other document or instrument executed or filed by the
Indemnifying Party with any governmental agency in connection herewith
or pursuant hereto (other than any action, suit, proceeding or
investigation alleging a wrongful action on the part of such
Indemnified Person which either (a) is unrelated to any wrongful act by
the Indemnifying Party or any of its representatives, and (b) was not
taken by such Indemnified Person in reliance upon any of the
representations, warranties or promises of the Indemnifying Party
contained herein or in the documents contemplated hereby or the
certificates delivered by the Indemnifying Party pursuant hereto or
thereto), which action, suit, proceeding or investigation requires the
participation of such Indemnified Person or is commenced or filed
<PAGE>
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against such Indemnified Person because of this Agreement and/or the
transactions contemplated hereby; PROVIDED, HOWEVER, that the
indemnification of Purchaser pursuant to this Section 12.1 relates
solely to actions, suits, proceedings or investigations arising out of
the breach by Streamline of any of its representations, warranties or
agreements made under this Agreement. The Indemnifying Party further
agrees, promptly upon demand by an Indemnified Person, at any time or
from time to time, to reimburse such Indemnified Person for, or pay,
any loss, claim, damage, liability or expense as to which the
Indemnifying Party has indemnified such Indemnified Person pursuant to
this Agreement.
(b) Each Indemnified Person agrees to give prompt written
notice to the Indemnifying Party after the receipt by such Indemnified
Person of any written notice of the commencement of any action, suit,
proceeding or investigation or threat thereof made in writing for which
such Indemnified Person will claim indemnification or contribution
pursuant to this Agreement; PROVIDED that the failure of any
Indemnified Person to give notice as provided herein shall not relieve
the Indemnifying Party of its obligations hereunder except to the
extent that the Indemnifying Party is materially prejudiced by such
failure to give notice. Unless in the reasonable judgment of such
Indemnified Person a conflict of interest may exist between such
Indemnified Person and the Indemnifying Party with respect to such
claim, each Indemnified Person agrees to permit the Indemnifying Party
to assume the defense of such claim with counsel reasonably
satisfactory to such Indemnified Person. If the Indemnifying Party is
not entitled to, or elects not to, assume the defense of a claim, it
will not be obligated to pay the fees and expenses of more than one
counsel for the Indemnified Persons with respect to such claim, unless
in the reasonable judgment of such Indemnified Person a conflict of
interest may exist between such Indemnified Person and any other of
such Indemnified Persons with respect to such claim, in which event the
Indemnifying Party shall be obligated to pay the fees and expenses of
such additional counsel or counsels. The Indemnifying Party will not be
subject to any liability for any settlement made without its consent.
12.2. CONTRIBUTION. (a) If the indemnification provided for in
Section 12.1 from the Indemnifying Party is unavailable to an
Indemnified Person under Section 12.1 in respect of any losses, claims,
damages or liabilities referred to therein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Person, shall
contribute to the amount paid or payable by such Indemnified Person as
a result of such losses, claims, damages or liabilities in such
proportion as is
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appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Persons in connection with the actions which resulted in
such losses, claims, damages or liabilities as well as any other
relevant equitable considerations. The relative fault of the
Indemnifying Party and Indemnified Persons shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been taken
by, or relates to information supplied by, the Indemnifying Party or
Indemnified Persons, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above
shall be deemed to include, subject to the limitations set forth in
Section 12.1, any legal or other fees or expenses reasonable incurred
by such party in connection with any investigation or proceeding.
(b) The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 12.2 were determined
by pro rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. 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.
(c) If indemnification is available under Section 11.1, the
Indemnifying Party shall indemnify each Indemnified Person to the full
extent provided in Section 12.1 without regard to the relative fault of
the Indemnifying Party, of Indemnified Person or any other equitable
consideration provided for in this Section 12.2.
12.3. REGISTRATION RIGHTS. Notwithstanding anything to the
contrary in this Section 12, the indemnification and contribution
provisions of Sections 11.6 and 11.7 shall govern any claim made with
respect to Registration Statements filed pursuant to Section 12.
13. MISCELLANEOUS.
13.1. GOVERNING LAW. This Agreement shall be governed in all
respects by and construed in accordance with the laws of the State of
New York, without regard to the choice of-law principles thereof.
13.2. SUCCESSORS AND ASSIGNS. This Agreement and the rights
and obligations of Purchaser hereunder may be assigned by
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Purchaser to any person or entity to which Shares are transferred by
Purchaser, and such transferee shall be deemed to be the "Purchaser"
for purposes of this Agreement; provided that, (i) the transferee
provides written notice of such assignment to Streamline and (ii)
solely for purposes of Section 9.7 and the rights of Purchaser to be an
Initiating Holder, such transferee holds, after a transfer from
Purchaser to such transferee, at least 1,000 shares of Series A
Cumulative Convertible Preferred Stock.
13.3. CONFIDENTIALITY. Purchaser agrees that it will keep
confidential and not disclose or divulge any confidential, proprietary
or secret information which it obtains from Streamline pursuant to
financial statements, reports or other materials submitted by
Streamline to Purchaser pursuant to this Agreement or pursuant to any
visitation or inspection rights granted hereunder (the "Confidential
Information"), unless such Confidential Information is known, or until
such Confidential Information becomes known to the public; provided,
however, that Purchaser may disclose such information (a) to its
attorneys, accountants, consultants and other professionals to the
extent necessary to obtain their services in connection with its
investment in Streamline, (b) to any prospective purchaser of any
Shares from Purchaser, as long as such prospective purchaser agrees in
writing to be bound by the provisions of this Section 13.3, (c) to any
affiliate or Subsidiary of Purchaser or (d) to any regulatory body
having jurisdiction over Purchaser. For purposes of this Section 13.3,
Confidential Information shall not include the following:
(i) was in the possession of Purchaser before Purchaser
received the Corporate Information;
(ii) is rightfully acquired by Purchaser from a third
party without any restriction or any obligation of
confidentiality; or
(iii) is independently developed by Purchaser without any
use or reference to the Corporate Information.
13.4. PUBLICITY. Except as required by law or United States
regulatory authorities, no public announcements or other disclosures of
this Agreement shall be made by either party without the other party's
prior consent.
13.5. EXPENSES. Each party hereto agrees to bear all costs and
expenses that it incurs in connection with the transactions
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contemplated by this Agreement, except that Streamline will pay, at the
Closing, the costs and expenses of in-house counsel to Purchaser in
connection with the preparation of this Agreement and any other
documents contemplated hereby, up to a maximum of $15,000.
13.6. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the
other documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to
the subjects hereof and thereof. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by each of the parties hereto.
13.7. NOTICES. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by
first-class air mail, postage prepaid, or delivered by hand, by
messenger or by a nationally recognized overnight courier service to:
IF TO PURCHASER, at Reliance Insurance Company, 55
East 52nd Street, New York, New York 10055, Attention: Chief
Investment officer, or at such other address as Purchaser
shall have furnished in writing to Streamline, with a copy to
the General Counsel of Purchaser;
IF TO STREAMLINE, at Streamline, Inc., 27 Dartmouth
Street, Westwood, Massachusetts 02090, Attention: President,
or at such other address as Streamline shall have furnished in
writing to Purchaser, with a copy to Hale and Dorr, 60 State
Street, Boston, Massachusetts 02109, Attention: Paul V.
Rogers, Esq.; or
IF TO THE FOUNDER, at c/o Streamline, Inc., 27
Dartmouth Street, Westwood, Massachusetts 02090, or at such
other address as the Founder shall have furnished in writing
to Purchaser.
Notices, provided in accordance with this Section 12.7 shall
be deemed delivered upon personal delivery or two business days after
deposit in the mail (provided that the date of deposit in the mail is
verifiable in the records of Streamline).
13.8. SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, provided that in such case, Streamline
and Purchaser each agree to enter into good faith negotiations to
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maintain the substance of such provisions so as to carry out the
intents of the parties hereto.
13.9. TITLES AND SUBTITLES. The titles of the Articles and
Sections of this Agreement are for convenience of reference only and
are not to be considered in construing this Agreement.
13.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original (whether or
not executed by facsimile), but all of which together shall constitute
one instrument.
13.11. FURTHER ASSURANCES. Each of the parties hereto agrees
to take such actions and execute such documents as is necessary to
carry out the intents and purposes of this Agreement and the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
STREAMLINE, INC.
By: /S/ TIMOTHY A. DEMELLO
----------------------
Timothy A. DeMello
CEO
RELIANCE INSURANCE COMPANY
By: /S/ JOHN P. FITZSIMONS
----------------------
John P. Fitzsimons
Vice President
/S/ TIMOTHY A. DEMELLO
--------------------------
TIMOTHY A. DEMELLO
<PAGE>
Exhibit 10.4
STREAMLINE, INC.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of June 13,
1997, is by and among Streamline, Inc., a Delaware corporation (the "Company"),
and the persons listed on SCHEDULE 1 attached hereto (the "Investors").
WITNESSETH:
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to issue and sell to the Investors, and the Investors desire to
purchase from the Company, up to an aggregate of 100,000 shares of the Company's
Preferred Stock, par value $1.00 per share ("Preferred Stock"), consisting of
shares of the Company's Series B Convertible Preferred Stock (the "Series B
Preferred") and shares of the Company's Series C Convertible Preferred Stock
(the "Series C Preferred"), for an aggregate purchase price of $10,000,000, as
more specifically set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein and other good and valuable consideration, the parties,
intending to be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such first-named Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Agreement" shall have the meaning set forth in the preamble.
"Certificate of Amendment" shall mean a Certificate of Amendment of the
Company, substantially in the form attached hereto as EXHIBIT A.
"Closing" and "Closing Date" shall mean, as applicable, the "First
Closing" and the "First Closing Date" or the "Second Closing" and the "Second
Closing Date."
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"Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company.
"Company" shall have the meaning set forth in the preamble.
"Financial Statements" shall mean (i) audited financial statements of
the Company containing balance sheets and statements of operations and cash
flows as at and for the Company's fiscal year ending December 31, 1996 and (ii)
an unaudited balance sheet and statement of operations and cash flows of the
Company as at and for the three months ended March 31, 1997.
"First Closing" and "First Closing Date" shall have the respective
meanings set forth in Section 2.1.
"Fully-Diluted Basis" gives effect, without duplication, to (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of then outstanding shares of
Series A Preferred, Series B Preferred and Series C Preferred or any other
convertible securities or the exercise of any option, warrant or similar right
(whether or not then exercisable) to acquire shares of Common Stock, as if such
preferred stock or other convertible securities had been so converted or such
option, warrant or similar right had been so exercised.
"Intellectual Property" shall mean patents, patent applications,
trademarks, service marks, trademark and service mark applications, trade names,
copyrights, licenses and other intellectual property rights.
"Investors" shall have the meaning set forth in the preamble.
"Permits" shall mean operating authority, licenses, franchises,
permits, certificates or rights.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Registration Rights Agreement" shall mean a Registration Rights
Agreement, substantially in the form attached as EXHIBIT B hereto.
"Second Closing" and "Second Closing Date" shall have the respective
meanings set forth in Section 2.2.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, or any successor act, as the
same may be in effect from time to time.
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"Series B Preferred" shall have the meaning set forth in the recitals.
"Shares" shall mean the shares of Series B Preferred and Series C
Preferred being sold and issued to the Investors pursuant to this Agreement.
ARTICLE 2. PURCHASE AND SALE; CLOSING.
SECTION 2.1. FIRST CLOSING.
(a) Subject to the terms and conditions set forth herein, the
Company hereby agrees to issue and sell to each of the Investors, and each of
the Investors hereby severally agrees to purchase from the Company, at the First
Closing the number of shares of Series B Preferred or Series C Preferred set
forth opposite such Investor's name on SCHEDULE 1 attached hereto under the
caption "First Closing", at the price of $100.00 per share.
(b) Subject to the satisfaction or waiver of the terms and
conditions set forth herein, the purchase and sale of the Shares described in
Section 2.1(a) above shall take place at the offices of Bingham, Dana & Gould
LLP, 150 Federal Street, Boston, Massachusetts 02110, at 10 a.m., on the date of
this Agreement, or at such other time and place as the Company and the Investors
mutually agree orally or in writing (which time and place are designated herein
as the "First Closing" and the date thereof as the "First Closing Date"). At the
First Closing, the Company shall deliver to each Investor a certificate or
certificates representing the shares of Series B Preferred or Series C Preferred
that such Investor is purchasing on the First Closing Date against payment of
the purchase price therefor by certified check payable to the Company or by wire
transfer of immediately available federal funds to such account as the Company
may designate in writing to such Investor at least two business days prior to
the First Closing Date.
SECTION 2.2. SECOND CLOSING.
(a) Each of the Persons listed on SCHEDULE 1 hereto under the
caption "Second Closing" shall have the option, at such Person's sole
discretion, to purchase at the Second Closing (as defined below) the number of
shares of Series B Preferred or Series C Preferred set forth opposite such
Investor's name on SCHEDULE 1 attached hereto under the caption "Second Closing"
at a price of $100.00 per share, subject to the terms and conditions set forth
herein. In the event that not every Person listed on SCHEDULE 1 hereto under the
caption "Second Closing" exercises its option to purchase Shares at the Second
Closing (as defined below), the Company may, at its discretion, sell to one or
more of the Investors (on a pro rata basis or on such other basis, and on such
terms and conditions, as the Company and the Investors unanimously may agree in
writing) and/or to such other Persons, and on such terms and conditions, as the
Company and the Investors may unanimously agree in writing, up to the remaining
number of authorized but unissued Shares.
(b) Subject to the satisfaction or waiver of the terms and
conditions set forth herein (and, in the case of each of General Electric
Capital Corporation and Electronic
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Data Systems Corporation, subject to the satisfaction or waiver of the terms and
conditions set forth in the letter agreement between the Company and each such
Person relating to such Person's option to purchase up to 20,000 shares of
Series B Preferred), the purchase and sale of the Shares described in Section
2.2(a) above shall take place at such time and place and on such date (but in no
event later than September 5, 1997) as the Company and the Persons purchasing
such Shares may mutually agree orally or in writing (which time, place and date
are designated herein as the "Second Closing" and the date thereof as the
"Second Closing Date"). At the Second Closing, the Company shall deliver to each
the Person purchasing Shares on the Second Closing Date a certificate or
certificates representing the shares of Series B Preferred or Series C Preferred
that such Person is purchasing on the Second Closing Date against payment of the
purchase price therefor by certified check payable to the Company or by wire
transfer of immediately available federal funds to such account as the Company
may designate in writing to such Person at least two business days prior to the
Second Closing Date.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each of the Investors as
follows:
SECTION 3.1. ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER. The
Company is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Delaware, and it has the requisite power
and authority (corporate and other) to own and hold its properties and assets,
and to carry on its business as conducted or proposed to be conducted. The
Company has requisite power and authority to execute, deliver and perform this
Agreement and to sell, issue, and deliver the Shares to the Investors. The
copies provided to the Investors of the Certificate of Incorporation and By-Laws
of the Company, each as amended to date, are complete, true, and correct and in
full force and effect as of the date hereof and, as of the Closing Date, shall
not have been subsequently amended, modified, or repealed, except by the filing
of the Certificate of Amendment. The Company is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification, except where the failure to so qualify would not materially
adversely affect the operations or financial condition of the Company
SECTION 3.2. AUTHORIZATION OF AGREEMENTS, ETC.
(a)(i) Each of (i) the execution, delivery and performance by
the Company of this Agreement and the Registration Rights Agreement, and (ii)
the issuance, sale, and delivery of the Shares to the Investors in accordance
with the terms hereof have been duly authorized by the board of directors and
stockholders of the Company, as necessary, and will not (with due notice or
lapse of time or both) violate any provision of law, rule, or regulation, any
order of any court or other agency of government, the Certificate of
Incorporation or the By-Laws, each as amended to date and as of the Closing
Date, or any provision of any indenture, mortgage, note, deed of trust,
agreement, or other instrument to which the Company or any of its properties or
assets is bound, or conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under the
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Certificate of Incorporation or By-Laws, each as amended to date and as of the
Closing Date, or any such indenture, mortgage, note, deed of trust, agreement,
or other instrument, or result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon any of
the properties or assets of the Company.
(b) The issuance, sale and delivery of the Shares in accordance
with the terms hereof have been duly authorized by the board of directors and
stockholders, as necessary, and, when issued in accordance with this Agreement,
the Shares shall be validly issued, fully paid, and nonassessable, with the
rights and privileges as set forth herein and in the Certificate of Amendment.
The Common Stock issuable upon conversion of the shares of Series B Preferred
and Series C Preferred purchased under this Agreement has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Company's Certificate of Incorporation, as amended by the filing of the
Certificate of Amendment, will be duly and validly issued, fully paid and
nonassessable. The issuance, sale, and delivery of the Shares and the Common
Stock issuable upon conversion of the Shares are not subject to any unwaived
preemptive right of any stockholder of the Company or to any right of first
refusal or other right in favor of any person.
SECTION 3.3. VALIDITY. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid, and binding
obligation of the Company, enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, moratorium, or other similar laws
affecting the enforcement of creditors, rights generally and except as the
availability of equitable remedies may be limited by general principles of
equity.
SECTION 3.4. CAPITAL STOCK.
(a) As of the date hereof and as of the Closing Date, the
authorized capital stock of the Company shall consist of 25,000,000 shares of
Common Stock, of which 6,855,064 shares are issued and outstanding, and 300,000
shares of Preferred Stock, $1.00 par value per share, of which (i) 100,000
shares have been designated as Series A Convertible Preferred Stock ("Series A
Preferred"), of which 50,000 shares are issued and outstanding, (ii) 100,000
shares have been designated as Series B Preferred, none of which is issued and
outstanding prior to the Closing, and (iii) 100,000 shares have been designated
as Series C Preferred, none of which is issued and outstanding prior to the
Closing. At the First Closing, 20,000 shares of Series B Preferred and 10,000
shares of Series C Preferred shall have been, or shall be, issued to the
Investors as listed on SCHEDULE 1 attached hereto, and at the Second Closing, if
any, up to an additional 70,000 shares of Preferred Stock, consisting of shares
of Series B Preferred and/or Series C Preferred shall have been, or shall be,
issued in accordance with Section 2.2 hereof.
(b) Except for (i) options to purchase, in the aggregate,
1,207,500 shares of Common Stock, issued or authorized for issuance to certain
employees and directors of and consultants to the Company, identified on
SCHEDULE 3.4 hereto, (ii) warrants to purchase, in the aggregate, 300,000 shares
of Common Stock, at an average weighted exercise price of $1.002 per share,
issued to the parties identified on SCHEDULE 3.4 hereto, (iii) warrants to
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purchase, in the aggregate, 285,714 shares of Common Stock, for an exercise
price of $3.50 per share, issued or issuable to Intel Corporation ("Intel"),
(iv) agreements to issue to each of General Electric Capital Corporation and
Electronic Data Systems Corporation an option to purchase up to 20,000 shares of
Series B Preferred, and (v) the issuance of shares pursuant to the terms hereof,
no subscriptions, warrants, options, convertible debt, or securities, or any
commitments, agreements, or rights of any kind with respect to securities of the
Company are outstanding as of the date hereof or shall be outstanding as of the
Closing Date.
The outstanding shares of the capital stock of the Company are duly
authorized and validly issued, fully paid and nonassessable, and such shares of
such capital stock, and all outstanding options and other securities of the
Company have been issued in full compliance with the registration and prospectus
delivery requirements of the Securities Act, and the registration and
qualification requirements of all applicable state securities laws, or in
compliance with applicable exemptions therefrom, and all other provisions of
applicable federal and state securities laws, including, without limitation,
anti-fraud provisions.
SECTION 3.5. PROPERTY AND ASSETS. The Company has good title to all of
its material properties and assets and none of such properties or assets is
subject to any mortgage, pledge, lien, security interest, lease, charge or
encumbrance, except as set forth in SCHEDULE 3.5.
SECTION 3.6. COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provision of its Certificate of Incorporation or
By-Laws, each as in effect on and as of the Closing. Except as identified on
SCHEDULE 3.6 hereto, the Company is not in violation or default of any provision
of any instrument, mortgage, deed of trust, loan, contract, commitment,
judgment, decree, order, or obligation to which it is a party or by which it or
any of its properties or assets are bound which would materially adversely
affect the financial condition or results of operations of the Company or, to
the Company's knowledge, of any provision of any federal, state, or local
statute, rule, or governmental regulation which would materially adversely
affect the condition (financial or otherwise), business, property, or
prospective results of operations or net worth of the Company. To the best of
the Company's knowledge, no employee of the Company is in violation of any term
of any contract or covenant (either with the Company or with another entity)
relating to employment, patents, proprietary information, disclosure,
non-competition or non-solicitation.
SECTION 3.7. CONSENTS. Except as identified on SCHEDULE 3.7 hereto, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, (i) any federal or state governmental
authority or (ii) any party to any contract identified on SCHEDULE 3.8, is
required in connection with the offer, sale or issuance of the Shares (and the
Common Stock issuable upon conversion of the Shares), except for the filing of
the Certificate of Amendment in the office of the Secretary of State of the
State of Delaware, which shall be, or shall have been, filed by the Company on
or prior to the First Closing Date; provided that the Company's representation
under this Section 3.7 is given only to the best of the Company's knowledge with
respect to any consent, approval, order,
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authorization, registration, qualification, designation, declaration or filing
that may be required on the part of any Investor as a result of such Investor's
conducting business in any regulated industry.
SECTION 3.8 MATERIAL CONTRACTS. SCHEDULE 3.8 sets forth a list of all
material agreements or commitments of any nature to which the Company is a party
or by which the Company or its properties is bound, including without limitation
(a) any agreements or commitments requiring future expenditures by the Company
in excess of $20,000 or which might result in payments to the Company in excess
of $20,000, (b) all employment and consulting agreements, employee benefit,
bonus, pension, profit-sharing, stock option, stock purchase and similar plans
and arrangements, and distributor and sales representative agreements, (c) any
agreement with any stockholder, officer or director of the Company or any
"affiliate" or "associate" of such Person (as such terms are defined in the
rules and regulations promulgated under the Securities Act), including without
limitation any agreement or other arrangement providing for the furnishing of
services by, rental of real or personal property from, or otherwise requiring
payments to, any such Person and (d) any agreement relating to Intellectual
Property rights. As of the date hereof, all of such agreements, understandings
or arrangements are in full force and effect, and there exists no default
thereunder by the Company.
SECTION 3.9 INTELLECTUAL PROPERTY. Set forth on SCHEDULE 3.9 hereto is
a list of all Intellectual Property owned by, or licensed to, the Company, with
an indication as to which of such items are owned by the Company and which are
licensed to the Company. The Intellectual Property set forth on SCHEDULE 3.9
together with all trade secrets, know-how, proprietary rights, formulas and
designs owned by, or licensed to, the Company (collectively, "Other Proprietary
Information") represents all Intellectual Property and Other Proprietary
Information necessary to enable the Company to carry on its business as now
conducted and presently proposed to be conducted. The Company is not infringing
upon the right or claimed right of any third party with respect to any
intellectual property rights of any third party. The Company has not licensed
any of the listed Intellectual Property or any Other Proprietary Information to
any other person, nor does any other person have any option or other right to
acquire, or any title, interest, claim in or lien on, any of the Intellectual
Property or any Other Proprietary Information which is owned by the Company. The
Company has not received any communications alleging that the Company (or any of
its employees or consultants) has violated or infringed or, by conducting its
business as proposed, would violate or infringe any patent, trademark, service
mark, trade name, copyright or trade secret or other proprietary right of any
other person or entity, and the Company is not aware of any such violation. The
Company has taken, and in the future will use its best efforts to take, all
steps reasonably necessary to preserve its legal rights in, and the secrecy of,
all of its Intellectual and Other Proprietary Information, except those for
which disclosure is required by a court or other judicial or administrative body
with legitimate jurisdiction. The Company is not obligated to pay any royalties
or other payments to any third parties with respect to the marketing, sale,
distribution, manufacturing, license or use of any Intellectual Property or any
other property or rights. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject
<PAGE>
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to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of such employee's best efforts to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. Neither the execution and delivery of this Agreement,
nor the carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as proposed, will, to the best of
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company. At no time during the conception of or
reduction of any of the Company's Intellectual Property or Other Proprietary
Rights to practice was any developer, inventor or other contributor to such
patents operating under any grants from any governmental entity or agency or
private source, performing research sponsored by any governmental entity or
agency or private source or subject to any employment agreement or invention
assignment or nondisclosure agreement or other obligation with any third party
that could adversely affect Company's right in such Intellectual Property or
Other Proprietary Rights.
SECTION 3.10. PERMITS. The Company has all Permits as are necessary or
appropriate to the operation of its business as presently and proposed to be
conducted. Such Permits are in full force and effect, no violations have been
recorded in respect of such Permits and no governmental proceeding is pending
or, to the best of the Company's knowledge, threatened, that could result in the
revocation or limitation of any of such Permits. The Company's business is in
material compliance with the requirements of all such Permits.
SECTION 3.11. INSURANCE. The Company maintains valid policies of
workers' compensation insurance, key man term life insurance upon the life of
Timothy A. DeMello in the amount of $1,000,000 and insurance with respect to its
properties and business of the kinds and in the amounts not less than is
customarily obtained by corporations of established reputation engaged in the
same or similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability and other risks.
SCHEDULE 3.11 lists the insurance carried, the policy limits thereof, the
insurance companies issuing such policies and the annual premiums paid therefor.
SECTION 3.12. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 3.12
are true and complete copies of the Financial Statements. The Financial
Statements have been prepared from the books and records of the Company, have
been prepared in accordance with generally accepted accounting principles
consistently applied and maintained throughout the periods indicated, accurately
reflect the books, records, and accounts of the Company, are complete and
correct in all material respects, and present fairly the financial condition of
the Company, as at their respective dates and the results of operations for the
periods then ended. None of the Financial Statements understates the true costs
and expenses of conducting the business or operations of the Company, fails to
disclose any material contingent liabilities, or inflates the revenues of the
Company.
SECTION 3.13. ABSENCE OF CERTAIN UNDISCLOSED LIABILITIES.
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(a) Except as set forth in the Financial Statements or on
SCHEDULE 3.13 hereto and for any liabilities arising in the ordinary course of
its business since December 31, 1996 and not material in amount, either
individually or in the aggregate,, the Company has not (i) incurred or accrued
any liabilities, debts or obligations, whether absolute, accrued, contingent,
unliquidated or otherwise and whether due or to become due, arising out of any
transaction (other than the transactions contemplated hereby) entered into prior
to or on the date hereof or out of any state of facts existing prior to or as of
the date hereof, or (ii) declared or paid any dividend or distribution to its
stockholders or redeemed or repurchased any of its capital stock. For purposes
of this Section 3.13(a), "material" means any amount in excess of $50,000.
(b) Except as set forth in SCHEDULE 3.13 hereto, (i) the
Company has no liabilities or obligations of any nature (whether known or
unknown, due or to become due, absolute, accrued, contingent or otherwise, and
whether or not determined or determinable), and (ii) to the best of the
Company's knowledge, there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a liability
or obligation, including any liabilities or obligations under Environmental Laws
or any unfunded obligation under any employee benefit plan, except, with respect
to any of the items described in clauses (i) or (ii) above, liabilities or
obligations reflected or reserved against in the Financial Statements, and
liabilities incurred in the ordinary course of business and consistent with past
practice since December 31, 1996, which individually and in the aggregate do not
have a material adverse effect on the financial condition, business, or
prospects of the Company.
SECTION 3.14. ABSENCE OF CHANGES. Except as set forth on SCHEDULE 3.14,
since March 31, 1997, there has not been: (a) any change in the assets,
liabilities, financial condition or operations of the Company from that
reflected in the Financial Statements, except changes in the ordinary course of
business that have not been, either individually or in the aggregate, materially
adverse; (b) any change (individually or in the aggregate), except in the
ordinary course of business, in the contingent obligations of the Company by way
of guaranty, endorsement, indemnity, warranty or otherwise; (c) any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting the assets, properties, financial condition, prospects, or
business of the Company; (d) any waiver or compromise by the Company of a
valuable right or of a material debt owed to it; (e) any loans made by the
Company to its shareholders, employees, officers or directors, other than, in
the case of employees, travel advances made in the ordinary course of business;
(f) any increases in the compensation of any of the Company's employees,
officers or directors; (g) any declaration or any payment of any dividend or
other distribution of the assets of the Company; (h) any issuance or a sale by
the Company of any shares of Common Stock or other securities; (i) to the best
of the Company's knowledge, any other event or condition of any character that
has materially and adversely affected the Company's business or prospects; or
(j) any agreement or commitment by the Company to do any of the things described
in this Section 3.14.
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SECTION 3.15. LITIGATION: CLAIMS; INVESTIGATIONS. Except as set forth
in SCHEDULE 3.15 hereto, there are no suits, actions, or claims, or any
investigations or inquiries by any administrative agency or governmental body,
or legal, administrative, or arbitration proceedings (collectively, "Actions")
pending against or, to the best knowledge of the Company, threatened against the
Company or to which the Company is a party or, in the case of threatened
proceedings, is reasonably likely to become a party. There is no outstanding
order, writ, judgment, injunction, or decree of any court, administrative
agency, governmental body, or arbitration tribunal against or affecting the
Company or any of its properties, rights, assets, or business. To the best of
the Company's knowledge, except as set forth on any Schedule hereto, there is no
factual or legal basis for any such Action that might result, individually or in
the aggregate, in any material adverse change in the business, properties,
assets, financial condition, affairs or prospects of the Company.
SECTION 3.16. COMPLIANCE. The Company has complied in all material
respects with all laws, regulations and orders applicable to its present and
proposed business, has all permits, licenses and other governmental
authorizations required for the conduct of its business and the ownership of its
properties and is, and has been, in compliance therewith. There is no term or
provision of any mortgage, indenture, contract, agreement or instrument to which
the Company is a party or by which it or its properties is bound, or, to the
best of the Company's knowledge, any provision of any state or federal judgment,
decree, order, statute, rule or regulation applicable to or binding upon the
Company, which materially adversely affects or, in the future is reasonably
likely to materially adversely affect, the business, prospects, assets or
condition, financial or otherwise, of the Company. None of the activities or
business of the Company are, or cause the Company to be, and the Company is not,
in violation of any federal or state law, rule, regulation or order, any term of
its Certificate of Incorporation or By-Laws, each as amended to date, the
Certificate of Amendment or any agreement or instrument. To the best of the
Company's knowledge, no employee of the Company is in violation of any term of
any contract or covenant (either with the Company or with another entity)
relating to employment, patents, proprietary information disclosure,
non-competition or non-solicitation.
SECTION 3.17. EMPLOYEE MATTERS. Except as set forth on SCHEDULE 3.17
hereto, the Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
agreement or arrangement with any collective bargaining agent. Each employee of
the Company with access to confidential or proprietary information has executed
and delivered to the Company the Company's standard Nondisclosure and
Development Agreement (an accurate copy of which has been provided to the
Investors), and each such agreement is in full force and effect. No employees of
the Company are represented by any labor union or covered by any collective
bargaining agreement. There is no pending or, to the Company's knowledge,
threatened labor disagreement involving the Company and any group of its
employees.
SECTION 3.18. ERISA. Except as set forth in SCHEDULE 3.18 hereto, the
Company does not have or otherwise contribute to or participate in any employee
benefit plan subject to the Employee Retirement Income Security Act of 1974.
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SECTION 3.19. BROKERS. The Company has no contract, arrangement, or
understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement.
SECTION 3.20. SUBSIDIARIES. Except as set forth in SCHEDULE 3.20
hereto, as of the date hereof, the Company does not own, directly or indirectly,
any shares of capital stock, partnership interests, or other participation,
rights, or other interests in the nature of an equity interest in any
corporation, partnership, company, trust, or other entity, or any option,
warrant, or other security convertible into any of the foregoing.
SECTION 3.21. USE OF PROCEEDS. All of the cash proceeds from the sale
of the Shares will be used by the Company solely in accordance with the
Company's business plan, as amended to reflect the provisions of that certain
Development Agreement of even date herewith between the Company and Intel
Corporation.
SECTION 3.22. TAXES. The Company has accurately prepared and filed all
federal, state, local and foreign tax returns required to be filed by it. All
taxes shown to be due and payable on such returns, any assessment received, and
all other taxes due and payable by the Company have been paid or will be paid
prior to the time they become delinquent. The federal income tax returns of the
Company have not been audited by the Internal Revenue Service. No deficiency
assessment or proposed adjustment of the Company's income taxes is pending, and
the Company has no knowledge of any proposed liability for any tax to be imposed
upon its properties for which the Company has not adequately reserved. The
provisions for taxes in the Financial Statements are sufficient for the payment
of all accrued and unpaid federal, state, county and local taxes of the Company,
whether or not assessed or disputed as of the date of each such balance sheet.
Other than as disclosed on SCHEDULE 3.15, there have been no examinations or
audits of any tax returns or reports by any applicable state or local
governmental agency. There are in effect no waivers of applicable statutes of
limitations with respect to taxes for any year. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be
treated as an "S" corporation or a collapsible corporation pursuant to Section
341(f) or Section 1362(a) of the Code, nor has it made any other elections
pursuant to the Code (other than elections which related solely to matters of
accounting, depreciation or amortization) which would have a material affect on
the Company, its financial condition, its business as presently conducted or
presently proposed to be conducted or any of its properties of material assets.
SECTION 3.23. NO PUBLIC OFFERING. Neither the Company nor any of its
directors, officers, affiliates, or any person or entity acting as agent for or
on behalf of any of the foregoing, directly or indirectly, has sold, offered for
sale, or solicited offers to purchase any of the Shares or other securities of
the Company by means of any general advertising or general solicitation so as to
bring the offer, issuance, or sale of the Shares contemplated by this Agreement
within the registration requirements of the Securities Act or within the
registration or qualification requirements of any "blue sky" or securities laws
of any state or other jurisdiction.
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SECTION 3.24. REGISTRATION RIGHTS. Except as set forth on SCHEDULE 3.24
hereto and as provided in the Registration Rights Agreement, the Company has not
granted or agreed to grant any registration rights, including piggyback
registration rights, to any person or entity.
SECTION 3.25. DISCLOSURES. Neither this Agreement nor any Schedule or
Exhibit hereto, nor any report, certificate or instrument furnished to the
Investors or their counsel in connection with the transactions contemplated by
this Agreement when read together, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company knows of
no information or fact which has or would have a material adverse effect on the
business, prospects, assets or condition, financial or otherwise, of the Company
which has not been disclosed to the Investors in writing.
SECTION 3.26. HAZARDOUS MATERIALS. During the period that the Company
has owned or leased its properties and facilities, (a) there have been no
disposals, releases or threatened releases of Hazardous Materials (as defined
below) on, from or under such properties or facilities, (b) neither the Company
nor, to the Company's knowledge, any third party, has used, generated,
manufactured or stored on, under or about such properties or facilities or
transported to or from such properties or facilities any Hazardous Materials.
The Company has no knowledge or any presence, disposals, releases or threatened
releases of Hazardous Materials on, from or under any of such properties or
facilities, which may have occurred prior to the Company having taken possession
of any of such properties of facilities. For purposes of this Agreement, the
terms "disposal", "release", and "threatened release" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA").
For the purposes of this Section, "Hazardous Materials" shall mean any hazardous
or toxic substance, material or waste which is regulated under, or defined as a
"hazardous substance", "pollutant", "contaminant", "toxic chemical", "hazardous
material", "toxic substance", or "hazardous chemical" under (1) CERCLA; (2) the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 ET
SEQ.; (3) the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, ET
SEQ.; (4) the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.; (5)
the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 ET SEQ.;
(6) regulations promulgated under any of the above statutes; or (7) any
applicable state or local statute, ordinance, rule, or regulation that has a
scope or purpose similar to those statutes identified above.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor severally represents and warrants to the Company, with
respect to itself only, that:
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SECTION 4.1. ACCREDITED INVESTOR: AUTHORIZATION, ETC. Such Investor is
an "accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act, has the power and authority to enter into and perform this
Agreement and to purchase the Shares.
SECTION 4.2. INVESTMENT KNOWLEDGE. Such Investor has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the risks and merits of its investment in the Company and is
capable of bearing the economic risks of such investment, including a complete
loss of its investment.
SECTION 4.3. OPPORTUNITY TO DISCUSS. Such Investor has had an
opportunity to discuss the business, management, and financial affairs of the
Company with the Company's representatives.
SECTION 4.4. INVESTMENT INTENT. The Shares are being acquired for such
Investor's own account for the purpose of investment and not with a view to or
for resale in connection with any distribution thereof or interest therein.
SECTION 4.5. REGISTRATION. Such Investor understands that (a) the
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Rule 506 under Regulation D and Section 4(2), (b) the
Shares must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (c) the
Shares shall bear a legend to such effect, and (d) the Company will make a
notation on its transfer books to such effect.
ARTICLE 5. CONDITIONS PRECEDENT TO CLOSING.
SECTION 5.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH INVESTOR. The
obligations of each Investor to purchase the Shares hereunder are subject to the
satisfaction or the waiver by such Investor of the following conditions prior to
or contemporaneously with the Closing, unless otherwise indicated:
(a) The representations and warranties of the Company contained in this
Agreement (except for such representations and warranties as are limited by
their terms to an earlier specified date (which shall be true as of such date))
shall be true and correct in all material respects at and as of the Closing
Date; and the Company shall have complied in all material respects with the
agreements set forth in this Agreement required to be performed by it at or
prior to the Closing;
(b) The Chief Executive Officer of the Company shall have delivered to
the Investors at the Closing a certificate stating that the conditions specified
in paragraph (a) above been fulfilled;
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(c) The Company shall have delivered to the Investors evidence of a key
man term life insurance upon the life of Timothy A. DeMello in the amount of
$1,000,000, with the proceeds payable exclusively to the Company;
(d) The Company shall have delivered to the Investors the opinion of
Bingham, Dana & Gould LLP, counsel for the Company, dated the date of the
Closing, substantially in form attached as EXHIBIT D hereto;
(e) The Company and each Investor (other than Reliance Insurance
Company) shall have entered into the Registration Rights Agreement;
(f) The Certificate of Amendment shall have been filed in the office
of, and accepted by, the Secretary of State of the State of Delaware;
(g) Reliance Insurance Company, the Company and Timothy A. DeMello
shall have terminated Section 9 of that certain Series A Stock Purchase
Agreement, dated May 15, 1996;
(h) The Company and Intel shall have entered into a certain Development
Agreement of even date herewith (the "Development Agreement"); and
(i) The offer and sale of the Shares pursuant to this Agreement shall
be exempt from the registration requirements of the Securities Act and the
registration and/or qualification requirements of all applicable state
securities laws.
SECTION 5.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to issue and sell the Shares pursuant to this
Agreement are subject to the satisfaction or the waiver by the Company of the
condition that contemporaneously with the Closing the representations and
warranties made by each Investor in this Agreement (except for such
representations and warranties as are limited by their terms to an earlier
specified date (which shall be true as of such date)) shall be true and correct
in all material respects at and as of the Closing Date; and each Investor shall
have complied in all material respects with the agreements hereunder required to
be performed by it at or prior to the Closing.
ARTICLE 6. COVENANTS OF THE COMPANY.
SECTION 6.1. FINANCIAL AND OTHER INFORMATION. Streamline will deliver
to each Investor the following:
(a) as soon as available and in any event within 45 days after
the end of the first, second and third quarterly accounting periods in each
fiscal year of the Company, an unaudited balance sheet of the Company as at the
end of such period and the related unaudited statements of operations,
stockholders' equity and changes in cash flow of the Company for such period and
(in the case of the second and third quarterly periods) for the period from the
beginning of the current fiscal year to the end of such quarterly period,
<PAGE>
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setting forth in each case in comparative form the figures for the corresponding
periods of the previous fiscal year;
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, an audited balance sheet of the
Company as at the end of such fiscal year and the related audited statement of
operations, stockholder's equity and changes in cash flow of the Company for
such fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and accompanied by the report
thereon of a firm of independent public accountants of recognized national
standing selected by the Company, which report (i) shall state that the
examination by such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards and (ii)
shall include the opinion of such accountants that such financial statements
have been prepared in accordance with generally accepted accounting principles
consistent with those applied in prior fiscal periods, except as otherwise
specified in such opinion;
(c) as soon as available and in any event within 30 days after
the end of each month, an unaudited balance sheet of the Company as at the end
of such month and the related unaudited statements of operations, stockholders'
equity and changes in cash flows of the Company for such month and for the
current fiscal year to the end of such month, setting forth in comparative form
the Company's projected financial statements for the corresponding periods for
the current fiscal year;
(d) as soon as available, but in any event within 30 days
after commencement of each new fiscal year, a business plan and projected
financial statements for such fiscal year; and
(e) with reasonable promptness, such other notices,
Information and data with respect to the Company as the Company delivers to the
holders of Common Stock, and such other information and data as the Investors
may from time to time reasonably request.
Notwithstanding the foregoing, the Company's obligations to deliver the
information specified in paragraphs (c) and (d) shall terminate once the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended.
The foregoing financial statements shall be prepared on a consolidated basis if
the Company then has any subsidiaries. The financial statements delivered
pursuant to paragraphs (a) and (c) shall be accompanied by a certificate of the
chief financial officer of the Company stating that such statements have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as noted) and fairly present the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby.
SECTION 6.2. INSPECTION. From and after the First Closing Date, the
Company will permit any authorized representative of an Investor to visit and
inspect any of the properties
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of the Company, to examine its and their books, reports, records and papers (and
make copies thereof and take extracts therefrom) and to discuss its and their
affairs, finances and accounts with, and to be advised as to the same by, its
and their officers, all at such reasonable times as such Investor may reasonably
request during normal business hours and following reasonable notice to the
Company.
SECTION 6.3. MATERIAL CHANGES AND LITIGATION. The Company shall
promptly notify the Investors of any material adverse change in the business,
prospects, assets or condition, financial or otherwise, of the Company and of
any litigation or governmental proceeding or investigation brought or, to the
best of the Company's knowledge, threatened against, the Company, or against any
officer, director, key employee or principal stockholder of the Company
materially adversely affecting or which, if adversely determined, would
materially adversely affect its business, prospects, assets or condition,
financial or otherwise.
SECTION 6.4. KEY MAN INSURANCE. For a period of five years after the
First Closing Date, Streamline shall maintain term life insurance upon the life
of Timothy A. DeMello in the amount of $1,000,000, with the proceeds payable
exclusively to the Company.
SECTION 6.5. HART-SCOTT-RODINO FILING. The Company will file and pay
all filing fees of any Investor relating to any Hart-Scott-Rodino filing
required in order for such Investor to convert its Shares into Common Stock.
SECTION 6.6. NONDISCLOSURE AGREEMENTS. Streamline shall require all
persons now or hereafter employed by Streamline who have access to confidential
and proprietary information of the Company to enter into the Company's standard
Nondisclosure and Development Agreements.
SECTION 6.7. NEGATIVE COVENANTS. So long as any shares of Series A
Preferred, Series B Preferred or Series C Preferred are outstanding, the Company
shall not, without the prior written consent of a majority in interest of the
holders of then outstanding shares of Series A Preferred, Series B Preferred and
Series C Preferred (voting together as a class, with each such holder being
entitled to the number of votes to which such holder would be entitled upon
conversion of each share of Series A Preferred, Series B Preferred and Series C
Preferred held of record by such holder):
(i) Reserve for issuance under any stock option plan
pursuant to which stock options may be granted to employees, directors or
consultants of the Company, in excess of 1,000,000 shares of Common Stock;
(ii) Make (or permit any subsidiary of the Company to
make) any loan or advance to, or purchase any stock or other securities of, any
subsidiary of the Company or other person unless it is wholly owned by the
Company;
(iii) Make any loan or advance to any person, including,
without limitation, any shareholder, employee, officer or director of the
Company or any subsidiary
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of the Company, except advances and similar expenditures in the ordinary course
of business or under the terms of an employee stock or option plan approved by
the Board of Directors; or
(iv) Guarantee directly or indirectly, any indebtedness
except for trade accounts of any subsidiary of the Company arising in the
ordinary course of business.
In addition, the Company shall not, without the unanimous written
consent of the Investors, amend the letter agreement between the Company and
Andersen Consulting LLP, dated May 13, 1996.
SECTION 6.8. EXPENSES OF DIRECTOR. The Company shall promptly reimburse
in full each director of the Company who is not an employee of the Company and
who was elected as a director by the holders of Series A Preferred and Series C
Preferred or by any holder of Series B Preferred for all reasonable
out-of-pocket expenses incurred in attending each meeting of the Board of
Directors of the Company or any committee thereof, as such director may request.
SECTION 6.9. PRESS RELEASES AND FILINGS. For so long as an Investor and
its Affiliates collectively continue to own at least 10% of all the Shares
issued to such Investor under the Stock Purchase Agreement (or shares of Common
Stock issued upon conversion thereof), the Company covenants and agrees to
provide each such Investor, promptly (and, in any case, within three business
days) after release or filing, with copies of any press releases or other public
announcements concerning the Company and copies of any filing by the Company
with the U.S. Securities and Exchange Commission.
SECTION 6.10. RESTRICTIONS ON EMPLOYEE STOCK OPTIONS. The Company shall
not sell stock to employees, officers or directors of or consultants to the
Company, except for options convertible into or exercisable for Common Stock, in
an amount not to exceed fifteen percent (15%), in the aggregate, of the number
of shares of the Company's capital stock, on a Fully-Diluted Basis, as of the
date hereof, granted to such individuals.
SECTION 6.11. RESERVATION OF COMMON STOCK. The Company shall reserve
and maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.
SECTION 6.12. LIMITATION ON SALE OF THE SHARES. The Company shall not
issue any shares of Series B Preferred or Series C Preferred other than in
accordance with this Agreement, and promptly after the later of (i) the Second
Closing, if any or (ii) September 5, 1997, the Company shall take all required
action to amend its Certificate of Incorporation, as then in effect, to provide
that any shares of Series B Preferred and Series C Preferred authorized for
issuance, but not then issued and outstanding, shall cease to be authorized for
issuance by the Company..
SECTION 6.13. TERMINATION OF COVENANTS. The covenants of the Company
contained in Sections 6.1, 6.3, 6.6, 6.7 and 6.10 shall terminate, and be of no
further force or effect,
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upon the Company's first: public offering of Common Stock, resulting in gross
proceeds to the Company of at least $15,000,000 (and net proceeds of at least
$14,000,000), at a price per share of at least $7.50.
ARTICLE 7. LEGEND.
Each Investor understands that the certificate or certificates
evidencing the Shares purchased by such Investor shall bear the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.
The Investors further understand that the Company may place a stop-transfer
order on any of the Shares with the Company's transfer agent.
ARTICLE 8. MISCELLANEOUS.
SECTION 8.1. SURVIVAL OF AGREEMENTS. All agreements, representations,
and warranties made herein shall survive each Closing and remain in full force
and effect for a period of two years thereafter.
SECTION 8.2. PARTIES IN INTEREST. All representations and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and permitted assigns
of the parties hereto, whether so expressed or not. Except as otherwise
expressly provided herein, nothing in this Agreement is intended to confer upon
any other person or entity any rights or remedies hereunder.
SECTION 8.3. NOTICES. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed effectively
given and received upon delivery in person, or one business day after delivery
by national overnight courier service or by telecopier transmission with
acknowledgment of transmission receipt, or three business days after deposit via
certified or registered mail, return receipt requested, in each case addressed
as follows:
(a) if to the Company:
Streamline, Inc.
27 Dartmouth Street
Westwood, MA 02090
Attention: Timothy A. DeMello
Chairman and Chief Executive Officer
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with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Attention: Wayne D. Bennett, Esq.
(b) if to the Investors, at the address for each Investor set forth on
SCHEDULE 1 to the Agreement
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 8.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 8.5. ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits hereto constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 8.6. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.7. NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party in exercising any
right, power, or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power, or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to any party at law or in equity or
otherwise.
(b) Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Company and
Investors which, at any given time, hold sixty-six and two-thirds (66 2/3%) or
more of the aggregate voting power of the outstanding shares of Series A
Preferred, Series B Preferred and Series C Preferred, with each Investor being
entitled to the number of votes to which such Investor would be entitled upon
conversion of each share of Series B Preferred and Series C Preferred held of
record by such holder.
<PAGE>
-20-
SECTION 8.8. SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by a judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 8.9. GENDER. All pronouns and all variations thereof shall be
deemed to refer to the masculine, feminine, or neuter, singular or plural, as
the identity of the person or persons, thing or entity may require.
SECTION 8.10. HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 8.11. CONFIDENTIALITY. Each party hereto agrees that it shall
at all times keep confidential and not divulge, furnish or make accessible to
anyone, except with the prior written permission of the other party or as
required by applicable law, rule or regulation (in which event, the disclosing
party shall use all reasonable efforts to obtain confidential treatment of
information so disclosed), any confidential information, knowledge or data
concerning or relating to the business or financial affairs of the other parties
(including, without limitation, the terms, conditions and existence of this
Agreement and the Development Agreement) to which such party has been or shall
become privy by reason of this Agreement, discussions or negotiations relating
to this Agreement, the performance of its obligations hereunder or the ownership
of Shares purchased hereunder. The parties hereto further agree that there shall
be no press release or other public statement issued by either party relating to
this Agreement or the transactions contemplated hereby, unless the parties
otherwise agree in writing. The provisions of this Section 8.11 shall be in
addition to, and not substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto with respect to the
transactions contemplated hereby. With reference to information acquired
pursuant to any information or inspection rights granted hereunder, each party
acknowledges that U.S. securities laws prohibit the purchase or sale of
securities of any issuer with any class of securities registered pursuant to
Section 12 or 15 of the Securities Exchange Act of 1934, as amended, by any
person acting on the basis of material non-public information relating to the
issuer of any such securities.
SECTION 8.12. PUBLIC ANNOUNCEMENTS. The Company shall not use Intel's
name or refer to Intel directly or indirectly in connection with Intel's
relationship with the Company in any advertisement, news release or professional
or trade publication, or in any other manner, unless otherwise required by law
or with Intel's prior written consent.
SECTION 8.13. LEGAL FEES. In the event of any action at law, suit in
equity or arbitration proceeding in relation to this Agreement or any Shares or
other securities of the Company issued or to be issued, the prevailing party
shall be paid by the other party a reasonable sum for attorneys' fees and
expenses of such prevailing party.
[Signature page to follow]
<PAGE>
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IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the day and year first above written.
STREAMLINE, INC.
By:/s/ Timothy A. Demello
----------------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
INVESTORS:
RELIANCE INSURANCE COMPANY
By: /s/ John P. Fitzsimmons
----------------------------------------------
John P. Fitzsimmons
Vice President
PAINEWEBBER CAPITAL INC.
By: /s/ DHANANJAY PAI
----------------------------------------------
Dhananjay Pai
President
INTEL CORPORATION
By: /s/ Satish Rishi
----------------------------------------------
Satish Rishi
Assistant Treasurer
<PAGE>
EXHIBITS
Exhibit A - Certificate of Amendment
Exhibit B - Registration Rights Amendment
Exhibit C - Opinion
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1 - Name of Investor, Number of Shares and Subscription Price
Schedule 3.4 - Capitalization
Schedule 3.5 - Property and Assets
Schedule 3.6 - Compliance with Other Instruments
Schedule 3.7 - Consents
Schedule 3.8 - Material Contracts
Schedule 3.9 - Intellectual Property
Schedule 3.11 - Insurance
Schedule 3.12 - Financial Statements
Schedule 3.13 - Absence of Certain Liabilities
Schedule 3.14 - Absence of Certain Changes
Schedule 3.15 - Litigation
Schedule 3.17 - Employee Matters
Schedule 3.18 - ERISA
Schedule 3.20 - Subsidiaries
Schedule 3.21 - Dividends and Distributions
Schedule 3.24 - Registration Rights
</TABLE>
<PAGE>
Exhibit 10.5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
June 13, 1997, by and among Streamline, Inc., a Delaware corporation (the
"Company"), PaineWebber Capital Inc., a Delaware corporation, Intel Corporation,
a Delaware corporation ("Intel"), and each other person that becomes a party to
this Agreement (collectively, the "Investors").
PREAMBLE
WHEREAS, the Investors have purchased up to an aggregate of 100,000
shares (the "Shares") of the Company's Preferred Stock, par value $1.00 per
share, consisting of shares of the Company's Series B Convertible Preferred
Stock (the "Series B Preferred") and shares of the Company's Series C
Convertible Preferred Stock (the "Series C Preferred"), pursuant to the terms of
that certain Stock Purchase Agreement, of even date herewith, by and among the
Company and the Investors (the "Stock Purchase Agreement");
WHEREAS, it is a condition precedent to the consummation by the
Investors of all of their respective obligations under the Stock Purchase
Agreement that the Company and the Investors enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties hereto hereby agree as follows:
1. DEFINITIONS. In addition to those terms defined elsewhere in this
Agreement, the following terms as used herein shall have the following meanings:
"AFFILIATE" shall mean, with respect to any Person, any Person
that, directly or indirectly, controls, is controlled by or is under
common control with such first-named Person. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"COMMISSION" shall mean the U.S. Securities and Exchange
Commission.
"COMMON STOCK" shall mean the common stock of the Company.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended.
<PAGE>
-2-
"PERMITTED TRANSFEREE" shall mean, with respect to any
Investor, any Affiliate of such Investor or any other Person that
purchases or otherwise acquires all or a portion of the Shares of such
Investor (or shares of Common Stock issued upon the conversion
thereof).
"PERSON" shall mean an individual, partnership, corporation,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision
thereof.
"PREFERRED STOCK" shall mean the Company's Series A
Convertible Preferred Stock, the Series B Preferred and the Series C
Preferred.
"REGISTRABLE SHARES" shall mean, with respect to each Investor
(or its Permitted Transferee), any or all of the shares of Common Stock
issued upon conversion of any or all of such Investor's (or Permitted
Transferee's) shares of Preferred Stock and, in the case of Intel,
shall also include any shares of Common Stock issuable upon exercise of
that certain warrant issued by the Company to Intel on the date hereof;
PROVIDED, HOWEVER, that such securities shall cease to be Registrable
Shares when the holder of such Registrable shares would be entitled to
sell all of such securities within a three-month period pursuant to the
provisions of Rule 144.
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act and any successor or substitute rule, law or provision.
"SECURITIES ACT" shall mean the U.S. Securities Act of 1933,
as amended.
2. DEMAND REGISTRATION RIGHTS.
2.1. REGISTRATION UPON REQUEST. Subject to the provisions of Section
2.4 below, at any time or from time to time, Investors holding thirty (30)
percent of the Registrable Shares then outstanding may notify the Company in
writing that such Investors desires for the Company to cause all or a portion of
the Registrable Shares to be registered under the Securities Act pursuant to
this Section 2.1; PROVIDED that the Registrable Shares to be so registered by
such Investors shall have an aggregate proposed sales price of at least
$2,000,000. Thereafter, the Company shall promptly give to each Investor written
notice of such demand for registration. Upon the written request of any Investor
given within ten days after the giving of any such notice by the Company, the
Company shall use its best efforts to cause to be included in such registration
the Registrable Shares of such Investor, to the extent requested to be
registered. Thereafter, subject to the conditions, limitations and provisions
set forth below in Sections 2.3, 2.4 and 5, the Company shall promptly prepare
and file, and use its best efforts to prosecute to effectiveness, an appropriate
filing with the Commission of a registration statement covering all of those
Registrable Shares with respect to which registration under the Securities Act
has been requested by the requesting
<PAGE>
-3-
Investors; PROVIDED that, if the Company has been given a notice of the type
specified in this Section 2 or 4.1, the Company is not at such time continuing
to pursue the registration referred to in such notice. Subject to the provisions
of Section 2.3 below, the Company may include in any registration pursuant to
this Section 2.1 additional shares of Common Stock for sale for its own account
or for the account of any other Person.
2.2. SELECTION OF UNDERWRITERS. If a registration pursuant to Section
2.1 involves an underwritten offering, the underwriter or underwriters thereof
shall be selected, after consultation with the Company, by the Investors who own
the Registrable Shares being so registered, PROVIDED that such underwriter or
underwriters shall be acceptable to the Company. The Company covenants that it
shall not unreasonably withhold its acceptance of any such underwriter or
underwriters.
2.3. PRIORITY OF DEMAND REGISTRATIONS. If a registration pursuant to
Section 2.1 involves an underwritten offering, and the managing underwriter
shall advise the Company in writing that, in its opinion, the number of shares
of Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering, (i) first, the number of
Registrable Shares requested to be included in such registration by the
Investors, pro rata among the Investors on the basis of the number of
Registrable Shares requested to be registered in such registration and (ii)
second, the other shares of Common Stock of the Company proposed to be included
in such registration, in accordance with the priorities, if any, then existing
among the Company and the holders of such other securities.
2.4. LIMITATION ON REGISTRATIONS. The Company shall not be required to
effect more than two (2) registrations pursuant to Section 2.1.
2.5. LIMITATION ON REQUESTS. Notwithstanding anything in this Section 2
to the contrary, the Investor may not request a registration pursuant to Section
2.1 during (i) the 180-day period following the closing of the Company's initial
public offering, (ii) the 180-day period following the effective date of any
registration statement filed in connection with a registration pursuant to
Section 2.1 or 4.1 or (iii) the 90-day period following the effective date of
any registration statement filed in connection with a registration pursuant to
Section 3. For purposes of this Agreement, a registration shall be deemed to
have been effected by the Company if the registration statement relating thereto
has been declared effective by the Commission or if such registration statement,
after having been filed with the Commission, is, through no fault of the
Company, withdrawn, abandoned or otherwise not declared effective within sixty
(60) days of the filing thereof.
3. PIGGYBACK REGISTRATION RIGHTS.
3.1. REGISTRATION. If at any time after the Company's initial public
offering, the Company proposes to register any of its Common Stock under the
Securities Act, whether for its own account or for the account of any
stockholder of the Company or pursuant to registration rights granted to holders
of securities of the Company (but excluding in all cases any registrations
pursuant to Sections 2 or 4 hereof or any registrations to be effected on
<PAGE>
-4-
Forms S-4 or S-8 or any applicable successor Forms), the Company shall, each
such time, give to each Investor written notice of its intent to do so. Upon the
written request of any Investor given within ten days after the giving of any
such notice by the Company, the Company shall use its best efforts to cause to
be included in such registration the Registrable Shares of such Investor, to the
extent requested to be registered, subject to Section 3.2; PROVIDED that (i) the
number of Registrable Shares proposed to be sold by such Investor is equal to at
least twenty-five (25) percent of the total number of Registrable Shares held by
such Investor, and (ii) such Investor agrees to sell those of its Registrable
Shares to be included in such registration in the same manner and on the same
terms and conditions as the other shares of Common Stock which the Company
purposes to register.
3.2. PRIORITY OF THE COMPANY SHARES. In connection with any offering
involving an underwriting of shares being issued by the Company or being sold
pursuant to any demand registration rights of any stockholder of the Company,
the Company shall not be required under Section 3.1 to include the Registrable
Shares of any Investor therein unless such Investor accepts and agrees to the
terms of the underwriting as agreed upon between the Company and/or the
stockholder(s) exercising demand registration rights, as applicable, and the
underwriters selected by the Company and/or such stockholders, and then only in
such quantity as (without any reduction in the numbers of shares to be sold for
the account of the Company and any such stockholders) will not, in the opinion
of the underwriters, jeopardize the success of the offering by the Company. If
the total number of shares of Common Stock which all selling stockholders of the
Company, including any Investors, request to be included in any offering exceeds
the number of shares which the underwriters believe to be compatible with the
success of the offering, the Company shall only be required to include in the
offering so many of shares of stockholders (including any Investors) exercising
piggy-back registration rights, pro rata among the Investors and other
stockholders exercising piggy-back registration rights on the basis of the
number of shares requested to be registered in such registration, as the
underwriters believe will not (without any reduction in the number of shares to
be sold for the account of the Company and any stockholder(s) exercising demand
registration rights) jeopardize the success of the offering.
4. FORM S-3 REGISTRATION.
4.1. REGISTRATION UPON REQUEST. In the event that the Company shall
receive from Investors holding twenty (20) percent of the Registrable Shares
then outstanding a written request or requests that the Company effect a
registration on Form S-3 (or any applicable successor Form) with respect to all
or a part of the Registrable Shares owned by such Investors, then the Company
will promptly use its best efforts to effect such registration of all or such
portion of such Investors' Registrable Shares as are specified in such request;
PROVIDED that, if the Company has been given a notice of the type specified in
Section 2.1, 3 or this Section 4.1, the Company is not at such time continuing
to pursue the registration referred to in such notice. Promptly after receipt by
the Company of a notice requesting registration pursuant to this Section 4.1,
the Company shall give to each Investor written notice of such request for
registration. Upon the written request of any Investor given within ten days
after the giving of any such notice by the Company, the Company shall use its
best efforts to cause to be included in such registration the Registrable Shares
of such
<PAGE>
-5-
Investor, to the extent requested to be registered. Subject to Section 4.3, the
Company may include in any registration pursuant to this Section 4.1 additional
shares of Common Stock for sale for its own account or for the account of any
other Person. No registration under this Section 4.1 shall be underwritten
unless the Company shall otherwise elect in its sole and absolute discretion.
4.2. SELECTION OF UNDERWRITERS. If a registration pursuant to Section
4.1 involves an underwritten offering, the underwriter or underwriters thereof
shall be selected by the Company.
4.3. PRIORITY OF DEMAND REGISTRATIONS. If a registration pursuant to
Section 4.1 involves an underwritten offering, and the managing underwriter
shall advise the Company in writing that, in its opinion, the number of shares
of Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering, (i) first, the number of
Registrable Shares requested to be included in such registration by the
requesting Investors and (ii) second, the other shares of Common Stock of the
Company proposed to be included in such registration, in accordance with the
priorities, if any, then existing among the Company and the holders of such
other securities.
4.4. LIMITATION ON REGISTRATIONS. Notwithstanding anything to the
contrary in this Section 4, the Company shall not be required to effect any
registration pursuant to Section 4.1 unless the Registrable Shares to be so
registered shall have an aggregate proposed sales price of at least $1,000,000.
4.5. LIMITATION ON REQUESTS. Notwithstanding anything in this Section
4.5 to the contrary, the Investors may not request a registration pursuant to
Section 4.1 during (i) the 180-day period following the closing of the Company's
initial public offering, (ii) the 180-day period following the effective date of
any registration statement filed in connection with a registration pursuant to
Section 2.1 or 4.1 or (iii) the 90-day period following the effective date of
any registration statement filed in connection with a registration pursuant to
Section 3.
5. DEFERRAL. Notwithstanding anything to the contrary contained in this
Agreement, the Company's obligation to file a registration statement pursuant to
Section 2, 3 or 4 shall be deferred for a period not to exceed 90 days in any
12-month period if the Company, in the good faith judgment of its Board of
Directors, reasonably believes that the filing thereof at the time requested
would materially adversely affect a pending or proposed public offering of
Common Stock, or an acquisition, merger, recapitalization, consolidation,
reorganization or similar transaction, or any negotiations, discussions or
pending proposals with respect thereto.
6. ADDITIONAL OBLIGATIONS OF THE COMPANY.
<PAGE>
-6-
Whenever the Company is required under Section 2, 3 or 4 to use its
best efforts to effect the registration of any of the Registrable Shares of any
Investor, the Company shall promptly:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Shares and use its best
efforts to cause such registration statement to become and remain
effective; PROVIDED, however that the Company shall in no event be
obligated to cause any such registration to remain effective for more
than 90 days;
(b) 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 comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement;
(c) Furnish to such Investor such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as the
Investor may reasonably request in order to facilitate the disposition
of such Registrable Shares; and
(d) Use its best efforts to register and qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as shall be reasonably appropriate in the opinion of the
Company and the managing underwriters, PROVIDED that the Company shall
not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and PROVIDED FURTHER that
(anything in Section 8 to the contrary notwithstanding with respect to
the bearing of expenses) if any jurisdiction in which the securities
shall be qualified shall require that expenses incurred in connection
with the qualification therein of the securities be borne by selling
shareholders, then each Investor shall, to the extent required by such
jurisdiction, pay its PRO RATA share of selling expenses.
7. FURNISH INFORMATION.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that any Investor requesting
registration of any of such Investor's Registrable Shares shall furnish to the
Company such information regarding such Investor, the Registrable Shares held by
such Investor, the proposed plan of distribution of such Registrable Shares, and
any other information as the Company shall reasonably request and as shall be
required in order to effect any such registration by the Company.
<PAGE>
-7-
8. EXPENSES.
All expenses incurred in connection with a registration pursuant to
this Agreement (excluding underwriting commissions and discounts and counsel
fees of any selling Investors), including without limitation all registration
and qualification fees, printing costs, and fees and disbursements of counsel
for the Company, shall be borne by the Company; PROVIDED, HOWEVER, that the
Company shall not be required to pay for blue sky registration or qualification
expenses in connection with states in which the Company is not registering or
qualifying its original issue shares or Registrable Shares of Investors upon
exercise of their demand registration rights; and PROVIDED, FURTHER, that
Investors participating as selling shareholders in the second or third
registration pursuant to Section 4.1 shall pay all expenses incurred in
connection with such registration(s) on a pro rata basis in accordance with the
number of Registrable Shares which are included in such registration(s) by such
Investors thereunder.
9. INDEMNIFICATION.
9.1. INDEMNIFICATION. In the event that any Registrable Shares of any
Investor are included in a registration statement pursuant to this Agreement:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless such Investor, any underwriter (as defined in the
Securities Act) for the Company, and each officer and director of such
Investor or such underwriter and each Person, if any, who controls such
Investor or such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading; and will reimburse the
Investor, such underwriter or such officer, director or controlling
Person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability or action; PROVIDED, HOWEVER, that the indemnity
agreement contained in this Section 9.1(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, damage, liability
or action to the extent that it primarily arises out of or is based
upon an untrue statement or alleged untrue statement or omission made
in connection with such registration statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto, in reliance
upon and in conformity with written information furnished expressly for
use in connection with such registration by such Investor, any
underwriter for such Investor or controlling Person with respect to
such Investor.
<PAGE>
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(b) To the extent permitted by law, such Investor will
indemnify and hold harmless the Company, each of its directors, each of
its officers who have signed such registration statement, each Person,
if any, who controls the Company within the meaning of the Securities
Act, and any underwriter for the Company (within the meaning of the
Securities Act) against any losses, claims, damages or liabilities to
which the Company or any such director, officer, controlling Person, or
underwriter may become subject to, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any untrue
or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus contained
therein or any amendments or supplements thereto, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary
prospectus, final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished by
the Investor expressly for use in connection with such registration;
and the Investor will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling
Person, or underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 9.1(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of such Investor against which the request for indemnity is being made
(which consent shall not be unreasonably withheld).
(c) Promptly after receipt by an indemnified party under this
Section 9.1 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 9.1, notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in and, to the
extent the indemnifying party desires, jointly with any other
indemnifying party similarly noticed, to assume at its expense the
defense thereof with counsel mutually satisfactory to the parties. The
failure to notify an indemnifying party promptly of the commencement of
any such action, if prejudicial to his ability to defend such action,
shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9.1 only if and to the extent such
failure to promptly notify was prejudicial to its ability to defend
such action, and the omission so to notify the indemnifying party will
not relieve the indemnifying party of any liability which he may have
to any indemnified party otherwise other than under this Section 9.1.
9.2. OVERRIDE. Notwithstanding anything in this Section 9 to the
contrary, if, in connection with an underwritten public offering of the
Registered Shares, the Company, any Investor and the underwriters enter into an
underwriting or purchase agreement relating to such offering which contains
provisions covering indemnification as between the Company and such Investor,
then the indemnification provision of this Section 9 shall be deemed inoperative
for purposes of such offering.
<PAGE>
-9-
10. LOCKUP.
Each Investor hereby agrees that, at the written request of the Company
or any managing underwriter of any underwritten public offering of securities of
the Company, such Investor shall not, without the prior written consent of the
Company or such managing underwriter, sell, make any short sale of, loan, grant
any option for the purchase of, pledge, encumber, or otherwise dispose of, or
exercise any registration rights with respect to, any Common Stock during the
90-day period (or 180-day period in connection with the Company's initial public
offering of Common Stock) commencing on the effective date of the registration
statement relating to such underwritten public offering of the Company's
securities; PROVIDED, that each officer or director of the Company and each
holder of at least 5% of its Common Stock (for this purpose, calculated on a
fully diluted basis assuming full exercise of all outstanding options, warrants,
and other rights to acquire shares of Common Stock and full conversion or
exchange of all securities that are convertible into or exchangeable for shares
of Common Stock) shall have entered into a similar agreement.
11. GENERAL.
11.1 ADDITIONAL REGISTRATION RIGHTS. Without the prior consent of
Investors holding a majority of the Registrable Shares then outstanding, the
Company shall not grant to any other holder of the Company's securities
registration rights that are superior to or in any way adversely affect the
registration rights granted to the Investors hereunder.
11.2. REMEDIES. In case that any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by any party
hereto, the party or parties entitled to the benefit of such covenants or
agreements may proceed to protect and enforce its or their rights, either by
suit in equity and/or action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement. The
rights, powers and remedies of the parties to this Agreement are cumulative and
not exclusive of any other right, power or remedy which such parties may have
under any other agreement or law. No single or partial assertion or exercise of
any right, power or remedy of a party hereunder shall preclude any other or
further assertion or exercise thereof.
11.3. ASSIGNMENT. None of the parties to this Agreement shall assign or
delegate any of their respective rights or obligations under this Agreement
without the prior written consent of each of the other parties hereto other than
in connection with a transfer of securities of the Company made to a Permitted
Transferee.
11.4. SURVIVAL. The rights and obligations of the parties hereto set
forth herein shall survive indefinitely, unless and until, by their respective
terms, they are no longer applicable.
<PAGE>
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11.5. ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior and contemporaneous arrangements or understandings with respect thereto.
11.6. NOTICES. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by first class, registered,
certified or overnight mail, postage prepaid, or telecopied with a confirmation
copy by regular mail, addressed or telecopied, as the case may be, to such party
at the address or telecopier number, as the case may be, set forth below or such
other address or telecopier number, as the case may be, as may hereafter be
designated in writing by the addressee to the addressor listing all parties:
(i) If to the Company, to:
Streamline, Inc.
27 Dartmouth Street
Westwood, MA 02090
Attn: Timothy A. DeMello
Chairman and Chief Executive Officer
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Attn: Wayne D. Bennett, Esq.
(ii) If to an Investor, to the address of such Investor set forth on
SCHEDULE 1 to the Stock Purchase Agreement
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Any notice or other communication pursuant to this Agreement shall be
deemed to have been duly given or made and to have become effective (i) when
delivered in hand to the party to which it was directed, (ii) if sent by telex,
telecopier, facsimile machine or telegraph and properly addressed in accordance
with the foregoing provisions of this Section 11.6, when received by the
addressee, (iii) if sent by commercial courier guaranteeing next business day
delivery, on the business day following the date of delivery to such courier, or
(iii) if sent by first-class mail, postage prepaid, and properly addressed in
accordance with the foregoing provisions of this Section 11.6, (A) when received
by the addressee, or (B) on the third business day following the day of dispatch
thereof, whichever of (A) or (B) shall be the earlier.
<PAGE>
-11-
11.7. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended, modified or terminated, and the observance of any provision of this
Agreement may be waived (either generally or in a particular instance and either
retrospectively or prospectively), with, but only with, the written consent of
each of the other parties hereto.
11.8. SEVERABILITY. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.9. NO WAIVER OF FUTURE BREACH. No failure or delay on the part of
any party to this Agreement in exercising any right, power or remedy hereunder
shall operate as a waiver thereof. No assent, express or implied, by any party
hereto to any breach in or default of any agreement or condition herein
contained on the part of any other party hereto shall constitute a waiver of or
assent to any succeeding breach in or default of the same or any other agreement
or condition hereof by such other party.
11.10. NO IMPLIED RIGHTS OR REMEDIES; THIRD PARTY BENEFICIARIES. Except
as otherwise expressly provided in this Agreement, nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any Person,
firm or corporation, other than the parties hereto, any rights or remedies under
or by reason of this Agreement. Except as otherwise expressly provided in this
Agreement, there are no intended third party beneficiaries under or by reason of
this Agreement.
11.11. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
11.12. NOUNS AND PRONOUNS. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
11.13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts, excluding
choice of law rules thereof.
11.14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
<PAGE>
-12-
IN WITNESS WHEREOF, this Registration Rights Agreement has been
executed under seal by the parties hereto as of the day and year first above
written.
STREAMLINE, INC.
By: /S/ TIMOTHY A. DEMELLO
----------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
RELIANCE INSURANCE COMPANY
By: /S/ JOHN P. FITZSIMONS
----------------------------------------
John P. Fitzsimons
Vice President
PAINEWEBBER CAPITAL INC.
By: /S/ DHANANJAY PAI
----------------------------------------
Dhananjay Pai
President
INTEL CORPORATION
By: /S/ SATISH RISHI
----------------------------------------
Satish Rishi
Assistant Treasurer
<PAGE>
STREAMLINE, INC.
INSTRUMENT OF ADHERENCE
SEPTEMBER 23, 1997
Reference is made to that certain Registration Rights Agreement (the
"Registration Rights Agreement"), dated as of June 13, 1997, initially by and
among Streamline, Inc., a Delaware corporation (the "Company"), PaineWebber
Capital Inc., Intel Corporation.
As a condition to the undersigned's purchase on the date hereof of
shares of the Company's Series B Convertible Preferred Stock, par value $1.00
per share, the undersigned hereby agrees to become a party as of the date hereof
to the Registration Rights Agreement as an "Investor" thereunder and that, as
such, the undersigned shall be afforded all of the rights of and subject to all
of the obligations of an Investor pursuant to the Registration Rights Agreement.
IN WITNESS WHEREOF, the undersigned hereby sets forth its hand as of
the date first written above.
SAP AMERICA, INC.
By: /S/ KEVIN S. MCKAY
--------------------------------
Kevin S. McKay
Chief Operations Officer and
Chief Financial Officer
Accepted:
STREAMLINE, INC.
By: /S/ TIMOTHY A. DEMELLO
---------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
<PAGE>
RELIANCE INSURANCE COMPANY, on behalf of itself and its nominee, HARE & Co.
By:/S/ JOHN R. FITZSIMONS
----------------------------------
John R. Fitzsimons
Vice President
INTEL CORPORATION
By:/S/ ARVIND SODHANI
----------------------------------
Arvind Sodhani
Vice President and Treasurer
PAINEWEBBER CAPITAL INC.
By:/S/ DHANANJAY PAI
----------------------------------
Dhananjay Pai
President
GENERAL ELECTRIC CAPITAL CORPORATION
By:/S/ THOMAS A. CROWLEY
----------------------------------
Thomas A. Crowley
Managing Director - Technology Ventures
(As Attorney in fact)
<PAGE>
STREAMLINE, INC.
INSTRUMENT OF ADHERENCE
SEPTEMBER 23, 1997
Reference is made to that certain Registration Rights Agreement (the
"Registration Rights Agreement"), dated as of June 13, 1997, initially by and
among Streamline, Inc., a Delaware corporation (the "Company"), PaineWebber
Capital Inc., Intel Corporation.
As a condition to the undersigned's purchase on the date hereof of
shares of the Company's Series B Convertible Preferred Stock, par value $1.00
per share, the undersigned hereby agrees to become a party as of the date hereof
to the Registration Rights Agreement as an "Investor" thereunder and that, as
such, the undersigned shall be afforded all of the rights of and subject to all
of the obligations of an Investor pursuant to the Registration Rights Agreement.
IN WITNESS WHEREOF, the undersigned hereby sets forth its hand as of
the date first written above.
GENERAL ELECTRIC CAPITAL CORPORATION
By: /S/ THOMAS A. CROWLEY
----------------------------------------
Thomas A. Crowley
Managing Director - Technology Ventures
(As Attorney in fact)
Accepted:
STREAMLINE, INC.
By:/S/ TIMOTHY A. DEMELLO
----------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
<PAGE>
-2-
RELIANCE INSURANCE COMPANY, on behalf of itself and its nominee, HARE & Co.
By:/S/ JOHN P. FITZSIMONS
----------------------------------------
John P. Fitzsimons
Vice President
INTEL CORPORATION
By:/S/ ARVIND SODHANI
----------------------------------------
Arvind Sodhani
Vice President and Treasurer
PAINEWEBBER CAPITAL INC.
By:/S/ DHANANJAY PAI
----------------------------------------
Dhananjay Pai
President
SAP AMERICA, INC.
By:/S/ KEVIN S. MCKAY
----------------------------------------
Kevin S. McKay
Chief Operations Officer and
Chief Financial Officer
<PAGE>
Exhibit 10.6
DEVELOPMENT AGREEMENT STREAMLINE-INTEL
- --------------------------------------------------------------------------------
This agreement ("Agreement") is entered into as of June 13, 1997, ("Effective
Date") by and between Intel Corporation, having a place of business at 2200
Mission College Blvd., Santa Clara, California, 95052 ("Intel") and Streamline,
Inc. ("Streamline") on behalf of themselves and their respective worldwide
subsidiaries.
BACKGROUND
A. Intel is developing technologies designed to encourage creation of
hybrid portal applications for Intel Architecture (IA) based PCs. Intel
plans to use in-house technology and industry technology components to
develop portal implementations for different market segments and to
deploy working implementations of portals for a variety of companies
who wish to lead with portal technology in their market segments.
B Streamline is developing an industry-leading, technology based consumer
direct business which Streamline intends to become a primary supplier
of grocery and related goods to time-starved consumers that fit a
certain marketing profile. The parties believe that the deployment of
Intel's hybrid portal concept would enhance the value of Streamline's
business by providing a superior shopping (consumer browsing and order
placement) interface that would ultimately help Streamline's goal of
providing superior consumer service, and provide a technology based
front end that would help in reducing overall costs in the order
acquisition process.
C. Intel wishes to assist Streamline in bringing certain products to
market by providing technical assistance to Streamline. Streamline is
willing to receive such assistance according to the terms of this
Agreement.
AGREEMENT
Intel and Streamline agree as follows:
1. GENERALLY
1. 1. THE CONSUMER GROCERY SEGMENT. The "Consumer Grocery" business
is the business of, in response to on-line computer-based
orders, providing direct delivery to home consumers of
groceries, household staples (i.e. home cleaners, health and
beauty aids), and similar products such as are found
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<PAGE>
in a conventional grocery store. Besides Streamline, other
companies engaged in the Consumer Grocery business include
Peapod, Shopper's Express, Homeruns, and ShopLink.
1.2. THE GROCERY APPLICATION. The "Grocery Application" is the
grocery and related product-oriented, sales application to be
developed by Intel and based on Intel's hybrid portal
technology for IA PCs, and the "push" server technology which
drives it. It will be targeted at customers of Streamline's
Consumer Grocery business with sufficiently capable home PCs
and will function as the front end to a business product,
interacting with back end and, Streamline's business
infrastructure (collectively, the "Streamline System"). The
Grocery Application will be scalable so that it will be
usable, though less richly, by a class of PCs which are less
capable than top-end PCs, though there will be a level of
capability at which browser access will represent the level of
interactivity and richness available. The Grocery Application
is described with greater particularity in Attachment A
attached hereto.
1.3. THE PROJECT. The "Project" is the respective efforts of
Streamline and Intel to develop the Grocery Application and
deploy it in Streamline's business. Streamline will manage the
integration of the various components of the working product.
This will include appropriate testing, timely feedback, and
facilitating the interactions with Streamline's other
technology vendors.
1.4. PROGRAM REVIEW. Intel and Streamline shall meet at least
monthly to review the progress of the Project. Among other
things, Intel and Streamline shall work to agree on the scope,
interim milestones, and timing of their respective efforts
hereunder. By June 30, 1997, Intel and Streamline shall agree
on a set of interim milestones, including up to two major
milestones which the parties may identify as presumptive
indicators of timely performance of each party hereunder,
final milestones and specifications.
1.5. PROPRIETARY APPLETS. The parties shall, in good faith, work to
enable Streamline to incorporate up to four functional
features authored by and belonging to Streamline into the
Grocery Application. These may be incorporated either through
"plug-in"
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<PAGE>
like interfaces or by incorporation into the code itself as
the parties may agree, and shall be identified by June 30,
1997. Such applets shall remain Streamline's property.
1.6. FURTHER EXTENSIONS. Intel shall have the right * . Such right
shall be exercised, * notice of all relevant terms of such
proposed activities.
2. INTEL ASSISTANCE
2.1. PORTAL DEVELOPMENT. Intel will devote reasonable efforts and
resources to the development and delivery of the Grocery
Application. The Grocery Application is licensed as set out in
Section 3.1.
2.2. ADVICE AND CONSULTATION. During the course of the Project,
Intel will provide advice and consultation to Streamline
relating to the technical capabilities of the IA and as to
features or architectures which would optimize use of the
Grocery Application. This consultation may include advice
and/or suggestions on system integration. Intel will work with
Streamline's suppliers on the back end enterprise and commerce
systems to integrate the servers into the back end dataflow,
and may provide input regarding basic Web content to enable
scalability. Streamline remains solely responsible for the
Project and its management other than development of the
Grocery Application.
2.3. MOCKUPS AND DEMONSTRATIONS. In support of the goal of creating
a user preferred interface, during development of the user
interface Intel will supply certain technology demos and
mockups for consumer testing as mutually determined by Intel
and Streamline. These shall remain Intel's property.
2.4. TUNING. During the course of the Project, Intel may develop
and deliver performance tuning modifications ("Tune-Ups") to
Streamline's software applications other than the Grocery
Application. Tune-Ups are licensed as set forth in Section 4.2
below.
* Confidential treatment requested
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<PAGE>
2.5. SOURCE. Intel will deliver the Grocery Application in both
source and object forms, subject to the terms hereof. Neither
party shall deliver or disclose Source Code received from the
other without the providing party's written consent.
3. TITLE AND LICENSES
3.1. GROCERY APPLICATION LICENSE. Effective on Intel's delivery and
Streamline's acceptance of the Gold Master of the Grocery
Application, Intel grants to Streamline a fully paid-up
license under Intel's copyrights, to use, reproduce, display,
and distribute (including distribution to Streamline
customers) the Grocery Application in object code form, and to
compile internally and modify the source code form thereof,
all subject to the following provisions:
3.1.1. This license shall only extend to use and
distribution of the Grocery Application in connection
with business transacted in the Consumer Grocery
market segment by Streamline or its franchisees,
including Streamline's subsidiary Regional Operating
Companies, under Streamline's service marks and for
which Streamline derives direct compensation.
3.1.2. The user interface of the Grocery Application shall
contain visible credits and acknowledgments of Intel
for its contributions in a manner to be agreed.
3.1.3. Streamline shall not remove Intel's proprietary
notices from the Grocery Application.
3.2. * STATUS. Until * to any * for distribution and use * . After
* , any such * to the provisions of * . Prior to the * or
authorize another company to * for the purpose of * embodied
in * .
3.3. INTEL ARCHITECTURE FOCUS. Streamline promises to (i) only
implement the portal concept for IA-based computers, (ii)
introduce new innovations in non-portal interfaces (browsers)
for IA at least as early as for any other platform and (iii)
develop
* Confidential treatment requested
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<PAGE>
back end technology solutions on IA. All non-portal (browser)
features will be readily useable by IA and new features will
be optimized for IA or specially adapted to run on IA. *
However, Streamline would retain the ability to develop other
technology solutions on their own, or with other parties, as
Streamline sees fit. Intel may provide input for these
efforts. This provision shall not survive termination of the
Agreement on account of breach or nonperformance by Intel.
3.4. TRADE DRESS. Notwithstanding Intel's ownership of the Grocery
Application, to the extent that the user interface of the
Grocery Application incorporates an appearance which consumers
may associate with Streamline as a source of goods and
services and not implied or required by underlying
functionality or the grocery metaphor, Streamline shall be the
owner of the trademark and trade dress rights in such
appearance for the Consumer Grocery market segment. By way of
example, the distinctive background of the interface may
constitute trade dress, while the concept of fulfilling an
ingredients list to a recipe would not.
3.5. NO OTHER LICENSES. Except for the licenses expressly provided
herein, no licenses are granted by either party, either
expressly or by implication, to any intellectual property of
the other. Notwithstanding Intel's ownership in the copyrights
in any specific Intel deliverables, Streamline shall own all
copyrights in its own original work.
3.6. TUNE-UPS. To the extent that Intel prepares and delivers any
Tune-ups to Streamline, Streamline shall have a non-exclusive
license under any Intel copyright therein to incorporate such
Tune-Ups into the software application for which the Tune-Up
was made. Streamline shall retain sole title to the product so
modified, and may license, modify, adapt, translate,
distribute, sell, and otherwise commercialize it in any way
whatsoever without any duty of accounting to Intel arising
from the incorporation of the Tune-Ups. The Parties do not
intend to create a "joint work."
* Confidential treatment requested
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<PAGE>
3.7. OTHER TECHNOLOGICAL INPUTS. Intel may deliver to Streamline
certain copyrighted software, other than the Grocery
Application, which Intel has developed either for the purpose
of this relationship or otherwise. Where such materials are
intended for redistribution, Intel shall provide Streamline
with written notice that it has a nonexclusive license under
Intel's copyrights to use the software in accordance with the
terms set out in Section 3.1.
3.8. NEW DEVELOPMENTS. Ownership of new developments, whether
patentable or not, shall be determined in accordance with the
patent laws of the United States. If a patentable invention is
made jointly, patent counsel of the parties shall meet and in
good faith agree on an appropriate manner of securing patent
protection therefor. Any jointly owned intellectual property
may be exploited without any duty of accounting.
4. STREAMLINE OBLIGATIONS RELATING TO THE PROJECT
4.1. DEVELOPMENT EFFORT. Streamline will commit sufficient
financial, technical, and marketing resources reasonably
appropriate to support a coordinated product rollout according
to the schedule set out in this Agreement.
4.2. SUPPORT. Streamline shall provide technical support to its
customers consistent with standard commercial practices and
the nature of the services it provides.
4.3. WARRANTS. In consideration of entering into this Agreement,
Streamline has granted to Intel a warrant to acquire 285,714
shares of Streamline's Common Stock, attached hereto as
Attachment B (the "Warrant"), for no additional consideration.
The Warrant is subject to the provisions of this Agreement.
5. MARKETING
5.1. EVENTS. Intel may invite Streamline to participate in industry
marketing events to provide testimony to the value of IA PCs
in new business models such as the Consumer Grocery business.
In
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<PAGE>
turn, if Streamline requests, Intel may elect to participate
in Streamline's marketing efforts
5.2. PUBLICITY. Neither party will reveal the existence or contents
of this Agreement without the consent of the other, except as
provided below or as required by law (in which case the other
party will be first given notice and an opportunity to
object).
5.2.1. Each party may discuss Grocery Application and use
the other party's name in connection with promotion
of its portal technology, provided that neither party
discloses any confidential information about the
other.
5.2.2. Streamline may publicly disclose and position its use
of Intel technology within the general framework
and-timeline set out below. Intel may make public
statements which parallel these permitted comments:
(a) before delivery of the Grocery Application,
Streamline shall keep the relationship confidential
except as agreed by the parties; (b) after delivery
of the Grocery Application the earlier of (i) the
completion of a 12 week in-market test by P&G or (ii)
six months after delivery of the Grocery Application
"Product Launch") Streamline may reveal that Intel
has selected Streamline to be the only beta customer
in the Consumer Grocery segment for its consumer
direct portal technology; and (c) after Product
Launch, Streamline may reveal that its consumer
direct solution is based on Intel architecture and
that Streamline is the first customer to make use of
the Intel consumer direct portal technology.
5.3. RESPECT FOR TRADEMARKS. Streamline shall not use Intel's
trademarks, or portions of them, including MMX(TM),
Pentium(R), Pentium(R) II, or -II, except in accordance with
Intel's guidelines for such use. In particular, Streamline
shall not incorporate any of these marks into its product
names, but Streamline may truthfully report that a product is
optimized or designed for such Intel products.
5.4. TAXES. Each party shall be solely responsible for its own
taxes, including any applicable sales taxes and customs duties
on items acquired under this Agreement. To the extent, if any,
that the applicable taxing authority requires withholding of
taxes
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<PAGE>
based on payments made hereunder, the paying party shall
withhold such taxes and provide the payee with the
documentation reasonably necessary to claim a credit therefor.
6. TERM & TERMINATION
6.1. TERM OF AGREEMENT. This Agreement's term commences as of the
Effective Date and terminates as of December 31, 2002, unless
the parties agree to extend it or it is terminated in
accordance with the terms hereof.
6.2. BREACH. Either party may terminate this Agreement by written
notice if the other party is in material breach of any of its
terms and fails to cure such breach within thirty days of
written notice of such breach.
6.3. SURVIVAL. The following provisions shall survive termination
or expiration: 3.1, 3.4, 3.6, 3.8, 5.4, and 7, provided that
where the termination is for breach by a party, the license(s)
granted to such party shall terminate.
6.4. EFFECT OF TERMINATION. The provisions of section 2 of the
Warrant attached hereto shall govern in the case of
termination of this Agreement.
7. GENERAL PROVISIONS
7.1. CONFIDENTIAL TERMS. Confidential information shall be held in
confidence pursuant to the terms of the Corporate
Non-Disclosure Agreement in place between the parties, except
to the extent that the terms are superseded by the express
provisions hereof. Streamline shall not disclose any
information or methods to Intel that Intel will be foreclosed
by confidentiality obligations from incorporating into its own
products, except that this shall not give Intel a right to
Streamline's source code.
7.2. RELATIONSHIP OF PARTIES. The parties are not partners or joint
venturers, or liable for the obligations, acts, or activities
of the other.
7.3. AMENDMENTS AND ASSIGNMENTS. Any change, modification or waiver
to this Agreement must be in writing and signed by an
authorized representative of each party. Neither party may
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<PAGE>
assign this Agreement or any portion of this Agreement to any
other party without the other's prior written consent.
7.4. MERGER AND WAIVER. Except for those certain agreements
pertaining to confidentiality, and equity investments, this
Agreement is the entire agreement between the parties with
respect to the development and distribution of the Grocery
Application, and it supersedes any prior or contemporaneous
agreements and negotiations relating thereto. No waiver of any
breach or default shall constitute a waiver of any subsequent
breach or default.
7.5. INTEL CONTRIBUTIONS. Intel represents that the work provided
by Intel hereunder is Intel's original work or properly
licensed from the author(s) thereof.
7.6. SUITS BASED ON INTEL DELIVERABLES. During the term of this
Agreement, Intel shall defend, indemnify, and hold Streamline
and its customers harmless from and against any suit or
proceeding brought against Streamline, its subsidiaries or
customers, based upon a claim that the Grocery Application
alone and not in combination with any other product infringes
the copyright or trade secret of another, or that it infringes
a U.S. patent of which Intel had notice upon or prior to
delivery to Streamline thereof. Streamline's indemnity will
include all damages and costs awarded, including attorneys'
fees, and settlement costs, provided that Streamline shall not
settle any claim without Intel's consent and that Intel shall
not be obligated to pay a settlement or judgment in excess of
$250,000, and further provided that:
7.6.1. Streamline shall promptly notify Intel of any claim
and will provide information, assistance, and
cooperation in defending against it (at Intel's
expense).
7.6.2. Streamline will have the right to participate in the
defense of any claim, at its own expense.
7.6.3. This indemnity shall not apply to software prepared
or supplied by Streamline.
7.6.4. Intel shall have the right to modify the Grocery
Application in order to avoid a claim of
infringement, or to replace it entirely in Intel's
reasonable judgment.
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<PAGE>
7.7. RIGHTS. Streamline warrants and represents that it has or
shall obtain all rights necessary to undertake the activities
described in this Agreement and to develop and market the
Streamline System. Streamline shall promptly notify Intel of
any written or otherwise valid charge or claim of infringement
of any third party's right relating to development or
distribution of the Streamline System.
7.8. Suits based on Streamline System. Streamline shall defend,
indemnify, and hold Intel and its customers harmless from and
against any suit or proceeding brought against Intel, its
subsidiaries or customers, based upon the development or
distribution of Streamline System, including any claim that
the Streamline System infringes any third-party intellectual
property right or that the Streamline System (including any
portion supplied by Intel) is in any way related to or a cause
of liability for harm to a human being (a "Claim").
Streamline's indemnity will include all damages and costs
awarded, including attorneys' fees, and settlement costs,
provided that Intel shall not settle any claim without
Streamline's consent.
7.8.1. Intel shall promptly notify Streamline of any Claim
and will provide information, assistance, and
cooperation in defending against it (at Streamline's
expense).
7.8.2. Intel will have the right to participate in the
defense of any Claim, at its own expense.
7.8.3. This indemnity shall not apply to software prepared
or supplied by Intel.
7.9. NO WARRANTY. EXCEPT AS EXPRESSLY PROVIDED HEREIN, MATERIALS
CONTRIBUTED BY EACH PARTY HEREUNDER ARE PROVIDED AS IS. THE
PARTIES MAKE NO WARRANTIES WITH RESPECT TO SUCH MATERIALS,
EITHER EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR A PARTICULAR
PURPOSE.
7.10. LIMITED LIABILITY. Neither party shall be liable to the other
for lost profits, expected revenues, or development or support
costs arising from any termination of this Agreement. IN NO
EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR LOSS OF
PROFITS, DATA, OR USE OR ANY SPECIAL,
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CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. THE PARTIES
ACKNOWLEDGE THAT THESE LIMITATIONS ON POTENTIAL LIABILITIES
WERE AN ESSENTIAL ELEMENT IN SETTING CONSIDERATION UNDER THIS
AGREEMENT.
7.11. COMPLIANCE WITH LAW. Neither party shall export, distribute,
or sell the Streamline System or the Intel Technology in
violation of US or other applicable law.
7.12. NOTICES AND REQUESTS. All notices and requests required or
made under this Agreement must be in writing and shall be
personally delivered or if mailed postage prepaid, certified
or registered mail, or overnight courier to the addresses
listed below:
To Intel To Streamline
Intel Corporation Streamline, Inc.
2200 Mission College Blvd.,
Santa Clara, California 95052
ATTN.: GENERAL COUNSEL ATTN.: GENERAL COUNSEL
7.13. CHOICE OF LAW. Any claim based on this Agreement shall be
governed by the laws of Delaware, and shall be subject to the
exclusive jurisdiction of the state and federal courts located
there.
In witness of their agreement the parties have caused the Agreement to be
executed below by their authorized representatives.
Intel Corporation Streamline, Inc.
By: /s/ Ronald J. Whittier By: /s/ Timothy A. Demello
-------------------------- ---------------------------
Name Ronald J. Whittier Name Timothy A. DeMello
Title Sr. VP Title Chairman
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<PAGE>
DEVELOPMENT AGREEMENT STREAMLINE-INTEL
- --------------------------------------------------------------------------------
Attachment A
Description and Development Plan
This Attachment is effective solely as a technical description and development
plan. It is subordinate to the provisions of the Agreement to which it is
attached.
*
* Confidential treatment requested
<PAGE>
AMENDMENT NO. 1
TO
DEVELOPMENT AGREEMENT STREAMLINE-INTEL
("AGREEMENT")
The subject Agreement Effective June 6, 1997 between Intel Corporation ("Intel")
and Streamline, Inc. ("Streamline") is hereby amended pursuant to paragraph 7.3
of the Agreement, effective as of September 22, 1998, to incorporate the
following modifications:
1. The following is added at the end of Section 7.7:
Streamline acknowledges that the Grocery Application will
contain search engine software owned by Verity, Inc., and that
Intel has entered into a license agreement with Verity,
allowing Intel to sublicense the search engine software as
incorporated in the Grocery Application, to Streamline (the
"Verity Agreement," attached hereto as Attachment C).
Streamline warrants and represents that it will abide by all
terms and conditions imposed on a sublicensee in the Verity
Agreement. Streamline will defend, indemnify, and hold Intel
harmless from and against any suit or proceeding brought
against Intel resulting from a breach of this representation
and warranty. Streamline's indemnity will include all damages
and costs awarded, including attorneys' fees, and settlement
costs, provided that Intel shall not settle any claim without
Streamline's consent.
The remaining terms of the Agreement remain in full force and effect.
AGREED:
INTEL CORPORATION STREAMLINE, INC.
/s/ Martin Guttmann /s/ Frank Britt
- ---------------------------- ----------------------------
Signature Signature
Martin Guttmann Frank Britt
- ---------------------------- ----------------------------
Printed Name Printed Name
Sr. Engineering Manager Vp Marketing
- ---------------------------- ----------------------------
Title Title
9/08/98 9/22/98
- ---------------------------- ----------------------------
Date Date
<PAGE>
Exhibit 10.7
ATTACHMENT B: WARRANT
STREAMLINE-INTEL
- --------------------------------------------------------------------------------
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY AND THE SHARES OF COMMON STOCK
ISSUABLE HEREUNDER HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii)
THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE
COMMISSION RULE 144.
Void after 5:00 p.m.,
Pacific Time
on June 13, 2001
WARRANT TO PURCHASE 285,714 SHARES OF COMMON STOCK
OF
STREAMLINE, INC.
(Subject to Adjustment)
<TABLE>
<S> <C>
Initial Number of Shares: 285,714 shares
Date of Grant: June 13, 1997
Expiration Date: June 13, 2001
</TABLE>
THIS CERTIFIES THAT, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Intel Corporation, a Delaware
corporation ("INTEL"), or its permitted registered assigns ("Holder"), is
entitled, subject to the terms and conditions of this Warrant, including the
vesting provisions described in Section 2, at any time after June 6, 1997 (the
"EFFECTIVE DATE"), and before 5:00 p.m. Pacific Time on June 6, 2001 (the
"EXPIRATION DATE"), to purchase from Streamline, Inc., a Delaware corporation
(the "Company"), Two Hundred Eighty-Five Thousand Seven-Hundred Fourteen
(285,714) fully paid and nonassessable shares of the Common Stock of the
Company, $0.01 par value per share (the "WARRANT STOCK"), at the Exercise Price
(as defined in Section 1.5 below). Both the number of shares of Warrant Stock
purchasable under this Warrant and the Exercise Price are subject to
<PAGE>
adjustment as provided herein. This Warrant is issued pursuant to that certain
Development Agreement between the Company and Intel Corporation of even date
herewith (the "DEVELOPMENT AGREEMENT"). This Warrant shall terminate on the
Expiration Date.
1. CERTAIN DEFINITIONS. As used in this Warrant:
1.1. The term "WARRANT STOCK" shall mean the Common Stock, $0.01 par
value per share, of the Company, and any other securities and property at any
time receivable or issuable upon exercise of this Warrant, unless the context
otherwise requires.
1.2. The term "WARRANT" as used herein, shall include this Warrant and
any warrant delivered in substitution or exchange therefor as provided herein.
1.3. The term "REGISTERED HOLDER" shall mean any Holder in whose name
this Warrant is registered upon the books and records maintained by the Company.
1.4. The term "FAIR MARKET VALUE" of a share of Warrant Stock as of a
particular date (the "DETERMINATION DATE") shall mean:
(a) If traded on a securities exchange or the NASDAQ National
Market, the Fair Market Value shall be deemed to be the average of the closing
prices of the Common Stock of the Company on such exchange over the five (5)
business days ending two (2) days prior to the Determination Date;
(b) If actively traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) days prior to the Determination Date; and
(c) If there is no active public market, the Fair Market Value
shall be the value thereof, as determined in good faith by the Board of
Directors of the Company.
1.5. The term "EXERCISE PRICE" shall mean $3.50 per share, subject to
adjustment as provided herein.
2. VESTING PROVISIONS OF WARRANT
This Warrant is subject to the following vesting provisions:
(a) twenty-five percent (25%) of the Warrant Stock shall be
immediately vested and exercisable as of the date of issuance;
<PAGE>
(b) seventy-five percent (75%) of the Warrant Stock shall be
vested and exercisable upon the delivery by Intel of the Grocery Application (as
defined in the Development Agreement); PROVIDED that (i) the date on which Intel
and the Company agree upon server interface specifications and product
specifications for the Grocery Application (the "Specification Agreement Date")
is on or before June 30, 1997, and (ii) the Grocery Application, substantially
conforming to specifications, is delivered to the Company by Intel within three
months of the end of the first quarter of 1998 (i.e. by June 30, 1998) (the
"Delivery Vesting Deadline"). Notwithstanding any of the foregoing, the Delivery
Vesting Deadline will be extended by the period, if any, between June 30, 1997,
and the Specification Agreement Date, if such agreement does not take place on
or before June 30, 1997. In addition, if any change to the server interface
specifications or the product specifications is agreed to by Intel and the
Company after the Specification Agreement Date, the Delivery Vesting Deadline
will be extended by such time as Intel and Streamline agree upon at the time of
such change, based upon the expected delay caused by such change. Furthermore,
if Intel delivers to the Company the Grocery Application, substantially
conforming to specifications, within three months after the Delivery Vesting
Deadline, then fifty percent (50%) of the Warrant Stock shall be vested and
exercisable upon such delivery and the remaining twenty-five (25%) of the
Warrant Stock shall not be exercisable, and if Intel delivers to the Company the
Grocery Application, substantially conforming to specifications, more than three
months but within six months after the Delivery Vesting Deadline, then
twenty-five percent (25%) of the Warrant Stock shall be vested and exercisable
upon such delivery and the remaining fifty percent (50%) shall not be
exercisable. If Intel does not deliver to the Company the Grocery Application,
substantially conforming to specifications, within six months after the Delivery
Vesting Deadline, then seventy-five percent (75%) of the Warrant Stock shall not
be vested or exercisable;
(c) Notwithstanding the above, this Warrant shall become fully
vested and immediately exercisable in full (i) immediately prior to any merger,
consolidation or other similar transaction involving the Company, any sale of
all or substantially all of the assets of the Company, any transaction or series
of related transactions (other than an initial public offering) in which the
stockholders immediately prior to such transaction (or the first of a series of
transactions) hold less than 75% of the capital stock of the Company (on a
fully-diluted, as converted basis) immediately after such transaction (or series
of transactions), or (ii) upon the termination by the Company of the Development
Agreement (other than a termination upon mutual agreement of Intel and the
Company, or a termination by the Company upon material breach by Intel).
-2-
<PAGE>
3. EXERCISE OF WARRANT
3.1. PAYMENT.
Subject to compliance with the terms and conditions of this
Warrant and applicable securities laws, this Warrant may be exercised, in whole
or in part, to the extent the Warrant Stock subject to this Warrant is vested,
at any time on or before the Expiration Date, by surrendering this Warrant at
the principal office of the Company together with:
(a) the form of Notice of Exercise attached hereto as Exhibit
1 (the "NOTICE OF EXERCISE") duly executed by the Holder, and
(b) payment, (i) in cash (by check) or by wire transfer, (ii)
by delivery of shares of capital stock of the Company valued at their Fair
Market Value; (iii) by cancellation by the Holder of indebtedness of the Company
to the Holder, or (iv) by any combination of (i), (ii) or (iii), of an amount
equal to the product obtained by multiplying the number of shares of Warrant
Stock being purchased upon such exercise by the then effective Exercise Price
(the "EXERCISE AMOUNT").
3.2. NET ISSUE EXERCISE
In lieu of the payment methods set forth in Section 3.1 (b)
above, the Holder may elect to exchange the Warrant for shares of Warrant Stock
equal to the value of the amount of the Warrant being exchanged on the date of
exchange. If Holder elects to exchange this Warrant as provided in this Section
3.2, Holder shall tender to the Company the Warrant for the amount being
exchanged, along with written notice of Holder's election to exchange up to the
full amount of the Warrant, and the Company shall issue to Holder, on a net
basis, the number of shares of the Company's Warrant Stock computed using the
following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Warrant Stock to be issued
to Holder;
Y = the number of shares of Warrant Stock purchasable under
the amount of the Warrant being exchanged (as adjusted to the
date of such calculation);
-3-
<PAGE>
A = the Fair Market Value of one share of the Company's Common
Stock; and
B = Exercise Price (as adjusted to the date of such
calculation).
All references herein to an "exercise" of the Warrant shall
include an exchange pursuant to this Section 3.2.
3.3 PARTIAL EXERCISE; EFFECTIVE DATE OF EXERCISE.
In case of any partial exercise of this Warrant, the Company
shall cancel this Warrant upon surrender hereof and shall execute and deliver a
new Warrant of like tenor and date for the balance of the shares of Warrant
Stock purchasable hereunder. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above. The person entitled to receive the shares of Warrant
Stock issuable upon exercise of this Warrant shall be treated for all purposes
as the holder of record of such shares as of the close of business on the date
the Holder is deemed to have exercised this Warrant.
3.4. STOCK CERTIFICATES: FRACTIONAL SHARES.
As soon as practicable on or after such date, the Company
shall issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of whole shares of Warrant Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share equal to such fraction of the Fair Market Value of one whole share of
Warrant Stock as of the date of exercise of this Warrant. No fractional shares
or scrip representing fractional shares shall be issued upon an exercise of this
Warrant, and any fractional shares shall be rounded to the nearest whole share.
4. VALID ISSUANCE; TAXES.
All shares of Warrant Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid and non-assessable, and the Company shall
pay all taxes and other governmental charges that may be imposed in respect of
the issue or delivery thereof. The Company shall not be required to pay any tax
or other charge imposed in connection with any transfer involved in the issuance
of any certificate for shares of Warrant Stock in any name other than that of
the Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established to the Company's
reasonable satisfaction that no tax or other charge is due.
-4-
<PAGE>
5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
The number of shares of Warrant Stock issuable upon exercise of this
Warrant (or any shares of stock or other securities or property receivable or
issuable upon exercise of this Warrant) and the Exercise Price are subject to
adjustment upon occurrence of the following events:
5.1. ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR
COMBINATIONS OF SHARES.
The Exercise Price of this Warrant shall be proportionally
decreased and the number of shares of Warrant Stock issuable upon exercise of
this Warrant (or any shares of stock or other securities at the time issuable
upon exercise of this Warrant) shall be proportionally increased to reflect any
stock split or subdivision of the Company's Common Stock. The Exercise Price of
this Warrant shall be proportionally increased and the number of shares of
Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
5.2. ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER
SECURITIES OR PROPERTY.
In case the Company shall make or issue, or shall fix a record
date for the determination of eligible holders entitled to receive, a dividend
or other distribution with respect to the Warrant Stock (or any shares of stock
or other securities at the time issuable upon exercise of the Warrant) payable
in (i) securities of the Company or (ii) assets (excluding cash dividends paid
or payable solely out of retained earnings), then, in each such case, the Holder
of this Warrant on exercise hereof at any time after the consummation, effective
date or record date of such dividend or other distribution, shall receive, in
addition to the shares of Warrant Stock (or such other stock or securities)
issuable on such exercise prior to such date, and without the payment of
additional consideration therefor, the securities or such other assets of the
Company to which such Holder would have been entitled upon such date if such
Holder had exercised this Warrant on the date hereof and had thereafter, during
the period from the date hereof to and including the date of such exercise,
retained such shares and/or all other additional stock available by it as
aforesaid during such period giving effect to all adjustments called for by this
Section 5.
5.3. RECLASSIFICATION.
-5-
<PAGE>
If the Company, by reclassification of securities or
otherwise, shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Exercise Price therefore shall be appropriately adjusted,
all subject to further adjustment as provided in this Section 5.
5.4. ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR
CONSOLIDATION.
In case of any capital reorganization of the capital stock of
the Company (other than a combination, reclassification, exchange or subdivision
of shares otherwise provided for herein), or any merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all the assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 5. The foregoing provisions of this Section 5.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
5.5 CERTAIN EVENTS
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<PAGE>
If (i) any event occurs of a type that would have an effect on
the rights granted under this Warrant similar to the effect of any event
described by the other provisions of this Section 5 and (ii) such event is not
expressly provided for by such other provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights and other rights
with equity features), then an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock obtainable upon exercise of this Warrant so
as to protect the rights of the Holder shall be made.
5.6. RESERVATION OF SECURITIES AND ASSETS.
The Company shall reserve, for the life of the Warrant, such
securities or such other assets of the Company the Holder is entitled to receive
pursuant to this Section 5.
6. CERTIFICATE AS TO ADJUSTMENTS.
In each case of any adjustment in the Exercise Price, or number or type
of shares issuable upon exercise of this Warrant, the Chief Financial Officer of
the Company shall compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a statement of
the adjusted Exercise Price. The Company shall promptly send (by facsimile and
by either first class mail, postage prepaid or overnight delivery) a copy of
each such certificate to the Holder.
7. LOSS OR MUTILATION.
Upon receipt of evidence reasonably satisfactory to the Company of the
ownership of and the loss, theft, destruction or mutilation of this Warrant, and
of indemnity reasonably satisfactory to it, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or
mutilated Warrant.
8. RESERVATION OF COMMON STOCK.
The Company hereby covenants that at all times there shall be reserved
for issuance and delivery upon exercise of this Warrant such number of shares of
Common Stock or other shares of capital stock of the Company as are from time to
time issuable upon exercise of this Warrant and, from time to time, will take
all steps necessary to amend its Certificate of Incorporation to provide
sufficient
-7-
<PAGE>
reserves of shares of Common Stock issuable upon exercise of this Warrant. All
such shares shall be duly authorized, and when issued upon such exercise, shall
be validly issued, fully paid and non-assessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale and
free and clear of all preemptive rights, except encumbrances or restrictions
arising under federal or state securities laws. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Warrant.
9. TRANSFER AND EXCHANGE.
Subject to compliance with applicable securities laws, and subject to
the provisions of Section 10 below, this Warrant may be transferred or assigned
in whole or in part, at any time, and from time to time, at the Holder's sole
election.
10. RESTRICTIONS ON TRANSFER.
The Holder, by acceptance hereof, agrees that, absent an effective
registration statement filed with the U.S. Securities and Exchange Commission
("SEC") under the Act covering the disposition or sale of this Warrant or the
Warrant Stock issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge, or hypothecate any or all such Warrants
or Warrant Stock, as the case may be, unless either (i) the Company has received
an opinion of counsel, in form reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition or (ii) the sale of such securities is made pursuant to SEC Rule
144; PROVIDED that if such sale is pursuant to Rule 144, the Company may require
the delivery of an opinion of counsel confirming that such Warrant or Warrant
Stock, as the case may be, may be sold pursuant to Rule 144, if the Company
determines that such opinion is reasonably necessary.
11. COMPLIANCE WITH SECURITIES LAWS.
By acceptance of this Warrant, the Holder hereby represents, warrants
and covenants that any shares of stock purchased upon exercise of this Warrant
shall be acquired for investment only and not with a view to, or for sale in
connection with, any distribution thereof; that the Holder has had such
opportunity as such Holder has deemed adequate to obtain from representatives of
the Company such information as is necessary to permit the holder to evaluate
the merits and risks of its investment in the Company; that the Holder is able
to bear the economic risk of holding such shares as may be acquired
-8-
<PAGE>
pursuant to the exercise of this Warrant for an indefinite period; that the
Holder understands that the shares of stock acquired pursuant to the exercise of
this Warrant will not be registered under the Act (unless otherwise required
pursuant to exercise by the holder of the registration rights, if any,
previously granted to the registered Holder) and will be "restricted securities"
within the meaning of Rule 144 under the Act and that the exemption from
registration under Rule 144 will not be available for at least one year from the
date of exercise of this Warrant, subject to any special treatment by the
Securities and Exchange Commission for exercise of this Warrant pursuant to
Section 3.2, and even then will not be available unless a public market then
exists for the stock, adequate information concerning the Company is then
available to the public, and other terms and conditions of Rule 144 are complied
with; and that all stock certificates representing shares of stock issued to the
Holder upon exercise of this Warrant may have affixed thereto a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN AND WILL
BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("THE ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
OR UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN
FORM REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR
(ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND
EXCHANGE COMMISSION RULE 144; PROVIDED THAT IF SUCH SALE IS PURSUANT TO
RULE 144, THE COMPANY MAY REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL
CONFIRMING THAT SUCH WARRANT OR WARRANT STOCK, AS THE CASE MAY BE, MAY
BE SOLD PURSUANT TO RULE 144, IF THE COMPANY DETERMINES THAT SUCH
OPINION IS REASONABLY NECESSARY.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS.
This Warrant shall not entitle the Holder to any voting rights or other
rights as a shareholder of the Company. In the absence of affirmative action by
such Holder to purchase Warrant Stock by exercise of this Warrant, no provisions
of this Warrant, and no enumeration herein of the rights or privileges of the
Holder hereof shall cause such Holder hereof to be a shareholder of the Company
for any purpose.
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<PAGE>
13. REGISTRATION RIGHTS.
All shares of Common Stock issuable upon exercise of this Warrant shall
be "Registrable Securities" as defined in Section 1 of that certain Registration
Rights Agreement, dated as of the date hereof, among the Company, Intel
Corporation and certain other stockholders of the Company, and entitled, subject
to the terms and conditions of that agreement, to all registration rights
granted to holders of Registrable Securities thereunder.
14. NOTICES.
All notices and other communications from the Company to the Holder
shall be given in accordance with Section 7.11 of the Development Agreement.
15. HEADINGS.
The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof.
16. LAW GOVERNING.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware.
17. NO IMPAIRMENT.
The Company will not, by amendment of its Certificate of Incorporation
or bylaws, or through reorganization, consolidation, merger, dissolution, issue
or sale of securities, sale of assets or any other 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 action as may be necessary or appropriate in order
to protect the rights of the Registered Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock issuable upon the
exercise of this Warrant above the amount payable therefor upon such exercise,
and (b) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and non-assessable
shares of Warrant Stock upon exercise of this Warrant.
18. NOTICES OF RECORD DATE. In case:
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<PAGE>
18.1. the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
18.2. of any consolidation or merger of the Company with or into
another corporation, any capital reorganization or the Company, any
reclassification of the Capital Stock of the Company, or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation; or
18.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
18.4 of any redemption or conversion of all outstanding shares of
Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of shares of Common Stock (or
such stock or securities as at the time are receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
thirty (30) days prior to the date therein specified.
19. SEVERABELITY.
If any term, provision, covenant or restriction of this Warrant is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
20. COUNTERPARTS.
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<PAGE>
For the convenience of the parties, any number of counterparts of this
Warrant may be executed by the parties hereto and each such executed counterpart
shall be, and shall be deemed to be, an original instrument.
21. NO INCONSISTENT AGREEMENTS.
The Company will not on or after the date of this Warrant enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders of this Warrant or otherwise conflicts with the
provision hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to holders of the
Company's securities under any other agreements, except rights that have been
waived.
22. SATURDAYS, SUNDAYS AND HOLIDAY.
If the Expiration Date falls on a Saturday, Sunday or legal holiday,
the Expiration Date shall automatically be extended until 5:00 p.m. the next
business day.
AGREED:
INTEL CORPORATION STREAMLINE, INC.
/s/ SATISH RISHI /s/ TIMOTHY A. DEMELLO
- -------------------------------- ---------------------------
Signature Signature
SATISH RISHI TIMOTHY A. DEMELLO
- -------------------------------- ---------------------------
Printed Name Printed Name
ASSISTANT TREASURER CHAIRMAN
- -------------------------------- ---------------------------
Title Title
6/13/97 6/6/97
- -------------------------------- ---------------------------
Date Date
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<PAGE>
EXHIBIT 1
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
STREAMLINE, INC:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
shares of Common Stock, as provided for therein, and (check the applicable box):
(a) tenders herewith payment of the exercise price in full in the form
of cash or a certified or official bank check in same-day funds in the
amount of $_________; and/or
(b) hereby tenders certificates representing _________ shares of
_________ stock of the Company, with a Fair Market Value of $________-.
(c) hereby agrees to cancel $__________ of indebtedness owed by the
Company to the Holder;
for a total of _________ shares of Common Stock.
Elects the Net Issue Exercise option pursuant to Section 3.2 of the
Warrant, and accordingly requests delivery of a net of ____________
shares of Common Stock.
Please issue a certificate or certificates for such shares of Common Stock in
the name of, and pay any cash for any fractional share to (please print name,
address and social security number):
Name:
------------------------------------------
Address:
------------------------------------------
Signature:
------------------------------------------
Note: The above signature should correspond exactly with the name of the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
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<PAGE>
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares
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<PAGE>
Exhibit 10.8
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY AND THE SHARES OF COMMON
STOCK ISSUABLE HEREUNDER HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), AND MAY NOT BE SOLD, OFFERED
FOR SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE
ACT UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE
EFFECT THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR
(ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE
COMMISSION RULE 144.
Void after 5:00 p.m.,
Pacific Time
on June 13, 2001
WARRANT TO PURCHASE 56,000 SHARES OF COMMON STOCK
OF
STREAMLINE, INC.
(Subject to Adjustment)
Initial Number of Shares: 56,000 shares
Date of Grant: January 21, 1998
Expiration Date: June 13, 2001
THIS CERTIFIES THAT, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Intel Corporation, a Delaware
corporation ("INTEL"), or its permitted registered assigns ("Holder"), is
entitled, subject to the terms and conditions of this Warrant, including the
vesting provisions described in Section 2, at any time after January 21, 1998
(the "EFFECTIVE DATE"), and before 5:00 p.m. Pacific Time on June 13, 2001 (the
"EXPIRATION DATE"), to purchase from Streamline, Inc., a Delaware corporation
(the "COMPANY"), Fifty-Six Thousand (56,000) fully paid and nonassessable shares
of the Common Stock of the Company, $0.01 par value per share (the "WARRANT
STOCK"), at the Exercise Price (as defined in Section 1.5 below). Both the
number of shares of Warrant Stock purchasable under this Warrant and the
Exercise Price are subject to adjustment as provided herein. This Warrant shall
terminate on the Expiration Date.
1. CERTAIN DEFINITIONS. As used in this Warrant:
1.1. The term "WARRANT STOCK" shall mean the Common Stock, $0.01 par
value per share, of the Company, and any other securities and
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property at any time receivable or issuable upon exercise of this
Warrant, unless the context otherwise requires.
1.2. The term "WARRANT" as used herein, shall include this Warrant and
any warrant delivered in substitution or exchange therefor as provided herein.
1.3. The term "REGISTERED HOLDER" shall mean any Holder in whose name
this Warrant is registered upon the books and records maintained by the Company.
1.4. The term "FAIR MARKET VALUE" of a share of Warrant Stock as of a
particular date (the "DETERMINATION DATE") shall mean:
(a) If traded on a securities exchange or the NASDAQ National
Market, the Fair Market Value shall be deemed to be the average of the closing
prices of the Common Stock of the Company on such exchange over the five (5)
business days ending two (2) days prior to the Determination Date;
(b) If actively traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) days prior to the Determination Date; and
(c) If there is no active public market, the Fair Market Value
shall be the value thereof, as determined in good faith by the Board of
Directors of the Company,
1.5. The term "EXERCISE PRICE" shall mean $3.50 per share, subject to
adjustment as provided herein.
1.6. the term "DEVELOPMENT AGREEMENT" shall mean that certain
Development Agreement between the Company and Intel, dated as of June 13, 1997.
2. VESTING PROVISIONS OF WARRANT
This Warrant is subject to the following vesting provisions:
(a) twenty-five percent (25%) of the Warrant Stock shall be
immediately vested and exercisable as of the date of issuance;
(b) seventy-five percent (75%) of the Warrant Stock shall be
vested and exercisable upon the delivery by Intel of the Grocery Application (as
defined in the Development Agreement); PROVIDED that the Grocery Application,
substantially conforming to specifications, is delivered to the Company by Intel
by August 1, 1998 (the "Delivery
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Vesting Deadline"). Notwithstanding the foregoing, if any change to the server
interface specifications or the product specifications is agreed to by Intel and
the Company, the Delivery Vesting Deadline will be extended by such time as
Intel and Streamline agree upon at the time of such change, based upon the
expected delay caused by such change. Furthermore, if Intel delivers to the
Company the Grocery Application, substantially conforming to specifications,
within three months after the Delivery Vesting Deadline, then fifty percent
(50%) of the Warrant Stock shall be vested and exercisable upon such delivery
and the remaining twenty-five (25%) of the Warrant Stock shall not be
exercisable, and if Intel delivers to the Company the Grocery Application,
substantially conforming to specifications, more than three months but within
six months after the Delivery Vesting Deadline, then twenty-five percent (25%)
of the Warrant Stock shall be vested and exercisable upon such delivery and the
remaining fifty percent (50%) shall not be exercisable. If Intel does not
deliver to the Company the Grocery Application, substantially conforming to
specifications, within six months after the Delivery Vesting Deadline, then
seventy-five percent (75%) of the Warrant Stock shall not be vested or
exercisable;
(c) Notwithstanding the above, this Warrant shall become fully
vested and immediately exercisable in full (i) immediately prior to any merger,
consolidation or other similar transaction involving the Company, any sale of
all or substantially all of the assets of the Company, any transaction or series
of related transactions (other than an initial public offering) in which the
stockholders immediately prior to such transaction (or the first of a series of
transactions) hold less than 75% of the capital stock of the Company (on a
fully-diluted, as converted basis) immediately after such transaction (or series
of transactions), or (ii) upon the termination by the Company of the Development
Agreement (other than a termination upon mutual agreement of Intel and the
Company, or a termination by the Company upon material breach by Intel).
3. EXERCISE OF WARRANT
3.1. PAYMENT.
Subject to compliance with the terms and conditions of this Warrant and
applicable securities laws, this Warrant may be exercised, in whole or in part,
to the extent the Warrant Stock subject to this Warrant is vested, at any time
on or before the Expiration Date, by surrendering this Warrant at the principal
office of the Company together with:
(a) the form of Notice of Exercise attached hereto as Exhibit
1 (the "NOTICE OF EXERCISE") duly executed by the Holder, and
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(b) payment, (i) in cash (by check) or by wire transfer, (ii)
by delivery of shares of capital stock of the Company valued at their Fair
Market Value, (iii) by cancellation by the Holder of indebtedness of the Company
to the Holder, or (iv) by any combination of (i), (ii) or (iii), of an amount
equal to the product obtained by multiplying the number of shares of Warrant
Stock being purchased upon such exercise by the then effective Exercise Price
(the "EXERCISE AMOUNT").
3.2. NET ISSUE EXERCISE
In lieu of the payment methods set forth in Section 3.1(b)
above, the Holder may elect to exchange the Warrant for shares of Warrant Stock
equal to the value of the amount of the Warrant being exchanged on the date of
exchange. If Holder elects to exchange this Warrant as provided in this Section
3.2, Holder shall tender to the Company the Warrant for the amount being
exchanged, along with written notice of Holder's election to exchange up to the
full amount of the Warrant, and the Company shall issue to Holder, on a net
basis, the number of shares of the Company's Warrant Stock computed using the
following formula:
X = Y (A-B)
A
Where X = the number of shares of Warrant Stock to be issued
to Holder,
Y = the number of shares of Warrant Stock
purchasable under the amount of the Warrant being
exchanged (as adjusted to the date of such
calculation);
A = the Fair Market Value of one share of the
Company's Common Stock; and
B = Exercise Price (as adjusted to the date of such
calculation).
All references herein to an "exercise" of the Warrant shall
include an exchange pursuant to this Section 3.2.
3.3. PARTIAL EXERCISE, EFFECTIVE DATE OF EXERCISE.
In case of any partial exercise of this Warrant, the Company
shall cancel this Warrant upon surrender hereof and shall execute and deliver a
new Warrant of like tenor and date for the balance of the shares of Warrant
Stock purchasable hereunder. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the
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date of its surrender for exercise as provided above. The person entitled to
receive the shares of Warrant Stock issuable upon exercise of this Warrant shall
be treated for all purposes as the holder of record of such shares as of the
close of business on the date the Holder is deemed to have exercised this
Warrant.
3.4. STOCK CERTIFICATES, FRACTIONAL SHARES.
As soon as practicable on or after such date, the Company
shall issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of whole shares of Warrant Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share equal to such fraction of the Fair Market Value of one whole share of
Warrant Stock as of the date of exercise of this Warrant. No fractional shares
or scrip representing fractional shares shall be issued upon an exercise of this
Warrant, and any fractional shares shall be rounded to the nearest whole share.
4. VALID ISSUANCE; TAXES.
All shares of Warrant Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid and non-assessable, and the Company shall
pay all taxes and other governmental charges that may be imposed in respect of
the issue or delivery thereof. The Company shall not be required to pay any tax
or other charge imposed in connection with any transfer involved in the issuance
of any certificate for shares of Warrant Stock in any name other than that of
the Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established to the Company's
reasonable satisfaction that no tax or other charge is due.
5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
The number of shares of Warrant Stock issuable upon exercise of this
Warrant (or any shares of stock or other securities or property receivable or
issuable upon exercise of this Warrant) and the Exercise Price are subject to
adjustment upon occurrence of the following events:
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5.1. ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR
COMBINATIONS OF SHARES.
The Exercise Price of this Warrant shall be proportionally
decreased and the number of shares of Warrant Stock issuable upon exercise of
this Warrant (or any shares of stock or other securities at the time issuable
upon exercise of this Warrant) shall be proportionally increased to reflect any
stock split or subdivision of the Company's Common Stock. The Exercise Price of
this Warrant shall be proportionally increased and the number of shares of
Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
5.2. ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER
SECURITIES OR PROPERTY.
In case the Company shall make or issue, or shall fix a record
date for the determination of eligible holders entitled to receive, a dividend
or other distribution with respect to the Warrant Stock (or any shares of stock
or other securities at the time issuable upon exercise of the Warrant) payable
in (i) securities of the Company or (ii) assets (excluding cash dividends paid
or payable solely out of retained earnings), then, in each such case, the Holder
of this Warrant on exercise hereof at any time after the consummation, effective
date or record date of such dividend or other distribution, shall receive, in
addition to the shares of Warrant Stock (or such other stock or securities)
issuable on such exercise prior to such date, and without the payment of
additional consideration therefor, the securities or such other assets of the
Company to which such Holder would have been entitled upon such date if such
Holder had exercised this Warrant on the date hereof and had thereafter, during
the period from the date hereof to and including the date of such exercise,
retained such shares and/or all other additional stock available by it as
aforesaid during such period giving effect to all adjustments called for by this
Section 5.
5.3. RECLASSIFICATION.
If the Company, by reclassification of securities or
otherwise, shall change any of the securities as to which purchase rights under
this Warrant exist into the same or a different number of securities of any
other class or classes, this Warrant shall thereafter represent the right to
acquire such number and kind of securities as would have been issuable as the
result of such change with respect to the securities that were subject to the
purchase rights under this Warrant immediately prior to such reclassification or
other change and the Exercise Price therefore
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shall be appropriately adjusted, all subject to further adjustment as provided
in this Section 5.
5.4. ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR
CONSOLIDATION.
In case of any capital reorganization of the capital stock of
the Company (other than a combination, reclassification, exchange or subdivision
of shares otherwise provided for herein), or any merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all the assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 5. The foregoing provisions of this Section 5.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
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5.5 CERTAIN EVENTS
If (i) any event occurs of a type that would have an effect on
the rights granted under this Warrant similar to the effect of any event
described by the other provisions of this Section 5 and (ii) such event IS not
expressly provided for by such other provisions (including, without limitation,
the granting of stock appreciation rights, phantom stock rights and other rights
with equity features), then an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock obtainable upon exercise of this Warrant so
as to protect the rights of the Holder shall be made.
5.6. RESERVATION OF SECURITIES AND ASSETS.
The Company shall reserve, for the life of the Warrant, such
securities or such other assets of the Company the Holder is entitled to receive
pursuant to this Section 5.
6. CERTIFICATE AS TO ADJUSTMENTS.
In each case of any adjustment in the Exercise Price, or number or type
of shares issuable upon exercise of this Warrant, the Chief Financial Officer of
the Company shall compute such adjustment in accordance with the terms of this
Warrant and prepare a certificate setting forth such adjustment and showing in
detail the facts upon which such adjustment is based, including a statement of
the adjusted Exercise Price. The Company shall promptly send (by facsimile and
by either first class mail, postage prepaid or overnight delivery) a copy of
each such certificate to the Holder.
7. LOSS OR MUTILATION.
Upon receipt of evidence reasonably satisfactory to the Company of the
ownership of and the loss, theft, destruction or mutilation of this Warrant, and
of indemnify reasonably satisfactory to it, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or
mutilated Warrant.
8. RESERVATION OF COMMON STOCK.
The Company hereby covenants that at all times there shall be reserved
for issuance and delivery upon exercise of this Warrant such number of shares of
Common Stock or other shares of capital stock of the Company as are from time to
time issuable upon exercise of this Warrant and, from time to time, will take
all steps necessary to amend its Certificate of Incorporation to provide
sufficient reserves of shares of
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<PAGE>
Common Stock issuable upon exercise of this Warrant. All such shares shall be
duly authorized, and when issued upon such exercise, shall be validly issued,
fully paid and non-assessable, free and clear of all liens, security interests,
charges and other encumbrances or restrictions on sale and free and clear of all
preemptive rights, except encumbrances or restrictions arising under federal or
state securities laws. Issuance of this Warrant shall constitute full authority
to the Company's officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of
Common Stock upon the exercise of this Warrant.
9. TRANSFER AND EXCHANGE.
Subject to compliance with applicable securities laws, and subject to
the provisions of Section 10 below, this Warrant may be transferred or assigned
in whole or in part, at any time, and from time to time, at the Holder's sole
election.
10. RESTRICTIONS ON TRANSFER.
The Holder, by acceptance hereof, agrees that, absent an effective
registration statement filed with the U.S. Securities and Exchange Commission
("SEC") under the Act covering the disposition or sale of this Warrant or the
Warrant Stock issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge, or hypothecate any or all such Warrants
or Warrant Stock, as the case may be, unless either (i) the Company has received
an opinion of counsel, in form reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition or (ii) the sale of such securities is made pursuant to SEC Rule
144; PROVIDED that if such sale is pursuant to Rule 144, the Company may require
the delivery of an opinion of counsel confirming that such Warrant or Warrant
Stock, as the case may be, may be sold pursuant to Rule 144, if the Company
determines that such opinion is reasonably necessary.
11. COMPLIANCE WITH SECURITIES LAWS.
By acceptance of this Warrant, the Holder hereby represents, warrants
and covenants that any shares of stock purchased upon exercise of this Warrant
shall be acquired for investment only and not with a view to, or for sale in
connection with, any distribution thereof, that the Holder has had such
opportunity as such Holder has deemed adequate to obtain from representatives of
the Company such information as is necessary to permit the holder to evaluate
the merits and risks of its investment in the Company; that the Holder is able
to bear the economic risk of holding such shares as may be acquired pursuant to
the exercise of this Warrant for an
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indefinite period; that the Holder understands that the shares of stock acquired
pursuant to the exercise of this Warrant will not be registered under the Act
(unless otherwise required pursuant to exercise by the holder of the
registration rights, if any, previously granted to the registered Holder) and
will be "restricted securities" within the meaning of Rule 144 under the Act and
that the exemption from registration under Rule 144 will not be available for at
least one year from the date of exercise of this Warrant, subject to any special
treatment by the Securities and Exchange Commission for exercise of this Warrant
pursuant to Section 3.2, and even then will not be available unless a public
market then exists for the stock, adequate information concerning the Company is
then available to the public, and other terms and conditions of Rule 144 are
complied with; and that all stock certificates representing shares of stock
issued to the Holder upon exercise of this Warrant may have affixed thereto a
legend substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN AND WILL
BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("THE ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
OR UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN
FORM REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR
(ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND
EXCHANGE COMMISSION RULE 144; PROVIDED THAT IF SUCH SALE IS PURSUANT TO
RULE 144, THE COMPANY MAY REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL
CONFIRMING THAT SUCH WARRANT OR WARRANT STOCK, AS THE CASE MAY BE, MAY
BE SOLD PURSUANT TO RULE 144, IF THE COMPANY DETERMINES THAT SUCH
OPINION IS REASONABLY NECESSARY.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS.
This Warrant shall not entitle the Holder to any voting rights or other
rights as a shareholder of the Company. In the absence of affirmative action by
such Holder to purchase Warrant Stock by exercise of this Warrant, no provisions
of this Warrant, and no enumeration herein
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of the rights or privileges of the Holder hereof shall cause such Holder hereof
to be a shareholder of the Company for any purpose.
13. REGISTRATION RIGHTS.
All shares of Common Stock issuable upon exercise of this Warrant shall
be "Registrable Securities" as defined in Section I of that certain Registration
Rights Agreement, dated as of June 13, 1997, among the Company, Intel and
certain other stockholders of the Company, and entitled, subject to the terms
and conditions of that agreement, to all registration rights granted to holders
of Registrable Securities thereunder.
14. NOTICES.
All notices and other communications from the Company to the Holder
shall be given in accordance with Section 7.11 of the Development Agreement.
15. HEADINGS.
The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof
16. LAW GOVERNING.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware.
17. NO IMPAIRMENT.
The Company will not, by amendment of its Certificate of Incorporation
or bylaws, or through reorganization, consolidation, merger, dissolution, issue
or sale of securities, sale of assets or any other 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 action as may be necessary or appropriate in order
to protect the rights of the Registered Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock issuable upon the
exercise of this Warrant above the amount payable therefor upon such exercise,
and (b) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and non-assessable
shares of Warrant Stock upon exercise of this Warrant.
18. NOTICES OF RECORD DATE. In case:
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18.1. the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
18.2. of any consolidation or merger of the Company with or into
another corporation, any capital reorganization or the Company, any
reclassification of the Capital Stock of the Company, or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation; or
18.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
18.4. of any redemption or conversion of all outstanding shares of
Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of shares of Common Stock (or
such stock or securities as at the time are receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
thirty (30) days prior to the date therein specified.
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19. SEVERABILITY.
If any term, provision, covenant or restriction of this Warrant is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
20. COUNTERPARTS.
For the convenience of the parties, any number of counterparts of this
Warrant may be executed by the parties hereto and each such executed counterpart
shall be, and shall be deemed to be, an original instrument.
21. NO INCONSISTENT AGREEMENTS.
The Company will not on or after the date of this Warrant enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders of this Warrant or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to holders of the
Company's securities under any other agreements, except rights that have been
waived.
22. SATURDAYS, SUNDAYS AND HOLIDAYS.
If the Expiration Date falls on a Saturday, Sunday or legal holiday,
the Expiration Date shall automatically be extended until 5:00 p.m. the next
business day.
AGREED:
INTEL CORPORATION STREAMLINE, INC.
/s/ A. R. Gosden /s/ Timothy A. Demello
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Signature Signature
A. R. Gosden Timothy A. Demello
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Printed Name Printed Name
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
- ----------------------------- ---------------------------
Title Title
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EXHIBIT I
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
STREAMLINE, INC.:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
shares of Common Stock, as provided for therein, and (check the applicable box):
(a) tenders herewith payment of the exercise price in full in the
form of cash or a certified or official bank check in same-day funds in
the amount of $_________________; and/or
(b) hereby tenders certificates representing _________ shares
of stock of _____________ the Company, with a Fair Market Value of
$____________
(c) hereby agrees to cancel $__________ of indebtedness owed by
the Company to the Holder; for a total of __________ shares of Common
Stock.
Elects the Net Issue Exercise option pursuant to Section 3.2 of the
Warrant, and accordingly requests delivery of a net of ___________
shares of Common Stock.
Please issue a certificate or certificates for such shares of Common Stock in
the name of, and pay any cash for any fractional share to (please print name,
address and social security number):
Name:
-----------------------------------
Address:
-----------------------------------
Signature:
-----------------------------------
Date:
-----------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
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Exhibit 10.9
STREAMLINE, INC.
WAIVER AND MODIFICATION AGREEMENT
This Waiver and Modification Agreement (this "Agreement"), dated as of
September 23, 1997, is by and among Streamline, Inc., a Delaware corporation
(the "Company") and the persons listed on SCHEDULE 1 attached hereto (the
"Investors").
WHEREAS, the Company and certain of the Investors (the "Initial
Investors," and those Investors which are not Initial Investors being referred
to hereinafter as the "New Investors") (i) entered into a certain Stock Purchase
Agreement, dated June 13, 1997 (the "Stock Purchase Agreement"), whereby the
Initial Investors agreed to purchase up to an aggregate of 100,000 shares of the
Company's Preferred Stock, par value $1.00 per share ("Preferred Stock"),
consisting of shares of the Company's Series B Convertible Preferred Stock (the
"Series B Preferred") and shares of the Company's Series C Preferred Stock (the
"Series C Preferred") and (ii) entered into a Registration Rights Agreement,
dated June 13, 1997 (the "Registration Rights Agreement");
WHEREAS, on June 13, 1997 (the "First Closing Date"), the Initial
Investors purchased an aggregate of 20,000 shares of Series B Preferred and
10,000 shares of Series C Preferred at the First Closing contemplated by the
Stock Purchase Agreement;
WHEREAS, the Stock Purchase Agreement contemplates that the Company
shall sell and issue to the Initial Investors and certain other persons, and the
Investors and such other persons shall purchase from the Company, up to an
additional 70,000 shares of Preferred Stock (the "Second Closing Shares") upon
satisfaction of certain conditions, at a second closing to take place no later
than September 5, 1997;
WHEREAS, the Company and the Investors are desirous of providing for
the sale and issuance of the Second Closing Shares to the Initial Investors and
New Investors listed under the caption "Second Closing" on SCHEDULE 1 attached
hereto, at a second closing to take place on the date hereof; and
WHEREAS, to facilitate the sale and issuance by the Company of the
Second Closing Shares, the Company and the Investors wish to modify the Stock
Purchase Agreement and the Registration Rights Agreement as provided herein;
NOW, THEREFORE, the parties hereto, in consideration of the premises
and the mutual covenants and agreements herein contained, and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, hereby agree as follows:
<PAGE>
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I. STOCK PURCHASE AGREEMENT
SECTION 1. DEFINITIONS
Capitalized terms not otherwise defined herein shall have the same
meaning given those terms in the Stock Purchase Agreement.
SECTION 2. WAIVER AND CONSENT
(a) The Company and the Initial Investors hereby waive the
requirement in Section 2.2(b) of the Stock Purchase Agreement that the Second
Closing take place no later than September 5, 1997, and the Company and the
Investors hereby consent to effect the Second Closing on the date hereof,
subject to and upon the terms and conditions set forth in the Stock Purchase
Agreement as modified and supplemented by this Agreement.
(b) The Initial Investors hereby waive certain preemptive rights
with respect to issuances of capital stock by the Company (the "Preemptive
Rights"), pursuant to Article Fourth, Section B.8 of the Company's Certificate
of Incorporation, as in effect on the date hereof (the "Charter") with respect
to the issuance to General Electric Capital Corporation, a New York corporation
("GE Capital"), on the date hereof, of a warrant (the "GE Warrant") to purchase
up to 285, 714 shares of Common Stock.
SECTION 3. ADDITIONAL PARTIES
The Stock Purchase Agreement is hereby amended and modified to add the
New Investors as parties thereto for all purposes thereof. From and after the
date hereof, the New Investors shall have all of the rights and obligations
applicable to Investors under the Stock Purchase Agreement as amended hereby. In
the case of GE Capital, the parties acknowledge that the Second Closing Shares
issued to GE Capital at the Second Closing are issued in satisfaction of, and
not in addition to, the Company's obligation to issue up to 20,000 shares of
Series B Preferred upon satisfaction of certain conditions set forth in a
certain letter agreement between the Company and GE Capital, dated as of May 30,
1997.
Each New Investor hereby acknowledges that it has received from the
Company a copy of each of the Stock Purchase Agreement (together with all of the
schedules and exhibits thereto) and the Registration Rights Agreement.
SECTION 4. MODIFICATION TO, AND SUPPLEMENTATION OF, THE STOCK PURCHASE
AGREEMENT.
The Stock Purchase Agreement is hereby modified and supplemented as
follows:
(a) SCHEDULES 1, 3.4, 3.13 and 3.15 of the Stock Purchase
Agreement are hereby deleted and replaced in their entirety with SCHEDULES 1,
3.4, 3.13 and 3.15, respectively, attached hereto.
<PAGE>
-3-
(b) SCHEDULES 3.7, 3.8 and 3.12 of the Stock Purchase Agreement are
hereby amended and supplemented with the Annexes to such Schedules attached
hereto.
(c) The definition of "Investors" in the Stock Purchase Agreement is
hereby amended to mean those Investors listed on SCHEDULE 1 attached hereto.
(d) The definition of "Financial Statements" in the Stock Purchase
Agreement is hereby amended by inserting after clause (ii) thereof the following
phrase: "and (iii) an unaudited balance sheet and statement of operations and
cash flows of the Company as at and for the seven months ended July 31, 1997."
(e) Subparagraphs (a) and (b) of Section 3.4 of the Stock Purchase
Agreement is hereby deleted and replaced with the following:
SECTION 3.4. CAPITAL STOCK.
(a) As of the date hereof and as of the Closing Date, the
authorized capital stock of the Company shall consist of 25,000,000
shares of Common Stock, of which 6,930,064 shares are issued and
outstanding, and 300,000 shares of Preferred Stock, $1.00 par value per
share, of which (i) 100,000 shares have been designated as Series A
Convertible Preferred Stock ("Series A Preferred"), of which 50,000
shares are issued and outstanding, (ii) 100,000 shares have been
designated as Series B Preferred, of which 20,000 shares are issued and
outstanding, and (iii) 100,000 shares have been designated as Series C
Preferred, of which 10,000 shares are issued and outstanding. At the
Second Closing, if any, up to an additional 70,000 shares of Preferred
Stock, consisting of shares of Series B Preferred and/or Series C
Preferred shall have been, or shall be, issued in accordance with
Section 2.2 hereof.
(b) Except for (i) options to purchase, in the aggregate,
1,307,500 shares of Common Stock, issued or authorized for issuance to
certain employees and directors of and consultants to the Company,
identified on SCHEDULE 3.4 hereto, (ii) warrants to purchase, in the
aggregate, 300,000 shares of Common Stock, at an average weighted
exercise price of $1.002 per share, issued to the parties identified on
SCHEDULE 3.4 hereto, (iii) warrants issued to Intel Corporation
("Intel") to purchase, in the aggregate, 285,714 shares of Common
Stock, at an exercise price of $3.50 per share, (iv) warrants to be
issued to General Electric Capital Corporation ("GE Capital") at the
Second Closing to purchase, in the aggregate, 285,714 shares of Common
Stock at an exercise price of $3.50 per share with respect to
twenty-five percent (25%) of such shares and at an exercise price equal
to or greater than $4.20 with respect to the remaining seventy-five
percent (75%) of such shares (in accordance with the exercise price
adjustments set forth in such warrant) and (v) the issuance of shares
pursuant to the terms hereof, no subscriptions, warrants, options,
convertible debt, or securities, or any commitments, agreements, or
rights of any kind with respect to securities of the
<PAGE>
-4-
Company are outstanding as of the date hereof or shall be outstanding
as of the Closing Date.
(f) The date "March 31, 1997" in the first sentence of Section
3.14 of the Stock Purchase Agreement is hereby deleted and replaced with the
date "December 31, 1996."
(g) The phrase "without the prior written consent of a
majority in interest of the holders of then outstanding shares of Series A
Preferred, Series B Preferred and Series C Preferred (voting together as a
class, with each such holder being entitled to the number of votes to which such
holder would be entitled upon conversion of each share of Series A Preferred,
Series B Preferred and Series C Preferred held of record by such holder)" in the
first sentence of Section 6.7 of the Stock Purchase Agreement is hereby deleted
and replaced with the following phrase:
without the prior written consent of at least 66-2/3% in interest of
the holders of then outstanding shares of Series A Preferred, Series B
Preferred and Series C Preferred (voting together as a class, with each
such holder being entitled to one vote for each share of Series A
Preferred, Series B Preferred and Series C Preferred held of record by
such holder)
(h) Section 6.13 of the Stock Purchase Agreement is hereby
deleted and replaced with the following:
SECTION 6.13. TERMINATION OF COVENANTS. The covenants of the
Company contained in Sections 6.1, 6.3, 6.6, 6.7, 6.10, 6.14 and 6.16
shall terminate, and be of no further force or effect, upon the
Company's first public offering of Common Stock, resulting in gross
proceeds to the Company of at least $15,000,000 (and net proceeds of at
least $14,000,000), at a price per share of at least $7.50.
(i) The Stock Purchase Agreement is hereby amended by
inserting the following as Section 6.14 thereto:
SECTION 6.14. ANCILLARY FINANCING. In the event the Company
proposes to enter into any arrangement for the provision of debt
financing with respect to assets of the Company, including but not
limited to leasing or secured or unsecured lending (a "Debt
Financing"), or receives an offer for the provision of Debt Financing
from any person (a "Prospective Financier"), then prior to negotiating
any such arrangement, the Company shall give GE Capital the right to
provide such Debt Financing on the following basis:
(i) The Company shall deliver a written request to GE
Capital to provide a proposal for Debt Financing (a "Financing
Notice"). Within fifteen (15) business days after receipt of
the Financing Notice, GE Capital shall deliver to the Company
a proposal containing the material terms of
<PAGE>
-5-
such financing or shall notify the Company that it does not
wish to provide such financing.
(ii) In the event that GE Capital notifies the
Company that it declines to deliver a proposal, then the
Company shall be free to pursue negotiations with a
Prospective Financier.
(iii) If GE Capital delivers a proposal to the
Company, then following delivery of such proposal, the Company
shall not enter into any other arrangements for the provision
of Debt Financing with any Prospective Financier on terms
equal to or less favorable to the Company (taken as a whole)
than those proposed by GE Capital in its proposal to the
Company.
(iv) If sixty (60) days after delivery of such
proposal, the Company has failed to enter into definitive
arrangements for the provision of Debt Financing that was the
subject of the Financing Notice, then the Company's
obligations under this Section 6.14 with respect to the
provision of Debt Financing shall thereafter be subject to all
of the restrictions and provisions of this Section 6.14.
(j) The Stock Purchase Agreement is hereby amended by
inserting the following as Section 6.15 thereto:
SECTION 6.15. CO-DEVELOPMENT. The Company shall permit GE
Capital or one of its Affiliates to participate, at no additional cost
to GE Capital or such Affiliate, in any activities conducted by the
next Streamline Consumer Learning Center organized by the Company prior
to the year 2000 (which Streamline Consumer Learning Center is expected
to be organized by the Company in 1998). Additionally, the Company
agrees that, during 1998, it shall use commercially reasonable efforts
to enter into arrangements with GE Capital or one of its Affiliates, on
terms mutually agreeable to such parties, for the co-development of
financial products or services to be offered to customers of the
Company.
(k) The Stock Purchase Agreement is hereby amended by
inserting the following as Section 6.16 thereto:
SECTION 6.16. PROHIBITION AGAINST CERTAIN REDEMPTIONS. So long
as any shares of Series A Preferred, Series B Preferred or Series C
Preferred are outstanding, the Company shall not, without the prior
written consent of at least a majority in interest of the holders of
then outstanding shares of Series A Preferred, Series B Preferred and
Series C Preferred (voting together as a class, with each such holder
being entitled to one vote for each share of Series A Preferred, Series
B Preferred and Series C Preferred held of record by such holder), (i)
repurchase, redeem or otherwise acquire for consideration from any
director, officer or holder of greater than 10% of Common Stock any
shares of Common Stock then held of
<PAGE>
-6-
record by such person or (ii) furnish information regarding the Company
or its operations in order to facilitate the sale of any shares of
Common Stock by any such person.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Investors purchasing
Second Closing Shares that the representations and warranties set forth in
Article 3 of the Stock Purchase Agreement, as supplemented and modified by this
Agreement, are true and correct in all material respects at and as of the date
hereof with the same effect as though made at and as of the date hereof, except
to the extent that any of such representations and warranties were made as of a
specified date, in which case such representations and warranties are true and
correct as of such date. Each Investor purchasing Second Closing Shares hereby
severally represents and warrants to the Company, with respect to itself only,
that the representations and warranties set forth in Article 4 of the Stock
Purchase Agreement are true and correct in all material respects at and as of
the date hereof.
II. REGISTRATION RIGHTS AGREEMENT
SECTION 1. MODIFICATION TO THE REGISTRATION RIGHTS AGREEMENT
The definition of "Registrable Shares" is hereby deleted and replaced
in its entirely with the following:
"REGISTRABLE SHARES" shall mean, (i) with respect to each
Investor (or its Permitted Transferee), any or all of the shares of
Common Stock issued upon conversion of any or all of such Investor's
(or Permitted Transferee's) shares of Preferred Stock, (ii) in the case
of Intel, shall also include any shares of Common Stock issuable upon
exercise of that certain warrant issued by the Company to Intel on June
13, 1997 and (iii) in the case of General Electric Capital Corporation
("GE"), shall also include any shares of Common Stock issuable upon
exercise of that certain warrant issued by the Company to GE on
September 23, 1997; PROVIDED, HOWEVER, that such securities shall cease
to be Registrable Shares when the holder of such Registrable shares
would be entitled to sell all of such securities within a three-month
period pursuant to the provisions of Rule 144.
III. GENERAL PROVISIONS
SECTION 1. RATIFICATION.
Except to the extent modified and/or supplemented by this Agreement,
all of the terms, conditions and covenants of the Stock Purchase Agreement and
the Registration
<PAGE>
-7-
Rights Agreement are hereby ratified and confirmed and shall remain in full
force and effect.
SECTION 2. ENTIRE AGREEMENT.
The Stock Purchase Agreement, the Registration Rights Agreement and
this Agreement, together with the other writings referred to therein and herein
and/or delivered pursuant thereto and/or hereto, contain the entire agreement
among the parties with respect to the subject matter thereof and hereof and
shall be read and construed together as a single agreement.
SECTION 3. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
SECTION 4. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed entirely within the state without regard to principles of conflicts of
law.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the day and year first above written.
STREAMLINE, INC.
By: /s/ Timothy A. Demello
----------------------------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
<PAGE>
-8-
INVESTORS:
RELIANCE INSURANCE COMPANY
on behalf of itself and its nominee, HARE & Co.
By: /s/ John P. Fitzsimmons
----------------------------------------------------------
John P. Fitzsimmons
Vice President
PAINEWEBBER CAPITAL INC.
By: /s/ Dhananjay Pai
----------------------------------------------------------
Dhananjay Pai
President
INTEL CORPORATION
By: /s/ Arvind Sodhani
----------------------------------------------------------
Arvind Sodhani
Vice President and Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Thomas A. Crowley
----------------------------------------------------------
Thomas A. Crowley
Managing Director-Technology Ventures
(As Attorney in Fact)
SAP AMERICA, INC.
By: /s/ Kevin S. Mckay
----------------------------------------------------------
Kevin S. McKay
Chief Operations Officer and Chief Financial Officer
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 1 Name of Investor, Number of Shares and Subscription Price
Schedule 3.4 Capitalization
Annex to Schedule 3.7 Consents
Annex to Schedule 3.8 Material Contracts
Annex to Schedule 3.12 Financial Statements
Schedule 3.13 Absence of Certain Undisclosed Liabilities
Schedule 3.15 Litigation
</TABLE>
<PAGE>
Exhibit 10.10
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY AND THE SHARES OF COMMON STOCK
ISSUABLE HEREUNDER HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii)
THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE
COMMISSION RULE 144.
Void after 5:00 p.m.,
Eastern Time
on September 23, 2001
WARRANT TO PURCHASE 285,714 SHARES OF COMMON STOCK
OF
STREAMLINE, INC.
(Subject to Adjustment)
Initial Number of Shares: 285,714 shares
Date of Grant: September 23, 1997
Expiration Date: September 23, 2001
THIS CERTIFIES THAT, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, General Electric Capital
Corporation, a New York corporation ("GE CAPITAL"), or its permitted registered
assigns ("HOLDER"), is entitled to purchase from Streamline, Inc., a Delaware
corporation (the "COMPANY"), subject to the terms and conditions of this Warrant
(including without limitation the vesting provisions set forth in Section 2
hereof), Two Hundred Eighty-Five Thousand Seven-Hundred Fourteen (285,714) fully
paid and nonassessable shares of the Common Stock of the Company, $0.01 par
value per share (the "WARRANT STOCK"), at the applicable Exercise Price (as
defined in Section 1.5 below). Both the number of shares of Warrant Stock
purchasable under this Warrant and the Exercise Price are subject to adjustment
as provided herein. This Warrant shall terminate at 5:00 p.m., Eastern Time, on
September 23, 2001 (the "EXPIRATION DATE").
<PAGE>
Warrant
- --------------------------------------------------------------------------------
1. CERTAIN DEFINITIONS. As used in this Warrant:
1.1. The term "WARRANT STOCK" shall mean the Common Stock, $0.01 par
value per share, of the Company, and any other securities and property at any
time receivable or issuable upon exercise of this Warrant, unless the context
otherwise requires.
1.2. The term "WARRANT" as used herein, shall include this Warrant and
any warrant delivered in substitution or exchange therefor as provided herein.
1.3. The term "REGISTERED HOLDER" shall mean any Holder in whose name
this Warrant is registered upon the books and records maintained by the Company.
1.4. The term "FAIR MARKET VALUE" of a share of Warrant Stock as of a
particular date (the "DETERMINATION DATE") shall mean:
(a) If traded on a securities exchange or the NASDAQ National
Market, the Fair Market Value shall be deemed to be the average of the closing
prices of the Common Stock of the Company on such exchange over the five (5)
business days ending two (2) days prior to the Determination Date;
(b) If actively traded over-the-counter, the Fair Market Value
shall be deemed to be the average of the closing bid prices over the 30-day
period ending three (3) days prior to the Determination Date; and
(c) If there is no active public market, the Fair Market Value
shall be the value thereof, as determined in good faith by the Board of
Directors of the Company.
1.5. The term "EXERCISE PRICE" shall mean:
(a) With respect to the Initial Shares (as defined in Section 2
hereof), $3.50 per share, subject to adjustment as provided herein;
(b) With respect to the Remaining Shares (as defined in Section 2
hereof), on or prior to September 23, 1998, $4.20 per share, subject to
adjustment as provided herein; and
-2-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
(c) With respect to the Remaining Shares (as defined in Section 2
hereof), after September 23, 1998, $5.04 per share, subject to adjustment as
provided herein.
1.6. The term "TOTAL DEBT FINANCING" shall mean the cumulative amount
of debt financing (including equipment and motor vehicle leasing) provided by GE
Capital to the Company as of any date of measurement.
2. VESTING
This Warrant is subject to the following vesting provisions:
(a) twenty-five percent (25%) of the Warrant Stock (the "INITIAL
SHARES") shall be immediately vested and exercisable; and
(b) seventy-five percent (75%) of the Warrant Stock (the
"REMAINING SHARES") shall become vested and exercisable, from time to time
during the period from September 23, 1997 through September 23, 1999, as the
Total Debt Financing provided to the Company by GE Capital exceeds $1,250,000,
the percentage of Remaining Shares being vested and exercisable on any date of
measurement being determined in accordance with the following formula:
TDF - $1,250,000
X = ----------------
$3,750,000
X = percentage of Remaining Shares vested as of a given date;
TDF = Total Debt Financing provided by GE Capital to the
Company as of such date (for purposes of this
calculation, if TDF exceeds $5,000,000, the value of
TDF shall be deemed to be $5,000,000).
(c) For purposes of clarification: (i) the Initial Shares are
immediately vested and exercisable and (ii) the Remaining Shares shall become
vested and exercisable in accordance with Section 2(b) hereof (it being
understood that a portion of the Remaining Shares may become vested and
exercisable without all of the Remaining Shares becoming vested and
exercisable). For all of the Remaining Shares to become fully vested and
exercisable, the Total Debt Financing provided to the Company
-3-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
by GE Capital on or prior to September 23, 1999 must equal or exceed $5,000,000.
3. MANNER OF EXERCISE
3.1. PAYMENT.
Subject to compliance with the terms and conditions of this Warrant and
applicable securities laws, this Warrant may be exercised, in whole or in part,
in accordance with the provisions of Section 2 hereof, at any time on or before
the Expiration Date, by surrendering this Warrant at the principal office of the
Company together with:
(a) the form of Notice of Exercise attached hereto as Exhibit 1
(the "NOTICE OF EXERCISE") duly executed by the Holder, and
(b) payment, in cash (by check) or by wire transfer, of an
aggregate amount equal to the number of shares of Warrant Stock being purchased
upon such exercise multiplied by the applicable Exercise Price for each such
share (such aggregate amount being referred to herein as the "EXERCISE AMOUNT").
3.2. PARTIAL EXERCISE, EFFECTIVE DATE OF EXERCISE.
In case of any partial exercise of this Warrant, the Company shall
cancel this Warrant upon surrender hereof and shall execute and deliver a new
Warrant of like tenor and date for the balance of the shares of Warrant Stock
purchasable hereunder. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above. The person entitled to receive the shares of Warrant
Stock issuable upon exercise of this Warrant shall be treated for all purposes
as the holder of record of such shares as of the close of business on the date
the Holder is deemed to have exercised this Warrant.
3.3. STOCK CERTIFICATES, FRACTIONAL SHARES.
As soon as practicable on or after such date, the Company shall
issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of whole shares of Warrant Stock
issuable upon such exercise, together with cash in lieu of any fraction of a
share equal to such fraction of the Fair Market Value of one whole share of
Warrant Stock as of the date of exercise of this Warrant. No fractional shares
or scrip representing fractional shares
-4-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
shall be issued upon an exercise of this Warrant, and any fractional shares
shall be rounded to the nearest whole share.
4. VALID ISSUANCE; TAXES.
All shares of Warrant Stock issued upon the exercise of this Warrant
shall be validly issued, fully paid and non-assessable, and the Company shall
pay all taxes and other governmental charges that may be imposed in respect of
the issue or delivery thereof. The Company shall not be required to pay any tax
or other charge imposed in connection with any transfer involved in the issuance
of any certificate for shares of Warrant Stock in any name other than that of
the Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established to the Company's
reasonable satisfaction that no tax or other charge is due.
5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
The number of shares of Warrant Stock issuable upon exercise of this
Warrant (or any shares of stock or other securities or property receivable or
issuable upon exercise of this Warrant) and the Exercise Price are subject to
adjustment upon occurrence of the following events:
5.1. ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR COMBINATIONS OF
SHARES.
The Exercise Price of this Warrant shall be proportionally
decreased and the number of shares of Warrant Stock issuable upon exercise of
this Warrant (or any shares of stock or other securities at the time issuable
upon exercise of this Warrant) shall be proportionally increased to reflect any
stock split or subdivision of the Company's Common Stock. The Exercise Price of
this Warrant shall be proportionally increased and the number of shares of
Warrant Stock issuable upon exercise of this Warrant (or any shares of stock or
other securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
-5-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
5.2. ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER
SECURITIES OR PROPERTY.
In case the Company shall make or issue, or shall fix a record
date for the determination of eligible holders entitled to receive, a dividend
or other distribution with respect to the Warrant Stock (or any shares of stock
or other securities at the time issuable upon exercise of the Warrant) payable
in (i) securities of the Company or (ii) assets (excluding cash dividends paid
or payable solely out of retained earnings), then, in each such case, the Holder
of this Warrant on exercise hereof at any time after the consummation, effective
date or record date of such dividend or other distribution, shall receive, in
addition to the shares of Warrant Stock (or such other stock or securities)
issuable on such exercise prior to such date, and without the payment of
additional consideration therefor, the securities or such other assets of the
Company to which such Holder would have been entitled upon such date if such
Holder had exercised this Warrant on the date hereof and had thereafter, during
the period from the date hereof to and including the date of such exercise,
retained such shares and/or all other additional stock available by it as
aforesaid during such period giving effect to all adjustments called for by this
Section 5.
5.3. RECLASSIFICATION.
If the Company, by reclassification of securities or otherwise,
shall change any of the securities as to which purchase rights under this
Warrant exist into the same or a different number of securities of any other
class or classes, this Warrant shall thereafter represent the right to acquire
such number and kind of securities as would have been issuable as the result of
such change with respect to the securities that were subject to the purchase
rights under this Warrant immediately prior to such reclassification or other
change and the Exercise Price therefore shall be appropriately adjusted, all
subject to further adjustment as provided in this Section 5.
5.4. ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR CONSOLIDATION.
In case of any capital reorganization of the capital stock of the
Company (other than a combination, reclassification, exchange or subdivision of
shares otherwise provided for herein), or any merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all the assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or
-6-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
transfer, lawful provision shall be made so that the Holder of this Warrant
shall thereafter be entitled to receive upon exercise of this Warrant, during
the period specified herein and upon payment of the Exercise Price then in
effect, the number of shares of stock or other securities or property of the
successor corporation resulting from such reorganization, merger, consolidation,
sale or transfer that a holder of the shares deliverable upon exercise of this
Warrant would have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if this Warrant had been exercised
immediately before such reorganization, merger, consolidation, sale or transfer,
all subject to further adjustment as provided in this Section 5. The foregoing
provisions of this Section 5.4 shall similarly apply to successive
reorganizations, consolidations, mergers, sales and transfers and to the stock
or securities of any other corporation that are at the time receivable upon the
exercise of this Warrant. If the per-share consideration payable to the Holder
hereof for shares in connection with any such transaction is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
5.5 CERTAIN EVENTS
If (i) any event occurs of a type that would have an effect on the
rights granted under this Warrant similar to the effect of any event described
by the other provisions of this Section 5 and (ii) such event IS not expressly
provided for by such other provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights and other rights
with equity features), then an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock obtainable upon exercise of this Warrant so
as to protect the rights of the Holder shall be made.
5.6. RESERVATION OF SECURITIES AND ASSETS.
The Company shall reserve, for the life of the Warrant, such
securities or such other assets of the Company the Holder is entitled to receive
pursuant to this Section 5.
-7-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
6. CERTIFICATE AS TO ADJUSTMENTS.
In each case of any adjustment in the Exercise Price, or number or type
of shares issuable upon exercise of this Warrant, the Chief Financial Officer or
the Controller of the Company shall compute such adjustment in accordance with
the terms of this Warrant and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based,
including a statement of the adjusted Exercise Price. The Company shall promptly
send (by facsimile and by either first class mail, postage prepaid or overnight
delivery) a copy of each such certificate to the Holder.
7. LOSS OR MUTILATION.
Upon receipt of evidence reasonably satisfactory to the Company of the
ownership of and the loss, theft, destruction or mutilation of this Warrant, and
of indemnify reasonably satisfactory to it, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or
mutilated Warrant.
8. RESERVATION OF COMMON STOCK.
The Company hereby covenants that at all times there shall be reserved
for issuance and delivery upon exercise of this Warrant such number of shares of
Common Stock or other shares of capital stock of the Company as are from time to
time issuable upon exercise of this Warrant and, from time to time, will take
all steps necessary to amend its Certificate of Incorporation to provide
sufficient reserves of shares of Common Stock issuable upon exercise of this
Warrant. All such shares shall be duly authorized, and when issued upon such
exercise, shall be validly issued, fully paid and non-assessable, free and clear
of all liens, security interests, charges and other encumbrances or restrictions
on sale and free and clear of all preemptive rights, except encumbrances or
restrictions arising under federal or state securities laws. Issuance of this
Warrant shall constitute full authority to the Company's officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
9. TRANSFER AND EXCHANGE.
Subject to compliance with applicable securities laws, and subject to
the provisions of Section 10 below, this Warrant may be transferred or
-8-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
assigned in whole or in part, at any time, and from time to time, at the
Holder's sole election.
10. RESTRICTIONS ON TRANSFER.
The Holder, by acceptance hereof, agrees that, absent an effective
registration statement filed with the U.S. Securities and Exchange Commission
("SEC") under the Act covering the disposition or sale of this Warrant or the
Warrant Stock issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge, or hypothecate any or all such Warrants
or Warrant Stock, as the case may be, unless either (i) the Company has received
an opinion of counsel, in form reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition or (ii) the sale of such securities is made pursuant to SEC Rule
144; PROVIDED that if such sale is pursuant to Rule 144, the Company may require
the delivery of an opinion of counsel confirming that such Warrant or Warrant
Stock, as the case may be, may be sold pursuant to Rule 144, if the Company
determines that such opinion is reasonably necessary.
11. COMPLIANCE WITH SECURITIES LAWS.
By acceptance of this Warrant, the Holder hereby represents, warrants
and covenants that any shares of stock purchased upon exercise of this Warrant
shall be acquired for investment only and not with a view to, or for sale in
connection with, any distribution thereof, that the Holder has had such
opportunity as such Holder has deemed adequate to obtain from representatives of
the Company such information as is necessary to permit the holder to evaluate
the merits and risks of its investment in the Company; that the Holder is able
to bear the economic risk of holding such shares as may be acquired pursuant to
the exercise of this Warrant for an indefinite period; that the Holder
understands that the shares of stock acquired pursuant to the exercise of this
Warrant will not be registered under the Act (unless otherwise required pursuant
to exercise by the holder of the registration rights, if any, previously granted
to the registered Holder) and will be restricted securities within the meaning
of Rule 144 under the Act and that the exemption from registration under Rule
144 will not be available for at least one year from the date of exercise of
this Warrant, and even then will not be available unless a public market then
exists for the stock, adequate information concerning the Company is then
available to the public, and other terms and conditions of Rule 144 are complied
with; and that all stock certificates
-9-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
representing shares of stock issued to the Holder upon exercise of this Warrant
may have affixed thereto a legend substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN AND WILL
BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("THE ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
OR UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL, IN
FORM REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR
(ii) THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND
EXCHANGE COMMISSION RULE 144; PROVIDED THAT IF SUCH SALE IS PURSUANT TO
RULE 144, THE COMPANY MAY REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL
CONFIRMING THAT SUCH WARRANT OR WARRANT STOCK, AS THE CASE MAY BE, MAY
BE SOLD PURSUANT TO RULE 144, IF THE COMPANY DETERMINES THAT SUCH
OPINION IS REASONABLY NECESSARY.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS.
This Warrant shall not entitle the Holder to any voting rights or other
rights as a shareholder of the Company. In the absence of affirmative action by
such Holder to purchase Warrant Stock by exercise of this Warrant, no provisions
of this Warrant, and no enumeration herein of the rights or privileges of the
Holder hereof shall cause such Holder hereof to be a shareholder of the Company
for any purpose.
13. REGISTRATION RIGHTS.
All shares of Common Stock issuable upon exercise of this Warrant shall
be "Registrable Securities" as defined in Section I of that certain Registration
Rights Agreement, dated as of June 13, 1997, among the Company and certain other
stockholders of the Company (as amended), and entitled, subject to the terms and
conditions of that agreement, to all
-10-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
registration rights granted to holders of Registrable Securities thereunder.
14. NOTICES.
All notices and other communications from the Company to the Holder
shall be given in accordance with Section 8.3 of that certain Stock Purchase
Agreement, dated as of June 13, 1997, among the Company and certain other
stockholders of the Company (as amended).
15. HEADINGS.
The headings in this Warrant are for purposes of convenience in
reference only, and shall not be deemed to constitute a part hereof
16. LAW GOVERNING.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware.
17. NO IMPAIRMENT.
The Company will not, by amendment of its Certificate of Incorporation
or bylaws, or through reorganization, consolidation, merger, dissolution, issue
or sale of securities, sale of assets or any other 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 action as may be necessary or appropriate in order
to protect the rights of the Registered Holder of this Warrant against
impairment. Without limiting the generality of the foregoing, the Company (a)
will not increase the par value of any shares of stock issuable upon the
exercise of this Warrant above the amount payable therefor upon such exercise,
and (b) will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and non-assessable
shares of Warrant Stock upon exercise of this Warrant.
18. NOTICES OF RECORD DATE. In case:
18.1. the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares
-11-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
of stock of any class or any other securities or to receive any other right; or
18.2. of any consolidation or merger of the Company with or into
another corporation, any capital reorganization or the Company, any
reclassification of the Capital Stock of the Company, or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation; or
18.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
18.4. of any redemption or conversion of all outstanding shares of
Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of shares of Common Stock (or
such stock or securities as at the time are receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered at least
thirty (30) days prior to the date therein specified.
19. SEVERABILITY.
If any term, provision, covenant or restriction of this Warrant is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
20. COUNTERPARTS.
For the convenience of the parties, any number of counterparts of this
Warrant may be executed by the parties hereto and each such
-12-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
executed counterpart shall be, and shall be deemed to be, an original
instrument.
21. NO INCONSISTENT AGREEMENTS.
The Company will not on or after the date of this Warrant enter into
any agreement with respect to its securities which is inconsistent with the
rights granted to the Holders of this Warrant or otherwise conflicts with the
provisions hereof The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to holders of the
Company's securities under any other agreements, except rights that have been
waived.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-13-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
22. SATURDAYS, SUNDAYS AND HOLIDAYS.
If the Expiration Date falls on a Saturday, Sunday or legal holiday,
the Expiration Date shall automatically be extended until 5:00 p.m. the next
business day.
AGREED:
GENERAL ELECTRIC STREAMLINE, INC.
CAPITAL CORPORATION
/s/ Thomas A. Crowley (as attorney in fact) /s/ Timothy A. DeMello
- ------------------------------------------- -------------------------------
Signature
Thomas A. Crowley Timothy A. Demello
- ------------------------------------------- -------------------------------
Printed Name Printed Name
Managing Director-Technology Ventures Chairman and Ceo
- ------------------------------------------- -------------------------------
Title Title
Date: 9/23/97 Date: 9/23/97
- ------------------------------------------- -------------------------------
-14-
<PAGE>
Warrant
- --------------------------------------------------------------------------------
EXHIBIT I
NOTICE OF EXERCISE
(To be executed upon exercise of Warrant)
STREAMLINE, INC.:
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, shares of Common Stock, as provided for therein, and tenders
herewith payment of the exercise price in full in the form of cash or a
certified or official bank check in same-day funds in the amount of
$ for a total of shares of Common Stock.
----------------- ----------
Please issue a certificate or certificates for such shares of Common
Stock in the name of, and pay any cash for any fractional share to (please print
name, address and social security number):
Name:
-----------------------------------
Address:
-----------------------------------
Signature:
-----------------------------------
Note: The above signature should correspond exactly with the name on the first
page of this Warrant Certificate or with the name of the assignee appearing in
the assignment form below.
If said number of shares shall not be all the shares purchasable under
the within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the shares purchasable
thereunder rounded up to the next higher whole number of shares.
By:
-----------------------------------
-----------------------------------
Date:
-----------------------------------
-15-
<PAGE>
Exhibit 10.11
NEITHER THIS NOTE NOR ANY SECURITIES THAT MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED
OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THIS NOTE AND ANY SUCH SECURITIES
MAY NOT BE TRANSFERRED UNLESS SO REGISTERED AND QUALIFIED UNDER ALL APPLICABLE
SECURITIES LAWS, OR UNLESS THE HOLDER DEMONSTRATES TO THE ISSUER'S SATISFACTION
THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
FORM OF NON-NEGOTIABLE
CONVERTIBLE PROMISSORY NOTE
$[ ] April 15, 1998
Boston, Massachusetts
PRINCIPAL. Streamline, Inc., a Delaware corporation (the "Company"),
hereby promises to pay to [ ] (the "Payee"), on October 1, 1998 (the "Maturity
Date"), subject to acceleration as set forth herein, the principal sum (the
"Principal Amount") of [ ] dollars ($[ ]), with interest from February 23, 1998
on the unpaid Principal Amount, from time to time outstanding, at a rate of
eight percent (8%) per annum, compounded annually.
PREPAYMENT. The Company will have the right to prepay all or any
portion of the unpaid Principal Amount at any time or from time to time, without
premium or penalty.
CONVERSION. At any time on or prior to the Maturity Date, at Payee's
option, the Payee may elect to convert all or part of the unpaid Principal
Amount and any interest owed with respect thereto into shares of the Company's
common stock, par value $.01 per share ("Common Stock"). Upon receipt by the
Company, on or prior to the Maturity Date, of written notice from the Payee (the
"Notice") stating the Payee's election to convert and the amount of unpaid
Principal Amount and interest to be converted (the "Conversion Amount"), the
Company shall issue to the Payee, as of the date of the Notice, such number of
shares of the Common Stock (rounded down to the nearest whole number) as shall
equal (i) the Conversion Amount divided by (ii) the lesser of (x) $3.50 or (y)
the price at which the preferred stock of the Company in the first Preferred
Stock Round (as defined below) occurring after the date of this Note is
initially convertible into Common Stock. The term "Preferred Stock Round" shall
mean an issuance by the Company of preferred stock of the Company that is
convertible into Common Stock.
ACCELERATION. At the Payee's option, the entire unpaid portion of the
Principal Amount of indebtedness represented by this Note will become due and
payable upon written notice of acceleration given by the Payee to the Company
following any (i) liquidation or dissolution of the Company, or any other
termination or winding-up of its existence or business,
<PAGE>
-2-
(ii) appointment of any receiver for the Company or its assets, (iii) assignment
by the Company for the benefit of its creditors, or (iv) institution by or
against the Company of any proceedings in bankruptcy or insolvency, which in the
case of any such institution other than by the Company, are not dismissed within
90 days.
SUBORDINATION. The indebtedness represented by this Note is
subordinated to indebtedness to (i) banks and financial institutions incurred by
the Company while this Note is outstanding and (ii) holders of 12% Senior
Discount Notes of the Company. The Payee (and each other holder of this Note, by
his, her, or its acceptance hereof) agrees to execute and deliver such
subordination, intercreditor or standstill agreement in such form and substance
as may be required by any such bank or financial institution or by any holder of
any 12% Senior Discount Note of the Company.
WAIVER OF PRESENTMENT, ETC. The Company hereby waives presentment,
notice, protest, and all other demands and notices.
NO OTHER WAIVERS. The failure of the Payee to exercise any of its
rights, remedies, powers, or privileges hereunder in any instance will not
constitute a waiver thereof.
PAYMENT OF COLLECTION COSTS. The Company will pay on demand all costs
of collection, including all court costs and attorneys' reasonable fees, paid or
incurred by the Payee in enforcing this Note after default.
ASSIGNMENT. Neither this Note nor any rights or obligations hereunder
shall be assignable or transferable by the Company or the Payee without the
written consent of the other.
GOVERNING LAW. THIS NOTE WILL BE GOVERNED BY AND INTERPRETED AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (WITHOUT REFERENCE TO PRINCIPLES OF CHOICE OF LAW).
IN WITNESS WHEREOF, the Company has executed and delivered this Note as
of the date first above written.
STREAMLINE, INC.
By:/s/ Timothy A. DeMello
--------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
<PAGE>
Exhibit 10.12
- --------------------------------------------------------------------------------
STREAMLINE, INC.
SECURITIES PURCHASE AGREEMENT
777 UNITS
EACH CONSISTING OF
$10,000 AGGREGATE PRINCIPAL AMOUNT OF
SENIOR DISCOUNT NOTES
DUE APRIL 15, 2001
AND
1,093.95 WARRANTS TO PURCHASE COMMON STOCK,
PAR VALUE $.01 PER SHARE,
OF
STREAMLINE, INC.
DATED AS OF APRIL 15,1998
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS...............................................................1
1.1 Definitions............................................................................1
1.2 Accounting Terms......................................................................22
ARTICLE II PURCHASE AND SALE OF UNITS...................................................................22
2.1 Issuance of Units.....................................................................22
2.2 Sale and Purchase of Unit.............................................................23
2.3 Closing of Sale of Units..............................................................23
ARTICLE III CONDITIONS TO CLOSING.......................................................................24
3.1 Conditions Precedent to Obligations of the Purchasers on the Closing Date.............24
3.2 Conditions Precedent to Obligations of the Company on the Closing Date................27
ARTICLE IV REPRESENTATIONS AND WARRANTIES, ETC..........................................................28
4.1 Organization and Qualification, Authority.............................................29
4.2 Subsidiaries..........................................................................29
4.3 Licenses..............................................................................29
4.4 Corporate and Governmental Authorization; Contravention...............................30
4.5 Validity and Binding Effect...........................................................30
4.6 Capitalization........................................................................31
4.7 Litigation; Defaults..................................................................31
4.8 Outstanding Debt......................................................................32
4.9 No Material Adverse Change............................................................32
4.10 Employee Programs.....................................................................33
4.11 Private Offering......................................................................35
4.12 Broker's or Finder's Commissions......................................................36
4.13 Disclosure............................................................................36
4.14 Foreign Assets Control Regulation, Etc................................................37
4.15 Federal Reserve Regulations and Other Matters.........................................37
4.16 Investment Company Act................................................................38
***4.17 Public Utility Holding Act............................................................38
4.18 Interstate Commerce Act...............................................................38
4.19 Environmental Regulation, Etc.........................................................38
4.20 Properties and Assets.................................................................39
4.21 Insurance.............................................................................40
4.22 Employment Practices..................................................................40
4.23 Financial Statements..................................................................41
4.24 Intellectual Property.................................................................41
4.25 Taxes.................................................................................43
(i)
<PAGE>
4.26 Transactions with Affiliates..........................................................44
4.27 Limitation on Subsidiary Payment Restrictions.........................................44
4.28 No Other Business.....................................................................44
4.29 Party in Interest.....................................................................44
4.30 Agreements............................................................................45
4.31 Accounts Receivable and Inventory.....................................................46
ARTICLE V PURCHASE FOR INVESTMENT; SOURCE OF FUNDS......................................................46
5.1 Purchase for Investment...............................................................46
5.2 Authority.............................................................................47
ARTICLE VI REDEMPTIONS AND OFFERS TO PURCHASE...........................................................47
6.1 Notice of Redemption..................................................................47
6.2 Selection of Senior Discount Notes to be Redeemed or Purchased........................48
6.3 Effect of Notice of Redemption........................................................48
6.4 Payment of Redemption Price...........................................................48
6.5 Senior Discount Notes Redeemed in Part................................................49
6.6 Optional and Mandatory Redemption.....................................................49
6.7 Mandatory Offers......................................................................50
ARTICLE VII COVENANTS...................................................................................51
7.1 Payment of Senior Discount Notes......................................................51
7.2 Reports...............................................................................52
7.3 Compliance Certificate................................................................53
7.4 Stay, Extension and Usury Laws........................................................55
7.5 Limitation on Restricted Payments.....................................................55
7.6 Corporate Existence...................................................................55
7.7 Limitation on Indebtedness............................................................56
7.8 Limitation on Transactions with Affiliates............................................58
7.9 Limitation on Liens...................................................................58
7.10 Payment of Taxes and Other Claims.....................................................58
7.11 Restrictions Against Limitations on Upstream Payments.................................59
7.12 Change of Control.....................................................................59
7.13 Redemption from the Proceeds of Securities Sales and Mezzanine Debt Financing.........59
7.14 Maintenance of Properties.............................................................60
7.15 Maintenance of Insurance..............................................................60
7.16 Compliance with Laws and Obligations..................................................61
7.17 Limitation on Issuances and Dispositions of Capital Stock of Subsidiaries an
Acquisitions and Sales................................................................61
7.18 Limitation on Sale of Assets..........................................................61
7.19 Limitations on Mergers and Acquisitions...............................................62
7.20 Limitations on Expenditures and other Activities......................................62
(ii)
<PAGE>
7.21 Books and Records.....................................................................63
7.22 Compliance with Agreements............................................................63
7.23 Current Public Information............................................................63
7.24 Required Securities Sales.............................................................63
7.25 Termination...........................................................................64
ARTICLE VIII [INTENTIONALLY DELETED]....................................................................64
ARTICLE IX DEFAULTS AND REMEDIES........................................................................64
9.1 Events of Default.....................................................................64
9.2 Acceleration..........................................................................65
9.3 Other Remedies........................................................................66
9.4 Waiver of Past Defaults...............................................................66
9.5 Control by a Majority.................................................................66
9.6 Rights of Holders to Receive Payment..................................................66
9.7 Holders May File Proofs of Claim......................................................67
9.8 Undertaking for Costs.................................................................67
ARTICLE X AMENDMENTS....................................................................................67
10.1 Amendments and Supplements Permitted Without Consent of Holders.......................67
10.2 Amendments and Supplements Requiring Consent of Holders: Other Consents...............67
10.3 Revocation and Effect of Consents.....................................................68
10.4 Notation on or Exchange of Senior Discount Notes......................................69
10.5 Board Approval........................................................................69
ARTICLE XI THE SENIOR DISCOUNT NOTES....................................................................70
11.1 Form and Dating.......................................................................70
11.2 Execution and Authentication..........................................................70
11.3 Transfer and Exchange.................................................................70
11.4 Replacement Senior Discount Notes.....................................................71
11.5 Outstanding Senior Discount Notes.....................................................71
11.6 Treasury Senior Discount Notes........................................................72
11.7 Temporary Senior Discount Notes.......................................................72
11.8 Cancellation..........................................................................72
11.9 Defaulted Interest....................................................................72
11.10 Record Date...........................................................................73
11.11 Restrictive Legends...................................................................73
11.12 Notice of Transfer; Opinions of Counsel...............................................74
ARTICLE XII INDEMNIFICATION.............................................................................75
12.1 Indemnification: Expenses, Etc........................................................75
ARTICLE XIII MISCELLANEOUS..............................................................................77
(iii)
<PAGE>
13.1 Survival of Representations and Warranties; Severability..............................77
13.2 Notices,. Etc.........................................................................78
13.3 Successors and Assigns................................................................79
13.4 Descriptive Headings..................................................................79
13.5 Satisfaction Requirement..............................................................79
13.6 Governing Law.........................................................................80
13.7 Service of Process....................................................................80
13.8 Counterparts..........................................................................81
13.9 Disclosure to Other Persons...........................................................81
13.10 No Adverse Interpretation of Other Agreements.........................................82
13.11 Waiver of Jury Trial..................................................................82
13.12 Merger................................................................................82
13.13 Expenses..............................................................................82
</TABLE>
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1.1 Definitions
Schedule 1.2 Accounting Terms
Schedule 2.1 Issuance of Units
Schedule 2.2 Sale and Purchase of Unit
Schedule 2.3 Closing of Sale of Units
Schedule 3.1 Conditions Precedent to Obligations of the Purchasers
on the Closing Date
Schedule 3.2 Conditions Precedent to Obligations of the Company
on the Closing Date
Schedule 4.1 - Organization and Qualification, Authority
Schedule 4.2 - Subsidiaries
Schedule 4.3 Licenses
Schedule 4.4 - Corporate and Governmental Authorization:
Contravention
Schedule 4.5 Validity and Binding Effect
Schedule 4.6 - Capitalization
Schedule 4.7 - Litigation; Defaults
Schedule 4.8 - Outstanding Debt
Schedule 4.9 - No Material Adverse Change
Schedule 4.10 - Employee Programs
Schedule 4.11 Private Offering
Schedule 4.12 Broker's or Finder's Commissions
Schedule 4.13 Disclosure
Schedule 4.14 Foreign Assets Control Regulation, Etc.
Schedule 4.15 Federal Reserve Regulations and Other Matters
(iv)
<PAGE>
Schedule 4.16 Investment Company Act
Schedule 4.17 Public Utility Holding Company Act
Schedule 4.18 Interstate Commerce Act
Schedule 4.19 - Environmental Regulations, Etc.
Schedule 4.20 - Properties and Assets
Schedule 4.21 - Insurance
Schedule 4.22 - Employment Practices
Schedule 4.23 - Financial Statements
Schedule 4.24 - Intellectual Property
Schedule 4.25 - Taxes
Schedule 4.26 - Transactions with Affiliates
Schedule 4.27 - Limitation on Subsidiary Payment Restrictions
Schedule 4.28 No Other Business
Schedule 4.29 Party in Interest
Schedule 4.30 - Agreements
Schedule 4.31 Accounts Receivable and Inventory
Schedule 5.1 Purchase for Investment
Schedule 5.2 Authority
Schedule 6.1 Notice of Redemption
Schedule 6.2 Selection of Senior Discount Notes to be Redeemed or
Purchased
Schedule 6.3 Effect of Notice of Redemption
Schedule 6.4 Payment of Redemption Price
Schedule 6.5 Senior Discount Notes Redeemed in Part
Schedule 6.6 Optional and Mandatory Redemption
Schedule 6.7 Mandatory Offers
Schedule 7.1 Payment of Senior Discount Notes
Schedule 7.2 Reports
Schedule 7.3 Compliance Certificate
Schedule 7.4 Stay, Extension and Usury Laws
Schedule 7.5 Limitation on Restricted Payments
Schedule 7.6 Corporate Existence
Schedule 7.7 Limitation on Indebtedness
Schedule 7.8 Limitation on Transactions with Affiliates
Schedule 7.9 Limitation on Liens
Schedule 7.10 Payment of Taxes and Other Claims
Schedule 7.11 Restrictions Against Limitations on Upstream
Payments
Schedule 7.12 Change of Control
Schedule 7.13 Redemption from the Proceeds of Securities Sales and
Mezzanine Debt Financing
Schedule 7.14 Maintenance of Properties
Schedule 7.15 Maintenance of Insurance
Schedule 7.16 Compliance with Laws and Obligations
(v)
<PAGE>
Schedule 7.17 Limitation on Issuances and Dispositions of Capital
Stock of Subsidiaries and Acquisitions and Sales
Schedule 7.18 Limitation on Sale of Assets
Schedule 7.19 Limitations on Mergers and Acquisitions
Schedule 7.20 Limitations on Expenditures and Other Activities
Schedule 7.21 Books and Records
Schedule 7.22 Compliance with Agreements
Schedule 7.23 Current Public Information
Schedule 7.24 Required Securities Sales
Schedule 7.25 Termination
Schedule 9.1 Events of Default
Schedule 9.2 Acceleration
Schedule 9.3 Other Remedies
Schedule 9.4 Waiver of Past Defaults
Schedule 9.5 Control by a Majority
Schedule 9.6 Rights of Holders to Receive Payment
Schedule 9.7 Holders May File Proofs of Claim
Schedule 9.10 Undertaking for Costs
Schedule 10.1 Amendments and Supplements Permitted Without
Consent of Holders
Schedule 10.2 Amendments and Supplements Requiring Consent of
Holders: Other Consents
Schedule 10.3 Revocation and Effect of Consents
Schedule 10.4 Notation on or Exchange of Senior Discount Notes
Schedule 10.5 Board Approval
Schedule 11.1 Form and Dating
Schedule 11.2 Execution and Authentication
Schedule 11.3 Transfer and Exchange
Schedule 11.4 Replacement Senior Discount Notes
Schedule 11.5 Outstanding Senior Discount Notes
Schedule 11.6 Treasury Senior Discount Notes
Schedule 11.7 Temporary Senior discount Notes
Schedule 11.8 Cancellation
Schedule 11.9 Defaulted Interest
Schedule 11.10 Record Date
Schedule 11.11 Restrictive Legends
Schedule 11.12 Notice of Transfer; Opinions of Counsel
Schedule 12.1 Indemnification; Expenses, Etc.
Schedule 13.1 Survival of Representations and Warranties;
Severability
Schedule 13.2 Notices
Schedule 13.3 Successors and Assigns
Schedule 13.4 Descriptive Headings
Schedule 13.5 Satisfaction Requirement
(vi)
<PAGE>
Schedule 13.6 Governing Law
Schedule 13.7 Service of Process
Schedule 13.8 Counterparts
Schedule 13.9 Disclosure to Other Persons
Schedule 13.10 No Adverse Interpretation of Other Agreements
Schedule 13.11 Waiver of Jury Trial
Schedule 13.12 Merger
Schedule 13.13 Expenses
EXHIBITS
Exhibit A - Form of Senior Discount Note
Exhibit B - Form of Opinion of Bingham Dana
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of Warrant Agreement
Exhibit E - List of Purchasers and Amounts
</TABLE>
(vii)
<PAGE>
STREAMLINE, INC.
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of April
15, 1998, is entered into by and between Streamline, Inc., a Delaware
corporation (the "Company"), and the purchasers listed on the signature page
hereto (the "Purchasers"). Unless otherwise defined, capitalized terms used in
this Agreement are defined in Article I; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement; references to a "section" or a "subdivision" are, unless
otherwise specified, to a section or a subdivision of this Agreement.
The Company, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, agrees with the Purchasers as
follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1 DEFINITIONS. In addition to any terms defined elsewhere in this
Agreement, unless otherwise specifically provided herein, the following terms
shall have the following meanings for all purposes when used in this Agreement,
and in any note, agreement, certificate, report or other document made or
delivered in connection with this Agreement:
"Accreted Value" means, with respect to any Senior Discount Note and as
of any date before April 15, 1999, the sum of (a) the issue price of such
Senior- Discount Note (which shall be equal to $900.90 per $1,000 principal
amount at maturity of the Senior Discount Notes) and (b) the amount which has
accreted at such time calculated by applying an accretion rate for the period
from the Issue Date through such date of 11.0% per annum simple interest. As of
any date on or after April 15, 1999, the Accreted Value of any Senior Discount
Note shall be equal to the principal amount at maturity of such Senior Discount
Note. Accretion shall be calculated on the basis of a 360-day year.
"Acquired Person" means, with respect to any specified Person, any
other Person acquired by such specified Person, whether by purchase, merger,
consolidation, other business combination or otherwise.
"Affiliate" means, with respect to any specified Person, any other
Person (a) directly or indirectly controlling (including, but not limited to,
all directors and executive officers of such Person), controlled by or under
direct or indirect common control with such specified Person, or (b) that
directly or
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indirectly owns more than 10% of the voting securities of such Person. A Person
shall be deemed to control a corporation if such Person possesses, directly or
indirectly, the power 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.
"Agreement" means this Agreement, as amended, modified or supplemented
from time to time, together with any exhibits, schedules or other attachments
thereto.
"Approvals" means each and every approval, consent, filing or
registration by, or with, any Governmental Body or any creditor or shareholder
of the Company, necessary (a) to authorize or permit the execution, delivery or
performance by the Company of the Transaction Documents, and (b) for the
validity or enforceability of any of such Transaction Documents against the
Company.
"Asset Disposition" means any sale, lease, transfer, conveyance or
other disposition (in one or series of related transactions) otherwise permitted
under this Agreement, including any such disposition by means of a merger,
consolidation or similar transaction, of shares of Capital Stock of a Subsidiary
(other than directors' qualifying shares), Property or other assets (each
referred to for the purposes of this definition as a "disposition") by the
Company or any of its Subsidiaries but excluding the following: (a) a
disposition by a Subsidiary to the Company or another Subsidiary or by the
Company or a Subsidiary to another Subsidiary, (b) a disposition of tangible
property or assets which have become obsolete or are otherwise not used, useful.
or necessary, so long as such disposition is at fair market value (as determined
by the Company in good faith), (c) a disposition that constitutes a Restricted
Payment or a Public Offering, in each case so long as effected in accordance
with all applicable provisions of this Agreement, and (d) a disposition of
inventory in the ordinary course of business, in each case so long as effected
in accordance with all applicable provisions of this Agreement.
"Bankruptcy Law" means Title 11, United States Code, or any similar
Federal or state law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person duly authorized, with respect to any particular matter, to exercise the
power of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
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"Business Day" means any day other than a Legal Holiday.
"Capital Lease" means a lease of (or other Indebtedness arrangements
conveying the right to use) real or personal property to any Person which is
required to be classified and accounted for as a capital lease or a liability on
the face of a balance sheet of such Person in accordance with GAAP. The stated
maturity of such obligation shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"Capital Lease Obligation" of any Person means the obligation of such
Person to pay rent or other payment amounts under a Capital Lease.
"Capital Stock" of any Person means any and all shares of, or
interests, rights, participations, and/or other equivalents in (however
designated), corporate stock or equity securities of such Person, including each
class of common stock and preferred stock of such Person and partnership or
limited liability company interests, whether general or limited, of such Person,
and including any securities convertible into or exercisable or exchangeable
for, or any right to acquire, any equity interest in such Person.
"Cash Equivalents" means: (a) marketable obligations issued or
unconditionally guaranteed by the United States government, in each case
maturing within 360 days after the date of acquisition thereof; (b) 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 360 days after the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; (c) commercial paper maturing no
more than 360 days after the date of acquisition thereof, issued by a
corporation organized under the laws of any state of the United States or of the
District of Columbia and, at the time of acquisition, having a rating in one of
the two highest rating categories obtainable from either Standard & Poor's
Corporation or Moody's Investors Service, Inc.; (d) money market funds whose
investments are made solely in securities described in clause (a) maturing
within 360 days after the date of acquisition thereof; (e) certificates of
deposit maturing within 360 days after the date of acquisition thereof, issued
by any commercial bank that is a member of the Federal Reserve System that has
capital, surplus and undivided profits (as shown on its most recent statement of
condition) aggregating not less than $100,000,000 and is rated A or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation; and (f)
repurchase agreements entered into with any commercial bank of the nature
referred to in clause (e) secured by a fully
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perfected Lien in any obligation of the type described in any of clauses (a)
through (e), having a fair market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation thereunder of
such commercial bank.
"Change of Control" means any transaction or series of transactions in
which any of the following occurs: (a) Timothy A. DeMello ceases to own at least
10% of the outstanding Common Stock or ceases to serve as Chief Executive
Officer of the Company; or (b) any Person or group (within the meaning of Rule
13d-3 under the Exchange Act and Sections 13(d) and 14(d) of the Exchange Act)
becomes the direct or indirect "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of 40% or more of the issued and outstanding shares of
Capital Stock entitled to vote in the election of directors of the Company or
the Surviving Person (if other than the Company).
"Change of Control Trigger Date" has the meaning ascribed thereto in
Section 7.12 hereof.
"Charter Documents" has the meaning ascribed thereto in Section 4.1
hereof.
"Closing" has the meaning ascribed thereto in Section 2.3 hereof.
"Closing Date" has the meaning ascribed thereto in Section 2.3 hereof.
"Code" means the Internal Revenue Code of 1986, as the same may be
amended from time to time, or any successor thereto, and the rules and
regulations issued thereunder, as from time to time in effect.
"Commission" means the United States Securities and Exchange Commission
or any other Federal agency at the time administering the Securities Act.
"Common Stock" means the common stock, par value $.01 per share, of the
Company.
"Common Stock Purchase Warrants" means the warrants of the Company
issued pursuant to the Warrant Agreement representing the right to purchase
shares of Common Stock at the exercise price set forth therein.
"Company" means the party named as such above until a successor
replaces it and thereafter means the successor.
"Consolidated" or "consolidated," when used with reference to any
accounting term, means the amount described by such accounting term,
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determined on a consolidated basis in accordance with GAAP, after elimination of
intercompany items.
"Consolidated EBIT" means, with respect to any Person, for any period,
the Consolidated Net Income of such Person and its consolidated Subsidiaries for
such period, plus or minus (a) a provision for taxes based on income or profits,
to the extent such provision for taxes was included in computing such
Consolidated Net Income, plus (b) Consolidated Interest Expense for such period,
all as determined on a consolidated basis in accordance with GAAP.
"Consolidated EBITDA" means, with respect to any Person, for any
period, the Consolidated EBIT of such Person and its consolidated Subsidiaries
for such period, plus depreciation, amortization and all other non-cash charges,
to the extent such depreciation, amortization and other non-cash charges were
deducted in computing such Consolidated EBIT (including amortization of goodwill
and other intangibles), all as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Coverage Ratio" means, as of any date of
determination, the ratio of (a) the Consolidated EBITDA for the period of the
most recent two consecutive fiscal quarters for which financial statements are
available to (b) Consolidated Interest Expense for such two fiscal quarters;
PROVIDED, HOWEVER, that (i) if the Company or any Subsidiary has issued any
Indebtedness since the beginning of such period that remains outstanding or if
the transaction giving rise to the need to calculate the Consolidated Interest
Coverage Ratio is an issuance of Indebtedness, or both, Consolidated EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness as if such Indebtedness had
been issued on the first day of such period and with respect to the discharge of
any other Indebtedness refinanced, refunded, exchanged or otherwise discharged
with the proceeds of such new Indebtedness as if any such discharge had occurred
on the first day of such period, (ii) if since the beginning of such period the
Company or any Subsidiary shall have made any Asset Disposition, Consolidated
EBITDA for such period shall be reduced by an amount equal to the Consolidated
EBITDA (if positive) directly attributable to the assets which are the subject
of such Asset Disposition for such period, or increased by an amount equal to
the Consolidated EBITDA (if negative) directly attributable thereto for such
period and Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Subsidiary refinanced, refunded, exchanged or
otherwise discharged with respect to the Company and its continuing Subsidiaries
in connection with such Asset Dispositions for such
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period (or if the Capital Stock of any Subsidiary is sold, the Consolidated
Interest Expense for such period directly attributable to the Indebtedness of
such Subsidiary to the extent the Company and its continuing Subsidiaries are no
longer liable for such Indebtedness after such sale), and (iii) if since the
beginning of such period the Company or any Subsidiary (by merger or otherwise)
shall have made an Investment in any Subsidiary (or any person which becomes a
Subsidiary) or an acquisition of assets or stock, including any acquisition of
assets or stock occurring in connection with a transaction causing a calculation
to be made hereunder, which constitutes all of an operating unit of a business,
Consolidated EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the issuing of any
Indebtedness), as if such Investment or acquisition occurred on the first day of
such period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto, and the amount of Consolidated Interest Expense associated with any
Indebtedness issued in connection therewith, the pro forma calculations shall be
determined in good faith by a responsible financial or accounting Officer of the
Company. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period.
"Consolidated Interest Expense" means, with respect to any Person, for
any period, (a) the total aggregate amount of interest expense (including
amortization of original issue discount and non-cash interest payments or
accruals and the interest component of any Capital Lease Obligations, but
excluding any intercompany interest owed by such Person to any Subsidiary or by
any Subsidiary to such Person or to any other Subsidiary of such Person) of such
Person and its consolidated Subsidiaries, determined on a consolidated basis in
accordance with GAAP, (b) all fees, commissions, discounts and other charges of
such Person and its consolidated Subsidiaries with respect to letters of credit
and bankers' acceptances, determined on a consolidated basis in accordance with
GAAP and (c) the product of (i) the total amount of dividends declared on
Disqualified Capital Stock (whether paid or not) of such Person and its
consolidated Subsidiaries times (ii) a fraction, the numerator of which is one
and the denominator of which is- one minus the then current combined federal,
state and local effective income tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP
(after consideration of any deferred tax assets of such Person then available
including without limitation, any amounts of available net operating loss
carryover).
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"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
consolidated Subsidiaries for such period, before payment or accrual of
preferred dividends, on a consolidated basis, determined in accordance with
GAAP; PROVIDE that (a) the net income of any other Person in which such Person
or any of its Subsidiaries has an interest (which interest does not cause the
net income of such other Person to be consolidated with the net income of such
Person and its Subsidiaries in accordance with GAAP) shall be included only to
the extent of the amount of dividends or distributions actually paid to such
Person or such Person's Subsidiaries by such other Person in such period; (b)
the net income of any Subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction actually
prevented the payment of an amount that otherwise could have been paid to, or
received by, such Person or a Subsidiary of such Person not subject to any
Payment Restriction, PROVIDED, HOWEVER, that with respect to the Consolidated
Net Income of the Company, the Consolidated Net Income of the Company's
Subsidiaries shall not be so excluded, notwithstanding the existence of any such
Payment Restriction, so long as the terms of any such Payment Restriction
limiting the payment of dividends by the Company's Subsidiaries are not more
restrictive at the time of determination of Consolidated Net Income than the
Payment Restrictions limiting such payment of dividends in effect on the date
hereof; (c) subject to the provisions of clause (a) above, the net income (or
loss) of any other Person shall not be included for any periods during which
such other Person is not a consolidated subsidiary of such Person and the net
income (or loss) of any successor to such Person by consolidation or merger or
transfer of all or substantially all assets shall not be included for any
periods prior to such consolidation, merger, or transfer of all or substantially
all assets; and (d) there shall be excluded the following: (i) such Person's
share, determined in accordance with GAAP, of the net loss of any other Person
in which such Person or any of its Subsidiaries has an interest (which interest
does not cause the net loss of such other Person to be consolidated with the net
income or loss of such Person and its Subsidiaries in accordance with GAAP),
(ii) the net income of any other Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition, (iii) all
gains realized upon or in connection with or as a consequence of the issuance of
the Capital Stock of such Person or any of its Subsidiaries, any gains on
pension reversions received by such Person or any of its Subsidiaries, or any
proceeds from life insurance policies received by such Person or any of its
Subsidiaries, (iv) all gains, together with any related provision for taxes,
realized in connection with any sale of assets by such Person or any of its
Subsidiaries during such period (including, without limitation, dispositions
pursuant to sale and leaseback transactions), (v) all gains realized in
connection with the acquisition of debt securities for a cost less than
principal plus accrued
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interest, (vi) all extraordinary gains, together with any related provision for
taxes, realized by such Person or any of its Subsidiaries during such period,
and (vii) the cumulative effect of a change in accounting principles in the year
of adoption of such change.
"Convertible Preferred Stock" means, with respect to the Company, the
Company's (a) Series A Cumulative Convertible Preferred Stock, liquidation
preference $100.00 per share, (b) Series B Convertible Preferred Stock,
liquidation preference $100.00 per share and (c) Series C Convertible Preferred
Stock, liquidation preference $100.00 per share.
"Current Affiliate" has the meaning ascribed thereto in Section 4.10
hereof.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DDJ" means DDJ Capital Management, LLC.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets in one transaction or a series of related transactions.
"Disqualified Capital Stock" means, (a) with respect to any Person, any
Capital Stock of such Person or its Subsidiaries that, on or prior to the stated
maturity date of the Senior Discount Notes, by its terms, by the terms of any
agreement related thereto or by the terms of any security into which it is
convertible, puttable or exchangeable, is, or upon the happening of an event or
the passage of time would be, required to be redeemed or repurchased by such
Person or its Subsidiaries, including at the option of the holder, in whole or
in part, or has, or upon the happening of an event or passage of time would
have, a redemption or similar payment due, or (b) any other Capital Stock of
such Person or its Subsidiaries designated as Disqualified Capital Stock by such
Person at the time of issuance.
"Dollars" and "$" mean lawful currency of the United States of America.
"Employee Program" has the meaning ascribed thereto in Section 4.10
hereof.
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"Environment" means soil, surface waters, groundwater, land, stream
sediments, surface or subsurface strata and ambient air.
"Environmental Law(s)" means and includes any federal, state, local or
foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment,
injunction, decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the Environment, health, safety or
natural resources, including, without limitation, those relating to the use,
handling, transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time, or any successor thereto, and the
rules and regulations issued thereunder, as from time to time in effect.
"Event of Default" has the meaning ascribed thereto in Section 9.1
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as the same
may be amended from time to time, or any successor thereto, and the rules and
regulations issued thereunder, as from time to time in effect.
"Fair Market Value" or "fair market value" means, with respect to any
assets or properties, the amount at which such assets or properties would change
hands between a willing buyer and a willing seller, within a commercially
reasonable time, each having reasonable knowledge of the relevant facts, neither
being under a compulsion to sell or buy, as such amount is determined by (a) the
Board of Directors of the Company acting in good faith or (b) an appraisal or
valuation firm of national or regional standing selected by the Company, with
experience in the appraisal or valuation of properties or assets of the type for
which Fair Market Value is being determined.
"Financial Statements" has the meaning ascribed thereto in Section 4.23
hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
entity as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of determination, as in
effect from time to time.
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"Governmental Body" means any governmental or quasi-governmental
authority including, without limitation, any federal, state, territorial,
county, municipal or other governmental or quasi-governmental agency, board,
branch, bureau, commission, court, department or other instrumentality or
political unit or subdivision, whether domestic or foreign.
"Gross Proceeds" means, when used with respect to a Public Offering or
a private offering of Capital Stock, the number of shares of Capital Stock sold
by the Company in such offering multiplied by the price paid for such shares by
the purchasers thereof.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing any Indebtedness of any other Person (the
"Primary Obligor") in any manner, whether directly or indirectly, and including,
without limitation, any obligation of such Person, (a) to purchase or pay (or
advance or supply funds, for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the. payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the holder of such Indebtedness of the
payment of such Indebtedness, or (c) to maintain working capital, equity capital
or other financial statement, condition or liquidity of the Primary Obligor so
as to enable the Primary Obligor to pay such Indebtedness (and "Guaranteed,"
"Guaranteeing" and "Guarantor" shall have meanings correlative to the
foregoing); PROVIDED, HOWEVER, that the Guarantee by any Person shall not
include endorsements -by such Person for collection or deposit, in either case,
in the ordinary course of business.
"Hazardous Materials" means petroleum or petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials, polychlorinated biphenyls and radon gas, and any other chemicals,
materials or substances designated, classified or regulated as hazardous or
toxic or as a pollutant or contaminant under any Environmental Law.
"Hazardous Waste" means and includes any hazardous waste as defined or
regulated under any Environmental Law.
"Holder" means a Person in whose name a Senior Discount Note is
registered in the register of registered holders of Senior Discount Notes kept
by the Company.
"Illegal Transfer Notice" has the meaning ascribed thereto in Section
11.13 hereof.
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"Incur" or "incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, Guarantee or otherwise become liable in respect of such
Indebtedness or other obligation, including by way of merger or acquisition of
another Person, or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing).
"Indebtedness" means, with respect to any Person, (a) all liabilities,
contingent or otherwise, of such Person (i) for borrowed money (whether or not
the recourse of the lender is to the whole of the assets of such Person or only
to a portion thereof and whether short-term or long-term, secured or unsecured),
(ii) evidenced by bonds, notes, debentures, drafts accepted or similar
instruments or letters of credit (including such liabilities representing the
balance deferred and unpaid of the purchase price of any property, other than
any such liability that represents an account payable or any other monetary
obligation to a trade creditor created, incurred, assumed or guaranteed by such
Person in the ordinary course of business in connection with obtaining goods,
materials or services, which account is not overdue according to the original
terms of sale, unless such account payable is being contested in good faith),
(iii) for the payment of money relating to Capital Lease Obligations; or (iv)
under the terms of any amendment, renewal, extension or refunding of any
liability of the types referred to in the preceding clauses (i), (ii) or (iii);
(b) the maximum fixed repurchase price of all Disqualified Capital Stock of such
Person or, if there is no such maximum fixed repurchase price, the liquidation
preference of such Disqualified Capital Stock, plus accrued but unpaid
dividends; (c) outstanding reimbursement obligations of such Person with respect
to letters of credit or bankers' acceptances issued for the benefit of such
Person; (d) net obligations of such Person with respect to Interest Rate or
Currency Protection Agreements; (e) all liabilities of others of the kind
described in the preceding clause (a), (b), (c) or (d) that such Person has
Guaranteed or that is otherwise its legal liability; and (f) all obligations of
others secured by a Lien to which any of the Property or assets of such Person
are subject (other than obligations of a lessor under any operating lease
pursuant to which the Company or any of its Subsidiaries leases Property, if
such lessor grants a Lien on such lease to secure such lessor's Indebtedness),
whether or not the obligations secured thereby shall have been assumed by such
Person or shall otherwise be such Person's legal liability (PROVIDED that if the
obligations so secured have not been assumed by such Person or are not otherwise
such Person's legal liability, such obligations shall be deemed to be in an
amount equal to the fair market value of such Properties or assets, as
determined in good faith by the Board of Directors of such Person, which
determination shall be evidenced by a Board
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Resolution). For purposes of the preceding sentence, the "maximum fixed
repurchase price" of any Disqualified Capital Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Capital Stock as if such Disqualified Capital Stock were purchased
on any date on which Indebtedness shall be required to be determined pursuant to
this Agreement, and if such price is based upon, or measured by, the fair market
value of such Disqualified Capital Stock (or any equity security for which it
may be exchanged or converted), such fair market value shall be determined in
good faith by the Board of Directors of such Person, which determination shall
be evidenced by a Board Resolution.
"Indemnified Party" or "Indemnified Parties" has the meaning ascribed
thereto in Section 12.1(a) hereof.
"Independent Financial Advisor" means a reputable accounting, appraisal
or a nationally recognized investment banking firm that is, in the reasonable
judgment of the Board of Directors of the Company, qualified to perform the task
for which such firm has been engaged hereunder and disinterested and independent
with respect to the Company and its Affiliates.
"Insolvency or Liquidation Proceeding" means, with respect to any
Person, (a) any insolvency or bankruptcy or similar case or proceeding, or any
reorganization, receivership liquidation, dissolution or winding up of such
Person, whether voluntary or involuntary, or (b) any assignment for the benefit
of creditors or any other marshaling of assets and liabilities of such Person.
"Intellectual Property" has the meaning ascribed thereto in Section
4.24(a) hereof.
"Interest Payment Date" means each October 15 and April 15 commencing
October 15, 1999.
"Interest Rate or Currency Protection Agreements" means any interest
rate swap agreement, interest rate cap agreement, currency swap agreement or
other financial agreement or arrangement designed to protect the Company or any
Subsidiary against fluctuations in interest rates or currency exchange rates and
which shall have a notional amount no greater than the payments due with respect
to Indebtedness being hedged thereby.
"Investment" means any investment by any Person in any other Person,
whether by a purchase of assets, in any transaction or series of related
transactions, individually or in the aggregate, purchase of Capital Stock,
capital contribution, loan, advance (other than reasonable loans and advances to
employees for moving and travel expenses, as salary advances,
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and other similar expenses incurred, in each case in the ordinary course of
business consistent with past practice) or similar credit extension constituting
Indebtedness of such other Person, and any Guarantee of Indebtedness of such
other Person.
"IRS" means the Internal Revenue Service or any successor agency.
"Issue Date" means the date of original issuance of the Senior Discount
Notes.
"Legal Holiday" means a Saturday, Sunday or a day on which banking
institutions in New York City, New York, or Boston, Massachusetts, or at such
place of payment, are not required to be open.
"License" or "Licenses" has the meaning ascribed thereto in Section 4.3
hereof.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or adverse
claim affecting title or resulting in an encumbrance against real or personal
property, or a security interest of any kind, whether or not filed, recorded or
otherwise perfected under applicable law (including any conditional sale or
other title retention agreement, any lease in the nature thereof, any option or
other agreement to sell which is intended to constitute or create a security
interest, mortgage, pledge or lien, and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction); PROVIDED that in no event shall an operating lease (as
opposed to a Capital Lease Obligation) or a license with respect to any
intangible asset be deemed to constitute a Lien hereunder.
"Losses" has the meaning ascribed thereto in Section 12.1(a) hereof.
"Material Adverse Effect" means a material adverse effect on the
business, Property, operations or condition (financial or otherwise) or
prospects of the Company and its Subsidiaries taken as a whole.
"Mezzanine Debt Financing" means the issuance, transfer, conveyance,
sale, or other disposition for cash by the Company or any of its Subsidiaries of
Subordinated Indebtedness.
"Multiemployer Plan" has the meaning ascribed thereto in Section 4.10
hereof.
"Net Cash Proceeds" means, with respect to (a) any Mezzanine Debt
Financing or (b) any Securities Sale, as the case may be, the aggregate
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amount of cash or Cash Equivalents actually received from time to time (whether
as initial consideration or through payment or disposition of deferred
consideration) by or on behalf of the Person issuing the Indebtedness or
securities, as the case may be, in connection with such transaction after
deducting therefrom only (without duplication) (i) brokerage commissions,
underwriting fees and discounts, legal fees, finder's fees, accountants' fee and
expenses, printers' fees and expenses, road show expenses and other similar
transaction fees and commissions incurred in connection with such transaction,
and (ii) the amount of Taxes payable in connection with or as a result of such
transaction, but only to the extent that the amounts so deducted are properly
attributable to such transaction and are, in the case of clause (i), at the time
of receipt of such cash, actually paid to a Person that is not an Affiliate of
such Person and, in the case of clause (ii), on the earlier of the dates on
which the tax return covering such taxes is filed or required to be filed,
actually paid to a Person that is not an Affiliate of such Person.
"Notice of Default" has the meaning ascribed thereto in Section 9.1(b)
hereof.
"Obligations" with respect to any instrument or agreement means any and
all principal, interest, penalties, premiums, fees, indemnifications,
reimbursements, damages and other charges, obligations and liabilities existing
from time to time under such instrument or agreement, whether direct or
indirect, joint or several, actual, absolute or contingent, matured or
unmatured, liquidated or unliquidated, secured or unsecured, arising by
contract, operation of law or otherwise, including any obligations or
liabilities to repay, redeem, repurchase, retire, acquire or defease any
Indebtedness under such instrument or agreement, or any obligation to establish
a sinking fund for any such purpose.
"Offer" means an irrevocable offer by the Company to repurchase for
cash Senior Discount Notes after any Change of Control Trigger Date or Repayment
Trigger Date.
"Officer" means, with respect to any Person, the Chairman of the Board
(if an officer), the Chief Executive Officer, the President, any Vice President,
the Chief Financial Officer, the Treasurer or the Secretary of such Person.
"Officers' Certificate" means a certificate executed on behalf of the
Company by (a) two Officers of the Company or (b) or by an Officer and an
Assistant Secretary of the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Purchasers.
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"PARI PASSU" means, when used with respect to the ranking of any
Indebtedness of any Person in relation to other Indebtedness of such Person,
that each such Indebtedness (a) either (i) is not subordinated or junior in
right of payment to any other Indebtedness of such Person or (ii) is subordinate
in right of payment to the same Indebtedness of such Person as is the other and
is so subordinate to the same extent and (b) is not subordinate in right of
payment to the other or to any Indebtedness of such Person as to which the other
is not so subordinate.
"Pari Passu Indebtedness" means any Indebtedness of the Company, other
than the Senior Discount Notes, whether outstanding on the date hereof or
Incurred hereafter, which (a) ranks PARI PASSU with the Senior Discount Notes
and (b) by its terms, or by the terms of any agreement or instrument pursuant to
which such Indebtedness is Incurred, (i) does not provide for payments of
principal of such Indebtedness at the final stated maturity thereof or by way of
a sinking fund applicable thereto or by way of any mandatory redemption,
retirement or repurchase thereof by the Company (including any redemption,
retirement or repurchase which is contingent upon events or circumstances, but
excluding any retirement required by virtue of acceleration of such Indebtedness
upon an event of default thereunder), in each case prior to the final stated
maturity of the Senior Discount Notes and (ii) does not permit redemption or
other retirement (including pursuant to an offer to purchase made by the issuer)
of such other Indebtedness at the option of the holder thereof prior to the
final stated maturity of the Senior Discount Notes, other than a redemption or
other retirement at the option of the holder of such Indebtedness (including
pursuant to an offer to purchase made by the issuer) which is conditioned upon
the change of control of the Company pursuant to provisions substantially
similar to those contained in Section 7.12 hereof.
"Payment Restriction" means, with respect to a Subsidiary of any
Person, any encumbrance, restriction or limitation, whether by operation of the
terms of its charter or by reason of any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation, on the ability of (a)
such Subsidiary to (i) pay dividends or, make other distributions on its Capital
Stock or make payments on any obligation, liability or Indebtedness owed to such
Person or any other Subsidiary of such Person, (ii) make loans or advances to
such Person or any other Subsidiary of such Person, or (iii) transfer any of its
properties or assets to such Person or any other Subsidiary of such Person, or
(b) such Person or any other Subsidiary of such Person to receive or retain any
such (i) dividends, distributions or payments, (ii) loans or advances, or (iii)
transfers of properties or assets.
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<PAGE>
"Permitted Disposition" means (a) any transfer, conveyance, sale,
lease, license or other disposition (a "sale") by the Company or any of its
Subsidiaries of its inventory or license of its intangible Property in the
ordinary course of its business; (b) any sale by the Company or any of its
Subsidiaries of its equipment or other tangible or intangible Property that is
obsolete or no longer useful or necessary to its business provided that such
sale is at Fair Market Value, and provided further that sales under this clause
(b) would not, individually or in the aggregate, have a Material Adverse Effect;
(c) any sale by the Company or any of its Subsidiaries in the ordinary course of
its business, and in a manner consistent with its customary and usual cash
management practices, of its Permitted Investments of the kind described in
clause (a) of the definition thereof, (d) the creation or Incurrence of any
Liens in any Property of the Company or any of its Subsidiaries that are
permitted by this Agreement and (e) any sale of Property by or at the direction
of a secured party holding a Lien on such Property, which Lien is permitted by
this Agreement, pursuant to the exercise by such secured party of its rights as
a creditor.
"Permitted Investment" by any Person means (a) Investments in cash and
Cash Equivalents, (b) Investments existing on the date hereof, (c) Investments
by the Company in any Subsidiary, (d) Investments by any Subsidiary in the
Company or other Subsidiaries, (e) Investments in the form of accounts.
receivable arising from sales of goods or services in the ordinary course of
business, PROVIDED that for any accounts receivable that are more than 120 days
overdue, appropriate reserves or allowances have been established in accordance
with GAAP, and (f) Investments in the form of advances or prepayments to
suppliers or employees in the ordinary course of business.
"Permitted Liens" shall mean (a) Liens for Taxes, assessments, and
similar governmental charges to the extent (1) not delinquent or (2) being
contested in good faith by appropriate proceedings and as to which reserves have
been set aside on the books of the Company to the extent required by GAAP; (b)
statutory Liens of landlords and carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen, or other like Liens arising in the ordinary course of
business and with respect to amounts not yet delinquent or being contested in
good faith by appropriate process of law, and for which a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
on the books of the Company; (c) pledges or deposits in the ordinary course of
business to secure lease obligations or nondelinquent obligations under workers'
compensation, unemployment insurance or other social security benefits; (d)
Liens to secure the performance of public statutory obligations that are not
delinquent, appeal bonds, performance bonds or other obligations of a like
nature (other than for
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borrowed money); (e) zoning restrictions, 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 business of the
Company or any Subsidiary incurred in the ordinary course of business; (f) Liens
in respect of purchase money or similar acquisition Indebtedness Incurred to
acquire furniture, fixtures, equipment or other operating assets, provided that
the principal amount of the Indebtedness secured by such Lien does not exceed
the acquisition cost of such assets; (g) Liens securing Indebtedness which
secures assets leased pursuant to Capital Lease Obligations; (h) Liens securing
Senior Indebtedness permitted to be incurred by Section 7.7(c)(iii) or Section
7.7(c)(iv); and (i) Liens imposed pursuant to condemnation or eminent domain or
substantially similar proceedings; provided that in the case of clauses (f) and
(g), any Indebtedness secured by such Liens was not Incurred in violation of
Section 7.7.
"Person" means any individual, corporation, limited or general
partnership, limited liability company, or Governmental Body.
"Post-Petition Interest" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"Preferred Stock" as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Principal" of a debt security means the principal of the security
including the premium, if any, on the security.
"Property" or "property" means any assets or property of any kind or
nature whatsoever, real, personal, or mixed (including fixtures), whether
tangible or intangible.
"Public Offering" with respect to any Person, means a firm commitment
underwritten primary public offering of Capital Stock of such Person.
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"Purchase Date" has the meaning ascribed thereto in Section 6.7 hereof.
"Purchasers" has the meaning ascribed thereto in the introduction
hereof.
"Purchasers' Special Counsel" means Goodwin, Procter & Hoar LLP, a
partnership including professional corporations, acting as special counsel to
the Purchasers in connection with the transactions contemplated hereunder or
such other counsel, as the Purchasers may select.
"Record Date" means a record date specified in the Senior Discount
Notes whether or not such record date is a Business Day.
"Redemption Date" means, when used with respect to any Senior Discount
Note to be redeemed, the date fixed for such redemption pursuant to this
Agreement and the Senior Discount Notes.
"Redemption Price" means, when used with respect to any Senior Discount
Note to be redeemed, the price fixed for such redemption pursuant to this
Agreement and the Senior Discount Notes, which shall include, without
duplication, in each case, accrued and unpaid interest to the Redemption Date
(subject to Section 6.4 hereof).
"Refinancing Indebtedness" means Indebtedness of the Company or any of
its Subsidiaries Incurred or given in exchange for, or the proceeds of which are
used to, extend, refinance, renew, replace, substitute, defease or refund any
other Indebtedness of the Company or any of its Subsidiaries (and related
interest, premium, penalties, breakage costs, fees, expenses and other amounts
owing in respect of such Indebtedness, to the extent permitted to be Incurred by
Section 7.7(c)(ii)) Incurred in accordance with the terms of this Agreement,
including Section 7.7.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated the Closing Date, by and between the Company and the
Purchasers, as the same may be amended, modified, or supplemented from time to
time in accordance with the terms thereof.
"Related Business" means the businesses conducted (or proposed to be
conducted) by the Company and its Subsidiaries as of the date hereof and any and
all businesses that in the good faith judgment of the Board of Directors of the
Company are materially related businesses. Without limiting the generality of
the foregoing, Related Business shall include providing, in response to on-line
computer-based orders, direct delivery to home consumers of (i) groceries,
household staples (i.e., home cleaners, health and beauty
18
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aids), and similar products such as are found in a typical grocery store and
(ii) other services.
"Release" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the Environment.
"Repayment Trigger Date" has the meaning ascribed thereto in Section
7.13(b) hereof.
"Restricted Payment" means, with respect to any Person, without
duplication: (a) any dividend or other distribution, whether in cash or in
Property or securities, declared or paid on any shares of such Person's Capital
Stock (other than any dividends, distributions or other payments in respect of
any Capital Stock made by any Subsidiary to the Company or a Wholly-Owned
Subsidiary), or the making by such Person or any of its Subsidiaries of any
other distribution in respect of such Person's Capital Stock or any warrants,
rights or options to purchase or acquire shares of any class of such Capital
Stock (other than exchangeable or convertible Indebtedness of such Person); (b)
the redemption, repurchase, retirement or other acquisition for value by such
Person or any of its Subsidiaries, directly or indirectly, of such Person's
Capital Stock (and, in the case of a Subsidiary, Capital Stock of the Company)
other than Capital Stock owned by the Company or a Wholly-Owned Subsidiary, or
any warrants, rights or options to purchase or acquire shares of any class of
such Capital Stock, provided that this clause (b) shall not include the
transaction among the Company and the stockholders of the Company's Subsidiary,
Streamline Mid-Atlantic, as such transaction is described in Schedule 4.26
hereto; (c) any payment to purchase, redeem, defease or otherwise acquire or
retire for value any Pari Passu Indebtedness or Subordinated Indebtedness (other
than with the proceeds of Refinancing Indebtedness permitted under this
Agreement or with the proceeds of sales of Capital Stock), except in accordance
with the mandatory redemption or repayment provisions set forth in the original
documentation, as such documentation exists on the date hereof, governing such
Indebtedness; and (d) any Investment other than Permitted Investments.
"Restricted Security" has the meaning ascribed thereto in Section 11.13
hereof.
"Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
"Rule 144A" means Rule 144A as promulgated by the Commission under the
Securities Act, and any successor rule or regulation thereto.
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"Sale" means any sale, lease, conveyance, exchange, transfer,
assignment, pledge, hypothecation or other disposition of any Property.
"Securities" means, collectively, the Senior Discount Notes and the
Common Purchase Warrants.
"Securities Act" means the Securities Act of 1933, as the same may be
amended from time to time, or any successor thereto, and the rules and
regulations issued thereunder, as from time to time in effect.
"Securities Sale" means the issuance or sale by the Company or any of
its Subsidiaries, for cash, of shares of Capital Stock (other than directors'
qualifying shares) or other ownership interests, or any securities convertible
into or exercisable or exchangeable for, or options, warrants, rights or any
other interests with respect to, any shares of Capital Stock or other ownership
interests of the Company or any such Subsidiary; PROVIDED, HOWEVER, that
compensatory issuances of Capital Stock and the exercise of (a) warrants or (b)
compensatory options to purchase Capital Stock shall not constitute a Securities
Sale.
"Senior Indebtedness" means and includes all principal of, premium and
interest (including Post-Petition Interest) on and other Obligations with
respect to any Indebtedness of the Company (other than as otherwise provided in
this definition), whether outstanding on the date hereof or hereafter Incurred,
other than the Senior Discount Notes; PROVIDED, HOWEVER, that the following
shall not constitute Senior Indebtedness: (a) any Indebtedness which by the
terms of the instrument creating or evidencing the same is PARI PASSU,
subordinated or junior in right of payment to the Senior Discount Notes in any
respect; (b) that portion of any Indebtedness Incurred in violation of this
Agreement; (c) any Preferred Stock; or (d) any Indebtedness of the Company which
is subordinated to or junior in right of payment in any respect to any other
Indebtedness of the Company. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (i) Indebtedness evidenced by the Senior
Discount Notes, (ii) Indebtedness which when incurred and without respect to any
election under Section 1111(b) of Title 11, United States Code, is without
recourse to the Company, (iii) any liability for foreign, Federal, state, local
or other Taxes owed or owing by the Company, (iv) Indebtedness of the Company to
the extent such liability constitutes Indebtedness to a Subsidiary or any other
Affiliate of the Company or any of such Affiliate's Subsidiaries, (v)
Indebtedness for the purchase of goods or materials in the ordinary course of
business or (vi) Indebtedness owed by the Company for compensation to employees
or for services.
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"Senior Discount Notes" means the Company's Senior Discount Notes due
April 15, 2001, as amended or supplemented from time to time in accordance with
the terms hereof, that are issued pursuant to this Agreement and each note
delivered in substitution or exchange for any such note.
"Subordinated Indebtedness" means Indebtedness of the Company which is
subordinated or junior in right and priority of payment to the Senior Discount
Notes.
"Subsidiary" of any Person means any other Person with respect to which
either (i) more than 50% of the interests having ordinary voting power to elect
a majority of the directors or individuals having similar functions of such
other Person (irrespective of whether at the time interests of any other class
or classes of such Person shall or might have voting power upon the occurrence
of any contingency), or (ii) more than 50% of the equity interests of such other
Person, is at the time directly or indirectly owned or controlled by such
Person, by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries. When used herein without reference to
any Person, Subsidiary means a Subsidiary of the Company.
"Taxes" means any present or future federal, state, county, local,
foreign or other income, Property, excise, franchise, sales, use, value added,
employees' income withholding, social security, unemployment and other taxes, of
any nature whatsoever now or hereafter imposed, levied, collected, withheld, or
assessed by any Governmental Body, which have become due or payable by the
Company or any of its Subsidiaries, or by any predecessors thereto, including
any fines or penalties with respect thereto or interest thereon, whether
disputed or not.
"Threat of Release" means a substantial likelihood of a Release which
under applicable Environmental Laws requires action to prevent or mitigate
damage to the Environment which may result from such Release.
"Transaction Documents" means, collectively, this Agreement, the Senior
Discount Notes, the Common Stock Purchase Warrants, the Registration Rights
Agreement, the Warrant Agreement and any and all agreements, certificates,
instruments and other documents contemplated thereby or executed and delivered
in connection therewith.
"Units" has the meaning ascribed thereto in Section 2.1 (c) hereof.
"Warrant Agreement" means the Warrant Agreement of even date herewith
by and between the Company and the Purchasers, as amended,
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modified or supplemented from time to time in accordance with the terms thereof.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"Wholly-Owned Subsidiary" means, with respect to any Person, a
Subsidiary 100% of the equity interests in which (however measured) are owned by
such Person or a Wholly-Owned Subsidiary of such Person or such Person and one
or more Wholly-Owned Subsidiaries of such Person taken together, except in any
case for the minimum equity interest required to be held by directors, if any,
to satisfy the requirements of any applicable statute requiring that directors
own qualifying shares.
1.2 ACCOUNTING TERMS. All accounting terms used and not defined in this
Agreement shall be construed in accordance with GAAP and all financial data
required to be delivered hereunder shall be prepared in accordance with such
principles.
ARTICLE II
PURCHASE AND SALE OF UNITS
2.1 ISSUANCE OF UNITS.
(a) The Company has authorized the issuance and sale of up to
$7,770,000 aggregate principal amount of its Senior Discount Notes, to be issued
pursuant to and in accordance with the terms of this Agreement. Each Senior
Discount Note will be issued in the principal amount of $10,000, substantially
in the form set forth in EXHIBIT A hereto, with such changes thereto, if any, as
may be approved by the Purchasers and the Company.
(b) The Company has authorized the issuance and sale of up to
850,000 Common Stock Purchase Warrants, each exercisable to purchase one share
of the Common Stock of the Company (subject to vesting and later adjustment upon
the occurrence of certain conditions set forth in the Warrant Agreement), to be
acquired by the Purchasers in accordance with the terms of this Agreement. The
Common Stock Purchase Warrants will be substantially in the form of the Warrant
Certificate as set forth in EXHIBIT A of the
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Warrant Agreement, with such changes thereto, if any, as may be approved by the
Purchasers and the Company.
(c) The Senior Discount Notes and the Common Stock Purchase
Warrants will be issued in attached units ("Units") each consisting of $10,000
principal amount of Senior Discount Notes and 1,093.95 Common Stock Purchase
Warrants, 579.15 of which are vested on the date hereof, subject to detachment
of the Common Stock Purchase Warrants from the Senior Discount Notes upon the
terms and subject to the conditions set forth herein.
(d) The Company and the Purchasers hereby agree that for
Federal income tax purposes, including for purposes of determining original
issue discount and the issue price of the Senior Discount Notes under sections
1271-1275 of the Code and the regulations issued thereunder, the $9,009.01 issue
price of each Unit shall be allocated $814.03 to each $1,000 of principal amount
of the Senior Discount Notes and $1.50 to each Common Stock Purchase Warrant
vested on the date hereof. The Company and the Purchasers hereby further agree
that the allocation of the issue price pursuant to the preceding sentence shall
be binding on the Company for purposes of any determination by the Company of
the issue price of the Senior Discount Notes pursuant to the first sentence of
Treasury Regulations section 1.1273-2(f)(2).
2.2 SALE AND PURCHASE OF UNIT. Subject to the terms and conditions of
this Agreement, the Company agrees to issue and sell to the Purchasers and each
of the Purchasers severally agrees to purchase from the Company, at the Closing
provided for in Section 2.3, the Units set forth opposite such Purchaser's name
on EXHIBIT E hereto, at the purchase price of $9,009.01 per Unit payable in cash
by wire transfer of immediately available funds.
2.3 CLOSING OF SALE OF UNITS. The purchase and delivery of the Units to
be purchased by the Purchasers shall take place at the offices of Goodwin,
Procter & Hoar LLP, Exchange Place, Boston, Massachusetts, at a closing (the
"Closing") on April 15, 1998, or at such other place or on such other date as
the Purchasers and the Company may agree upon (such date on which- the Closing
shall have actually occurred, the "Closing Date"). At the Closing, the Company
will deliver or cause to be delivered to each Purchaser the Units to be
purchased by it against payment of the purchase price therefor. The Units to be
purchased hereunder shall be in the form of Senior Discount Notes and Common
Stock Purchase Warrant certificates, in each case dated the date of the Closing
and in the amounts and registered in the names of the Persons set forth on
EXHIBIT E hereto. If at the Closing the Company shall fail to tender to any
Purchaser any of the Units to be purchased by it as provided in
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this Article H, or any of the conditions specified in Article III for the
benefit of such Purchaser or the Company, as the case may be, shall not have
been satisfied or waived in writing by such Purchaser or the Company, as
applicable, such Purchaser or the Company, as the case may be, shall, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any other rights it may have by reason of such failure or such
non-fulfillment.
ARTICLE III
CONDITIONS TO CLOSING
3.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASERS ON THE
CLOSING DATE. Each Purchaser's obligation to purchase and pay for the Units to
be sold to it at the Closing is subject to the fulfillment to its satisfaction,
prior to or at the Closing, of the following conditions, provided that any or
all of the following conditions may be waived, in whole or in part, by such
Purchaser with respect to this Agreement in its sole and absolute discretion:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and its Subsidiaries contained in this Agreement
and in the other Transaction Documents shall be correct in all material respects
when made and at the time of the Closing, after giving effect to the sale of the
Units, except that any representations and warranties that relate to a
particular date or period shall be correct in all material respects only as of
such date or for such period.
(b) PERFORMANCE: NO DEFAULT. The Company shall have performed
and complied in all material respects with all agreements and conditions
contained in this Agreement and the other Transaction Documents required to be
performed or complied with prior to or at the Closing, and at the time of the
Closing, after giving effect to the sale of the Units, no Default or Event of
Default shall have occurred and be continuing.
(c) COMPLIANCE CERTIFICATE. The Company shall have delivered
to the Purchasers an Officers' Certificate, dated the Closing Date, certifying
on behalf of the Company that the conditions specified in Sections 3.1(a) and
(b) have been fulfilled.
(d) OPINION OF COUNSEL. The Purchasers shall have received
from Bingham Dana LLP, counsel for the Company, a favorable opinion
substantially in the form set forth in EXHIBIT B, addressed to the Purchasers,
dated the Closing Date, and otherwise reasonably satisfactory in substance and
form to the Purchasers.
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<PAGE>
(e) LEGAL INVESTMENT. On the Closing Date, the Purchasers'
purchase of the Units shall be permitted by the laws and regulations of the
jurisdiction to which the Purchasers are subject (including, without limitation,
Section 5 of the Securities Act and Regulations T, U, or X of the Board of
Governors of the Federal Reserve System), and credit controls (whether voluntary
or mandatory) or similar restraints applicable to the Purchasers and shall not
subject the Purchasers to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation (other than
applicable securities law restrictions on resale of the Units), and shall not be
enjoined (temporarily or permanently) under, prohibited by or contrary to any
injunction, order or decree applicable to the Purchasers.
(f) COMPLIANCE WITH SECURITIES LAWS. The offering, issuance
and sale of the Units under this Agreement shall have complied with all
applicable requirements of the Federal securities laws and the Purchasers shall
have received evidence, if any, of such compliance in form and substance
reasonably satisfactory to the Purchasers.
(g) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings contemplated by this Agreement, including, without limitation, the
matters set forth in the Transaction Documents and all of the other documents
and instruments incident thereto, shall be reasonably satisfactory to the
Purchasers, and the Purchasers shall have received all such counterpart
originals or certified or other copies of such documents as the Purchasers may
reasonably request.
(h) COMPLETION OF OTHER TRANSACTION. Simultaneously with or
prior to the issuance and sale to the
Purchasers of the Units to be purchased by the Purchasers at the Closing:
(i) the Company and the Purchasers shall have duly
entered into the Registration Rights Agreement substantially in the
form of EXHIBIT C hereto, the Purchasers shall have received
fully-executed counterparts of the Registration Rights Agreement in
such numbers reasonably requested by them, and such agreement shall be
in full force and effect;
(ii) the Company and the Purchasers shall have duly
entered into the Warrant Agreement substantially in the form of EXHIBIT
D hereto, the Purchasers shall have received fully-executed
counterparts of the Warrant Agreement in such numbers reasonably
requested by them, and such agreement shall be in full force and
effect; and
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(iii) each of the other Transaction Documents and any
other agreements and documents contemplated thereby and in connection
therewith shall have been executed and delivered by all respective
parties thereto and shall be in full force and effect.
(i) RELATED MATTERS. As of the Closing, the Company's Charter
Documents shall not have been modified or amended since the date delivered to
the Purchasers by the Company.
(j) NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. No
legislation, order, rule, ruling or regulation shall have been enacted or made
by or on behalf of any governmental body, department or agency of the United
States, nor shall any decision of any court of competent jurisdiction within the
United States have been rendered which, in the Purchasers' reasonable judgment,
could materially and adversely affect any of the Units or any part thereof as an
investment. There shall be no action, suit, investigation or proceeding pending
or threatened against or affecting the Purchasers, any of their respective
properties or rights, or any of their respective Affiliates, associates,
officers or directors (in such capacity), before any court, arbitrator or
administrative or governmental body which (i) seeks to restrain, enjoin, prevent
the consummation of or otherwise affect the transactions contemplated by this
Agreement and the other Transaction Documents, or (ii) questions the validity or
legality of any such transactions or seeks to recover damages or to obtain other
relief in connection with any such transactions, and, to the Purchasers'
knowledge, there shall be no valid basis for any such action, proceeding or
investigation.
(k) GOVERNMENTAL AND THIRD PARTY PERMITS, CONSENTS, ETC.
Except as set forth on SCHEDULE 4.4, the Company and its Subsidiaries shall have
duly applied for and obtained all Approvals from each Governmental Body, or
pursuant to any agreement to which the Company or any of its Subsidiaries is a
party or to which any of them or any of their assets is subject, which are
required in connection with this Agreement, the other Transaction Documents or
any other agreements and documents contemplated thereby and in connection
therewith.
(l) SECRETARY'S CERTIFICATE. The Purchasers shall have
received a certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of each of the Company and its Subsidiaries, on behalf of such entity,
(i) certifying as true, complete and correct its Charter Documents and in the
case of the Company, resolutions relating to the transactions contemplated
hereby attached thereto, (ii) in the case of the Company, as to the absence of
proceedings or other action for dissolution, liquidation or reorganization of
the Company, (iii) in the case of any Subsidiary, as to the
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absence of proceedings or other action for dissolution, liquidation or
reorganization of such Subsidiary, (iv) as to the incumbency and specimen
signatures of officers who shall have executed instruments, agreements and other
documents in connection with the transactions contemplated hereby, and (v)
covering such other matters, and with such other attachments thereto, as
Purchaser's Special Counsel may reasonably request at least one Business Day
before the Closing Date, which certificates and attachments thereto shall be
reasonably satisfactory in form and substance to such Purchaser.
3.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY ON THE CLOSING
DATE. The Company's obligation to issue the Units at the Closing is subject to
the fulfillment to its satisfaction, prior to or at the Closing, of the
following conditions, provided that any or all of the following conditions may
be waived, in whole or in part, by the Company with respect to this Agreement in
its sole and absolute discretion:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchasers contained in this Agreement and in the other
Transaction Documents shall be correct in all material respects when made and at
the time of the Closing, after giving effect to the sale of the Units, except
that any representations and warranties that relate to a particular date or
period shall be correct in all material respects only as of such date or for
such period.
(b) PERFORMANCE; NO DEFAULT. The Purchasers shall have
performed and complied in all material respects with all agreements and
conditions contained in this Agreement and the other Transaction Documents
required to be performed or complied with prior to or at the Closing, and at the
time of the Closing -after giving effect to the sale of the Units, no Default or
Event of Default shall have occurred and be continuing.
(c) RELATED MATTERS. Contemporaneously with the Closing,
the Company shall have received payment in full for the Units to be issued
pursuant to this Agreement.
(d) NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. No
legislation, order, rule, ruling or regulation shall have been enacted or made
by or on behalf of any Governmental Body, nor shall any decision of any court of
competent jurisdiction within the United States have been rendered which, in the
Company's reasonable judgment, could materially and adversely affect any of the
Units or any part thereof as an investment. There shall be no action, suit,
investigation or proceeding pending or threatened in writing, against or
affecting the Company, any of its properties or rights, or any of its
Affiliates, associates, officers or directors, before any court, arbitrator or
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administrative or governmental body which (i) seeks to restrain, enjoin, prevent
the consummation of or otherwise affect the transactions contemplated by this
Agreement and the other Transaction Documents, or (ii) questions the validity or
legality of any such transactions or seeks to recover damages or to obtain other
relief in connection with any such transactions, and, to the Company's
knowledge, there shall be no valid basis for any such action, proceeding or
investigation.
(e) GOVERNMENTAL AND THIRD PARTY PERMITS, CONSENTS, ETC.
Each Purchaser and its Subsidiaries shall have duly applied for and obtained all
Approvals from each Governmental Body, or pursuant to any agreement to which
such Purchaser is a party or to which its assets are subject, which may be
required in connection with this Agreement, the other Transaction Documents or
any other agreements and documents contemplated thereby and in connection
therewith.
(f) COMPLETION OF OTHER TRANSACTIONS. Simultaneously with or
prior to the issuance and sale to the Purchaser's of the Units to be purchased
by the Purchasers at the Closing:
(i) the Company and the Purchasers shall have duly
entered into the Registration Rights Agreement substantially in the
form of EXHIBIT C hereto, the Company shall have received a
fully-executed counterpart of the Registration Rights Agreement, and
such agreement shall be in full force and effect;
(ii) the Company and the Purchasers shall have duly
entered into the Warrant Agreement substantially in the form of EXHIBIT
D hereto, the Company shall have received a fully-executed counterpart
of the Warrant Agreement, and such agreement shall be in full force and
effect; and
(iii) each of the other Transaction Documents and any
other agreements and documents contemplated thereby and in connection
therewith shall have been executed and delivered by all respective
parties thereto and shall be in full force and effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES, ETC.
In order to induce the Purchasers to purchase the Units, the Company
represents and warrants that the statements contained in this Article IV are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made and as though the Closing Date
were substituted for the date of this Agreement throughout Article IV):
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4.1 ORGANIZATION AND QUALIFICATION, AUTHORITY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has full corporate power and
authority to own and lease its properties and carry on its business as presently
conducted, is duly qualified, registered or licensed as a foreign corporation to
do business and is in good standing in each jurisdiction in which the ownership
or leasing of its properties or the character of its present operations makes
such qualification, registration or licensing necessary, except where the
failure so to qualify or be in good standing would not have a Material Adverse
Effect. The Company has heretofore delivered to Purchasers complete and correct
copies of the Certificate of Incorporation and of the by-laws of the Company and
each of its Subsidiaries, each as amended to date and as presently in effect
(collectively, with respect to any such Person, "Charter Documents"). A list of
all jurisdictions in which the Company is qualified, registered or licensed to
do business as a foreign corporation is attached hereto as SCHEDULE 4.1.
4.2 SUBSIDIARIES. The Company's Subsidiaries are set forth on SCHEDULE
4.2 hereto. Each of the Subsidiaries is a corporation, limited liability company
or partnership duly incorporated or formed, validly existing and in good
standing under the laws of the jurisdiction of its organization, has full
corporate, limited liability company or partnership power and authority, as the
case may be, to own and lease its properties, and carry on its business as
presently conducted, is duly qualified, registered or licensed as a foreign
corporation, limited liability company or partnership to do business and is in
good standing in each jurisdiction in which the ownership or leasing of its
properties or the character of its present. operations make such qualification,
registration or licensing necessary, except where the failure so to qualify or
be in good standing would not have a Material Adverse Effect. A list of all
jurisdictions in which each of the Subsidiaries is qualified, registered or
licensed to do business as a foreign corporation, limited liability company or
partnership is attached hereto as SCHEDULE 4.2. Except as disclosed on SCHEDULE
4.2, the Company owns, directly or indirectly, all of the outstanding shares of
Capital Stock or other evidences of equity ownership of each of its Subsidiaries
free of any Lien, restriction (other than restrictions generally applicable to
securities under federal, provincial or state securities laws) or encumbrance,
and said shares have been duly issued and are validly outstanding.
4.3 LICENSES. The Company and its Subsidiaries hold all material
licenses, franchises, permits, consents, registrations, certificates and other
approvals (including, without limitation, those relating to environmental
matters, public and worker health and safety, buildings, highways or zoning)
(individually, a "License" and collectively, "Licenses") required for the
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conduct of its business as now being conducted, and is operating in substantial
compliance therewith, except where the failure to hold any such License or to
operate in compliance therewith would not have a Material Adverse Effect. The
Company and its Subsidiaries are in substantial compliance with all laws,
regulations, orders and decrees applicable to it, except in each case where the
failure so to comply would not have a Material Adverse Effect, or a material
adverse effect on the ability of the Company or any of its Subsidiaries to
perform on a timely basis any obligation that it has or will have under any
Transaction Document to which it is a party.
4.4 CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. Except as
set forth on SCHEDULE 4.4, the execution, delivery and performance by the
Company of the Transaction Documents to which it is a party and all other
instruments or agreements to be executed at the Closing in connection therewith,
and the issuance and sale to the Purchasers of the Units pursuant to this
Agreement, are within the Company's corporate power, having been duly authorized
by all necessary corporate action on the part of the Company; do not require any
License, authorization, approval, qualification or formal exemption from, or
other action by or in respect of, or filing of a declaration or registration
with, any court, Governmental Body, agency or official or other Person (except
such as have been obtained or as may be required under the Securities Act or
state securities or Blue Sky laws); do not contravene or constitute a default
under or violation of (a) any provision of applicable law or regulation of any
Governmental Body, (b) the respective Charter Documents of the Company or any of
its Subsidiaries, (c) any agreement (or require the consent of any Person under
any agreement that has not been obtained) to which the Company or any of its
Subsidiaries is a party, or (d) any judgment, injunction, order, decree or other
instrument binding upon the Company, any of its Subsidiaries or any of their
respective properties, except where such contravention, default or violation
would not have a Material Adverse Effect; and do not and will not result in the
creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries, other than Permitted Liens.
4.5 VALIDITY AND BINDING EFFECT. Each of the Transaction Documents has
been duly executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in accordance with
their respective terms, except for (a) the effect upon the Transaction Documents
of bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting the rights of creditors generally, (b) limitations
imposed by a court of competent jurisdiction under general equitable principles
upon the specific enforceability of any of the remedies, covenants or other
provisions of the Transaction Documents and upon the availability of injunctive
relief or other
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equitable remedies, and (c) any applicable laws relating to the maximum
permissible rate of interest.
4.6 CAPITALIZATION. Except as set forth on SCHEDULE 4.6 hereto, and
except for the Senior Discount Notes and the Warrants, there are no outstanding
subscriptions, options, warrants, rights, convertible or exchangeable securities
or other agreements or commitments of any character obligating the Company or
its Subsidiaries to issue any securities. Except as set forth on SCHEDULE 4.6,
there are no voting trusts or other agreements or understandings to which the
Company or its Subsidiaries is a party with respect to the voting of the Capital
Stock of the Company or the Subsidiaries. Except as set forth on SCHEDULE 4.6 or
as contemplated by the Registration Rights Agreement, neither the Company nor
any of its Subsidiaries has entered into any agreement to register its equity or
debt securities under the Securities Act.
4.7 LITIGATION; DEFAULTS. Except as set forth on SCHEDULE 4.7 or
SCHEDULE 4.9, there is no action, suit, proceeding or investigation pending or,
to the knowledge of the Company, threatened against or affecting the Company,
any of its Subsidiaries, or any properties of any of the foregoing, before or by
any court or arbitrator or any Governmental Body which (individually or in the
aggregate) could reasonably be expected to (i) have a Material Adverse Effect,
or (ii) impair the ability of the Company or any Subsidiary to perform fully on
a timely basis any material obligation which the Company or such Subsidiary has
or will have under any Transaction Document to which the Company or such
Subsidiary is a party. Except as set forth on SCHEDULE 4.7 or SCHEDULE 4.19,
neither the Company nor any of its Subsidiaries is in violation of, or in
default under (and there does not exist any event or condition which, after
notice or lapse of time or both, would constitute such a default under), any
term of its respective Charter Documents, or of any term of any agreement,
instrument, judgment, decree, order, statute, injunction, governmental
regulation, rule or ordinance (including, without limitation, those relating to
zoning, city planning or similar matters) applicable to the Company or any of
its Subsidiaries or to which the Company or any of its Subsidiaries is bound, or
to any properties of the Company or any of its Subsidiaries, except in each case
to the extent that such violations or defaults, individually or in the
aggregate, could not reasonably be expected to (a) affect the validity of any
Transaction Document, (b) have a Material Adverse Effect, or (c) impair the
ability of the Company to perform fully on a timely basis any material
obligation which the Company has or will have under any Transaction Document to
which the Company is a party.
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4.8 OUTSTANDING DEBT. Except as set forth on SCHEDULE 4.8 hereto, and
except for the Senior Discount Notes, neither the Company nor any of its
Subsidiaries will have outstanding any debt for borrowed money, or obligations
or liabilities evidenced by bonds, debentures, notes or other similar
instruments or under capital leases other than short-term debt incurred in the
ordinary course of business. SCHEDULE 4.8 contains a complete and accurate list
of all material guarantees, assumptions, purchase agreements and similar
agreements and arrangements whereby the Company or any of its Subsidiaries is or
may become directly or indirectly liable or responsible for the indebtedness or
other obligations of another Person other than the Company or any of its
Subsidiaries, except for negotiable instruments endorsed for collection or
deposit in the ordinary course of its business, identifying, with respect to
each of the respective parties, amounts and maturities.
4.9 NO MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE 4.9,
since February 28, 1998, there has been no material adverse change in the
condition (financial or other), assets, business, or results of operations of
the Company or any of its Subsidiaries. Except as set forth on SCHEDULE 4.9,
since February 28, 1998, neither the Company nor any Subsidiary has (a) incurred
any obligation or liability (contingent or other), other than obligations and
liabilities incurred in the ordinary course of business, and no Lien has been
placed on any of the properties of the Company or any of its Subsidiaries which
remains in existence on the date hereof, other than Permitted Liens and
liabilities and Liens described on SCHEDULE 4.20 hereto, and (b) acquired or
disposed of any material assets by the Company or any of its Subsidiaries (or
any contract or arrangement therefor) or any other material transaction,
otherwise than for fair. value in the ordinary course of business; (c) paid,
discharged or satisfied any claim, Lien, obligation or liability, other than any
claim, Lien, obligation or liability (i) reflected or reserved against on the
Financial Statements or paid, discharged or satisfied in the ordinary course of
business since the date of the Financial Statements or (ii) incurred and paid,
discharged or satisfied since the date of the Financial Statements, in each case
in the ordinary course of business; (d) written off as uncollectible any
accounts receivable other then in the ordinary course of business and for
amounts not greater than $10,000; (e) terminated or amended, suffered the
termination or amendment of, failed to perform in all material respects all of
its obligations or suffered or permitted any material default to exist under,
any material agreement, license or permit; (f) suffered, or received
notification of, cancellation (nor does it have any knowledge of any set of
facts which would give any other party thereto any right to cancel), or canceled
or waived, any material right with respect to any material agreement, license or
permit; (g) suffered any damage, destruction or loss of tangible property
(whether or not covered by insurance) which in
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the aggregate exceeds $5,000; (h) made any loan (including any intercompany
advance) to any other Person (other than advances to employees in the ordinary
course of business which do not exceed $5,000 individually or $25,000 in the
aggregate); (i) canceled, waived or released any debt, claim or right in an
amount exceeding $10,000 or otherwise of substantial value; (j) paid any amount
to or entered into any agreement, arrangement or transaction with any Affiliate
outside the ordinary course of business; (k) declared, set aside, or paid any
dividend or distribution with respect to its capital stock or redeemed,
purchased or otherwise acquired any of its capital stock; (1) entered into any
transaction with any of its directors, officers or employees outside the
ordinary course of business; (m) granted any increase outside the ordinary
course of business in the compensation of any officer or employee or made any
other change in employment terms of any officer or employee; (n) suffered any
labor difficulty; (o) made any change in any method of accounting or accounting
practice; or (p) agreed, in writing or otherwise, to any of the foregoing.
4.10 EMPLOYEE PROGRAMS. SCHEDULE 4.10 sets forth a list of every
Employee Program maintained by the Company or any Current Affiliate at any time
during the five-year period ending on the Closing Date or with respect to which
a liability of the Company or an Affiliate (as defined below) exists. Each
Employee Program (other than a Multiemployer Plan) which has been maintained by
the Company during the five-year period ending on the Closing Date and which has
been intended to qualify under Section 401(a) or Section 501(c)(9) of the Code
has received a favorable determination or approval letter from the Internal
Revenue Service regarding its qualification under such section or the remedial
amendment period under Section 401(b) of the Code has not yet expired with
respect to such Employee Program and, to the knowledge of the Company, nothing
has occurred that would adversely affect such qualification since the date of
such letter or application for a determination or approval letter has been
timely made and to the knowledge of the Company, no reason exists why a
favorable determination or approval shall not be granted. Except as set forth on
SCHEDULE 4.10, the Company has no knowledge of any failure of any party to
comply with any laws applicable with respect to the Employee Programs that have
been maintained by the Company or any Current Affiliate, and no such failure
will result from completion of the transactions contemplated hereby. With
respect to any Employee Program ever maintained by the Company or an Affiliate,
there has been no "prohibited transaction," as defined in Section 406 of ERISA
or Code Section 4975, or breach of any duty under ERISA or other applicable law
or any agreement which in any such case could subject the Company to material
liability either directly or indirectly (including, without limitation, through
any obligation of indemnification or contribution) for any damages, penalties,
or taxes, or any other loss or expense. No litigation or
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governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or
threatened with respect to any such Employee Program (other than a Multiemployer
Plan).
The Company and its Current Affiliates have not incurred any liability
under title IV of ERISA which has not been paid in full prior to the Closing.
Neither the Company nor any of its Current Affiliates is liable for any material
"accumulated funding deficiency" (whether or not waived) with respect to any
Employee Program ever maintained by the Company or any Affiliate and subject to
Code Section 412 or ERISA Section 302. With respect to any Employee Program
subject to title IV of ERISA, there has been no (and the transactions
contemplated by this Agreement will not result in any) (a) "reportable event,"
within the meaning of ERISA Section 4043 or the regulations thereunder (for
which the notice requirement is not waived Under 29 C.F.R. Part 2615) or (b)
other event or condition which presents a material risk of plan termination or
any other event that may cause the Company or any Current Affiliate to incur
material liability or have a material Lien imposed on its assets under title IV
of ERISA. All payments and/or contributions required to have been made by the
Company and its Current Affiliates (under the provisions of any agreements or
other governing documents or applicable law) with respect to all Employee
Programs subject to title IV of ERISA ever maintained by the Company or any
Affiliate, for all periods prior to the Closing, have been timely made. Except
as described on SCHEDULE 4.10, no Employee Program maintained by the Company or
an Affiliate and subject to title IV of ERISA (other than a Multiemployer Plan)
has any "unfunded benefit liabilities" within the meaning of ERISA Section
4001(a)(18), as of the Closing Date. With respect to Multiemployer Plans
maintained by the Company or any Affiliate, SCHEDULE 4.10 states the aggregate
amount of withdrawal liability or other termination liability that would be
incurred by the Company or any Affiliate if there were a withdrawal from any
such plan as determined by the most recent withdrawal liability calculation
prepared by such plan. Except as disclosed on SCHEDULE 4.10, none of the
Employee Programs which is a welfare plan maintained by the Company or any
Affiliate provides health care or any other non-pension benefits to any
employees after their employment is terminated (other than as required by part 6
of subtitle B of title I of ERISA or comparable statutes or regulations) or has
ever promised to provide such post-termination benefits.
For purposes of this section:
(i) "Employee Program" means (A) any employee benefit
plan within the meaning of Section 3(3) of ERISA and employee
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benefit plans (such as foreign or excess benefit plans) which are not
subject to ERISA, and (B) any stock option plans, bonus or incentive
award plans, severance pay policies or agreements, deferred
compensation arrangements, supplemental income arrangements, vacation
plans, and all other employee benefit plans, agreements, and
arrangements not described in (A) above, and (C) any trust used to
fund, benefits under the foregoing maintained by the Company or any
Affiliate.
(ii) For purposes of this Section 4.10, an entity is
an "Affiliate" of the Company if it would have ever been considered a
single employer with the Company under ERISA Section 4001(b) or part of
the same "controlled group" as the Company for purposes of ERISA
Section 302(d)(8)(C); an entity is a "Current Affiliate" if it
currently would be considered a single employer with the Company under
ERISA Section 4001(b) or part of the same "controlled group" as the
Company for purposes of ERISA Section 302(d)(8)(C); and each reference
to the Company includes its Subsidiaries.
(iii) An entity "maintains" an Employee Program if
such entity sponsors, contributes to, or provides benefits under such
Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such
Employee Program, or if such Employee Program provides benefits to or
otherwise covers employees of such entity (or, in respect of such
employees, their spouses, dependents, or beneficiaries).
(iv) "Multiemployer Plan" means a (pension or
non-pension) employee benefit plan to which more than one employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
4.11 PRIVATE OFFERING. No form of general solicitation or general
advertising, including, but not limited to, advertisements, articles, notices or
other communications, published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising, was used
by the Company or any of its Subsidiaries or any of the Company's or such
Subsidiary's representatives, or, to the knowledge of the Company, any other
Person acting on behalf of the Company or any of its Subsidiaries, in connection
with the offering of the Units being purchased under this Agreement. During the
six months prior to the Closing, neither the Company, any of its Subsidiaries
nor any Person acting on the Company's or such Subsidiary's behalf has directly
or indirectly offered the Units, or any
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part thereof or any other similar securities, for sale to, or sold or solicited
any offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with any Person or Persons other than the Purchasers and other
investors who the Company reasonably believed had such knowledge and experience
in financial and business matters that they were capable of evaluating the
merits and risks of purchasing the Units. The Company further represents to the
Purchasers that, assuming the accuracy of the representations of the Purchasers
as set forth in Section 5 hereof, neither the Company, any of its Subsidiaries
nor any Person acting on the Company's or such Subsidiary's behalf has taken or
will take any action which would subject the issue and sale of the Units to the
provisions of Section 5 of the Securities Act, except as contemplated by the
Registration Rights Agreement. The Company has not sold the Units to anyone
other than the Purchasers designated in this Agreement. During the six months
prior to the Closing, no securities of the same class or series as the
securities comprising the Units have been issued and sold by the Company. Each
Senior Discount Note and Common Stock Purchase Warrant certificate shall bear
substantially the same legend set forth in Section 11.12 hereof, as applicable,
for at least so long as such restrictions apply.
4.12 BROKER'S OR FINDER'S COMMISSIONS. Neither the Company nor any of
its Subsidiaries has engaged any broker or finder or has incurred or become
liable for any broker's commission or finder's fee relating to or in connection
with the transactions contemplated by this Agreement. In addition to and not in
limitation of any other rights hereunder, the Company and its Subsidiaries agree
that they will indemnify and hold harmless the Purchasers from and against any
and all claims, demands or liabilities for broker's, finder's, placement agent's
or other similar fees or commissions and any and all liabilities with respect to
any taxes (including interest and penalties) payable or incurred or alleged to
have been incurred by the Company or any of its Subsidiaries or any Person
acting or alleged to have been acting on the Company's or such Subsidiary's
behalf, in connection with this Agreement, the issuance or sale of the Units or
any other transaction contemplated by any of the Transaction Documents.
4.13 DISCLOSURE.
(a) The historical financial and operating information
delivered to the Purchasers has been derived from the consolidated books and
records of the Company and its Subsidiaries prepared in accordance with GAAP.
(b) Neither this Agreement nor any Schedule or Exhibit
hereto, nor any report, document, certificate or instrument furnished to the
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Purchasers or their counsel in connection with the transactions contemplated by
this Agreement, when read together, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading. There is no
material fact known to the Company which the Company has not disclosed to the
Purchasers in writing which has or, insofar as the Company can reasonably
foresee, may have or will have a Material Adverse Effect or a material adverse
effect
4.14 FOREIGN ASSETS CONTROL REGULATION, ETC. Neither the issue and sale
of the Units by the Company nor its use of the proceeds thereof as contemplated
by this Agreement will violate, in any material respect, the Foreign Assets
Control Regulations, the Transaction Control Regulations, the Cuban Assets
Control Regulations, the Foreign Funds Control Regulations, the Iranian Assets
Control Regulations, the Nicaraguan Trade Control Regulations, the South African
Transactions Control Regulations, the Libyan Sanctions Regulations, the Soviet
Gold Coin Regulations, the Panamanian Transactions Regulations, the Haitian
Transactions Regulations, or the Iraqi Sanctions Regulations of the United
States Treasury department (31 C.F.R., Subtitle B, Chapter V, as amended) or
Executive Orders 12722 and 12724 (transactions with Iraq).
4.15 FEDERAL RESERVE REGULATIONS AND OTHER MATTERS. Neither the
Company nor any of its Subsidiaries will, directly or indirectly, use
any of the proceeds from the sale of the Unites for the purpose,
whether immediate, incidental or ultimate, of buying any "margin
stock," or of maintaining, reducing or retiring any indebtedness
originally incurred to purchase any stock that is currently a "margin
stock", or for any other purpose which might constitute the
transactions contemplated hereby a "purpose credit," in each case
within the meaning of Regulations G or U of the Board of Governors of
the Federal Reserve System (12 C.F.R. 207 and 221, as amended,
respectively), or otherwise take or permit to be taken any action which
would involve a violation of such Regulation G or Regulation U or of
Regulations T or X of the Board of Governors of the Federal Reserve
System (12 C.F.R. 220 and 224, as amended, respectively) or any other
regulation of such Board. No indebtedness that may be maintained,
reduced or retired with the proceeds from the sale of the Unites was
incurred for the purpose of purchasing or carrying any "margin stock"
and neither the Company nor any of its Subsidiaries own any such
"margin stock" or have any present intention of acquiring, directly or
indirectly any such "margin stock".
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4.16 INVESTMENT COMPANY ACT. Neither the Company nor any of its
Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.17 PUBLIC UTILITY HOLDING COMPANY ACT. To the Company's knowledge,
neither the Company nor any of its Subsidiaries is 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," as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.
4. 18 INTERSTATE COMMERCE ACT. To the Company's knowledge, neither the
Company nor any of its Subsidiaries is, nor will be, a "rail carrier,"
or a person controlled by or affiliated with a "rail carrier," within
the meaning of Title 49, U.S.C. Neither the Company nor any of its
Subsidiaries is a "carrier" or other person to which 49 U.S.C. Section
11301(b)(1) is applicable.
4.19 ENVIRONMENTAL REGULATION, ETC.
(a) Except as set forth on SCHEDULE 4.19, to the knowledge of
the Company, each of the Company and its Subsidiaries (i) has no liability under
any Environmental Law or common law cause of action relating to or arising from
environmental conditions which could have a Material Adverse Effect, and any
property owned, operated, leased, or used by the Company and its Subsidiaries
and any facilities and operations thereon comply with all applicable
Environmental Laws except to the extent that failure to comply could have a
Material Adverse Effect; (ii) has not entered into or been subject to any
judgment, consent decree, compliance order, or administrative order with respect
to any environmental or health and safety matter or received any request for
information, notice, demand letter, administrative inquiry, or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law which could have a
Material Adverse Effect; and (iii) has no reason to believe that any of the
items enumerated in clause (ii) of this paragraph will be forthcoming.
(b) Except as set forth on SCHEDULE 4.19, to the knowledge of
the Company: (i) each of the Company and its Subsidiaries has not generated,
transported, used, stored, treated, disposed of, or managed any Hazardous Waste,
except in accordance with applicable Environmental Laws; (ii) the Company has no
knowledge of any Release or Threat of Release of a Hazardous Material at any
site presently or formerly owned, operated, leased, or used by the Company or
any of its Subsidiaries; (iii) the Company and its Subsidiaries have never had
Hazardous Material transported from
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any site presently or formerly owned, operated, leased, or used by the Company
or any of its Subsidiaries for treatment, storage, or disposal at any other
place, except in accordance with applicable Environmental Laws except such
noncompliance which could not reasonably be expected to have a Material Adverse
Effect; (iv) the Company and its Subsidiaries do not presently own, operate,
lease or use any site on which underground storage tanks are or were located;(v)
the Company and its Subsidiaries have never placed underground storage tanks on
any site owned, operated, leased or used by the Company or any of its
Subsidiaries; (vi) the Company and its Subsidiaries have never removed
underground storage tanks from any site presently or formerly owned, operated,
leased or used by the Company or any of its Subsidiaries; and (vii) the Company
and its Subsidiaries have never had a Lien imposed by any Governmental Body on
any property, facility, machinery, or equipment owned, operated, leased, or used
by the Company or any of its Subsidiaries in connection with the presence of any
Hazardous Material.
4.20 PROPERTIES AND ASSETS. The Company and its Subsidiaries have good
record and marketable fee title to (or, in the case of licensed Property, valid
licenses to) all real Property and all other Property and assets, whether
tangible or intangible, owned by them and reasonably necessary in the conduct of
business of the Company or such Subsidiaries, except defects in title which do
not and will not have a Material Adverse Effect. All of the leases necessary in
any material respect for the operation of their respective properties and
assets, under which the Company or any of its Subsidiaries holds any Property or
assets, real or personal, are valid, subsisting and enforceable and afford
peaceful and undisturbed possession of the subject matter of the lease, and no
material default by the Company or any of its Subsidiaries exists under any of
the provisions thereof. All buildings, machinery and equipment of the Company
and its Subsidiaries are in good repair and working order, except for ordinary
wear and tear, and except as would have a Material Adverse Effect. All material
current and proposed uses of such Property or assets of the Company and its
Subsidiaries are permitted as of right and no regulation or ordinance interferes
with such current or proposed uses. To the knowledge of the Company, there is no
pending or formally proposed change in any such laws, regulations and ordinances
which would have a Material Adverse Effect. Except as set forth on SCHEDULE
4.20, no condemnation proceeding is pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries. All Property and
assets of any kind (real or personal, tangible or intangible) of the Company and
its Subsidiaries are free from all Liens except for (a) Liens which would not
have a Material Adverse Effect; (b) Liens disclosed on SCHEDULE 4.20 hereto; and
(c) Permitted Liens. Except as set forth on SCHEDULE 4.20 hereto, neither the
Company nor any of its
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Subsidiaries has signed any material financing statement, as debtor or lessee,
or any security agreement authorizing any secured party thereunder to file any
such financing statement.
4.21 INSURANCE. A list of all insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors under which the Company or any of its Subsidiaries may
derive any material benefit is set forth on SCHEDULE 4.21 hereof. There is no
claim by the Company or any of its Subsidiaries pending under any of such
policies or bonds as to which coverage has been questioned, reserved, denied or
disputed by the underwriters of such policies or bonds or their agents where
such question, reservation, denial or dispute would have a Material Adverse
Effect. All premiums due and payable under all such policies and bonds have been
paid, and the Company and its Subsidiaries are otherwise in full compliance with
the terms and conditions of all such policies and bonds. Except as set forth on
SCHEDULE 4.21, such policies of insurance and bonds (or other policies and bonds
providing substantially similar insurance coverage) are and have been in full
force and effect for at least the last year or since the inception of the
Company or any of its Subsidiaries, as the case may be, and remain in full force
and effect. Such policies of insurance and bonds are of the type and in amounts
customarily carried by Persons conducting business similar to that presently
conducted by the Company and its Subsidiaries. The Company knows of no
threatened termination of any such policies or bonds.
4.22 EMPLOYMENT PRACTICES. Except as set forth on SCHEDULE 4.22 hereto,
neither the Company nor any of its Subsidiaries is a party to or in the process
of negotiating any collective bargaining or labor agreement or union contract.
As of the date of this Agreement, there is no (a) charge, complaint or suit
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries respecting employment, hiring for employment,
terminating from employment, employment practices, employment discrimination,
terms and conditions of employment, safety, wrongful termination, or wages and
hours, (b) unfair labor practice charge or complaint pending or, to the
knowledge of the Company, threatened against, or decision or order in effect and
binding on, the Company or any of its Subsidiaries before or of the National
Labor Relations Board, (c) grievance or arbitration proceeding arising out of or
under collective bargaining agreements pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, (d) strike,
labor dispute, slow-down, work stoppage or other interference with work pending
or, to the knowledge of the Company, threatened against the Company or its
Subsidiaries, or (e) to the knowledge of the Company, union organizing
activities or union representation question threatened or existing with respect
to any groups of
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employees of the Company or any of its Subsidiaries, which in the case of
(a)-(e) above could be reasonably expected to have a Material Adverse Effect.
4.23 FINANCIAL STATEMENTS.
(a)......The Company has delivered to the Purchasers the
following financial statements (the "Financial Statements"), copies of which are
attached hereto as SCHEDULE 4.23:
(1) A balance sheet of the Company for its
fiscal year ending on December 31, 1997 and
statements of income, retained earnings and
cash flows for the year then ended.
(2) A balance sheet of the Company as of
February 28, 1998 and statements of income,
retained earnings and cash flows for the
period then ended, certified by the
Company's Chief Financial Officer or
Controller.
Said financial statements have been prepared in accordance with
generally accepted accounting principles applied consistently during
the periods covered thereby, are complete and correct in all material
respects, and present fairly in all material respects the financial
condition of the Company at the dates of said statements and the
results of its operations and its cash flows for the periods covered
thereby.
(b) As of February 28, 1998 and as of the date hereof and
the Closing Date, and except as set forth in the Schedules hereto, there are no
material liabilities or claims relating to the Company or its Subsidiaries of
any nature, whether accrued, absolute, contingent or otherwise, asserted or, to
the Company's knowledge, unasserted, except liabilities or claims stated or
adequately reserved against in the Financial Statements or liabilities or claims
incurred in the ordinary course of the Company's and its Subsidiaries'
operations which are not required to be reflected in the Financial Statements or
in the notes thereto under GAAP. Nothing has come to the attention of the
Company since the date of the Financial Statements which would indicate that the
Financial Statements did not fairly present in all material respects the
financial position of the Company and its Subsidiaries as of the respective
dates thereof.
4.24 INTELLECTUAL PROPERTY.
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(a) Except as described on SCHEDULE 4.24, the Company and
its Subsidiaries have ownership of, or the right or license to use (i) all
patent, copyright, trade secret, trademark, or other proprietary rights, used in
the business of the Company or any of its Subsidiaries and material to the
Company and its Subsidiaries on a consolidated basis, and (ii) all customer
lists, designs, manufacturing or other processes, computer software systems,
data compilations, research results and other information required for or
incident to their products or their business as presently conducted or
contemplated (clauses (i) and (ii), collectively, "Intellectual Property"). All
patents, patent applications, trademarks, trademark applications and
registrations and registered copyrights which are owned by or licensed to the
Company or any of its Subsidiaries or used or to be used by the Company or any
of its Subsidiaries in their business as presently conducted, and which are
material to the Company and its Subsidiaries on a consolidated basis are listed
on SCHEDULE 4.24. Except as described on SCHEDULE 4.24, all of such patents,
patent applications, trademarks, trademark applications and registrations and
registered copyrights have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, the United States Register of
Copyrights, or the corresponding offices of other jurisdictions as identified on
SCHEDULE 4.24, and have been properly maintained and renewed in accordance with
all applicable provisions of law and administrative regulations in the United
States and each such jurisdiction. There are no claims or demands of any other
Person pertaining to any of such Intellectual Property and no proceedings have
been instituted, or are pending or, to the knowledge of the Company, threatened,
which challenge the rights of the Company or any of its Subsidiaries in respect
thereof.
(b) All material licenses or other agreements under which the
Company or any of its Subsidiaries is granted rights in Intellectual Property
are listed on SCHEDULE 4.24. Except as set forth on SCHEDULE 4.24, all said
licenses or other agreements are in full force and effect and there is no
material default by any party thereto.
(c) The Company and its Subsidiaries regularly require all
professional and technical employees, and other employees having access to
valuable non-public information of the Company or any of its Subsidiaries, to
execute agreements under which such employees are required to convey to the
Company or any of its Subsidiaries, as applicable, ownership of all inventions
and developments conceived or created by them in the course of their employment
and to maintain the confidentiality of all such information of the Company and
its Subsidiaries. To the Company's knowledge, neither the Company nor its
Subsidiaries made any such information available to any Person other than
employees of the Company or any of its Subsidiaries
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except pursuant to written agreements requiring the recipients to maintain the
confidentiality of such information and appropriately restricting the use
thereof. To the knowledge of the Company, there are no infringements by others
of any of its or any Subsidiary's Intellectual Property rights.
(d) To the knowledge of the Company, the present business,
activities and products of the Company or any of its Subsidiaries do not
infringe any intellectual property of any other Person, except where such
infringement would not have a Material Adverse Effect. No proceeding charging
the Company or any of its Subsidiaries with infringement of any adversely held
Intellectual Property has been filed or is, to the knowledge of the Company,
threatened to be filed. To the Company's knowledge, there exists no unexpired
patent or patent application which includes claims that would be infringed by or
otherwise have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is making unauthorized use of any confidential information or trade
secrets of any Person, including without limitation any former employer of any
past or present employee of the Company or any of its Subsidiaries, except where
such use would not have a Material Adverse Effect. Except as set forth on
SCHEDULE 4.24, neither the Company or any of its Subsidiaries nor, to the
knowledge of the Company, any of its or any Subsidiary's employees have any
agreements or arrangements with any Persons other than the Company or any of its
Subsidiaries related to confidential information or trade secrets of such
Persons or restricting any such employee's engagement in business activities of
any nature. The activities of the Company or any of its Subsidiaries or any of
its or any Subsidiary's employees on behalf of the Company or any of its
Subsidiaries do not violate any such agreements or arrangements known to the
Company which any such employees have with other Persons.
4.25 TAXES. The Company and its Subsidiaries, and any predecessors to
the Company and any of its Subsidiaries, have filed or obtained extensions of
all Tax returns heretofore required by law to be filed by any of them. All
material Taxes have been paid in full or are adequately provided for in
accordance with GAAP on the financial statements of the applicable Person. All
material deposits, Taxes and other assessments and levies required by law to be
made, withheld, collected or provided for by the Company or any of its
Subsidiaries including deposits with respect to Taxes constituting employees'
income withholding taxes, have been duly made, withheld, collected or provided
for and have been paid over to the proper federal, state or local authority, or
are held by the applicable Person for such payment. No Liens arising from or in
connection with Taxes have been filed and are currently in effect against the
Company or any of its Subsidiaries, except for Liens for Taxes which are not yet
due. Except as set forth on SCHEDULE 4.25 hereto, neither the Company nor any of
its Subsidiaries, nor any predecessors
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thereto, has executed or filed with the IRS or any other taxing authority any
agreement or document extending, or having the effect of extending, the period
for assessment or collection of any Taxes. The federal income tax returns of the
Company and each of its Subsidiaries, and any predecessors thereto, have been
examined by the IRS, or the statute of limitations with respect to federal
income taxes has expired, for all tax years to and including the fiscal year
ended December 31, 1994 and, except as set forth on SCHEDULE 4.25, any
deficiencies have been paid in full or are being contested in good faith by
appropriate action or appropriate reserves therefor in accordance with GAAP have
been established on the Company's or applicable Subsidiaries' books. Except as
set forth on SCHEDULE 4.25, neither the Company nor any of its Subsidiaries is a
party to any tax sharing agreement or arrangement. Except as set forth on
SCHEDULE 4.25, no audits or investigations are pending or, to the knowledge of
the Company, threatened with respect to any tax returns or taxes of the Company
or any of its Subsidiaries, or any predecessor thereto.
4.26 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE
4.26, there are no material transactions, agreements or understandings, existing
or presently contemplated between or among the Company or any of its
Subsidiaries and any of its officers or directors or stockholders or any of
their Affiliates or associates.
4.27 LIMITATION ON SUBSIDIARY PAYMENT RESTRICTIONS. Except as set forth
on SCHEDULE 4.27 hereto, or as set forth in this Agreement, neither the Company
nor any of its Subsidiaries is subject to any consensual restriction on the
ability of any such Subsidiary (a) to pay dividends or make any other
distributions on such Subsidiary's Capital Stock to, or pay any indebtedness
owing to, or repurchase or redeem any of such Subsidiary's Capital Stock from,
the Company or any other Subsidiary of the Company, (b) to make any loans or
advances to the Company or any other Subsidiary of the Company, or (c) to
transfer any of its Property or assets to the Company or any other Subsidiary.
4.28 NO OTHER BUSINESS. The Company has not and is not engaged in any
material respect in any business other than providing direct delivery to home
consumers of (i) groceries, household staples (i.e., home cleaners, health and
beauty aids), and similar products such as are found in a typical grocery store
and (ii) other services and products.
4.29 PARTY IN INTEREST. The Company is not a "party in interest," as
that term is defined in Section 3.14 of ERISA, with respect to any employee
benefit plan having an interest in the General Motors Employees Domestic Group
Pension Trust.
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4.30 AGREEMENTS. Set forth on SCHEDULE 4.30 is a list of each
agreement, arrangement or understanding to which the Company or any Subsidiary
is a party (a copy or if oral, a description of each of which designated with an
asterisk on SCHEDULE 4.30 has been delivered to the Purchasers):
(a) for the lease of personal property from or to third
parties providing for annual lease payments to any single lessor or from any
single lessee in excess of $25,000;
(b) for the purchase, distribution or sale of supplies,
products or other personal property of for the furnishing or receipt of
information or services, in each case calling for performance over a period of
more than one year or involving more than $50,000 other than purchases in the
ordinary course of business;
(c) concerning any partnership or joint venture;
(d) under which it has created, incurred, assumed, or
guaranteed (or may create, incur, assume or guarantee) indebtedness (including
Capitalized Lease Obligations) involving more than $50,000 or pursuant to which
a Lien is or may be imposed on any of its assets, tangible or intangible other
than in the ordinary course of business.
(e) concerning noncompetition;
(f) with any director, officer or employee and involving
employment or severance for an amount in excess of $100,000 per year;
(g) the consequences of a default or termination of which
could result in a material adverse change in the condition (financial or other)
assets, business or results of operations of the Company or any of its
Subsidiaries;
(h) otherwise involving more than $50,000 or not entered into
in the ordinary course of business; and
(i) otherwise material to the Company's business
Except as set forth on SCHEDULE 4.30, neither the Company nor any
Subsidiary is in default, nor is there any basis for any valid claim of default,
and no event has occurred which, with notice or lapse of time, would constitute
a default under any material agreement, arrangement or understanding set forth
on SCHEDULE 4.30, except for defaults which, either individually or in the
aggregate, could not result in a material adverse
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change in the condition (financial or other) assets, business or results of
operations of the Company or any of its Subsidiaries. Except as set forth on
SCHEDULE 4.30, to the knowledge of the Company, no other Person is in default
under any such agreement.
4.31 ACCOUNTS RECEIVABLE AND INVENTORY.
(a) The accounts receivable of the Company reflected on
the Financial Statements or arising after the date thereof (i) arose from the
sale of inventory or provision of services in the ordinary course of business,
(ii) reflect extensions of credit consistent with past practices of the Company;
(iii) have been made for valuable consideration, (iv) will be legally
enforceable in all material respects according to their terms (except as
affected by bankruptcy, insolvency fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or by principles of equity and prevailing standards of commercial
reasonableness), and (v) will not be subject to any valid defense or right of
offset or similar claim.
(b) Except for items which are in the possession or
control of suppliers, the inventories of the Company are in the physical
possession of the Company at a facility of the Company, or are in transit from
suppliers of the Company to one of such facilities. Subject to the reserves set
forth on the Financial Statements or established in the ordinary course of
business thereafter, such inventories are in good condition and are of a quality
presently usable and suitable for the purposes for which they are intended and
are in a condition and a quantity such that they can be used in the ordinary
course of business of the Company.
ARTICLE V
PURCHASE FOR INVESTMENT; SOURCE OF FUNDS
Each Purchaser makes severally as to itself the representations
contained in this Article V.
5.1 PURCHASE FOR INVESTMENT. Each Purchaser represents that (a) by
reason of its business and financial experience, and the business and financial
experience of those persons, if any, retained by it to advise it with respect to
its investment in the Units, it together with such advisers have such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risk of the prospective investment, (b) it is an
accredited investor as defined in Regulation D under the Securities Act and (c)
it is purchasing the Units for its own account or for one or more separate
accounts maintained by it or for the account of one or more institutional
investors on whose behalf such Purchaser has authority to
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make this representation for investment and not with a view to the distribution
or other disposition thereof or with any present intention of distributing or
selling any of the Units except in compliance with the Securities Act and except
to one or more such institutional investors, provided that the disposition of
such Purchaser's or such investor's property shall at all times be within its
control. Such Purchaser understands and agrees that the Units have not been
registered under the Securities Act and may be resold (which resale is not now
contemplated) only if registered pursuant to the provisions thereunder or if an
exemption from registration is available.
5.2 AUTHORITY. Each Purchaser represents that it has full power and
authority and has taken all action necessary to authorize it to enter into and
perform its obligations under this Agreement and all other Transaction Documents
and other documents or instruments contemplated hereby or thereby. This
Agreement is the legal, valid and binding obligation of such Purchaser, and is
enforceable against it in accordance with its terms.
ARTICLE VI
REDEMPTIONS AND OFFERS TO PURCHASE
6.1 NOTICE OF REDEMPTION. If the Company elects or is required to
redeem Senior Discount Notes pursuant to Section 6.6 hereof, at least 30 days
but not more than 60 days before any Redemption Date, the Company shall mail by
first class mail a notice of redemption to the registered address of each Holder
of Senior Discount Notes or portions thereof that are to be redeemed. With
respect to any redemption of Senior Discount Notes, the notice shall identify
the Senior Discount Notes or portions thereof to be redeemed and shall state:
(i) the Redemption Date; (ii) the Redemption Price for the Senior Discount Notes
and the amount of unpaid and accrued interest on such Senior Discount Notes as
of the date of redemption; (iii) if any Senior Discount Note is being redeemed
in part, the portion of the principal amount of such Senior Discount Note to be
redeemed and that, after the Redemption Date, upon surrender of such Senior
Discount Note, a new Senior Discount Note or Senior Discount Notes in principal
amount equal to the unredeemed portion will be issued; (iv) that Senior Discount
Notes called for redemption must be surrendered to the Company to collect the
Redemption Price for such Senior Discount Notes; (v) that, unless the Company
defaults in paying the Redemption Price, interest on Senior Discount Notes
called for redemption ceases to accrue on and after the Redemption Date and the
only remaining right of the Holders of such Senior Discount Notes is to receive
payment of the Redemption Price. upon surrender to the Company of the Senior
Discount Notes redeemed; and (vi) if fewer than all the Senior Discount Notes
are to be redeemed, the identification of the particular Senior Discount Notes
(or
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portion thereof) to be redeemed, as well as the aggregate principal amount of
Senior Discount Notes to be redeemed and the aggregate principal amount of
Senior Discount Notes to be outstanding after such partial redemption.
6.2 SELECTION OF SENIOR DISCOUNT NOTES TO BE REDEEMED OR PURCHASED. If
less than all outstanding Senior Discount Notes are to be redeemed or if less
than all Senior Discount Notes tendered pursuant to an Offer are to be accepted
for payment, the Company shall select the outstanding Senior Discount Notes to
be redeemed or accepted for payment in compliance with the requirements of the
principal national securities exchange, if any, on which the Senior Discount
Notes are listed or, if the Senior Discount Notes are not listed on a securities
exchange, on a pro rata basis. The Company shall select for redemption or
purchase Senior Discount Notes or portions of Senior Discount Notes in principal
amounts of $1,000 or integral multiples thereof; except that if all of the
Senior Discount Notes of a Holder are selected for redemption or purchase, the
aggregate principal amount of the Senior Discount Notes held by such Holder,
even if not a multiple of $1,000, may be redeemed or purchased. Except as
provided in the preceding sentence, provisions of this Agreement that apply to
Senior Discount Notes called for redemption or tendered pursuant to an Offer
also apply to portions of Senior Discount Notes called for redemption or
tendered pursuant to an Offer.
6.3 EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption is mailed
to the Holders, Senior Discount Notes called for redemption in such notice
become due and payable on the Redemption Date at the Redemption Price. Upon
surrender to, the Company, the Senior Discount Notes called for redemption shall
be paid at the Redemption Price on the Redemption Date.
6.4 PAYMENT OF REDEMPTION PRICE. On or prior to any Redemption Date,
the Company shall segregate money sufficient to pay the Redemption Price of all
Senior Discount Notes to be redeemed on that date. Unless the Company defaults
in the payment of such Redemption Price, interest on the Senior Discount Notes
to be redeemed will cease to accrue on such Senior Discount Notes on the
applicable Redemption Date, whether or not such Senior Discount Notes are
presented for payment. If a Senior Discount Note is redeemed on or after an
interest Record Date but on or prior to the related Interest Payment Date, then
any accrued and unpaid interest shall be paid to the Person in whose name such
Senior Discount Note was registered at the close of business on such Record
Date. If any Senior Discount Note called for redemption shall not be so paid
upon surrender for redemption, interest will be paid on the unpaid principal,
premium, if any, and interest from the Redemption Date until such principal,
premium and interest is paid, at the rate of interest provided in the Senior
Discount Notes and Section 7.1. If a
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Redemption Date is a non-Business Day, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from the
Redemption Date to such succeeding Business Day.
6.5 SENIOR DISCOUNT NOTES REDEEMED IN PART. Upon surrender of a Senior
Discount Note that is redeemed in part, the Company shall issue to the Holder
thereof at the Company's expense a new Senior Discount Note equal in principal
amount to the unredeemed portion of the Senior Discount Note surrendered.
6.6 OPTIONAL AND MANDATORY REDEMPTION.
(a) The Senior Discount Notes will be subject to redemption at
any time after the Closing Date, in whole or from time to time in part (in
multiples of $1,000 of principal amount) at the option of the Company at the
price set forth below.
(i) prior to the first anniversary of the Closing
Date, at a price equal to the Accreted Value thereof plus a call
premium equal to (A) one percent of the Accreted Value of such Senior
Discount Notes plus (B) an additional 0.5% for each additional thirty
days (payable on the first day of each such period), beginning the
thirty-first day following the Closing Date, prior to the Redemption
Date, up to a maximum call premium of 4% of the Accreted Value of such
Senior Discount Notes;
(ii) during the period from and including the first
anniversary of the Closing Date through the day immediately prior to
the second anniversary of the Closing Date, at a price equal to 104% of
the Accreted Value of such Senior Discount Notes plus any accrued and
unpaid interest to the Redemption Date; and
(iii) at any time on or after the second anniversary
of the Closing Date, at a price equal to 102% of the Accreted Value of
such Senior Discount Notes, plus any accrued and unpaid interest to the
Redemption Date.
(b) On the second anniversary of the Closing Date, the Company
shall redeem (without prepayment penalty or premium) an aggregate principal
amount of Senior Discount Notes equal to $2.0 million less the aggregate
principal amount of Senior Discount Notes previously redeemed by the Company.
The redemption price payable by the Company with respect to any Senior Discount
Notes redeemed pursuant to this Section 6.6(b) shall be equal to 100% of the
principal amount so redeemed, plus any accrued and unpaid interest thereon to
the Redemption Date.
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(c) Upon any partial prepayment or redemption of the Senior
Discount Notes, the principal amount so prepaid or redeemed shall be allocated
to all Senior Discount Notes at the time outstanding in proportion to the
respective outstanding principal amounts thereof, and a corresponding pro rata
adjustment shall be made in the minimum denomination of a Senior Discount Note
pursuant to Section 11.1.
6.7 MANDATORY OFFERS.
(a) Within 10 Business Days after any Change of Control
Trigger Date or any Repayment Trigger Date, the Company shall mail a notice to
each Holder containing all instructions and materials necessary to enable such
Holders to tender Senior Discount Notes pursuant to the Offer and stating: (i)
that an Offer is being made pursuant to Section 7.12 or 7.13, as the case may
be, the length of time the Offer shall remain open, and the maximum aggregate
principal amount of Senior Discount Notes that the Company is required to
purchase pursuant to such Offer; (ii) the purchase price for the Senior Discount
Notes (as set forth in Section 7.12 or 7.13, as the case may be), the amount of
accrued and unpaid interest on such Senior Discount Notes as of the purchase
date, and the purchase date (which shall be no earlier than 30 days nor later
than 40 days from the date such notice is mailed (the "Purchase Date")); (iii)
that any Senior Discount Note not tendered will continue to accrue interest if
interest is then accruing; (iv) that, except to the extent the Company defaults
in the payment of the purchase price the Purchase Date with respect to any
Senior Discount Notes tendered, interest shall cease to accrue on the Purchase
Date with respect to all Senior Discount Notes tendered in connection with such
Offer; (v) that Holders electing to tender any Senior Discount Note or portion
thereof will be required to surrender their Senior Discount Note, with a form
entitled "Option of Holder to Elect Purchase" completed, to the Company at the
address specified in Section 13.2 hereof prior to the close of business on the
Business Day preceding the Purchase Date, PROVIDED that Holders electing to
tender only a portion of any Senior Discount Note must tender a principal amount
of $1,000 or integral multiples thereof; (vi) that Holders will be entitled to
withdraw their election to tender Senior Discount Notes if the Company receives,
not later than the close of business on the second Business Day preceding the
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of Senior Discount Notes delivered
for purchase, and a statement that such Holder is withdrawing his election to
have such Senior Discount Notes purchased; (vii) that Holders whose Senior
Discount Notes are accepted for payment in part will be issued new Senior
Discount Notes equal in principal amount to the unpurchased portion of Senior
Discount Notes surrendered, PROVIDED that only Senior Discount Notes in a
principal amount of $1,000 or integral
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multiples thereof will be accepted for payment in part and (viii) if the Offer
is made with respect to a Change of Control, the circumstances and relevant
facts regarding such Change of Control.
(b) On the Purchase Date for any Offer, the Company shall
(i) in the case of an Offer resulting from a Change of Control, accept for
payment all Senior Discount Notes or portions thereof tendered pursuant to such
Offer, (ii) in the case of an Offer resulting from one or more Securities Sales
or Mezzanine Debt Financings the aggregate Net Cash Proceeds of which exceed
$30,000,000, accept for payment all Senior Discount Notes or portions thereof
tendered pursuant to such Offer.
(c) With respect to any Offer, except to the extent that the
Company defaults in the payment of the purchase price for any Senior Discount
Notes on the Purchase Date in connection with such Offer, interest shall cease
to accrue on the Purchase Date with respect to all Senior Discount Notes
tendered in connection with such Offer.
(d) Promptly after the Purchase Date with respect to an Offer,
(i) the Company shall mail to each Holder of Senior Discount Notes or portions
tendered for payment pursuant to the terms of this Agreement an amount equal to
the purchase price for, plus any accrued and unpaid interest on, such Senior
Discount Notes, (ii) with respect to any tendered Senior Discount Note which the
Company is not required to accept for payment pursuant to the terms of this
Agreement, the Company shall return such Senior Discount Note to the Holder
thereof, and (iii) with respect to any Senior Discount Note accepted for payment
in part pursuant to the terms of this Agreement, the Company shall authenticate
and mail to each such Holder a new Senior Discount Note equal in principal
amount to the unpurchased portion of the tendered Senior Discount Note.
(e) The Company will give notice to each Holder of the results
of the Offer on or as soon as practicable after the Purchase Date, and (ii)
comply with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations to the extent such laws and regulations are applicable to any Offer.
ARTICLE VII
COVENANTS
7.1 PAYMENT OF SENIOR DISCOUNT NOTES. The Company shall pay the
principal of, and premium, if any, and interest on, the Senior Discount Notes on
the dates and in the manner provided in the Senior Discount Notes. Holders must
surrender their Senior Discount Notes to the Company to collect principal
payments. Principal, premium, or interest shall be
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considered paid on the date due if, by 2:00 p.m., Boston, Massachusetts time, on
such date, the Company shall have executed wire transfers in immediately
available funds designated for and sufficient to pay such principal, premium or
interest. To the extent lawful, the Company shall pay interest (including
Post-Petition Interest) on overdue principal, premium and interest (without
regard to any applicable grace period) at a rate equal to 3.0% per annum in
excess of the then applicable interest rate on the Senior Discount Notes.
7.2 REPORTS.
FINANCIAL AND OTHER INFORMATION. The Company will deliver to each
Purchaser who, as of 5 days prior to the date on which document is to be
delivered, holds Senior Discount Note's having an aggregate Accreted Value of at
least $1.0 million, the following:
(a) as soon as available and in any event within 45 days after
the end of the first, second and third quarterly accounting periods in each
fiscal year of the Company, an unaudited balance sheet of the Company as at the
end of such period and the related unaudited statements of operations,
stockholders' equity and changes in cash flow of the Company for such period and
(in the case of the second and third quarterly periods) for the period from the
beginning of the current fiscal year to the end of such quarterly period,
setting forth in each case in comparative form the figures for the corresponding
periods of the previous fiscal year;
(b) as soon as available and in any event within 120 days
after the end of each fiscal year of the Company, provided that unaudited copies
of the same information shall be provided within 90 days after the end of each
fiscal year, an audited balance sheet of the Company as at the end of such
fiscal year and the related audited statement of operations, stockholder's
equity and changes in cash flow of the Company for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and accompanied by the report thereon of a firm of
independent public accountants of recognized national standing selected by the
Company, which report (i) shall state that the examination by such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards and (ii) shall include the opinion of such
accountants that such financial statements (x) have been prepared in accordance
with generally accepted accounting principles consistent with those applied in
prior fiscal periods, except as otherwise specified in such opinion, and (y)
present fairly in all material respects the financial condition of the Company
at the dates of said financial statements and the results of the Company's
operations for the periods covered thereby;
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(c) as soon as available and in any event within 30 days after
the end of each month, an unaudited balance sheet of the Company as at the end
of such month and the related unaudited statements of operations, stockholders'
equity and changes in cash flows of the Company for such month and for the
current fiscal year to the end of such month, setting forth in comparative form
the Company's projected financial statements for the corresponding periods for
the current fiscal year and setting forth net new subscribers to services
provided;
(d) as soon as available, but in any event within 30 days
after commencement of each new fiscal year, a business plan and projected
financial statements for such fiscal year; and
(e) with reasonable promptness, (i) such other notices,
information and data with respect to the Company as the Company delivers to the
holders of Common Stock; including, promptly upon receipt thereof, any
additional reports, management letters or other detailed information concerning
significant aspects of the Company's operations or financial affairs given to
the Company by its independent accountants (and not otherwise contained in other
materials provided hereunder), and (ii) such other information and data as the
Purchasers may from time to time reasonably request.
Notwithstanding the foregoing, the Company's obligations to deliver the
information specified in clauses (c), (d) and (e)(ii) of this Section 7.2 shall
terminate once the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (a
"Reporting Company"). In addition, once the Company becomes a Reporting Company,
the Company shall not be required to deliver to any Holder the information
specified in clauses (a) and (b) above before such information is filed with the
Securities and Exchange Commission.
The foregoing financial statements shall be prepared on a consolidated basis if
the Company then has any subsidiaries. The financial statements delivered
pursuant to paragraphs (a) and (c) shall be accompanied by a certificate of the
chief financial officer or controller of the Company stating that such
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except as noted) and fairly present the
financial condition and results of operations of the Company at the date thereof
and for the periods covered thereby.
7.3 COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Holders, within 15 days
after the end of each calendar quarter, an Officers' Certificate stating that
(i)
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a review of the activities of the Company and its Subsidiaries during the
preceding calendar quarter has been made to determine whether the Company has
kept, observed, performed and fulfilled all of its obligations under this
Agreement and the Senior Discount Notes, (ii) such review was supervised by the
Officers of the Company signing such certificate, and (iii) that to the best
knowledge of each Officer signing such certificate, (A) the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Agreement and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Agreement (or, if a Default or Event of
Default occurred, describing all such Defaults or Events of Default of which
each such Officer may have knowledge and what action the Company has taken or
proposes to take with respect thereto), and (B) no event has occurred and
remains in existence by reason of which payments on account of the principal of,
or premium, if any, or interest on, the Senior Discount Notes are prohibited or
if such event has occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations
of the American Institute of Certified Public Accountants, the audited financial
statements delivered by the Company pursuant to Section 7.2(b) hereof shall be
accompanied by a written statement of Price Waterhouse, the Company's
independent public accountants (or another independent accounting firm of
established national reputation reasonably satisfactory to the Holders), that in
making the examination necessary for certification of such financial statements
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Sections 7.1, 7.5, 7.7, 7.8, 7.9, 7.10,
7.11, 7.13, 7.17, 7.18, 7.19, 7.20 or 7.21, or if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company will, so long as any of the Senior Discount
Notes are outstanding, deliver to the Holders, promptly after any Officer of the
Company becomes aware of (i) any Default or Event of Default, (ii) any default
or event of default under any other mortgage, agreement or instrument that could
result in an Event of Default under Section 9.1, or (iii) any condition or event
which has resulted in or is reasonably likely to result in any material
liability under any federal, state or local statute or regulation relating to
public health and safety, worker. health and safety or pollution or protection
of the environment or any other material adverse change, event or circumstance
affecting the Company or any Subsidiary (including, without limitation, the
filing of any material litigation against the Company or any
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Subsidiary or the existence of any dispute with any Person which involves a
reasonable likelihood of such litigation being commenced) an Officers'
Certificate specifying such Default, Event of Default or default and what action
the Company is taking or proposes to take with respect thereto.
7.4 STAY, EXTENSION AND USURY LAWS. The Company covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that might affect the covenants or the performance of its obligations
under this Agreement and the Senior Discount Notes; and the Company (to the
extent it may lawfully do so) hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not, by resort to any such law,
hinder, delay or impede the execution of any power granted to the Holders
pursuant to this Agreement, but will suffer and permit the execution of every
such power as though no such law has been enacted.
7.5 LIMITATION ON RESTRICTED PAYMENTS.
(a) The Company shall not, and shall not permit any Subsidiary
to, directly or indirectly, make any Restricted Payment.
(b) Notwithstanding Section 7.5(a), the following Restricted
Payments may be made: (i) the payment of any cash dividend on the Company's or
any Subsidiary's Capital Stock, provided that the aggregate amount of cash
dividends payable by the Company and its Subsidiaries, other than dividends
payable to the Company or any Subsidiary, during any twelvemonth period shall
not exceed twenty percent (20%) of the Company's Consolidated Net Income; (ii)
the redemption or repayment of the Senior Discount Notes under the circumstances
set forth in this Agreement, (iii) dividends or distributions on Capital Stock
payable in Capital Stock (other than Disqualified Capital Stock); (iv)
redemptions, repurchases, retirements or other acquisitions of Capital Stock of
any Person in exchange for Capital Stock (other than Disqualified Capital
Stock); (v) payments to purchase, redeem, defease or otherwise acquire or retire
any Pari Passu Indebtedness or Subordinated Indebtedness so long as such payment
consists of Capital Stock (other than Disqualified Capital Stock); (vi)
repurchases of securities at cost upon termination of employment or other
association with a Person by any officer, director, employee or consultant of
such Person; and (vii) any payments in respect of Senior Indebtedness.
7.6 CORPORATE EXISTENCE. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate or similar existence of each of its Subsidiaries in
accordance with the respective organizational documents of
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each of its Subsidiaries and the rights (charter and statutory), licenses and
franchises of the Company and each of its Subsidiaries; PROVIDED, HOWEVER, that
the Company shall not be required to preserve any such right, license or
franchise, or the corporate or similar existence of any Subsidiary, if the
Company's Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries taken as a whole and that the loss thereof is not adverse in any
material respect to the holders of the Senior Discount Notes and the Warrants.
7.7 LIMITATION ON INDEBTEDNESS.
(a) Except as set forth in this Section 7.7, the Company shall
not, and shall not permit any Subsidiary, after the date hereof, directly or
indirectly, to Incur any Indebtedness.
(b) Notwithstanding Section 7.7(a) and in addition to
Indebtedness permitted to be Incurred under Section 7.7(c), the Company or any
Subsidiary may Incur Subordinated Indebtedness if (i) no Default or Event of
Default shall have occurred and be continuing at the time or as a consequence of
the Incurrence of such Indebtedness, (ii) on the date of the Incurrence of such
Indebtedness, the Consolidated Interest Coverage Ratio of the Company and its
Subsidiaries at the time of such Incurrence, after giving pro forma, effect
thereto, is not less than 2.0 to 1, and (iii) any Subordinated Indebtedness so
Incurred under this Section 7.7(b) by its terms, or by the terms of any
agreement or instrument pursuant to which such Subordinated Indebtedness is
Incurred, (A) does not provide for payments of principal of such Indebtedness at
the stated maturity thereof or by way of a sinking fund applicable thereto or by
way of any mandatory redemption, defeasance, retirement or repurchase thereof by
the Company (including any redemption, retirement or repurchase which is
contingent upon events or circumstances, but excluding any retirement required
by virtue of acceleration of such Indebtedness upon an event of default
thereunder), in each case prior to the final stated maturity of the Senior
Discount Notes and (B) does not permit redemption or other retirement thereof
(including pursuant to an offer to purchase made by the Company) at the option
of the holder thereof prior to the final stated maturity of the Senior Discount
Notes, other than a redemption or other retirement at the option of the holder
of such Subordinated Indebtedness (including pursuant to an offer to purchase
made by the Company) which is' conditioned upon a change of control of the
Company pursuant to provisions substantially similar to those contained in
Section 7.12.
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(c) Notwithstanding Section 7.7(a), and in addition to 7.7(b),
the Company and its Subsidiaries may Incur, after the date hereof, any
of the following Indebtedness:
(i) Indebtedness outstanding at the date hereof as
set forth on SCHEDULE 4.8, including the Indebtedness evidenced by the
Senior Discount Notes;
(ii) Refinancing Indebtedness with respect to
Indebtedness that was Incurred prior to the date hereof or, if incurred
after the date hereof, was Incurred in compliance with the provisions
of this Agreement; PROVIDED, HOWEVER, that (A) the principal amount of
such Refinancing Indebtedness shall not exceed the principal amount (or
accreted value, in the case of Indebtedness issued at a discount) of
the Indebtedness so extended, refinanced, renewed, replaced,
substituted, defeased or refunded (plus the amount of fees, costs and
expenses incurred and the amount of any premium, penalties, breakage
costs and other similar amounts required to be paid in connection with
such refinancing pursuant to the terms of the instrument governing the
Indebtedness so extended, refinanced, renewed, replaced, substituted,
defeased or refunded or the amount of any premium reasonably determined
by the Company as necessary to accomplish a refinancing by means of a
tender offer or privately negotiated repurchase, which determination
shall be supported by a fairness opinion from an Independent Financial
Advisor, plus the fees, costs and expenses of such tender offer or
repurchase); and (B) the Refinancing Indebtedness shall (1) have a
Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of the Indebtedness being extended,
refinanced, renewed, replaced, substituted, defeased or refunded; (2)
not have a final scheduled maturity earlier than the final scheduled
maturity of the Indebtedness being extended, refinanced, replaced,
renewed, substituted, defeased or refunded; (3) not permit redemption
at the option of the holder earlier than the earliest date of
redemption at the option of the holder of the Indebtedness being
extended, refinanced, renewed, replaced, substituted, defeased or
refunded; and (4) rank no more senior or be at least as subordinated,
as the case may be, in right of payment to the Senior Discount Notes as
the Indebtedness being extended, refinanced, replaced, renewed,
substituted, defeased or refunded; and
(iii) Senior Indebtedness of the Company not to
exceed an aggregate of $10,000,000 Incurred in connection with the
Company's establishment of a senior secured credit facility with a bank
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or other lending institution, the terms of which shall include
subordination provisions acceptable to DDJ, in its reasonable
discretion.
(iv) Indebtedness of the Company or any Subsidiary in
an aggregate amount not exceeding $10,000,000, whether or not secured
by a Lien, the proceeds of which are used solely to purchase inventory
and/or purchase or lease assets acquired in the ordinary course of
business.
7.8 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Neither the Company nor
any of its Subsidiaries shall enter into, amend, modify or supplement, or permit
any Subsidiary to enter into amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any Subsidiary's
officers, directors, employees, stockholders or Affiliates or with any
individual related by blood, marriage or adoption to any such individual or with
any entity in which any such Person or individual owns a beneficial interest,
except for customary employment arrangements and benefit programs on reasonable
terms and except as otherwise expressly contemplated by this Agreement.
7.9 LIMITATION ON LIENS. The Company shall not, and shall not permit
any of its Subsidiaries to, Incur, assume, suffer to exist, create or otherwise
cause to be effective any Lien on any asset now owned or hereafter acquired, or
any income or profits therefrom or assign or convey any right to receive income
therefrom to secure any Indebtedness except: (a) Permitted Liens, (b) Liens
existing as of the date hereof (and any extension, renewal or replacement Liens
upon the same Property subject to such Liens, provided the principal amount of
Indebtedness secured by each Lien constituting such an extension, renewal or
replacement Lien shall not exceed the principal amount of Indebtedness secured
by the Lien theretofore existing, and (c) Liens replacing, extending or
renewing, in whole or in part, any Lien described in the foregoing clauses (a)
and (b), including in connection with any refinancing of the Indebtedness, in
whole or in part, secured by any such Lien effected in accordance with Section
7.7, PROVIDED that if any such clauses limit the amount secured by or the
Property or assets subject to such Liens, no, such replacement, extension or
renewal shall increase the amount of Indebtedness or the Property or assets
subject to such Liens.
7.10 PAYMENT OF TAXES AND OTHER CLAIMS. The Company shall, and shall
cause each of its Subsidiaries to, pay or discharge, before the same shall
become delinquent, (a) all Taxes, assessments and governmental charges
(including withholding taxes and penalties, interest and additions to taxes)
levied or imposed upon it or any of its Subsidiaries or properties of the
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Company or any of its Subsidiaries and (b) all lawful claims for labor,
materials and supplies that, if unpaid might by law become a Lien upon the
Property of it or any of its Subsidiaries; PROVIDED, HOWEVER, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such Tax, assessment, charge or claim if the amount, applicability or validity
thereof is being contested in good faith by appropriate proceedings and an
adequate reserve has been established therefor to the extent required by GAAP.
7.11 RESTRICTIONS AGAINST LIMITATIONS ON UPSTREAM PAYMENTS. The Company
shall not, and shall not permit any Subsidiary of the Company to, create or
otherwise cause or suffer to exist or to become effective any Payment
Restriction or other encumbrance or restriction on the ability of any Subsidiary
of the Company to (a) pay dividends or make any other distributions on its
Capital Stock or any other interest or participation in, or measured by, its
profits owned by, or pay any Indebtedness owed to, the Company or a Subsidiary
of the Company, (b) make loans or advances to the Company or a Subsidiary of the
Company, or (c) transfer any of its Properties or assets to the Company or any
Subsidiary of the Company, except for such Payment Restrictions or encumbrances
existing under or by reason of: (i) applicable law; (ii) non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices; (iii) instruments governing purchase money
Indebtedness for Property acquired in the ordinary course of business that only
impose restrictions on the Property so acquired; or (iv) Refinancing
Indebtedness permitted under this Agreement with respect to Indebtedness
described in clause (iii), PROVIDED that the restrictions contained in the
agreements governing such Refinancing Indebtedness are no more restrictive in
the aggregate than those contained in the instrument governing the Indebtedness
being refinanced immediately prior to such refinancing.
7.12 CHANGE OF CONTROL. Upon the occurrence of a Change of Control
(such date being the "Change of Control Trigger Date"), each Holder will have
the right to require the Company to repurchase all or any part of such Holder's
Senior Discount Notes pursuant to the Offer (but, with respect to any partial
tender of Senior Discount Notes, the Company shall only be required to purchase
principal amounts in integral multiples of $1,000) at a purchase price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest to the Purchase Date. The Offer shall be effected in accordance with
Section 6.7 and Article VI (to the extent applicable) and the provisions of this
Section 7.12.
7.13 REDEMPTION FROM THE PROCEEDS OF SECURITIES SALES AND MEZZANIN
DEBT FINANCING.
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(a) Subject to 7.13(b), the Company will not, and will
not permit any of its Subsidiaries to, undertake any Securities Sale or any
Mezzanine Debt Financing, unless: (i) the Company or the applicable Subsidiary
receives consideration, which, at the time of such Securities Sale or Mezzanine
Debt Financing, is at least equal to the fair market value of the Capital Stock
or other equity or debt securities sold or otherwise disposed of (as determined
in good faith by the Board of Directors of the Company evidenced by a Board
Resolution); and (ii) in the case of a Securities Sale, such Securities Sale
does not involve Disqualified Capital Stock.
(b) As soon as practicable, but in no event later than 10
Business Days after any date (with respect to both a Securities Sale or a
Mezzanine Debt Financing, a "Repayment Trigger Date") that the aggregate amount
of Net Cash Proceeds from all such Securities Sales and Mezzanine Debt
Financings, occurring on or after the date hereof exceed $25,000,000, the
Company shall commence an Offer to purchase one-half of the Senior Discount
Notes held by each Holder, at an offer price equal to 100% of the Accreted Value
thereof, plus accrued and unpaid interest to the Purchase Date. The Offer shall
be effected in accordance with Section 6.7 and Article VI (to the extent
applicable) and the provisions of this Section 7.13. To the extent that any such
Net Cash Proceeds remain after completion of an Offer, the Company may use the
remaining amount for any purpose permitted by this Agreement.
7.14 MAINTENANCE OF PROPERTIES. The Company will cause all properties
used or useful in the conduct of its business or the business of any Subsidiary
of the Company to be maintained and kept in good condition, repair and working
order, subject to normal wear and tear, and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 7.14 shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined by the Company in good faith, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any material respect to the Holders.
7.15 MAINTENANCE OF INSURANCE. The Company shall, and shall cause its
Subsidiaries to, (a) keep at all times all of their properties which are of an
insurable nature insured against loss or damage with financially sound and
reputable insurers to the extent that property of similar character is usually
so insured by corporations similarly situated and owning like properties in
accordance with good business practice, and (b) will maintain with financially
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sound and reputable insurers insurance against other hazards and risks and
liability to persons and property to the extent and in a manner customary for
corporations in similar business similarly situated. The Company shall, and
shall cause its Subsidiaries to, use the proceeds from any such insurance policy
to repair, replace or otherwise restore the property to which such proceeds
relate, except to the extent that a different use of such proceeds is, as
determined by the Company, in good faith, desirable in the conduct of its
business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
7.16 COMPLIANCE WITH LAWS AND OBLIGATIONS. The Company shall comply,
and shall cause each of its Subsidiaries to comply, with (i) all applicable
statutes, rules, regulations, orders and restrictions of the United States of
America, all states and municipalities thereof, and of any governmental
department, commission, board, regulatory authority, bureau, agency and
instrumentality of the foregoing, in respect of the conduct of their respective
businesses and the ownership of their respective properties, except such as are
being contested in good faith and by appropriate proceedings and except for such
noncompliance as would not in the aggregate have a Material Adverse Effect and
(ii) all other material obligations which the Company or any Subsidiary incurs
pursuant to any contract or agreement, whether oral or written, express or
implied, as such obligations become due, unless and to the extent that the same
are being contested in good faith and by appropriate proceedings and adequate
reserves (as determined in accordance with GAAP, consistently applied) have been
established on its books with respect thereto.
7.17 LIMITATION ON ISSUANCES AND DISPOSITIONS OF CAPITAL STOCK OF
SUBSIDIARIES AND ACQUISITIONS AND SALES. The Company (a) shall not, and shall
not permit any Subsidiary to, transfer, convey, sell, or otherwise dispose of
any Capital Stock of a Subsidiary, or securities convertible into or exercisable
or exchangeable for, or options, warrants, rights or any other interest with
respect to, Capital Stock of a Subsidiary to any Person if such transfer, sale,
conveyance or disposition would cause such Subsidiary to cease to be a
Subsidiary, and (b) shall not permit any Subsidiary to issue shares of its
Capital Stock (other than directors' qualifying shares), or securities
convertible into or exercisable or exchangeable for, or options, warrants,
rights or any other interest with respect to, its Capital Stock to any Person if
such issuance would cause such Subsidiary to cease to be a Subsidiary.
7.18 LIMITATION ON SALE OF ASSETS. The Company shall not, and shall not
permit any of its Subsidiaries to sell, lease or otherwise dispose of any assets
of the Company or its Subsidiaries in any transaction or series of related
transactions (other than a Permitted Disposition) or sell or
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permanently dispose of any of its or any Subsidiary's Intellectual Property
(other than a Permitted Disposition).
7.19 LIMITATIONS ON MERGERS AND ACQUISITIONS. The Company shall
not:
(a) merge or consolidate with any Person or permit any
Subsidiary to merge or consolidate with any Person (other than the Company or a
Wholly-Owned Subsidiary);
(b) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction (including, without limitation, any
reorganization into a limited liability company, a partnership or any other
non-corporate entity which is treated as a partnership for federal income tax
purposes); or
(c) acquire, or permit any Subsidiary to acquire, any interest
in any company or business (whether by a purchase of assets, purchase of stock,
merger or otherwise), other than a Permitted Investment.
Provided that the Company may engage in a transaction described in
clauses (a) and (b) of this Section 7.19 if, concurrently with the closing of
such transaction, all outstanding Senior Discount Notes are either redeemed
pursuant to Section 6.6 hereof, or Offered to be redeemed pursuant to Section
7.12 hereof.
7.20 LIMITATIONS ON EXPENDITURES AND OTHER ACTIVITIES. The Company
shall not:
(a) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than providing
direct delivery to home consumers of (i) groceries, household staples (i.e.,
home cleaners, health and beauty aids), and similar products such as are found
in a typical grocery store and (ii) other services and products;
(b) make any capital expenditures (including, without
limitation, payments with respect to Capital Leases, as determined in accordance
with GAAP consistently applied) exceeding $10,000,000 in the aggregate on a
consolidated basis during any twelve-month period;
(c) enter into any leases or other rental agreements
(excluding Capital Leases, as determined in accordance with generally accepted
accounting principles consistently applied) under which the amount
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of the aggregate lease payments for all such agreements exceeds $5,000,000 on a
consolidated basis for any twelve-month period; or
(d) change its fiscal year.
7.21 BOOKS AND RECORDS. The Company shall maintain proper books of
record and account which present fairly in all material respects its financial
condition and results of operations and make provisions on its financial
statements for all such proper reserves as in each case are required in
accordance with GAAP, consistently applied.
7.22 COMPLIANCE WITH AGREEMENTS. The Company shall perform and observe
(i) all of its obligations to each holder of the Senior Discount Notes and all
of its obligations to each holder of the Common Stock set forth in the Company's
Certificate of Incorporation and bylaws, (ii) all of its obligations to each
holder of the Warrants set forth in the Warrant Agreement (as that term is
defined therein) and (iii) all of its obligations to each holder of Registrable
Shares set forth in the Registration Rights Agreement (as that term is defined
therein).
7.23 CURRENT PUBLIC INFORMATION. In the event that the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company shall at all times file all
reports required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder and shall take such further action as any holder
or holders of Restricted Securities may reasonably request, all to the extent
required to enable such holders to sell Restricted Securities pursuant to (i)
Rule 144 adopted by the Securities and Exchange Commission under the Securities
Act (as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission. Upon
request, the Company shall deliver to any holder of Restricted Securities a
written statement as to whether it has complied with such requirements.
7.24 REQUIRED SECURITIES SALES.
(a) During the period from the Closing Date through
October 14, 1998, the Company shall use reasonable efforts to sell Capital
Stock (other than Disqualified Capital Stock and debt convertible into equity
securities of the Company) in a sale or sales on terms satisfactory to DDJ in
its reasonable discretion resulting in Net Cash Proceeds to the Company of at
least $3.5 million; and
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(b) During the period from the Closing Date through January
14, 1999, the Company shall use reasonable efforts to sell, including sales
pursuant to Section 7.24(a), Capital Stock (other than Disqualified Capital
Stock and debt convertible into equity securities of the Company) in a sale or
sales on terms satisfactory to DDJ in its reasonable discretion, including sales
pursuant to clause (a) of this Section 7.24, resulting in Net Cash Proceeds to
the Company of at least $7.0 million.
7.25 TERMINATION. The obligations of the Company under this Article VII
shall terminate as of the date on which no Senior Discount Notes are
outstanding.
ARTICLE VIII
[INTENTIONALLY DELETED]
ARTICLE IX
DEFAULTS AND REMEDIES
9.1 EVENTS OF DEFAULT.
(a) Each of the following constitutes an "Event of Default":
(i) the Company shall fail to make any payment in respect of (A) the principal
of or premium, if any, on the Senior Discount Notes as the same shall become
due, whether at maturity, upon acceleration, redemption or otherwise, or (B)
interest on or in respect of any Senior Discount Notes as the same shall become
due, and such failure shall continue for a period of 15 Business Days; (ii)
failure by the Company for 30 days after receipt of notice from the Holders of
at least 25% of the principal amount of the outstanding Senior Discount Notes to
comply with any other provisions of this Agreement or any Senior Discount Notes;
(iii) default under any mortgage, agreement or instrument under which there may
be Incurred or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Subsidiaries) whether such
Indebtedness now exists, or is created after the date hereof, if (A) such
default results in the acceleration of such Indebtedness prior to its express
maturity or shall constitute a default in the payment of such Indebtedness at
final maturity of such Indebtedness, and (B) the principal amount of any such
Indebtedness that has been accelerated or not paid at maturity, when added to
the aggregate principal amount of all other such Indebtedness that has been
accelerated or not paid at maturity, exceeds $500,000; (iv) failure by the
Company or any of its Subsidiaries to pay final judgments, the uninsured portion
of which exceeds $100,000, which judgments are not paid, discharged, bonded or
stayed for a period of 90 days after the date of entry thereof; (v) if under any
Bankruptcy Law, (A) the Company or any Subsidiary commences a
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voluntary case, consents to the entry of an order for relief against it in an
involuntary case, consents to the appointment of a Custodian of it or for all or
substantially all of its Property, or makes a general assignment for the benefit
of its creditors, or (B) a court of competent jurisdiction enters an order or
decree, and such order or decree remains unstayed and in effect for 60 days,
that is for relief against the Company or any Subsidiary in an involuntary case,
appoints a Custodian of the Company or any Subsidiary or for all or
substantially all of the Property of the Company or any Subsidiary, or orders
the liquidation of the Company or any Subsidiary; and (vi) any of the
Transaction Documents shall cease, for any reason, to be in full force and
effect in any material respect, except as a result of an amendment, waiver or
termination thereof as contemplated or permitted hereby, or the Company shall so
assert in writing.
(b) Any notice of default delivered to the Company by the
Holders of Senior Discount Notes must be in writing and must specify the Event
of Default, demand that it be remedied and state that the notice is a "Notice of
Default."
9.2 ACCELERATION.
(a) If an Event of Default (other than an Event of Default
under Section 9. 1 (a) (v)) occurs and is continuing, the Holders of at least
25% in principal amount of the then outstanding Senior Discount Notes may
declare all outstanding Senior Discount Notes to be due and payable immediately
and, upon such declaration, the principal amount of, and premium, if any, and
any accrued and unpaid interest on, all such Senior Discount Notes, to the date
of payment shall be due and payable immediately.
(b) Notwithstanding anything to the contrary in this
Agreement, if an Event of Default arises under Section 9.1(a)(v) the principal
amount of, and premium, if any, and any accrued and unpaid interest on, all
outstanding Senior Discount Notes shall IPSO FACTO become and be immediately due
and payable without any declaration or other act on the part of any Holder.
(c) To the extent permitted under Section 10.2(b), the
Holders of a majority in aggregate principal amount of the then outstanding
Senior Discount Notes by notice to the Company may rescind any declaration of
acceleration of such Senior Discount Notes and its consequences if (i) the
rescission would not conflict with any judgment or decree, (ii) if all existing
Defaults and Events of Default (other than the nonpayment of principal of, or
premium, if any, or interest on, the Senior Discount Notes which shall have
become due by such declaration) shall have been cured or waived, and (iii) the
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Company has delivered to the Holders an Officers' Certificate to the effect of
clauses (i) and (ii) above.
(d) In the event of a declaration of acceleration under
this Agreement because an Event of Default set forth in Section 9. 1(a)(iii) has
occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if either (i) the holders of the
Indebtedness which is the subject of such Event of Default have waived such
failure to pay at maturity or have rescinded the acceleration in respect of such
Indebtedness within 10 days of such maturity or declaration of acceleration, as
the case may be, and no other Event of Default has occurred during such 10-day
period which has not been cured or waived, or (ii) such Indebtedness shall have
been discharged or the maturity thereof shall have been extended such that it is
not then due and payable, or the underlying default has been cured within 10
days of such maturity or declaration of acceleration, as the case may be.
9.3 OTHER REMEDIES. If an Event of Default. occurs and is continuing,
the Holders may pursue any available remedy to collect the payment of principal
of, or premium, if any, or interest on the Senior Discount Notes or to enforce
the performance of any provision of the Senior Discount Notes or this Agreement.
A delay or omission by any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
9.4 WAIVER OF PAST DEFAULTS. Subject to the provisions of Sections 9.6
and 10.2 hereof, the Holders of a majority in aggregate principal amount of the
then outstanding Senior Discount Notes by notice to the Company may on behalf of
all Holders waive any existing Default or Event of Default and its consequences
under this Agreement, except a continuing Default or Event of Default in the
payment of the principal of, or premium, if any, or interest on, any Note (which
may only be waived with the consent of each Holder affected). Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Agreement; PROVIDED that no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
9.5 CONTROL BY A MAJORITY. The Holders of a majority in principal
amount of the Senior Discount Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Holders.
9.6 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other
provision of this Agreement, the right of any Holder of a Senior Discount Note
to receive payment of principal of, and premium, if any, and
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interest on such Senior Discount Note, on or after the respective dates
expressed in such Senior Discount Note, or to bring suit for the enforcement of
any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Holder.
9.7 HOLDERS MAY FILE PROOFS OF CLAIM. The Holders may file such proofs
of claim and other papers or documents as may be necessary or advisable to have
the claims of the Holders allowed in any Insolvency or Liquidation Proceeding or
other judicial proceeding relative to the Company (or any other obligor upon the
Senior Discount Notes), its creditors or its property.
9.8 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right
or remedy under this Agreement, a court in its discretion may require the filing
by any party litigant in the suit of an undertaking to pay the costs of the
suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant.
ARTICLE X
AMENDMENTS
10.1 AMENDMENTS AND SUPPLEMENTS PERMITTED WITHOUT CONSENT OF HOLDERS.
Notwithstanding Section 10.2, the Company may amend or supplement this Agreement
or the Senior Discount Notes without the consent of any Holder to: (i) cure any
ambiguity, defect or inconsistency, provided that such amendment does not
adversely affect the rights of any Holder; (ii) provide for uncertificated
Senior Discount Notes in addition to or in place of certificated Senior Discount
Notes; (iii) provide for the assumption of the Company's obligations to the
Holders in the event of any Disposition involving the Company that is permitted
under Article VIII in which the Company is not the Surviving Person; or (iv)
make any change that would (A) provide any additional rights or benefits to
Holders or (B) not adversely affect the legal rights under this Agreement of any
Holder.
10.2 AMENDMENTS AND SUPPLEMENTS REQUIRING CONSENT OF HOLDERS: OTHER
CONSENTS.
(a) Except as otherwise provided in Sections 10. 1 and 10.2(b),
this Agreement and the Senior Discount Notes may be amended or supplemented with
the written consent of the Holders of at least a majority of the aggregate
principal amount of the then outstanding Senior Discount Notes (including
consents obtained in connection with a tender offer or exchange offer for the
Senior Discount Notes), and any existing Default or
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Event of Default or compliance with any provision of this Agreement or the
Senior Discount Notes may be waived with the consent of Holders of at least a
majority of the aggregate principal amount of the then outstanding Senior
Discount Notes (including consents obtained in connection with a tender offer or
exchange offer for the Senior Discount Notes).
(b) Without the consent of each Holder affected, no amendment,
supplement or waiver to this Agreement shall: (i) reduce the principal amount of
Senior Discount Notes whose Holders must consent to an amendment, supplement or
waiver; (ii) reduce the principal of or change the fixed maturity of any Senior
Discount Note, or alter the provisions with respect to the redemption of the
Senior Discount Notes in a manner adverse to the Holders; (iii) reduce the rate
of or change the time for payment of interest on any Senior Discount Note; (iv)
waive a Default or Event of Default in the payment of principal of, or premium,
if any, or interest on, the Senior Discount Notes (except that Holders of at
least a majority in aggregate principal amount of the then outstanding Senior
Discount Notes may (A) rescind an acceleration of the Senior Discount Notes that
resulted from a non-payment default, and (B) waive the payment default that
resulted from such acceleration); (v) make any Senior Discount Note payable in
money other than that stated in the Senior Discount Notes; (vi) make any change
in the provisions of this Agreement relating to waivers of past Defaults or the
rights of Holders to receive payments of principal of, or premium, if any, or
interest on, the Senior Discount Notes; (vii) waive a redemption payment with
respect to any Senior Discount Note; or (viii) make any change in Section 9.4,
Section 9.6 or this sentence.
(c) It shall not be necessary for the consent of the Holders
under this Section 10.2 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof. After an amendment, supplement or waiver under this Section 10.2
becomes effective, the Company shall mail to each Holder affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Agreement or waiver.
(d) Except as otherwise specified in this Agreement, if any
consent or approval of the Holders is required pursuant to the terms of this
Agreement, such consent or approval shall be deemed to have been given if given
by at least a majority of the aggregate principal amount of then outstanding
Senior Discount Notes.
10.3 REVOCATION AND EFFECT OF CONSENTS.
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(a) Until an amendment, supplement or waiver becomes effective,
a consent to it by a Holder of a Senior Discount Note is a continuing consent by
the Holder and every subsequent holder of a Senior Discount Note or portion of a
Senior Discount Note that evidences the same Indebtedness as the consenting
Holder's Senior Discount Note, even if notation of the consent is not made on
any such Senior Discount Note. However, any such Holder or subsequent Holder may
revoke the consent as to his or her Senior Discount Note or portion of a Senior
Discount Note if the Company receives the notice of revocation before the date
on which the Company mails to the Holders an Officers' Certificate certifying
that the Holders of the requisite principal amount of Senior Discount Notes have
consented (and not theretofore revoked such consent) to the amendment or waiver.
(b) The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the holders of Senior Discount Notes
entitled to consent to any amendment or waiver. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were holders of Senior Discount Notes at such record date (or their
duly designated proxies), and only those Persons, shall be entitled to consent
to such amendment or waiver or to revoke any consent previously given, whether
or not such Persons continue to be holders of Senior Discount Notes after such
record date. No consent shall be valid or effective for more than 90 days after
such record date.
(c) After an amendment or waiver becomes effective it shall
bind every Holder, unless it is of the type described in Section 10.2(b), in
which case the amendment or waiver shall only bind each Holder that consented to
it and every subsequent holder of a Senior Discount Note that evidences the same
debt as the consenting Holder's Senior Discount Note.
10.4 NOTATION ON OR EXCHANGE OF SENIOR DISCOUNT NOTES. The Company may
place an appropriate notation about an amendment, supplement or waiver on any
Senior Discount Note thereafter issued in exchange for any Senior Discount Note
issued as of the date of such amendment, supplement or waiver. The Company in
exchange for all Senior Discount Notes may issue new Senior Discount Notes that
reflect the amendment, supplement or waiver. Failure to make the appropriate
notation or issue a new Senior Discount Note shall not affect the validity and
effect of such amendment, supplement or waiver.
10.5 BOARD APPROVAL. The Company may not sign an amendment, supplement
or waiver with respect to this Agreement until the Board of Directors of the
Company approves it.
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ARTICLE XI
THE SENIOR DISCOUNT NOTES
11.1 FORM AND DATING. The Senior Discount Notes shall be substantially
in the form of EXHIBIT A hereto, which exhibit is part of this Agreement. The
Senior Discount Notes may have notations, legends or endorsements required by
law, stock exchange rule or usage. The Company shall approve the form of the
Senior Discount Notes and any notation, legend or endorsement on them. Subject
to adjustment as provided in Section 6.6(c) hereof, the Senior Discount Notes
shall be issued, and may be transferred only, in denominations of $10,000 and
integral multiples thereof. The terms and provisions contained in the Senior
Discount Notes shall constitute, and are hereby expressly made, a part of this
Agreement and to the extent applicable, the Company, by its execution and
delivery of this Agreement, expressly agrees to such terms and provisions and to
be bound thereby.
11.2 EXECUTION AND AUTHENTICATION. Two Officers of the Company (each of
whom shall have been duly authorized by all requisite corporate actions) shall
sign each Senior Discount Note for the Company by manual or facsimile signature.
If an Officer whose signature is on a Senior Discount Note no longer holds that
office at the time the Senior Discount Note is issued, the Senior Discount Note
shall nevertheless be valid. The Company's seal shall be reproduced on each
Senior Discount Note.
With respect to the sale and issuance of the Senior Discount Notes, the
Company shall authorize for issuance, upon the execution and delivery of this
Agreement, Senior Discount Notes in an aggregate principal amount up to
$7,770,000. In no case shall the aggregate principal amount of outstanding
Senior Discount Notes exceed $7,770,000 at any time, except as provided in
Section 11.5.
11.3 TRANSFER AND EXCHANGE.
(a) When Senior Discount Notes are presented to the Company
with a request to register a transfer or to exchange them for an equal principal
amount of Senior Discount Notes of other authorized denominations, the Company
shall register the transfer or make the exchange if its requirements for such
transaction are met; PROVIDED, HOWEVER, that any Senior Discount Note presented
or surrendered for registration of transfer or exchange shall be duly endorsed
or accompanied by a written instruction of transfer in form satisfactory to the
Company or duly executed by the Holder of such Senior Discount Note or by its
attorney duly authorized in writing.
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(b) The Company shall not be required to issue, register the
transfer of or exchange any Senior Discount Note (i) selected for redemption, in
whole or in part, except the unredeemed portion of any Senior Discount Note
being redeemed in part may be transferred or exchanged, or (ii) during an Offer
if such Senior Discount Note is tendered pursuant to such Offer and not
withdrawn.
(c) No service charge shall be made for any registration of
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Sections 10.4 or 11.7 which the Company shall pay).
(d) Prior to due presentment for registration of transfer of
any Senior Discount Note, the Company may deem and treat the Person in whose
name any Senior Discount Note is registered as the absolute owner of such Senior
Discount Note (whether or not such Senior Discount Note shall be overdue and
notwithstanding any notation of ownership or other writing on such Senior
Discount Note made by anyone other than the Company) for the purpose of
receiving payment of principal of, and premium, if any, and interest on, such
Senior Discount Note and for all other purposes, and notice to the contrary
shall not affect the Company.
11.4 REPLACEMENT SENIOR DISCOUNT NOTES. If any mutilated Senior
Discount Note is surrendered to the Company, or if the Company receives evidence
to its satisfaction of the destruction, loss or theft of any Senior Discount
Note, the Company shall issue a replacement Senior Discount Note and each such
replacement Senior Discount Note shall be an additional obligation of the
Company. If the Company requires, the Holder must supply an indemnity bond that
is sufficient in the judgment of the Company to protect the Company from any
loss that any of them may suffer if a Senior Discount Note is replaced. The
Company may charge for its reasonable expenses in replacing a Senior Discount
Note.
11.5 OUTSTANDING SENIOR DISCOUNT NOTES. The Senior Discount Notes
outstanding at any time are all the Senior Discount Notes the Company has issued
except for those it has canceled, those delivered to it for cancellation, and
those described in this Section 11.5 as not outstanding. If a Senior Discount
Note is replaced pursuant to Section 11.4 (other than a mutilated Note
surrendered for replacement), it ceases to be outstanding unless the Company
receives proof satisfactory to it that a bona fide purchaser holds the replaced
Senior Discount Note. A mutilated Senior Discount Note ceases to be outstanding
upon surrender of such Senior Discount Note and
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replacement thereof pursuant to Section 11.4 hereof. If the entire principal of,
and premium, if any, and accrued interest on, any Senior Discount Note is
considered paid under Section 6. 1, it ceases to be outstanding and interest on
it ceases to accrue. Subject to Section 11.6, a Senior Discount Note does not
cease to be outstanding because the Company or any Affiliate of the Company
holds such Senior Discount Note.
11.6 TREASURY SENIOR DISCOUNT NOTES. In determining whether the Holders
of the required principal amount of Senior Discount Notes have concurred in any
directions, waiver or consent, Senior Discount Notes owned by the Company or any
Subsidiary or Affiliate of the Company shall be considered as though they are
not outstanding. Notwithstanding the foregoing, Senior Discount Notes that the
Company or any Affiliate of the Company offers to purchase or acquires pursuant
to an exchange offer, tender offer or otherwise shall not be deemed to be owned
by the Company or any Affiliate of the Company until legal title to such Senior
Discount Notes passes to the Company or such Affiliate, as the case may be.
11.7 TEMPORARY SENIOR DISCOUNT NOTES. Until definitive Senior Discount
Notes are ready for delivery, the Company may prepare and issue Temporary Senior
Discount Notes. temporary Senior Discount Notes shall be substantially in the
form of definitive Senior Discount Notes but may have variations that the
Company considers appropriate for temporary Senior Discount Notes. Without
unreasonable delay, the Company shall prepare and issue definitive Senior
Discount Notes in exchange for temporary Senior Discount Notes. Until such
exchange, temporary Senior Discount Notes shall be entitled to the same rights,
benefits and privileges as definitive Senior Discount Notes.
11.8 CANCELLATION. The Company shall cancel any Senior Discount Notes
surrendered to it for registration of transfer, exchange, replacement, payment
(including all Senior Discount Notes called for redemption and all Senior
Discount Notes accepted for payment pursuant to an Offer) or cancellation. The
Company may not issue new Senior Discount Notes to replace any Senior Discount
Notes that have been canceled. If the Company or any Affiliate of the Company
acquires any Senior Discount Notes (other than by redemption pursuant to
Section 6.6 or an Offer pursuant to Section 6.7), such acquisition shall not
operate as a redemption or satisfaction of the Indebtedness represented by
such Senior Discount Notes unless and until such Senior Discount Notes are
canceled pursuant to this Section 11.8.
11.9 DEFAULTED INTEREST. If the Company defaults in a payment of
interest on the Senior Discount Notes, it shall pay the defaulted interest in
any lawful manner plus, to the extent lawful, interest payable on the
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defaulted interest, to Holders on a subsequent special record date, in each case
at the rate provided in the Senior Discount Notes and Section 7.1. The Company
shall fix or cause to be fixed each such special record date and payment date.
At least 15 days before the special record date, the Company shall mail a notice
that states the special record date, the related payment date and the amount of
interest (including interest, if any, on the defaulted interest) to be paid.
11.10 RECORD DATE. The record date for purposes of determining the
identity of Holders of Senior Discount Notes entitled to vote or consent to any
action by vote or consent authorized or permitted under this Agreement shall be
10 days prior to the first solicitation of such vote or consent.
11.11 RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 11.11, each Unit, and each constituent Senior Discount Note and Common
Stock Purchase Warrant certificate (or Common Stock certificate issued on
exercise thereof), issued pursuant to this Agreement shall be stamped or
otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE.
SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT
TO (i) A REGISTRATION STATEMENT WITH RESPECT TO SUCH
SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR
RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM
REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED
THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO
THE COMPANY THAT AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT IS AVAILABLE.
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IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION OF THIS SECURITY IS RESTRICTED BY, AND THE RIGHTS.
OF THE HOLDER OF SUCH SECURITY ARE SUBJECT TO THE TERMS AND
CONDITIONS CONTAINED IN, A SECURITIES PURCHASE AGREEMENT DATED
AS OF APRIL 15,1998, A COMPLETE AND CORRECT COPY OF THE FORM
OF WHICH WILL BE FURNISHED BY THE ISSUER TO THE HOLDER HEREOF
UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THIS DEBT INSTRUMENT WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT
("OID"). STREAMLINE, INC., AT 27 DARTMOUTH STREET, WESTWOOD,
MASSACHUSETTS, WILL, BEGINNING APRIL 15,1998, MAKE AVAILABLE
TO HOLDERS UPON REQUEST THE ISSUE PRICE, THE AMOUNT OF OID,
THE ISSUE DATE AND THE YIELD TO MATURITY.
The Company shall maintain a copy of this Agreement and any amendments
thereto on file in its principal office, and will make such copy available
during normal business hours for inspection to any party thereto or will provide
such copy to any Purchaser upon its request.
Whenever the legend requirement imposed by this Section 11.11 shall
terminate, as hereinabove provided, the respective holders of Securities for
which such legend requirements have terminated shall be entitled to receive from
the Company, at the Company's expense, Senior Discount Notes or new Common Stock
Purchase Warrant certificates, as applicable, without such. legend.
11.12 NOTICE OF TRANSFER; OPINIONS OF COUNSEL. The holder of each
Senior Discount Note and Common Stock Purchase Warrant certificate (or Common
Stock certificate issued on exercise thereof) bearing the restrictive legend set
forth in Section 11.11 above (a "Restricted Security") agrees in connection with
any transfer of such Restricted Security to give to the Company, upon request
(a) written description of the manner or circumstances of such transfer and/or
an opinion of counsel, which is knowledgeable in securities law matters
(including in-house counsel or regular counsel to such Purchaser or its
investment advisor), in form and substance reasonably satisfactory to the
Company, to the effect that the
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transfer of such Restricted Security may be effected without registration of
such Restricted Security under the Securities Act. If for any reason the Company
(after having been furnished with the opinion required to be furnished pursuant
to this Section 11.12) shall fail to notify such holder within 5 days after such
holder shall have delivered such description and/or opinion to the Company that,
in its or its counsel's opinion, the transfer may not be legally effective (the
"Illegal Transfer Notice"), such holders shall thereupon be entitled to
consummate the transfer of the Restricted Security as proposed; PROVIDED,
HOWEVER, that such procedure shall not be required, and any such attempted
transfer shall not be effective, in respect of a proposed transfer which is
expressly prohibited by the terms of this Agreement because it represents an
attempt to transfer Senior Discount Notes in an aggregate principal amount of
less than $10,000 (subject to adjustment) in contravention of Section 11.1
hereof. If the holder of the Restricted Security delivers to the Company an
opinion of counsel (including in-house counsel or regular counsel to such
Purchaser or its investment adviser) in form and substance reasonably
satisfactory to the Company that subsequent transfers of such Restricted
Security will not require registration under the Securities Act, or if the
Company does not provide the holders with an Illegal Transfer Notice as set
forth above, the Company will promptly after such contemplated transfer deliver
new certificates for such Restricted Security which do not bear the Securities
Act legend set forth in Section 11.11 above. The restrictions imposed by this
Article XI upon the transferability of any particular Restricted Security shall
cease and terminate when such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or transferred
pursuant to Rule 144 promulgated under the Securities Act. The holder of any
Restricted Security as to which such restrictions shall have terminated shall be
entitled to receive from the Company a new security of the same type but not
bearing the restrictive Securities Act legend set forth in Section 11.11 and not
containing any other reference to the restrictions imposed by this Article XI.
Notwithstanding any of the foregoing, no opinion of counsel will be required to
be rendered pursuant to this Section 11.12 with respect to the transfer of any
Securities on which the restrictive legend has been removed in accordance with
this Section 11.12. As used in this Section 11.12, the term "transfer"
encompasses any sale, transfer or other disposition of any Securities referred
to herein.
ARTICLE XII
INDEMNIFICATION
12.1 INDEMNIFICATION: EXPENSES, ETC.
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(a) In addition to any and all obligations of the Company to
indemnify the Purchasers hereunder or under the other Transaction Documents, the
Company agrees, without limitation as to time, to indemnify and hold harmless
each Purchaser, its Affiliates, and the employees, officers, directors, and
agents of such Purchaser and its Affiliates (individually, an "Indemnified
Party" and, collectively the "Indemnified Parties") from and against any and all
losses, claims, damages, liabilities, costs (including the reasonable costs of
preparation and attorneys' fees) and expenses (including expenses of
investigation) (collectively, "Losses") incurred or suffered by an Indemnified
Party (i) in connection with or arising out of any breach of any warranty, or
the inaccuracy of any representation, as the case may be, made by the Company,
or the failure of the Company to fulfill any agreement or covenant contained in
this Agreement or (ii) in connection with any proceeding against the Company or
any Indemnified Party brought by any third party arising out of or in connection
with this Agreement or the other Transaction Documents or the transactions
contemplated hereby or thereby, as the case may be, or any action taken in
connection herewith or therewith (or any other document or instrument executed
herewith or pursuant hereto or thereto), whether or not the transactions
contemplated by this Agreement are consummated or whether or not any Indemnified
Party is a formal party to any proceeding; PROVIDED, HOWEVER, that the Company
shall not be liable for any losses resulting from action on the part of any
Indemnified Party which is finally determined in such proceeding to be wrongful
or which is an act of gross negligence, recklessness, or willful misconduct by
such Indemnified Party. The Company agrees promptly to reimburse any Indemnified
Party for all such Losses as they are incurred or suffered by such Indemnified
Party.
Except as otherwise provided herein, the Company agrees (for the
benefit of the Purchasers) to pay, and to hold each Purchaser harmless from and
against, all costs and expenses (including, without limitation, reasonable
attorneys' fees, expenses and disbursements), if any, incurred in connection
with the enforcement against the Company of this Agreement or any other
agreement to which the Company is a party or any other agreement or instrument
furnished pursuant hereto or thereto, as the case may be, or in connection
herewith or therewith in any action in which such Purchaser shall prevail or in
any action in which such Purchaser shall in good faith assert any provision of
any of the foregoing as a defense.
(b) If any Indemnified Party is entitled to indemnification
hereunder, such Indemnified Party shall give prompt notice to the Company of any
claim or of the commencement of any proceeding against the Company or any
Indemnified Party brought by any third party with respect to which such
Indemnified Party seeks indemnification pursuant hereto; PROVIDED,
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HOWEVER, that the failure so to notify the Company shall not relieve the Company
from any obligation or liability except to the extent the Company is prejudiced
by such failure. The Company shall have the right, exercisable by giving written
notice to an Indemnified Party promptly after the receipt of written notice from
such Indemnified Party of such claim or proceeding, to assume, at the expense of
the Company, the defense of any such claim or proceeding with counsel reasonably
satisfactory to such Indemnified Party. The Indemnified Party or Parties will
not be subject to any liability for any settlement made without its or their
consent (but such consent will not be unreasonably withheld). The Company shall
not consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by claimant or plaintiff to
such Indemnified Party or Parties of a release, in form and substance reasonably
satisfactory to the Indemnified Party or Parties, from all liability in respect
of such claim, litigation or proceeding.
(c) In addition to any other obligations of the Company to
indemnify the Purchasers herein or pursuant to any of the Transaction Documents
or any other agreements or documents executed and delivered in connection
herewith or therewith, the Company will pay, and will save each Purchaser and
each other holder of any of the Securities harmless from liability for the
payment of, the following expenses arising in connection with the transactions
contemplated hereby: (a) the costs and expenses, including reasonable attorneys'
fees, incurred by such Purchaser in enforcing any rights under this Agreement or
in responding to any subpoena or other legal process issued in connection with
this Agreement or the transactions contemplated hereby or thereby or by reason
of such Purchaser having acquired any of the Securities, including, without
limitation, costs and expenses incurred by such Purchaser in any bankruptcy
case; (b) the cost of delivering to such Purchaser's principal office, insured
to its satisfaction, the Units delivered to such Purchaser hereunder and any
Securities delivered to such Purchaser upon any substitution of Securities
pursuant to this Agreement or any of the Transaction Documents and of such
Purchaser's delivering any Securities, insured to its satisfaction, upon any
such substitution; and (c) the reasonable out-of-pocket expenses incurred by
such Purchaser in connection with any amendments or waivers.
ARTICLE XIII
MISCELLANEOUS
13.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; SEVERABILITY. All
representations and warranties contained in this Agreement or the Transaction
Documents or made in writing by or on behalf of the Company in connection with
the transactions contemplated by this Agreement or the
77
<PAGE>
Transaction Documents shall survive, for the duration of any statutes of
limitation applicable thereto, the execution and delivery of this Agreement, any
investigation at any time made by the Purchasers or on the Purchasers' behalf,
the purchase of the Units by the Purchasers under this Agreement and any
disposition of or payment on the Units. All statements contained in any
certificate or other instrument delivered to the Purchasers by or on behalf of
the Company pursuant to this Agreement or the Transaction Documents at the
Closing shall be deemed representations and warranties of the Company under this
Agreement. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provisions
in any other jurisdiction.
13.2 NOTICES, ETC. Any notice or communication under this Agreement
shall be duly given if in writing and delivered in person, mailed by registered
or certified mail, postage prepaid, return receipt requested or delivered by
telecopier or overnight air courier guaranteeing next day delivery to the
other's address:
If to the Company: Streamline, Inc.
27 Dartmouth Street
Westwood, Massachusetts 02090
Attn: Chief Executive Officer
Fax: (781) 407-1946
Tel: (781) 407-1900
With a copy to: Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attn: Wayne D. Bennett, Esq.
If to the Purchasers: DDJ Capital Management, LLC
141 Linden Street, Suite S-4
Wellesley, Massachusetts 02181
Attn: General Counsel
Fax: (781) 283-8555
Tel: (781) 283-8500
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Laura Hodges Taylor, P.C.
Fax: (617) 570-8150
Tel: (617) 570-1536
78
<PAGE>
The Company or the Purchasers by notice to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; the date receipt is acknowledged, if mailed by registered or
certified mail; when answered back, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to any Holder shall be mailed by
first-class mail to his or her address shown on the register maintained by the
Company. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders. If a notice
or communication is mailed in the manner provided above within the time
prescribed, it is duly given, whether or not the addressee receives it.
13.3 SUCCESSORS AND ASSIGNS. Whenever in this Agreement any of the
parties hereto are referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants, promises and agreements
by or on behalf of the respective parties which are contained in this Agreement
shall bind and inure to the benefit of the successors and assigns of all other
parties, provided that such transfer or assignment is made in compliance with
Section 11.3 and Section 11.12 hereof. The terms and provisions of this
Agreement and the other Transaction Documents shall inure to the benefit of and
shall be binding upon any assignee or transferee of the Purchasers, provided
that such transfer or assignment is made in compliance with Section 11.3 and
Section 11.12 hereof, and in the event of such transfer or assignment, the
rights and privileges herein conferred upon the Purchasers shall automatically
extend to and be vested in, and become an obligation of such transferee or
assignee, all subject to the terms and conditions hereof. In connection
therewith, such transferee or assignee may disclose all documents and
information which such transferee or assignee now or hereafter may have relating
to the Securities, this Agreement, the other Transaction Documents, the Company,
any other Persons referred to herein or any of the business of any of the
foregoing entities, subject to full compliance with Section 13.9 hereof.
13.4 DESCRIPTIVE HEADINGS. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
13.5 SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to the Purchasers or to the holders of a specified
79
<PAGE>
portion of the principal amount of any class of the Securities, the
determination of such satisfaction shall be made by the Purchasers or such
holders, as the case may be, in the sole and exclusive judgment (exercised in
good faith) of the Person or Persons making such determination.
13.6 GOVERNING LAW. THIS AGREEMENT AND THE UNITS SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAW.
13.7 SERVICE OF PROCESS. The Company and each Purchaser (a) hereby
irrevocably submits itself to the jurisdiction of the state courts of the
Commonwealth of Massachusetts and to the jurisdiction of the United States
District Court for the District of Massachusetts for the purpose of any suit,
action or other proceeding arising out of or based upon this Agreement, the
Securities, the other Transaction Documents or the subject matter hereof or
thereof brought by the Company, a Purchaser or its successors or assigns, and
(b) hereby waives, and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court, and (c) hereby waives any
offsets or counterclaims in any such action, suit or proceeding (other than
compulsory counterclaims). The Company and each Purchaser hereby consents to
service of process by registered mail at the address to which notices are to be
given. The Company and each Purchaser agrees that its submission to jurisdiction
and its consent to service of process by mail is made for the express benefit of
the Company and the Purchasers, respectively. Final judgment against the Company
or any Purchaser in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions (a) by suit, action or proceeding on the
judgment, a certified or true copy of which shall be conclusive evidence of the
fact and of the amount of any indebtedness or liability of the Company or any
Purchaser therein described or (b) in any other manner provided by or pursuant
to the laws of such other jurisdiction; PROVIDED, HOWEVER, that the Company or a
Purchaser may at its option bring suit or institute other judicial proceedings
against the a Purchaser or Company or any of such Purchaser's or the Company's
assets in any state or federal court of the United States or in any country or
place where such Purchaser or Company or such assets may be found.
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<PAGE>
13.8 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
13.9 DISCLOSURE TO OTHER PERSONS. Each Purchaser agrees to keep
confidential any financial information delivered by the Company pursuant to this
Agreement (other than information that is publicly available) and such other
non-public proprietary information delivered by the Company that is clearly
designated in writing to be or otherwise known by such Purchaser to be
confidential; PROVIDED, HOWEVER, that nothing herein shall prevent such
Purchaser from disclosing such information: (a) to any prospective purchaser who
agrees in writing to be bound by this Section 13.9, (b) to any Affiliate,
director, officer, employee, agent and professional consultant of any
prospective purchasers, in its capacity as such or any actual purchaser,
participant, assignee, or transferee of such Purchaser's or prospective
purchaser's rights under any Unit or any part thereof that agrees in writing to
be bound by this Section 13.9, (c) upon order of any court or administrative
agency having jurisdiction over such party, (d) upon the request or demand of
any regulatory agency or authority having jurisdiction over such party, (e)
which has been publicly disclosed through no breach of such Purchaser, (f) which
has been obtained from any Person that is not a party hereto or an Affiliate of
any such party, (g) in connection with the exercise of any remedy hereunder, (h)
to the certified public accountants for such Purchaser or as required in summary
financial or descriptive business information disclosed by such Purchaser that
is an investment fund as part of its regular reports to its investors or
partners, or (i) as otherwise expressly contemplated by this Agreement. In order
to permit the Company to remove or limit any order, request or demand or to
obtain confidential treatment for any disclosure pursuant to (c) or (d) above,
such Purchaser will use reasonable efforts to inform the Company of any such
request for disclosure prior to disclosure. Nothing in this Section 13.9 shall
be construed to create or give rise to any fiduciary duty on the part of such
Purchaser to the Company. The Company shall not, nor shall it permit any
Subsidiary to, disclose any Purchaser's name or identity as an investor in the
Company in any press release or other public announcement or in any document or
material filed with any governmental entity, without the prior written consent
of such Purchaser, unless such disclosure is required by applicable law or
governmental regulations or by order of a court of competent jurisdiction, in
which case prior to making such disclosure the Company shall give written notice
to such Purchaser describing in reasonable detail the proposed content of such
disclosure and shall permit the Purchaser to review and comment upon the form
and substance of such disclosure.
81
<PAGE>
13.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Agreement may
not be used to interpret another agreement, indenture, loan or debt agreement of
the Company or any Subsidiary. Any such agreement, indenture, loan or debt
agreement may not be used to interpret this Agreement.
13.11 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY
JURY IN ANY LITIGATION, SUIT OR PROCEEDING, IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF THIS AGREEMENT, THE SECURITIES, ANY OTHER
TRANSACTION DOCUMENTS, OR ANY INSTRUMENT OR DOCUMENT DELIVERED PURSUANT TO THIS
AGREEMENT, THE SECURITIES OR ANY OTHER TRANSACTION DOCUMENTS, OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF, PROVIDED,
HOWEVER, THAT WITH RESPECT TO ANY COMPULSORY COUNTERCLAIM (I.E., A CLAIM BY ONE
PARTY AGAINST ANOTHER PARTY WHICH IF NOT BROUGHT IN SUCH ACTION WOULD RESULT IN
THE PARTY BRINGING SUCH CLAIM BEING FOREVER BARRED FROM BRINGING SUCH CLAIM),
THE PARTY BRINGING SUCH CLAIM SHALL HAVE THE RIGHT TO RAISE SUCH COMPULSORY
COUNTERCLAIM IN ANY SUCH LITIGATION.
13.12 MERGER. This Agreement and the Senior Discount Notes constitute
the entire agreement of the Company and the Holders and express the entire
understanding of the Company and the Holders with respect to the Senior Discount
Notes.
13.13 EXPENSES. The Company agrees to pay, on demand, all reasonable
out-of-pocket expenses incurred by the Holders, including, without limitation,
reasonable legal and accounting fees, in connection with the collection of
amounts upon the occurrence of an Event of Default hereunder, and the revision,
protection or enforcement of any of the Holder's rights against the Company
under this Agreement and the Senior Discount Notes.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
82
<PAGE>
SECURITIES PURCHASE AGREEMENT
UNITS OF SENIOR DISCOUNT NOTES. AND COMMON STOCK PURCHASE WARRANTS
COMPANY SIGNATURE PAGE
If this Agreement is satisfactory, please so indicate by signing the
applicable attached signature page of this Agreement and delivering such
counterpart to the Company whereupon this Agreement will become binding among
the parties hereto in accordance with its terms.
STREAMLINE, INC.,
a Delaware corporation
By: /s/ TIMOTHY A. DEMELLO
-------------------------------------
Name: Timothy A. DeMello
Title: Chairman and Chief Executive
Officer
<PAGE>
SECURITIES PURCHASE AGREEMENT FOR UNITS OF SENIOR
DISCOUNT NOTES AND COMMON STOCK PURCHASE WARRANTS
PURCHASER COUNTERPART SIGNATURE PAGE
<TABLE>
<S> <C>
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Units
to be Purchased:
Number of Units: 222
DDJ Canadian High Yield Fund
Comprised of:
By: DDJ Capital Management, LLC, Aggregate principal
as attorney-in-fact amount of Senior Discount
Notes to be Purchased:
$2,220,000
By: /s/ DAVID J. BREAZZANO
----------------------
Name: DAVID J. BREAZZANO Aggregate Number of
Title: Member Shares of Common Stock
Purchase Warrants to be
Purchased (Base Amount):
242,857
Purchase Price: $2,000,000.22
</TABLE>
Address: c/o DDJ Capital Management, LLC
Attn: Wendy Schnipper Clayton
141 Linden Street, Suite 4
Wellesley, MA 02181
Telephone: (781) 283-8500
Telecopy: (781) 283-8555
Nominee (name in which the Units are to be registered, if different than name of
Purchaser):
Royal Trust Corporation, in trust for Account No. 110455024
Tax I.D. Number:
------------------------
(if acquired in the name of a nominee, the taxpayer I.D.
number of such nominee)
<PAGE>
SECURITIES PURCHASE AGREEMENT FOR UNITS OF SENIOR
DISCOUNT NOTES AND COMMON STOCK PURCHASE WARRANTS
PURCHASER COUNTERPART SIGNATURE PAGE
<TABLE>
<S> <C>
Accepted and agreed as of the Aggregate Number and
date first written above: Purchase Price of Units
to be Purchased:
Number of Units: 555
Mellon Bank, N.A., solely in its capacity as Comprised of:
Trustee for General Motors Employees Aggregate principal
Domestic Group Pension Trust as directed amount of Senior Discount
by DDJ Capital Management, LLC, and not Notes to be Purchased
in its individual capacity $5,550,000
By: /s/ BERNADETTE RIST Aggregate Number of
-------------------- Shares of Common Stock
Name: Bernadette Rist Purchase Warrants to be
Title: Authorized Signatory Purchased (Base Amount):
607,143
Purchase Price: $5,000,000.55
</TABLE>
Address: c/o DDJ Capital Management, LLC
Attn: Wendy Schnipper Clayton
141 Linden Street, Suite 4
Wellesley, MA 02181
Telephone: (781) 283-8500
Telecopy: (781) 283-8555
Nominee (name in which the Units are to be registered, if different than name of
Purchaser):
Mellon Bank, N.A., solely in its capacity as Trustee for General Motors
Employees Domestic Group Pension Trust
Tax I.D. Number: 25-645-3016
(if acquired in the name of a nominee, the taxpayer I.D.
number of such nominee)
<PAGE>
Exhibit 10.13
WARRANT AGREEMENT
BY AND BETWEEN
STREAMLINE, INC.
AND
THE PURCHASERS NAMED HEREIN
DATED AS OF APRIL 15, 1998
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. WARRANT CERTIFICATES....................................................................1
Section 1.1. FORMS OF WARRANT CERTIFICATES.................................................1
Section 1.2. EXECUTION OF WARRANT CERTIFICATES.............................................1
Section 1.3. REGISTRATION OF WARRANT CERTIFICATES..........................................2
Section 1.4. EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES.................................2
Section 1.5. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATE......................2
Section 1.6. CANCELLATION OF WARRANT CERTIFICATES..........................................3
ARTICLE II. WARRANT EXERCISE PRICE, VESTING AND EXERCISE OF WARRANTS...............................3
Section 2.1. EXERCISE PRICE................................................................3
Section 2.2. VESTING.......................................................................3
Section 2.3. REGISTRATION OF WARRANTS AND WARRANT SHARE....................................5
Section 2.4. PROCEDURE FOR EXERCISE OF WARRANTS............................................5
Section 2.5. ISSUANCE OF COMMON STOCK......................................................7
Section 2.6. CERTIFICATES FOR UNEXERCISED WARRANTS.........................................8
Section 2.7. RESERVATION OF SHARES.........................................................8
Section 2.8. NO IMPAIRMENT.................................................................8
ARTICLE III. ADJUSTMENTS AND NOTICE PROVISIONS.....................................................8
Section 3.1. ADJUSTMENT OF EXERCISE PRICE..................................................9
Section 3.2. SALES OF CERTAIN SECURITIES...................................................11
Section 3.3. NO ADJUSTMENTS TO EXERCISE PRICE..............................................12
Section 3.4. ADJUSTMENT OF NUMBER OF SHARES................................................12
Section 3.5. REORGANIZATIONS...............................................................13
Section 3.6. VERIFICATION OF COMPUTATIONS..................................................13
Section 3.7. NOTICE OF CERTAIN ACTIONS.....................................................14
Section 3.8. CERTIFICATE OF ADJUSTMENTS....................................................14
Section 3.9. WARRANT CERTIFICATE AMENDMENTS................................................15
Section 3.10. FRACTIONAL SHARES............................................................15
ARTICLE IV. MISCELLANEOUS............................................................................15
Section 4.1. PAYMENT OF TAXES AND CHARGES..................................................15
Section 4.2. CHANGES TO AGREEMENT..........................................................16
Section 4.3. ASSIGNMENT....................................................................16
Section 4.4. SUCCESSOR TO COMPANY..........................................................16
Section 4.5. REPORTS.......................................................................16
Section 4.6. NOTICES.......................................................................18
Section 4.7. DEFECTS IN NOTICE.............................................................19
</TABLE>
<PAGE>
<TABLE>
-3-
<S> <C> <C>
Section 4.8. GOVERNING LAW.................................................................19
Section 4.9. STANDING......................................................................19
Section 4.10. HEADINGS......................................................................19
Section 4.11. COUNTERPARTS..................................................................19
Section 4.12. AVAILABILITY OF THE AGREEMENT.................................................19
Section 4.13. ENTIRE AGREEMENT..............................................................20
</TABLE>
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT, dated as of April 15, 1998, is entered into by
and between Streamline, Inc., a Delaware corporation (the "Company"), and the
undersigned purchasers (the "Purchasers").
WITNESSETH:
WHEREAS, the Company proposes to sell pursuant to a Securities Purchase
Agreement, dated as of April 15, 1998 (the "Securities Purchase Agreement"), by
and between the Company and the Purchasers, units consisting of Senior Discount
Notes in the aggregate principal amount of $7,770,000 (as defined in the
Securities Purchase Agreement) and warrants (each, a "Warrant," and
collectively, the "Warrants") to purchase up to an aggregate of 850,000 shares
(subject to adjustment and vesting as set forth herein) of the common stock, par
value $.01 per share, of the Company (the "Common Stock") (the Common Stock
issuable upon exercise of the Warrants being referred to herein as the "Warrant
Shares");
NOW, THEREFORE, in consideration of the premises and of the mutual
agree herein contained, the parties hereto agree as follows:
ARTICLE I.
WARRANT CERTIFICATES
SECTION 1.1. FORMS OF WARRANT CERTIFICATES. The warrant certificates
(the "Warrant Certificates") shall be issued in registered form only and,
together with the form of the election to purchase (the "Election to Purchase"),
and assignment (the "Assignment") to be attached thereto, shall be substantially
in the form of EXHIBIT A attached hereto and, in addition, may have such
letters, numbers or other marks of identification or designation and such
legends, summaries, or endorsements stamped, printed, lithographed or engraved
thereon as the Company may deem appropriate and as art not inconsistent with the
provisions of this Agreement, or as, in any particular case, may be required in
the opinion of counsel for the Company, to comply with any law or with any rule
or regulation of any regulatory authority or agency, or to conform to customary
usage.
SECTION 1.2. EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed on behalf of the Company by its Chief Executive
Officer or any Vice President and attested to by its Secretary or Assistant
Secretary, either manually or by facsimile signature printed thereon. In case
any authorized officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company either before or after
delivery thereof by the Company to any Purchaser, the signature of such person
on such Warrant Certificates shall be
<PAGE>
-2-
valid nevertheless and such Warrant Certificates may be issued and delivered to
those persons entitled to receive the Warrants represented thereby with the same
force and effect as though the person who signed such Warrant Certificates had
not ceased to be an officer of the Company.
SECTION 1.3. REGISTRATION OF WARRANT CERTIFICATES. The Company shall
number and register the Warrant Certificates in a register as they are needed.
The Company may deem and treat the registered holder(s) of the Warrant
Certificates (the "Holders") as the absolute owner(s) thereof for all purposes.
SECTION 1.4. EXCHANGE AND TRANSFER OF WARRANT CERTIFICATES. The
Warrants (and any Warrant Shares issued upon exercise of the Warrants) shall
bear such restrictive legend or legends as may be required by the Securities
Purchase Agreement and as may be required by law and shall be transferable only
in accordance with the terms of this Agreement and the Securities Purchase
Agreement.
The Company may from time to time register the transfer of any
outstanding Warrant Certificates in a warrant register to be maintained by the
Company upon surrender thereof accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company duly executed by the
Holder or Holders thereof or by the duly appointed legal representative thereof
or by a duly authorized attorney. Upon any such registration of transfer, a new
Warrant Certificate shall be issued to the transferee(s).
Warrant Certificates may be exchanged at the option of the Holder(s)
thereof, when surrendered to the Company at the address set forth in Section 4.6
hereof for another Warrant Certificate or Warrant Certificates of like tenor and
representing in the aggregate a like number of Warrant Shares and Base Amount
(as defined in Section 2.2 hereof): PROVIDED that the Company shall not be
required to issue any Warrant Certificate representing any fractional Warrant
Shares. The number of Warrant Shares represented by a Warrant issued by the
Company upon the exchange or transfer of a Warrant shall be equal to the sum of
(i) the number of Warrant Shares with respect to which such Warrant is
exercisable on the date of such transfer or exchange, plus (ii) the number of
Warrant shares with respect to which such Warrant could in the future become
exercisable pursuant to Section 2.2 hereof (without regard to any Partial
Expiration that has not occurred as of the date of such transfer or exchange).
SECTION 1.5. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATE.
If any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the
Company shall issue, execute and deliver, in exchange and
<PAGE>
-3-
substitution for and upon cancellation of a mutilated Warrant Certificate, or in
lieu of or in substitution for a lost, stolen or destroyed Warrant Certificate,
a new Warrant Certificate representing an equivalent number of Warrant Shares
and Base Amount (as defined in Section 2.2 hereof). If required by the Company,
the Holder of the mutilated, lost, stolen or destroyed Warrant Certificate must
provide indemnity sufficient to protect the Company from any loss which it may
suffer if the Warrant Certificate is replaced. Any such new Warrant Certificate
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated or destroyed Warrant Certificate shall
be at any time enforceable by anyone.
SECTION 1.6. CANCELLATION OF WARRANT CERTIFICATES. Any Warrant
Certificate surrendered upon the exercise of Warrants or for exchange or
transfer, or purchased or otherwise acquired by the Company, shall be canceled
and shall not be reissued by the Company; and, except as provided in Section 2.6
hereof in case of the exercise of less than all of the Warrant Shares evidenced
by a Warrant Certificate or in Section 1.4 in an exchange or transfer, no
Warrant Certificate shall be issued hereunder in lieu of such canceled Warrant
Certificate. Any Warrant Certificate so canceled shall be destroyed by the
Company.
ARTICLE II.
WARRANT EXERCISE PRICE, VESTING AND EXERCISE OF WARRANTS
SECTION 2.1. EXERCISE PRICE. Each Warrant Certificate shall, when
signed by the Chief Executive Officer or any Vice President and attested to by
the Secretary or Assistant Secretary of the Company, entitle the Holder thereof
to purchase from the Company, subject to the terms and conditions of this
Agreement, the number of fully paid and nonassessable Warrant Shares evidenced
thereby (to the extent that (i) the Warrant Shares subject to such Warrant
Certificate have vested pursuant to Section 2.2 hereof, and (ii) the Warrant
Shares subject to such Warrant Certificate have not expired pursuant to a
Partial Expiration (as defined in Section 2.4 hereof)) at a purchase price of
$3.50 per share (the "Initial Exercise Price") or such adjusted number of
Warrant Shares at such adjusted purchase price as may be established from time
to time pursuant to the provisions of Article III hereof, payable in full in
accordance with Section 2.4 hereof, at the time of exercise of the Warrant.
Except as the context otherwise requires, the term "Exercise Price" as used in
this Agreement shall mean the purchase price of one share of Common Stock,
reflecting all appropriate adjustments made in accordance with the provisions of
Article III hereof.
SECTION 2.2. VESTING. Notwithstanding anything in this Agreement or in
any Warrant Certificate to the contrary, only those Warrant Shares that have
become vested pursuant to the provisions of this Section 2.2 may be
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acquired or purchased upon exercise of Warrants. Warrant Shares shall vest in
the manner and at the times specified in this Section 2.2. With respect to each
Warrant Certificate, the "Base Amount" shall initially be the number of Warrant
Shares represented by such Warrant Certificate on the date hereof, which Base
Amount shall be adjusted pursuant to Section 3.4 hereof. In the case of a
Warrant Certificate that is transferred in part, pursuant to Section 1.4 hereof
(a "Transferred Warrant Certificate"), the Base Amount of each new Warrant
Certificate issued to each transferee of a portion of the Transferred Warrant
Certificate shall be determined by the transferor of the Transferred Warrant
Certificate at the time of such transfer; provided that the aggregate Base
Amounts of all new Warrant Certificates issued as a result of the transfer of
the Transferred Warrant Certificate shall initially equal the Base Amount of the
Transferred Warrant Certificate (as adjusted pursuant to Section 3.4 hereof
through the date of such transfer), and shall be adjusted thereafter pursuant to
Section 3.4 and upon any subsequent transfers as described in this Section 2.2.
The Base Amount of a Warrant Certificate shall not be adjusted as a result of a
Partial Expiration (as defined in Section 2.4 hereof). The Warrant Certificates
are subject to the following vesting provisions:
(a) Each Warrant Certificate shall be immediately vested and
exercisable as to 52.9412% of the Base Amount (rounded up to the nearest whole
share) of such Warrant Certificate.
(b) On October 15, 1998, if the Company has not, between the date
hereof and October 14, 1998, completed one or more sales of the Company's
capital stock (other than debt convertible into capital stock of the Company) on
terms satisfactory to DDJ Capital Management, LLC ("DDJ"), in its reasonable
discretion, resulting in proceeds to the Company of at least $3.5 million, each
Warrant Certificate shall become vested and exercisable with respect to an
additional 11.7647% of the Base Amount (rounded up to the nearest whole share)
of such Warrant Certificate (as adjusted pursuant to Section 3.4 hereof through
October 15, 1998).
(c) On January 15, 1999, if the Company has not, between the date
hereof and January 14, 1999, completed one or more sales of the Company's
capital stock (other than debt convertible into capital stock of the Company)
(including without limitation sales pursuant to Section 2.2(b) hereof) on terms
satisfactory to DDJ, in its reasonable discretion, resulting in proceeds to the
Company of at least $7.0, million, each Warrant Certificate shall become vested
and exercisable with respect to an additional 11.7647% of the Base Amount
(rounded up to the nearest whole share) of such Warrant Certificate (as adjusted
pursuant to Section 3.4 hereof through January 15, 1999).
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(d) On April 1, 1999, and on the first day of each calendar quarter
thereafter through January 1, 2001, if the Company has not, prior to such date,
(i) completed an initial public offering of its securities resulting in proceeds
to the Company of at least $25,000,000 (a "Qualifying Offering") or (ii)
completed a sale of substantially all of the assets of the Company or a merger
pursuant to which merger the stockholders of the Company receive consideration,
in cash or securities of a class that is registered under Securities Exchange
Act of 1934, as amended, and listed on a national securities exchange, at least
equal in value to the value (as determined in good faith by the Company's Board
of Directors) of the Company's tangible and intangible assets (such sale or
merger, a "Qualifying Sale"), each Warrant Certificate shall become vested and
exercisable with respect to an additional 2.9412% of the Base Amount (rounded up
to the nearest whole share) of such Warrant Certificate on such date (as
adjusted pursuant to Section 3.4 hereof through the applicable vesting date). On
the date on which the Company completes a Qualifying Offering or a Qualifying
Sale, the Warrant Certificate shall become ineffective as to any unvested
Warrant Shares as of that date.
SECTION 2.3. REGISTRATION OF WARRANTS AND WARRANT SHARE. The Company
shall secure the effective registration of the Warrant Shares for resale under
the Securities Act upon the terms and subject to the conditions set forth in the
Registration Rights Agreement dated as of the date hereof (the "Registration
Rights Agreement") between the Company and the Purchasers. Promptly after a
registration statement under the Securities Act covering the Warrant Shares has
become effective, the Company shall cause notice thereof together with a copy of
the prospectus covering the Warrant Shares to be mailed to each registered
Holder.
SECTION 2.4. PROCEDURE FOR EXERCISE OF WARRANTS. Subject to the
provisions of Section 2.2 hereof, the Warrants may be exercised at any time
prior to the Expiration Date (as hereinafter defined) at the Exercise Price.
The Warrants shall expire at 5:00 p.m., New York City time, on the date that
is the earlier of (i) April 15, 2005, or (ii) the fifth anniversary of the
completion of an initial public offering of the Company's securities
resulting in proceeds to the Company of at least $25,000,000 (the "Expiration
Date"). Notwithstanding the foregoing sentence, each Warrant Certificate may
expire prior to the Expiration Date with respect to a portion of the Warrant
Shares represented by such Warrant Certificate as follows: (i) in the event
that all Senior Discount Notes (as defined in the Securities Purchase
Agreement) have been redeemed by the Company as of a date prior to the date
that is six months after the date hereof, each Warrant Certificate shall
expire and become unexercisable with respect to 5.8824% of the Base Amount of
such Warrant Certificate, and (ii) in the event that all Senior Discount
Notes have been redeemed by the Company as of a date that is on or after the
date that
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is six months after the date hereof and prior to the date that is nine months
after the date hereof, on the date that the last Senior Discount Note is
redeemed, each Warrant Certificate shall expire and become unexercisable with
respect to 2.9412% of the Base Amount of such Warrant Certificate. A partial
expiration of a Warrant Certificate pursuant to the preceding sentence shall
be called a "Partial Expiration." Warrant Shares as to which a Warrant
Certificate becomes unexercisable as a result of a Partial Expiration shall
be allocated pro rata among the Warrant Shares with respect to which such
Warrant Certificate is exercisable as of immediately prior to such Partial
Expiration and the Warrant Shares with respect to which such Warrant
Certificate may, in the future, vest pursuant to Section 2.2 hereof. The
Warrants may be exercised by surrendering the Warrant Certificates
representing such Warrants to the Company at its address set forth in Section
4.6 hereof, together with the Election to Purchase duly completed and
executed, accompanied by payment in full, as set forth below, to the Company
of the Exercise Price for each Warrant Share in respect of which such
Warrants are being exercised, and if the holder of any Warrants being
exercised is not the original holder of such Warrants and if requested by the
Company, a duly executed instrument or certificate, in form and substance
satisfactory to the Company, pursuant to which such Holder makes such
representations and warranties and provides such information as may
reasonably be required solely in order to confirm compliance with applicable
securities laws. Such Exercise Price shall be paid in full by (i) cash or a
certified check or a wire transfer in same day funds in an amount equal to
the Exercise Price multiplied by the number of Warrant Shares then being
purchased or (ii) delivery to the Company of Senior Discount Notes having a
value (which shall be the Accreted Value (as defined in the Securities
Purchase Agreement) of such Notes plus any accrued interest thereon through
the time of exercise). In the alternative, the Holder of a Warrant
Certificate may exercise its right to purchase some or all of the Warrant
Shares subject to such Warrant Certificate, on a net basis, such that,
without the exchange of any funds, such Holder receives that number of
Warrant Shares subscribed to pursuant to such Warrant Certificate less that
number of shares of Common Stock having an aggregate Fair Market Value at the
time of exercise equal to the aggregate Exercise Price that would otherwise
have been paid by such Holder for the number of Warrant Shares subscribed to
pursuant to such Warrant Certificate (hereinafter, a "Net Cashless Exercise").
As used herein: (a) the term "Fair Market Value," on a per share basis,
means the average of the daily Closing Prices (as hereinafter defined) of the
Common Stock for the five (5) consecutive Trading Days (as hereinafter defined)
ending the Trading Day immediately preceding the Date of Exercise (the "Fair
Market Value Measurement Period"); (b) the term "Date of Exercise" with respect
to any Warrant means the date on which such
<PAGE>
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Warrant is exercised as provided herein; (c) the term "Closing Price" for any
date shall mean, the last sale price reported in THE WALL STREET JOURNAL regular
way or, in case no such reported sale takes place on such date, the average of
the last reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is admitted to
trading or listed if that is the principal market for the Common Stock or, if
not listed or admitted to trading on any national securities exchange or if such
national securities exchange is not the principal market for the Common Stock,
the last sale price as reported on The Nasdaq Stock Market, Inc.'s National
Market ("Nasdaq") or its successor, if any, or if the Common Stock is not so
reported, the average of the reported bid and asked prices in the
over-the-counter market, as furnished by the National Quotation Bureau, Inc., or
if such firm is not then engaged in the business of reporting such prices, as
furnished by any similar firm then engaged in such business and selected by the
Company or, if there is no such firm, as furnished by any member of the National
Association of Securities Dealers, Inc. ("NASD") selected by the Company or, if
the Common Stock is not quoted in the over-the-counter market, the fair value
thereof determined in good faith by the Company's Board of Directors as of a
date which is within 15 days of the date as of which the determination is to be
made; and (d) the term "Trading Days" with respect to the Common Stock means (i)
if the Common Stock is quoted on Nasdaq or any similar system of automated
dissemination of quotations of securities prices, days on which trades may be
made on such system or (ii) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such national
securities exchange is open for business.
SECTION 2.5. ISSUANCE OF COMMON STOCK. As soon as practicable after the
Date of Exercise of any Warrants, the Company shall issue, or cause its transfer
agent to issue, a certificate or certificates for the number of full Warrant
Shares, registered in accordance with the instructions set forth in the Election
to Purchase, together with cash for fractional shares as provided in Section
3.10. All Warrant Shares issued upon the exercise of any Warrants shall (subject
to Section 11.12 of the Securities Purchase Agreement, this Warrant and
applicable securities laws) be validly authorized and issued, fully paid,
non-assessable, free of preemptive rights and (subject to Section 4.1 hereof)
free from all taxes, liens, charges and security interests in respect of the
issuance thereof. Each person in whose name any such certificate for Warrant
Shares is issued shall be deemed for all purposes to have become the holder of
record of the Common Stock represented thereby on the Date of Exercise of the
Warrants resulting in the issuance of such shares, irrespective of the date of
issuance or delivery of such certificate for Warrant Shares.
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SECTION 2.6. CERTIFICATES FOR UNEXERCISED WARRANTS. In the event that,
prior to the Expiration Date, a Warrant Certificate is exercised in respect of
fewer than all of the Warrant Shares issuable on such exercise a new Warrant
Certificate representing the remaining Warrant Shares shall be issued and
delivered pursuant to the provisions hereof; PROVIDED that the Company shall not
be required to issue any Warrant Certificate representing any fractional Warrant
Shares.
SECTION 2.7. RESERVATION OF SHARES. The Company shall at all times
reserve and keep available, free from preemptive rights, for issuance upon the
exercise of Warrants, the maximum number of its authorized but unissued shares
of Common Stock which may then be issuable upon the exercise in fall of all
outstanding Warrants. The Company shall from time to time take all action which
may be necessary or appropriate so that the Warrant Shares, immediately upon
their issuance following an exercise of Warrants, will be listed or quoted, as
the case may be, on the principal securities exchanges or markets within the
United States of America, if any, on which other shares of the Common Stock are
then listed.
SECTION 2.8. NO IMPAIRMENT. The Company shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Warrants,
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 Holders against impairment. Without limiting the
generality of the foregoing, the Company will (a) not increase the par value of
any Warrant Shares receivable upon the exercise of the Warrants above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and non-assessable Warrant
Shares upon the exercise of any Warrant, and (c) 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 the Warrants, provided that this clause (c) shall not
require the Company to register the issuance of Warrant Shares under the
Securities Act of 1933, as amended. Notwithstanding the foregoing paragraph, the
Company shall not be required to issue Warrant Shares upon the exercise of any
Warrant if such issuance would result in a violation by the Company of any
applicable law.
ARTICLE III.
ADJUSTMENTS AND NOTICE PROVISIONS
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SECTION 3.1. ADJUSTMENT OF EXERCISE PRICE. Subject to the provisions of
this Article III, the Exercise Price in effect from time to time shall be
subject to adjustment, as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on the outstanding shares of its Common Stock in shares of its
Common Stock, (ii) subdivide or reclassify the outstanding shares of its Common
Stock into a greater number of shares, or (iii) combine or reclassify the
outstanding shares of its Common Stock into a smaller number of shares, the
Exercise Price in effect immediately after the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price in effect immediately prior thereto by a
fraction, of which the numerator shall be the number of shares of Common Stock
outstanding immediately before such dividend, distribution, subdivision,
combination or reclassification, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after such dividend,
distribution, subdivision, combination or reclassification. Any shares of Common
Stock of the Company issuable in payment of a dividend shall be deemed to have
been issued immediately prior to the record date for such dividend for purposes
of calculating the number of outstanding shares of Common Stock of the Company
under Subsection 3.1(c) hereof. Such adjustment shall be made successively
whenever any event specified above shall occur.
(b) In case the Company shall fix a record date for the issuance of
rights, options, warrants or convertible or exchangeable securities to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of its Common Stock at a price per share less than the Exercise Price on such
record date, the Exercise Price shall be adjusted immediately thereafter so that
it shall equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding on such record date plus the number
of shares of Common Stock which the aggregate offering price of the total number
of shares of Common Stock so offered would purchase at the Exercise Price on
such record date, and of which the denominator shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered for subscription or purchase. Such adjustment
shall be made successively whenever such a record date is fixed. To the extent
that any such rights, options, warrants or convertible or exchangeable
securities are not so issued or expire unexercised, the Exercise Price then in
effect shall be readjusted to the Exercise Price which would then be in effect
if such unissued or unexercised rights, options, warrants or convertible or
exchangeable securities had not been issuable.
<PAGE>
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(c) In case the Company shall fix a record date for the making of a
distribution to all holders of shares of its Common Stock (i) of shares of any
class other than its Common Stock or (ii) of evidences of its indebtedness or
(iii) of assets (excluding cash dividends or distributions (other than
extraordinary cash dividends or distributions), and dividends or distributions
referred to in Subsection 3.1(a) hereof) or (iv) of rights, options, warrants or
convertible or exchangeable securities (excluding those rights, options,
warrants convertible or exchangeable securities referred to Subsection 3.1(b)
hereof), then in each such case the Exercise Price in effect immediately
thereafter shall be determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding on such record date
multiplied by the Fair Market Value per share on such record date, less the
aggregate fair market value as determined in good faith by the Board of
Directors of the Company of said shares or evidences of indebtedness or assets
or rights, options, warrants or convertible or exchangeable securities so
distributed, and of which the denominator shall be the total number of shares of
Common Stock outstanding on such record date multiplied by such Fair Market
Value per share. Such adjustment shall be made successively whenever such a
record date is fixed; provided, however, that in no event shall the exercise
price be less than the par value per share of the Common Stock, which shall not
be greater than $.01 per share. In the event that such distribution is not so
made, or that such distribution, by its express terms, is intended to be made,
and is in fact made, to all holders of Warrant Shares upon exercise of their
respective Warrants, the Exercise Price then in effect shall be readjusted to
the Exercise Price which would then be in effect if such record date had not
been fixed.
(d) In the event that there shall have occurred prior to any date on
which a calculation of the Fair Market Value of the Common Stock is contemplated
by this Agreement (a "Computation Date") any event described in Subsection
3.1(a), 3.1(b) or 3.1(c) which shall have become effective with respect to
market transactions at any time (the "Market-Effect Date") within the Fair
Market Value Measurement Period, the Closing Price for each Trading Day
preceding the Market-Effect Date shall be adjusted, for purposes of calculating
such average, by multiplying such Closing Price by a fraction, of which the
numerator shall be the Exercise Price as in effect immediately prior to the
Computation Date and the denominator of which shall be the Exercise Price as in
effect immediately prior to the Market-Effect Date, it being understood that the
purpose of this proviso is to ensure that the effect of such event on the market
price of the Common Stock shall, as nearly as possible, be eliminated in order
that the distortion in the calculation of the Fair Market Value may be
minimized.
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SECTION 3.2. SALES OF CERTAIN SECURITIES. (a) In case the Company shall
on or after the date hereof issue or sell any shares of Common Stock or any
rights, options, warrants or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock (excluding
Excluded Securities, as defined in Subsection 3.2(b) below) at a price per share
less than the Exercise Price on the date of such issuance or sale (which amount
shall be subject to adjustment in the event of a stock dividend, stock split or
subdivision, combination or reclassification of the Common Stock), then the
Exercise Price shall be adjusted immediately thereafter so that it shall equal
the price determined by multiplying the Exercise Price in effect immediately
prior to such issuance or sale by a fraction, of which the numerator shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance or sale plus the number of additional shares of Common Stock the
Aggregate Consideration Receivable (as defined in Subsection 3.2(d) below) would
purchase at the Exercise Price in effect immediately prior to such issuance or
sale (which amount shall be subject to adjustment in the event of a stock
dividend, stock split or subdivision, combination or reclassification of the
Common Stock), and of which the denominator shall be the number of shares of
Common Stock outstanding immediately prior to such issuance or sale plus the
number of additional shares of Common Stock offered for subscription or
purchase. Such adjustment shall be made successively whenever such issuance or
sale shall occur. To the extent that any such shares of Common Stock are not so
issued or sold or any such rights, options, warrants or convertible or
exchangeable securities are not so issued or sold or expire unexercised, the
Exercise Price then in effect shall be readjusted to the Exercise Price which
would then be in effect if such unissued or unsold shares of Common Stock and
such unissued or unsold or unexercised rights, options, warrants or convertible
or exchangeable securities had not been issuable.
(b) "Excluded Securities" means (i) stock options or warrants granted
or issued to officers, directors or employees of the Company, (ii) equity
securities issued or issuable upon exercise of any stock options or warrants
referred to in the foregoing clause (i), (iii) any and all securities issued or
issuable upon conversion, exercise or exchange of any convertible securities,
warrants or options that are outstanding on the date of this Agreement, (iv) any
and all securities sold by the Company pursuant to an underwritten public
offering registered under the Securities Act of 1933, as amended, (v) any and
all securities approved by the holders of a majority of the Warrant Shares
issuable upon exercise of the Warrants (assuming that all Warrants are fully
vested pursuant to Section 2.2 hereof), (vi) rights, options, warrants, or
convertible or exchangeable securities issued in any of the transactions
described in Subsections 3.1(b) or (c) or Section 3.5 hereof, (vii) shares of
Common Stock issuable upon the exercise of the Warrants, and
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(viii) shares of Common Stock issuable upon exercise of rights, options or
warrants or conversion or exchange of convertible or exchangeable securities
issued or sold under circumstances causing an adjustment pursuant to this
Section 3.2.
(c) The price per share of Common Stock referred to in Subsection
3.2(a) above shall be determined by dividing (i) the Aggregate Consideration
Receivable in respect of such rights, options, warrants or convertible or
exchangeable securities, by (ii) the total number of shares of Common Stock
covered by such rights, options, warrants or convertible or exchangeable
securities.
(d) "Aggregate Consideration Receivable" means the aggregate amount
paid to the Company for such rights, options, warrants or convertible or
exchangeable securities, plus the aggregate consideration or premiums stated in
such rights, options, warrants or convertible or exchangeable securities to be
payable for the shares of Common Stock covered thereby.
(e) In case the Company shall sell and issue rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, for a consideration consisting, in whole or
in part, of property other than cash or its equivalent, then in determining the
"price per share of Common Stock" referred to in Subsections 3.2(a) and (c)
above and the "Aggregate Consideration Receivable" referred to in Subsections
3.2(c) and (d) above, the Board of Directors of the Company shall determine, in
good faith and on a reasonable basis, the fair value of said property.
SECTION 3.3. NO ADJUSTMENTS TO EXERCISE PRICE. No adjustment in the
Exercise Price in accordance with the provisions of Subsection 3.1(a), (b) or
(c) or Subsection 3.2(a) hereof need be made unless such adjustment would amount
to a change of at least 0.5% in such Exercise Price, PROVIDED, HOWEVER, that the
amount by which any adjustment is not made by reason of the provisions of this
Section 3.3 shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
SECTION 3.4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to Subsection 3.1(a), (b), or (c) or Subsection
3.2(a) hereof, each Warrant shall thereupon evidence the right to purchase that
number of Warrant Shares and have that Base Amount (calculated to the nearest
hundredth of a share) obtained by multiplying the number of Warrant Shares
purchasable immediately prior to such adjustment upon exercise of the Warrant
and the Base Amount as of immediately prior to such adjustment, respectively, by
the Exercise Price in
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effect immediately prior to such adjustment and dividing the product so obtained
by the Exercise Price in effect immediately after such adjustment.
SECTION 3.5. REORGANIZATIONS. In case of any capital reorganization,
other than in the cases referred to in Section 3.1 hereof, or the consolidation
or merger of the Company with or into another corporation (other than a merger
or consolidation in which the Company is the continuing corporation and which
does not result in any reclassification of the outstanding shares of Common
Stock or the conversion of such outstanding shares of Common Stock into shares
of other stock or other securities or property), or the sale or conveyance of
the property of the Company as an entirety or substantially as an entirety
(collectively such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of Warrant Shares theretofore deliverable) the number of shares of
stock or other securities or property to which a holder of the number of Warrant
Shares which would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if such Warrant had
been exercised as to such Warrant Shares immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the Board of Directors of the Company, shall be made
in the application of the provisions herein set forth with respect to the rights
and interests of Holders so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of Warrants. Any such
adjustment shall be made by and set forth in a supplemental agreement prepared
by the Company or any successor thereto, between the Company and any successor
thereto, and shall for all purposes hereof conclusively be deemed to be an
appropriate adjustment. The Company shall not effect any such Reorganization,
unless upon or prior to the consummation thereof the successor corporation, or
if the Company shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or property to be
delivered to holders of shares of the Common Stock outstanding at the effective
time thereof, then such issuer, shall assume by written instrument the
obligation to deliver to the Holder of any Warrant Certificate such shares of
stock, securities, cash or other property as such holder shall be entitled to
purchase in accordance with the foregoing provisions.
SECTION 3.6. VERIFICATION OF COMPUTATIONS. At the request of any
Holder, the Company shall select a firm of independent public accountants (which
may be its outside auditors), which selection may be changed from time to time,
to verify any computation and/or adjustment made in accordance with this Article
III. The certificate, report or other written statement of any such firm shall
be conclusive evidence of the correctness of any computation made under this
Article III. Promptly upon its receipt of
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such certificate, report or statement from such firm of independent public
accountants, the Company shall deliver a copy thereof to each Holder.
SECTION 3.7. NOTICE OF CERTAIN ACTIONS. In the event the Company shall
(a) declare any dividend payable in stock to the holders of its Common Stock or
make any other distribution in property other than cash to the holders of its
Common Stock, (b) offer to the holders of its Common Stock rights to subscribe
for or purchase any shares of any class of stock or any other rights or options,
or (c) effect any reclassification of its- Common Stock (other than a
reclassification involving merely the subdivision or combination of outstanding
shares of Common Stock) or any capital reorganization or any consolidation or
merger (other am a merger in which no distribution of securities or other
property is made to holders of Common Stock) or any sale, transfer or other
disposition of its property, assets and business substantially as an entirety,
or the liquidation, dissolution or winding up of the Company; then, in each such
case, the Company shall cause notice of such proposed action to be mailed to
each Holder at least thirty (30) days prior to such action; PROVIDED, HOWEVER,
that in the event that the Company provides public notice of such action
specifying the information set forth below at least fifteen (15) days prior to
such action, the Company shall be deemed to have satisfied its obligation to
provide notice pursuant to this Section 3.7. Such notice shall specify the date
on which the books of the Company shall close, or a record be taken, for
determining holders of Common Stock entitled to receive such stock dividend or
other distribution or such rights or options, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer, other
disposition, liquidation, dissolution, winding up or exchange shall take place
or commence, as the case may be, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to receive securities or
other property deliverable upon such action, if any such date has been fixed.
Such notice shall be mailed in the case of any action covered by paragraph (a)
or (b) of this Section 3.7, at least ten (10) days prior to the record date for
determining holders of the Common Stock for purposes of receiving such payment
or offer, and in the case of any action covered by this paragraph (c), at least
ten (10) days prior to the earlier of the date upon which such action is to take
place or any record date to determine holders of Common Stock entitled to
receive such securities or other property.
SECTION 3.8. CERTIFICATE OF ADJUSTMENTS. Whenever any adjustment is to
be made pursuant to this Article III, the Company shall prepare a certificate
executed by the Chief Financial Officer of the Company, setting forth such
adjustments to be mailed to each Holder at least fifteen (15) days prior
thereto, such notice to include in reasonable detail (a) the events
precipitating the adjustment, (b) the computation of any adjustments, and (c)
the Exercise Price and the number of shares or the securities or other property
purchasable upon exercise of each Warrant after giving effect to
<PAGE>
-15-
such adjustment. Such Certificate shall be accompanied by the accountant's
verification required by Section 3.6 hereof.
SECTION 3.9. WARRANT CERTIFICATE AMENDMENTS. Irrespective of any
adjustments pursuant to this Article III, Warrant Certificates theretofore or
thereafter issued need not be amended or replaced, but certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments;
PROVIDED the Company may, at its option, issue new Warrant Certificates
evidencing Warrants in such form as may be approved by its Board of Directors to
reflect any adjustment in the Exercise Price and number of Warrant Shares
purchasable under the Warrants.
SECTION 3.10. FRACTIONAL SHARES. The Company shall not be required upon
the exercise of any Warrant to issue fractional Warrant Shares which may result
from adjustments in accordance with this Article III to the Exercise Price or
number of Warrant Shares purchasable under each Warrant. If more than one
Warrant is exercised at one time by the same Holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed based
on the aggregate number of Warrant Shares purchasable upon exercise of such
Warrants. With respect to any final fraction of a share called for upon the
exercise of any Warrant or Warrants, the Company shall pay an amount in cash to
the Holder of the Warrants in respect of such final fraction in an amount equal
to the Fair Market Value of a share of Common Stock as of the Date of Exercise
of such Warrants, multiplied by such fraction. All calculations under this
Section 3.10 shall be made to the nearest hundredth of a share.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1. PAYMENT OF TAXES AND CHARGES. The Company will pay all
taxes (other than income taxes) and other government charges in connection with
the issuance or delivery of the Warrants and the initial issuance or delivery of
Warrant Shares upon the exercise of any Warrants and payment of the Exercise
Price. The Company shall not, however, be required to pay any additional
transfer taxes in connection with the subsequent transfer of Warrants or any
transfer involved in the issuance and delivery of Warrant Shares in a name other
than the name in which the Warrants to which such issuance relates were
registered, and, if any such tax would otherwise be payable by the Company, no
such issuance or delivery shall be made unless and until the person requesting
such issuance has paid to the Company the amount of any such tax, or it is
established to the reasonable satisfaction of the Company that any such tax has
been paid.
<PAGE>
-16-
SECTION 4.2. CHANGES TO AGREEMENT. The Company, when authorized by its
Board of Directors, with the written consent of Holders of at least a majority
of the outstanding Warrants may amend or supplement this Agreement. The Company
may, without the consent or concurrence of any Holder, by supplemental agreement
or otherwise, make any changes or corrections in this Agreement that the Company
shall have been advised by counsel (a) are required to cure any ambiguity or to
correct any defective or inconsistent provision or clerical omission or mistake
or manifest error herein contained, (b) add to the covenants and agreements of
the Company in this Agreement such further covenants and agreements thereafter
to be observed, or (c) result in the surrender of any right or power reserved to
or conferred upon the Company in this Agreement, in each case which changes or
corrections do not and will not adversely affect, alter or change the rights,
privileges or immunities of the Holders.
SECTION 4.3. ASSIGNMENT. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Holders shall bind and
inure to the benefit of their respective successors and assigns, provided that
the Warrants are transferred or assigned pursuant to Section 1.3 hereof and
Section 11.13 of the Securities Purchase Agreement.
SECTION 4.4. SUCCESSOR TO COMPANY. In the event that the Company merges
or consolidates with or into any other corporation or sell or otherwise
transfers its property, assets and business substantially as an entirety to a
successor corporation, the Company shall use its best efforts to have such
successor corporation assume each and every covenant and condition of this
Agreement to be performed and observed by the Company, subject to Section 3.5
hereof.
SECTION 4.5. REPORTS.
FINANCIAL AND OTHER INFORMATION. The Company will deliver to each
Holder who, as of 5 days prior to the date on which document is to be delivered,
holds Warrants representing at least 100,000 Warrant Shares in the aggregate,
the following:
(a) as soon as available and in any event within 45 days after the end
of the first, second and third quarterly accounting periods in each fiscal year
of the Company, an unaudited balance sheet of the Company as at the end of such
period and the related unaudited statements of operations, stockholders' equity
and changes in cash flow of the Company for such period and (in the case of the
second and third quarterly periods) for the period from the beginning of the
current fiscal year to the end of such quarterly period, setting forth in each
case in comparative form the figures for the corresponding periods of the
previous fiscal year;
<PAGE>
-17-
(b) as soon as available and in any event within 120 days after the end
of each fiscal year of the Company, provided that such information shall also be
provided in unaudited form within 90 days after the end of each fiscal year of
the Company, an audited balance sheet of the Company as at the end of such
fiscal year and the related audited statement of operations, stockholder's
equity and changes in cash flow of the Company for such fiscal year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and accompanied by the report thereon of a firm of
independent public accountants of recognized national standing selected by the
Company, which report (i) shall state that the examination by such accountants
in connection with such financial statements has been made in accordance with
generally accepted auditing standards and (ii) shall include the opinion of such
accountants that such financial statements (x) have been prepared in accordance
with generally accepted accounting principles consistent with those applied in
prior fiscal periods, except as otherwise specified in such opinion, and (y)
present fairly in all material respects the financial condition of the Company
at the dates of said financial statements and the results of the Company's
operations for the periods covered thereby;
(c) as soon as available and in any event within 30 days after the end
of each month, an unaudited balance sheet of the Company as at the end of such
month and the related unaudited statements of operations, stockholders' equity
and changes in cash flows of the Company for such month and for the current
fiscal year to the end of such month, setting forth in comparative form the
Company's projected financial statements for the corresponding periods for the
current fiscal year and setting forth net new subscribers to services provided;
(d) as soon as available, but in any event within 30 days after
commencement of each new fiscal year, a business plan and projected financial
statements for such fiscal year; and
(e) with reasonable promptness, (i) such other notices, information and
data with respect to the Company as the Company delivers to the holders of
Common Stock, including, promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning significant aspects
of the Company's operations or financial affairs given to the Company by its
independent accountants (and not otherwise contained in other materials provided
hereunder), and (ii) such other information and data as the Purchasers may from
time to time reasonably request.
Notwithstanding the foregoing, the Company's obligations to deliver the
information specified in clauses (c), (d) and (e)(ii) of this Section 4.5 shall
terminate once the Company becomes subject to the reporting requirements
<PAGE>
-18-
of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (a
"Reporting Company"). In addition, once the Company becomes a Reporting Company,
the Company shall not be required to deliver the information specified in
clauses (a) and (b) to any Holder prior to the date on which such information is
filed with the Securities and Exchange Commission.
The foregoing financial statements shall be prepared on a consolidated basis if
the Company then has any subsidiaries. The financial statements delivered
pursuant to paragraphs (a) and (c) shall be accompanied by a certificate of the
chief financial officer or controller of the Company stating that such
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except as noted) and fairly present the
financial condition and results of operations of the Company at the date thereof
and for the periods covered thereby.
SECTION 4.6. NOTICES. Any notice or demand required by this Agreement
to be given or made by any Holder to or on the Company shall be sufficiently
given or made if sent by first-class or registered mail, postage prepaid,
addressed as follows:
Streamline, Inc.
27 Dartmouth Street
Westwood, Massachusetts 02090
Attn: Chief Executive Officer
With a copy to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attn:, Wayne D. Bennett, Esq.
Any notice or demand required by this Agreement to be given or made by the
Company to or on any Holder shall be sufficiently given or made if sent by
first-class or registered mail, postage prepaid, addressed to such Holder and
sent to the following address:
DDJ Capital Management, LLC
141 Linden Street, Suite S-4
Wellesley, MA 02181
Attn: Wendy Schnipper Clayton, Esq.
With a copy to:
Goodwin, Procter & Hoar LLP
<PAGE>
-19-
Exchange Place
Boston, MA 02109-2881
Attn: Laura Hodges Taylor, P.C.
Any notice or demand required by this Agreement to be given or made by the
Company to or on any Holder shall be sufficiently given or made, whether or not
such holder receives the notice, five (5) days after mailing, if sent by
first-class or registered mail, postage prepaid, addressed to such Holder at its
last address as shown on the books of the Company. Otherwise, such notice or
demand shall be deemed given when received by the party entitled thereto.
SECTION 4.7. DEFECTS IN NOTICE. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice
pursuant to this Agreement shall not affect in any way the rights of any Holder
or the legality or validity of any adjustment made pursuant to Section 3.1, 3.2
or 3.4 hereof, or any transaction giving rise to any such adjustment, or the
legality or validity of any action taken or to be taken by the Company.
SECTION 4.8. GOVERNING LAW. This Agreement and each Warrant Certificate
issued hereunder shall be governed by the laws of the Commonwealth of
Massachusetts without regard to principles of conflicts of laws thereof.
SECTION 4.9. STANDING. Nothing in this Agreement expressed and nothing
that may be implied from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company and the Holders of any right, remedy or claim under or by reason of this
Agreement or of any covenant, condition, stipulation, promise or agreement
contained herein; and all covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors, and the Holders.
SECTION 4.10. HEADINGS. The descriptive headings of the articles and
sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 4.11. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, and all of which together
shall constitute one and the same instrument.
SECTION 4.12. AVAILABILITY OF THE AGREEMENT. The Company shall keep
copies of this Agreement available for inspection by Holders during normal
business hours. Copies of this Agreement may be obtained upon
<PAGE>
-20-
written request addressed to the Company at the address set forth in Section 4.6
hereof.
SECTION 4.13. ENTIRE AGREEMENT. This Agreement, including the Exhibits
referred to herein and the other writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement of the parties
with respect to its subject matter, and supersedes all previous written or oral
negotiations, commitments and writings.
<PAGE>
-21-
WARRANT AGREEMENT
COMPANY SIGNATURE PAGE
IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by
the parties as of the day and year first above written.
STREAMLINE, INC.,
a Delaware corporation
By: /s/ Timothy A. Demello
------------------------------------
Timothy A. DeMello
Chairman and Chief
Executive Officer
<PAGE>
-22-
WARRANT AGREEMENT
PURCHASER SIGNATURE
Accepted and Agreed as of the date first written above.
DDJ Canadian High Yield Fund
By: DDJ Capital Management LLC,
as attorney-in-fact
By: /s/ David J. Breazzano
------------------------------------
David J. Breazzano
Member
With a copy to: Notice Information:
Wendy Schnipper Clayton, Esq. Mr. Jay Burnham
DDJ Capital Management, LLC DDJ Capital Management, LLC
141 Linden Street, Suite 4 141 Linden Street, Suite S-4
Wellesley, MA 02181 Wellesley, Massachusetts 02181
Phone: (781) 283-8500
Fax: (781) 283-8555
Mellon Bank N.A., solely in its capacity as
Trustee for General Motors Employees
Domestic Group Pension. Trust as directed by
DDJ Capital Management LLC, and not in its
individual capacity
By: /s/ Bernadette Rist
----------------------------------------
Bernadette Rist
Authorized Signatory
With a copy to: Notice Information:
Wendy Schnipper Clayton, Esq. Mr. Jay Burnham
DDJ Capital Management, LLC DDJ Capital Management, LLC
141 Linden Street, Suite 4 141 Linden Street, Suite S-4
Wellesley, MA 02181 Wellesley, Massachusetts 02181
<PAGE>
-23-
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER SUCH ACT IS AVAILABLE. ANY
TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS CONTAINED IN A SECURITIES PURCHASE AGREEMENT AND A WARRANT
AGREEMENT DATED AS OF APRIL 15, 1998, AS AMENDED. FROM TIME TO TIME (THE
"SECURITIES PURCHASE AGREEMENT"), A COMPLETE AND CORRECT COPY OF THE FORM OF
WHICH WILL BE FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST
AND WITHOUT CHARGE.
No.
---------------
Certificate for ________Warrants
STREAMLINE, INC.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES that _______________________________, or its registered assigns
is the registered holder (the "Registered Holder") of Warrants set forth above,
of which____________ are vested on the date of issuance hereof, each of which
represents the right to purchase one fully paid and non-assessable share of
common stock, par value $.01 per share (the "Common Stock"), of Streamline,
Inc., a Delaware corporation (the "Company"), at the Exercise Price (as defined
in the Warrant Agreement) at the times specified, and in accordance with the
vesting schedule set forth in the Warrant Agreement, by surrendering this
Warrant Certificate, with the form of Election to Purchase attached hereto duly
executed and by paying in
<PAGE>
-24-
full the Exercise Price, and if the holder of any Warrants being exercised is
not the original holder of such Warrants and if requested by the Company, a duly
executed instrument or certificate, in form and substance satisfactory to the
Company, pursuant to which such Holder makes such representations and warranties
and provides such information as may reasonably be required solely in order to
confirm compliance with applicable securities, laws, Payment of the Exercise
Price shall be made as set forth in the Warrant Agreement (as hereinafter
defined). No Warrant may be exercised after 5:00 P.M., New York City time, on
the date that is the earlier of (i) the fifth anniversary of the completion of a
public offering by the Company raising at least $25,000,000 or (ii) April 15,
2005 (the "Expiration Date"). All Warrants evidenced hereby shall thereafter
become void, subject to the terms of the Warrant Agreement hereinafter referred
to.
Prior to the Expiration Date, subject to any applicable laws, rules or
regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate and in accordance
with the terms of the Warrant Agreement and the Securities Purchase Agreement
hereinafter referred to, the Registered Holder shall be entitled to transfer
this Warrant Certificate, in whole or in part, upon surrender of this Warrant
Certificate at the principal office of the Company with the form of assignment
set forth hereon duly executed. Upon any such transfer, a new Warrant
Certificate or Warrant Certificates representing the same aggregate number of
Warrants to purchase the shares of the Common Stock will be issued in accordance
with instructions in the form of assignment.
Upon the exercise of less than all of the Warrants to purchase the
shares of the Common Stock evidenced by this Warrant Certificate, there shall be
issued to the Registered Holder a new Warrant Certificate in respect of the
Warrants not exercised.
Prior to the Expiration Date, the Registered Holder shall be entitled
to exchange this Warrant Certificate, with or without other Warrant
Certificates, for another Warrant Certificate or Warrant Certificates for the
same aggregate number of Warrants to purchase the shares of the Common Stock,
upon surrender of this Warrant Certificate at the principal office of the
Company.
Upon certain events provided for in the Warrant Agreement, the Exercise
Price and the number of shares of Common Stock issuable upon the exercise of
each Warrant are required to be adjusted.
<PAGE>
-25-
No fractional shares will be issued upon the exercise of Warrants. As
to any final fraction of a share of Common Stock which the Registered Holder of
one or more Warrant Certificates, the rights under which are exercised in the
same transaction, would otherwise be entitled to purchase upon such exercise,
the Company shall pay the cash value thereof determined as provided in the
Warrant Agreement. No Warrant Certificate representing less than one Warrant
Share will be issued.
This Warrant Certificate is issued under and in accordance with the
Warrant Agreement dated as of April 15, 1998 (the "Warrant Agreement") by and
among the Company and the Purchasers (as defined in the Warrant Agreement) and
is subject to the terms and provisions contained in the Warrant Agreement. All
capitalized terms not defined herein shall have the meanings given such terms as
set forth in the Warrant Agreement.
This Warrant Certificate shall not entitle the Registered Holder to any
of the rights of a stockholder of the Company, including, without limitation,
the right to vote, to receive dividends and other distributions, or to attend or
receive any notice of meetings of stockholders or any other proceedings of the
Company.
The Base Amount of this Warrant (as defined in the Warrant Agreement)
is ___________ shares of Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
/Seal/ STREAMLINE, INC.
By:
-------------------------------------
Name:
Title:
/Seal/ Attest:
By:
--------------------------------------
Name:
Title: Secretary
<PAGE>
-26-
[Form of Assignment]
FOR VALUE RECEIVED, the undersigned hereby irrevocably sells, assigns
and transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants to purchase the shares of the Common Stock set forth below:
NAME OF ASSIGNEE ADDRESS NO. OF WARRANT SHARE BASE AMOUNT
- ---------------- ------- -------------------- -----------
and does hereby irrevocably constitute and appoint __________________true and
lawful Attorney, to make such transfer on the books of Streamline, Inc.,
maintained for that purpose, with full power of substitution in the premises.
Dated: ,
------------------------------
----------------------
Signature
(Signature must conform
in all respects to name
of holder as specified
on the face of the
Warrant Certificate.)
<PAGE>
-27-
[Form of Election To Purchase]
The undersigned hereby irrevocably elects to exercise _______ of the
Warrants represented by this Warrant Certificate and to purchase the shares of
Common Stock issuable upon the exercise of said Warrants, and requests that
certificates for such shares be issued and delivered as follows:
ISSUE TO:
---------------------------------------------------------------------
(NAME)
---------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
---------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER)
DELIVER TO: -------------------------------------------------------------------
(NAME)
at ----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
In full payment of the purchase price with respect to the exercise of
Warrants to purchase shares of the Common Stock, the undersigned:
hereby tenders payment of $_________ by cash, certified check,
cashier's check or money order payable in United States
currency to the order of the Company, or;
hereby delivers to the Company Senior Discount Notes (as
defined in the Securities Purchase Agreement) having a value
(which shall be the Accreted Value (as defined in the
Securities Purchase Agreement) of such Notes pus any accrued
interest thereon through the date hereof) of $_______________;
or
hereby makes a Net Cashless Exercise (as defined in the
Warrant Agreement).
If the number of Warrants to purchase the shares of the Common Stock
hereby exercised is less than the Warrants represented by this
<PAGE>
-28-
Warrant Certificate, the undersigned requests that a new Warrant Certificate
representing the number of such full Warrants not exercised by issued and
delivered as follows:
ISSUE TO: ---------------------------------------------------------------------
(NAME)
- -------------------------------------------------------------------------------
ADDRESS, INCLUDING ZIP CODE)
- -------------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO --------------------------------------------------------------------
(NAME)
at ---------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Date: ----------------------
----------------------
Signature
(Signature must conform
in all respects to name
of holder as specified
on the face of the
Warrant Certificate.)
PLEASE INSERT SOCIAL
SECURITY OR TAX I.D.
NUMBER HOLDER
----------------------
----------------------
<PAGE>
REGISTRATION RIGHTS AND CO-SALE AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of April
15, 1998, by and among Streamline, Inc. a Delaware corporation (the "Company"),
the stockholders and optionholders of the Company named on Exhibit A hereto (the
"Stockholders"), Mellon Bank, N.A., solely in its capacity as Trustee for
General Motors Employees Domestic Group Pension Trust, and not in its individual
capacity, DDJ Canadian High Yield Fund, and each other person that becomes a
party to this Agreement (collectively, the "Investors"). PREAMBLE
WHEREAS, the Investors have purchased warrants to purchase up to an
aggregate of 850,000 shares (the "Warrants") of the Company's Common Stock, par
value $0.01 per share, pursuant to the terms of that certain Securities Purchase
Agreement dated April 15, 1998, by and among the Company and the Investors (the
"Securities Purchase Agreement") and pursuant to the terms of that certain
Warrant Agreement of even date herewith, by and among the Company and the
Investors (the "Warrant Agreement");
WHEREAS, it is a condition precedent to the consummation by the Investors
of all of their respective obligations under the Securities Purchase Agreement
that the Company and the Investors enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties hereto hereby agree as follows:
1. DEFINITIONS. In addition to those terms defined elsewhere in this
Agreement. the following terms as used herein shall have the following meanings:
"AFFILIATE" shall mean, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such first-named Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person. whether through the ownership of voting securities or by contract or
otherwise.
<PAGE>
-2-
"COMMISSION" shall mean the U.S. Securities and Exchange Commission.
"COMMON STOCK" shall mean the common stock, par value $.01 per share, of
the Company.
"EXCHANGE ACT" shall. mean the Securities Exchange Act of 1934, as amended.
"PERMITTED TRANSFEREE" shall mean, with respect to any Investor, any
Affiliate of such Investor or any other Person that purchases or otherwise
acquires all or a portion of the Warrants of such Investor (or shares of Common
Stock issued upon the exercise thereof). References to Investors herein shall
include Permitted Transferees.
"PERSON" shall mean an individual, partnership, corporation, association,
trust joint venture, unincorporated organization, and any government;
governmental department or agency or political subdivision thereof.
"REGISTRABLE SHARES" shall mean, with respect to each Investor (or its
Permitted Transferee), any or all of the shares of Common Stock issued upon
exercise of those certain warrants issued by the Company to such Investor on the
date hereof; PROVIDED, HOWEVER, that, except for purposes of Section 10 hereof,
such securities shall cease to be Registrable Shares when the holder of such
Registrable shares would be entitled to sell all of such securities within a
three-month period pursuant to the provisions of Rule 144.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act and any
successor or substitute rule, law or provision.
"SECURITIES ACT" shall mean the U.S. Securities Act of 1933, as amended.
"TRANSFER" means any direct or indirect transfer, donation, sale,
assignment, pledge, hypothecation, grant of a security interest in or other
disposal or attempted disposal of all or any portion of a security or of any
rights. "Transferred" means the accomplishment of a Transfer and "Transferee"
means the recipient of Registrable Shares in a Transfer.
2. DEMAND REGISTRATION RIGHTS.
2.1. REGISTRATION UPON REQUEST. Subject to the provisions of Section 2.4
below, at any time or from time to time, Investors holding thirty (30) percent
of the Registrable Shares then outstanding may notify the
<PAGE>
-3-
Company in writing that such Investors desire for the Company to cause all or a
portion of the Registrable Shares to be registered under the Securities Act
pursuant to this Section 2.1. Thereafter, the Company shall promptly give to
each Investor written notice of such demand for registration. Upon the written
request of any Investor given within ten days after the giving of any such
notice by the Company, the Company shall use its best efforts to cause to be
included in such registration the Registrable Shares of such Investor, to the
extent requested to be registered. Thereafter, subject to the conditions,
limitations and provisions set forth below in Sections 2.3. 2.4 and 5, the
Company shall promptly prepare and file. and use its best efforts to prosecute
to effectiveness, an appropriate filing with the Commission of a registration
statement covering all of those Registrable Shares with respect to which
registration under the Securities Act has been requested by the requesting
Investors: PROVIDED that, if the Company has previously been given a notice of
the type specified in this Section 2 or 4.1 the Company is not at such time
continuing to pursue the registration referred to in such notice. Subject to the
provisions of Section 2.3 below, the Company may include in any registration
pursuant to this Section 2.1 additional shares of Common Stock for sale for its
own account or for the account of any other Person.
2.2. SELECTION OF UNDERWRITERS. If a registration pursuant to Section 2.1
involves an underwritten offering, the underwriter or underwriters thereof shall
be selected, after consultation with the Company, by the Investors who own the
Registrable Shares being so registered, PROVIDED that such underwriter or
underwriters shall be acceptable to the Company. The Company covenants that it
shall not unreasonably withhold its acceptance of any such underwriter or
underwriters.
2.3. PRIORITY OF DEMAND REGISTRATIONS. If a registration pursuant to
Section 2.1 involves an underwritten offering, and the managing underwriter
shall advise the Company in writing that, in its opinion, the number of shares
of Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering, (i) first, the number of
Registrable Shares requested to be included in such registration by the
Investors, pro rata among the Investors on the basis of the number of
Registrable Shares requested to be registered in such registration and (ii)
second, the other shares of Common Stock of the Company proposed to be included
in such registration, in accordance with the priorities, if any, then existing
among the Company and the holders of such other securities.
<PAGE>
-4-
2.4. LIMITATION ON REGISTRATIONS. The Company shall not be required to
effect more than two (2) registrations pursuant to Section 2. 1.
2.5. LIMITATION ON REQUEST. Notwithstanding anything in this Section 2 to
the contrary, the Investor may not request a registration pursuant to Section
2.1 during (i) the 180-day period following the closing of the Company's initial
public offering, (ii) the 180-day period following the effective date of any
registration statement filed in connection with a registration pursuant to
Section 2.1 or 4.1 or (iii) the 90-day period following the effective date of
any registration statement filed in connection with a registration pursuant to
Section 3. For purposes of this Agreement, a registration shall be deemed to
have been effected by the Company if the registration statement relating thereto
has been declared effective by the Commission or if such registration statement,
after having been filed with the Commission, is, through no fault of the
Company, withdrawn, abandoned or otherwise not declared effective within sixty
(60) days of the filing thereof.
3. PIGGYBACK REGISTRATION RIGHTS.
3.1. REGISTRATION. If at any time after the Company's initial public
offering, the Company proposes to register any of its Common Stock under the
Securities Act, whether for its own account or for the account of any
stockholder of the Company or pursuant to registration rights granted to holders
of securities of the Company (but excluding in all cases any registrations
pursuant to Sections 2 or 4 hereof or any registrations to be effected on Forms
S-4 or S-8 or any applicable successor Forms), the Company shall, each such
time, give to each Investor written notice of its intent to do so. Upon the
written request of any Investor given within ten days after the giving of any
such notice by the Company, the Company shall use its best efforts to cause to
be included in such registration the Registrable Shares of such Investor. to the
extent requested to be registered, subject to Section 3.2; PROVIDED that (i) the
number of Registrable Shares proposed to be sold by such Investor is equal to at
least twenty-five percent (25%) of the total number of Registrable Shares held
by such Investor. and (ii) such Investor agrees to sell those of its Registrable
Shares to be included in such registration in the same manner and on the same
terms and conditions as the other shares of Common Stock which the Company
purposes to register.
3.2. PRIORITY OF THE COMPANY SHARES. In connection with any offering
involving an underwriting of shares being issued by the Company or being sold
pursuant to any demand registration rights of any stockholder of the Company,
the Company shall not be required under Section 3.1 to include the Registrable
Shares of any Investor therein unless such Investor accepts and agrees to the
terms of the underwriting as agreed upon between the
<PAGE>
-5-
Company and/or the stockholder(s) exercising demand registration rights, as
applicable, and the underwriters selected by the Company and/or such
stockholders, and then only in such quantity as (without any reduction in the
numbers of shares to be sold for the account of the Company and any such
stockholders) will not, in the opinion of the underwriters, jeopardize the
success of the offering by the Company. If the total number of shares of Common
Stock which all selling stockholders of the Company, including any Investors,
request to be included in any offering exceeds the number of shares which the
underwriters believe to be compatible with the success of the offering, the
Company shall only be required to include in the offering so many of shares of
stockholders (including any Investors) exercising piggyback registration rights,
pro rata among the Investors and other stockholders exercising piggyback
registration rights on the basis of the number of shares requested to be
registered in such registration, as the underwriters believe will not (without
any reduction in the number of shares to be sold for the account of the Company
and any stockholder(s) exercising demand registration rights) jeopardize the
success of the offering.
4. FORM S-3 REGISTRATION.
4.1. REGISTRATION UPON REQUEST. In the event that the Company shall receive
from Investors holding twenty (20) percent of the Registrable Shares then
outstanding a written request or requests that the Company effect a registration
on Form S-3 (or any applicable successor Form) with respect to all or a part of
the Registrable Shares owned by such Investors, then the Company will promptly
use its best efforts to effect such registration of all or such portion of such
Investors' Registrable Shares as are specified in such request; PROVIDED that,
if the Company has been given a notice of the type specified in Section 2.1, 3
or this Section 4.1, the Company is not at such time continuing to pursue the
registration referred to in such notice. Promptly after receipt by the Company
of a notice requesting registration pursuant to this Section 4.1, the Company
shall give to each Investor written notice of such request for registration.
Upon the written request of any Investor giver, within ten days after the giving
of any such notice by the Company, the Company shall use its best efforts to
cause to be included in such registration the Registrable Shares of such
Investor, to the extent requested to be registered. Subject to Section 4.3, the
Company may include in any registration pursuant to this Section 4.1 additional
shares of Common Stock for sale for its own account or for the account of any
other Person. No registration under this Section 4.1 shall be underwritten
unless the Company shall otherwise elect in its sole and absolute discretion.
<PAGE>
-6-
4.2. SELECTION OF UNDERWRITERS. If a registration pursuant to Section 4.1
involves an underwritten offering, the underwriter or underwriters thereof shall
be selected by the Company.
4.3. PRIORITY OF DEMAND REGISTRATIONS. If a registration pursuant to
Section 4.1 involves an underwritten offering, and the managing underwriter
shall advise the Company in writing that, in its opinion, the number of shares
of Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering, (i) first, the number of
Registrable Shares requested to be included in such registration by the
requesting Investors and (ii) second, the other shares of Common Stock of the
Company proposed to be included in such registration, in accordance with the
priorities, if any, then existing among the Company and the holders of such
other securities.
4.4. LIMITATION ON REQUESTS. Notwithstanding anything in this Section 4.5
to the contrary, the Investors may not request a registration pursuant to
Section 4.1 during (i) the 180-day period following the closing of the Company's
initial public offering, (ii) the 180-day period following the effective date of
any registration statement filed in connection with a registration pursuant to
Section 2.1 or 4.1 or (iii) the 90-day period following the effective date of
any registration statement filed in connection with a registration pursuant to
Section 3.
4.5. LIMITATION ON REGISTRATIONS. Notwithstanding anything to the contrary
in this Section 4, the Company shall not be required to effect any registration
pursuant to Section 4.1 unless the Registrable Shares to be so registered shall
have an aggregate proposed sale price of at least $350,000.
5. DEFERRAL. Notwithstanding anything to the contrary contained in this
Agreement, the Company's obligation to file a registration statement pursuant to
Section 2, 3 or 4 shall be deferred for a period not to exceed 90 days in any
12-month period if the Company, in the good faith judgment of its Board of
Directors, reasonably believes that the filing thereof at the time requested
would materially adversely affect a pending or proposed public offering of
Common Stock, or any acquisition, merger, recapitalization, consolidation,
reorganization or similar transaction, or any negotiations. discussions or
pending proposals with respect thereto.
6. ADDITIONAL OBLIGATIONS OF THE COMPANY. Whenever the Company is required
under Section 2, 3 or 4 to use its best efforts to effect the registration of
any of the Registrable Shares of any Investor, the Company shall promptly:
<PAGE>
-7-
(a) Prepare and file with the Commission a registration statement with
respect to such Registrable Shares and use its best efforts to cause such
registration statement to become and remain effective; PROVIDED, however
that the Company shall in no event be obligated to cause any such
registration to remain effective for more than 180 days:
(b) 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 comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such registration statement;
(c) Furnish to such Investor such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as the Investor may reasonably
request in order to facilitate the disposition of such Registrable Shares;
and
(d) Use its best efforts to register and qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions
as shall be reasonably appropriate in the opinion of the Company and the
managing underwriters; PROVIDE that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions; and PROVIDED FURTHER that (anything in Section 8 to the
contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification therein of the
securities be borne by selling shareholders, then each Investor shall, to
the extent required by such jurisdiction, pay its PRO RATA share of selling
expenses.
7. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
any Investor requesting registration of any of such Investor's Registrable
Shares shall furnish to the Company such information regarding such Investor,
the Registrable Shares held by such Investor, the proposed plan of distribution
of such Registrable Shares, and any other information as the Company shall
reasonably request and as shall be required in order to effect any such
registration by the Company.
8. EXPENSES. All expenses incurred in connection with a registration
pursuant to this Agreement (excluding underwriting commissions and discounts and
counsel fees of any selling Investors), including without
<PAGE>
-8-
limitation all registration and qualification fees, printing costs, and fees and
disbursements of counsel for the Company, shall be borne by the Company;
PROVIDED, HOWEVER, that the Company shall not be required to pay for blue sky
registration or qualification expenses in connection with states in which the
Company is not registering or qualifying its original issue shares or
Registrable Shares of Investors upon exercise of their demand registration
rights.
9. INDEMNIFICATION. In the event that any Registrable Shares of any
Investor are included in a registration statement pursuant to this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless such Investor, any underwriter (as defined in the Securities
Act) for the Company, and each partner, member, officer, director, trustee,
stockholder, employee, agent and investment adviser of such Investor or
such underwriter and each Person, if any, who controls such Investor or
such underwriter within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act, or is under common control with, or
is controlled by such Investor or underwriter, together with the partners,
members, officers, directors, trustees, stockholders, employees, agents and
investment advisors of such controlling person (collectively, the
"Controlling Persons") against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue or
alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make
the statements therein not misleading; and will reimburse such Investor,
such underwriter or such partner, member, officer, director, trustee,
stockholder, employee, agent and investment adviser of such Investor or
underwriter or any Controlling Person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, inability or action; PROVIDED, HOWEVER, that
the indemnity agreement contained in this Section 9. 1 (a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company
be liable in any such case for any such loss, damage, liability or action
to
<PAGE>
-9-
the extent that it primarily arises out of or is based upon an untrue
statement or alleged untrue statement or omission made in connection with
such registration statement, preliminary prospectus, final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Investor, any underwriter for such Investor, or any
partner, member, officer, director, trustee, stockholder, employee, agent
and investment adviser of such Investor or underwriter, or any Controlling
Person.
(b) To the extent permitted by law, such Investor will indemnify and
hold harmless the Company, each of its directors, each of its officers who
have signed such registration statement, each Person, if any, who controls
the Company within the meaning of the Securities Act, and any underwriter
for the Company (within the meaning of the Securities Act) against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, controlling Person, or underwriter may become subject
to, under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are
based upon any untrue or alleged untrue statement of any material fact
contained in such registration statement, including any preliminary
prospectus contained therein or any amendments or supplements thereto, or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary prospectus,
final prospectus, or amendments or supplements thereto, in reliance upon
and in conformity with written information furnished by the Investor
expressly for use in connection with such registration; and the Investor
will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling Person, or underwriter
in connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the indemnity agreement
contained in this Section 9.1(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Investor against which
the request for indemnity is being made (which consent shall not be
unreasonably withheld). In no event shall the liability of any Investor
hereunder be greater in amount than the dollar amount of the net proceeds
received by such Investor upon the sale of the Registrable Shares giving
rise to such indemnification obligation.
<PAGE>
-10-
(c) Promptly after receipt by an indemnified party under this Section
9.1 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party under this Section 9.1, notify the indemnifying party in writing of
the commencement thereof and the indemnifying party shall have the right to
participate in and, to the extent the indemnifying party desires, jointly
with any other indemnifying party similarly noticed, to assume at its
expense the defense thereof with counsel mutually satisfactory to the
parties. The failure to notify an indemnifying party promptly of the
commencement of any such action, if prejudicial to his ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9.1 only if and to the extent such
failure to promptly notify was prejudicial to its ability to defend such
action, and the omission so to notify the indemnifying party will not
relieve the indemnifying party of any liability which he may have to any
indemnified party otherwise other than under this Section 9.1.
10. CO-SALE OPTIONS. Prior to an initial public offering of the Company's
Common Stock, in the event that any Stockholder ("a Transferring Stockholder")
receives a bona fide offer (a "Transaction Offer") to purchase all or any
portion of the shares of Common Stock held by such Transferring Stockholder (or
issuable upon the exercise of options or convertible securities held by such
Transferring Stockholder) from any other Person (the "Offeror"), such
Transferring Stockholder may Transfer such shares only pursuant to and in
accordance with the provisions of this Section 10.1. For purposes of this
Section 10, a Transfer shall not include a pledge, donation or hypothecation,
provided that the Person to which any shares of Common Stock are pledged,
donated or hypothecated agrees to be bound by the terms of this Section 10 as a
Stockholder, unless such requirement is waived in writing by the holders of a
majority of the Registrable Shares and shares of Common Stock issuable upon
exercise of the Warrants. Additionally, for purposes of this Section 10, a
Transfer shall not include a sale or sales by Timothy A. DeMello of up to an
aggregate of 37,500 shares of Common Stock to Howard Kra pursuant to that
certain agreement between Messrs. DeMello and Kra dated October 28, 1996.
(a) Such Transferring Stockholder shall deliver written notice (the
"Offer Notice") of the terms of such Transaction Offer to each Investor
holding an aggregate of at least 50,000 Registrable Shares and shares of
Common Stock issuable upon the exercise of Warrants (subject to adjustment
for stock splits, stock dividends and the like) (a "Section 10 Investor").
The Offer Notice shall specify (i) the name and address of the Offeror,
(ii) the number of shares of Common Stock of the Transferring Stockholder
subject to the
<PAGE>
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Transaction Offer (the "Offered Shares"), (iii) the consideration per share
to be paid for the Offered Shares, and (iv) all other material terms and
conditions of the Transaction Offer.
(b) Each Section 10 Investor shall have the right to participate in
the sale of Common Stock which is the subject of the Transaction Offer on
the terms and conditions herein stated (the "Co-Sale Option"), which right
shall be exercisable upon written notice (the "Acceptance Notice") to the
Transferring Stockholder within ten (10) days after the Transferring
Stockholder delivers the Offer Notice to the Section 10 Investors. The
Acceptance Notice shall indicate the maximum number of shares such Section
10 Investor wishes to sell (including the number of shares it would sell if
one or more other Section 10 Investors do not elect to participate in the
sale) on the terms and conditions stated in the Offer Notice.
Each of the Section 10 Investors shall have the right to sell a number of
Registrable Shares and shares of Common Stock issuable upon exercise of the
Warrants held by such Section 10 Investor pursuant to the Transaction Offer
which is equal to or less than (the exact amount to be determined by such
Section 10 Investor) the product obtained by multiplying (i) the total
number of Offered Shares subject to the Transaction Offer by (ii) a
fraction, the numerator of which is the total number of Registrable Shares
and shares of Common Stock issuable upon the exercise of Warrants held by
such Section 10 Investor on the date of the Acceptance Notice and the
denominator of which is the sum of the total number of Registrable Shares
and shares of Common Stock issuable upon the Exercise of Warrants then held
by all Section 10 Investors plus the number of shares of Common Stock held
by the Transferring Stockholder on the date of the Acceptance Notice. To
the extent one or more Section 10 Investors elect not to exercise their
Co-Sale Option, then the rights of the other Section 10 Investors (who
exercise their Co-Sale Option) to sell shares pursuant their Co-Sale Option
shall be increased proportionately by the full amount of shares which the
non-electing Section 10 Investors were entitled to sell pursuant to this
Section 10.1.
Within ten (10) days after the date by which the Section 10 Investors were
first required to notify the Transferring Stockholder of their intent to
exercise their Co-Sale Option, the Transferring Stockholder shall notify
each participating Section 10 Investor of the number of shares held by such
Section 10 Investor that will be included in the sale and the date on which
the Transaction Offer will be consummated, which shall be no later than the
later of (i) sixty (60) days after the date by which the Section 10
Investors were required to notify the Transferring Stockholder of their
intent to exercise their Co-Sale Option and (ii) the satisfaction of any
governmental approval or filing requirements, if any.
<PAGE>
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Each of the Section 10 Investors participating in a sale under this Section
10.1 shall effect its participation in such sale hereunder by delivery to
the Offeror, in a timely manner, or to the Transferring Stockholder for
delivery to the Offeror, of one or more instruments or certificates,
properly endorsed for transfer, representing the Registrable Shares it
elects to sell therein, provided that no Section 10 Investor shall be
required to make any representations or warranties or provide any
indemnities in connection therewith other than with respect to the
Registrable Shares being conveyed. At the time of consummation of the sale
of Common Stock which is the subject of the Transaction Offer, the Offeror
shall remit directly to each such Section 10 Investor that portion of the
sale proceeds to which each Section 10 Investor is entitled by reason of
its participation therein.
11. LOCKUP. Each Investor hereby agrees that, at the written request of the
Company or any managing underwriter of any underwritten public offering of
securities of the Company, such Investor shall not, if such Investor holds more
than 5% of the outstanding Common Stock of the Company at the time of such
request (for this purpose, calculated on a fully diluted basis assuming full
exercise of all outstanding options, warrants, and other rights to acquire
shares of Common Stock and full conversion or exchange of all securities that
are convertible into or exchangeable for shares of Common Stock), without the
prior written consent of the Company or such managing underwriter, sell, make
any short sale of, loan, grant any option for the purchase of, pledge, encumber,
or otherwise dispose of, or exercise any registration rights with respect to,
any Common Stock during the 90-day period (or 180-day period in connection with
the Company's initial public offering of Common Stock) commencing on the
effective date of the registration statement relating to such underwritten
public offering of the Company's securities; PROVIDED, that each officer or
director of the Company and each holder of at least 5% of its Common Stock (for
this purpose, calculated on a fully diluted basis assuming full exercise of all
outstanding options, warrants, and other rights to acquire shares of Common
Stock and full conversion or exchange of all securities that are convertible
into or exchangeable for shares of Common Stock), shall have entered into a
similar agreement.
12. GENERAL.
12.1. ADDITIONAL REGISTRATION RIGHTS. Without the prior consent of
Investors holding a majority of the Registrable Shares then outstanding, the
Company shall not grant to any other holder of the Company's securities
registration rights that are superior to or in any way adversely affect the
registration rights granted to the Investors hereunder.
<PAGE>
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12.2. REMEDIES. In case that any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by any party
hereto, the party or parties entitled to the benefit of such covenants or
agreements may proceed to protect and enforce its or their rights, either by
suit in equity and/or action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement. The
rights, powers and remedies of the parties to this Agreement are cumulative and
not exclusive of any other right, power or remedy which such parties may have
under any other agreement or law. No single or partial assertion or exercise of
any right, power or remedy of a party hereunder shall preclude any other or
further assertion or exercise thereof.
12.3. ASSIGNMENT. None of the parties to this Agreement shall assign or
delegate any of their respective rights or obligations under this Agreement
without the prior written consent of each of the other parties hereto other than
in connection with a transfer of securities of the Company made to a Permitted
Transferee.
12.4. SURVIVAL. The rights and obligations of the parties hereto set forth
herein shall survive indefinitely, unless and until, by their respective terms,
they are no longer applicable.
12.5. ENTIRE AGREEMENT. This Agreement contains the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous arrangements or understandings with respect thereto.
12.6. NOTICES. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by first class, registered,
certified or overnight mail, postage prepaid, or telecopied with a confirmation
copy by regular mail, addressed or telecopied, as the case may be, to such party
at the address or telecopier number, as the case may be, set forth below or such
other address or telecopier number, as the case may be, as may hereafter be
designated in writing by the addressee to the addressor listing all parties:
<PAGE>
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(i) If to the Company or a Stockholder, to:
Streamline, Inc.
27 Dartmouth Street
Westwood, MA 02090
Attn: Timothy A. DeMello
Chairman and Chief Executive Officer
and (if applicable) such Stockholder
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, Massachusetts 02110
Attn: Wayne D. Bennett, Esq.
(ii) If to an Investor, to the address of such Investor set forth on such
Investor's signature page to the Warrant Agreement
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Any notice or other communication pursuant to this Agreement shall be
deemed to have been duly given or made and to have become effective (i) when
delivered in hand to the party to which it was directed, (ii) if sent by telex,
telecopier, facsimile machine or telegraph and properly addressed in accordance
with the foregoing provisions of this Section 12.6, when received by the
addressee, (iii) if sent by commercial courier guaranteeing next business day
delivery, on the business day following the date of delivery to such courier, or
(iv) if sent by first-class mail, postage prepaid, and properly addressed in
accordance with the foregoing provisions of this Section 12.6, (A) when received
by the addressee, or (B) on the third business day following the day of dispatch
thereof, whichever of (A) or (B) shall be the earlier.
12.7. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended, modified or terminated, and the observance of any provision of this
Agreement may be waived (either generally or in a particular instance and either
retrospectively or prospectively), with, but only with, the written consent of
each of the other parties hereto.
12.8. SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction. be ineffective
to the extent of such prohibition or unenforceability without
<PAGE>
-15-
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12.9. NO WAIVER OF FUTURE BREACH. No failure or delay on the part of any
party to this Agreement in exercising any right, power or remedy hereunder shall
operate as a waiver thereof. No assent, express or implied, by any party hereto
to any breach in or default of any agreement or condition herein contained on
the part of any other party hereto shall constitute a waiver of or assent to any
succeeding breach in or default of the same or any other agreement or condition
hereof by such other party.
12.10. NO IMPLIED RIGHTS OR REMEDIES; THIRD PARTY BENEFICIARIES. Except as
otherwise expressly provided in this Agreement, nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any Person,
firm or corporation, other than the parties hereto, any rights or remedies under
or by reason of this Agreement. Except as otherwise expressly provided in this
Agreement, there are no intended third party beneficiaries under or by reason of
this Agreement.
12.11. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
12.12. NOUNS AND PRONOUNS. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of names and pronouns shall include the plural and
vice-versa.
12.13. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts. excluding choice
of law rules thereof.
12.14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts. and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
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IN WITNESS WHEREOF. this Registration Rights Agreement has been executed
under seal by the parties hereto as of the day and year first above written.
STREAMLINE, INC.
By: /S/ TIMOTHY A. DEMELLO
--------------------------
Timothy A. DeMello
President
DDJ Canadian High Yield Fund
By: DDJ Capital Management,
LLC, as attorney-in-fact
By: /S/ DAVID J. BREAZZANO
--------------------------
David J. Breazzano
Member
Mellon Bank, N.A., solely in its
capacity as Trustee for General
Motors Employees Domestic Group
Pension Trust as directed by DDJ
Capital Management, LLC, and not
in its individual capacity
By: /S/ BERNADETTE RIST
--------------------------
Bernadette Rist
Authorized Signatory
<PAGE>
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REGISTRATION RIGHTS AGREEMENT
STOCKHOLDER SIGNATURE PAGE
/S/ TIMOTHY A. DEMELLO
---------------------------
Timothy A. DeMello
/S/ KEVIN ABT
--------------------------
Kevin Abt
/S/ DAVID BLAKELOCK
--------------------------
David Blakelock
/S/ FRANK BRITT
--------------------------
Frank Britt
/S/ MARY WADLINGER
--------------------------
Mary Wadlinger
<PAGE>
Exhibit 10.15
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO THE SECURITIES OR "BLUE
SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, OR (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO SUCH ACT, PROVIDED THAT,
IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN
FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY THAT AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE.
IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS
SECURITY IS RESTRICTED BY, AND THE RIGHTS OF THE HOLDER OF SUCH SECURITY ARE
SUBJECT TO THE TERMS AND CONDITIONS CONTAINED IN, A SECURITIES PURCHASE
AGREEMENT DATED AS OF APRIL 15, 1998, A COMPLETE AND CORRECT COPY OF THE FORM OF
WHICH WILL BE FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST
AND WITHOUT CHARGE.
PURSUANT TO PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986 RELATING TO ORIGINAL
ISSUE DISCOUNT AND TREASURY REGULATIONS PUBLISHED THEREUNDER, THE FOLLOWING
INFORMATION IS PROVIDED: (1) THIS SECURITY IS BEING ISSUED WITH ORIGINAL ISSUE
DISCOUNT IN THE AMOUNT OF $185.97 PER $1,000 OF FACE AMOUNT; (2) THE ISSUE PRICE
OF THIS SECURITY IS $814.03 PER $1,000 FACE AMOUNT; (3) THE ISSUE DATE OF THIS
SECURITY IS APRIL 15, 1998; AND (4) THE YIELD TO MATURITY OF THIS SECURITY IS
7.1%.
STREAMLINE, INC.
FORM OF SENIOR DISCOUNT NOTE DUE APRIL 15, 2001
No. [ ] $[ ]
Streamline, Inc., a Delaware corporation (hereinafter called the
"Company", which term includes any successor entity under the Agreement
hereinafter referred to), for value received, hereby promises to pay to [ ],
or registered assigns, the principal sum of [ ] Dollars on April 15, 2001.
Interest Payment Dates: October 15 and April 15 commencing October
15, 1999
Record Dates: October 1 and April 1
Reference is hereby made to the further provisions of this Senior
Discount Note set forth on the following three (3) pages, which further
provisions shall for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Senior Discount Note to
be signed manually or by facsimile by its duly authorized officers and a
facsimile of its seal to be affixed hereto or imprinted hereto.
STREAMLINE, INC.
By: /s/ TIMOTHY A. DEMELLO
------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
<PAGE>
Senior Discount Note due April 15, 2001
1. INTEREST. Streamline, Inc. (the "Company") promises to pay interest on the
principal amount of this Senior Discount Note at the rate and in the manner
specified below. Interest on this Senior Discount Note will accrue at 12.0% per
annum simple interest from April 15, 1999 until maturity and will be payable
semiannually in cash on April 15 and October 15 of each year beginning on
October 15, 1999, or if any such day is not a Business Day on the next
succeeding Business Day (each an "Interest Payment Date"), to the holder of
record on the immediately preceding April 1 or October 1, as the case may be.
Interest on this Senior Discount Note will accrue from the most recent date on
which interest has been paid or, if no interest has been paid, from April 15,
1999, provided that the first Interest Payment Date shall be October 15, 1999.
The Company shall pay interest on overdue principal and premium, if any, from
time to time on demand at the rate of 3.0% per annum in excess of the interest
rate then in effect and shall pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Accreted Value of this Senior Discount Note shall accrete, for
purposes of calculating any Redemption Price or Purchase Price and for all other
purposes in determining Accreted Value, in the period during which this Senior
Discount Note remains outstanding, at 11.0% per annum simple interest from the
date hereof until April 15, 1999 and shall cease to accrete upon the earlier of
April 15, 1999 or any Purchase Date.
Accretion will be computed on the basis of a 360-day year.
2. METHOD OF PAYMENT. The Company will pay interest on this Senior
Discount Note (except defaulted interest, which shall be paid to the registered
Holder of this Senior Discount Note upon demand) to the Person who is the
registered Holder of this Senior Discount Note at the close of business on the
applicable record date with respect to each Interest Payment Date even if such
Senior Discount Note is canceled after such record date and on or before such
Interest Payment Date. Holders must surrender Senior Discount Notes to the
Company to collect principal payments on such Senior Discount Notes. The Company
will pay principal, premium, if any, and interest in money of the United States
that at the time of payment is legal tender for payment of public and private
debts. However, the Company may pay principal, premium, if any, and interest by
wire transfer of Federal funds, or interest by check payable in such money, and
any such check may be mailed to a Holder's registered address.
3. SECURITIES PURCHASE AGREEMENT. The Company issued the Senior
Discount Notes pursuant to a Securities Purchase Agreement, dated as of April
15, 1998 (the "Agreement"), by and between the Company, as issuer of the Senior
Discount Notes, and the Purchasers named therein. The terms of the Senior
Discount Notes are those stated in the Agreement and herein. The Senior Discount
Notes are subject to, and qualified by, all such terms, certain of which are
<PAGE>
summarized herein, and Holders are referred to the Agreement (all capitalized
terms not defined herein shall have the meanings assigned them in the
Agreement). The Senior Discount Notes are general obligations of the Company
limited to $7,770,000 in aggregate principal amount.
4. REDEMPTION. This Senior Discount Note is subject to mandatory
redemption by the Company and is also subject to optional redemption by the
Company, all pursuant to and subject to the terms, provisions and conditions set
forth in the Agreement.
5. TRANSFER AND EXCHANGE. This Senior Discount Note may be transferred,
exchanged and/or registered subject to, and in accordance with, the terms,
provisions and conditions set forth in the Agreement.
6. PERSONS DEEMED OWNERS. The registered holder of a Senior Discount
Note shall be treated as its owner for all purposes.
7. AMENDMENTS AND WAIVERS. This Senior Discount Note may be amended or
supplemented pursuant to, and in accordance with, the terms, provisions and
conditions set forth in the Agreement.
8. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or shareholder of the Company shall have any liability for any
obligation of the Company under the Agreement or this Senior Discount Note or
for any claim based on, in respect of, or by reason of, any such obligation or
the creation of any such obligation. The Holder hereof, by accepting this Senior
Discount Note, waives and releases such Persons from all such liability, and
such waiver and release is part of the consideration for the Issuance of this
Senior Discount Note.
9. SUCCESSOR SUBSTITUTED. Upon the merger, consolidation or other
business combination involving the Company or upon the sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the Company's properties and assets, the Surviving Person (if other than the
Company) resulting from such Disposition shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under the Agreement
with the same effect as if such Surviving Person had been named as the Company
in the Agreement.
10. GOVERNING LAW. This Senior Discount Note shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts, without regard to the conflict of laws provisions thereof.
11. COPIES OF AGREEMENT. The Company will furnish to the Holder hereof,
upon written request and without charge a copy of the Agreement, which has in it
the text of this Senior Discount Note. Requests may be made to: Streamline,
Inc., 27 Dartmouth Street, Westwood, Massachusetts 02090, Attn: Chief Executive
Officer.
3
<PAGE>
ASSIGNMENT FORM
To assign this Senior Discount Note, fill in the form below:
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto
(Please insert social security or other identifying number of assignee)
at
(Please print or typewrite name and address including postal zip code of
assignee)
the within Senior Discount Note and all rights thereunder, hereby irrevocably
constituting and appointing ________________________________________ to transfer
said Senior Discount Note on the books of the Company. The agent may substitute
another to act for him. Date:________________________
Your Signature:
--------------------
(Sign exactly as your name appears on
the other side of this Senior Discount
Note)
Signature Guarantee:
-------------------------
4
<PAGE>
Exhibit 10.16
STREAMLINE, INC.
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of September
18, 1998, is by and among Streamline, Inc., a Delaware corporation (the
"Company"), and Nordstrom, Inc., a Washington corporation (the "Investor").
WITNESSETH:
WHEREAS, subject to the terms and conditions set forth herein, the
Company desires to issue and sell to the Investor, and the Investor desires to
purchase from the Company 228,570 shares of the Company's Series D Convertible
Preferred Stock, par value $1.00 per share (the "Series D Preferred"), for a
purchase price of $22,857,000, as more specifically set forth herein;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein and other good and valuable consideration, the parties,
intending to be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
respective meanings:
"Affiliate" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such first-named Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Agreement" shall have the meaning set forth in the preamble.
"Certificate of Amendment" shall mean a Certificate of Amendment to the
Certificate of Incorporation of the Company, substantially in the form attached
hereto as EXHIBIT A.
"Closing" and "Closing Date" shall have the respective meanings set
forth in Section 2.1.
"Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company.
"Company" shall have the meaning set forth in the preamble.
<PAGE>
-2-
"Financial Statements" shall mean (i) audited financial statements of
the Company containing balance sheets and statements of operations and cash
flows as, at and for the Company's fiscal year ending December 31, 1997 and (ii)
an unaudited balance sheet and statement of operations and cash flows of the
Company as, at and for the eight month period ending August 31, 1998.
"Fully-Diluted Basis" gives effect, without duplication, to (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of then outstanding shares of
Series A Preferred, Series B Preferred, Series C Preferred, and Series D
Preferred or any other convertible securities or the exercise of any option,
warrant or similar right (whether or not then exercisable) to acquire shares of
Common Stock, as if such preferred stock or other convertible securities had
been so converted or such option, warrant or similar right had been so
exercised.
"Intellectual Property" shall mean patents, patent applications,
trademarks, service marks, trademark and service mark applications, trade names,
copyrights, licenses and other intellectual property rights.
"Investor" shall have the meaning set forth in the preamble.
"Permits" shall mean operating authority, licenses, franchises,
permits, certificates or rights.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" shall mean Series A Preferred, Series B Preferred and
Series C Preferred and Series D Preferred Stock.
"Registration Rights Agreement" shall mean a Registration Rights
Agreement, substantially in the form attached as EXHIBIT B hereto.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder, or any successor act, as the
same may be in effect from time to time.
"Senior Discount Notes" shall have the meaning set forth in Section
3.21.
"Series B Preferred" shall have the meaning set forth in Section 3.4.
"Series C Preferred" shall have the meaning set forth in Section 3.4.
"Series D Preferred" shall have the meaning set forth in the recitals.
<PAGE>
-3-
"Shareholders Agreement" shall mean a Shareholders Agreement,
substantially in the form attached as EXHIBIT C hereto.
"Shares" shall mean the Series D Preferred.
ARTICLE 2. PURCHASE AND SALE; CLOSING.
SECTION 2.1. CLOSING.
(a) Subject to the terms and conditions set forth herein, the
Company hereby agrees to issue and sell to the Investor, and the Investor hereby
agrees to purchase from the Company, at the Closing the 228, 570 shares of
Series D Preferred for a purchase price of $22,857,000.
(b) Subject to the satisfaction or waiver of the terms and
conditions set forth herein, the purchase and sale of the Shares shall take
place at the offices of Bingham Dana LLP, 150 Federal Street, Boston,
Massachusetts 02110, at 10 a.m., on the date of this Agreement, or at such other
time and place as the Company and the Investor mutually agree orally or in
writing (which time and place are designated herein as the "Closing" and the
date thereof as the "Closing Date"). At the Closing, the Company shall deliver
to the Investor a certificate representing the Shares against payment of the
purchase price therefor by certified check payable to the Company or by wire
transfer of immediately available federal funds to such account as the Company
may designate in writing to the Investor at least two business days prior to the
Closing Date.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Investor as follows:
SECTION 3.1. ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER. The
Company is a corporation duly incorporated, validly existing, and in good
standing under the laws of the State of Delaware, and it has the requisite power
and authority (corporate and other) to own and hold its properties and assets,
and to carry on its business as conducted or proposed to be conducted. The
Company has requisite power and authority to execute, deliver and perform this
Agreement and to sell, issue, and deliver the Shares to the Investor. The copies
provided to the Investor of the Certificate of Incorporation and By-Laws of the
Company, each as amended to date, are complete, true, and correct and in full
force and effect as of the date hereof and, as of the Closing Date, shall not
have been subsequently amended, modified, or repealed, except by the filing of
the Certificate of Amendment. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification, except where the failure to so qualify would not materially
adversely affect the operations or financial condition of the Company
<PAGE>
-4-
SECTION 3.2. AUTHORIZATION OF AGREEMENTS, ETC.
(a)(i) Each of (i) the execution, delivery and performance by
the Company of this Agreement, the Shareholders Agreement and the Registration
Rights Agreement, and (ii) the issuance, sale, and delivery of the Shares to the
Investor in accordance with the terms hereof have been duly authorized by the
board of directors and stockholders of the Company, as necessary, and will not
(with due notice or lapse of time or both) violate any provision of law, rule,
or regulation, any order of any court or other agency of government, the
Certificate of Incorporation or the By-Laws, each as amended to date and as of
the Closing Date, or any provision of any indenture, mortgage, note, deed of
trust, agreement, or other instrument to which the Company or any of its
properties or assets is bound, or conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under the
Certificate of Incorporation or By-Laws, each as amended to date and as of the
Closing Date, or any such indenture, mortgage, note, deed of trust, agreement,
or other instrument, or result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon any of
the properties or assets of the Company.
(b) The issuance, sale and delivery of the Shares in accordance
with the terms hereof have been duly authorized by the board of directors and
stockholders, as necessary, and, when issued in accordance with this Agreement,
the Shares shall be validly issued, fully paid, and nonassessable, with the
rights and privileges as set forth herein and in the Certificate of Amendment.
The Common Stock issuable upon conversion of the shares of Series D Preferred
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Company's Certificate of
Incorporation, as amended by the filing of the Certificate of Amendment, will be
duly and validly issued, fully paid and nonassessable. The issuance, sale, and
delivery of the Shares and the Common Stock issuable upon conversion of the
Shares are not subject to any unwaived preemptive right of any stockholder of
the Company or to any right of first refusal or other right in favor of any
person.
SECTION 3.3. VALIDITY. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid, and binding
obligation of the Company, enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, moratorium, or other similar laws
affecting the enforcement of creditors, rights generally and except as the
availability of equitable remedies may be limited by general principles of
equity.
SECTION 3.4. CAPITAL STOCK.
(a) As of the date hereof and as of the Closing Date, the
authorized capital stock of the Company shall consist of 45,400,000 shares of
Common Stock, of which 7,009,064 shares are issued and outstanding, 680,000
shares of Preferred Stock, $1.00 par value per share, of which (i) 100,000
shares have been designated as Series A Convertible Preferred Stock ("Series A
Preferred"), of which 50,000 shares are issued and outstanding, (ii) 100,000
shares have been designated as Series B Convertible Preferred Stock ("Series B
Preferred"), of which 80,000 shares are issued and outstanding, (iii) 100,000
shares have been designated as Series C Preferred, of which 10,000 shares are
issued and outstanding, and 378,570 shares of Series D
<PAGE>
-5-
Preferred, none of which is issued and outstanding prior to Closing. At the
Closing, 228,570 shares of Series D Preferred shall have been, or shall be,
issued to the Investor.
(b) Except for (i) options to purchase, in the aggregate, 1,900,000 shares of
Common Stock, issued or authorized for issuance to certain employees and
directors of and consultants to the Company, identified on SCHEDULE 3.4 hereto,
(ii) warrants to purchase, in the aggregate, 300,000 shares of Common Stock, at
an average weighted exercise price of $1.002 per share, issued to the parties
identified on SCHEDULE 3.4 hereto, (iii) warrants to purchase, in the aggregate,
341,714 shares of Common Stock, for an exercise price of $3.50 per share, issued
or issuable to Intel Corporation, (iv) warrants to purchase, in the aggregate,
285,714 shares of Common Stock, for an exercise price of $3.50 per share with
respect to twenty-five percent (25%) of such shares and at an exercise price
equal to or greater than $4.20 with respect to the remaining seventy-five
percent (75%) of such shares (in accordance with the exercise price adjustments
set forth in such warrant issued or issuable to General Electric Capital
Corporation, (v) warrants (the "DDJ Warrants") to purchase, in the aggregate,
850,000 shares of Common Stock, for an exercise price of $3.50 per share, issued
to the parties identified on SCHEDULE 3.4 hereto, (vi) the Senior Discount
Notes, (vii) non-negotiable convertible notes, having an aggregate principal
face value of $600,000, issued to the parties identified on SCHEDULE 3.4 hereto,
(viii) the issuance of the Shares pursuant to the terms hereof and (ix) an
aggregate of 10,000 shares of Common Stock to be issued by the Company to the
holders of the DDJ Warrants in accordance with the arrangement described on
Schedule 3.4 hereto, no subscriptions, warrants, options, convertible debt, or
securities, or any commitments, agreements, or rights of any kind with respect
to securities of the Company are outstanding as of the date hereof or shall be
outstanding as of the Closing Date.
The outstanding shares of the capital stock of the Company are duly
authorized and validly issued, fully paid and nonassessable, and such shares of
such capital stock, and all outstanding options and other securities of the
Company have been issued in full compliance with the registration and prospectus
delivery requirements of the Securities Act, and the registration and
qualification requirements of all applicable state securities laws, or in
compliance with applicable exemptions therefrom, and all other provisions of
applicable federal and state securities laws, including, without limitation,
anti-fraud provisions.
SECTION 3.5. PROPERTY AND ASSETS. The Company has good title to all of
its properties and assets reflected on the balance sheets set forth on SCHEDULE
3.12 and none of such properties or assets is subject to any mortgage, pledge,
lien, security interest, lease, charge or encumbrance, except as set forth in
SCHEDULE 3.5.
SECTION 3.6. COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provision of its Certificate of Incorporation or
By-Laws, each as in effect on and as of the Closing. Except as identified on
SCHEDULE 3.6 hereto, the Company is not in violation or default of any provision
of any instrument, mortgage, deed of trust, loan, contract, commitment,
judgment, decree, order, or obligation to which it is a party or by which it or
any of its properties or assets are bound which would materially adversely
affect the financial condition or results of operations of the Company or, to
the Company's knowledge, of any provision of any federal, state, or local
statute, rule, or governmental regulation which would materially adversely
<PAGE>
-6-
affect the condition (financial or otherwise), business, property, or
prospective results of operations or net worth of the Company. To the best of
the Company's knowledge, no employee of the Company is in violation of any term
of any contract or covenant (either with the Company or with another entity)
relating to employment, patents, proprietary information, disclosure,
non-competition or non-solicitation.
SECTION 3.7. CONSENTS. Except as identified on SCHEDULE 3.7 hereto, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, (i) any federal, state or local
governmental authority or (ii) any party to any contract identified on SCHEDULE
3.8, is required in connection with the transactions contemplated by this
Agreement, except for the filing of the Certificate of Amendment in the office
of the Secretary of State of the State of Delaware, which shall be, or shall
have been, filed by the Company on or prior to the Closing Date; provided that
the Company's representation under this Section 3.7 is given only to the best of
the Company's knowledge with respect to any consent, approval, order,
authorization, registration, qualification, designation, declaration or filing
that may be required on the part of the Investor as a result of the Investor's
conducting business in any regulated industry.
SECTION 3.8 MATERIAL CONTRACTS. SCHEDULE 3.8 sets forth a list of all
material agreements or commitments of any nature to which the Company is a party
or by which the Company or its properties is bound, including without limitation
(a) any agreements or commitments requiring future expenditures by the Company
in excess of $20,000 or which might result in payments to the Company in excess
of $20,000, (b) all employment, consulting and independent contractor
agreements, employee benefit, bonus, pension, profit-sharing, stock option,
stock purchase and similar plans and arrangements, (c) any agreement with any
stockholder, officer or director of the Company or any "affiliate" or
"associate" of such Person (as such terms are defined in the rules and
regulations promulgated under the Securities Act), including without limitation
any agreement or other arrangement providing for the furnishing of services by,
rental of real or personal property from, or otherwise requiring payments to,
any such Person and (d) any agreement relating to Intellectual Property rights.
As of the date hereof, all of such agreements, understandings or arrangements
are in full force and effect, and there exists no default thereunder by the
Company.
SECTION 3.9 INTELLECTUAL PROPERTY. Set forth on SCHEDULE 3.9 hereto is
a list of all Intellectual Property owned by, or licensed to, the Company, with
an indication as to which of such items are owned by the Company and which are
licensed to the Company. The Intellectual Property set forth on SCHEDULE 3.9
together with all trade secrets, know-how, proprietary rights, formulas and
designs owned by, or licensed to, the Company (collectively, "Other Proprietary
Information") represents all Intellectual Property and Other Proprietary
Information necessary to enable the Company to carry on its business as now
conducted and presently proposed to be conducted. The Company is not infringing
upon the right or claimed right of any third party with respect to any
intellectual property rights of any third party. The Company has not licensed
any of the listed Intellectual Property or any Other Proprietary Information to
any other person, nor does any other person have any option or other right to
acquire, or any title, interest, claim in or lien on, any of the Intellectual
Property or any Other Proprietary Information which is owned by the Company. The
Company has not received any communications alleging that the Company
<PAGE>
-7-
(or any of its employees or consultants) has violated or infringed or, by
conducting its business as proposed, would violate or infringe any patent,
trademark, service mark, trade name, copyright or trade secret or other
proprietary right of any other person or entity, and the Company is not aware of
any such violation. The Company has taken, and in the future will use its best
efforts to take, all steps reasonably necessary to preserve its legal rights in,
and the secrecy of, all of its Intellectual and Other Proprietary Information,
except those for which disclosure is required by a court or other judicial or
administrative body with legitimate jurisdiction. The Company is not obligated
to pay any royalties or other payments to any third parties with respect to the
marketing, sale, distribution, manufacturing, license or use of any Intellectual
Property or any other property or rights. The Company is not aware that any of
its employees is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any judgment,
decree or order of any court or administrative agency, that would interfere with
the use of such employee's best efforts to promote the interests of the Company
or that would conflict with the Company's business as proposed to be conducted.
Neither the execution and delivery of this Agreement, nor the carrying on of the
Company's business by the employees of the Company, nor the conduct of the
Company's business as proposed, will, to the best of Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated. The Company does not believe it is or
will be necessary to utilize any inventions of any of its employees (or people
it currently intends to hire) made prior to their employment by the Company. At
no time during the conception of or reduction of any of the Company's
Intellectual Property or Other Proprietary Rights to practice was any developer,
inventor or other contributor to such patents operating under any grants from
any governmental entity or agency or private source, performing research
sponsored by any governmental entity or agency or private source or subject to
any employment agreement or invention assignment or nondisclosure agreement or
other obligation with any third party that could adversely affect Company's
right in such Intellectual Property or Other Proprietary Rights.
SECTION 3.10. PERMITS. The Company has all Permits as are necessary or
appropriate to the operation of its business as presently and proposed to be
conducted. Such Permits are in full force and effect, no violations have been
recorded in respect of such Permits and no proceeding is pending or, to the best
of the Company's knowledge, threatened, that could result in the revocation or
limitation of any of such Permits. The Company's business is in material
compliance with the requirements of all such Permits.
SECTION 3.11. INSURANCE. The Company maintains valid policies of
workers' compensation insurance, key man term life insurance upon the life of
Timothy A. DeMello in the amount of $1,000,000 and insurance with respect to its
properties and business of the kinds and in the amounts not less than is
customarily obtained by corporations of established reputation engaged in the
same or similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability and other risks.
SCHEDULE 3.11 lists the insurance carried, the policy limits thereof, the
insurance companies issuing such policies and the annual premiums paid therefor.
SECTION 3.12. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 3.12
are true and complete copies of the Financial Statements. The Financial
Statements have been prepared from
<PAGE>
-8-
the books and records of the Company, have been prepared in accordance with
generally accepted accounting principles consistently applied and maintained
throughout the periods indicated, accurately reflect the books, records, and
accounts of the Company, are complete and correct in all material respects, and
present fairly the financial condition of the Company, as at their respective
dates and the results of operations for the periods then ended. None of the
Financial Statements understates the true costs and expenses of conducting the
business or operations of the Company, fails to disclose any material contingent
liabilities, or inflates the revenues of the Company.
SECTION 3.13. ABSENCE OF CERTAIN UNDISCLOSED LIABILITIES.
(a) Except as set forth in the Financial Statements or on
SCHEDULE 3.13 hereto and for any liabilities arising in the ordinary course of
its business since December 31, 1997 and not material in amount, either
individually or in the aggregate, the Company has not (i) incurred or accrued
any liabilities, debts or obligations, whether absolute, accrued, contingent,
unliquidated or otherwise and whether due or to become due, arising out of any
transaction (other than the transactions contemplated hereby) entered into prior
to or on the date hereof or out of any state of facts existing prior to or as of
the date hereof, or (ii) declared or paid any dividend or distribution to its
stockholders or redeemed or repurchased any of its capital stock. For purposes
of this Section 3.13 and Section 3.14 hereof, "material" and "materially" means
any amount in excess of $50,000.
(b) Except as set forth in SCHEDULE 3.13 hereto, (i) the Company
has no liabilities or obligations of any nature (whether known or unknown, due
or to become due, absolute, accrued, contingent or otherwise, and whether or not
determined or determinable), and (ii) to the best of the Company's knowledge,
there is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability or obligation, including
any liabilities or obligations under Environmental Laws or any unfunded
obligation under any employee benefit plan, except, with respect to any of the
items described in clauses (i) or (ii) above, liabilities or obligations
reflected or reserved against in the Financial Statements, and liabilities
incurred in the ordinary course of business and consistent with past practice
since December 31, 1997, which individually and in the aggregate do not have a
material adverse effect on the financial condition, business, or prospects of
the Company.
SECTION 3.14. ABSENCE OF CHANGES. Except as set forth on SCHEDULE 3.14,
since June 30, 1998, there has not been: (a) any change in the assets,
liabilities, financial condition or operations of the Company from that
reflected in the Financial Statements, except changes in the ordinary course of
business that have not been, either individually or in the aggregate, materially
adverse; (b) any change (individually or in the aggregate), except in the
ordinary course of business, in the contingent obligations of the Company by way
of guaranty, endorsement, indemnity, warranty or otherwise; (c) any damage,
destruction or loss, whether or not covered by insurance, materially and
adversely affecting the assets, properties, financial condition, prospects, or
business of the Company; (d) any waiver or compromise by the Company of a
valuable right or of a material debt owed to it; (e) any loans made by the
Company to its shareholders, employees, officers or directors, other than, in
the case of employees, travel advances made in the ordinary course of business;
(f) any increases in the compensation of any of the Company's employees,
officers or
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directors; (g) any declaration or any payment of any dividend or other
distribution of the assets of the Company; (h) any issuance or a sale by the
Company of any shares of Common Stock or other securities; (i) to the best of
the Company's knowledge, any other event or condition of any character that has
materially and adversely affected the Company's business or prospects; or (j)
any agreement or commitment by the Company to do any of the things described in
this Section 3.14.
SECTION 3.15. LITIGATION: CLAIMS; INVESTIGATIONS. Except as set forth
in SCHEDULE 3.15 hereto, there are no suits, actions, or claims, or any
investigations or inquiries by any administrative agency or governmental body,
or legal, administrative, or arbitration proceedings (collectively, "Actions")
pending against or, to the best knowledge of the Company, threatened against the
Company or to which the Company is a party or, in the case of threatened
proceedings, is reasonably likely to become a party. There is no outstanding
order, writ, judgment, injunction, or decree of any court, administrative
agency, governmental body, or arbitration tribunal against or affecting the
Company or any of its properties, rights, assets, or business. To the best of
the Company's knowledge, except as set forth on any Schedule hereto, there is no
factual or legal basis for any such Action that might result, individually or in
the aggregate, in any material adverse change in the business, properties,
assets, financial condition, affairs or prospects of the Company.
SECTION 3.16. COMPLIANCE. The Company has complied in all material
respects with all laws, regulations and orders applicable to its present and
proposed business, has all permits, licenses and other governmental
authorizations required for the conduct of its business and the ownership of its
properties and is, and has been, in compliance therewith. There is no term or
provision of any mortgage, indenture, contract, agreement or instrument to which
the Company is a party or by which it or its properties is bound, or, to the
best of the Company's knowledge, any provision of any state or federal judgment,
decree, order, statute, rule or regulation applicable to or binding upon the
Company, which materially adversely affects or, in the future is reasonably
likely to materially adversely affect, the business, prospects, assets or
condition, financial or otherwise, of the Company. None of the activities or
business of the Company are, or cause the Company to be, and the Company is not,
in violation of any federal or state law, rule, regulation or order, any term of
its Certificate of Incorporation or By-Laws, each as amended to date, the
Certificate of Amendment or any agreement or instrument. To the best of the
Company's knowledge, no employee of the Company is in violation of any term of
any contract or covenant (either with the Company or with another entity)
relating to employment, patents, proprietary information disclosure,
non-competition or non-solicitation.
SECTION 3.17. EMPLOYEE MATTERS. Except as set forth on SCHEDULE 3.17
hereto, the Company is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee compensation
agreement or any arrangement with any collective bargaining agent. Each employee
of the Company with access to confidential or proprietary information has
executed and delivered to the Company the Company's standard Nondisclosure and
Development Agreement (an accurate copy of which has been provided to the
Investor), and each such agreement is in full force and effect. No employees of
the Company are represented by any labor union or covered by any collective
bargaining agreement. There is no pending or, to the
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Company's knowledge, threatened labor disagreement involving the Company and any
of its employees.
SECTION 3.18. ERISA. Except as set forth in SCHEDULE 3.18 hereto, the
Company does not have or otherwise contribute to or participate in any employee
benefit plan subject to the Employee Retirement Income Security Act of 1974.
SECTION 3.19. BROKERS. The Company has no contract, arrangement, or
understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement.
SECTION 3.20. SUBSIDIARIES. Except as set forth in SCHEDULE 3.20
hereto, as of the date hereof, the Company does not own, directly or indirectly,
any shares of capital stock, partnership interests, or other participation,
rights, or other interests in the nature of an equity interest in any
corporation, partnership, company, trust, or other entity, or any option,
warrant, or other security convertible into any of the foregoing.
SECTION 3.21. USE OF PROCEEDS. All of the cash proceeds from the sale
of the Shares will be used by the Company (i) to redeem the Senior Discount
Notes of the Company, due April 15, 2001 (the "Senior Discount Notes") having an
aggregate principal face value of $7,770,000, issued pursuant to the Securities
Purchase Agreement dated April 15, 1998 by and among the Company and the
"Investor" parties identified therein and (ii) for working capital and continued
development of the Company's business model.
SECTION 3.22. TAXES. The Company has accurately prepared and filed all
federal, state, local and foreign tax returns required to be filed by it. All
taxes shown to be due and payable on such returns, any assessment received, and
all other taxes due and payable by the Company have been paid or will be paid
prior to the time they become delinquent. The federal income tax returns of the
Company have not been audited by the Internal Revenue Service. No deficiency
assessment or proposed adjustment of the Company's income taxes is pending, and
the Company has no knowledge of any proposed liability for any tax to be imposed
upon its properties for which the Company has not adequately reserved. The
provisions for taxes in the Financial Statements are sufficient for the payment
of all accrued and unpaid federal, state, county and local taxes of the Company,
whether or not assessed or disputed as of the date of each such balance sheet.
Other than as disclosed on SCHEDULE 3.15, there have been no examinations or
audits of any tax returns or reports by any applicable state or local
governmental agency. There are in effect no waivers of applicable statutes of
limitations with respect to taxes for any year. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be
treated as an "S" corporation or a collapsible corporation pursuant to Section
341(f) or Section 1362(a) of the Code, nor has it made any other elections
pursuant to the Code (other than elections which related solely to matters of
accounting, depreciation or amortization) which would have a material affect on
the Company, its financial condition, its business as presently conducted or
presently proposed to be conducted or any of its properties of material assets.
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SECTION 3.23. NO PUBLIC OFFERING. Neither the Company nor any of its
directors, officers, affiliates, or any person or entity acting as agent for or
on behalf of any of the foregoing, directly or indirectly, has sold, offered for
sale, or solicited offers to purchase any of the Shares or other securities of
the Company by means of any general advertising or general solicitation so as to
bring the offer, issuance, or sale of the Shares contemplated by this Agreement
within the registration requirements of the Securities Act or within the
registration or qualification requirements of any "blue sky" or securities laws
of any state or other jurisdiction.
SECTION 3.24. REGISTRATION RIGHTS. Except as set forth on SCHEDULE 3.24
hereto and as provided in the Registration Rights Agreement, the Company has not
granted or agreed to grant any registration rights, including piggyback
registration rights, to any person or entity.
SECTION 3.25. DISCLOSURES. Neither this Agreement nor any Schedule or
Exhibit hereto, nor any report, certificate or instrument furnished to the
Investor or their counsel in connection with the transactions contemplated by
this Agreement when read together, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The Company knows of
no information or fact which has or would have a material adverse effect on the
business, prospects, assets or condition, financial or otherwise, of the Company
which has not been disclosed to the Investor in writing.
SECTION 3.26. HAZARDOUS MATERIALS. During the period that the Company
has owned or leased its properties and facilities, (a) there have been no
disposals, releases or threatened releases of Hazardous Materials (as defined
below) on, from or under such properties or facilities, (b) neither the Company
nor, to the Company's knowledge, any third party, has used, generated,
manufactured or stored on, under or about such properties or facilities or
transported to or from such properties or facilities any Hazardous Materials.
The Company has no knowledge or any presence, disposals, releases or threatened
releases of Hazardous Materials on, from or under any of such properties or
facilities, which may have occurred prior to the Company having taken possession
of any of such properties of facilities. For purposes of this Agreement, the
terms "disposal", "release", and "threatened release" shall have the definitions
assigned thereto by the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA").
For the purposes of this Section, "Hazardous Materials" shall mean any hazardous
or toxic substance, material or waste which is regulated under, or defined as a
"hazardous substance", "pollutant", "contaminant", "toxic chemical", "hazardous
material", "toxic substance", or "hazardous chemical" under (1) CERCLA; (2) the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 ET
SEQ.; (3) the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, ET
SEQ.; (4) the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.; (5)
the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 ET SEQ.;
(6) regulations promulgated under any of the above statutes; or (7) any
applicable state or local statute, ordinance, rule, or regulation that has a
scope or purpose similar to those statutes identified above.
<PAGE>
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ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor represents and warrants to the Company, that:
SECTION 4.1. ACCREDITED INVESTOR: AUTHORIZATION, ETC. The Investor is
an "accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act, has the power and authority to enter into and perform this
Agreement and to purchase the Shares.
SECTION 4.2. INVESTMENT KNOWLEDGE. The Investor has sufficient
knowledge and experience in financial and business matters so as to be capable
of evaluating the risks and merits of its investment in the Company and is
capable of bearing the economic risks of such investment, including a complete
loss of its investment.
SECTION 4.3. OPPORTUNITY TO DISCUSS. The Investor has had an
opportunity to discuss the business, management, and financial affairs of the
Company with the Company's representatives.
SECTION 4.4. INVESTMENT INTENT. The Shares are being acquired for the
Investor's own account for the purpose of investment and not with a view to or
for resale in connection with any distribution thereof or interest therein.
SECTION 4.5. REGISTRATION. The Investor understands that (a) the Shares
have not been registered under the Securities Act by reason of their issuance in
a transaction exempt from the registration requirements of the Securities Act
pursuant to Rule 506 under Regulation D and Section 4(2), (b) the Shares and the
shares of Common Stock issuable upon conversion thereof, must be held
indefinitely unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (c) the Shares shall bear a
legend to such effect, and (d) the Company will make a notation on its transfer
books to such effect.
ARTICLE 5. CONDITIONS PRECEDENT TO CLOSING.
SECTION 5.1. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTOR. The
obligations of the Investor to purchase the Shares hereunder are subject to the
satisfaction or the waiver by the Investor of the following conditions prior to
or contemporaneously with the Closing, unless otherwise indicated:
(a) The representations and warranties of the Company contained in this
Agreement (except for such representations and warranties as are limited by
their terms to an earlier specified date (which shall be true as of such date))
shall be true and correct in all material respects at and as of the Closing
Date; and the Company shall have complied in all material respects with the
agreements set forth in this Agreement required to be performed by it at or
prior to the Closing;
<PAGE>
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(b) The Chief Executive Officer of the Company shall have delivered to
the Investor at the Closing a certificate stating that the conditions specified
in paragraph (a) above been fulfilled;
(c) The Company shall have delivered to the Investor evidence of a key
man term life insurance upon the life of Timothy A. DeMello in the amount of
$1,000,000, with the proceeds payable exclusively to the Company;
(d) The Company shall have delivered to the Investor the opinion of
Bingham Dana LLP, counsel for the Company, dated the date of the Closing,
substantially in form attached as EXHIBIT D hereto;
(e) The Company and the Investor shall have entered into the
Registration Rights Agreement;
(f) The Certificate of Amendment shall have been filed in the office
of, and accepted by, the Secretary of State of the State of Delaware;
(g) The Company and holders of the requisite number of outstanding
shares of Series A, Preferred Series B Preferred and/or Series C Preferred shall
enter into an amendment substantially in the form attached as EXHIBIT E to the
Series A Preferred Stock Purchase Agreement, dated May 15, 1996, by and among
the Company, Reliance Insurance Company and Timothy A. DeMello and the Stock
Purchase Agreement, dated June 13, 1997 by and among the Company and the
Investor defined therein, as applicable.
(h) The offer and sale of the Shares pursuant to this Agreement shall
be exempt from the registration requirements of the Securities Act and the
registration and/or qualification requirements of all applicable state
securities laws.
SECTION 5.2. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to issue and sell the Shares pursuant to this
Agreement are subject to the satisfaction or the waiver by the Company of the
condition that contemporaneously with the Closing the representations and
warranties made by the Investor in this Agreement (except for such
representations and warranties as are limited by their terms to an earlier
specified date (which shall be true as of such date)) shall be true and correct
in all material respects at and as of the Closing Date; and the Investor shall
have complied in all material respects with the agreements hereunder required to
be performed by it at or prior to the Closing.
ARTICLE 6. COVENANTS OF THE COMPANY.
SECTION 6.1. FINANCIAL AND OTHER INFORMATION. The Company will deliver
to the Investor the following:
(a) as soon as available and in any event within 45 days after
the end of the first, second and third quarterly accounting periods in each
fiscal year of the Company, an unaudited balance sheet of the Company as at the
end of such period and the related unaudited
<PAGE>
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statements of operations, stockholders' equity and changes in cash flow of the
Company for such period and (in the case of the second and third quarterly
periods) for the period from the beginning of the current fiscal year to the end
of such quarterly period, setting forth in each case in comparative form the
figures for the corresponding periods of the previous fiscal year;
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, an audited balance sheet of the
Company as at the end of such fiscal year and the related audited statement of
operations, stockholder's equity and changes in cash flow of the Company for
such fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, all in reasonable detail and accompanied by the report
thereon of a firm of independent public accountants of recognized national
standing selected by the Company, which report (i) shall state that the
examination by such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards and (ii)
shall include the opinion of such accountants that such financial statements
have been prepared in accordance with generally accepted accounting principles
consistent with those applied in prior fiscal periods, except as otherwise
specified in such opinion;
(c) as soon as available and in any event within 30 days after
the end of each month, an unaudited balance sheet of the Company as at the end
of such month and the related unaudited statements of operations, stockholders'
equity and changes in cash flows of the Company for such month and for the
current fiscal year to the end of such month, setting forth in comparative form
the Company's projected financial statements for the corresponding periods for
the current fiscal year;
(d) as soon as available, but in any event within 30 days after
commencement of each new fiscal year, a business plan and projected financial
statements for such fiscal year; and
(e) with reasonable promptness, such other notices, information
and data with respect to the Company as the Company delivers to the holders of
Common Stock, and such other information and data as the Investor may from time
to time reasonably request.
Notwithstanding the foregoing, the Company's obligations to deliver the
information specified in paragraphs (c) and (d) shall terminate once the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended.
The foregoing financial statements shall be prepared on a consolidated basis if
the Company then has any subsidiaries. The financial statements delivered
pursuant to paragraphs (a) and (c) shall be accompanied by a certificate of the
chief financial officer of the Company stating that such statements have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as noted) and fairly present the financial
condition and results of operations of the Company at the date thereof and for
the periods covered thereby.
SECTION 6.2. BOOKS AND RECORDS; INSPECTION. The Company shall maintain
proper books of record and account which present fairly in all material respects
its financial condition and results of operations and make provision on its
financial statements for all such proper
<PAGE>
-15-
reserves as in each case are required in accordance with GAAP, consistently
applied. From and after the Closing Date, the Company will permit any authorized
representative of the Investor to visit and inspect any of the properties of the
Company, to examine its and their books, reports, records and papers (and make
copies thereof and take extracts therefrom) and to discuss its and their
affairs, finances and accounts with, and to be advised as to the same by, its
and their officers, all at such reasonable times as the Investor may reasonably
request during normal business hours and following reasonable notice to the
Company.
SECTION 6.3. MATERIAL CHANGES AND LITIGATION. The Company shall
promptly notify the Investor of any material adverse change in the business,
prospects, assets or condition, financial or otherwise, of the Company and of
any litigation or governmental proceeding or investigation brought or, to the
best of the Company's knowledge, threatened against, the Company, or against any
officer, director, key employee or principal stockholder of the Company
materially adversely affecting or which, if adversely determined, would
materially adversely affect its business, prospects, assets or condition,
financial or otherwise.
SECTION 6.4. PAYMENT OF TAXES. The Company will pay and discharge
promptly, or cause to be paid and discharged promptly, when due and payable, all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or upon any of its property, real, personal and mixed, or upon any
part thereof, as well as all claims of any kind (including claims for labor,
materials and supplies), which, if unpaid, might by law become a lien or charge
upon its property; PROVIDED, however, that the Company shall not be required to
pay any tax, assessment, charge, levy or claim if the amount, applicability or
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books reserves deemed
by it adequate with respect thereto.
SECTION 6.5. CORPORATE EXISTENCE. The Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, and material rights and franchisees, provided, however,
that nothing in this section shall (A) prevent the abandonment or termination of
the Company's authorization to do business in any foreign state or jurisdiction
if, in the opinion of the Company's Board of Directors, such abandonment or
termination is in the interest of the Company or (B) require compliance with any
law so long as the validity or applicability thereof shall be disputed or
contested in good faith.
SECTION 6.6. PROPERTIES, BUSINESS, INSURANCE. The Company shall
maintain with respect to their its properties and business, with financially
sound and reputable insurers, insurance of the kinds and in the amounts not less
than is customarily obtained by corporations of established reputation engaged
in the same or similar business and similarly situated, including, without
limitation, insurance against loss, damage, fire, theft, public liability and
other risks against such casualties and contingencies and of such types and in
such amounts as is customary for reasonable and prudent companies similarly
situated.
SECTION 6.7. APPLICABLE LAWS. The Company shall comply in all material
respects with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the
<PAGE>
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conduct of their respective businesses and the ownership of their respective
properties, except such as are being contested in good faith and by appropriate
proceedings and except for such noncompliance as would not in the aggregate have
a material adverse effect.
SECTION 6.8. KEY MAN INSURANCE. For a period of five years after the
Closing Date, Streamline shall maintain term life insurance upon the life of
Timothy A. DeMello in the amount of $1,000,000, with the proceeds payable
exclusively to the Company.
SECTION 6.9. HART-SCOTT-RODINO FILING. The Company will file and pay
all filing fees of the Investor, if any, relating to any Hart-Scott-Rodino
filing required in order for such Investor to convert its Shares into Common
Stock.
SECTION 6.10. NONDISCLOSURE AGREEMENTS. Streamline shall require all
persons now or hereafter employed by Streamline who have access to confidential
and proprietary information of the Company to enter into the Company's standard
Nondisclosure and Development Agreements.
SECTION 6.11. NEGATIVE COVENANTS. So long as any shares of Series D
Preferred are outstanding, the Company shall not take any of the actions listed
in Subparagraphs (a) through (i) of Section B.6.4 of the Certificate of
Amendment, PROVIDED, HOWEVER, that if the Company shall not have received such
written consent or evidence of such affirmative vote within 10 business days,
then (i) the Company shall nonetheless be entitled to take such action and (ii)
a "Disapproval Event" (as defined in Section B.6.4 of the Certificate of
Amendment) shall be deemed to have occurred.
SECTION 6.12. EXPENSES OF DIRECTOR. The Company shall promptly
reimburse in full each person servicing as a director of the Company or as an
observer of meetings of the Board of Directors of the Company or any committee
thereof, who is not also an employee of the Company and who was elected or
designated, as applicable, as a director or observer by the holders of Series D
Preferred for all reasonable out-of-pocket expenses incurred in attending each
meeting of the Board of Directors of the Company or any committee thereof, as
such director or observer may request.
SECTION 6.13. PRESS RELEASES AND FILINGS. For so long as the Investor
and its Affiliates collectively continue to own, in the aggregate at least 10%,
on a Fully Diluted Basis, of the shares of Common Stock issued or issuable upon
conversion of the Shares (or shares of Common Stock issued upon conversion
thereof), the Company covenants and agrees to provide the Investor, promptly
(and, in any case, within three business days) after release or filing, with
copies of any press releases or other public announcements concerning the
Company and copies of any filing by the Company with the U.S. Securities and
Exchange Commission.
SECTION 6.14. RESTRICTIONS ON EMPLOYEE STOCK OPTIONS. The Company shall
not sell stock to employees, officers or directors of or consultants to the
Company, except for options convertible into or exercisable for Common Stock, in
an amount not to exceed ten percent (10%), in the aggregate, of the number of
shares of the Company's capital stock, on a Fully-Diluted Basis, as of the date
hereof, granted to such individuals.
<PAGE>
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SECTION 6.15. RESERVATION OF COMMON STOCK. The Company shall reserve
and maintain a sufficient number of shares of Common Stock for issuance upon
conversion of all of the outstanding Shares.
SECTION 6.16. DIRECTORS AND OFFICERS INSURANCE. The Company shall
obtain, within thirty (30) days of the Closing Date, and maintain a valid policy
of directors and officers insurance, with coverage and terms mutually agreeable
to the Company and Nordstrom.
SECTION 6.17. TERMINATION OF COVENANTS. The covenants of the Company
contained in Sections 6.1 to 6.11, 6.14 and 6.17 shall terminate, and be of no
further force or effect, upon the Company's first public offering of Common
Stock at a price per share of at least $4.00 (subject to appropriate adjustments
for stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares), resulting in gross proceeds to the
Company of at least $25,000,000.
ARTICLE 7. LEGEND.
The Investor understands that the certificate or certificates
evidencing the Shares purchased by the Investor shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT.
The Investor further understand that the Company may place a stop-transfer order
on any of the Shares with the Company's transfer agent.
ARTICLE 8. MISCELLANEOUS.
SECTION 8.1. SURVIVAL OF AGREEMENTS. All agreements, representations,
and warranties made herein shall survive each Closing and remain in full force
and effect for a period of two years thereafter.
SECTION 8.2. PARTIES IN INTEREST. All representations and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and permitted assigns
of the parties hereto, whether so expressed or not. Except as otherwise
expressly provided herein, nothing in this Agreement is intended to confer upon
any other person or entity any rights or remedies hereunder.
SECTION 8.3. NOTICES. All notices, requests, consents, and other
communications hereunder shall be in writing and shall be deemed effectively
given and received upon delivery in
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person, or one business day after delivery by national overnight courier service
or by telecopier transmission with acknowledgment of transmission receipt, or
three business days after deposit via certified or registered mail, return
receipt requested, in each case addressed as follows:
(a) if to the Company:
Streamline, Inc.
27 Dartmouth Street
Westwood, MA 02090
Attention: Timothy A. DeMello
Chairman and Chief Executive Officer
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Wayne D. Bennett, Esq.
(b) if to the Investor:
Nordstrom, Inc.
1617 6th Avenue
Seattle, Washington 98101
Attention: J. Daniel Nordstrom
with a copy to:
Lane Powell Spears Lubersky LLP
1420 Fifth Avenue, Suite 4100
Seattle, Washington 98101-2338
Attention: D. Wayne Gittinger, Esq.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 8.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN THE STATE WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 8.5. ENTIRE AGREEMENT. This Agreement, including the Schedules
and Exhibits hereto constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
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SECTION 8.6. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 8.7. NO WAIVERS; AMENDMENTS.
(a) No failure or delay on the part of any party in exercising any
right, power, or remedy hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such right, power, or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to any party at law or in equity or
otherwise.
(b) Any provision of this Agreement may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Company and
the Investor which, at any given time, hold sixty-six and two-thirds (66 2/3%)
or more of the aggregate voting power of the outstanding shares of Series D
Preferred.
SECTION 8.8. SEVERABILITY. If any provision of this Agreement shall be
declared void or unenforceable by a judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 8.9. GENDER. All pronouns and all variations thereof shall be
deemed to refer to the masculine, feminine, or neuter, singular or plural, as
the identity of the person or persons, thing or entity may require.
SECTION 8.10. HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 8.11. CONFIDENTIALITY. Each party hereto agrees that it shall
at all times keep confidential and not divulge, furnish or make accessible to
anyone, except with the prior written permission of the other party or as
required by applicable law, rule or regulation (in which event, the disclosing
party shall use all reasonable efforts to obtain confidential treatment of
information so disclosed), any confidential information, knowledge or data
concerning or relating to the business or financial affairs of the other parties
to which such party has been or shall become privy by reason of this Agreement,
discussions or negotiations relating to this Agreement, the performance of its
obligations hereunder or the ownership of the purchased hereunder. Each party
hereto further agrees that there shall be no press release or other public
statement issued by either party relating to this Agreement or the transactions
contemplated hereby, unless the other party otherwise agrees in writing. The
Company further agrees that there shall be no press release or other public
statement issued by the Company which uses the name "Nordstrom", unless
Nordstrom otherwise agrees in writing. The provisions of this Section 8.11 shall
be in addition to, and not substitution for, the provisions of any separate
nondisclosure agreement executed by the parties hereto with respect to the
transactions contemplated hereby. With reference to information acquired
pursuant to any information or inspection rights granted
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hereunder, each party acknowledges that U.S. securities laws prohibit the
purchase or sale of securities of any issuer with any class of securities
registered pursuant to Section 12 or 15 of the Securities Exchange Act of 1934,
as amended, by any person acting on the basis of material non-public information
relating to the issuer of any such securities.
SECTION 8.12. LEGAL FEES. In the event of any action at law, suit in
equity or arbitration proceeding in relation to this Agreement or any Shares or
other securities of the Company issued or to be issued, the prevailing party
shall be paid by the other party a reasonable sum for attorneys' fees and
expenses of such prevailing party.
[Signature page to follow]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the day and year first above written.
STREAMLINE, INC.
By:/s/ Timothy A. DeMello
-----------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
INVESTOR:
NORDSTROM, INC.
By:/s/ James A. Nordstrom
-----------------------------------------
James A. Nordstrom
<PAGE>
EXHIBITS
Exhibit A - Certificate of Amendment
Exhibit B - Registration Rights Amendment
Exhibit C - Shareholders Agreement
Exhibit-D - Opinion
Exhibit E - Waiver and Modification Agreement
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 3.4 - Capitalization
Schedule 3.5 - Property and Assets
Schedule 3.6 - Compliance with Other Instruments
Schedule 3.7 - Consents
Schedule 3.8 - Material Contracts
Schedule 3.9 - Intellectual Property
Schedule 3.11 - Insurance
Schedule 3.12 - Financial Statements
Schedule 3.13 - Absence of Certain Undisclosed Liabilities
Schedule 3.14 - Absence of Changes
Schedule 3.15 - Litigation
Schedule 3.17 - Employee Matters
Schedule 3.18 - ERISA
Schedule 3.20 - Subsidiaries
Schedule 3.24 - Registration Rights
</TABLE>
<PAGE>
Exhibit 10.17
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made as of
September 18, 1998, by and among Streamline, Inc., a Delaware corporation (the
"Company"), and Nordstrom, Inc., a Washington corporation (the "Investor").
PREAMBLE
WHEREAS, the Investor has purchased up to an aggregate of 228,570
shares (the "Shares") of the Company's Series D Preferred Stock, par value $1.00
per share ("Series D Preferred Stock"), pursuant to the terms of that certain
Stock Purchase Agreement, of even date herewith, by and among the Company and
the Investor (the "Stock Purchase Agreement");
WHEREAS, it is a condition precedent to the consummation by the
Investor of all of its obligations under the Stock Purchase Agreement that the
Company and the Investor enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties hereto hereby agree as follows:
1. DEFINITIONS. In addition to those terms defined elsewhere in this
Agreement, the following terms as used herein shall have the following meanings:
"AFFILIATE" shall mean, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common
control with such first-named Person. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlled by" and "under common control with") shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"COMMISSION" shall mean the U.S. Securities and Exchange Commission.
"COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of the Company.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
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"PERMITTED TRANSFEREE" shall mean, with respect to the
Investor, any Person that purchases or otherwise acquires all or a
portion of the Shares of the Investor (any shares of Series D Preferred
Stock issued as or dividend thereon and/or shares of Common Stock
issued upon the conversion thereof).
"PERSON" shall mean an individual, partnership, corporation,
limited liability company, association, trust, joint venture,
unincorporated organization, and any government, governmental
department or agency or political subdivision thereof.
"REGISTRABLE SHARES" shall mean, with respect to the Investor
(or its Permitted Transferee), any or all of the shares of Common Stock
issued upon conversion of any or all of the Investor's (or Permitted
Transferee's) shares of Series D Preferred Stock, PROVIDED, HOWEVER,
that such securities shall cease to be Registrable Shares when the
holder of such Registrable shares would be entitled to sell all of such
securities within a three-month period pursuant to the provisions of
Rule 144.
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act and any successor or substitute rule, law or provision.
"SECURITIES ACT" shall mean the U.S. Securities Act of 1933,
as amended.
2. DEMAND REGISTRATION RIGHTS.
2.1. REGISTRATION UPON REQUEST. Subject to the provisions of Section
2.4 below, at any time or from time to time, holders of record of at least
thirty (30) percent of the Registrable Shares then outstanding may notify the
Company in writing that such holders desire for the Company to cause all or a
portion of the Registrable Shares to be registered under the Securities Act
pursuant to this Section 2.1; PROVIDED that the Registrable Shares to be so
registered by the Investor shall have an aggregate proposed sales price of at
least $2,000,000. Thereafter, the Company shall promptly give to each holder of
at least ten (10) percent of the Registrable Shares then outstanding written
notice of such demand for registration. Upon the written request of any such
holder given within ten days after the giving of any such notice by the Company,
the Company shall use its best efforts to cause to be included in such
registration the Registrable Shares of such holder, to the extent requested to
be registered. Thereafter, subject to the conditions, limitations and provisions
set forth below in Sections 2.3, 2.4 and 5, the Company shall promptly prepare
and file, and use its best efforts to prosecute to effectiveness, an appropriate
filing with the Commission of a registration statement covering all of those
Registrable Shares with respect to which registration under the Securities Act
has been requested by the requesting holders of Registrable Shares; PROVIDED
that, if the Company has been given a notice of the type specified in this
Section 2 or 4.1, the
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Company is not at such time continuing to pursue the registration referred to in
such notice. Subject to the provisions of Section 2.3 below, the Company may
include in any registration pursuant to this Section 2.1 additional shares of
Common Stock for sale for its own account or for the account of any other
Person.
2.2. SELECTION OF UNDERWRITERS. If a registration pursuant to Section
2.1 involves an underwritten offering, the underwriter or underwriters thereof
shall be selected, after consultation with the Company, by the Persons who own
the Registrable Shares being so registered, PROVIDED that such underwriter or
underwriters shall be acceptable to the Company. The Company covenants that it
shall not unreasonably withhold its acceptance of any such underwriter or
underwriters.
2.3. PRIORITY OF DEMAND REGISTRATIONS. If a registration pursuant to
Section 2.1 involves an underwritten offering, and the managing underwriter
shall advise the Company in writing that, in its opinion, the number of shares
of Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering, (i) first, the number of
Registrable Shares requested to be included in such registration pursuant to
Section 2.1, and (ii) second, the other shares of Common Stock of the Company
proposed to be included in such registration, in accordance with the priorities,
if any, then existing among the Company and the holders of such other
securities.
2.4. LIMITATION ON REGISTRATIONS. The Company shall not be required to
effect more than two (2) registrations pursuant to Section 2.1.
2.5. LIMITATION ON REQUESTS. Notwithstanding anything in this Section 2
to the contrary, no Person may request a registration pursuant to Section 2.1
during (i) the 180-day period following the closing of the Company's initial
public offering, (ii) the 180-day period following the effective date of any
registration statement filed in connection with a registration pursuant to
Section 2.1 or 4.1 or (iii) the 90-day period following the effective date of
any registration statement filed in connection with a registration pursuant to
Section 3. For purposes of this Agreement, a registration shall be deemed to
have been effected by the Company if the registration statement relating thereto
has been declared effective by the Commission or if such registration statement,
after having been filed with the Commission, is, through no fault of the
Company, withdrawn, abandoned or otherwise not declared effective within sixty
(60) days of the filing thereof.
3. PIGGYBACK REGISTRATION RIGHTS.
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3.1. REGISTRATION. If at any time the Company proposes to register any
of its Common Stock under the Securities Act, whether for its own account or for
the account of any stockholder of the Company or pursuant to registration rights
granted to holders of securities of the Company (but excluding in all cases any
registrations pursuant to Sections 2 or 4 hereof or any registrations to be
effected on Forms S-4 or S-8 or any applicable successor Forms), the Company
shall, each such time, give to each holder of record of at least ten (10)
percent of the Registrable Shares then outstanding written notice of its intent
to do so. Upon the written request of any such holder given within ten days
after the giving of any such notice by the Company, the Company shall use its
best efforts to cause to be included in such registration the Registrable Shares
of such holder, to the extent requested to be registered, subject to Section
3.2; PROVIDED that (i) the number of Registrable Shares proposed to be sold by
each holder is equal to at least twenty-five (25) percent of the total number of
Registrable Shares held by such holder, and (ii) such holder agrees to sell
those of its Registrable Shares to be included in such registration in the same
manner and on the same terms and conditions as the other shares of Common Stock
which the Company purposes to register.
3.2. PRIORITY OF THE COMPANY SHARES. In connection with any offering
involving an underwriting of shares being issued by the Company or being sold
pursuant to any demand registration rights of any stockholder of the Company,
the Company shall not be required under Section 3.1 to include the Registrable
Shares of any Person requesting registration therein unless such Person accepts
and agrees to the terms of the underwriting as agreed upon between the Company
and/or the stockholder(s) exercising demand registration rights, as applicable,
and the underwriters selected by the Company and/or such stockholders, and then
only in such quantity as (without any reduction in the numbers of shares to be
sold for the account of the Company and any such stockholders) will not, in the
opinion of the underwriters, jeopardize the success of the offering by the
Company. If the total number of shares of Common Stock which all selling
stockholders of the Company, including the Persons requesting registration
pursuant to Section 3.1, request to be included in any offering exceeds the
number of shares which the underwriters believe to be compatible with the
success of the offering, the Company shall only be required to include in the
offering so many of shares of stockholders (including the Persons) exercising
piggyback registration rights hereunder, pro rata among such Persons and other
stockholders exercising piggyback registration rights on the basis of the number
of shares requested to be registered in such registration, as the underwriters
believe will not (without any reduction in the number of shares to be sold for
the account of the Company and any stockholder(s) exercising demand registration
rights) jeopardize the success of the offering.
<PAGE>
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4. FORM S-3 REGISTRATION.
4.1. REGISTRATION UPON REQUEST. In the event that the Company shall
receive from the holders of record of at least twenty (20) percent of the
Registrable Shares then outstanding a written request or requests that the
Company effect a registration on Form S-3 (or any applicable successor Form)
with respect to all or a part of the Registrable Shares owned by such holders,
then the Company will promptly use its best efforts to effect such registration
of all or such portion of such holders' Registrable Shares as are specified in
such request; PROVIDED that, if the Company has been given a notice of the type
specified in Section 2.1, 3 or this Section 4.1, the Company is not at such time
continuing to pursue the registration referred to in such notice. Promptly after
receipt by the Company of a notice requesting registration pursuant to this
Section 4.1, the Company shall give to such holders written notice of such
request for registration. Upon the written request of any such holder given
within ten days after the giving of any such notice by the Company, the Company
shall use its best efforts to cause to be included in such registration the
Registrable Shares of such holders, to the extent requested to be registered.
Subject to Section 4.3, the Company may include in any registration pursuant to
this Section 4.1 additional shares of Common Stock for sale for its own account
or for the account of any other Person. No registration under this Section 4.1
shall be underwritten unless the Company shall otherwise elect in its sole and
absolute discretion.
4.2. SELECTION OF UNDERWRITERS. If a registration pursuant to Section
4.1 involves an underwritten offering, the underwriter or underwriters thereof
shall be selected by the Company.
4.3. PRIORITY OF DEMAND REGISTRATION. If a registration pursuant to
Section 4.1 involves an underwritten offering, and the managing underwriter
shall advise the Company in writing that, in its opinion, the number of shares
of Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering, (i) first, the number of
Registrable Shares requested to be included in such registration by the Persons
requesting registration pursuant to Section 4.1 and (ii) second, the other
shares of Common Stock of the Company proposed to be included in such
registration, in accordance with the priorities, if any, then existing among the
Company and the holders of such other securities.
4.4. LIMITATION ON REGISTRATIONS. Notwithstanding anything to the
contrary in this Section 4, the Company shall not be required to effect any
registration pursuant to Section 4.1 unless the Registrable Shares to be so
registered shall have an aggregate proposed sales price of at least $1,000,000.
<PAGE>
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4.5. LIMITATION ON REQUESTS. Notwithstanding anything in this Section
4.5 to the contrary, no holder of Registrable Shares may request a registration
pursuant to Section 4.1 during (i) the 180-day period following the closing of
the Company's initial public offering, (ii) the 180-day period following the
effective date of any registration statement filed in connection with a
registration pursuant to Section 2.1 or 4.1 or (iii) the 90-day period following
the effective date of any registration statement filed in connection with a
registration pursuant to Section 3.
5. DEFERRAL. Notwithstanding anything to the contrary contained in this
Agreement, the Company's obligation to file a registration statement pursuant to
Section 2, 3 or 4 shall be deferred for a period not to exceed 90 days in any
12-month period if the Company, in the good faith judgment of its Board of
Directors, reasonably believes that the filing thereof at the time requested
would materially adversely affect a pending or proposed public offering of
Common Stock, or an acquisition, merger, recapitalization, consolidation,
reorganization or similar transaction, or any negotiations, discussions or
pending proposals with respect thereto.
6. ADDITIONAL OBLIGATIONS OF THE COMPANY.
Whenever the Company is required under Section 2, 3 or 4 to use its
best efforts to effect the registration of any of the Registrable Shares, the
Company shall promptly:
(a) Prepare and file with the Commission a registration
statement with respect to such Registrable Shares and use its best
efforts to cause such registration statement to become and remain
effective; PROVIDED, however that the Company shall in no event be
obligated to cause any such registration to remain effective for more
than 90 days;
(b) 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 comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement;
(c) Furnish to each holder of Registrable Shares being so
registered such number of copies of a prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as such holder may reasonably
request in order to facilitate the disposition of such Registrable
Shares;
(d) Use its best efforts to register and qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as
<PAGE>
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shall be reasonably appropriate in the opinion of the Company and the
managing underwriters, PROVIDED that the Company shall not be required
in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions, and PROVIDED FURTHER that (anything in Section
8 to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be
qualified shall require that expenses incurred in connection with the
qualification therein of the securities be borne by selling
shareholders, then such shareholders shall, to the extent required by
such jurisdiction, pay its PRO RATA share of selling expenses;
(e) Immediately notify the holders of such Registrable Shares,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event of
which the Company has knowledge as a result of which the prospectus
contained in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
and, at the request of any such holder, promptly prepare and furnish to
it a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that such prospectus will not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under
which they were made; PROVIDED, that after such notification and until
such supplement or amendment has been so delivered, no such holder will
deliver or otherwise use the original prospectus;
(f) Use its best efforts to cause the Company's Common Stock
and such Registrable Shares to be listed for trading on The New York
Stock Exchange or The American Stock Exchange or for inclusion in the
automated quotation system of The Nasdaq Stock Market, PROVIDED that
the Company meets the applicable criteria for original listing with
respect thereto; and
(g) Enter into such customary agreements (including, without
limitation, an underwriting agreement and an agreement engaging a
transfer agent and registrar for the Company's Common Stock) and take
all such other action in connection therewith (including, without
limitation, arranging for the provision of legal opinions, "comfort
letters" and other documents by appropriate third parties) as any
holder of such Registrable Shares may reasonably request in order to
expedite or facilitate the disposition of such Registrable Shares.
<PAGE>
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7. FURNISH INFORMATION.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that any holder of Registrable Shares
requesting registration thereof shall furnish to the Company such information
regarding such holder, the Registrable Shares held by such holder, the proposed
plan of distribution of such Registrable Shares, and any other information as
the Company shall reasonably request and as shall be required in order to effect
any such registration by the Company.
8. EXPENSES.
All expenses incurred in connection with a registration pursuant to
this Agreement (excluding underwriting commissions and discounts and counsel
fees of any selling Investors), including without limitation all registration
and qualification fees, printing costs, and fees and disbursements of counsel
for the Company, shall be borne by the Company; PROVIDED, HOWEVER, that the
Company shall not be required to pay for blue sky registration or qualification
expenses in connection with states in which the Company is not registering or
qualifying its original issue shares or Registrable Shares that are being
registered upon the exercise of demand registration rights hereunder; and
PROVIDED, FURTHER, that the holders of Registrable Shares participating as
selling shareholders in the second or third registration pursuant to Section 4.1
shall pay all expenses incurred in connection with such registration(s) on a pro
rata basis in accordance with the number of Registrable Shares which are
included in such registration(s) by such holders thereunder.
9. INDEMNIFICATION.
9.1. INDEMNIFICATION. In the event that any Registrable Shares are
included in a registration statement pursuant to this Agreement:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless the holder thereof, any underwriter (as defined in the
Securities Act) for the Company, and each officer and director of such
holder or such underwriter and each Person, if any, who controls such
holder or such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several,
to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue or alleged
untrue statement of any material fact contained in such registration
statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to
make the
<PAGE>
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statements therein not misleading; and will reimburse such holder, such
underwriter or such officer, director or controlling Person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or
action; PROVIDED, HOWEVER, that the indemnity agreement contained in
this Section 9.1(a) shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, damage, liability or action to the extent that
it primarily arises out of or is based upon an untrue statement or
alleged untrue statement or omission made in connection with such
registration statement, preliminary prospectus, final prospectus, or
amendments or supplements thereto, in reliance upon and in conformity
with written information furnished expressly for use in connection with
such registration by such holder, any underwriter for such holder or
controlling Person with respect to such holder.
(b) To the extent permitted by law, such holder will indemnify
and hold harmless the Company, each of its directors, each of its
officers who have signed such registration statement, each Person, if
any, who controls the Company within the meaning of the Securities Act,
and any underwriter for the Company (within the meaning of the
Securities Act) against any losses, claims, damages or liabilities to
which the Company or any such director, officer, controlling Person, or
underwriter may become subject to, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any untrue
or alleged untrue statement of any material fact contained in such
registration statement, including any preliminary prospectus contained
therein or any amendments or supplements thereto, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary
prospectus, final prospectus, or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished by
such holder expressly for use in connection with such registration; and
such holder will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling
Person, or underwriter in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER,
that the indemnity agreement contained in this Section 9.1(b) shall not
apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent
of such holder against
<PAGE>
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which the request for indemnity is being made (which consent shall not
be unreasonably withheld).
(c) Promptly after receipt by an indemnified party under this
Section 9.1 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 9.1, notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in and, to the
extent the indemnifying party desires, jointly with any other
indemnifying party similarly noticed, to assume at its expense the
defense thereof with counsel mutually satisfactory to the parties. The
failure to notify an indemnifying party promptly of the commencement of
any such action, if prejudicial to his ability to defend such action,
shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9.1 only if and to the extent such
failure to promptly notify was prejudicial to its ability to defend
such action, and the omission so to notify the indemnifying party will
not relieve the indemnifying party of any liability which he may have
to any indemnified party otherwise other than under this Section 9.1.
9.2. OVERRIDE. Notwithstanding anything in this Section 9 to the
contrary, if, in connection with an underwritten public offering of the
Registered Shares, the Company, any holder of Registrable Shares and the
underwriters enter into an underwriting or purchase agreement relating to such
offering which contains provisions covering indemnification as between the
Company and such holder, then the indemnification provision of this Section 9
shall be deemed inoperative for purposes of such offering.
10. LOCKUP.
The Investor hereby agrees that, at the written request of the Company
or any managing underwriter of any underwritten public offering of securities of
the Company, the Investor shall not, without the prior written consent of the
Company or such managing underwriter, sell, make any short sale of, loan, grant
any option for the purchase of, pledge, encumber, or otherwise dispose of, or
exercise any registration rights with respect to, any Common Stock during the
90-day period (or 180-day period in connection with the Company's initial public
offering of Common Stock) commencing on the effective date of the registration
statement relating to such underwritten public offering of the Company's
securities; PROVIDED, that each officer or director of the Company and each
holder of at least 5% of its Common Stock (for this purpose, calculated on a
fully diluted basis assuming full exercise of all outstanding options, warrants,
and other rights to acquire shares of Common Stock and full conversion or
exchange of all securities that are convertible into or exchangeable for shares
of Common Stock) shall have entered into a similar agreement.
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11. GENERAL.
11.1 ADDITIONAL REGISTRATION RIGHTS. Without the prior consent of the
holders of record of at least a majority of the Registrable Shares then
outstanding, the Company shall not grant to any other holder of the Company's
securities registration rights that are superior to or in any way adversely
affect the registration rights granted to the Investor hereunder.
11.2. REMEDIES. In case that any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by any party
hereto, the party or parties entitled to the benefit of such covenants or
agreements may proceed to protect and enforce its or their rights, either by
suit in equity and/or action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement. The
rights, powers and remedies of the parties to this Agreement are cumulative and
not exclusive of any other right, power or remedy which such parties may have
under any other agreement or law. No single or partial assertion or exercise of
any right, power or remedy of a party hereunder shall preclude any other or
further assertion or exercise thereof.
11.3. ASSIGNMENT. None of the parties to this Agreement shall assign or
delegate any of their respective rights or obligations under this Agreement
without the prior written consent of each of the other parties hereto other than
in connection with a transfer of securities of the Company made to a Permitted
Transferee.
11.4. SURVIVAL. The rights and obligations of the parties hereto set
forth herein shall survive indefinitely, unless and until, by their respective
terms, they are no longer applicable.
11.5. ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior and contemporaneous arrangements or understandings with respect thereto.
11.6. NOTICES. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or duly sent by first class, registered,
certified or overnight mail, postage prepaid, or telecopied with a confirmation
copy by regular mail, addressed or telecopied, as the case may be, to such party
at the address or telecopier number, as the case may be, set forth below or such
other address or telecopier number, as the case may be, as may hereafter be
designated in writing by the addressee to the addressor listing all parties:
<PAGE>
-12-
(i) If to the Company, to:
Streamline, Inc.
27 Dartmouth Street
Westwood, MA 02090
Attn: Timothy A. DeMello
Chairman and Chief Executive Officer
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attn: Wayne D. Bennett, Esq.
(ii) If to the Investor, to:
Nordstrom, Inc.
1617 Sixth Avenue
Seattle, WA 98101
Attention: J. Daniel Nordstrom
with a copy to:
Lane Powell Spears Lubersky LLP
1420 Fifth Avenue, Suite 4100
Seattle, WA 98101-2338
Attention: D. Wayne Gittenger, Esq.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
Any notice or other communication pursuant to this Agreement shall be
deemed to have been duly given or made and to have become effective (i) when
delivered in hand to the party to which it was directed, (ii) if sent by telex,
telecopier, facsimile machine or telegraph and properly addressed in accordance
with the foregoing provisions of this Section 11.6, when received by the
addressee, (iii) if sent by commercial courier guaranteeing next business day
delivery, on the business day following the date of delivery to such courier, or
(iii) if sent by first-class mail, postage prepaid, and properly addressed in
accordance with the foregoing provisions
<PAGE>
-13-
of this Section 11.6, (A) when received by the addressee, or (B) on the third
business day following the day of dispatch thereof, whichever of (A) or (B)
shall be the earlier.
11.7. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be
amended, modified or terminated, and the observance of any provision of this
Agreement may be waived (either generally or in a particular instance and either
retrospectively or prospectively), with, but only with, the written consent of
each of the other parties hereto.
11.8. SEVERABILITY. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11.9. NO WAIVER OF FUTURE BREACH. No failure or delay on the part of
any party to this Agreement in exercising any right, power or remedy hereunder
shall operate as a waiver thereof. No assent, express or implied, by any party
hereto to any breach in or default of any agreement or condition herein
contained on the part of any other party hereto shall constitute a waiver of or
assent to any succeeding breach in or default of the same or any other agreement
or condition hereof by such other party.
11.10. NO IMPLIED RIGHTS OR REMEDIES; THIRD PARTY BENEFICIARIES. Except
as otherwise expressly provided in this Agreement, nothing herein expressed or
implied is intended or shall be construed to confer upon or to give any Person,
firm or corporation, other than the parties hereto, any rights or remedies under
or by reason of this Agreement. Except as otherwise expressly provided in this
Agreement, there are no intended third party beneficiaries under or by reason of
this Agreement.
11.11. HEADINGS. The headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be deemed to
be a part of this Agreement.
11.12. NOUNS AND PRONOUNS. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
11.13. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts, excluding
choice of law rules thereof.
<PAGE>
-14-
11.14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, this Registration Rights Agreement has been
executed under seal by the parties hereto as of the day and year first above
written.
STREAMLINE, INC.
By: /s/ Timothy A. DeMello
-----------------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
NORDSTROM, INC.
By: /s/ James A. Nordstrom
-----------------------------------------------
James A. Nordstrom
'
<PAGE>
Exhibit 10.18
September 18, 1998
Streamline, Inc.
General Electric Capital Corporation
Intel Corporation
SAP America, Inc.
PaineWebber Capital Inc.
HARE & CO. c/o The Bank of New York
DDJ CANADIAN HIGH YIELD FUND
MELLON BANK, N.A., solely in its capacity as
Trustee for General Motors Employees Domestic
Group Pension Trust as directed by DDJ Capital
Management, LLC, and not in its individual capacity
Nordstrom, Inc.
Re: Registration Rights
Ladies and Gentlemen:
Reference is made to (i) that certain Series A Preferred Stock Purchase
Agreement (the "Series A Agreement"), dated as of May 15, 1996, by and among
Streamline, Inc. (the "Company"), Reliance Insurance Company ("Reliance") and
Timothy A. DeMello, (ii) that certain Registration Rights Agreement (the "Series
B Registration Rights Agreement"), dated as of June 13, 1997, by and among the
Company, Intel Corporation ("Intel"), and PaineWebber Capital Inc.
("PaineWebber") and to which General Electric Capital Corporation ("GE") and SAP
America, Inc. ("SAP") became parties as of September 23, 1997, (iii) that
certain Registration Rights Agreement (the "DDJ Registration Rights Agreement"),
dated as of April 15, 1998, by and among the Company, DDJ CANADIAN HIGH YIELD
FUND and its nominee HARE & CO c/o The Bank of New York (collectively, "DDJ")
and MELLON BANK, N.A., solely in its capacity as Trustee for General Motors
Employees Domestic Group Pension Trust as directed by DDJ Capital Management,
LLC, and not in its individual capacity (the "GM Trust"), and (iv) that certain
Registration Rights Agreement (the "Series D Registration Rights Agreement"),
dated as of the date hereof by and between the Company and Nordstrom, Inc.
("Nordstrom").
<PAGE>
Reliance hereby irrevocably consents under Section 11.1(c) of the Series A
Agreement to the inclusion in any registration of shares of the Company's Common
Stock held by Reliance made pursuant to Section 11.1 of the Series A Agreement
of any Registrable Shares (as defined in the Series B Registration Rights
Agreement, the DDJ Registration Rights Agreement, and the Series D Registration
Rights Agreement, as applicable) held by one or more of Intel, PaineWebber, GE,
SAP, DDJ, the GM Trust, Nordstrom or any of their respective Permitted
Transferees (as defined in the Series B Registration Rights Agreement, the DDJ
Registration Rights Agreement, or Series D Registration Rights Agreement, as
applicable), provided that, in the case of inclusion of shares in such
registration by a Permitted Transferee, the Registrable Shares held by any such
Permitted Transferee constitute at least 20% of the Registrable Shares issued by
the Company to Intel, PaineWebber, GE, SAP, DDJ or the GM Trust, as the case may
be (10% in the case of Nordstrom) (such a Permitted Transferee which holds at
least 20% of the Registrable Shares issued by the Company to Intel, PaineWebber,
GE, SAP, DDJ or the GM Trust, as the case may be, or 10% of the Registrable
Shares issued by the Company to Nordstrom, being referred to herein as a
"Qualifying Transferee").
Reliance further agrees that, in the event that any registration referenced
in the preceding paragraph involves an underwritten offering, and the managing
underwriter thereof shall advise Reliance that, in its opinion, the number of
shares of Common Stock requested to be included in such registration exceeds the
number which can be sold in such offering, the number of shares of Common Stock
included in such offering shall be allocated, pro rata, on the basis of the
number of shares requested to be included in such registration by Reliance and
each of the entities referred to in the preceding paragraph.
The Company shall promptly (and, in any event, within three business days)
notify each of Intel, PaineWebber, GE, SAP, DDJ, the GM Trust, Nordstrom and
their Qualifying Transferees of any request for registration by Reliance
pursuant to Section 11.1 of the Series A Agreement, and each of such persons
hereby agrees that (i) Reliance has no obligations under this paragraph and
shall not be held liable, in any way whatsoever, in the event that the Company
fails to so notify any such person and (ii) any failure by the Company to
provide the notification set forth in this paragraph shall have no effect, in
any way whatsoever, on Reliance's rights pursuant to Section 11.1 of the Series
A Agreement or on the timing of any actions to be taken by any person in
connection therewith.
<PAGE>
Each of the undersigned agrees that this letter agreement shall be
assignable by each party hereto to any Qualifying Transferee. In the event that
Reliance transfers any shares of the Company's securities, Reliance agrees that
it shall take such steps as it believes are necessary to ensure that the rights
granted to Intel, PaineWebber, GE, SAP, DDJ, the GM Trust, Nordstrom and their
Qualifying Transferees under the foregoing paragraphs remain available to such
persons.
This letter agreement is intended to supersede the letter agreements
relating to the subject matter hereof, dated as of June 13, 1997, September 23,
1997 and April 15, 1998, by and among certain of the parties hereto.
This letter agreement shall not be amended without the written consent of
each of the parties hereto (or their Qualified Transferees).
[signature page to follow]
<PAGE>
IN WITNESS WHEREOF, the undersigned hereby sets forth its hand as of the
date first written above.
RELIANCE INSURANCE COMPANY,
on behalf of itself and its nominee, HARE
& Co.
By: /s/ John P. Fitzsimons
---------------------------------
John P. Fitzsimons
Vice President
AGREED AND ACCEPTED:
STREAMLINE, INC. GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Timothy A. Demello By: /s/ Thomas A. Crowley
----------------------- --------------------------------
Timothy A. DeMello Thomas A. Crowley
Chairman and Chief Managing Director-ECG
Executive Officer
INTEL CORPORATION SAP AMERICA, INC.
By: /s/ Arvind Sodhani By: /s/ Brad C. Brubaker
----------------------- --------------------------------
Arvind Sodhani Brad C. Brubaker
Vice President and Vice President
Treasurer
PAINEWEBBER CAPITAL INC. DDJ CANADIAN HIGH YIELD
FUND
By: DDJ Capital Management, LLC, its
attorney in fact
By: /s/ Dhananjay Pai By: /s/ David J. Breazzano
----------------------- --------------------------------
Dhananjay Pai David J. Breazzano
President Member
AND ITS NOMINEE:
HARE & CO. C/O
THE BANK OF NEW YORK
By: /s/ Helena Morales
--------------------------------
Helena Morales
Assistant Treasurer
<PAGE>
MELLON BANK, N.A.,
solely in its capacity as Trustee for
General Motors Employees Domestic Group
Pension Trust as directed by DDJ Capital
Management, LLC, and not in its individual
capacity
By: /s/ Bernadette Rist
----------------------------------------
Bernadetter Rist
Authorized Signatory
NORDSTROM, INC.
By: /s/ Erik B. Nordstrom
----------------------------------------
Erik B. Nordstrom
<PAGE>
Exhibit 10.19
STREAMLINE, INC.
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement (this "AGREEMENT"), is made as of
this 18th day of September 1998 by and among:
(i) Streamline, Inc., a Delaware corporation (the "COMPANY");
(ii) Timothy A. DeMello and the undersigned officers of the Company
(collectively, together with Mr. DeMello, the "Officers");
(iii) Nordstrom, Inc., a Washington corporation; and
(iv) each person or entity who subsequently becomes party hereto
pursuant to Section 1 or Section 3 hereof.
For purposes of this Agreement, the holders of record, from time to
time, of shares of the Company's Series D Convertible Preferred Stock, par value
$1.00 per share (the "SERIES D PREFERRED STOCK") are referred to herein as
"SERIES D PREFERRED SHAREHOLDERS," and together with the Officers, are referred
to herein as the "SHAREHOLDERS".
WHEREAS, in connection with the Company's sale and issuance of shares
of Series D Preferred Stock and the Officers wish to extend to the Series D
Preferred Shareholders certain rights and obligations contained herein;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, the parties hereto hereby agree as follows:
1. FIRST-REFUSAL AND CO-SALE RIGHTS AS TO STOCK TRANSFERS.
(a) RESTRICTION ON TRANSFERS. No Shareholder may assign, exchange,
encumber, pledge, transfer, or otherwise dispose of (any such action referred to
hereinafter as a "TRANSFER") any shares of capital stock of the Company or any
other securities of the Company held by such Shareholder ("SHARES") in whole or
in part except pursuant to the terms of this Agreement.
<PAGE>
-2-
Any transfer or attempted Transfer of Shares in violation of the provisions of
this Agreement shall be void, and the Company and its transfer agent shall not
recognize such Transfer, record it on the books and records of the Company, or
issue stock certificates in connection therewith. In addition to any other legal
or equitable remedies which it may have, the Company may enforce its rights by
actions for specific performance (to the extent permitted by law) and may refuse
to recognize any transferee as one of its shareholders for any purpose,
including without limitation for purposes of dividend and voting rights, until
all applicable provisions hereof have been complied with.
(b) TRANSFER NOTICE. At least 30 days prior to any proposed Transfer
(other than a Permitted Transfer, as defined in Section 1(d)) by a Shareholder,
such Shareholder (the "TRANSFERRING SHAREHOLDER") shall give written notice (the
"TRANSFER NOTICE"), in accordance with Section 4 hereof, to the Company, setting
forth (i) the number and class of equity securities proposed to be sold by the
Transferring Shareholder (the "OFFERED SECURITIES"), (ii) the anticipated date
of the proposed Transfer and the names and addresses of the proposed
transferees, and (iii) the material terms of the proposed Transfer, including
the cash and/or other consideration to be received in respect of such Transfer.
(c) COMPANY'S AND SHAREHOLDERS' OPTIONS. Upon the giving of any
Transfer Notice, then subject to all of the provisions of this Section 1(b), the
Company and the Shareholders shall have certain rights and options, as follows:
(i) RIGHTS OF FIRST REFUSAL. Upon receipt of a Transfer Notice
relating to a proposed Transfer of shares of Series D Preferred Stock, the
Company shall have the option, but not the obligation, to purchase all of such
Offered Securities on the same terms as are specified in the Transfer Notice,
including any deferred payment terms, PROVIDED, that the Company shall have the
right to substitute cash in the amount of the fair market value of any non-cash
consideration proposed to be received from the proposed transferee(s). Within 30
days after receipt of the Transfer Notice, the Company shall give written notice
to the Transferring Shareholder stating whether it elects to exercise such
option. Failure by the Company to give such notice within such time period shall
be deemed an election by the Company not to exercise its option. The closing of
the purchase and sale of the Offered Securities shall take place as soon as is
reasonably practicable at such date, time, and place as the Company exercising
its purchase option hereunder may reasonably determine. If the Company does not
elect hereunder to purchase the Offered Securities, subject to the provisions of
Section 1(c)(ii) hereof, the Transferring Shareholder shall thereafter be free
for a period of 90 days to consummate the Transfer described in the Transfer
<PAGE>
-3-
Notice to the transferee(s) specified therein, at the price and on the other
terms set forth therein; PROVIDED, that such transferee(s) shall first execute
and deliver to the Company an Instrument of Adherence in the form of EXHIBIT A
annexed hereto, which executed Instrument of Adherence shall become a part of
this Agreement upon acceptance by the Company, whereupon each such transferee
shall become a "Series D Preferred Shareholder" party to this Agreement.
However, if such Transfer is not consummated within such 90-day period, the
Transferring Shareholder shall not Transfer any of the Offered Securities
without again complying with all of the provisions of this Section 1.
(ii) CO-SALE RIGHTS WITH RESPECT TO TRANSFERS BY AFFILIATES.
Within 10 days of receipt of one or more Transfer Notices relating to a proposed
Transfer by one or more Officers, in one transaction or a series of related
transactions, of Shares representing greater than 5% of the then outstanding
number of shares of the Company's Common Stock, par value $0.01 per share, (the
"Common Stock") (assuming the conversion into shares of Common Stock of all then
outstanding shares of preferred stock of the Company), the Company shall deliver
a copy of such Transfer Notice(s) to each holder of record of at least 10% of
the then outstanding shares of Series D Preferred Stock. Each such Series D
Preferred Shareholder may elect to participate in the contemplated Transfer by
delivering written notice to the Transferring Shareholder within 30 days after
such Series D Preferred Shareholder's receipt of such Transfer Notice(s). The
Transferring Shareholder(s) shall use his or her (or their) best efforts to
obtain the agreement of the prospective transferee(s) to purchase the Offered
Securities plus such number of shares of Common Stock (or a number of shares of
capital stock of the Company convertible into such number of share of Common
Stock) that each such Series D Preferred Shareholder wishes to include in such
Transfer. If the Transferring Shareholder(s) fail(s) to obtain the agreement of
the prospective transferee(s) to purchase all such shares, then each Series D
Preferred Shareholder electing to participate in the Transfer will be entitled
to sell in the Transfer, at the same price and on the same terms as specified in
the Transfer Notice, a number of shares of Common Stock (or a number of shares
of capital stock of the Company convertible into such number of shares of Common
Stock) equal to and not less than the product of (i) the quotient determined by
dividing (A) the number of shares of Common Stock into which the shares of
Series D Preferred Stock then held of record by such Series D Preferred
Shareholder are then convertible, by (B) the number of outstanding shares of
Common Stock (assuming conversion into shares of Common Stock of all the
outstanding shares of preferred stock of the Company), multiplied by (ii) the
aggregate number of Shares constituting the Offered Securities to be sold in the
proposed Transfer. The Transferring Shareholder(s) will be entitled to
<PAGE>
-4-
sell in the contemplated Transfer the balance of the Offered Securities (after
reducing the total number of Offered Securities proposed to be included in the
Transfer by the number of shares of Common Stock (or a number of shares of
capital stock of the Company convertible into such number of shares of Common
Stock) with respect to which any of the Series D Preferred Shareholders have
elected to participate, if any). The Transferring Shareholder(s) shall use his
or her (or their) best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Series D Preferred Shareholders in any
contemplated Transfer and shall not Transfer any Shares to such prospective
transferee(s) unless such prospective transferee(s) allows the participation of
the Series D Preferred Shareholders on the terms specified herein. Subject to
the foregoing, the Transferring Shareholder(s) may, within 90 days after the
expiration of the 30-day period referred to above for notice to be provided by
Series D Preferred Shareholders, transfer the Offered Securities (reduced by the
number of shares of Common Stock (or shares of capital stock of the Company
convertible into such number of shares of Common Stock) with respect to which
any of the Series D Preferred Shareholders have elected to participate, if any)
to the transferee(s) identified in the Transfer Notice at a price and on terms
no more favorable to the Transferring Shareholder(s) than specified in the
Transfer Notice. However, if such Transfer is not consummated within such 90-day
period, the Transferring Shareholder(s) shall not transfer any of the Offered
Securities as have not been purchased within such period without again complying
with all of the provisions of this Section 1.
(d) PERMITTED TRANSFERS. This Section 1 shall not bar a Transfer of
Shares by a Shareholder to a wholly-owned subsidiary of such Shareholder, or to
a member of such Shareholder's immediate family, or to a trust or limited
partnership the beneficiaries or limited partners of which are members of such
Shareholder's immediate family (such trust or family members (including the
estate of a Shareholder or any other person acquiring Shares by reason of a
Shareholder's death) being referred to herein as "PERMITTED TRANSFEREES"),
PROVIDED, however, that, prior to the effectiveness of any such Transfer, any
such Permitted Transferee must execute an Instrument of Adherence in the form of
EXHIBIT A annexed hereto, which executed Instrument of Adherence shall thereupon
become a part of this Agreement, whereupon such Permitted Transferee shall
become an "Officer" party to this Agreement.
2. VOTING.
(a) NUMBER OF DIRECTORS. The Company and the Shareholders shall
cause the Company to have seven (7) directors.
<PAGE>
-5-
(b) BEST EFFORTS. Each Shareholder hereby agrees to use its best
efforts to cause compliance with the provisions of this Section 2.
3. NEW OFFICERS.
The Company shall cause each person who becomes an officer of the
Company to execute an Instrument of Adherence in the form of EXHIBIT A annexed
hereto, which executed Instrument of Adherence shall thereupon become a part of
this Agreement, whereupon such executing officer shall become an "Officer" party
to this Agreement.
4. LEGEND ON CERTIFICATE.
In order to effectuate the terms of this Agreement, each certificate of
stock issued to each of the Shareholders evidencing ownership of Shares shall
bear a legend substantially as follows:
"The shares of stock evidenced by this certificate are subject
to certain restrictions on their transfer contained in a certain
Shareholders' Agreement, dated as of September 18, 1998 to which the
Corporation is a party. The Corporation will furnish a copy of such
agreement to the holder of this certificate upon written request and
without charge."
5. MISCELLANEOUS.
(a) NOTICES. All notices, requests, consents, and other communications
hereunder shall be in writing and shall be deemed effectively given and received
upon delivery in person, or one business day after delivery by national
overnight courier service or by telecopier transmission with acknowledgment of
transmission receipt, or three business days after deposit via certified or
registered mail, return receipt requested, in each case addressed as follows:
(i) if to the Company, to:
Streamline, Inc.
27 Dartmouth Street
Westwood, MA 02090
Fax: 781-407-1946
Attention: President
<PAGE>
-6-
with a copy to:
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Fax: 617-951-8736
Attention: Wayne D. Bennett, Esq.
(ii) if to a Shareholder, to the most recent address or
telecopier number of such Shareholder listed in the Company's books and records;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other.
(b) TERMINATION. This Agreement shall terminate on the occurrence of
any of the following events:
(i) bankruptcy, receivership or dissolution of the Company or sale
of all or substantially all of the capital stock or assets of
the Company, or merger by the Company with another Company in
which the Company is not the surviving entity;
(ii) the closing of an issuance of shares of the Company's capital
stock in an underwritten public offering, at a price per share
of at least $4.00 (subject to appropriate adjustments for
stock splits, stock dividends, combinations and other similar
recapitalizations affecting such shares), with gross proceeds
to the Company of at least $25,000,000;
(iii) as to any individual Shareholder, when he or her and his or
her executors and administrators no longer own any Shares;
(iv) as to any Officer, other than Timothy A. DeMello, when he or
she (or, in the case of a Permitted Transferee, when the
officer of the Company that transferred Shares to such
Permitted Transferee) has ceased to be an officer of the
Company for a period of 90 consecutive days; or
(v) the execution of a written agreement of (i) the Company; (ii)
the holders of a majority of the shares of Common Stock
(assuming the conversion into Common Stock of shares of
capital stock of the Company convertible into Common Stock)
held by the Officers who are then parties to this Agreement
and (iii)
<PAGE>
-7-
Shareholders holding of record at least fifty
percent (50%) of the shares of Series D Preferred Stock then
outstanding.
(c) BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto, their heirs, legal representatives,
successors and assigns.
(d) ENTIRE AGREEMENT. This Agreement constitutes the sole and entire
agreement of the parties with respect to the subject matter hereof.
(e) ENFORCEABILITY. If any of the terms, provisions or conditions of
this Agreement or the application thereof in any circumstances shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement and the
application of such term, provision or condition to circumstances other than
those to which it is held invalid or unenforceable shall not be affected
thereby, and each of the terms, provisions and conditions of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
(f) GOVERNING LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the internal substantive laws of the State of
Delaware, without regard to conflicts or choice of law provisions.
(g) NO WAIVER. No assent, express or implied, by the Company or any
Shareholder to any breach in or default of any agreement or condition herein
contained on the party of any other Shareholder shall constitute a waiver of or
assent to any succeeding breach in or default of the same or any other agreement
or condition hereof.
(h) INTERPRETATION. In this Agreement, the use of any of the three
genders shall be deemed to include the other two. Furthermore, any notices,
consents, offers, or other actions required by a Shareholder that is not a
natural person, shall be deemed to apply and refer to the trustee or other then
authorized individual of such Shareholder at the time of such notice, consent,
offer or other action.
(i) AMENDMENT. No amendment or modification of this Agreement shall be
valid unless the same is in writing and signed by (i) the Company; (ii) the
holders of a majority of the share of Common Stock (assuming the conversion into
Common Stock of shares of capital stock of the Company convertible into Common
Stock) held by the Officers who are then parties to this Agreement and (iii)
Shareholders holding of record at least fifty percent (50%) of the shares of
Series D Preferred Stock then outstanding.
<PAGE>
-8-
(j) HEADINGS. The headings in this Agreement are for convenience of
identification only, do not constitute a part hereof, and shall not affect the
meaning or construction hereof.
(k) SEVERABILITY. If any provision of this Agreement shall be declared
void or unenforceable by a judicial or administrative authority, the validity of
any other provision and of the entire Agreement shall not be affected thereby.
(m) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed an original and all of
which, taken together, shall constitute one and the same agreement. In making
proof of this Agreement it shall not be necessary to produce or account for more
than one such counterpart.
<PAGE>
IN WITNESS WHEREOF, this Shareholders' Agreement has been executed
under seal by the parties hereto as of the day and year first above written.
THE COMPANY:
STREAMLINE, INC.
By:/s/ TIMOTHY A. DEMELLO
------------------------
Timothy A. DeMello
[ADDITIONAL SIGNATURE PAGES TO FOLLOW]
<PAGE>
/s/ Timothy A. Demello
Timothy A. DeMello
OFFICERS OF
THE COMPANY:
/s/ Frank Britt
---------------------------------
Frank Britt
Vice President Marketing and
Merchandizing
/s/ David Blakelock
---------------------------------
David Blakelock
Vice President Operations,
Assistant Secretary
/s/ Mary Wadlinger
---------------------------------
Mary Wadlinger
Vice President Customer Quality
/s/ Lauren Farrell
---------------------------------
Lauren Farrell
Secretary
HOLDERS OF SERIES D
PREFERRED STOCK:
NORDSTROM, INC.
By: /s/ James A. Nordstrom
---------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
EXHIBIT A
INSTRUMENT OF ADHERENCE
Reference is made to that certain Shareholders' Agreement dated as of
September 18, 1998, a copy of which is attached hereto (as amended and in effect
from time to time, the "Shareholders' Agreement"), among Streamline, Inc., a
Delaware corporation (the "Company"), and the shareholder parties identified on
the signature pages thereto (collectively, the "Shareholders").
The undersigned, , in order to become the owner or holder of:
shares (the "Purchased Common Shares") of Common Stock, par value
$0.01 per share, of the Company, and;
shares (the "Purchased Preferred Shares") of Series D Convertible
Preferred Stock, par value $0.01 per share, of the Company
hereby agrees that, by the undersigned's execution hereof, all of the Purchased
Common Shares, all of the Purchased Preferred Shares and all other shares of
capital stock of the Company that may from time to time be owned or held by the
undersigned, constitute shares subject to all the restrictions and conditions
applicable to the Shares (as defined in the Shareholders' Agreement). This
Instrument of Adherence shall take effect and shall become a part of the
Shareholders' Agreement immediately upon execution.
Executed as of the date set forth below under the laws of the State of
Delaware.
Signature:
----------------------------
Address:
----------------------------
----------------------------
----------------------------
Date:
----------------------------
Accepted:
STREAMLINE, INC.
By:
--------------------------
<PAGE>
Exhibit 10.20
STREAMLINE, INC.
WAIVER AND MODIFICATION AGREEMENT
This Waiver and Modification Agreement (this "Agreement"), dated as of
September 18, 1998, is made by and among Streamline, Inc., a Delaware
corporation (the "Company") and the holders of record of all of the outstanding
shares of the Company's Series A Convertible Preferred Stock, par value $1.00
per share ("Series A Preferred"), Series B Convertible Preferred Stock, par
value $1.00 per share ("Series B Preferred"), and Series C Convertible Preferred
Stock, par value $1.00 per share ("Series C Preferred") (such holders,
collectively, the "Investors").
WHEREAS, the Company, Reliance Insurance Company ("Reliance") and
Timothy A. DeMello entered into a certain Series A Preferred Stock Purchase
Agreement, dated May 15, 1996 (as amended from time to time, the "Series A Stock
Purchase Agreement"), pursuant to which Reliance purchased 50,000 shares of
Series A Preferred;
WHEREAS, the Company, Reliance, Intel Corporation ("Intel") and
PaineWebber Capital Inc. ("PaineWebber", and together with Reliance and Intel,
the "Initial Series B/C Investors"), entered into a certain Stock Purchase
Agreement, dated June 13, 1997 (as amended, the "Series B/C Stock Purchase
Agreement"), pursuant to which the Initial Series B/C Investors purchased an
aggregate of 20,000 shares of Series B Preferred and 10,000 shares of Series C
Preferred;
WHEREAS, the Company, the Initial Series B/C Investors, General
Electric Capital Corporation ("GE Capital") and SAP America ("SAP", and together
with GE Capital, the "New Series B/C Investors") entered into that certain
Waiver and Modification Agreement, dated September 23, 1997 (the "Waiver and
Modification Agreement") pursuant to which the Initial Series B/C Investors and
the New Series B/C Investors (the "Series B/C Investors") purchased an aggregate
of 60,000 shares of Series B Preferred;
WHEREAS, the Company and the Series B/C Investors are parties to a
certain Registration Rights Agreement, dated June 13, 1997 (the "Series B/C
Registration Rights Agreement");
WHEREAS, the Company and Nordstrom, Inc. ("Nordstrom") propose to enter
into a certain Stock Purchase Agreement (the "Series D Stock Purchase
Agreement"), pursuant to which Nordstrom proposes to purchase up to 228,570
shares (the "Series D Preferred Shares") of Series D Convertible Preferred
Stock, par value $1.00 per share, ("Series D Preferred");
<PAGE>
-2-
WHEREAS, to facilitate the sale and issuance by the Company of the
Series D Preferred Shares, the Company and the Investors wish to amend the
Series A Stock Purchase Agreement, and the Series B/C Stock Purchase Agreement,
(collectively, the "Purchase Agreements") and to waive certain pre-emptive
rights as provided herein;
NOW, THEREFORE, the parties hereto, in consideration of the premises
and the mutual covenants and agreements herein contained, and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, hereby agree as follows:
I. SERIES A STOCK PURCHASE AGREEMENT
SECTION 1. AMENDMENT TO THE SERIES A STOCK PURCHASE AGREEMENT
The Company and Reliance hereby amend the Series A Stock
Purchase Agreement by deleting Section 9.8 thereof in its entirety.
II. SERIES B/C STOCK PURCHASE AGREEMENT
SECTION 1. AMENDMENT TO THE SERIES B/C STOCK PURCHASE AGREEMENT
The Company and the Series B/C Investors hereby amend the
Series B/C Stock Purchase Agreement by deleting Section 6.7 in its
entirety.
III. SERIES B/C REGISTRATION RIGHTS AGREEMENT
SECTION 1 AMENDMENT TO SERIES B/C REGISTRATION AGREEMENT
The Company and the Series B/C Investors hereby amend the
Series B/C Registration Rights Agreement by inserting the following as
Section 2.6 thereto:
2.6 CONSENT FOR FIRST UNDERWRITTEN PUBLIC OFFERING
Notwithstanding anything in this Section 2 to the contrary,
the Company shall not be required to cause to be registered
any Registrable Shares pursuant to Section 2 prior to the
Company's first underwritten public offering without the
written consent of at least a majority of the then outstanding
shares of the Company's Series D Convertible Preferred Stock,
$1.00 par value per share.
IV. CONSENT TO REGISTRATION RIGHTS AGREEMENT
Each of the Investors hereby consent to the Company's entering into a
Registration Rights Agreement, substantially in the form attached hereto as
EXHIBIT A,
<PAGE>
-3-
with Nordstom and the Company's grant to Nordstrom of the registration rights
provided for therein.
V. WAIVER OF PREEMPTIVE RIGHTS
Each of the Investors hereby waive such preemptive rights as such
Investor may have from time to time, pursuant to Article Fourth, Section B.8 of
the Company's Certificate of Incorporation, as in effect on the date hereof (the
"Charter") with respect to (i) the issuance by the Company to Nordstrom of up to
200,000 shares of Series D Preferred, (ii) the issuance by the Company of
additional shares of Series D Preferred in payment of any dividend that may
accrue with respect to any shares of Series D Preferred, all in accordance with
Section B.2(a)(v) of the Charter; (iii) the issuance by the Company of shares of
the Company's Common Stock, par value $.01 per share ("Common Stock") upon
conversion of shares of Series D Preferred; and (iv) the issuance by the Company
to the holders (the "Debtholders") of the Company's Senior Discount Notes due
April 15, 2001, of an aggregate of 10,000 shares of Common Stock pursuant to the
terms and conditions of that certain Warrant Modification Agreement, dated on or
about the date hereof, by and among the Company and the Debtholders.
VI. GENERAL PROVISIONS
SECTION 1. RATIFICATION.
Except to the extent amended by this Agreement, all of the terms,
conditions and covenants of the Purchase Agreements are hereby ratified and
confirmed and remain in full force and effect.
SECTION 2. ENTIRE AGREEMENT.
The Purchase Agreements, and this Agreement together with the other
writings referred to therein and herein and/or delivered pursuant thereto and/or
hereto, contain the entire agreement among the parties with respect to the
subject matter thereof and hereof and shall be read and construed together as a
single agreement.
SECTION 3. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
<PAGE>
-4-
SECTION 4. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed entirely within the state without regard to principles of conflicts of
law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the day and year first above written.
STREAMLINE, INC.
By: /s/ Timothy A. Demello
----------------------------------------------
Timothy A. DeMello
Chairman and Chief Executive Officer
INVESTORS:
RELIANCE INSURANCE COMPANY
on behalf of itself and its nominee, HARE & Co.
By: /s/ John P. Fitzsimons
----------------------------------------------
John P. Fitzsimons
Vice President
PAINEWEBBER CAPITAL INC.
By: /s/ Dhananjay Pai
----------------------------------------------
Dhananjay Pai
President
INTEL CORPORATION
By: /s/ Arvind Sodhani
----------------------------------------------
Arvind Sodhani
Vice President and Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Thomas A. Crowley
----------------------------------------------
Thomas A. Crowley
Managing Director-ECG
SAP AMERICA, INC.
By: /s/ Brad C. Brubaker
----------------------------------------------
Brad C. Brubaker
Vice President
<PAGE>
Exhibit 10.21
STREAMLINE, INC.
AGREEMENT
This Agreement (this "Agreement"), dated as of September 18, 1998, is
by and among Streamline, Inc., a Delaware corporation (the "Company") and the
holders of record (the "Purchasers") of the Company's Senior Discount Notes due
April 15, 2001 (the "Senior Discount Notes") and of Common Stock Purchase
Warrants (the "Warrants") to purchase up to an aggregate of 850,000 shares of
the Company's Common Stock, par value $.01 per share ("Common Stock").
WHEREAS, the Company and the Purchasers entered into (i) a certain
Securities Purchase Agreement, dated April 15, 1998 (as amended, modified or
supplemented from time to time, the "Securities Purchase Agreement"), pursuant
to which the Purchasers agreed to purchase (A) up to $7,700,000 aggregate
principal amount of Senior Discount Notes and (B) the Warrants, (ii) a certain
Warrant Agreement, dated April 15, 1998 (the "Warrant Agreement"), and (iii) a
certain Registration Rights Agreement, dated April 15, 1998 (the "Registration
Rights Agreement");
WHEREAS, pursuant to the Warrant Agreement, 52.9412% of the Base Amount
of each Warrant became immediately vested and exercisable and the remainder of
the Base Amount of each Warrant vested and became exercisable upon terms and
conditions associated with the Company's inability to meet certain capital
financing objectives; and
WHEREAS, the Company and Nordstrom, Inc., a Washington corporation,
("Nordstrom") propose to enter into a Stock Purchase Agreement substantially in
the form attached hereto as EXHIBIT A (the "Stock Purchase Agreement") pursuant
to which Nordstrom intends to purchase 228,570 shares (the "Series D Preferred
Shares") of the Company's Series D Convertible Preferred Stock, which preferred
stock shall have the powers, designations, preferences and privileges as set
forth in the form of Certificate of Amendment of Certificate of Incorporation of
the Company, substantially in the form attached hereto as EXHIBIT B (the "Series
D Preferred");
NOW, THEREFORE, the parties hereto, in consideration of the premises
and the mutual covenants and agreements herein contained, and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound, hereby agree, subject to,
conditional upon and effective simultaneously with the sale and issuance by the
Company of the Series D Preferred Shares to Nordstrom, pursuant to the Stock
Purchase Agreement, as follows:
<PAGE>
-2-
I. ISSUANCE OF COMMON STOCK.
Subject to the terms and conditions set forth herein, the Company
hereby agrees to issue and sell to each Purchaser and each of the Purchasers
agrees to purchase from the Company the number of shares (the "Shares") of
Common Stock set forth opposite such Purchaser's name on SCHEDULE 1 attached
hereto, in consideration for each Purchaser's (i) paying to the Company the
amount set forth opposite such Purchaser's name on SCHEDULE 1 attached hereto,
(ii) agreeing to the amendment to the Warrant Agreement specified in Section III
below and (iii) agreeing to the amendment to the Registration Rights Agreement
specified in Section IV below. Such shares shall be registered in the name of
each Purchaser or its nominee as indicated on SCHEDULE 1.
II. APPROVAL AND AGREEMENT OF PURCHASERS.
Subject to the terms and conditions set forth herein, each Purchaser
hereby:
(i) approves the sale and issuance by the Company of the Series D
Preferred Shares to Nordstrom pursuant to the Stock Purchase Agreement, and any
issuance by the Company of shares of Series D Preferred in payment of any
dividend on, and shares of Common Stock issuable upon conversion of, the Series
D Preferred Shares, and
(ii) agrees that such sale and issuances satisfy the Company's
obligations pursuant to subsections (b) and (c) of Section 2.2 of the Warrant
Agreement and subsections (a) and (b) of Section 7.24 of the Securities Purchase
Agreement.
III. WARRANT AGREEMENT.
Subject to the terms and conditions set forth herein (and, in any
event, with respect to clause (ii) below, upon satisfaction of Subparagraph
1.(c) of Section VII of this Agreement,) the Warrant Agreement is hereby amended
by:
(i) deleting subparagraphs (b), (c) and (d) in their entirety and
replacing them with the following:
(b) No Warrant Certificate shall become vested or exercisable
for more than 52.9412% of the Base Amount of such Warrant Certificate,
and
(ii) deleting the third, fourth and fifth sentence of Section 2.4 in
their entirety.
IV. REGISTRATION RIGHTS AGREEMENT
Subject to the terms and conditions set forth herein, the Registration
Rights Agreement is hereby amended by deleting the definition of "Registrable
Shares" in its entirety and replacing it with the following:
<PAGE>
-3-
"Registrable Shares shall mean, with respect to each Investor (or its
Permitted Transferee), (i) any or all of the shares of Common Stock issued upon
exercise of those certain warrants issued by the Company to such Investor on the
date hereof, and (ii) the 10,000 shares of Common Stock issued pursuant to that
certain Agreement, dated as of September 18, 1998, by and among the Company and
the Purchasers.
V. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchasers on the
date hereof and on the date (the "Closing Date") that all of the conditions set
forth this Section VII of this Agreement are satisfied (the "Closing") as
follows:
1. ORGANIZATION, QUALIFICATIONS AND CORPORATE POWER. The Company is a
corporation duly incorporated, validly existing, and in good standing under the
laws of the State of Delaware, and it has the requisite power and authority
(corporate and other) to own and hold its properties and assets, and to carry on
its business as conducted or proposed to be conducted. The Company has requisite
power and authority to execute, deliver and perform this Agreement and to sell,
issue, and deliver the Shares to the Purchasers. The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the ownership of its properties or the conduct of its
business requires such qualification, except where the failure to so qualify
would not materially adversely affect the operations or financial condition of
the Company
2. AUTHORIZATION OF AGREEMENTS, ETC.
(a)(i) Each of (i) the execution, delivery and performance by the
Company of this Agreement and (ii) the issuance, sale, and delivery of the
Shares to the Purchasers in accordance with the terms hereof have been duly
authorized by the board of directors and stockholders of the Company, as
necessary, and will not (with due notice or lapse of time or both) violate any
provision of law, rule, or regulation, any order of any court or other agency of
government, the Certificate of Incorporation of the Company or the By-Laws of
the Company, each as amended to date and as of the date hereof, or any provision
of any indenture, mortgage, note, deed of trust, agreement, or other instrument
to which the Company or any of its properties or assets is bound, or conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under the Certificate of Incorporation or By-Laws of the
Company, each as amended to date and as of the date hereof, or any such
indenture, mortgage, note, deed of trust, agreement, or other instrument, or
result in the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company.
(b) The issuance, sale and delivery of the Shares in accordance with
the terms hereof have been duly authorized by the board of directors and
stockholders, as necessary, and, when issued in accordance with this Agreement,
the Shares shall be validly issued, fully paid, and nonassessable. The issuance,
sale, and delivery of the
<PAGE>
-4-
Shares are not subject to any unwaived preemptive right of any stockholder of
the Company or to any right of first refusal or other right in favor of any
person.
3. VALIDITY. This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid, and binding obligation of the Company,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, moratorium, or other similar laws affecting the enforcement of
creditors, rights generally and except as the availability of equitable remedies
may be limited by general principles of equity.
4. PRIVATE OFFERING. No form of general solicitation or general
advertising, including; but not limited to, advertisements, articles, notices or
other communications, published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising, was used
by the Company or any of its Subsidiaries or any of the Company's or such
Subsidiary's representatives, or, to the knowledge of the Company, any other
Person acting on behalf of the Company or any or its Subsidiaries, in connection
with the offering of the Shares being offered under this Agreement. During the
six months prior to the Closing, neither the Company, any of its Subsidiaries
nor any Person acting on the Company's or such Subsidiary's behalf has directly
or indirectly offered any Shares, or any part thereof or any other similar
securities, for sale to, or sold or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with any Person
or Persons other than the Purchasers and other investors who the Company
reasonably believed had such knowledge and experience in financial and business
matters that they were capable of evaluating the merits and risks of purchasing
the Shares. The Company further represents to the Purchasers that, assuming the
accuracy of the representations of the Purchasers as set forth in Section V
hereof, neither the Company, any of its Subsidiaries nor any Person acting on
the Company's or such Subsidiary's behalf has taken or will take any action
which would subject the issue and sale of the Shares to the provisions of
Section 5 of the Securities Act, except as contemplated by the Registration
Rights Agreement. The Company has not sold the Shares to anyone other than the
Purchasers designated in this Agreement.
5. ABSENCE OF CERTAIN EVENTS. Other than in connection with the Stock
Purchase Agreement, no event has occurred which would require the adjustment of
the Exercise Price (as defined in the Warrant Agreement) pursuant to Article III
of the Warrant Agreement or would require the Company to provide notice pursuant
to Section 3.7 of the Warrant Agreement.
DEFINED TERMS. All capitalized terms used in Sections V.4 and V.5 not
defined herein shall have the meanings set forth in the Securities Purchase
Agreement.
VI. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
The Purchaser represents and warrants to the Company on the date hereof
and on the Closing Date, that:
<PAGE>
-5-
1. ACCREDITED INVESTOR: AUTHORIZATION, ETC. Each Purchaser is an
"accredited investor" within the meaning of Rule 501 promulgated under the
Securities Act of 1933, as amended, has the power and authority to enter into
and perform this Agreement and to purchase the Shares.
2. INVESTMENT KNOWLEDGE. Each Purchaser has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the risks and merits of its investment in the Company and is capable of bearing
the economic risks of such investment, including a complete loss of its
investment.
3. OPPORTUNITY TO DISCUSS. Each Purchaser has had an opportunity to
discuss the business, management, and financial affairs of the Company with the
Company's representatives.
4. INVESTMENT INTENT. The Shares are being acquired for the Purchaser's
own account for the purpose of investment and not with a view to or for resale
in connection with any distribution thereof or interest therein.
VII. CONDITIONS TO CLOSING.
1. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASERS.
The obligations of the Purchasers to (i) purchase the Shares, (ii) approve and
agree to issuance by the Company of the Series D Preferred Shares to Nordstrom,
and (iii) amend the Warrant Agreement and (iv) amend the Registration Rights
Agreement hereunder are subject to the satisfaction or waiver by the Purchasers
of the following conditions prior to or contemporaneously with the Closing,
unless otherwise indicated:
(a) the representations and warranties made by the Company in this
Agreement (except for such representations and warranties as are limited by
their terms to an earlier specified date (which shall be true as of such date))
shall be true and correct in all material respects at and as of the Closing
Date; and the Company shall have complied in all material respects with the
agreements hereunder required to be performed by it at or prior to the Closing;
(b) Nordstrom shall have purchased the Series D Preferred Shares
pursuant to the Stock Purchase Agreement; and
(c) the Company shall have paid the Redemption Price (as defined in the
Securities Purchase Agreement) for all Senior Discount Notes held by Purchasers.
<PAGE>
-6-
2. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
The obligations of the Company to (i) issue and sell the Shares (ii)
amend the Warrant Agreement and (iii) amend the Registration Rights Agreement
pursuant to this Agreement are subject to the satisfaction or waiver by the
Company of the condition that contemporaneously with the Closing the
representations and warranties made by the Purchasers in this Agreement (except
for such representations and warranties as are limited by their terms to an
earlier specified date (which shall be true as of such date)) shall be true and
correct in all material respects at and as of the Closing Date; and the
Purchasers shall have complied in all material respects with the agreements
hereunder required to be performed by it at or prior to the Closing.
VIII. GENERAL PROVISIONS.
1. RATIFICATION.
Except to the extent amended by this Agreement, all of the terms,
conditions and covenants of the Securities Purchase Agreement and the Warrant
Agreement are hereby ratified and confirmed and shall remain in full force and
effect.
2. ENTIRE AGREEMENT.
The Securities Purchase Agreement, the Warrant Agreement and this
Agreement, together with the other writings referred to therein and herein
and/or delivered pursuant thereto and/or hereto, contain the entire agreement
among the parties with respect to the subject matter thereof and hereof and
shall be read and construed together as a single agreement.
3. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
4. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware applicable to contracts made and to be
performed entirely within the state without regard to principles of conflicts of
law.
[Remainder of this page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the day and year first above written.
STREAMLINE, INC.
By: /s/ David k. Blakelock
---------------------------------------------------------
David K. Blakelock
Vice President Operations and
Assistant Secretary
DDJ CANADIAN HIGH YIELD FUND
By: DDJ CAPITAL MANAGEMENT, LLC, its attorney-in-fact
By: /s/ David J. Breazzano
---------------------------------------------------------
David J. Breazzano
Member
MELLON BANK, N.A., solely in its capacity as Trustee
for General Motors Employees Domestic Group Pension
Trust as directed by DDJ Capital Management, LLC, and
not in its individual capacity
By: /s/ Bernadette Rist
---------------------------------------------------------
Bernadette Rist
Authorized Signatory
Agreement to Sections II, III, IV and VIII as
registered holder of Senior Discount Notes
beneficially owned by DDJ Canadian High Yield Fund
HARE & CO.
C/O THE BANK OF NEW YORK
By: /s/ Helena Morales
---------------------------------------------------------
Helena Morales
Assistant Treasurer
<PAGE>
SCHEDULE 1
<TABLE>
<CAPTION>
CASH
PURCHASER NOMINEE NO. SHARES PAYMENT
- --------- ------- ---------- -------
<S> <C> <C> <C>
DDJ CANADIAN HIGH YIELD FUND HARE & CO.C/O THE BANK OF NEW YORK 2,857 $28.57
MELLON BANK, N.A., solely in its capacity MELLON BANK, N.A., solely in its 7,143 $71.43
as Trustee for General Motors Employees capacity as Trustee for General Motors
Domestic Group Pension Trust as directed by Employees Domestic Group Pension Trust
DDJ Capital Management, LLC, and not in its as directed by DDJ Capital Management,
individual capacity LLC, and not in its individual capacity
</TABLE>
<PAGE>
Exhibit 10.22
March 7, 1997
Timothy DeMello
President
Streamline, Inc.
27 Dartmouth Street
Westwood, Massachusetts 02090
Dear Tim,
We're very excited about working with you as your technology partner to help
create an array of capabilities to support Streamline's multi-channel strategy.
This letter will serve to confirm our mutual understanding of the services Elm
Square Technologies, Inc. (hereafter "Elm Square") will provide Streamline, Inc.
(hereafter "Streamline").
The parties to this agreement are Elm Square Technologies, Inc. with a primary
business address of Three Dundee Park, Andover, Massachusetts 01810 and
Streamline, Inc. with a primary business address of 27 Dartmouth Street,
Westwood, Massachusetts 02090.
SCOPE AND DELIVERABLES
Elm Square will create a World Wide Web-based customer support system for
Streamline, Inc. that will perform the following basic functions:
- customer order processing
- customer service
- interactive marketing
The system will be designed to capitalize on the unique capabilities of WebTV
and it will be able to operate in any HTML environment including traditional
browsers. The system project will be organized in five consecutive releases.
Although each release will feature an array of capabilities, they will broadly
represent the following levels of functionality:
-Page 1-
<PAGE>
RELEASE 1 - BASIC ORDER PROCESSING
The goal of Release 1 is to provide Web-based ordering that clearly exceeds the
capabilities offered by competing services.
WEB SITE
- Personalized market page
- Creation and modification of orders covering all products and services
- Creation and modification of personal lists
- Product browsing including category drill down
- Product search using free-form text and fielded text
- Current order status display
- Limited account information and maintenance
- Offline customer service & FAQ
SYSTEM INFRASTRUCTURE
- Web server
- Database server
- Customer database
- Extended UPC database
RELEASE 2 - ADVANCED ORDER PROCESSING
This release extends the order processing and account management capabilities.
WEB SITE
- Auto-replenishment
- Review and update customer profile
- Customer preferences
- Complete account information and maintenance
- Automated customer service triage and responses
RELEASE 3 - INTERACTIVE MARKETING
This release introduces the ability to perform certain marketing activities
(incl. sampling and other promotions) based on customers' unique demographic
attributes and prior purchase activity.
-Page 2-
<PAGE>
WEB SITE
- Actionable billboards (web banners that support direct purchasing)
- Personalized opportunities (customer specific sales propositions)
- Web-presence site (core marketing page, etc.)
- Realtime customer service
RELEASE 4 - AUTOMATED INVENTORY AND ORDER PROCESSING SUPPORT
This release automates the manual interfaces with other Streamline systems,
including the systems used to manage the CRC and the enterprise financial
reporting.
SYSTEM INFRASTRUCTURE
- Integration of the inventory management system
- Integration of the enterprise management system
RELEASE 5 - FULL CHANNEL ADVERTISING SUPPORT
Based on the availability of functional capability within the WebTV device
(Sony), this release will support limited full motion video promotions.
WEB SITE
- WebTV Full Motion Video
Each release will be customer-ready and with the intent of installation in some
or all of the test market homes. In the first three releases described above,
communication with inventory management / order fulfillment activities will be
accomplished through a printed order summary sheet. The final design of each
release will be determined by the joint design team.
The associated file management system (database) will contain customer profiles,
personal shopping information & lists, and complete transactional history
including all support service interactions. To the extent that it is
economically viable, the system will also maintain full UPC coded product
information, including descriptions, prices, brand and product images,
nutritional information and product ingredients.
-Page 3-
<PAGE>
SERVICES TO BE PROVIDED
Elm Square will provide the following services:
- strategic technical leadership,
- systems integration,
- project management,
- software design and development,
- platform selection,
- network design and supervision, and
- external supplier management.
FEES, EXPENSES AND TERM
This agreement shall be in force for ten months commencing March 1, 1997 and
ending December 31, 1997. A monthly fee of $125,000.00 shall be received from
Streamline at Elm Square on or prior to the last regular business day of each
month. These fees will cover the following items for the term of this agreement:
- Elm Square personnel associated with the development activity
- travel expenses for Elm Square personnel
- network support hardware for the development activity
- all telecommunications to and from Elm Square
- all licenses and fees for software and information used in this
application
CONFIDENTIALITY
Elm Square shall render undivided loyalty and allegiance to Streamline in
relations to its obligations under this agreement. Elm Square shall not, at any
time, without prior written consent of Streamline, disclose to any third party
any Confidential Information. Elm Square shall keep such information secret and
confidential and shall take reasonable precautions to prevent any unauthorized
use or disclosure of the Confidential Information.
For the purposes of this agreement, "Confidential Information" means any of
Streamline's information, whether of a technical, business or other nature,
including but not limited to, information which relates to Streamline's trade
secrets, products, promotional materials, developments, proprietary rights or
business affairs. Confidential Information does not include any information
that:
-Page 4-
<PAGE>
(a.) was in the public domain at the time of Streamline's communication thereof
to Elm Square, or was entered into the public domain through no fault of Elm
Square subsequent to the time of Streamline's communication thereof to Elm
Square;
(b.) was developed by employees or agents of Elm Square independently of and
without reference to any of Streamline's information or other information that
Streamline has disclosed in confidence to any third party; or
(c.) is subject to disclosure pursuant to an order, decree, subpoena or other
validly issued judicial or administrative proce-
OWNERSHIP
All systems specifically designed and developed for Streamline shall remain the
property of Streamline. This shall include, but not be limited to, all
externally purchased creative designs and proprietary information contained
within the associated file management systems. Elm Square will retain ownership
rights to any and all hardware systems utilized on Elm Square's premises.
CANCELLATION
Streamline may terminate the contract at any time by providing two months
written notice to Elm Square. The actual date of termination will be the same
day of the month two months later that written notice was given, and the final
month's payment will be prorated based on that date. For example, notice given
on May 20, 1997 would result in a termination as of July 20, 1997 and the July
payment would be 20/31 of $125,000.00.
NOTICES
All notices, communications and payments which are required under this agreement
or which the parties agree to provide each other shall be in writing to the
respective individuals and addresses below unless notified in writing of an
alternate address.
GOVERNING
This agreement, and all rights of the parties thereunder, shall be governed by
the laws of the Commonwealth of Massachusetts.
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<PAGE>
If you are in agreement with the terms and conditions as outlines above, please
sign one copy of the letter in the space provided and return it to us.
Sincerely,
/s/ Thomas O. Jones
------------------------------
Thomas O. Jones
President
Elm Square Technologies
Three Dundee Park
Andover, MA 01810
The foregoing is hereby accepted by Streamline, Inc.
Timothy DeMello
President
Streamline, Inc.
27 Dartmouth Street
Westwood, Massachusetts 02090
Signature: /s/ Timothy A. Demello
-------------------------------
Date:
-------------------------------
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<PAGE>
Exhibit 10.23
THE WARRANT EVIDENCED OR CONSTITUTED HEREBY AND THE SHARES OF COMMON STOCK
ISSUABLE HEREUNDER HAVE BEEN AND WILL BE ISSUED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE ACT
UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION OR (ii)
THE SALE OF SUCH SECURITIES IS MADE PURSUANT TO SECURITIES AND EXCHANGE
COMMISSION RULE 144.
Void after 5:00 p.m.,
Eastern Time
on December 15, 2003
WARRANT TO PURCHASE 200,000 SHARES OF COMMON STOCK
OF
STREAMLINE, INC.
(Subject to Adjustment)
Initial Number of Shares: 200,000 shares
Date of Grant: December 15, 1998
Expiration Date: December 15, 2003
THIS CERTIFIES THAT, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Elm Square Technologies, Inc. ("ELM
SQUARE"), or its permitted registered assigns ("HOLDER"), is entitled to
purchase from Streamline, Inc., a Delaware corporation (the "COMPANY"), subject
to the terms and conditions of this Warrant, Two Hundred Thousand (200,000)
fully paid and nonassessable shares of the Common Stock of the Company, $0.01
par value per share (the "WARRANT STOCK"), at an exercise price of $2.00 per
share (the "EXERCISE PRICE"). Both the number of shares of Warrant Stock
purchasable under this Warrant and the Exercise Price are subject to adjustment
as provided herein. This Warrant shall terminate at 5:00 p.m., Eastern Time, on
December 15, 2003 (the "EXPIRATION DATE").
<PAGE>
WARRANT
- --------------------------------------------------------------------------------
1. CERTAIN DEFINITIONS. As used in this Warrant:
1.1. The term "WARRANT STOCK" shall mean the Common Stock, $0.01 par value
per share, of the Company, and any other securities and property at any time
receivable or issuable upon exercise of this Warrant, unless the context
otherwise requires.
1.2. The term "WARRANT" as used herein, shall include this Warrant and any
warrant delivered in substitution or exchange therefor as provided herein.
1.3. The term "REGISTERED HOLDER" shall mean any Holder in whose name this
Warrant is registered upon the books and records maintained by the Company.
1.4. The term "FAIR MARKET VALUE" of a share of Warrant Stock as of a
particular date (the "DETERMINATION DATE") shall mean:
(a) If traded on a securities exchange or the NASDAQ National Market,
the Fair Market Value shall be deemed to be the average of the closing prices of
the Common Stock of the Company on such exchange over the five (5) business days
ending two (2) days prior to the Determination Date;
(b) If actively traded over-the-counter, the Fair Market Value shall
be deemed to be the average of the closing bid prices over the 30-day period
ending three (3) days prior to the Determination Date; and
(c) If there is no active public market, the Fair Market Value shall
be the value thereof, as determined in good faith by the Board of Directors of
the Company.
2. VESTING
This Warrant shall be fully vested and exercisable as of December 15,
1998.
3. MANNER OF EXERCISE
3.1. PAYMENT.
Subject to compliance with the terms and conditions of this Warrant and
applicable securities laws, this Warrant may be exercised, in whole or in part,
at any time on or before the Expiration Date, by surrendering this Warrant at
the principal office of the Company together with:
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<PAGE>
(a) the form of Notice of Exercise attached hereto as Exhibit 1 (the
"NOTICE OF EXERCISE") duly executed by the Holder, and
(b) payment, in cash (by check) or by wire transfer, of an aggregate
amount equal to the number of shares of Warrant Stock being purchased upon such
exercise multiplied by the applicable Exercise Price for each such share (such
aggregate amount being referred to herein as the "EXERCISE AMOUNT").
3.2. PARTIAL EXERCISE, EFFECTIVE DATE OF EXERCISE.
In case of any partial exercise of this Warrant, the Company shall
cancel this Warrant upon surrender hereof and shall execute and deliver a new
Warrant of like tenor and date for the balance of the shares of Warrant Stock
purchasable hereunder. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above. The person entitled to receive the shares of
Warrant Stock issuable upon exercise of this Warrant shall be treated for all
purposes as the holder of record of such shares as of the close of business on
the date the Holder is deemed to have exercised this Warrant.
3.3. STOCK CERTIFICATES, FRACTIONAL SHARES.
As soon as practicable on or after such date, the Company shall issue
and deliver to the person or persons entitled to receive the same a certificate
or certificates for the number of whole shares of Warrant Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share equal to
such fraction of the Fair Market Value of one whole share of Warrant Stock as of
the date of exercise of this Warrant. No fractional shares or scrip
representing fractional shares shall be issued upon an exercise of this Warrant,
and any fractional shares shall be rounded to the nearest whole share.
4. VALID ISSUANCE; TAXES.
All shares of Warrant Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and non-assessable, and the Company shall pay all
taxes and other governmental charges that may be imposed in respect of the issue
or delivery thereof. The Company shall not be required to pay any tax or other
charge imposed in connection with any transfer involved in the issuance of any
certificate for shares of Warrant Stock in any name other than that of the
Registered Holder of this Warrant, and in such case the Company shall not be
required to issue
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<PAGE>
or deliver any stock certificate or security until such tax or other charge has
been paid, or it has been established to the Company's reasonable satisfaction
that no tax or other charge is due.
5. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
The number of shares of Warrant Stock issuable upon exercise of this
Warrant (or any shares of stock or other securities or property receivable or
issuable upon exercise of this Warrant) and the Exercise Price are subject to
adjustment upon occurrence of the following events:
5.1. ADJUSTMENT FOR STOCK SPLITS, STOCK SUBDIVISIONS OR COMBINATIONS OF
SHARES.
The Exercise Price of this Warrant shall be proportionally decreased
and the number of shares of Warrant Stock issuable upon exercise of this Warrant
(or any shares of stock or other securities at the time issuable upon exercise
of this Warrant) shall be proportionally increased to reflect any stock split or
subdivision of the Company's Common Stock. The Exercise Price of this Warrant
shall be proportionally increased and the number of shares of Warrant Stock
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall be
proportionally decreased to reflect any combination of the Company's Common
Stock.
5.2. ADJUSTMENT FOR DIVIDENDS OR DISTRIBUTIONS OF STOCK OR OTHER SECURITIES
OR PROPERTY.
In case the Company shall make or issue, or shall fix a record date
for the determination of eligible holders entitled to receive, a dividend or
other distribution with respect to the Warrant Stock (or any shares of stock or
other securities at the time issuable upon exercise of the Warrant) payable in
(i) securities of the Company or (ii) assets (excluding cash dividends paid or
payable solely out of retained earnings), then, in each such case, the Holder of
this Warrant on exercise hereof at any time after the consummation, effective
date or record date of such dividend or other distribution, shall receive, in
addition to the shares of Warrant Stock (or such other stock or securities)
issuable on such exercise prior to such date, and without the payment of
additional consideration therefor, the securities or such other assets of the
Company to which such Holder would have been entitled upon such date if such
Holder had exercised this Warrant on the date hereof and had thereafter, during
the period from the
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<PAGE>
date hereof to and including the date of such exercise, retained such shares
and/or all other additional stock available by it as aforesaid during such
period giving effect to all adjustments called for by this Section 5.
5.3. RECLASSIFICATION.
If the Company, by reclassification of securities or otherwise, shall
change any of the securities as to which purchase rights under this Warrant
exist into the same or a different number of securities of any other class or
classes, this Warrant shall thereafter represent the right to acquire such
number and kind of securities as would have been issuable as the result of such
change with respect to the securities that were subject to the purchase rights
under this Warrant immediately prior to such reclassification or other change
and the Exercise Price therefore shall be appropriately adjusted, all subject to
further adjustment as provided in this Section 5.
5.4. ADJUSTMENT FOR CAPITAL REORGANIZATION, MERGER OR CONSOLIDATION.
In case of any capital reorganization of the capital stock of the
Company (other than a combination, reclassification, exchange or subdivision of
shares otherwise provided for herein), or any merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all the assets of the Company then, and in each such case, as a part of such
reorganization, merger, consolidation, sale or transfer, lawful provision shall
be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 5. The foregoing provisions of this Section 5.4 shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall
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<PAGE>
be determined in good faith by the Company's Board of Directors. In all events,
appropriate adjustment (as determined in good faith by the Company's Board of
Directors) shall be made in the application of the provisions of this Warrant
with respect to the rights and interests of the Holder after the transaction, to
the end that the provisions of this Warrant shall be applicable after that
event, as near as reasonably may be, in relation to any shares or other property
deliverable after that event upon exercise of this Warrant.
5.5 CERTAIN EVENTS
If (i) any event occurs of a type that would have an effect on the
rights granted under this Warrant similar to the effect of any event described
by the other provisions of this Section 5 and (ii) such event is not expressly
provided for by such other provisions (including, without limitation, the
granting of stock appreciation rights, phantom stock rights and other rights
with equity features), then an appropriate adjustment in the Exercise Price and
the number of shares of Common Stock obtainable upon exercise of this Warrant so
as to protect the rights of the Holder shall be made.
5.6. RESERVATION OF SECURITIES AND ASSETS.
The Company shall reserve, for the life of the Warrant, such
securities or such other assets of the Company the Holder is entitled to receive
pursuant to this Section 5.
6. CERTIFICATE AS TO ADJUSTMENTS.
In each case of any adjustment in the Exercise Price, or number or type of
shares issuable upon exercise of this Warrant, the Chief Financial Officer or
the Controller of the Company shall compute such adjustment in accordance with
the terms of this Warrant and prepare a certificate setting forth such
adjustment and showing in detail the facts upon which such adjustment is based,
including a statement of the adjusted Exercise Price. The Company shall
promptly send (by facsimile and by either first class mail, postage prepaid or
overnight delivery) a copy of each such certificate to the Holder.
7. LOSS OR MUTILATION.
Upon receipt of evidence reasonably satisfactory to the Company of the
ownership of and the loss, theft, destruction or mutilation of this Warrant, and
of indemnify reasonably satisfactory to it, and (in the case
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<PAGE>
of mutilation) upon surrender and cancellation of this Warrant, the Company will
execute and deliver in lieu thereof a new Warrant of like tenor as the lost,
stolen, destroyed or mutilated Warrant.
8. RESERVATION OF COMMON STOCK.
The Company hereby covenants that at all times there shall be reserved for
issuance and delivery upon exercise of this Warrant such number of shares of
Common Stock or other shares of capital stock of the Company as are from time to
time issuable upon exercise of this Warrant and, from time to time, will take
all steps necessary to amend its Certificate of Incorporation to provide
sufficient reserves of shares of Common Stock issuable upon exercise of this
Warrant. All such shares shall be duly authorized, and when issued upon such
exercise, shall be validly issued, fully paid and non-assessable, free and clear
of all liens, security interests, charges and other encumbrances or restrictions
on sale and free and clear of all preemptive rights, except encumbrances or
restrictions arising under federal or state securities laws. Issuance of this
Warrant shall constitute full authority to the Company's officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the exercise of this
Warrant.
9. TRANSFER AND EXCHANGE.
Subject to compliance with applicable securities laws, and subject to the
provisions of Section 10 below, this Warrant may be transferred or assigned in
whole or in part, at any time, and from time to time, at the Holder's sole
election.
10. RESTRICTIONS ON TRANSFER.
The Holder, by acceptance hereof, agrees that, absent an effective
registration statement filed with the U.S. Securities and Exchange Commission
("SEC") under the Act covering the disposition or sale of this Warrant or the
Warrant Stock issued or issuable upon exercise hereof, as the case may be, and
registration or qualification under applicable state securities laws, such
Holder will not sell, transfer, pledge, or hypothecate any or all such Warrants
or Warrant Stock, as the case may be, unless either (i) the Company has received
an opinion of counsel, in form reasonably satisfactory to the Company, to the
effect that such registration is not required in connection with such
disposition or (ii) the sale of such securities is made pursuant to SEC Rule
144; PROVIDED that if such sale is pursuant to Rule 144, the Company may require
the delivery
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<PAGE>
of a reasonably satisfactory opinion of counsel confirming that such Warrant or
Warrant Stock, as the case may be, may be sold pursuant to Rule 144, if the
Company determines that such opinion is reasonably necessary.
11. COMPLIANCE WITH SECURITIES LAWS.
By acceptance of this Warrant, the Holder hereby represents, warrants and
covenants that any shares of stock purchased upon exercise of this Warrant shall
be acquired for investment only and not with a view to, or for sale in
connection with, any distribution thereof, that the Holder has had such
opportunity as such Holder has deemed adequate to obtain from representatives of
the Company such information as is necessary to permit the holder to evaluate
the merits and risks of its investment in the Company; that the Holder is able
to bear the economic risk of holding such shares as may be acquired pursuant to
the exercise of this Warrant for an indefinite period; that the Holder
understands that the shares of stock acquired pursuant to the exercise of this
Warrant will not be registered under the Act (unless otherwise required pursuant
to exercise by the holder of the registration rights, if any, previously granted
to the registered Holder) and will be restricted securities within the meaning
of Rule 144 under the Act and that the exemption from registration under Rule
144 will not be available for at least one year from the date of exercise of
this Warrant, and even then will not be available unless a public market then
exists for the stock, adequate information concerning the Company is then
available to the public, and other terms and conditions of Rule 144 are complied
with; and that all stock certificates representing shares of stock issued to the
Holder upon exercise of this Warrant may have affixed thereto a legend
substantially in the following form:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN AND WILL
BE ISSUED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED ("THE ACT"), AND MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, PLEDGED OR HYPOTHECATED WITHOUT REGISTRATION UNDER THE
ACT OR UNLESS EITHER (i) THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, IN FORM REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH DISPOSITION
OR (ii) THE SALE OF SUCH SECURITIES IS
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<PAGE>
MADE PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 144; PROVIDED THAT
IF SUCH SALE IS PURSUANT TO RULE 144, THE COMPANY MAY REQUIRE THE DELIVERY
OF A REASONABLY SATISFACTORY OPINION OF COUNSEL CONFIRMING THAT SUCH
WARRANT OR WARRANT STOCK, AS THE CASE MAY BE, MAY BE SOLD PURSUANT TO RULE
144, IF THE COMPANY DETERMINES THAT SUCH OPINION IS REASONABLY NECESSARY.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDERS.
This Warrant shall not entitle the Holder to any voting rights or other
rights as a shareholder of the Company. In the absence of affirmative action by
such Holder to purchase Warrant Stock by exercise of this Warrant, no provisions
of this Warrant, and no enumeration herein of the rights or privileges of the
Holder hereof shall cause such Holder hereof to be a shareholder of the Company
for any purpose.
13. NOTICES.
All notices and other communications from the Company to the Holder shall
be given in any manner deemed reasonable by the Company to the Holder at the
most recent address or facsimile number of the Holder provided in writing to the
Company by the Holder.
14. HEADINGS.
The headings in this Warrant are for purposes of convenience in reference
only, and shall not be deemed to constitute a part hereof
15. LAW GOVERNING.
This Warrant shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware.
16. NO IMPAIRMENT.
The Company will not, by amendment of its Certificate of Incorporation or
bylaws, or through reorganization, consolidation, merger, dissolution, issue or
sale of securities, sale of assets or any other 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 action as
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<PAGE>
may be necessary or appropriate in order to protect the rights of the Registered
Holder of this Warrant against impairment. Without limiting the generality of
the foregoing, the Company (a) will not increase the par value of any shares of
stock issuable upon the exercise of this Warrant above the amount payable
therefor upon such exercise, and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of Warrant Stock upon exercise of this
Warrant.
17. NOTICES OF RECORD DATE. In case:
17.1. the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of
any class or any other securities or to receive any other right; or
17.2. of any consolidation or merger of the Company with or into
another corporation, any capital reorganization or the Company, any
reclassification of the Capital Stock of the Company, or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation; or
17.3. of any voluntary dissolution, liquidation or winding-up of the
Company; or
17.4. of any redemption or conversion of all outstanding shares of
Common Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of shares of Common Stock (or
such stock or securities as at the time are receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution,
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<PAGE>
liquidation or winding-up. Such notice shall be delivered at least thirty (30)
days prior to the date therein specified.
18. SEVERABILITY.
If any term, provision, covenant or restriction of this Warrant is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated.
19. COUNTERPARTS.
For the convenience of the parties, any number of counterparts of this
Warrant may be executed by the parties hereto and each such executed counterpart
shall be, and shall be deemed to be, an original instrument.
20. NO INCONSISTENT AGREEMENTS.
The Company will not on or after the date of this Warrant enter into any
agreement with respect to its securities which is inconsistent with the rights
granted to the Holders of this Warrant or otherwise conflicts with the
provisions hereof The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to holders of the
Company's securities under any other agreements, except rights that have been
waived.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
21. SATURDAYS, SUNDAYS AND HOLIDAYS.
If the Expiration Date falls on a Saturday, Sunday or legal holiday, the
Expiration Date shall automatically be extended until 5:00 p.m. the next
business day.
AGREED:
ELM SQUARE STREAMLINE, INC.
TECHNOLOGIES, INC.
/s/ Thomas O. Jones /s/ Timothy A. DeMello
- ------------------------- -------------------------
Signature Signature
Thomas O. Jones Timothy A. DeMello
- ------------------------- -------------------------
Printed Name Printed Name
President Chairman and CEO
- ------------------------- -------------------------
Title Title
Date: March 28, 1999 Date: March 28, 1999
------------------- -------------------
ASSENT AND AGREEMENT:
In consideration of the Company's agreement to issue this Warrant, the
undersigned hereby (i) assents and agrees that the Incentive Stock Option
Agreement, dated February 28, 1997, by and between the Company and the
undersigned, relating to options to purchase up to 200,000 shares of the Common
Stock of the Company, $0.01 par value per share, and all of the rights and
obligations of each such party thereunder are hereby terminated and of no
further effect and (ii) further agrees to return to the Company any copy of such
agreement in the undersigned's possession.
/s/ Thomas Jones
- -------------------------
Thomas Jones
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<PAGE>
Exhibit 10.24
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, entered into as of ___________, 1996, by and
between STREAMLINE, INC. a Delaware business corporation having its principal
office at 27 Dartmouth Street, Westwood, Massachusetts 02090 (the "Company") ,
and FRANK F. BRITT, an individual residing at 33 Knollwood Court, Burlington,
Massachusetts 01803 (hereinafter called the "Executive").
R E C I T A L S:
WHEREAS, the Company wishes to retain the services of the Executive and
to compensate him therefor; and
WHEREAS, the Executive is desirous of committing himself to serve the
Company on the terms herein provided.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained, the parties
hereto agree as follows:
1. EMPLOYMENT. (a) The Company will employ the Executive and the
Executive will serve the Company as Vice President of Marketing and
Merchandising, upon the terms and conditions provided herein. The Executive's
duties under this Agreement shall be to devise and direct the Company's
marketing strategy and direct its sales program and related staff. In the
discharge of his duties hereunder, the Executive shall report to the President
of the Company and shall keep such officer informed of the Executive's
activities hereunder. In rendering his services hereunder, the Executive shall
not be required to reside outside the greater Boston area.
(b) During the term hereof, the Executive shall be employed by the
Company on a full-time basis and shall perform such duties and responsibilities
as are specified above, and any such other related duties as may reasonably be
designated from time to time by the President or Board of Directors of the
Company (the "Board") . During the term of his employment hereunder, the
Executive shall use his best efforts in the discharge of his duties hereunder
and in furtherance of the business of the Company.
2. TERM. The initial term of the Executive's employment hereunder shall
be for the 12-month period beginning on the date hereof (the "Initial Term"),
unless earlier terminated as herein provided. Thereafter, the
<PAGE>
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Executive's employment hereunder shall be extended for successive 12-month
periods, unless either party advises the other in writing, at least 60 days
prior to the expiration of the then current term of his employment (the "Term"),
that such employment shall not be further extended, in which event the
Executive's employment hereunder shall terminate as of the end of the then
current Term hereof.
3. BASE SALARY. The Company agrees to pay and the Executive agrees to
accept, in accordance with the provisions contained herein, a base salary at an
annual rate of not less than One Hundred Thousand Dollars ($100,000), payable
semi-monthly and subject to being increased from time to time by the Board of
Directors of the Company, following and based upon annual reviews of the
Executive's performance, the first such review to be made not later than the
first annual anniversary of the date hereof. Such base salary, as from time to
time increased, is hereinafter referred to as the "Base Salary".
4. ADDITIONAL COMPENSATION. In addition to his Base Salary, in
consideration of (a) the execution of this Agreement, the Executive shall be
paid a one time bonus of $15, 000, payable in equal installments on the first
two semi-monthly dates Base Salary is paid hereunder and (b) a [ ] study to be
completed by the end of 1996, the Executive shall be paid $2,500 or before [ ],
1996.
5. Benefits. During the term hereof, the Executive shall be entitled to
(i) paid vacation at the rate of ___________ (_____) weeks per 12-month period,
to be taken at mutually convenient times; (ii) subject to any contribution
therefor generally required of senior executive employees of the Company, to
participate in any and all employee benefit plans from time to time in effect
for senior executives of the Company generally, except to the extent such plans
are in a category of benefit otherwise provided to the Executive. Such
participation shall be subject to (A) the terms of the applicable plan
documents, and (B) generally applicable policies of the Company; (iii) an
incentive stock option to purchase an aggregate of 175,000 shares of the
Company's common stock for $1.02 per share, such option to be in the form in
which annexed hereto as Exhibit 5; and (iv) those other employee benefits
described in Schedule 5 hereto.
6. BUSINESS EXPENSES. The Company shall promptly pay or reimburse the
Executive for business expenses incurred or paid by him in the performance of
his duties and responsibilities hereunder, in accordance with such written
policies as may from time to time by implemented by the Board and be provided to
the Executive. The Company shall further reimburse the
<PAGE>
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Executive upon request for one-half (1/2) of the legal expenses incurred by him
on or in the preparation and negotiation of this Agreement.
7. TERMINATION.
(a) DEATH. The Executive's employment hereunder shall
terminate upon his death, in which event the Company shall be obliged to pay to
the Executive's estate any Base Salary and Additional Compensation earned and
owing prior to the Executive's death, plus any expense reimbursement owed the
Executive prior to his death.
(b) CAUSE. The Company may terminate the Executive's
employment hereunder for Cause at any time upon notice to the Executive setting
forth in reasonable detail the nature of such Cause. For the purposes of this
Agreement, "Cause," as determined by the Board in its reasonable judgment, shall
mean: (i) a Criminal Conviction (as hereinafter defined); (ii) the failure by
the Executive to substantially perform his duties hereunder, other than any such
failure resulting from the Executive's Disability (as defined in ss.7(c)
hereof), where such failure is not cured to the reasonable satisfaction of the
Board within 30 days after Executive's receipt of written notice thereof,
including in reasonable detail the nature of such failure; or, (iii) the
engaging by the Executive in fraud or other intentional misconduct with respect
to the Company. As used herein, "Criminal Conviction" means any conviction of a
criminal violation, related to the Executive's duties or responsibilities to the
Company. In the event of any termination under this ss.7(b), the Company shall
pay to the Executive any Base Salary and Additional Compensation earned and
owing prior to the Date of Termination of the Executive's employment, plus any
expense reimbursement owed the Executive prior to the Date of Termination of his
employment.
(c) DISABILITY. (i) The Company may terminate the Executive's
employment hereunder upon notice to him, in the event that the Executive becomes
disabled during his employment hereunder through any illness, injury, accident
or condition of either a physical or psychological nature and, as a result, is
unable to perform substantially all of his duties and responsibilities hereunder
for 120 days cumulatively during any period of 365 consecutive calendar days. In
the event of any termination under this ss.7(c), the Company shall pay to the
Executive or his legal representative any Base Salary and Additional
Compensation earned and owing prior to the Date of Termination of the
Executive's employment, plus any expense reimbursement owed the Executive prior
to the Date of Termination of his employment.
<PAGE>
-4-
(ii) The Board may designate another employee to act in the Executive's
place during any period of the Executive's disability. Notwithstanding any such
designation, the Executive shall continue to receive his Base Salary in
accordance with ss.3 hereof (and, if then unpaid, Additional Compensation in
accordance with ss.4 hereof), less any amounts received by the Executive under
any disability income plan provided Executive by the Company, and shall continue
to participate in Company benefit plans in accordance with ss.5 hereof to the
extent permitted by the then current terms of the applicable benefit plans,
until the Date of Termination of the Executive's employment.
(iii) If any question shall arise as to whether during any period the
Executive is disabled through any-illness, injury, accident or condition of
either a physical or psychological nature so as to be unable to perform
substantially all of his duties and responsibilities hereunder, the Executive
may, and at the request of the Company shall, submit to a medical examination by
a physician selected by the Company to whom the Executive or his duly appointed
guardian, if any, has no reasonable objection, to determine whether the
Executive is so disabled and such determination shall for the purposes of this
Agreement be conclusive of the issue.
(d) BY THE COMPANY OTHER THAN FOR CAUSE. The Company may at any time
terminate the Executive's employment hereunder other than for Cause at any time
upon notice to the Executive. In the event of such termination, then until the
later of (i) the conclusion of the Initial Term hereof, or (ii) the conclusion
of a period of two (2) months following the date when Notice of Termination
under this ss.7(d) is given, the Company shall continue to pay the Executive his
Base Salary at the rate then in effect (and, if then unpaid, Additional
Compensation in accordance with ss.4 hereof) and to provide Executive any
benefits then applicable to the Executive, provided that the Executive is
entitled to continue such participation is not permitted, the Company shall pay
the Executive in cash upon such Date of Termination the reasonable value
thereof.
(e) NOTICE OF TERMINATION. Any termination by the Company pursuant to
ss.ss.7(b), 7(c) or 7(d) hereof shall be communicated by written Notice of
Termination to the Executive. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and (in the case of termination under
ss.ss.7(b) or (c) hereof) shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
<PAGE>
-5-
(f) DATE OF TERMINATION. The Date of Termination of the Executive's
employment shall mean (i) if the Executive's employment is terminated by his
death, the date of his death, and (ii) if the Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given.
8. PROPRIETARY INFORMATION, NON-COMPETITION AND NON-SOLICITATION. (a).
The Executive acknowledges that the Company continually develops Proprietary
Information, that the Executive may develop Proprietary Information for the
Company, and that the Executive may learn of Proprietary Information during the
course of his employment with the Company. The Executive will not, except as may
be required by applicable law or legal process, intentionally disclose any
Proprietary Information to any person or entity other than employees of or
consultants to the Company or use the same for any purposes (other than in the
performance of his duties as an employee of the Company) without written
approval by an officer of the Company, either during or after his employment
with the Company, unless and until such Proprietary Information has become
public knowledge without fault by the Executive.
(b) As used herein, "Proprietary Information" means any and all
information, whether or not in writing, of the Company and/or any of its more
than 50%-owned subsidiaries (each an "Affiliate") of a private, secret or
confidential nature concerning the business, business relationships or financial
affairs of the Company and/or any of its Affiliates, the confidentiality of
which is legally protectible under applicable law. By way of illustration, but
not limitation, Proprietary Information may include inventions, products,
processes, methods, techniques, formulas, compositions, compounds, projects,
developments, plans, research data, clinical data, financial data, personnel
data, computer programs, customer and supplier lists, and specialized knowledge
of customers or prospective customers of the Company. Proprietary Information
does not include any information which was or is generally available to the
public at the time of disclosure, which is or becomes generally available to the
public other than by a breach of this Agreement, information rightfully
available from a third party without an obligation of confidentiality to the
Company; or general information or experience acquired by the Executive in the
course of his employment.
(c) The Executive agrees that all files, letters, memoranda, reports,
records, data, sketches, drawings, laboratory notebooks, program listings, or
other written, photographic, or other tangible material containing Proprietary
Information, whether created by the Executive or others, which shall come into
his custody or possession, shall be and are the exclusive
<PAGE>
-6-
property of the Company to be used by the Executive only in the performance of
his duties for the Company. All such materials or copies thereof and all
tangible property of the Company in the custody or possession of the Executive
shall be delivered to the Company, upon the earlier of (i) a written request by
the President of the Company, or (ii) termination of his employment. After such
delivery, the Executive shall not retain any such materials or copies thereof or
any such tangible property.
(d) The Executive agrees that his obligation not to disclose or to use
information and materials of the types set forth in subparagraphs (b) and (c)
above, and his obligation to return materials and tangible property, set forth
in subparagraph (c) above, also extends to such types of information, materials
and tangible property of customers of the Company or suppliers to the Company or
other third parties who may have disclosed or entrusted the same to the Company
or to the Executive in confidence.
(e) The Executive agrees that some restrictions on his activities
during and after the Term of his employment are necessary to protect the
legitimate interests of the Company. The Executive therefore agrees that, (i)
during the Term of his employment with the Company, he will not engage in any
outside business activity competitive with the business of the Company or its
Affiliates, unless disclosed to and approved in writing by the President or the
Board; (ii) for 24 months from the date of termination of his employment by
reason of the Executive's resignation (the "Non-competition Period"), the
Executive shall not within the states of Maine, Vermont, New Hampshire,
Massachusetts, Rhode Island and Connecticut, as an individual proprietor,
partner, stockholder, officer, employee, director, joint venturer, lender or
consultant, (A) develop, design, produce, market, sell or render (or assist any
other person in developing, designing, producing, marketing, selling or
rendering) products or services competitive with those developed, designed,
produced, marketed, sold or rendered by the Company while the Executive was
employed by the Company, or (B) solicit, divert or take away, or attempt to
divert or to take away, the business patronage of any of the clients, customers
or accounts which were served by the Executive while he was employed by the
Company; and (iii) during the Non-Competition Period, the Executive shall not
directly or indirectly recruit or solicit any employee of the Company, or induce
or attempt to induce any employee of the Company to terminate his or her
employment with the Company.
(f) The Executive acknowledges that he has carefully read and
considered all the terms and conditions of this Agreement, including the
restraints imposed upon him pursuant to this Section 8. The Executive agrees
that said restraints are necessary for the reasonable and proper protection of
the Company and that each and every one of the restraints is reasonable in
<PAGE>
-7-
respect to subject matter, length of time and geographic area. The Executive
therefore agrees that the Company, in addition to any other remedies available
to it, shall be entitled to preliminary and permanent injunctive relief against
any breach of threatened breach by the Executive of any of said covenants. The
parties further agree that, in the event that any provision of this ss.8 shall
be determined by any court of competent jurisdiction to be unenforceable by
reason of its extending over too great a time, too large a geographic area, or
too great a range of activities, such provisions shall be deemed to be modified
to permit its enforcement to the maximum extent permitted by law. Nothing herein
contained shall prevent the Executive from holding or investing in securities
listed on a national securities exchange or sold in the over-the-counter market,
provided such investment do not exceed in the aggregate one percent (1%) of the
issued and outstanding equity interests of a firm which is a competitor of the
Company within the meaning of this ss.8.
9. DEVELOPMENTS. (a) The Executive will make full and prompt disclosure
to the Company of all inventions, improvements discoveries, methods,
developments, software, and works of authorship, whether, patentable or not,
which are created, made, conceived or reduced to practice by him or under his
direction or jointly with others during the Term of his employment by the
Company, whether or not during normal working hours or on the premises of the
Company (all of which are collectively referred to in this Agreement as
"Developments") .
(b) The Executive agrees to assign and does hereby assign to the
Company (or any person or entity designated by the Company all his right, title
and interest in and to all Developments and all related patents, patent
applications, copyrights and copyright applications. However, this ss.9(b) shall
not apply to Developments which do not relate to the employment duties of the
Executive or the present or planned business or research and development of the
Company and which are made and conceived by the Executive not during normal
working hours, not on the Company's Premises and not using the Company's tools,
devices, equipment or Proprietary Information. The Executive understands that,
to the extent this Agreement shall be construed in accordance with the laws of
any jurisdiction which precludes a requirement in an employee agreement to
assign certain classes of inventions in an employee, this ss.9(b) shall be
interpreted not to apply to any invention which a court rules or the Company
agrees falls within such classes.
(c) The Executive agrees to cooperate fully with the Company, both
during and after the Term of his employment with the Company, at the Company's
expense, with respect to the procurement, maintenance and
<PAGE>
-8-
enforcement of copyrights, patents and other intellectual property rights (both
in the United States and foreign countries) relating to Developments. The
Executive shall sign all papers, including, without limitation, copyright
applications, patent applications, declarations, oaths, formal assignments and
assignments of priority rights, which the Company reasonably deems necessary or
desirable in order to protect its rights and interests in any Development.
(d) The Executive hereby represents that, except as the Executive may
otherwise have disclosed in writing to the Company, the Executive is not bound
by the terms of any agreement with any previous employer or other party to
refrain from using or disclosing any trade secret or confidential or proprietary
information in the course of his employment with the Company or to refrain from
competing, directly or indirectly, with the business of such previous employer
or any other party. The Executive further represents that his performance of all
the terms of this Agreement and as an employee of the Company does not and will
not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by the Executive in confidence or in trust prior to
his employment with the Company, and the Executive will not disclose to the
Company or induce the Company to use any confidential or proprietary information
or material belonging to any previous employer or others.
(e) The Executive acknowledges that the Company from time to time may
have agreements with other persons or with the United States Government, or
agencies thereof, which impose obligations or restrictions on the Company
regarding inventions made during the course of work under such agreements or
regarding the confidential nature of such work. The Executive agrees to be bound
by all such obligations and restrictions which are made known to the Executive
and are not contrary to his rights hereunder or under applicable law, and to
take all action necessary to discharge the obligations of the Company under such
agreements.
10. ASSIGNMENT. Neither the Company nor the Executive may assign this
Agreement or any interest herein, by operation of law or otherwise, without the
prior written consent of the other. This Agreement shall inure to the benefit of
and be binding upon the Company and the Executive, their respective successors,
executors, administrators, heirs and permitted assigns.
11. NO CONFLICT WITH OTHER AGREEMENT. The Executive represents that the
execution and performance by him of this Agreement does not and will not
conflict with or breach the terms of any other agreement by which the Employee
is bound.
<PAGE>
-9-
12. SEVERABILITY. If all or any portion of any provision of this
Agreement shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the application
of such portion or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
13. WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
14. NOTICES. All communications provided for herein shall be in
writing, and if addressed to the Executive shall only be hand delivered or sent
by registered or certified mail, return receipt requested, postage prepaid,
addressed to:
Mr. Frank F. Britt
33 Knollwood Court
Burlington, MA 01803
with a copy to
Steven D. Eimert, Esq.
Sherin and Lodgen LLP
100 Summer Street
Boston, MA 02110
or if addressed to the Company shall only be hand delivered or sent by
registered or certified mail, return receipt requested, postage prepaid,
addressed to:
Streamline, Inc.
27 Dartmouth Street
Westwood, MA 02090
Attn.: President
with a copy to:
<PAGE>
-10-
or to such other address as the party or person to receive such notice shall
hereafter advise the other party hereto in accordance with this provision, and
shall be deemed given on the date of the first attempted delivery thereof by
hand or by the Postal Service, as shown in the latter case by the records of the
Postal Service.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes and
terminates without liability all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive's employment.
16. AMENDMENTS. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
17. HEADINGS. The headings and caption in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
18. GOVERNING LAW; PLACE OF SUIT. This is a Massachusetts contract and
shall be construed and enforced under and be governed in all respects by the
laws of the Commonwealth of Massachusetts, without regard to the conflicts of
laws principles of that or any other jurisdiction. Any action, suit, or other
legal proceeding which is commenced to resolve any matter arising under or
relating to any provision of this Agreement shall be commenced only in a court
of the Commonwealth of Massachusetts (or, if appropriate, a federal court
located within Massachusetts), and the Company and the Executive each consents
to the jurisdiction of such a court, and agrees that service of process from
such court may be effected without the requirement of personal service by
mailing the same to such party in accordance with the provisions of ss.14
hereof.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, by its duly authorized representative, and by the
Executive as of the date first above written.
THE EXECUTIVE STREAMLINE, INC.
/s/ FRANK F. BRITT By: /s/ TIMOTHY A. DEMELLO
- ------------------------------- ----------------------------
Frank F. Britt JULY 1, 1996
Name: TIMOTHY A. DEMELLO
Title: CHAIRMAN & CEO
<PAGE>
Exhibit 10.25
STREAMLINE
REVISED
May 1, 1997
Faith Popcorn
BRAINRESERVE
One Madison Avenue
New York, NY 10010
Dear Faith:
This memorandum serves as a contract between Streamline and BrainReserve.
BACKGROUND:
The Consumer Learning Center is a "live" research center designed to bring
together and further develop the best thinking on relationship marketing in the
emerging Consumer Direct industry. Toward that end, our objective is twofold: 1)
to create a practical, hands-on forum to help determine how best to serve and
market to the new consumer; and 2) to establish Streamline as the recognized
leader in the Consumer Direct industry.
BRAINRESERVE'S ROLE:
We believe the BrainReserve is perfectly suited to support the work of the
Consumer Learning Center.
The primary objectives of this assignment are two-fold:
1. To clearly articulate the barriers and enablers of Consumer Direct
channel growth by drawing on consumer and expert opinion from a broad
range of areas, including the fields of technology, world-class service
organizations, and academia.
2. To develop one trend-supported "Sociological Impact Statement" white
paper and presentation, including the implications and innovations for
three key audiences: the consumer (80% of focus), the manufacturer (10%
of focus), and Streamline (10% of focus).
BrainReserve's report and presentation will cover three specific implication
arenas:
- - What does the use of this category of home delivery service mean
to the family in terms of time made available, lifestyle, and
family impact of increased leisure and/or work time. What accrues
to the family from the reduction of stress related to the
outsourcing of shopping and repetitive task responsibilities? What
types of products, promotions and services are required for
optimum benefit?
- - What are the barriers to entry for adoption of Streamline and
other competing services? Why do consumers sign on? Why do they
cancel? What keeps them from becoming early adopters? Are there
benefits (such as Streamline's "high touch"
27 Dartmouth Street Westwood, MA 02090
tel 617.407.1900 fax 617.407.1946
<PAGE>
-2-
approach to service delivery) that can be engineered into this
"high tech" category to facilitate trial, adoption, and
loyalty from the consumer and market leadership for
Streamline?
- - What should the core of Streamline's vision be to provide a
sustainable competitive advantage? What must it stand for uniquely
in the consumer landscape to ensure market leadership over time?
BRAINRESERVE APPROACH:
In order to achieve the above objectives BrainReserve will:
1. Attend five meetings of the CLC and will deliver one major presentation
(late June/early July) and one joint presentation (October).
2. Conduct qualitative research, including:
- 50- 100 TalentBank Expert Interviews
- 5 Creative Thinks : 3 with 6-8 experts per session (total of
approximately 20 experts)
2 with 6-8 consumers per session (total of
approximately 15 consumers)
- 1 Critical Think, and
- 1 Trend Discontinuity Session
3. Participate in Streamline's on-going consumer research to help design
and participate in relevant qualitative and quantitative studies.
BrainReserve expects that Streamline should plan to conduct a series of
focus groups among the following:
- Current Streamline customers
- Current competitive service subscribers, and
- Potential subscribers of a service like Streamline
If BrainReserve and Streamline together conclude that quantitative consumer
research is required, BrainReserve will help define a cost-effective option to
gathering such data. Streamline understands that the cost of quantitative
research is supplemental to the BrainReserve professional fees detailed below.
PROJECT TIMING:
This project is a two-and-a-half-month study, to be conducted during the
nine-month period beginning February 15, 1997 and continuing through October 15,
1997. The rough timeline is estimated as follows:
FEBRUARY
Two weeks elapsed time to develop and refine (with Streamline) the research
goals, methodology, and definitive project timetable. Articulate consumer
research objectives and identify opportunities to leverage focus group
activities of the CLC.
<PAGE>
-3-
MARCH/APRIL
Three weeks elapsed time to conduct Talent Bank expert interviews, and conduct
first round of Creative Thinks. Hypothesis development.
MAY/JUNE
Three weeks elapsed time to conduct second round of Creative Thinks with first
round of consumer quantitative ratification (with CLC Panel, or Chilton or other
omnibus service). Development of Impact Statement White Paper Presentation of
interim findings at full session of the CLC.
JULY
One week elapsed time to refine White Paper, development of presentation and
present to Streamline and the CLC (if not conducted in late June as described
above). Development of secondary presentation of strategic and trend-support of
best consumer hypothesis ratification.
OCTOBER
Integrated final presentation with Streamline to CLC participants of total study
results.
COMPENSATION AND TERMS:
Streamline will compensate BrainReserve a total of $400,000 comprised of
$375,000 in professional and qualitative research fees and $25,000 in expenses.
As of May 1, 1997 the following payments totaling $208,333 have been issued by
Streamline to BrainReserve:
<TABLE>
<S> <C>
December 4, 1996 $62,500
January 27, 1997 $62,500
February 6, 1997 $ 8,333
May 1, 1997 $75,000
</TABLE>
The balance of $191,667 will be paid by Streamline to BrainReserve according to
the following schedule:
<TABLE>
<S> <C>
June 26, 1997 $95,833
October 14, 1997 $95,834
</TABLE>
In addition, as of January 1997, the BrainReserve was granted a warrant to buy
100,000 shares of common stock at a price of $1.02 per share. The vesting
schedule for the warrant is as follows:
<TABLE>
<S> <C>
Upon project commencement 33,333 shares
February 1, 1997 33,333 shares
June 30, 1997 33,334 shares
</TABLE>
Fees and expenses described herein assume that any qualitative and quantitative
research costs (beyond the BrainReserve effort described above) will be funded
separately by the CLC and that BrainReserve will be able to influence and
benefit from any such effort.
<PAGE>
-4-
CONFIDENTIALITY AND OWNERSHIP OF TRADEMARKS:
Streamline and BrainReserve agree that each will hold in confidence and not
disclose to third parties the proprietary and confidential information of the
other, nor will either party use the name of the other or the names or
photographs of their principals in press releases, promotional material or
advertising without the prior written consent of the other.
In addition, all terms and marks denoted by "(TM)"' herein are trademarks of
BrainReserve. Notwithstanding any other provisions of this agreement, any
trademarks or trade names of BrainReserve (the "Trademarks") remain the property
of BrainReserve. This agreement does not in any way confer any license or any
right, title or interest in or to the Trademarks.
This agreement, together with the Warrant Agreement, sets forth the entire
agreement between Streamline and BrainReserve as of the date hereof APRIL 30,
1997. Any future possible business between the two parties will be covered under
separate agreement.
Agreed and Accepted
STREAMLINE, INC.
by:
/s/ Timothy A. DeMello Date: 5/8/97
- ----------------------------------------------- ---------
Timothy A. DeMello, Chairman and CEO Streamline
BRAINSERVE, INC.
by:
/s/ Faith Popcorn Date:
- ----------------------------------------------- ---------
Faith Popcorn, Founder and CEO
<PAGE>
Exhibit 10.26
FORM OF
1998 STREAMLINE CONSUMER LEARNING CENTER
MEMBERSHIP AGREEMENT
1.0 DEFINITION OF THE CONSUMER LEARNING CENTER (CLC)
The Consumer Learning Center is a "live" research center designed to
bring together and further develop the best thinking on consumer
behavior in the emerging Consumer Direct industry. Streamline, Inc.,
sponsor of the CLC, has invited approximately six manufacturers along
with other industry and academic experts to participate in the Center's
research and development activities.
1.1 STRUCTURE
The CLC will select several major areas of emphasis and organize itself
accordingly. Members will align themselves with one to two key
sub-teams according to their specific interests. All output of the CLC
will be shared by the full membership in accordance with the
confidentiality terms described below.
1.2 DURATION
CLC activities will formally begin in March 1998 and continue through
November 1998. Five full sessions of the CLC will be conducted
throughout this period: March, May, July, September, and November.
In addition, sub-teams of the CLC will conduct more frequent working
sessions according to their individual project schedules. Streamline is
pleased to host all sessions of the CLC at its headquarters in
Westwood, Massachusetts.
2.0 MEMBERSHIP REQUIREMENTS
Membership requirements are designed both to ensure adequate resources
and support for initiatives, and to protect each member's investment in
the intellectual capital created as part of the Consumer Learning
Center.
2.1 EXECUTIVE SPONSORSHIP AND STAFFING
Each member will be asked to identify an executive sponsor provide
input into the formal CLC research agenda, review pi
sessions of the CLC according to their availability.
In addition, members will identify up to three representatives
initiatives. Member representatives will contribute to CLC s sessions,
research activities, and analyses), as determined by s attend both full
and sub-team working sessions at Streamline.
<PAGE>
2.2 CONFIDENTIALITY
All members agree that none of the CLC activities will be designed to
restrict competition in any fashion, and no information about prices,
promotions, or other elements of competition will be exchanged by
competitors, nor will any agreements be reached that may tend to
inhibit competition, or otherwise violate any federal or state
antitrust law. As part of the fees paid hereunder, Streamline, Inc.
will retain antitrust counsel (acceptable to member representatives)
who will review all proposed activities prior to member involvement to
ensure antitrust compliance. Antitrust counsel will review all agendas
of meetings, and be present at meetings where appropriate.
Three areas of confidentiality have been identified: member-specific
data and information, Streamline-specific data and information, and the
collective findings and products of the CLC.
We do not foresee the need for extensive member-specific data and
information. However, in the event that members are asked to or opt to
provide proprietary data or information to the CLC, such materials will
be considered confidential and will not be shared outside the CLC
without the express written consent of the member in question, as
described in the Mutual Non-Disclosure Agreement.
In order to ensure that the activities of the CLC are valuable for
practical, hands-on learning, it will be necessary for Streamline, Inc.
to share much of its business operations with member organizations. In
the spirit of innovation and thought capital development, Streamline is
willing to make specific data and information available with the
understanding that all such information is proprietary and confidential
to Streamline and will not under any circumstances, be shared with any
individual or organization outside the CLC, as described in the Mutual
Non-Disclosure Agreement.
All members agree that the intellectual and other property developed by
the Consumer Learning Center is proprietary and confidential to members
of the Consumer Learning Center for a period of three months following
the conclusion of CLC activities in November 1998.
3.0 FEES AND PAYMENT TERMS
Membership fees for the 1998 Consumer Learning Center total $180,000.
<PAGE>
Payments may be made in two installments. The first installment for
$90,000 will be invoiced upon issuance of the Membership Agreement. The
final installment of $90,000 will be invoiced in June 1998 for receipt
by July 15, 1998.
AGREED AND ACCEPTED BY:
------------------------
Member Organization
------------------------
Executive Sponsor Signature
------------------------
Executive Sponsor Print Name
------------------------
Title
------------------------
Date
------------------------
Streamline, Inc. By: ------------------------
Title
------------------------
Date
------------------------
<PAGE>
FORM OF
1998 STREAMLINE CONSUMER LEARNING CENTER
MUTUAL NON-DISCLOSURE AGREEMENT
During the course of discussions between Streamline, Inc. ("Streamline") and the
companies participating in the Consumer Learning Center ("CLC") all of which,
including Streamline, are hereby designated as "Members," each member may
disclose to the other certain information it considers as proprietary and
confidential which (a) relates to specific business and/or pre-existing
proprietary materials and information of each member, and (b) has been
identified as confidential ("Confidential Information"). As used herein, the
Member disclosing Confidential Information is the "Disclosing Member" and the
member(s) receiving the Confidential Information is the "Recipient(s)." In
connection therewith, the Members agree as follows:
1. Confidential Information of the Disclosing Member may be used by the
Recipient(s) only in connection with the CLC and may not be disclosed
by the Recipient(s) to any other member, except upon the written
authorization of the Disclosing Member.
2. The Recipient(s) will not, at any time, use the Confidential
Information of the Disclosing Member in any fashion, form, or manner,
except in the furtherance of the goals of the CLC.
3. Each Member will protect the confidentiality of the other's
Confidential Information in the same manner it protects the
confidentiality of its own proprietary and confidential information of
like kind. Access to the Confidential Information shall be restricted
to those of each Member's personnel engaged in a use permitted hereby.
4. Confidential Information disclosed hereunder shall at all times remain
as between the Member(s), the property of the Disclosing Member. No
license under any trade secrets, copyrights, or other rights is granted
by this Agreement or any disclosure of Confidential Information
hereunder.
5. Confidential Information of the Disclosing Member may not be copied or
reproduced or incorporated into other materials by the Recipient(s)
without the Disclosing Member's prior written consent.
6. All Confidential Information made available hereunder, including copies
thereof, shall be returned to the Disclosing Member upon the first to
occur of (a) completion of the CLC or (b) request by the Disclosing
Member.
<PAGE>
7. Nothing in this Agreement shall prohibit or limit any Member's use of
information (including but not limited to ideas, concepts, know-how,
techniques, and methodologies) (i) previously known to it, (ii)
independently developed by it, (iii) acquired by it from a third party
which was not, to the Recipient's knowledge, under an obligation to the
Disclosing Member not to disclose such information, or (iv) which is or
becomes publicly available through no breech by the Members of this
Agreement.
8. In the event any Recipient receives a subpoena or other validly issued
administrative or judicial process demanding Confidential Information
of a Disclosing Member, the Recipient shall promptly notify the
Disclosing Member and tender to it the defense of such demand. Unless
the demand shall have been timely limited, quashed or extended, the
Recipient shall thereafter be entitled to comply with such demand to
the extent permitted by law. If requested by the Disclosing Member to
whom the defense has been tendered, the Recipient shall cooperate (at
the expense of the requesting Disclosing Member) in the defense of a
demand.
9. Subject only to its confidentiality and non-disclosure obligations as
set forth in this Agreement, each Member's right to develop, use, and
market products and services similar to or competitive with the
Confidential Information of the other Members shall remain unimpaired.
Each Member acknowledges that the other Member(s) may already possess
or have developed products or services similar to or competitive with
those of the other Member(s) disclosed in the Confidential Information.
10. None of the Members may use the name of the other Member(s) in
connection with any advertising or publicity materials or activities
without the prior written consent of the other Member(s).
11. This Agreement shall become effective as of the date when it has been
executed by every Member and executed copies are delivered to every
member and Confidential Information is first made available to the
other hereunder.
12. All obligations of the parties to this Mutual Non-Disclosure Agreement
shall terminate five (5) years from the date the CLC project is
completed. This Agreement shall remain in full force and effect
notwithstanding the termination of any party's membership in the CLC.
<PAGE>
13. Nothing in this Agreement shall require any Member to disclose any
Confidential Information to any other Member.
AGREED AND ACCEPTED:
----------------------------
Member Organization
----------------------------
Executive Sponsor Signature
----------------------------
Executive Sponsor Print Name
----------------------------
Title ----------------------------
Date ----------------------------
Streamline, Inc.
----------------------------
Title
----------------------------
Date
----------------------------
<PAGE>
Exhibit 10.27
Bruce E. Welty
PRESIDENT & CEO
January 30, 1997
Mr. Tim Dimello
StreamLine
27 Dartmouth Street
Westwood, MA 02090
RE: PROPOSED WORKING RELATIONSHIP
Dear Tim:
We are pleased to begin working together on this Warehouse Management System!
In order to establish our business relationship, I thought I would send you a
letter which documents our current understanding and proposes a way in which we
may further develop it. As is always the case in my correspondence with you, we
count on your feedback and agreement, so we encourage you to make any changes or
recommendations.
We have discussed having Welty-Leger begin by working with the StreamLine Team,
led by Mr. Blakelock, to learn the nuances of your distribution operation. Then,
once we have arrived at an understanding of the requirements, Welty-Leger will
prepare a document describing the flows and WHAT happens (Logical Design). Once
we have an understanding of what happens, we will determine how to model it
within ALLPoints(TM) (Physical Design).
We agree to waive the license fees ($295,000 average selling price) for the
usage and source code licenses for the Westwood facility and will work with you
over the coming weeks and months to establish a fair pricing arrangement for the
future CRC implementations. We will attempt to gear our pricing such that we can
bundle our software into the overall licensing arrangement of the StreamLine
Management System(R) which you will offer to your geographical operators. We
presume there is room for different
WELTY-LEGER CORPORATION
333 ELM STREET, DEDHAM, MA 02026 TEL: 617-461-8700 FAX: 617-461-0061
<PAGE>
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pricing levels depending on the number of warehouses supported in the geography,
volume of transactions, size/tier of hardware, or other such considerations.
which are normally considered in the pricing of software and systems.
During these initial phases of design and analysis, Welty-Leger will invoice you
for actual hours worked based on a discounted daily rate of $720/day or
$90/hour. This rate is discounted from our normal daily rate of $1,200 or
$150/hour. We will not invoice you more than $31,680/month without your prior
approval, which represents two people working full time (two FTE's). We expect
this initial period to be at a lower rate as we ramp up to the required level.
Once we have determined the effort required (somewhere probably during the
Physical Design phase), we will revisit the staffing levels with you to
determine what must be done to move forward.
As you know, software development is expensive and we must both be careful to
closely manage the process to be sure that we are spending the money wisely. In
many of our projects, much money and effort is wasted because of the tendency of
the larger companies to introduce layers and layers of overhead into the
process. I'd like to think we are smart enough to avoid that in this project
because we are dealing with the principals and not a lot of mid-level
management.
The keyword is Streamline.
Please let me know your thoughts.
Sincerely,
/S/ BRUCE E. WELTY
- ---------------------------------
Bruce Welty
President & CEO
cc: David Blakelock, VP of Operations, StreamLine
Paul F. Carmichael, VP of Operations, Welty-Leger
PS: Would you like a Press Release sent out on this? We would.
WELTY-LEGER CORPORATION
333 ELM STREET, DEDHAM, MA 02026 TEL: 617-461-8700 FAX: 617-461-0061
<PAGE>
Exhibit 10.28
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this "Agreement")
dated as of November 2, 1998, is by and among Streamline, Inc. ("Streamline"), a
Delaware corporation, Streamline Acquisition Sub, Inc. ("Merger Sub"), a
Delaware corporation that is a wholly owned subsidiary of Streamline, and
Streamline Mid-Atlantic, Inc. (the "Company"), a Delaware corporation.
WHEREAS, the parties desire that Merger Sub be merged with and into the
Company (the "Merger"), subject to the terms and conditions set forth in this
Agreement; and
WHEREAS, for Federal income tax purposes, the parties intend and expect
that the Merger qualify as a reorganization under the provisions of Section 368
of the United States Internal Revenue Code of 1986, as amended (the "Code"); and
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
hereby agree as follows:
1. CLOSING. Subject to the other provisions of this Agreement, a
closing (the "Closing") will be held at the offices of Bingham Dana LLP, 150
Federal Street, Boston, Massachusetts 02110, as soon as is reasonably
practicable following satisfaction or waiver of the conditions set forth in
Sections 8 and 9 (the date on which the Closing actually occurs being referred
to herein as the "Closing Date"). On the Closing Date, Merger Sub and the
Company will execute a Certificate of Merger (the "Merger Certificate")
substantially in the form of the attached EXHIBIT A and file it with the
Delaware Secretary of State in order to cause the Merger to be effected in
accordance with the laws of the State of Delaware. The Merger will be effective
upon the filing of the Merger Certificate (the "Effective Time"). For all
purposes, all of the document deliveries and other actions to occur at the
Closing will be conclusively presumed to have occurred at the same time,
immediately before the Effective Time.
2. EFFECT OF MERGER. At the Effective Time, automatically and without
further action:
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2.1. SURVIVING CORPORATION. Merger Sub will be merged with and into the
Company and the separate existence of Merger Sub will cease. The Company will
continue in existence as the surviving corporation in the Merger (the "Surviving
Corporation"). The effect of the Merger will be as provided in the applicable
provisions of the Delaware General Corporation Law (the "DGCL"). Without
limiting the generality of the foregoing, and subject thereto, except as
otherwise provided herein, all of the property, rights, privileges, powers, and
franchises of Merger Sub and the Company, respectively, will vest in the
Surviving Corporation, and all of the debts, liabilities, and duties of Merger
Sub and the Company, respectively, will become the debts, liabilities, and
duties of the Surviving Corporation.
2.2. CERTIFICATE OF INCORPORATION. The Company's Certificate of
Incorporation, as in effect immediately before the Effective Time, will be
amended by the Merger Certificate (among other things, to reduce the Company's
authorized capital stock to one share of common stock), and as so amended will
be the Certificate of Incorporation of the Surviving Corporation.
2.3. BY-LAWS. The Company's by-laws, as in effect immediately before
the Effective Time, will be amended and restated to read in their entirety as
set forth in the attached EXHIBIT B, and as so amended and restated will be the
by-laws of the Surviving Corporation.
2.4. DIRECTORS AND OFFICERS. From and after the Effective Time, the
respective officers and members of the Board of Directors of the Surviving
Corporation will consist of those persons named as such in the Merger
Certificate, each such person to hold office, subject to the applicable
provisions of the Certificate of Incorporation and the by-laws of the Surviving
Corporation, until the next annual meeting of directors or stockholders, as the
case may be, of the Surviving Corporation and until his successor is duly
elected or appointed and qualified.
2.5. CONVERSION OF COMPANY STOCK.
(a) COMPANY COMMON STOCK. Each share of common stock, par
value $.01 per share, of the Company ("Company Common Stock") issued
and outstanding immediately before the Effective Time (other than any
Dissenting Shares (as defined in Section 2.7) and other than any shares
held directly or indirectly by Streamline or the Company or any of
their respective subsidiaries) will be converted into and become
one-seventh (1/7th) of one share (such number of shares, as adjusted
pursuant to Section 2.5(b), the "Exchange Ratio") of common stock, par
value $.01 per share, of Streamline ("Streamline Common Stock"),
subject to adjustment as provided in Section 2.5(c) and to the payment
of cash
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adjustments in lieu of the issuance of fractional shares as provided in
Section 3.3.
(b) ADJUSTMENT OF EXCHANGE RATIO. In the event that,
subsequent to the date of this Agreement but before the Effective Time,
the shares of Streamline Common Stock issued and outstanding as of the
date of this Agreement are increased, decreased, or changed into or
exchanged for a different number or kind of shares or securities
through reorganization, recapitalization, reclassification, stock
dividend, stock split, reverse stock split, or other similar changes in
Streamline's capitalization, then an appropriate and proportionate
adjustment will be made to the Exchange Ratio so that each holder of
Company Common Stock immediately before the Effective Time will receive
pursuant to this Section 2.5, that number of shares of Streamline
Common Stock that such holder would have received as a result of such
change if such change had occurred immediately after the Effective Time
(and such holders were treated for purposes of such change as holders
of Streamline Common Stock).
2.6. CANCELLATION OF TREASURY STOCK, ETC. Each share of Company Common
Stock held directly or indirectly by Streamline or the Company or any of their
respective subsidiaries will be canceled and will cease to exist, and no payment
will be made with respect thereto.
2.7. DISSENTING SHARES. Each share of Company Common Stock that,
immediately before the Effective Time, was held by any person who has duly
exercised the appraisal rights afforded to dissenting stockholders pursuant to
Section 262 of the DGCL (such shares, collectively, "Dissenting Shares") will
not be converted into or represent the right to receive the consideration
referred to in Section 2.5 hereof. Instead, the holders of Dissenting Shares
will be entitled to receive payment of the appraised value of such shares in
accordance with the provisions of such Section 262, except that all Dissenting
Shares held by stockholders of the Company who withdraw, fail to perfect, or
otherwise lose their appraisal rights with respect to Dissenting Shares will
thereupon be deemed to have converted such shares into shares of Streamline
Common Stock pursuant to Section 2.5 hereof.
2.8. CONVERSION OF MERGER SUB'S SHARES. Each share of the common stock,
$0.01 par value per share, of Merger Sub that was issued and outstanding
immediately before the Effective Time will be converted into and become one
share of the common stock, $0.01 par value, of the Surviving Corporation.
2.9. TAX TREATMENT. The parties intend and expect that the Merger will
qualify as a "reorganization" within the meaning of Section 368 of the Code.
<PAGE>
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3. PROCEDURES.
3.1. CERTIFICATES. Immediately after the Effective Time, stock
certificates (each, a "Certificate," and collectively, the "Certificates")
representing shares of Company Common Stock that have been converted into shares
of Streamline Common Stock in the Merger will be conclusively deemed to
represent such shares of Streamline Common Stock.
3.2. EXCHANGE OF CERTIFICATES. As promptly as practicable after the
Effective Time, Streamline or its transfer agent will send to each stockholder
of the Company transmittal materials for use in exchanging their Certificates
for certificates for the shares of Streamline Common Stock into which such
shares of Company Common Stock have been converted. Upon surrender of a
Certificate to Streamline or its transfer agent, as the case may be, together
with a duly executed letter of transmittal and any other reasonably required
documents, the holder of such Certificate will be entitled to receive, in
exchange therefor, a certificate for the number of shares of Streamline Common
Stock to which such holder is entitled, and such Certificate will be canceled.
3.3. NO FRACTIONAL SHARES. In lieu of the issuance of fractional shares
of Streamline Common Stock, cash adjustments will be paid (without interest) to
the Company's stockholders in respect of any fractional share of Streamline
Common Stock that would otherwise be issuable to them and the amount of such
cash adjustments will be determined by multiplying each relevant holder's
fractional interest by $3.50 (such amount to be proportionately adjusted to
reflect stock splits, stock dividends, reverse stock splits, and other
recapitalizations, reorganizations, and similar events affecting Streamline
Common Stock and occurring after the date of this Agreement). For purposes of
determining whether, and in what amounts, a particular stockholder of the
Company would be entitled to receive cash adjustments under this section, shares
held of record by such holder and represented by two or more Certificates will
be aggregated.
3.4. TERMINATION OF RIGHTS. After the Effective Time, holders of
Company Common Stock will cease to be, and will have no rights as, stockholders
of the Company, other than (i) in the case of shares other than Dissenting
Shares, the rights to receive shares of Streamline Common Stock into which such
shares have been converted and/or payments in lieu of fractional shares, as
provided in this Agreement, and (ii) in the case of Dissenting Shares, the
rights afforded to the holders thereof under Section 262 of the DGCL.
3.5. LOST CERTIFICATES, ETC. In the event that any Certificate has been
lost, stolen, or destroyed, then upon receipt of appropriate evidence as to such
loss, theft, or destruction, and to the ownership of such Certificate by the
person
<PAGE>
-5-
claiming such Certificate to be lost, stolen, or destroyed, and the receipt by
Streamline or its transfer agent for Streamline Common Stock of appropriate and
customary indemnification, Streamline or such transfer agent will issue in
exchange for such lost, stolen, or destroyed Certificate the shares of
Streamline Common Stock and the fractional share payment, if any, deliverable in
respect thereof as determined in accordance with this Agreement.
4. COMPANY WARRANTS. After the Effective Time, each warrant to purchase
shares of Company Common Stock that is outstanding immediately before the
Effective Time and listed SCHEDULE 4 (a "Company Warrant") will be deemed to be
a warrant to purchase from Streamline up to a number of whole shares of
Streamline Common Stock equal to the product of (i) the number of shares of
Company Common Stock subject to such Company Warrant, multiplied by (ii) the
Exchange Ratio, at a price per share of Streamline Common Stock determined by
dividing the exercise price per share of Company Common Stock provided for in
such Company Warrant by the Exchange Ratio. No scrip or fractional share
interests will be issued in connection with the exercise of any Company Warrant.
Except for the foregoing, each Company Warrant will remain subject after the
Effective Time to the same terms and conditions (including without limitation
those with respect to dates on which and the proportionate extent to which such
Company Warrant may be exercised) as were applicable to such Company Warrant
immediately before the Effective Time.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Streamline and Merger Sub
as follows:
5.1. AUTHORIZATION AND ENFORCEABILITY. The Company has all requisite
power and full legal right and authority (including due approval of its Board of
Directors and stockholders) to enter into this Agreement, to perform all of its
agreements and obligations hereunder, and to consummate the transactions hereby
contemplated to be consummated by it. This Agreement has been duly executed and
delivered by the Company and constitutes a legal, valid, and binding obligation
of the Company, enforceable against it in accordance with its terms, except as
enforceability may be subject to the effect of any applicable bankruptcy,
insolvency, fraudulent conveyance, moratorium, reorganization, marshaling, or
other similar laws or rules of law affecting creditors' rights and remedies
generally, and to general principles of equity.
5.2. GOVERNMENTAL AND OTHER THIRD-PARTY CONSENTS, NON-CONTRAVENTION,
ETC. Except as set forth on SCHEDULE 5.2 hereto, no consent, approval, or
authorization of or registration, designation, declaration, or filing with any
governmental authority, federal or other, or any other person is required on the
part of the Company in connection with this Agreement, the
<PAGE>
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Merger, or any of the other transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation by the Company
of such transactions will not violate (a) any provision of its Certificate of
Incorporation or by-laws, (b) any order, judgment, injunction, award or decree
of any court or state or federal governmental or regulatory body applicable to
the Company, or (iii) any judgment, decree, order, statute, rule, regulation,
agreement, instrument, or other obligation to which the Company is a party or by
or to which it or any of its assets is bound or subject.
5.3. DISCLOSURE. No representation or warranty of the Company in this
Agreement or in any other agreement, instrument, certificate, or other document
delivered by the Company in connection with this Agreement, the Merger, or any
of the other transactions contemplated hereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact required to be stated therein or necessary to make the statements contained
therein not false or misleading.
6. REPRESENTATIONS AND WARRANTIES OF STREAMLINE AND MERGER SUB.
Each of Streamline and Merger Sub hereby represents and warrants to the
Company as follows:
6.1. AUTHORIZATION AND ENFORCEABILITY. Such corporation has all
requisite power and full legal right and authority (including due approval of
its Board of Directors and stockholders, as applicable) to enter into this
Agreement, to perform all of its agreements and obligations hereunder, and to
consummate the transactions hereby contemplated to be consummated by it. This
Agreement has been duly executed and delivered by such corporation and
constitutes a legal, valid, and binding obligation of such corporation,
enforceable against it in accordance with its terms, except as enforceability
may be subject to the effect of any applicable bankruptcy, insolvency,
fraudulent conveyance, moratorium, reorganization, marshaling, or other similar
laws or rules of law affecting creditors' rights and remedies generally, and to
general principles of equity.
6.2. GOVERNMENTAL AND OTHER THIRD-PARTY CONSENTS, NON-CONTRAVENTION,
ETC. No consent, approval, or authorization of or registration, designation,
declaration, or filing with any governmental authority, federal or other, or any
other person is required on the part of such corporation in connection with this
Agreement, the Merger, or any of the other transactions contemplated hereby,
except that Streamline expects to file a Form D with the Securities and Exchange
Commission following the consummation of the Merger. The execution, delivery,
and performance of this Agreement and the consummation by such corporation of
such transactions will not violate (a) any provision of its Certificate of
Incorporation or by-laws, (b) any order, judgment,
<PAGE>
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injunction, award or decree of any court or state or federal governmental or
regulatory body applicable to such corporation, or (iii) any judgment, decree,
order, statute, rule, regulation, agreement, instrument, or other obligation to
which such corporation is a party or by or to which it or any of its assets is
bound or subject.
6.3. DISCLOSURE. No representation or warranty of such corporation in
this Agreement or in any other agreement, instrument, certificate, or other
document delivered by such corporation in connection with this Agreement, the
Merger, or any of the other transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact required to be stated therein or necessary to make the statements
contained therein not false or misleading.
7. MUTUAL COVENANTS.
7.1. TAX-FREE REORGANIZATION TREATMENT. No party will take or cause or
permit to be taken any action, whether before or after the Effective Time, that
would disqualify the Merger as a "reorganization" within the meaning of Section
368 of the Code.
7.2. TAX MATTERS. The parties understand and agree that none of them is
making any representation or warranty with respect to the tax consequences of
this Agreement, the Merger, or the other transactions contemplated hereby. The
parties intend, however, that the Merger constitute a "tax-free reorganization"
under Section 368 of the Code, and agree to report the Merger as such on their
respective tax returns.
7.3. FURTHER ASSURANCES. Subject to the terms and conditions set forth
in this Agreement, from time to time both before and after the Effective Time,
each of the parties will use his or its best reasonable efforts, as promptly as
is practicable to take or cause to be taken all actions, and to do or cause to
be done all other things, as are necessary, proper, or advisable to consummate
and make effective the Merger and the other transactions contemplated hereby.
8. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of the
Company to consummate the Merger are subject to the satisfaction (or waiver by
the Company, in its sole discretion) of each of the conditions set forth in this
section on or before the Closing Date. If the Merger is consummated, such
conditions will conclusively be deemed to have been satisfied or waived.
8.1. STOCKHOLDER APPROVAL. The requisite number of stockholders of the
Company shall have approved the Merger.
<PAGE>
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8.2. REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of Streamline and Merger Sub contained in this Agreement shall be
true and correct as of the date hereof and as of the Closing Date as though made
on and as of the Closing Date.
8.3. COMPLIANCE WITH AGREEMENT. Streamline and Merger Sub shall have
performed and complied in all material respects with all of their respective
obligations under this Agreement to be performed or complied with by them before
or at the Closing, including without limitation the execution and delivery of
all documents to be executed and delivered by any of them in connection with
this Agreement and/or the consummation of the Merger and the other transactions
contemplated hereby.
9. CONDITIONS TO STREAMLINE'S AND MERGER SUB'S OBLIGATIONS. The
obligations of each of Streamline and Merger Sub, respectively, to consummate
the Merger are subject to the satisfaction (or waiver by Streamline, in its sole
discretion) of each of the conditions set forth in this section on or before the
Closing Date. If the Merger is consummated, such conditions will conclusively be
deemed to have been satisfied or waived.
9.1. STOCKHOLDER APPROVAL. The requisite number of stockholders of the
Company shall have approved the Merger.
9.2. STOCKHOLDER AND WARRANT HOLDER DOCUMENTATION. Each stockholder and
warrant holder of the Company shall have executed and delivered to Streamline an
Investor Questionnaire in the form attached as EXHIBIT C hereto and an
Instrument of Representations in the form attached as EXHIBIT D hereto, and each
such Investor Questionnaire and Instrument of Representations shall be
acceptable to Streamline. Additionally, each warrant holder of the Company shall
have executed and delivered to Streamline a Contingent Agreement to Exchange
Warrant in the form attached as EXHIBIT E hereto, and each such Contingent
Agreement to Exchange Warrant shall be acceptable to Streamline.
9.3. REPRESENTATIONS AND WARRANTIES. All of the representations and
warranties of the Company contained in this Agreement shall be true and correct
as of the date hereof and as of the Closing Date as though made on and as of the
Closing Date.
9.4. COMPLIANCE WITH AGREEMENT. The Company shall have performed and
complied in all material respects with all of their respective obligations under
this Agreement to be performed or complied with by them before or at the
Closing, including without limitation the execution and delivery of all
documents to be executed and delivered by any of them in connection with
<PAGE>
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this Agreement and/or the consummation of the Merger and the other transactions
contemplated hereby.
9.4 NO DISSENTING SHARES. There shall be no holders of Dissenting
Shares as of or immediately prior to the Effective Time.
10. TERMINATION.
(a) This Agreement may be terminated at any time before the Effective
Time by agreement of Streamline and the Company, notwithstanding the approval of
this Agreement and/or of the Merger by the stockholders of any party.
(b) If (i) any temporary restraining order, preliminary or permanent
injunction, or other order issued by any court of competent jurisdiction, or
other binding legal restraint or prohibition preventing the consummation of the
Merger or the other transactions contemplated hereby is at any time in effect
for a period of more than 20 consecutive days, or (ii) the Closing does not
occur on or before March 31, 1999, then either Streamline or the Company may
terminate this Agreement by delivering written notice to the other at any time
after the close of business on date such termination right arises hereunder,
PROVIDED that such failure to close is not the result of a breach of this
Agreement by the terminating party (including, in the case of any such
termination by Streamline, any breach by Merger Sub.
(c) Any termination of this Agreement will not affect the rights or
obligations of any party arising, or based on actions or omissions occurring,
before such termination. The provisions of Section 11 ("General") will survive
any termination of this Agreement.
11. GENERAL.
11.1. COOPERATION. Each of the parties will cooperate with the others
and use its best reasonable efforts to prepare all necessary documentation, to
effect all necessary filings, and to obtain all necessary permits, consents,
approvals, and authorizations of all governmental bodies and other third parties
necessary to consummate the transactions contemplated by this Agreement.
11.2. EXPENSES. The parties to this Agreement will be responsible for
and will pay all of their own respective expenses in connection with the
negotiation and preparation of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby; provided that, in the event of
any litigation or arbitration of any dispute related to or arising out of this
Agreement, each prevailing party shall be entitled to recover from the
non-
<PAGE>
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prevailing party or parties all of such prevailing party's reasonable costs and
expenses in connection therewith.
11.3. BENEFITS OF AGREEMENT; NO ASSIGNMENTS; NO THIRD-PARTY
BENEFICIARIES.
(a) This Agreement will bind and inure to the benefit of the parties
hereto and their respective heirs, successors, and permitted assigns.
(b) No party will assign any rights or delegate any obligations
hereunder without the consent of the other parties, and any attempt to do so
will be void.
(c) Nothing in this Agreement is intended to or will confer any rights
or remedies on any person other than the parties hereto and their respective
heirs, successors, and permitted assigns, except as expressly provided in this
Section 11.
11.4. NOTICES. All notices, requests, payments, instructions, or other
documents to be given hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if (i) delivered
personally (effective upon delivery), (ii) mailed by registered or certified
mail, return receipt requested, postage prepaid (effective five business days
after dispatch), (iii) sent by a reputable, established courier service that
guarantees next business day delivery (effective the next business day), or (iv)
sent by telecopier followed within 24 hours by confirmation by one of the
foregoing methods (effective upon receipt of the telecopy in complete, readable
form), if delivered to the most recent address and/or telecopier number provided
by the party being notified to the party giving notice.
11.5. COUNTERPARTS. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered will be an
original, but all of which together will constitute one and the same agreement.
In pleading or proving this Agreement, it will not be necessary to produce or
account for more than one such counterpart.
11.6. EQUITABLE RELIEF. Each of the parties hereby acknowledges that
any breach by him or it of his or its obligations under this Agreement would
cause substantial and irreparable damage to the parties, and that money damages
would be an inadequate remedy therefor, and accordingly, acknowledges and agrees
that each other party will be entitled to an injunction, specific performance,
and/or other equitable relief to prevent the breach of such obligations.
<PAGE>
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11.7 WAIVERS. No waiver of any breach or default hereunder will be
valid unless in a writing signed by the waiving party. No failure or other delay
by any party exercising any right, power, or privilege hereunder will be or
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege.
11.8 ENTIRE AGREEMENT. This Agreement, together with the exhibits and
schedules hereto and the other agreements, instruments, certificates, and other
documents referred to herein as having been or to be executed and delivered in
connection with the transactions contemplated hereby, contains the entire
understanding and agreement among the parties, and supersedes any prior
understandings or agreements among them, or between or among any of them, with
respect to the subject matter hereof.
11.9. GOVERNING LAW. This Agreement will be governed by and interpreted
and construed in accordance with the internal laws of the Commonwealth of
Massachusetts, as applied to contracts under seal made, and entirely to be
performed, within Massachusetts, and without reference to principles of
conflicts or choice of laws.
11.10. AMENDMENT. This Agreement may not be amended, modified, or
supplemented except by a writing duly executed by Streamline, Merger Sub and the
Company.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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Executed and delivered under seal as of the date first above written.
STREAMLINE: STREAMLINE, INC.
By: /S/ TIMOTHY A. DEMELLO
---------------------------------
Timothy A. DeMello
President
MERGER SUB: STREAMLINE ACQUISITION SUB, INC.
By: /S/ TIMOTHY A. DEMELLO
---------------------------------
Timothy A. DeMello
President
COMPANY: STREAMLINE MID-ATLANTIC, INC.
By: /S/ TIMOTHY A. DEMELLO
---------------------------------
Timothy A. DeMello
Chairman
<PAGE>
Exhibit 10.29
THIS INSTRUMENT IS AN INDENTURE OF LEASE in which the Landlord and the
Tenant are the parties hereinafter named, and which relates to space in the
building (the "Building") known as, and having an address at, 25-31 Dartmouth
Street, Westwood, Massachusetts.
The parties to this instrument hereby agree with each other as follows:
ARTICLE I
BASIC LEASE PROVISIONS AND ENUMERATIONS OF EXHIBITS
1.1 INTRODUCTION. The following sets forth the basic data and identifying
Exhibits elsewhere hereinafter referred to in this Lease, and, where
appropriate, constitute definitions of the terms hereinafter listed.
1.2 BASIC DATA.
Date: August 18, 1995
Landlord: MORTIMER B. ZUCKERMAN, TRUSTEE OF
BEE EM ZEE TRUST under Declaration
of Trust dated May 10, 1976 and filed
with the Norfolk County Registry
District of the Land Court as Document
No. 364271 but not individually.
Present Mailing Address c/o Boston Properties, Inc.
of Landlord: 8 Arlington Street
Boston, Massachusetts 02116
Landlord's Construction Michael A. Cantalupa
Representative:
Tenant: SKY ROCK SERVICES CORPORATION,
a Delaware corporation
Present Mailing Address: 199 Wells Avenue
Newton Centre, Massachusetts 02159
Tenant's Construction Timothy A. DeMello
Representative:
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Original Term: With respect to the Office Premises,
the Original Term shall commence on the
"Office Premises Commencement Date"
(hereinafter defined); and with respect
to the Warehouse Premises, the Original
Term shall commence on the "Warehouse
Premises Commencement Date" (also
hereinafter defined); and the Original
Term shall expire on the last day of
the [co]sixtieth (60th) full calendar
month following the Warehouse Premises
Commencement Date, unless extended
pursuant to Section 2.5 hereof or
unless extended or sooner terminated as
hereinafter provided.
Extension Option: One (1) period of five (5) years as
provided in and on the terms set forth
in Section 3.2 hereof.
Lease Term: The Original Term and if extended
pursuant to Section 3.2 hereof the
Extended Term.
Lease Year: A period of twelve (12) consecutive
calendar months, commencing on the
first day of January in each year,
except that the first Lease Year of the
Lease Term hereof shall be the period
commencing on the Commencement Date and
ending on the succeeding December 31,
and the last Lease Year of the Lease
Term hereof shall be the period
commencing on January 1 of the calendar
year in which the Lease Term ends, and
ending with the date on which the Lease
Term ends.
Office Premises
Commencement Date: September 11, 1995
Warehouse Premises
Commencement Date: October 2, 1995
Building: The single story Building located on the
"Site".
The Office Premises: The portion of the Building labeled as
"Office Space" on the floor plan annexed
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hereto as Exhibit B and incorporated
herein by reference as further defined
and limited in Section 2.1 hereof.
The Warehouse Premises: The portion of the Building labeled
as "Warehouse Space" on the floor plan
annexed hereto as Exhibit B and
incorporated herein by reference as
further defined and limited in Section
2.1 hereof.
The Initial Premises: The Office Premises and the Warehouse
Premises.
Premises: The Office Premises, the Warehouse
Premises and such other portion of the
Building that Tenant is leasing at
any time pursuant to the provisions
of this Lease.
Rentable Floor Area of
The Office Premises: 9,269 square feet.
Rentable Floor Area of
The Warehouse Premises: 27,367 square feet.
Rentable Floor Area of
The Initial Premises
(being the Total of the
Office Premises and the
Warehouse Premises): 36,636 square feet.
Rentable Floor Area of
the Premises: The Rentable Floor Area of the Office
Premises and the Rentable Floor Area of
the Warehouse Premises and the
rentable floor are of the space added
to the Premises by the Tenant pursuant to
its rights under this Lease.
Total Rentable Floor Area
of the Building: 78,045 square feet.
Annual Fixed Rent For
The Office Premises: During the Original Term of this Lease
at the annual rate of $60,248.50 being
the product of (i) $6.50 and (ii) the
"Rentable Floor Area of the Office
Premises."
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Annual Fixed Rent For
The Warehouse Premises: During the Original Term of this Lease at
the annual rate of $177,885.50 being the
product of (i) $6.50 and (ii) the
"'Rentable Floor Area of the Warehouse
Premises."
Annual Fixed Rent For
The Initial Premises: During the Original Term of this Lease
at the annual rate equal to the sum of
the Annual Fixed Rent for the Office
Premises and the Annual Fixed Rent for
the Warehouse Premises.
Annual Fixed Rent For
The Premises: During the Original Term, the sum of
the Annual Fixed Rent for the Initial
Premises and the Annual Fixed Rent for
any space added to the Premises by
Tenant pursuant to its rights under
this Lease.
Annual Fixed Rent
During Extended Term: As determined pursuant to Section 3.2
if the extension option is exercised
in accordance with Section 3.2.
Tenant Electricity: As provided in and subject to the
provisions of Section 5.2 and Section 7.5
hereof.
Additional Rent: All charges and other sums payable by
Tenant as set forth in this Lease, in
addition to Annual Fixed Rent.
Initial Minimum Limits
of Tenant's Commercial
General Liability Insurance: $2,000,000 combined single limit per
occurrence on a per location basis.
Lot or Site: All, and also any part of, the property
described in Exhibit A, plus any additions
or reductions thereto resulting from the
change of any abutting street line. The
terms Lot and Site are used
interchangeably in this instrument.
Property: The Building and Lot or Site.
Real Estate Taxes: As provided in Article VI hereof.
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Operating Expenses: As provided in Article VII hereof
Number of Parking Spaces: Ninety (90) spaces as provided in
Section 10.1 hereof.
Permitted Use: (i) For the storage warehousing and
distribution of prepackaged food,
nonalcoholic beverages and other
prepackaged household consumable
products (the "Pre-Packaged
Warehousing/Distribution Uses");
provided, however, that Tenant shall be
solely responsible (a) for conducting the
Warehousing/ Distribution Uses in
compliance with the provisions of the
Westwood Zoning By-Law from time to time
applicable to the Property (the
"Applicable Zoning By-Law") and (b) for
obtaining and maintaining in full force
and effect such permits, licenses and
approvals, if any, as shall be required
for the aforesaid use by any applicable
Legal Requirements (including, without
limitation, Westwood Board of Health
requirements) and the failure to do so
shall not affect this Lease and (ii) for
office uses ancillary to the aforesaid
use and other uses customarily
ancillary to the aforesaid uses to the
extent permitted pursuant to the
Applicable Zoning By-Law.
Additional Permitted Uses: The storage warehousing and distribution
of meat, fish, produce and alcoholic
beverages and other warehouse and
distribution uses only provided and on
the condition precedent in each case
that (i) (a) such use shall be
permitted as of right under the
provisions of the Applicable Zoning
By-Law or (b) if permitted under the
Applicable Zoning By-Law only upon the
issuance of a special permit, other
approval or permission (the "Use
Permit"), Tenant (at its sole cost and
expense) shall obtain such Use Permit,
shall maintain the Use Permit in full
force and effect and shall comply with
all of the terms and conditions of the
Use Permit; (ii) Tenant (at its sole
cost and
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expense) shall comply with all
"Insurance Requirements"; (iii) Tenant
(at its sole cost and expense) shall
comply with all other applicable "Legal
Requirements," shall obtain such
permits, approvals and licenses
(collectively "Other Permits") as may
from time to time be required by
applicable Legal Requirements, shall
maintain such Other Permits in full
force and effect and shall comply with
all of the terms and conditions set
forth in the Other Permits; and (iv)
shall not create, cause, suffer or
permit any nuisance, unsafe or
unsanitary conditions to exist which
affect the Premises, any other premises
in the Building or any portion of the
Property. Without limiting the
foregoing, Tenant shall not permit any
insects, rodents or vermin of any kind
to exist in, on or about the Property.
Insurance Requirements: The requirements of any insurer of the
Property and the requirements of any
organization or service board or rating
agency insofar as they pertain to the
Property or the use of the Premises or
the manner of use of the Premises.
Legal Requirements: All laws, statutes, by-laws and court
decisions and the orders, rules,
regulations and requirements of all
Federal State, County and municipal
governments and the appropriate
agencies, authorities, officers,
departments, boards and commissions
thereof (including, but not limited to,
the Town of Westwood Board of Health),
whether now or hereinafter in force,
which may be applicable to the Premises
or the Property or the use or manner of
use thereof or to the streets,
sidewalks and curbs adjacent thereto.
Recognized Brokers: Meredith & Grew, Incorporated 160
Federal Street Boston, Massachusetts
02110 and Leggatt McCall/Grubb & Ellis
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One Post Office Square Boston,
Massachusetts 02109
Security Deposit: $60,000.00, as provided in and subject
to Section 17.26 hereof.
1.3 ENUMERATION OF EXHIBITS. The following Exhibits attached hereto are a
part of this Lease, are incorporated herein by reference, and are to be
treated as a part of this Lease for all purposes. Undertakings
contained in such Exhibits are agreements on the part of Landlord and
Tenant, as the case may be, to perform the obligations stated therein
to be performed by Landlord and Tenant, as and where stipulated
therein.
Exhibit A -- Description of the Site.
Exhibit B -- Floor Plan of Initial Premises and
Offer Space.
Exhibit C -- Tenants Construction Plan.
Exhibit D -- Intentionally Omitted.
Exhibit E -- Broker Determination.
Exhibit F -- Title Matters.
ARTICLE II
PREMISES
2.1 DEMISE AND LEASE OF PREMISES. Landlord hereby demises and leases to
Tenant, and Tenant hereby hires and accepts from Landlord, the Premises
in the Building, excluding exterior faces of exterior walls, the common
stairways and stairwells, mechanical rooms, electric and telephone
closets, janitor closets, and pipes, ducts, shafts, conduits, wires and
appurtenant fixtures serving exclusively or in common other parts of
the Building, and if the Premises includes less than the entire
rentable area of any floor, excluding the common corridors located on
such floor.
2.2 APPURTENANT RIGHTS AND RESERVATIONS. Tenant shall have, as appurtenant
to the Premises, the non-exclusive right to use in common with others,
but not in a manner or extent that would interfere with the normal
operation and use of the Building as a multi-tenant light industrial
and warehouse building and subject to reasonable rules of general
applicability to tenants of the Building from time to time made by
Landlord of which Tenant is given notice: (a) the common lobbies,
corridors and stairways of the Building, and the pipes, ducts, shafts,
conduits, wires and appurtenant meters and equipment serving the
Premises in common with others, (b) the
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common walkways and driveways necessary for access to the Building and
(c) if the Premises include less than the entire rentable floor area of
any floor, the common corridors of such floor.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use: (a) to install, use, maintain, repair,
replace and relocate for service to the Premises and other parts of the
Building, or either, pipes, ducts, conduits, wires and appurtenant
fixtures, wherever located in the Premises or the Building, and (b) to
alter or relocate any other common facility, provided that
substitutions are substantially equivalent or better. Installations,
replacements and relocations referred to in clause (a) above shall be
located so far as practicable in the central core area of the Building,
above ceiling surfaces, below floor surfaces or within perimeter walls
of the Premises. Except in the case of emergencies, Landlord agrees to
use its best efforts to give Tenant reasonable advance notice of any of
the foregoing activities which require work in the Premises.
2.3 SIGNAGE. Tenant shall have the right to one but only one of (a) a sign
located on the exterior of the Building or (b) a pylon sign location in
the lawn area of the Site fronting on Dartmouth Street ("Tenant's
Signage") provided that (i) such Tenant's signage as is selected by
Tenant is first approved by Landlord as to the size, location,
aesthetics, design and scheme thereof and (ii) such Tenant's signage as
selected by Tenant complies with all applicable Insurance Requirements
and all applicable Legal Requirements including, without limitation,
the requirements of the Town of Westwood Zoning By-Law (collectively
called "Governmental Requirements"). Tenant shall be solely responsible
for all costs and expenses regarding such Tenant's Signage including,
without limitation, design costs, installation costs, maintenance and
repair costs, and all applicable, permit and approval costs. Landlord
agrees to cooperate with Tenant regarding Tenant's obtaining approvals
of such Tenant's Signage provided that Landlord shall not be required
to expend any monies, assume any costs or expenses or undertake or
assume any liability. Tenant shall be solely responsible (at its sole
cost and expense) for the maintenance, repair and upkeep of such
Tenant's Signage. In addition, Landlord shall improve the existing
street signage along University Avenue (the "University Avenue Sign")
in a manner generally consistent with the white post, hanging shingle
type sign that exists at the property known as and numbered 40-46
Harvard Street Westwood, Massachusetts owned by an affiliate of
Landlord and Tenant shall be entitled to one (1) identification panel
on the University Avenue Sign. The rights set forth in this Section 2.3
shall not be available to any assignee or subtenant except for an
assignee or subtenant under Section 12.2 hereof and in no event shall
any signage under this Section 2.3 identify more than one (1) occupant
of the Premises. The failure or inability of Tenant to obtain and/or
maintain any permits, approvals, consents or the like required by
Governmental Requirements or to obtain Landlord's cooperation shall not
affect in any way this Lease or Tenant's obligations under this Lease
and, without limitation, Tenant shall have no right to terminate this
Lease and shall have no right to any
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abatement, set off withholding or other reduction of Annual Fixed Rent
or Additional Rent.
2.4 TENANT'S RIGHT OF FIRST OFFER. (A) The portion of the Building shown on
Exhibit B as the "First Offer Space" contains 20,111 square feet of
rentable floor area (the "Rentable Floor Area of the First Offer
Space"). This Section 2.4 shall apply to the First Offer Space and to
the remaining space in the Building only under the limited circumstance
that a "Third Party Offer" (hereinafter defined) is received or
obtained covering all or a portion of the remaining space in the
Building and all or a portion of the First Offer Space. As of the Date
of this Lease, the First Offer Space is not leased to Tenant or any
other tenants. Subject to the provisions of this Section 2.4, Landlord
agrees that if at any time Landlord shall receive or obtain a bona fide
offer from a third party offeror (a "Third Party Offeror") which
Landlord wishes, in good faith, to accept or otherwise desires to enter
into a lease (a "Third Party Offer") to lease all or any portion of the
First Offer Space or any larger portion of the Building which includes
all or any portion of the First Offer Space then Landlord shall first
give notice thereof to Tenant, provided that, as of the date Landlord
receives such Third Party Offer, (i) there exists no "Event of Default"
(as defined in Section 15.1), (ii) this Lease is still in full force
and effect and (iii) except for an assignment or subletting permitted
under Section 12.2 hereof, Tenant has neither assigned this Lease nor
sublet more than twenty-five percent (25%) of the Rentable Floor Area
of the Premises in the aggregate at that time under lease, leases or
lease amendments between Landlord and Tenant. Said notice (herein
called "Landlord's Submitted Offer") shall consist of a copy of the
Third Party Offer and two counterpart originals of a commitment to
enter into an amendment to this Lease to incorporate all of the space
which is the subject of the Third Party Offer into the Premises demised
under this Lease upon the terms and conditions of the Third Party
Offer.
(B) Tenant shall have the right to accept Landlord's Submitted Offer by
executing such two (2) counterpart original commitments to enter into
such lease amendment and delivering to Landlord the same within seven
(7) days after Tenant's receipt of Landlord's Submitted Offer. Within
ten (10) business days after Landlord's receipt of such accepted
commitment, Landlord shall deliver to Tenant two (2) counterpart
originals of an amendment to this Lease to incorporate all of the space
which is the subject of the Third Party Offer into the Premises demised
under this Lease upon the terms and conditions of such accepted
commitment. Within ten (10) business days after Tenants receipt of such
amendment Tenant shall execute both counterpart originals of such
amendment and shall deliver the same to Landlord along with appropriate
evidence of the authority of Tenant to enter into the transaction. If
Tenant shall duly and timely comply with the foregoing, Landlord shall
execute the two (2) counterpart original amendments and shall promptly
return one (1) fully executed counterpart to Tenant.
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(C) (i) If at the expiration of seven (7) days after Tenant's receipt
of Landlord's Submitted Offer Tenant shall not have accepted Landlord's
Submitted Offer by entering into such commitment and delivering the
same to Landlord, or (ii) if Tenant shall so execute and deliver such
commitment but at the end of ten (10) business days after Tenant's
receipt of such lease amendment (consistent with the terms of the
executed commitment) Tenant has not entered into such lease amendment
and delivered the same to Landlord and/or has not complied with the
provisions of subparagraph (B) above, time being of the essence in
respect to all of the same, Landlord shall be free for a period of one
hundred eighty (180) days after the applicable of the events described
in items (i) and (ii) above, as the case may be, to enter into a lease
or leasing transaction of the space which is the subject of the Third
Party Offer with the prospective tenant identified in the Third Party
Offer upon terms and conditions substantially no less favorable to the
Landlord than contained in Landlord's Submitted Offer without again
offering such space to Tenant for lease, it being agreed that if
Landlord does not so lease such portion of the First Offer Space (which
was the subject of the Third Party Offer) during such one hundred
eighty (180) day period to such Third Party Offeror or if such Third
Party Offeror withdraws the Third Party Offer sooner than the
expiration of such 180 day period or if the terms of the proposed lease
with the tenant identified in said Third Party Offer become
substantially less favorable to Landlord than those set forth in said
Third Party Offer, then in any such event the terms of this Section
shall again apply to such the First Offer Space which was the subject
of the Third Party Offer. However, in the event that Landlord shall so
lease such portion of the First Offer Space (which was the subject of
and included in the Third Party Offer) during such one hundred and
eighty (180) days period to such Third Party Offeror, Tenant shall have
no further rights under this Section 2.4 to such portion of the First
Offer Space which was the subject of and included in the Third Party
Offer.
2.5 TENANT'S EXPANSION RIGHTS. (A) Subject to the provisions of this
Section 2.5, by notice given by Tenant to Landlord ("Tenant's Notice")
not later than ninety (90) days following the Office Premises
Commencement Date (time being of the essence), which Tenant's Notice
shall be accompanied by a payment to Landlord in the amount of the
product of (i) $200.00 and (ii) the number of days from the Office
Premises Commencement Date through the date Tenant gives Tenant's
Notice to Landlord ("Tenant's Payment"), Tenant shall have the right to
lease the First Offer Space; provided that, as of the date Landlord
receives Tenant's Notice (i) there exists no "Event of Default" (as
defined in Section 15.1), (ii) this Lease is still in full force and
effect and (iii) except for an assignment or subletting permitted under
Section 12.2 hereof, Tenant has neither assigned this Lease nor sublet
more than twenty-five percent (25%) of the Rentable Floor Area of the
Premises in the aggregate at that time under lease, leases or lease
amendments between Landlord and Tenant. The Tenant's Payment shall be
deemed earned for all purposes when received by Landlord and shall not
be credited against any Annual Fixed Rent or Additional Rent and shall
not be refunded to Tenant. If
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Tenant shall duly and timely give Tenant's Notice, the same shall
constitute an agreement to enter into an amendment to this Lease to
incorporate such space into the Premises upon all the same terms and
conditions contained in this Lease except that (i) the First Offer
Space shall be leased to Tenant in "as is" condition, there shall be no
Special Allowance (the provisions of Section 3.1.1 hereof not being
applicable to the First Offer Space), (ii) Tenant shall be responsible
for all improvements to the First Offer Space, at Tenant's sole cost
and expense; but subject to the provisions of Article IX hereof, (iii)
Tenant shall bear all costs for Landlord to demise the First Offer
Space from the remainder of the space in the Building not leased to
Tenant, (iv) the commencement date for the First Offer Space shall be
the date of Tenant's Notice (the "First Offer Space Commencement
Date"), (v) the "Original Term" (defined in Section 1.2 hereof) shall
be extended for all Premises then under lease, leases or amendments
thereto (including, without limitation, the Initial Premises and the
First Offer Space) for a period of two (2) years from the expiration
date of the Original Term and the Original Term shall be conterminous
as to all of the Premises, (vi) Sections 2.4.,and 2.5 shall, no longer
be applicable, (vii) the Annual Fixed Rent for the First Offer Space
for the period commencing on the First Offer Space Commencement Date
and ending on the day preceding the first anniversary of the Office
Premises Commencement Date shall be the product of (a) the Rentable
Floor Area of the First Offer Space and (b) $3.625, and (viii)
thereafter during the remainder of the Original Term (as so extended as
above provided) the Annual Fixed Rent for the First Offer Space shall
be the product of (a) the Rentable Floor Area of the First Offer Space
and (b) $7.25.
(B) Notwithstanding anything contained in this Section 2.5, in the
event that Landlord shall offer the First Offer Space (or any portion
thereof) to Tenant as provided in Section 2.4 within the ninety (90)
day period set forth in Section 2.5(A) above, the provisions of this
Section 2.5 shall automatically cease and terminate and Tenant's sole
right to the First Offer Space shall be as set forth in and on the
terms and conditions of Section 2.4 hereof.
ARTICLE III
LEASE TERM AND EXTENSION OPTION
3.1 TERM. The Term of this Lease shall be the period specified in Section
1.2 hereof as the "Lease Term", unless sooner terminated or extended as
herein provided. The Lease Term hereof shall commence as to the Office
Premises on the Office Premises Commencement Date defined in Section
1.2 hereof. The Lease Term hereof shall commence as to the Warehouse
Premises on the Warehouse Premises Commencement Date also defined in
Section 1.2 hereof.
3.1.1 TERMINATION OPTION. By written notice ("Tenant's Termination Notice")
given by Tenant to Landlord at any time prior to the 270th day prior to
the third (3rd) anniversary of the Warehouse Premises Commencement
Date, Tenant may elect to cancel and terminate this Lease effective on
the day
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immediately preceding the third (3rd) anniversary of the Warehouse
Premises Commencement Date (the "Early Termination Date") but not
before or after said date; provided, however, that as a condition
precedent to such cancellation and termination, Tenant must deliver to
Landlord together with Tenant's Termination Notice good funds in an
amount equal to the sum of (i) $238,134.00 plus (ii) an amount equal to
twelve (12) months annual fixed rent respecting space in the Building
(in addition to the Initial Premises) leased by Tenant pursuant to
Sections 2.4 or 2.5 or otherwise (collectively herein called "Tenant's
Termination Payment") and provided further that notwithstanding such
termination and as a further condition precedent thereto, (i) Tenant
shall pay to Landlord on a timely basis all Annual Fixed Rent, Tenant's
share of operating costs, taxes and electricity, and all Additional
Rent and, other amounts due from Tenant (including, but not limited to,
all past due amounts thereof) through the Early Termination Date, (it
being acknowledged and agreed that Tenant's Termination Payment is in
addition to such amounts and no credit shall be given towards the
payment of such amount on account of the payment of Tenant's
Termination Payment), (ii) there shall be no "Event of Default" (as
defined in Section 15.1) on either the date Tenant gives Tenant's
Termination Notice or on the Early Termination Date and (iii) Tenant
shall quit and vacate the Premises as of the Early Termination Date and
surrender the same in the condition required by the applicable
provisions of this Lease. In the event that Tenant's share of such
operating costs, taxes and electricity, and such other Additional Rent
and other amounts due through the Early Termination Date is not finally
determined as of the giving of Tenant's Termination Notice, Tenant
shall make payment on account as reasonably estimated by Landlord if so
requested by Landlord and in any event Tenant shall make final payment
of amounts due through the Early Termination Date within thirty (30)
days after final billing therefor by Landlord. In the event of
overpayment by Tenant, Landlord shall refund such overpayment to Tenant
within a reasonable period of time not to exceed thirty (30) days. The
obligations of Tenant and Landlord set forth in this Section 3.1.1
shall survive the termination of this Lease hereunder. If Tenant shall
not give to Landlord an Early Termination Notice as provided in this
Section 3.1.1 (time being of the essence), the provisions of this
Section 3.1.1 shall be deemed null and void.
3.2 EXTENSION OPTION. (A) Provided that at the time of exercise of the
herein described option to extend (i) there exists no "Event of
Default" (defined in Section 15.1) and (ii) this Lease is still in full
force and effect, and (iii) Tenant has neither assigned this Lease nor
sublet more than twenty-five percent (25%) of the Rentable Floor Area
of the Premises (except for an assignment or subletting permitted under
Section 12.2 hereof), Tenant shall have the right to extend the Term
hereof upon all the same terms, conditions, covenants and agreements
herein contained (except for the Annual Fixed Rent which shall be
adjusted during the option period as hereinbelow set forth and except
that there shall be no further option to extend) for one (1) period of
five (5) years as hereinafter set forth. The option period is sometimes
herein referred to as the "Extended Term".
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(B)(i) If Tenant desires to exercise the option to extend the Term,
then Tenant shall give notice to Landlord, not earlier than twelve (12)
months nor later than nine (9) months prior to the expiration of the
Original Term of Tenant's request for Landlord's quotation to Tenant of
a proposed annual rent for the Extended Term. Within ten (10) days
following Landlord's receipt of Tenant's request, Landlord shall
deliver to Tenant such quotation. If at the expiration of thirty (30)
days after the date when Landlord delivers such quotation to Tenant as
aforesaid (the "Negotiation Period"), Landlord and Tenant have not
reached agreement on a determination of an annual rental for the
Extended Term and executed a written instrument extending the Original
Term of this Lease pursuant to such agreement, then Tenant shall have
the right, for thirty (30) days following the expiration of the
Negotiation Period, to make a request to Landlord for a broker
determination (the "Broker Determination") of the Prevailing Market
Rent (as defined in Exhibit E) for the Extended Term, which Broker
Determination shall be made in the manner set forth in Exhibit E.
(B)(ii) If Tenant timely shall have requested the Broker Determination,
then in order to exercise its right to extend the Original Term of this
Lease for the Extended Term, Tenant, within thirty (30) days after
receipt of the Broker Determination, shall give written notice to
Landlord of Tenant's exercise of its right to extend the Lease Term for
the Extended Term pursuant to this subsection 3.2(B)(ii), in which case
the Annual Fixed Rent for the Extended Term shall be the greater of (a)
the Prevailing Market Rent as determined by the Broker Determination or
(b) the Annual Fixed Rent in effect during the last twelve (12) month
period of the Original Tenn. Upon the giving of notice by Tenant within
said thirty (30) day period as provided in this subsection (B)(ii) then
this Lease and Lease Term hereof shall be extended for an additional
term of five (5) years upon all of the same terms, conditions,
covenants and agreements contained in this Lease except that the Annual
Fixed Rent for the Extended Term shall be the rent determined as
described in this subparagraph.
(C) Upon the giving of notice by Tenant to Landlord exercising Tenant's
option to extend the Lease Term in accordance with the provisions of
either subsection B(i) or B(ii) above, then this Lease and the Lease
Term hereof shall be extended, for the Extended Term, without the
necessity for the execution of any additional documents, except that
Landlord and Tenant agree to enter into an instrument in writing
setting forth the Annual Fixed Rent for the Extended Term as determined
in the relevant manner set forth in this Section 3.2, and in such event
all references herein to the Lease Term or the term of this Lease shall
be construed as referring to the Lease Term, as so extended, unless the
context clearly otherwise requires, and except that there shall be no
further option to extend the Lease Term. Notwithstanding anything
contained herein to the contrary, in no event shall the Lease Term
hereof be extended for more than five (5) years after the expiration of
the Original Lease Term hereof.
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ARTICLE IV
CONSTRUCTION
4.1 CONSTRUCTION WORK. (A) Tenant shall give written notice to Landlord of
Tenant's authorization for Landlord to commence construction of the
work in the Initial Premises as described in Exhibit C ("Tenant's
Construction Start Notice"). Subject to delays due to governmental
regulation, unusual scarcity of or inability to obtain labor or
materials, labor difficulties, casualty or other causes reasonably
beyond Landlord's control (collectively "Landlord's Force Majeure") or
attributable to Tenant's action or inaction, Landlord shall commence
construction of said work in the Initial Premises within five (5)
business days after Landlord's receipt of Tenant's Construction Start
Notice and Landlord shall use reasonable speed and diligence in the
construction of the work to be undertaken by Landlord in the Initial
Premises as described in Exhibit C. Tenant shall have no claim against
Landlord for failure so to complete construction of the work in the
Initial Premises. Notwithstanding anything herein contained, the
failure of Tenant to give to Landlord a Tenant's Construction Start
Notice and/or the failure of Landlord to complete the aforesaid work
(i) shall not delay, postpone or otherwise alter either the Office
Premises Commencement Date or the Warehouse Premises Commencement Date,
(ii) shall not delay, postpone or otherwise alter the obligation of
Tenant to pay Annual Fixed Rent and Additional Rent and to perform
Tenant's other obligations under this Lease, (iii) shall not give
Tenant any right to terminate this Lease or to offset, withhold, abate
or otherwise deduct from Annual Fixed Rent or Additional Rent and (iv)
shall not constitute a default of Landlord.
Landlord shall use due diligence to complete as soon as conditions
practically permit all punch list items and any work listed on
applicable Certificates of Occupancy as being incomplete, and Tenant
shall cooperate with Landlord in providing access as may be required to
complete such work in a normal manner.
Tenant agrees that no delay by it, or anyone employed by it, in
performing work to prepare the Initial Premises for occupancy shall
delay commencement of the Term or the obligation to pay rent,
regardless of the reason for such delay or whether or not it is within
the control of Tenant or any such employee.
4.1.1 TENANT'S PAYMENT OF COST OF WORK. As of August 18, 1995, the cost of
the work in the Initial Premises as described and/or shown on Exhibit C
is $140,000.00 (the "Cost Of The Work"); provided, however, that if
Tenant shall not give to Landlord a Tenant's Construction Start Notice
by October 15, 1995 (time being of the essence), Landlord shall have
the right to reprice the work described in Exhibit C and in such event
Tenant shall, at its option by written notice to Landlord, either (i)
have Landlord perform the work
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pursuant to the revised pricing and the Cost Of The Work to be paid to
Landlord shall be adjusted consistent with the repricing (and Tenant
shall together therewith give Landlord a Construction Start Notice) or
(ii) elect to perform the work (at Tenant's sole cost and expense) with
another contractor of Tenant's choosing which contractor shall be first
approved by Landlord. If Tenant shall not give to Landlord a notice
pursuant to the foregoing within ten (10) days after Tenant's receipt
of the repricing, Tenant shall be deemed to have elected item (ii)
above. Tenant covenants and agrees to pay for the entire cost of said
work. If Tenant shall elect for Landlord to perform said work
concurrently with Tenant's delivery of the Construction Start Notice to
Landlord Tenant shall deliver to Landlord good funds in the total
amount of the Cost Of The Work (as it may be adjusted as aforesaid).
Landlord shall hold said amount in escrow subject to the following
provisions of this Section 4.1.1. Not more frequently than once every
thirty (30) days during the performance of said work and, in addition,
upon substantial completion of said work, Landlord shall submit to
Tenant a written statement of the work completed to the date of such
statement (accompanied by billings or other reasonable evidence
relating thereto). Landlord shall have the right to charge the escrow
and to pay therefrom the cost of the work covered by the applicable
statement submitted by Landlord and upon substantial completion of the
work the escrow shall terminate and Landlord shall have the right to
withdraw the balance of the funds in said escrow.
4.2 INTENTIONALLY OMITTED.
4.3 QUALITY AND PERFORMANCE OF WORK. Landlord shall perform the work
described in Exhibit C and Tenant shall be obligated to pay for the
cost of the work, described in Exhibit C as set forth in Section 4.1.1
hereof. The work described in Exhibit C shall be performed in
substantial compliance with the requirements of the Americans with
Disabilities Act and its implementing regulations. All construction
work required or permitted by this Lease shall be done in a good and
workmanlike manner and in compliance with all applicable Legal
Requirements and Insurance Requirements. All of Tenant's work shall be
coordinated with any work being performed by or for Landlord and in
such manner as to maintain harmonious labor relations. Each party may
inspect the work of the other at reasonable times and shall promptly
give notice of observed defects. Each party authorizes the other to
rely in connection with design and construction upon approval and other
actions on the party's behalf by any Construction Representative of the
party named in Section 1.2 or any person hereafter designated in
substitution or addition by notice to the party relying. Only in the
event Landlord performs the work described in Exhibit C, except to the
extent to which Tenant shall have given Landlord notice of respects in
which Landlord has not performed Landlord's construction obligations
under this Article IV (i) not later than the end of the ninth (9th)
full calendar month next beginning after the Warehouse Premises
Commencement Date with respect to the heating, ventilating and air
conditioning systems servicing the Premises, and (ii) not later than
the sixth (6th) full calendar month next
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beginning after the Commencement Date with respect to Landlord's
construction obligations under this Article IV not referenced in (i)
above, Tenant shall be deemed conclusively to have approved Landlord's
construction and shall have no claim that Landlord has failed to
perform any of Landlord's obligations under this Article IV. Landlord
agrees to correct or repair at its expense items which are then
incomplete or do not conform to the work contemplated under Exhibit C
and as to which, in either case, Landlord performed the work described
in Exhibit C and Tenant shall have given notice to Landlord, as
aforesaid.
ARTICLE V
ANNUAL FIXED RENT AND ELECTRICITY
5.1 FIXED RENT. Tenant agrees to pay to Landlord, or as directed by
Landlord, at Landlord's Present Mailing Address specified in Section
1.2 hereof, or at such other place as Landlord shall from time to time
designate by notice, (1) on the applicable Commencement Date, and
thereafter monthly, in advance, on the first day of each and every
calendar month during the Original Lease Term, a sum equal to
one-twelfth (1/12) of the Annual Fixed Rent specified in Section 1.2
hereof and (2) on the first day of each and every calendar month during
each extension option period (if exercised), a sum equal to one-twelfth
of the applicable Annual Fixed Rent as determined in Section 3.2 for
the extension option period. Until notice of some other designation is
given, Annual Fixed Rent and all other charges for which provision is
herein made shall be paid by remittance to or to the order of BOSTON
PROPERTIES, INC., Agents at 8 Arlington Street, Boston, Massachusetts
02116, and all remittances received by BOSTON PROPERTIES, INC., as
Agents as aforesaid, or by any subsequently designated recipient, shall
be treated as a payment to Landlord.
Annual Fixed Rent for any partial month shall be paid by Tenant to
Landlord at such rate on a pro rata basis, and, if the applicable
Commencement Date shall be other than the first day of a calendar
month, the first payment which Tenant shall make to Landlord shall be a
payment equal to a proportionate part of such monthly Annual Fixed Rent
for the partial month from the applicable Commencement Date to the
first day of the succeeding calendar month.
Other charges payable by Tenant on a monthly basis, as elsewhere
provided in this Lease, likewise shall be prorated, and the first
payment on account thereof shall be determined in similar fashion and
shall commence on the applicable Commencement Date and other provisions
of this Lease calling for monthly payments shall be read as
incorporating this undertaking by Tenant.
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The Annual Fixed Rent and all other charges for which provision is made
in this Lease shall be paid by Tenant to Landlord without setoff,
deduction or abatement.
5.2 ELECTRICITY. Tenant covenants and agrees to take all steps required by
the appropriate utility company to provide for the direct billing to
Tenant of the electricity serving the Premises including, without
limitation, making application(s) to such utility company in connection
therewith and making any deposits (including, but not limited to, such
letters of credit) as such utility company shall require. Tenant
covenants and agrees to pay, punctually as and when due, all
electricity charges and rates for and relating to the Premises and from
time to time if requested by Landlord to provide Landlord with evidence
of payment to, and good standing with, such utility company as Landlord
may reasonably require. Tenant covenants and agrees to keep and
maintain sufficient heat in the Premises in order to keep the portions
of the pipes and other building systems located within the Premises
from freezing. Tenant covenants and agrees to defend, save harmless and
indemnify Landlord against all liability, cost and damage arising out
of or in any way connected to providing heat in the Premises, to the
payment, non-payment or late payment of any and all charges and rates
and deposits to such utility company and the foregoing shall survive
the expiration or early termination of this Lease.
5.3 NATURE OF LEASE. Except only as expressly provided in this Lease, it is
the purpose and intent of Landlord and Tenant that this Lease
constitute and be construed as, an absolutely net lease whereby, under
all circumstances and conditions (whether not or hereafter existing or
whether or not in the contemplation of the parties), this Lease shall
yield to Landlord the full amount of the applicable Annual Fixed Rent
and Additional Rent (collectively sometimes referred to as the "Rent")
throughout the Lease Term, and Tenant shall pay such Rent without
assertion of any counterclaim, set-off, deduction or defense and except
only as otherwise expressly provided in this Lease, without abatement,
suspension, deferment, diminution or reduction. Notwithstanding the
foregoing, (i) Landlord shall perform the obligations as set forth in
and subject to the provisions of Section 7.1 hereof and (ii) Landlord
shall otherwise comply with the provisions of Sections 7.2 and 7.3
hereof subject, however, to reimbursement by Tenant as contained in
Section 7.5 hereof.
ARTICLE VI
TAXES
6.1 DEFINITIONS. With reference to the real estate taxes referred to in
this Article VI, it is agreed that terms used herein are defined as
follows:
(a) "Tax Year" means the 12-month period beginning July 1
each year during the Lease Term or if the appropriate
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Governmental tax fiscal period shall begin on any
date other than July 1, such other date.
(b) "Landlord's Tax Expenses Allocable to the Premises"
means the same proportion of Landlord's Tax Expenses
as Rentable Floor Area of Tenants Premises bears to
95% of the Total Rentable Floor Area of the Building.
(c) "Landlord's Tax Expenses" with respect to any Tax
Year means the aggregate "real estate taxes"
(hereinafter defined) with respect to that Tax Year,
reduced by any net abatement receipts with respect to
that Tax Year; provided, however, that if in any Tax
Year an abatement has been obtained on account of
vacancies in the Building, or if the real estate
taxes had initially been assessed in an amount to
reflect such vacancies then Landlord's Tax Expenses
shall be determined to be an amount equal to the
taxes which would normally be expected to have been
assessed had occupancy been ninety-five percent (95%)
as of the reference date or period on which or in
relation to which such assessment was made.
(d) "Real estate taxes" means all taxes and special
assessments of every kind and nature assessed by any
Governmental authority on the Site or the Building or
the Property which the Landlord shall be obligated to
pay because of or in connection with the ownership,
leasing and operation of the Site and the Building
and reasonable expenses of any proceedings for
abatement of taxes. The amount of special taxes or
special assessments to be included shall be limited
to the amount of the installment (plus any interest
other than penalty interest payable thereon) of such
special tax or special assessment required to be paid
during the year in respect of which such taxes are
being determined. There shall be excluded from such
taxes all income, estate, succession, inheritance and
transfer taxes; provided, however, that if at any
time during the Lease Term the present system of ad
valorem taxation of real property shall be changed so
that in lieu of, or in addition to, the whole or any
part of the ad valorem tax on real property, there
shall be assessed on Landlord a capital levy or other
tax on the gross rents received with respect to the
Site or Building, or a Federal, State, County,
Municipal, or other local income, franchise, excise
or similar tax, assessment, levy or charge (distinct
from any now in effect in the jurisdiction in which
the Property is located) measured by or based, in
whole or in part, upon any such gross rents, then any
and all of such taxes, assessments, levies or
charges, to the extent so measured or based, shall be
deemed to be included within the term "real estate
taxes" but only to the extent that the same would be
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payable if the Site or Building were the only
property of Landlord.
6.2 TENANT'S SHARE OF REAL ESTATE TAXES. For each full Tax Year falling
within the Lease Term, Tenant shall pay to Landlord, as Additional
Rent, Landlord's Tax Expenses Allocable to the Premises and for each
fraction of a Tax Year falling within the Lease Term either at the
beginning or end thereof, Tenant shall pay to Landlord, as Additional
Rent, the product of such fraction and Landlord's Tax Expenses
Allocable to the Premises for the full Tax Year in which such fraction
of the Tax Year occurs. The payments required to be paid by Tenant as
provided in the preceding sentence are herein called "Tenant's Tax
Payments". Payments by Tenant on account of Tenant's Tax Payments shall
be made monthly at the time and in the fashion herein provided for the
payment of Annual Fixed Rent. The amount so to be paid to Landlord
shall be an amount form time to time reasonably estimated by Landlord
to be sufficient to provide Landlord, in the aggregate, a sum equal to
Tenant's Tax Payments, five (5) days at least before that day on which
tax payments by Landlord would become delinquent. Not later than ninety
(90) days after Landlord's Tax Expenses Allocable to the Premises are
determinable for the first such Tax Year or fraction thereof and for
each succeeding Tax Year or fraction thereof during the Lease Term,
Landlord shall render Tenant a statement in reasonable detail certified
by a representative of Landlord showing for the preceding year or
fraction thereof, as the case may be, real estate taxes on the Building
and Site, abatements and refunds, if any, of any such taxes and
assessments, expenditures incurred in obtaining such abatement or
refund, the amount of Tenant's Tax Payments, the amount thereof already
paid by Tenant and the amount thereof overpaid by, or remaining due
from Tenant for the period covered by such statement. Within thirty
(30) days after the receipt of such statement, Tenant shall pay any sum
remaining due. Any balance shown as due to Tenant shall be credited
against Annual Fixed Rent next due, or refunded to Tenant if the Lease
Term has then expired and Tenant has no further obligation to Landlord.
Expenditures for legal fees and for other expenses incurred in
obtaining an abatement or refund may be charged against the abatement
or refund before the adjustments are made for the Tax Year.
To the extent that real estate taxes shall be payable to the taxing
authority in installments with respect to periods less than a Tax Year,
the statement to be furnished by Landlord shall be rendered and
payments made on account of such installments.
6.3 REAL ESTATE TAX ABATEMENT PROCEEDING. Provided that there shall not
then be existing an Event of Default (defined in Section 15.1 hereof)
and Tenant shall not have assigned this Lease nor sublet any portion of
the Premises (except for an assignment or subletting permitted under
Section 12.2 hereof), by written notice to Landlord received by
Landlord at least forty-five (45) days prior to the date a real estate
tax abatement application is
<PAGE>
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required to be filed, Tenant shall have the right to request that
Landlord institute appropriate tax abatement proceedings and if
Landlord, in its sole judgement determines that it is desirable to do
so, Landlord shall institute (or cause to be instituted) a real estate
tax abatement proceeding. If Landlord shall so institute (or caused to
be instituted) a tax abatement proceeding, Landlord shall have the
right to compromise, negotiate or otherwise settle the proceeding
and/or to determine to discontinue or otherwise conclude such
proceeding.
ARTICLE VII
LANDLORD'S REPAIRS AND SERVICES AND TENANT'S ESCALATION
PAYMENTS
7.1 STRUCTURAL REPAIRS. Except for (a) normal and reasonable wear and use
and (b) damage caused by fire or other casualty and by eminent domain,
Landlord shall, throughout the Lease Term, at Landlord's sole cost and
expense, keep and maintain in good order, condition and repair the
following portions of the Building: the structural portions of the
roof, the exterior and load bearing walls, the foundation, the
structural columns and floor slabs and other structural elements of the
Building; provided, however, that Tenant shall pay to Landlord, as
Additional Rent, the cost of any and all such repairs which may be
required as a result of repairs, alterations, or installations made by
Tenant or any subtenant, assignee, licensee or concessionaire of Tenant
or any agent, servant, employee or contractor of any of them or to the
extent of any. loss, destruction or damage caused by the negligent acts
or omissions of Tenant, any assignee or subtenant or any agent,
servant, employee, customer, visitor or contractor of any of them.
7.2 OTHER REPAIRS TO BE MADE BY LANDLORD. Except as otherwise provided in
this Lease and subject to provisions for reimbursement by Tenant as
contained in Section 7.5, Landlord agrees to keep and maintain in good
order, condition and repair the common areas and facilities of the Site
and Building, including heating, ventilating, air conditioning,
plumbing and other Building systems equipment servicing the Premises,
except that Landlord shall in no event be responsible to Tenant for (a)
the condition of glass in and about the Premises (other than for glass
in exterior walls for which Landlord shall be responsible unless the
damage thereto is attributable to Tenant's negligence or misuse, in
which event the responsibility therefor shall be Tenant's), or (b) for
any condition in the Premises or the Building caused by any act or
neglect of Tenant or any agent, employee, contractor, assignee,
subtenant or invitee of Tenant. Without limitation, Landlord shall not
be responsible to make any improvements or repairs to the Building or
the Premises other than as expressly provided in Section 7.1 or in this
Section 7.2, unless expressly otherwise provided in this Lease or
unless the need for the same is caused by the acts or omissions of
Landlord, its contractors or agents.
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7.3 SERVICES TO BE PROVIDED BY LANDLORD. Except as otherwise provided in
this Lease and subject to provisions for reimbursement by Tenant as
contained in Section 7.5 and Tenant's responsibilities in regard to
electricity as provided in Section 5.2, Landlord agrees to furnish, at
Tenant's expense, reasonable additional Building operation services
which are usual and customary in similar buildings and such additional
special services as may be mutually agreed upon by Landlord and Tenant,
upon reasonable and equitable rates from time to time established by
Landlord. Landlord shall perform the work and/or services for which it
charges Tenant under Section 7.4 hereof.
7.4 OPERATING COSTS DEFINED. "Operating Expenses Allocable to the Premises"
means the same proportion of the Operating Expenses for the Property as
Rentable Floor Area of the Premises bears to 95% of the Total Rentable
Floor Area of the Building. "Operating Expenses for the Property" means
the reasonable cost of operation of the Property incurred by Landlord,
including those incurred in discharging Landlord's obligations under
Sections 7.2 and 7.3. Such costs shall exclude payments of debt service
and any other mortgage charges, brokerage commissions, salaries of
executives and owners not directly employed in the management or
operation of the Building, the general overhead and administrative
expenses of the home office of Landlord or Landlord's managing agent,
and costs of special services rendered to tenants (including Tenant)
for which a separate charge is made, advertising or promotional
expenses or other costs directly attributable to seeking and obtaining
new tenants or retaining existing tenants (including, without
limitation, legal costs and costs of lease negotiations), costs due to
Landlord's violations of law or Landlord's defaults under leases and
costs of remedying non-compliance with law existing prior to
performance of the work described in Exhibit C, but shall include,
without limitation:
(a) compensation, wages and all fringe benefits,
workmen's compensation insurance premiums and payroll
taxes paid to, for or with respect to all persons for
their services in the operating, maintaining or
cleaning of the Building or the Site;
(b) payments under service contracts with independent
contractors for operating, maintaining or cleaning of
the Building or the Site;
(c) steam, water, sewer, gas, oil, electricity and
telephone charges (excluding such utility charges
separately chargeable to tenants for additional or
separate services and electricity charges paid by
Tenant in the manner set forth in Section 5.2) and
costs of maintaining letters of credit or other
security as may be required by utility companies as a
condition of providing such services;
<PAGE>
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(d) cost of maintenance, cleaning and repairs (other than
repairs not properly chargeable against income or
reimbursed from contractors under guarantees);
(e) cost of snow removal and care of landscaping;
(f) cost of building and cleaning supplies and equipment;
(g) premiums for insurance carried with respect to the
Property (including, without limitation, liability
insurance, insurance against loss in case of fire or
casualty and of monthly installments of Annual Fixed
Rent and any Additional Rent which may be due under
this Lease and other leases of space in the Building
for not more than twelve (12) months in the case of
both Annual Fixed Rent and Additional Rent and, if
there be any first mortgage on the Property,
including such insurance as may be required by the
holder of such first mortgage);
(h) management fees at reasonable rates consistent with
the type of occupancy and the services rendered;
(i) depreciation for capital expenditures made by
Landlord (x) to reduce operating expenses if Landlord
reasonably shall have determined that the annual
reduction in operating expenses shall exceed
depreciation therefor or (y) to comply with
applicable Legal Requirements hereafter enacted,
(plus, in the case of both (x) and (y), an interest
factor, reasonably determined by Landlord, as being
the interest rate then charged for long term
mortgages by institutional lenders on like properties
within the general locality in which the Building is
located), and in the case of both (x) and (y)
depreciation shall be determined by dividing the
original cost of such capital expenditure by the
number of years of useful life of the capital item
acquired, which useful life shall be determined
reasonably by Landlord in accordance with generally
accepted accounting principles and practices in
effect at the time of acquisition of the capital
item. Tenant shall not be obligated for any portion
of the amount hereunder for periods after the
expiration date of this Lease; and
(j) all other reasonable and necessary expenses paid in
connection with the operating, cleaning and
maintenance of the Building, the Site and said common
areas and facilities and properly chargeable against
income (including, without limitation, landscaping
and maintenance of the parking areas of the Site and
the repair and maintenance of the roof of the
Building).
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Notwithstanding the foregoing, in determining the amount of Operating
Expenses for the Property for any calendar year or portion thereof
falling within the Lease Term, no decrease in Operating Expenses
Allocable to the Property shall result in a reduction in the amount
otherwise payable by Tenant if and to the extent said decrease is
attributable to vacancy in the Building rather than to any other
causes.
7.5 TENANT'S SHARE OF OPERATING EXPENSES. (A) For each calendar year
falling within the Lease Term, Tenant shall pay to Landlord, as
Additional Rent, the Operating Expenses Allocable to the Premises (as
defined in Section 7.4) and for each fraction of a calendar year
falling within the Lease Term at the beginning or end thereof, Tenant
shall pay to Landlord, as Additional Rent, the product of such
fractions and the Operating Expenses Allocable to the Premises. The
payments required to be paid by Tenant as provided in the preceding
sentence are herein called "Tenant's Operating Costs Payments".
Tenant's Operating Cost Payments shall be paid to Landlord, as
Additional Rent, on or before the thirtieth (30th) day following
receipt by Tenant of the statement referred to below in this Section
7.5.
(B) Payments by Tenant on account of Tenant's Operating Cost Payments
shall be made monthly at the time and in the fashion herein provided
for the payment of Annual Fixed Rent. The amount so to be paid to
Landlord shall be an amount from time to time reasonably estimated by
Landlord to be sufficient to cover, in the aggregate, a sum equal to
Tenant's Operating Costs Payments for each calendar year during the
Lease Term.
(C) No later than ninety (90) days after the end of the first calendar
year or fraction thereof ending December 31 and of each succeeding
calendar year during the Lease Term or fraction thereof at the end of
the Lease Term, Landlord shall render Tenant a statement in reasonable
detail and according to usual accounting practices certified by a
representative of Landlord, showing for the preceding calendar year or
fraction thereof, as the case may be, the Operating Expenses for the
Property and the Operating Expenses Allocable to the Premises. Said
statement to be rendered to Tenant also shall show for the preceding
year or fraction thereof, as the case may be, the amounts already paid
by Tenant on account of Tenant's Operating Cost Payments and the amount
of Tenant's Operating Cost Payments remaining due from, or overpaid by,
Tenant for the year or other period covered by the statement.
If such statement shows a balance remaining due to Landlord, Tenant
shall pay same to Landlord on or before the thirtieth (30th) day
following receipt by Tenant of said statement. Any balance shown as due
to Tenant shall be credited against Annual Fixed Rent next due, or
refunded to Tenant if the Lease Term has then expired and Tenant has no
further obligation to Landlord.
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Notwithstanding the provisions of the immediately preceding paragraph,
if Tenant desires to contest such statement, Tenant shall give written
notice to Landlord thereof within sixty (60) days after Tenant's
receipt of such statement, time being of the essence. If the statement
rendered by Landlord to Tenant shows a balance remaining due to
Landlord, then as a condition precedent to Tenant contesting such
statement and in addition to giving such a notice of contest, Tenant
shall pay such balance under protest (with a written statement to
Landlord of such payment under protest) within said sixty (60) day
period. If Tenant shall fail to (i) give notice of such contest or (ii)
to pay any such balance (with a notice of protest) within said sixty
(60) day period, Tenant shall be deemed to have accepted such statement
as rendered by Landlord. Within thirty (30) days after such notice of
contest (together with payment under protest of any balance shown on
Landlord's statement and a written statement thereof) to Landlord, time
being of the essence, Tenant shall have the right during normal
business hours and at Landlord's place of business to examine
Landlord's books and records with respect to such statement on not less
than three (3) days' prior written notice to Landlord. If such
examination reveals that such statement is incorrect, the appropriate
adjustment in the amount due from Tenant to landlord promptly shall be
made and Tenant may make a demand on Landlord for payment of any refund
claimed by Tenant as a result of such examination and if Landlord shall
not pay such demand, Tenant shall have the right to bring and prosecute
suit to collect such demand for payment but Landlord's failure to pay
such demand for payment shall not entitle Tenant to offset against,
withhold or otherwise deduct from Annual Fixed Rent or any Additional
Rent nor shall Landlord's failure to pay Tenant's demand for payment be
a default of Landlord or give Tenant the right to terminate this Lease,
Tenant's sole right being to bring and prosecute such suit as
aforesaid.
ARTICLE VIII
TENANT'S REPAIRS
8.1 TENANTS REPAIRS AND MAINTENANCE. Tenant covenants and agrees that, from
and after the date that possession of the Premises is delivered to
Tenant and until the end of the Lease Term, Tenant will keep neat and
clean and maintain in good order, condition and repair the Premises and
every part thereof, excepting only for those repairs for which Landlord
is responsible under the terms of Article VII of this Lease, reasonable
use and damage by fire or other casualty and as a consequence of the
exercise of the power of eminent domain. Tenant shall not permit or
commit any waste, and Tenant shall be responsible for the cost of
repairs which may be made necessary by reason of damages to common
areas in the Building by Tenant, Tenant's agents, employees,
contractors, or invitees.
If repairs are required to be made by Tenant pursuant to the terms
hereof, Landlord may demand that Tenant make the same forthwith, and if
Tenant refuses or neglects to commence such repairs and complete the
same with
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reasonable dispatch after such demand, Landlord may (but shall not be
required to do so) make or cause such repairs to be made and shall not
be responsible to Tenant for any loss or damage that may accrue to
Tenant's stock or business by reason thereof. If Landlord makes or
causes such repairs to be made, Tenant agrees that Tenant will
forthwith on demand, pay to Landlord as Additional Rent the cost
thereof, and if Tenant shall default in such payment, Landlord shall
have the remedies provided for non-payment of rent or other charges
payable hereunder.
ARTICLE IX
ALTERATIONS
9.1 LANDLORD'S APPROVAL. Tenant covenants and agrees not to make
alterations, additions or improvements to the Premises, whether before
or during the Lease Term, except in accordance with plans and
specifications therefor first approved by Landlord in writing, which
approval shall not be unreasonably withheld or delayed. Landlord shall
not be deemed unreasonable:
(a) for withholding approval of any alterations,
additions or improvements which (i) in Landlord's
opinion might adversely affect any structural or
exterior element of the Building, any area or element
outside of the Premises or any facility serving any
area of the Building outside of the Premises, or (ii)
involve or affect the exterior design, size, height
or other exterior dimensions of the Building, or
(iii) enlarge the Rentable Floor Area of the
Premises; or
(b) for making its approval conditional on Tenant's
agreement to restore the Premises to its condition
prior to such alteration, addition, or improvement at
the expiration or earlier termination of the Lease
Term.
Landlord's review and approval of any such plans and specifications and
consent to perform work described therein shall not be deemed an
agreement by Landlord that such plans, specifications and work conform
with applicable Legal Requirements and applicable Insurance
Requirements nor deemed a waiver of Tenant's obligations under this
Lease with respect to applicable Legal Requirements and Insurance
Requirements nor impose any liability or obligation upon Landlord with
respect to the completeness, design sufficiency or compliance of such
plans, specifications and work with applicable Legal Requirements and
Insurance Requirements.
9.2 CONFORMITY OF WORK. Tenant covenants and agrees that any alterations,
additions, improvements or installations made by it to or upon the
Premises shall be done in a good and workmanlike manner and in
compliance with all applicable Legal Requirements and Insurance
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Requirements now or hereafter in force, that materials of first and
otherwise good quality shall be employed therein, that the structure of
the Building shall not be endangered or impaired thereby and that the
Premises shall not be diminished in value thereby.
9.3 PERFORMANCE OF WORK. GOVERNMENTAL PERMITS AND INSURANCE. All of
Tenant's alterations and additions and installation of furnishings
shall be coordinated with any work being performed by or for Landlord
and in such manner as to maintain harmonious labor relations and not to
damage the Building or Site or interfere with Building construction or
operation and, except for installation of furnishings, shall be
performed by Landlord's general contractor or by contractors or workmen
first approved by Landlord. Except for work by Landlord's general
contractor, Tenant shall procure all necessary governmental permits
before making any repairs, alterations, other improvements or
installations. Tenant agrees to save harmless and indemnify Landlord
from any and all injury, loss, claims or damage to any person or
property occasioned by or arising out of the doing of any such work
whether the same be performed prior to or during the Term of this
Lease. In addition, Tenant shall cause each contractor to carry
workmen's compensation insurance in statutory amounts covering the
employees of all contractors and subcontractors, and commercial general
liability insurance or comprehensive general liability insurance with a
broad form comprehensive liability endorsement with such limits as
Landlord may require reasonably from time to time during the Term of
this Lease, but in no event less than the minimum amount of commercial
general liability insurance or comprehensive general liability
insurance Tenant is required to maintain as set forth in Section 1.2
hereof and as the same may be modified as provided in Section 13.2
hereof (all such insurance to be written in companies approved
reasonably by Landlord and insuring Landlord, Landlord's managing agent
and Tenant as well as contractors) and to deliver to Landlord
certificates of all such insurance.
9.4 LIENS. Tenant covenants and agrees to pay promptly when due the entire
cost of any work done on the Premises by Tenant, its agents, employees
or contractors, and not to cause or permit any liens for labor or
materials performed or furnished in connection therewith to attach to
the Premises or the Building or the Site and immediately to discharge
any such liens which may so attach.
9.5 NATURE OF ALTERATIONS. All work, construction, repairs, alterations,
other improvements or installations made to or upon the Premises
(including, but not limited to, the construction performed by Landlord
under Article IV), shall become part of the Premises and shall become
the property of Landlord and remain upon and be surrendered with the
Premises as a part thereof upon the expiration or earlier termination
of the Lease Term, except as follows:
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(a) All trade fixtures whether by law deemed to be a part
of the realty or not, installed at any time or times
by Tenant or any person claiming under Tenant shall
remain the property of Tenant or persons claiming
under Tenant and may be removed by Tenant or any
person claiming under Tenant at any time or times
during the Lease Term or any occupancy by Tenant
thereafter and shall be removed by Tenant at the
expiration or earlier termination of the Lease Term
if so requested by Landlord. Tenant shall repair any
damage to the Premises occasioned by the removal by
Tenant or any person claiming under Tenant of any
such property from the Premises.
(b) At the expiration or earlier termination of the Lease
Term, unless otherwise agreed in writing by Landlord,
Tenant shall remove any wiring for Tenant's computer,
telephone and other communication systems and
equipment and any alterations, additions and
improvements made with Landlord's consent during the
Lease Term for which such removal was made a
condition of such consent under Section 9.1(b). Upon
such removal Tenant shall restore the Premises to
their condition prior to such alterations, additions
and improvements and repair any damage occasioned by
such removal and restoration.
(c) If Tenant shall make any alterations, additions or
improvements to the Premises for which Landlord's
approval is required under Section 9.1 without
obtaining such approval, then at Landlord's request
at any time during the Lease Term, and at any event
at the expiration or earlier termination of the Lease
Term, Tenant shall remove such alterations, additions
and improvements and restore the Premises to their
condition prior to same and repair any damage
occasioned by such removal and restoration. Nothing
herein shall be deemed to be a consent to Tenant to
make any such alterations, additions or improvements,
the provisions of Section 9.1 being applicable to any
such work.
9.6 INCREASES IN TAXES. Tenant shall pay, as additional rent, one hundred
percent (100%) of any increase in real estate taxes on the Property
which shall, at any time after the Commencement Date, result from
alterations, additions or improvements to the Premises made by Tenant
if the taxing authority specifically determines such increase results
from such alterations, additions or improvements made by Tenant. Tenant
shall not be obligated to pay any portion of any increase in real
estate taxes on the Property resulting from alterations, additions or
improvements to other tenant premises made by such other tenants
("Other Tenant Alterations") where the taxing authority specifically
determine such increase results from Other Tenant Alterations.
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ARTICLE X
PARKING AND LOADING
10.1 PARKING SPACES. Tenant shall have the right to use the Number of
Parking Spaces (referred to in Section 1.2), in common with use by
other tenants from time to time of the Building, of the parking area on
the Site; provided, however, that Landlord shall not be obligated to
furnish stalls or spaces in any parking area specifically designated
for Tenant's use. Twenty (20) of the Total Number of Parking Spaces
will be reserved for Tenant's use of its "step van vehicles"
(so-called) and said twenty (20) spaces will be located at the southern
most portion of the parking area. In addition, Tenant shall have the
use of three (3) loading docks which are shown on the floor plan
attached hereto as Exhibit B. Tenant covenants and agrees that it and
all persons claiming by, through and under it, shall at all times abide
by all reasonable rules and regulations promulgated by Landlord with
respect to the use of the parking areas on the Site. The parking
privileges granted herein are non-transferrable except to a permitted
assignee or subtenant as provided in Section 12.1 through Section 12.7.
Further, Landlord assumes no responsibility whatsoever for loss or
damage due to fire, theft or otherwise to any automobile(s) parked on
the Site or to any personal property therein, however caused except to
the extent of the gross negligence or willful misconduct of Landlord,
and Tenant covenants and agrees, upon request from Landlord from time
to time, to notify its officers, employees, agents and invitees of such
limitation of liability. Tenant acknowledges and agrees that a license
only is hereby granted, and no bailment is intended or shall be
created.
ARTICLE XI
CERTAIN TENANT COVENANTS
Tenant covenants during the Lease Term and for such further time as
Tenant occupies any part of the Premises:
11.1 To pay when due all Annual Fixed Rent and Additional Rent and all
charges for utility services rendered to the Premises and service
inspections therefor and, as further Additional Rent, all charges for
additional and special services rendered pursuant to Section 7.3.
11.2 To use and occupy the Premises for only the Permitted Use and the
Additional Permitted Uses but only in conformity with and subject to
(i) applicable Insurance Requirements, (ii) applicable Legal
Requirements and (iii) the terms, conditions and requirements set forth
in the definition of Additional Permitted Uses in Section 1.2 hereof,
and not to injure or deface the Premises or the Property, not to permit
in the Premises any auction sale, vending machines (other than vending
machines which dispense food, candy, nonalcoholic beverages, toiletries
and similar grooming products) or
<PAGE>
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flammable fluids or chemicals, or nuisance, or the emission from the
Premises of any objectionable noise or odor, nor to use or devote the
Premises or any part thereof for any purpose other than the Permitted
Uses, nor any use thereof which is inconsistent with the maintenance of
the Building as an warehouse and distribution building of the
first-class in the quality of its maintenance, use and occupancy, or
which is improper, offensive, contrary to law or ordinance or liable to
invalidate or increase the premiums for any insurance on the Building
or its contents or liable to render necessary any alteration or
addition to the Building. Further, Tenant shall not nor shall Tenant
permit its employees, invitees or contractors to engage in any activity
which may produce a hazardous material, waste or substance, or keep or
maintain any substance which is or may hereafter be classified as a
hazardous material, waste or substance, under federal, state or local
laws, rules and regulations, including, without limitation, 42 U.S.C.
Section 6901 et seq., 42 U.S.C. Section 9601 et seq., 42 U.S.C. Section
2601 et seq., 49 U.S.C. Section 1802 et seq. and Massachusetts General
Laws, Chapter 21E, and the rules and regulations promulgated under any
of the foregoing, as such laws, rules and regulations may be amended
from time to time (collectively "Hazardous Waste Laws") and, further,
Tenant shall comply and shall cause its employees, invitees, agents and
contractors to comply with each of the foregoing. In the conduct of the
Permitted Uses, Tenant shall have the right to use fluids or materials
which would otherwise be classified as hazardous materials or
substances under applicable Hazardous Waste Laws provided and on the
condition that (i) such fluids or materials are customarily used in
Tenant's business operations and are used in small quantities, (ii)
Tenant shall comply with all requirements of Hazardous Waste Laws
(including, but not limited to, all requirements thereof relating to
(a) the use, storage, handling, keeping, disposal and transporting of
such fluids and materials and (b) record keeping with respect thereto)
and (ii) Tenant shall obtain all licenses, permits, special permits,
approvals, consents and other permissions from all applicable
governmental authorities necessary or required under all Legal
Requirements and Hazardous Waste Laws from time to time in effect for
and relating to the use, storage, handling, keeping, disposal and
transporting of such fluids and materials (as, for example but not in
limitation, flammable fuel or flammable substance licenses and
registrations) and (iii) Tenant's use, storage, handling, keeping,
disposal and transporting of such fluids and materials shall comply
with and be permitted under all applicable Legal Requirements
including, but not limited to, the provisions of the Town of Westwood
Zoning By-Law from time to time in effect. In addition and
notwithstanding the foregoing, Tenant shall indemnify and hold Landlord
harmless from, against and on account of any violation or alleged
violation of any Hazardous Waste Law, any applicable Legal Requirements
and/or any applicable Insurance Requirement related to, regulating or
covering the use, storage, handling, keeping, disposal and/or
transporting of such fluids and materials caused (or alleged to be
caused) by Tenant, its employees, officers,
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directors, invitees, agents or contractors and the provisions of this
Section shall survive the expiration or termination of this Lease
except to the extent caused by Landlord, its employees, officers,
directors, invitees, agents and contractors. Further, Tenant assumes
the obligation to pay any increase in Landlord's insurance premiums
resulting from any of the foregoing and Tenant shall make such
alterations as shall be required under or by applicable Legal
Requirements (including applicable Hazardous Waste Laws) and applicable
Insurance Requirements in order to keep, use, store, handle, dispose of
and transport such fluids and materials, such alterations to be subject
to the requirements of Article IX hereof.
11.3 Not to obstruct in any manner any portion of the Building not hereby
leased or any portion thereof or of the Site used by Tenant in common
with others; not without prior consent of Landlord to permit the
painting or placing of any signs, curtains, blinds, shades, awnings,
aerials or flagpoles, or the like, visible from outside the Premises;
and to comply with all reasonable rules and regulations now or
hereafter made by Landlord, of which Tenant has been given notice, for
the care and use of the Building and the Site and their facilities and
approaches, but Landlord shall not be liable to Tenant for the failure
of other occupants of the Building to conform to such rules and
regulations.
11.4 To keep the Premises equipped with all safety appliances required by
law or ordinance or any other regulation of any public authority
because of any use made by Tenant other than normal warehouse and
distribution use, and to procure all licenses and permits so required
because of any use made by Tenant other than normal warehouse and
distribution use, and to procure all licenses and permits so required
because of such use and, if requested by Landlord, to do any work so
required because of such use, it being understood that the foregoing
provisions shall not be construed to broaden in any way Tenant's
Permitted Uses.
11.5 Not to place a load upon any floor in the Premises exceeding an average
rate of 250 pounds of live load (including partitions) per square foot
of floor area in the warehouse portion of the Building and 70 pounds of
live load (including partitions) per square foot of floor area in the
office portion of the Building; and not to move any safe, vault or
other heavy equipment in, about or out of the Premises except in such
manner and at such time as Landlord shall in each instance authorize.
Tenant's business machines and mechanical equipment shall be placed and
maintained by Tenant at Tenant's expense in settings sufficient to
absorb and prevent vibration or noise that may be transmitted to the
Building structure or to any other space in the Building.
11.6 To pay promptly when due all taxes which may be imposed upon Tenant's
Property in the Premises to whomever assessed.
11.7 Intentionally Omitted.
11.8 Not to do or permit anything to be done in or upon the Premises, or
bring in anything or keep anything therein, which shall increase the
rate of insurance on the Premises or on the Building above the standard
rate applicable to
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premises being occupied for the use to which Tenant has agreed to
devote the Premises; and Tenant further agrees that, in the event that
Tenant shall do any of the foregoing, Tenant will promptly pay to
Landlord, on demand, any such increase resulting therefrom, which shall
be due and payable as Additional Rent hereunder.
11.9 Without limiting the provisions of Section 11.2 hereof, to comply with
all applicable Legal Requirements now or hereafter in force which shall
impose a duty on Landlord or Tenant relating to or as a result of the
use or occupancy of the Premises; provided that Tenant shall not be
required to make any alterations or additions to the structure, roof,
exterior and load bearing walls, foundation, structural floor slabs and
other structural elements of the Building unless the same are required
by such Legal Requirements as a result of or in connection with
Tenant's particular use or occupancy of the Premises beyond normal use
of space of this kind or are required pursuant to the provisions of
Section 11.2 hereof. Tenant shall promptly pay all fines, penalties and
damages that may arise out of or be imposed because of its failure to
comply with the provisions of this Section 11.9.
ARTICLE XII
ASSIGNMENT AND SUBLETTING
12.1 RESTRICTIONS ON TRANSFER. Except as otherwise expressly provided
herein, Tenant covenants and agrees that it shall not assign, mortgage,
pledge, hypothecate or otherwise transfer this Lease and/or Tenant's
interest in this Lease or sublet (which term, without limitation, shall
include granting of concessions, licenses or the like) the whole or any
part of the Premises. Any assignment, mortgage, pledge, hypothecation,
transfer or subletting not expressly permitted in or consented to by
Landlord under this Article XII shall be void, ab initio; shall be of
no force and effect; and shall confer no rights on or in favor of third
parties. In addition, Landlord shall be entitled to seek specific
performance of or other equitable relief with respect to the provisions
hereof.
12.2 EXCEPTIONS FOR PARENT OR SUBSIDIARY. Notwithstanding the foregoing
provisions of Section 12.1 above and the provisions of Section 12.4
below, BUT subject to the provisions of Sections 12.5, 12.6 and 12.7
below, Tenant shall have the right to assign this Lease or to sublet
the Premises (in whole or in part) to any parent or subsidiary
corporation of Tenant or to any corporation into which Tenant may be
converted or with which it may merge.
12.3 LANDLORD'S TERMINATION RIGHT. Notwithstanding the provisions of Section
12.1 above, in the event Tenant desires to assign this Lease or to
sublet the whole (but not part) of the Premises (no partial subletting
being permitted other than as provided in Section 12.2), Tenant shall
notify Landlord thereof in writing and Landlord shall have the right at
its sole option, to be exercised within thirty (30) days after receipt
of Tenant's notice,
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to terminate this Lease as of a date specified in a notice to Tenant,
which date shall not be earlier than sixty (60) days nor later than one
hundred and twenty (120) days after Landlord's notice to Tenant;
provided, however, that upon the termination date as set forth in
Landlord's notice, all obligations relating to the period after such
termination date (but not those relating to the period before such
termination date) shall cease and promptly upon being billed therefor
by Landlord, Tenant shall make final payment of all rent and additional
rent due from Tenant through the termination date. In the event that
Landlord shall not exercise its termination rights as aforesaid, or
shall fail to give any or timely notice pursuant to this Section the
provisions of Sections 12.4-12.7 shall be applicable. This Section 12.3
shall not be applicable to an assignment or sublease pursuant to
Section 12.2. Notwithstanding the foregoing, Tenant may, by written
notice to Landlord given within fifteen (15) days after Tenant's
receipt of Landlord's notice of termination as aforesaid, avoid such
termination by giving written notice that Tenant has validly canceled
any agreement to enter into such assignment or subletting and agreeing
to remain as Tenant in the Premises pursuant to this Lease, provided
that Tenant includes with its notice evidence reasonably satisfactory
to Landlord evidencing such valid cancellation of such agreement to
enter into such assignment or subletting. In the event Tenant so avoids
Landlord's termination, this Lease shall remain in full force and
effect in accordance with its terms as if such assignment or subletting
had not been proposed and as if such termination had not been
exercised.
12.4 CONSENT OF LANDLORD. Notwithstanding the provisions of Section 12.1
above, BUT subject to the provisions of this Section 12.4 and the
provisions of Sections 12.5, 12.6 and 12.7 below, in the event that
Landlord shall not have exercised the termination right as set forth in
Section 12.3, or shall have failed to give any or timely notice under
Section 12.3, then for a period of ninety (90) days (i) after the
receipt of Landlord's notice stating that Landlord does not elect the
termination right, or (ii) after the expiration of the thirty (30) day
period referred to in Section 12.3, in the event Landlord shall not
give any or timely notice under Section 12.3 as the case may be, Tenant
shall have the right to assign this Lease or sublet the whole (but not
part) of the Premises in accordance with Tenant's notice to Landlord
given as provided in Section 12.5 provided that, in each instance,
Tenant first obtains the express prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Landlord
shall not be deemed to be unreasonably withholding its consent to such
a proposed assignment or subleasing if:
(a) the proposed assignee or subtenant is not of a
character consistent with the operation of a first
class warehouse/distribution building (by way of
example Landlord shall not be deemed to be
unreasonably withholding its consent to an assignment
or subleasing to any governmental agency), or
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(b) the proposed assignee or subtenant is not of good
character and reputation, or
(c) the proposed assignee or subtenant does not possess
adequate financial capability to perform the Tenant
obligations as and when due or required, or
(d) the assignee or subtenant proposes to use the
Premises (or part thereof) for a purpose other than
the purpose for which the Premises may be used as
stated in Section 1.2 hereof, or
(e) the character of the business to be conducted or the
proposed use of the Premises by the proposed
subtenant or assignee shall (i) be likely to increase
Operating Expenses for the Property beyond that which
Landlord now incurs for use by Tenant; (ii) be likely
to increase the burden on Building systems or
equipment over the burden prior to such proposed
subletting or assignment; or (iii) violate or be
likely to violate any provisions or restrictions
contained herein relating to the use or occupancy of
the Premises, or
(f) there shall be existing an Event of Default (defined
in Section 15.1).
12.5 TENANT'S NOTICE. Tenant shall give Landlord notice of any proposed
sublease or assignment, and said notice shall specify the provisions of
the proposed assignment or subletting, including (a) the name and
address of the proposed assignee or subtenant, (b) in the case of a
proposed assignment or subletting pursuant to Section 12.4, such
information as to the proposed assignee's or proposed subtenant's net
worth and financial capability and standing as may reasonably be
required for Landlord to make the determination referred to in Section
12.4 above (provided, however, that Landlord shall hold such
information confidential having the right to release same to its
officers, accountants, attorneys and mortgage lenders on a confidential
basis), (c) all of the terms and provisions upon which the proposed
assignment or subletting is to be made, (d) in the case of a proposed
assignment or subletting pursuant to Section 12.4, all other
information necessary to make the determination referred to in Section
12.4 above and (e) in the case of a proposed assignment or subletting
pursuant to Section 12.2 above, such information as may be reasonably
required by Landlord to determine that such proposed assignment or
subletting complies with the requirements of said Section 12.2. No
partial subletting shall be permitted.
If Landlord shall consent to the proposed assignment or subletting, as
the case may be, then, in such event, Tenant may thereafter sublease
(the whole but not part of the Premises) or assign pursuant to Tenant's
notice, as given hereunder; provided, however, that if such assignment
or sublease shall not
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be executed and delivered to Landlord within ninety (90) days after the
date of Landlord's consent, the consent shall be deemed null and void
and the provisions of Section 12.3 shall be applicable.
12.6 PROFIT ON SUBLEASING OR ASSIGNMENT. In addition, in the case of any
assignment or subleasing as to which Landlord may consent (other than
an assignment or subletting permitted under Section 12.2 hereof) such
consent shall be upon the express and further condition, covenant and
agreement, and Tenant hereby covenants and agrees that, in addition to
the Annual Fixed Rent, Additional Rent and other charges to be paid
pursuant to this Lease, fifty percent (50%) of the "Assignment/Sublease
Profits" (hereinafter defined), if any shall be paid to Landlord.
The "Assignment/Sublease Profits" shall be the excess, if any, of (a)
the "Assignment/Sublease Net Revenues" as hereinafter defined over (b)
the Annual Fixed Rent, Additional Rent and other charges provided in
this Lease (provided, however, that for the purpose of calculating the
Assignment/Sublease Profits in the case of a sublease, appropriate
proportions in the applicable Annual Fixed Rent, Additional Rent and
other charges under this Lease shall be made based on the percentage of
the Premises subleased and on the terms of the sublease). The
"Assignment/Sublease Net Revenues" shall be the fixed rent, Additional
Rent and all other charges and sums payable either initially or over
the term of the sublease or assignment PLUS all other profits and
increases to be derived by Tenant as a result of such subletting or
assignment, less the reasonable costs of Tenant incurred in such
subleasing or assignment (the definition of which shall include but not
necessarily be LIMITED to rent concessions, brokerage commissions
reasonable out of pocket attorneys fees of Tenant's outside counsel and
alteration allowances) amortized over the term of the sublease or
assignment.
All payments of the Assignment/Sublease Profits due Landlord shall be
made within ten (10) days of receipt of same by Tenant.
12.7 ADDITIONAL CONDITIONS. (A) It shall be a condition of the validity of
any assignment or subletting of right under Section 12.2 above, or
consented to under Section 12.4 above, that the assignee or sublessee
agrees directly with Landlord, in form reasonably satisfactory to
Landlord, to be bound by all the obligations of the Tenant hereunder,
including, without limitation, the obligation to pay the Annual Fixed
Rent, Additional Rent, and other amounts provided for under this Lease
(but in the case of a partial subletting pursuant to Section 12.2, such
subtenant shall agree on a pro rata basis to be so bound) including the
provisions of Sections 12.1 through 12.7 hereof, but such assignment or
subletting shall not relieve the Tenant named herein of any of the
obligations of the Tenant hereunder, Tenant shall remain fully and
primarily liable therefor and the liability of Tenant and such assignee
(or subtenant, as the case may be) shall be joint and several. Further,
and notwithstanding the foregoing, the provisions hereof shall not
constitute a
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recognition of the assignment or the assignee thereunder or the
sublease or the subtenant thereunder, as the case may be, and at
Landlord's option, upon the termination of the Lease, the assignment or
sublease shall be terminated.
(B) As Additional Rent, Tenant shall reimburse Landlord promptly for
reasonable out of pocket legal and other expenses incurred by Landlord
in connection with any request by Tenant for consent to assignment or
subletting.
(C) If this Lease be assigned, or if the Premises or any part thereof
be sublet or occupied by anyone other than Tenant, Landlord may upon
prior notice to Tenant, at any time and from time to time, collect
Annual Fixed Rent, Additional Rent, and other charges from the
assignee, sublessee or occupant and apply the net amount collected to
the Annual Fixed Rent, Additional Rent and other charges herein
reserved, but no such assignment, subletting, occupancy or collection
shall be deemed a waiver of this covenant, or a waiver of the
provisions of Sections 12.1 through 12.7 hereof, or the acceptance of
the assignee, sublessee or occupant as a tenant or a release of Tenant
from the further performance by Tenant of covenants on the part of
Tenant herein contained, the Tenant herein named to remain primarily
liable under this Lease.
(D) The consent by Landlord to an assignment or subletting under any of
the provisions of Sections 12.2 or 12.4 shall in no wise be construed
to relieve Tenant from obtaining the express consent in writing of
Landlord to any further assignment or subletting.
ARTICLE XIII
INDEMNITY AND COMMERCIAL GENERAL LIABILITY INSURANCE
13.1 TENANT'S INDEMNITY. To the maximum extent this agreement may be made
effective according to law, Tenant agrees to indemnify and save
harmless Landlord from and against all claims of whatever nature
arising from or claimed to have arisen from any act, omission or
negligence of Tenant, or Tenant's contractors, licensees, invitees,
agents, servants, independent contractors or employees, or arising from
any accident, injury or damage whatsoever caused to any person, or to
the property of any person, occurring after the date that possession of
the Premises is first delivered to Tenant and until the end of the
Lease Term and thereafter, so long as Tenant is in occupancy of any
part of the Premises, in or about the Premises or arising from any
accident, injury or damage occurring outside the Premises but within
the Building or on the Site, where and to the extent such accident,
injury or damage results, or is claimed to have resulted, from an act
or omission on the part of Tenant or Tenant's contractors, licensees,
invitees, agents, servants, independent contractors or employees.
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This indemnity and hold harmless agreement shall include indemnity
against all costs, expenses and liabilities incurred in or in
connection with any such claim or proceeding brought thereon, and the
defense thereof.
13.2 COMMERCIAL GENERAL LIABILITY INSURANCE. Tenant agrees to maintain in
full force from the date upon which Tenant first enters the Premises
for any reason, throughout the Lease Term of this Lease, and
thereafter, so long as Tenant is in occupancy of any part of the
Premises, a policy of commercial general liability or comprehensive
general liability insurance with a broad form comprehensive liability
endorsement under which Landlord and Landlord's managing agent (and
such other persons as are in privity of estate with Landlord and
Landlord's managing agent as may be set out in notice from time to
time) and Tenant are named as insureds, and under which the insurer
agrees to indemnify and hold Landlord, and those in privity of estate
with Landlord and Landlord's managing agent, harmless from and against
all cost, expense and/or liability arising out of or based upon any and
all claims, accidents, injuries and damages mentioned in Section 13.1
of this Article XIII, in the broadest form of such coverage from time
to time available in the jurisdiction in which the Premises are
located. Each such policy shall be non-cancelable and non-amendable
with respect to Landlord and Landlord's said designees without thirty
(30) days' prior notice to Landlord and to the holder of a mortgage on
the Property, and a duplicate original or certificate thereof shall be
delivered to Landlord. As of the Commencement Date hereof, the minimum
limits of liability of such insurance shall be as specified in Section
1.2 and from time to time during the Lease Term for such higher limits,
if any, as are carried customarily in the Greater Boston Area with
respect to similar properties.
13.3 NON-SUBROGATION. Any insurance carried by either party with respect to
the Premises or property therein or occurrences thereon shall, if it
can be so written without additional premium or with an additional
premium which the other party agrees to pay, include a clause or
endorsement denying to the insurer rights of subrogation against the
other party to the extent rights have been waived by the insured prior
to occurrence of injury or loss. Each party, notwithstanding any
provisions of this Lease to the contrary, hereby waives any rights of
recovery against the other for injury or loss due to hazards covered by
such insurance to the extent of the indemnification received
thereunder.
13.4 TENANT'S RISK. To the maximum extent that this agreement may be made
effective according to law, Tenant agrees to use and occupy the
Premises and to use such other portions of the Building and the Site as
Tenant is herein given the right to use at Tenant's own risk; and
Landlord shall have no responsibility or liability for any loss of or
damage to fixtures or other personal property of Tenant unless the same
is caused by the gross negligence or wilful misconduct of Landlord, its
contractors or agents.
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13.5 LANDLORD'S INDEMNITY. Landlord agrees to indemnify and save Tenant
harmless from and against injuries arising from or claimed to have
arisen from the negligence of Landlord, its agents or employees
occurring after the date that possession of the Premises is first
delivered to Tenant and until the expiration or earlier termination of
the Lease Term, provided, however that in no event shall the aforesaid
indemnity render Landlord responsible or liable for any loss or damage
to fixtures or personal property of Tenant and Landlord shall in no
event be liable for any indirect or consequential damages; and
provided, further, that the provisions of this Section shall not be
applicable (i) to the holder of any mortgage now or hereafter on the
Site or the Building (whether or not such holder shall be a mortgagee
in possession of or shall have exercised any rights under a
conditional, collateral or other assignment of leases and/or rents
respecting, the Site and/or Building or (ii) any person acquiring title
as a result of, of subsequent to, a foreclosure of any such mortgage or
a deed in lieu of foreclosure.
ARTICLE XIV
FIRE CASUALTY AND TAKING
14.0 CASUALTY INSURANCE. Landlord shall carry at all times during the Term
of this Lease with respect to the Building insurance against loss or
damage covered by the so-called "all risk" type insurance coverage.
Such insurance shall be in an amount equal to at least the replacement
value of the Building, as reasonably estimated by Landlord from time to
time, and such insurance may be written with a deductible as determined
by landlord. Notwithstanding the foregoing provisions of this Section
14.0, if at any time or from time to time during the Term of this Lease
(as it may be extended) "all risk" type insurance coverage shall not be
available and/or if replacement value coverage shall not be available,
then the type of fire and casualty insurance and the amount of such
coverage shall be as determined by Landlord. Landlord may also maintain
such other insurance as may from time to time be required by any
mortgagee holding a first mortgage lien on the Building. Further,
Landlord may also maintain such liability insurance and insurance
against loss of Annual Fixed Rent and Additional Rent and such other
risks and perils as Landlord deems proper. Any and all such insurance
together with the liability insurance required or permitted to be
carried under this Lease may be maintained under a blanket policy
affecting other premises of Landlord and/or its affiliated business
organizations.
14.1 DAMAGE RESULTING FROM CASUALTY. In case during the Lease Term the
Building or the Site are damaged by fire or other casualty, and such
fire or casualty damage cannot, in the ordinary course, reasonably be
expected to be repaired within one hundred eighty (180) days from the
time that repair work would commence, Landlord may, at its election,
terminate this Lease by notice given to Tenant within sixty (60) days
after the date of such fire or other casualty, specifying the effective
date of termination. The effective date of termination specified by
Landlord shall not be less than thirty (30) days
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nor more than forty-five (45) days after the date of notice of such
termination. Unless terminated pursuant to the foregoing provisions,
this Lease shall remain in full force and effect following any such
damage subject, however, to the following provisions.
If during the last two (2) Lease Years of the Lease Term (AS IT MAY
HAVE BEEN EXTENDED), the Building shall be damaged by fire or casualty
and such fire or casualty damage to the Premises cannot reasonably be
expected to be repaired or restored within one hundred eighty (180)
days from the time that repair or restoration work would commence, then
Tenant shall have the right, by giving notice to Landlord not later
than thirty (30) days after such damage, to terminate this Lease,
whereupon this Lease shall terminate as of the date of such notice with
the same force and effect as if such date were the date originally
established as the expiration date hereof.
If the Building or the Site or any part thereof are damaged by fire or
other casualty and this Lease is not so terminated, or Landlord has no
right to terminate this Lease, and in either such case the holder of
any mortgage which includes the Building as a part of the mortgaged
premises or any ground lessor of any ground lease which includes the
Site as part of the demised premises allows the net insurance proceeds
to be applied to the restoration of the Building (and/or the Site),
Landlord, promptly after such damage and the determination of the net
amount of insurance proceeds available shall use due diligence to
restore the Premises and the Building in the event of damage thereto
(excluding Tenant's Property) into proper condition for use and
occupation and a just proportion of the Annual Fixed Rent, Tenant's
Operating Cost Payments and Tenant's share of real estate taxes
according to the nature and extent of the injury to the Premises shall
be abated from the date of casualty until the Premises shall have been
put by Landlord substantially into such condition. Notwithstanding the
foregoing but provided Landlord has maintained the insurance required
by Section 14.0 hereof, Landlord shall not be obligated to expend for
such repairs and restoration any amount in excess of the net insurance
proceeds plus the amount of Landlord's deductible with respect to the
Property.
Where Landlord is obligated or otherwise elects to effect restoration
of the Premises, unless such restoration is completed within ten (10)
months from the date of the casualty or taking, such period to be
subject, however, to extension where the delay in completion of such
work is due to causes beyond Landlord's reasonable control (but in no
event beyond thirteen (13) months from the date of the casualty or
taking), Tenant shall have the right to terminate this Lease at anytime
after the expiration of such ten (10) month (as extended) period until
the restoration is substantially completed, such termination to take
effect as of the thirtieth (30th) day after the date of receipt by
Landlord of Tenant's notice, with the same force and effect as if such
date were the date originally established as the expiration date hereof
unless, within such thirty (30) day period such restoration is
substantially completed, in which case Tenant's notice of termination
shall be of no force
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and effect and this Lease and the Lease Term shall continue in full
force and effect.
14.2 UNINSURED CASUALTY. Notwithstanding anything to the contrary contained
in this Lease, if the Building or the Premises shall be substantially
damaged by fire or casualty as the result of a risk not covered by the
forms of casualty insurance at the time maintained or required to be
maintained by Landlord and such fire or casualty damage cannot, in the
ordinary course, reasonably be expected to be repaired within ninety
(90) days from the time that repair work would commence, Landlord may,
at its election, terminate the Term of this Lease by notice to Tenant
given within thirty (30) days after such loss. If Landlord shall give
such notice, then this Lease shall terminate as of the date of such
notice with the same force and effect as if such date were the date
originally established as the expiration date hereof.
14.3 RIGHTS OF TERMINATION FOR TAKING. Except as hereinafter provided in
Section 14.4 hereof, if the Premises or such portion thereof as to
render the balance (if reconstructed to the maximum extent practicable
in the circumstances) unsuitable for Tenant's purposes as determined by
Tenant acting reasonably and in good faith, shall be taken by
condemnation or right of eminent domain, Tenant shall have the right to
terminate this Lease by notice to Landlord of its desire to do so,
provided that such notice is given not later than thirty (30) days
after Tenant has been deprived of possession. If Tenant shall give such
notice, then this Lease shall terminate as of the date of such notice
with the same force and effect as if such date were the date originally
established as the expiration date hereof.
Further, if so much of the Building shall be so taken that continued
operation of the Building would be uneconomic or if the entire Building
is so taken, Landlord shall have the right to terminate this Lease by
giving notice to Tenant of Landlord's desire to do so not later than
thirty (30) days after Tenant has been deprived of possession of the
Premises (or such portion thereof as may be taken). If Landlord shall
give such notice, then this Lease shall terminate as of the date of
such notice with the same force and effect as if such date were the
date originally established as the expiration date hereof.
Should any part of the Premises be so taken or condemned during the
Lease Term hereof, and should this Lease not be terminated in
accordance with the foregoing provisions, and the holder of any
mortgage which includes the Premises as part of the mortgaged premises
or any ground lessor of any ground lease which includes the Site as
part of the demised premises allows the net condemnation proceeds to be
applied to the restoration of the Building, Landlord agrees that after
the determination of the net amount of condemnation proceeds available
to Landlord, Landlord shall use due diligence to put what may remain of
the Premises into proper condition for use and occupation as nearly
like the condition of the Premises prior to such taking as shall be
practicable (excluding Tenant's Property). Unless such
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work is completed within ten (10) months from the date of such
determination, such period to be subject, however, to extension where
the delay in completion of such work is due to causes beyond Landlord's
reasonable control (but in no event beyond thirteen (13) months from
the date of the taking), Tenant shall have the right to terminate this
Lease at any time after the expiration of such ten (10) month (as
extended) period until such work is substantially completed, such
termination to take effect as of the thirtieth (30th) day after the
date of receipt by Landlord of Tenant's notice, with the same force and
effect as if such date were the date originally established as the
expiration date hereof unless, within such thirty (30) day period such
work is substantially completed, in which case Tenant's notice of
termination shall be of no force and effect and this Lease and the
Lease Term shall continue in full force and effect. Notwithstanding the
foregoing, Landlord shall not be obligated to expend for such repair
and restoration any amount in excess of the net condemnation proceeds.
If the Premises shall be affected by any exercise of the power of
eminent domain and neither Landlord nor Tenant shall terminate this
Lease as provided above, then the Annual Fixed Rent, the Tenants
Operating Cost Payments and Tenant's share of real estate taxes shall
be justly and equitably abated and reduced according to the nature and
extent of the loss of use thereof suffered by Tenant; and in case of a
taking which permanently reduces the Rentable Floor Area of the
Premises, a just proportion of the Annual Fixed Rent, Tenant's
Operating Cost Payments and Tenants share of real estate taxes shall be
abated for the remainder of the Lease Term.
14.4 AWARD. Except as otherwise provided in this Section 14.4, Landlord
shall have and hereby reserves and excepts, and Tenant hereby grants
and assigns to Landlord, all rights to recover for damages to the
Building and the Site and the leasehold interest hereby created, and
compensation accrued or hereafter to accrue by reason of such taking,
damage or destruction, as aforesaid, and by way of confirming the
foregoing, Tenant hereby grants and assigns, and covenants with
Landlord to grant and assign to Landlord, all rights to such damages or
compensation.
However, nothing contained herein shall be construed to prevent Tenant
from prosecuting in any such proceedings a claim for its trade fixtures
so taken or relocation, moving and other dislocation expenses, provided
that such action shall not affect the amount of compensation otherwise
recoverable by Landlord from the taking authority.
ARTICLE XV
DEFAULT
15.1 TENANT'S DEFAULT. This Lease and the term of this Lease are subject to
the limitation that Tenant shall be in default if, at any time during
the Lease Term, any one or more of the following events (herein called
an "Event of
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Default" a "default of Tenant" or similar reference) shall occur and
not be cured prior to the expiration of the grace period (if any)
herein provided, as follows:
(a) Tenant shall fail to pay any installment of the
Annual Fixed Rent, or any Additional Rent or any
other monetary amount due under this Lease on or
before the date on which the same becomes due and
payable, and such failure continues for seven (7)
days after notice from Landlord thereof; or
(b) Landlord having rightfully given the notice specified
in (a) above to Tenant three (3) times in any twelve
(12) month period, Tenant shall fail thereafter to
pay the Annual Fixed Rent, Additional Rent or any
other monetary amount due under this Lease on or
before the date on which the same becomes due and
payable; or
(c) Tenant shall fail to perform or observe some term or
condition of this Lease which, because of its
character, would immediately jeopardize Landlord's
interest (such as, but without limitation, failure to
maintain general liability insurance, or the
employment of labor and contractors within the
Premises which interfere with Landlord's work, in
violation of Section 4.3 or Section 9.3), and such
failure continues for three (3) days after notice
from Landlord to Tenant thereof; or
(d) Tenant shall fail to perform or observe any other
requirement, term, covenant or condition of this
Lease (not hereinabove in this Section 15.1
specifically referred to) on the part of Tenant to be
performed or observed and such failure shall continue
for thirty (30) days after notice thereof from
Landlord to Tenant, or if said default shall
reasonably require longer than thirty (30) days to
cure, if Tenant shall fail to commence to cure said
default within thirty (30) days after notice thereof
and/or fail to continuously prosecute the curing of
the same to completion with due diligence; or
(e) The estate hereby created shall be taken on execution
or by other process of law; or
(f) Tenant shall make an assignment or trust mortgage
arrangement, so-called, for the benefit of its
creditors; or
(g) Tenant shall judicially be declared bankrupt or
insolvent according to law; or
(h) a receiver, guardian, conservator, trustee in
involuntary bankruptcy or other similar officer is
appointed to take charge
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of all or any substantial part of Tenant's property
by a court of competent jurisdiction; or
(i) any petition shall be filed against. Tenant in any
court, whether or not pursuant to any statute of the
United States or of any State, in any bankruptcy,
reorganization, composition, extension, arrangement
or insolvency proceeding, and such proceedings shall
not be fully and finally dismissed within sixty (60)
days after the institution of the same; or
(j) Tenant shall file any petition in any court, whether
or not pursuant to any statute of the United States
or any State, in any bankruptcy, reorganization,
composition, extension, arrangement or insolvency
proceeding; or
(k) Tenant otherwise abandons the Premises.
15.2 TERMINATION; RE-ENTRY. Upon the happening of any one or more of the
aforementioned Events of Default (notwithstanding any license of a
former breach of covenant or waiver of the benefit hereof or consent in
a former instance), Landlord or Landlord's agents or servants may give
to Tenant a notice (hereinafter called "notice of termination")
terminating this Lease on a date specified in such notice of
termination (which shall be not less than five (5) days after the date
of the mailing of such notice of termination), and this Lease and the
Lease Term, as well as any and all of the right, title and interest of
the Tenant hereunder, shall wholly cease and expire on the date set
forth in such notice of termination in the same manner and with the
same force and effect as if such date were the date originally
specified herein for the expiration of the Lease Term, and Tenant shall
then quit and surrender the Premises to Landlord.
In addition or as an alternative to the giving of such notice of
termination, Landlord or Landlord's agents or servants may, by any
suitable action or proceeding at law, immediately or at any time
thereafter re-enter the Premises and remove therefrom Tenant, its
agents, employees, servants, licensees, and any subtenants and other
persons, and all or any of its or their property therefrom, and
repossess and enjoy the Premises, together with all additions,
alterations and improvements thereto; but, in any event under this
Section 15.2, Tenant shall remain liable as hereinafter provided.
The words "re-enter" and "re-entry" as used throughout this Article XV
are not restricted to their technical legal meanings.
15.3 CONTINUED LIABILITY; RE-LETTING. If this Lease is terminated or if
Landlord shall re-enter the Premises as aforesaid, or in the event of
the termination of this Lease, or of re-entry, by or under any
proceeding or action or any provision of law by reason of an Event of
Default hereunder on the part of Tenant, Tenant covenants and agrees
forthwith to pay and be liable
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for, on the days originally fixed herein for the payment thereof,
amounts equal to the several installments of Annual Fixed Rent, all
Additional Rent and other charges reserved as they would, under the
terms of this Lease, become due if this Lease had not been terminated
or if Landlord had not entered or re-entered, as aforesaid, arid
whether the Premises be relet or remain vacant, in whole or in part, or
for a period less than the remainder of the Lease Term, or for the
whole thereof, but, in the event the Premises be relet by Landlord,
Tenant shall be entitled to a credit in the net amount of rent and
other charges received by Landlord in reletting, after deduction of all
reasonable expenses incurred in reletting the Premises (including,
without limitation, remodeling costs, brokerage fees and the like), and
in collecting the rent in connection. therewith, in the following
manner:
Amounts received by Landlord after reletting shall first be applied
against such Landlord's expenses, until the same are recovered, and
until such recovery, Tenant shall pay, as of each day when a payment
would fall due under this Lease, the amount which Tenant is obligated
to pay under the terms of this Lease (Tenants liability prior to any
such reletting and such recovery not in any way to be diminished as a
result of the fact that such reletting might be for a rent higher than
the rent provided for in this Lease); when and if such expenses have
been completely recovered, the amounts received from reletting by
Landlord as have not previously been applied shall be credited against
Tenant's obligations as of each day when a payment would fall due under
this Lease, and only the net amount thereof shall be payable by Tenant.
Further, Tenant shall not be entitled to any credit of any kind for any
period after the date when the term of this Lease is scheduled to
expire according to its terms.
15.4 LIQUIDATED DAMAGES. Landlord may elect, as an alternative, to have
Tenant pay liquidated damages, which election may be made by notice
given to Tenant at any time after the termination of this Lease under
Section 15.2, above, and whether or not Landlord shall have collected
any damages as hereinbefore provided in this Article XV, and in lieu of
all other such damages beyond the date of such notice. Upon such
notice, Tenant shall promptly pay to Landlord, as liquidated damages,
in addition to any damages collected or due from Tenant from any period
prior to such notice, such a sum as at the time of such notice
represents the amount of the excess, if any, of (a) the discounted
present value, at a discount rate of 6%, of the Annual Fixed Rent,
Additional Rent and other charges which would have been payable by
Tenant under this Lease for the remainder of the Lease Term if the
Lease terms had been fully complied with by Tenant, over and above (b)
the discounted present value, at a discount rate of 6%, of the Annual
Fixed Rent, Additional Rent and other charges that would be received by
Landlord if the Premises were re-leased at the time of such notice for
the remainder of the Lease Term at the fair market value (including
provisions regarding periodic increases in Annual Fixed Rent if such
are applicable) prevailing at the time of such notice.
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For the purposes of this Article, if Landlord elects to require Tenant
to Pay liquidated damages in accordance with this Section 15.4, the
total rent shall be computed by assuming Tenants share of real estate
taxes under Section 6.1 and Tenant's Operating Cost Payments under
Section 7.4 to be the same as were payable for the twelve (12) calendar
months (or if less than twelve (12) calendar months have been elapsed
since the date hereof, the partial year) immediately preceding such
termination of re-entry.
Nothing contained in this Lease shall limit or prejudice the right of
Landlord to prove for and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal
to the maximum allowed by any statute, or rule of law in effect at the
time when, and governing the proceeds in which, the damages are to be
proved, whether or not the amount be greater, equal to, or less than
the amount of the loss or damages referred to above.
15.5 WAIVER OF REDEMPTION. Tenant, for itself and any and all persons
claiming through or under Tenant, including its creditors, upon the
termination of this Lease and of the term of this Lease in accordance
with the terms hereof, after the expiration of applicable notice and
cure periods, or in the event of entry of judgment for the recovery of
the possession of the Premises in any action or proceeding, or if
Landlord shall enter the Premises by process of law or otherwise,
hereby waives any right of redemption provided or permitted by any
statute, law or decision now or hereafter in force, and does hereby
waive, surrender and give up all rights or privileges which it or they
may or might have under and by reason of any present or future law or
decision, to redeem the Premises or for a continuation of this Lease
for the term of this Lease hereby demised after having been
dispossessed or ejected therefrom by process of law, or otherwise.
15.6 LANDLORD'S DEFAULT. Landlord shall in no event be in default in the
performance of any of Landlord's obligations hereunder unless and until
Landlord shall have failed to perform such obligations within thirty
(30) days, or such additional time as is reasonably required to correct
any such default, after notice by Tenant to Landlord properly
specifying wherein Landlord has failed to perform any such obligation.
ARTICLE XVI
BANKRUPTCY OR INSOLVENCY
16.1 CHAPTER 7 PROCEEDINGS. If the Tenant shall become a debtor under
Chapter 7 of the Bankruptcy Code and Tenant's trustee or Tenant shall
elect to assume this Lease for the purpose of assigning the same or
otherwise, such election and assignment may be made only if all of the
provisions of Sections 16.2 and 16.4 of this Article XVI are satisfied.
If Tenant or Tenant's trustee shall fail to elect to assume this Lease
within sixty (60) days after the filing of a petition, or such
additional time as provided by the court within
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such 60-day period, this Lease shall be deemed to have been rejected.
Immediately thereupon, Landlord shall be entitled to possession of the
Premises without further obligation to Tenant or Tenant's trustee and
this Lease shall terminate, but Landlord's right to be compensated for
damages (including, without limitation, damages pursuant to Article
XV), in any such proceeding shall survive.
16.2 CHAPTER 11 PROCEEDINGS. If a petition for reorganization or adjustment
of debts is filed concerning Tenant under Chapter 11 of the Bankruptcy
Code, or a proceeding is filed under Chapter 7 of the Bankruptcy Code
and is transferred to Chapter 11, Tenant's trustee or Tenant, as
debtor-in-possession, must elect to assume this Lease within the
earlier of (i) confirmation of the plan and (ii) one hundred twenty
(120) days from the date of the filing of the petition under Chapter 11
or such transfer thereto or Tenants trustee or Tenant, as
debtor-in-possession, shall be deemed to have rejected this Lease. If
Tenant's trustee or Tenant, as debtor-in-possession, has failed to
perform all of Tenant's obligations under this Lease within the time
periods (excluding grace periods) required for such performance, no
election by Tenant's trustee or by Tenant, as debtor-in-possession, to
assume this Lease, whether under Chapter 7 or Chapter 11, shall be
effective unless each of the following conditions has been satisfied:
(a) Tenants trustee or Tenant, as debtor-in-possession,
has cured, or has provided Landlord with Assurance
(hereinafter defined) that it will cure (i) all
monetary defaults under this lease within ten (10)
days from the date of such assumption, and (ii) all
nonmonetary defaults under this lease within thirty
(30) days from the date of such assumption; and
(b) Tenants trustee or Tenant, as debtor-in-possession,
has provided Landlord with Assurance of the future
performance of each of the obligations under this
Lease of Tenant, Tenant's trustee or Tenant, as
debtor-in-possession, and has (i) deposited with
Landlord, as security for the timely payment of rent
hereunder, an amount equal to one annual installment
of Annual Fixed Rent which Tenant was obligated to
pay to Landlord under this Lease during the Lease
Year in which such default occurred, and (ii) paid in
advance to Landlord Tenant's annual obligations for
Additional Rent and all other monetary charges
payable by Tenant under this Lease. The obligations
imposed upon Tenant's trustee or Tenant, as debtor-in
possession, shall continue with respect to Tenant or
any assignee of Tenant's interests in this Lease
after the completion of bankruptcy proceedings.
For purposes of this Section 16.2, Landlord and Tenant acknowledge that
"Assurance" shall mean no less than: (i) Tenant's trustee or Tenant, as
debtor-in-possession, has and will continue to have sufficient
unencumbered
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assets after the payment of all secured obligations and administration
expenses to assure Landlord that sufficient funds will be available to
fulfill the obligations of Tenant under this Lease, and (ii) the
Bankruptcy Court shall have entered an order segregating sufficient
cash payment to Landlord, or Tenant's trustee or Tenant, as
debtor-in-possession, or shall have granted a valid and perfected first
lien and security interest and mortgage in property of Tenant,
acceptable as to value and kind to Landlord, to secure to Landlord the
obligation of Tenant's trustee or Tenant, as debtor-in-possession, to
cure defaults under this Lease, both monetary and nonmonetary, within
the time period set forth above.
16.3 BANKRUPTCY EVENT FOLLOWING LEASE ASSUMPTION. If this Lease is assumed
in accordance with the provisions of Section 16.2 and thereafter Tenant
is liquidated or files or has filed against it a subsequent petition
for reorganization or adjustment of debts under Chapter 11 of the
Bankruptcy Code, Landlord may, at its option, terminate this Lease and
all rights of Tenant hereunder, by giving Tenant notice of its election
to so terminate within thirty (30) days after the occurrence of either
of such events.
16.4 LEASE ASSIGNMENT FOLLOWING LEASE ASSUMPTION. If Tenant's trustee or
Tenant, as debtor-in-possession, has assumed this Lease pursuant to the
terms and provisions of Sections 16.1 and 16.2 of this Article for the
purpose of assigning (or elects to assign) this Lease, this Lease may
be so assigned only if the proposed assignee has provided adequate
assurance of future performance of all of the terms, covenants and
conditions of this Lease to be performed by Tenant. Landlord shall be
entitled to receive all cash proceeds of any such assignment. As used
herein, "adequate assurance of future performance" shall mean that all
of the following conditions have been satisfied:
(a) the proposed assignee has furnished Landlord with
either (i) a current financial statement audited by a
certified public accountant indicating a net worth
and working capital in amounts which Landlord
reasonably determines to be sufficient to assure the
future performance by such assignee of Tenants
obligations under this Lease, or (ii) a guaranty or
guaranties in form and substance satisfactory to
Landlord from one or more persons or entities with
aggregate net worth which Landlord reasonably
determines to be sufficient to assure the future
performance by such assignee of Tenant's obligations
under this Lease; and
(b) Landlord has obtained all consents or waivers from
others required under any lease, mortgage, financing
agreement or other agreement by which Landlord is
bound to permit Landlord to consent to such
assignment.
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16.5 USE AND OCCUPANCY CHARGES. When, pursuant to the Bankruptcy Code,
Tenant's trustee or Tenant, as debtor-in-possession, shall be obliged
to pay reasonable use and occupancy charges for the use of the
Premises, such charges shall not be less than the Annual Fixed Rent
which Tenant is obligated to pay to Landlord under this Lease, plus all
Additional Rent and all other monetary charges payable by Tenant under
this Lease.
16.6 FURTHER PROVISIONS. Neither the whole nor any portion of Tenant's
interest in this Lease or its estate in the Premises shall pass to any
United States trustee, receiver, assignee for the benefit of creditors,
or any other person or entity, or otherwise by operation of law under
the laws of any state having jurisdiction of the person of property of
Tenant, unless Landlord shall have consented to such transfer in
writing. No acceptance by Landlord of rent or any other payments from
any United States trustee, receiver, assignee, person or other entity
shall be deemed to constitute such consent by Landlord, nor shall it be
deemed a waiver of Landlord's right to terminate this Lease for any
transfer of Tenant's interest under this Lease without such consent.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 WAIVER. Failure on the part of Landlord or Tenant to complain of any
action or non-action on the part of the other, no matter how long the
same may continue, shall never be a waiver by Tenant or Landlord,
respectively, of any of its rights hereunder.
Further, no waiver at any time of any of the provisions hereof by
Landlord or Tenant shall be construed as a waiver of any of the other
provisions hereof, and a waiver at any time of any of the provisions
hereof shall not be construed as a waiver at any subsequent time of the
same provisions. The consent or approval of Landlord or Tenant to or of
any action by the other requiring such consent or approval shall not be
construed to waive or render unnecessary Landlord's or Tenant's consent
or approval to or of any subsequent similar act by the other. .
No payment by Tenant, or acceptance by Landlord, of a lesser amount
than shall be due .from Tenant to Landlord shall be treated otherwise
than as a payment on account. The acceptance by Landlord of a check for
a lesser amount with an endorsement or statement thereon, or upon any
letter accompanying such check, that such lesser amount is payment in
full, shall be given no effect, and Landlord may accept such check
without prejudice to any other rights or remedies which Landlord may
have against Tenant. Further, the acceptance by Landlord of Annual
Fixed Rent, Additional Rent or any other charges paid by Tenant under
this Lease shall not be or be deemed to be a waiver by Landlord of any
default by Tenant, whether or not
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Landlord knows of such default, except for such defaults as to which
such payment relates.
17.2 CUMULATIVE REMEDIES. The specific remedies to which Landlord and Tenant
may resort under the terms of this Lease are cumulative and are not
intended to be exclusive of any other remedies or means of redress
which they may be lawfully entitled to seek in case of any breach or
threatened breach of any provisions of this Lease. In addition to the
other remedies provided in this Lease, Landlord shall be entitled to
the restraint by injunction of the violation or attempted or threatened
violation of any of the covenants, conditions or provisions of this
Lease or to seek specific performance of any such covenants, conditions
or provisions, provided, however, that the foregoing shall not be
construed as a confession of judgment by Tenant.
17.3 QUIET ENJOYMENT. Landlord agrees that, upon Tenant's paying the Annual
Fixed Rent, Additional Rent and other charges herein reserved, and
performing and observing the covenants, conditions and agreements
hereof upon the part of Tenant to be performed and observed, Tenant
shall and may peaceably hold and enjoy the Premises during the term of
this Lease, without interruption or disturbance from Landlord or
persons claiming through or under Landlord, subject, however, to the
terms of this Lease. This covenant shall be construed as running with
the land to and against subsequent owners and successors in interest,
and is not, nor shall it operate or be construed as, a personal
covenant of Landlord, except to the extent of the Landlord's interest
in the Premises, and this covenant and any and all other covenants of
Landlord contained in this Lease shall be binding upon Landlord and
upon such subsequent owners and successors in interest of Landlord's
interest under this Lease, to the extent of their respective interests,
as and when they shall acquire same and then only for so long as they
shall retain such interest.
17.4 SURRENDER. (A) No act or thing done by Landlord during the Lease Term
shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such surrender shall be valid, unless in writing
signed by Landlord. No employee of Landlord or of Landlord's agents
shall have any power to accept the keys of the Premises as an
acceptance of a surrender of the Premises prior to the termination of
this Lease; provided, however, that the foregoing shall not apply to
the delivery of keys to Landlord or its agents in its (or their)
capacity as managing agent or for purpose of emergency access. In any
event, however, the delivery of keys to any employee of Landlord or of
Landlord's agents shall not operate as a termination of the lease or a
surrender of the Premises.
(B) Upon the expiration or earlier termination of the Lease Term,
Tenant shall surrender the Premises to Landlord in the condition as
required by Sections 8.1 and 9.5, first removing all goods and effects
of Tenant and completing such other removals as may be permitted or
required pursuant to Section 9.5.
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17.5 BROKERAGE. (A) Tenant warrants and represents that Tenant has not dealt
with any broker in connection with the consummation of this Lease other
than the Recognized Brokers designated in Section 1.2 hereof; and in
the event any claim is made against the Landlord relative to dealings
with brokers other than the Recognized Brokers designated in Section
1.2 hereof, Tenant shall defend the claim against Landlord with counsel
of Landlord's selection and save harmless and indemnify Landlord on
account of loss, cost or damage which may arise by reason of such
claim.
(B) Landlord warrants and represents that Landlord has not dealt with
any broker in connection with the consummation of this Lease other than
the Recognized Brokers designated in Section 1.2 hereof; and in the
event any claim is made against the Tenant relative to dealings by
Landlord with parties other than the Recognized Brokers designated in
Section 1.2 hereof, Landlord shall defend the claim against Tenant with
counsel of Landlord's selection, subject to approval by Tenant which
shall not be unreasonably withheld, and save harmless and indemnify
Tenant on account of loss, cost or damage which may arise by reason of
such claim. Landlord agrees that it shall be solely responsible for the
payment of brokerage commissions to the Recognized Brokers designated
in Section 1.2 hereof.
17.6 INVALIDITY OF PARTICULAR PROVISIONS. If any term or provision of this
Lease, or the application thereof to any person or circumstance shall,
to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and be enforced to the fullest
extent permitted by law.
17.7 PROVISIONS BINDING, ETC. The obligations of this Lease shall run with
the land, and except as herein otherwise provided, the terms hereof
shall be binding upon and shall inure to the benefit of the successors
and assigns, respectively, of Landlord and Tenant and, if Tenant shall
be an individual, upon and to his heirs, executors, administrators,
successors and assigns. Each term and each provision of this Lease to
be performed by Tenant shall be construed to be both a covenant and a
condition. The reference contained to successors and assigns of Tenant
is not intended to constitute a consent to assignment by Tenant, but
has reference only to those instances in which Landlord may have later
given consent to a particular assignment as required by the provisions
of Article XII hereof.
17.8 RECORDING. Each of Landlord and Tenant agree not to record the within
Lease, but each party hereto agrees, on the request of the other, to
execute a so-called Notice of Lease or short form lease in form
recordable and complying with applicable law and reasonably
satisfactory to Landlord's and Tenant's attorneys. In no event shall
such document set forth the rent or other charges payable by Tenant
under this Lease; and any such document
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shall expressly state that it is executed pursuant to the provisions
contained in this Lease, and is not intended to vary the terms and
conditions of this Lease.
17.9 NOTICES AND TIME FOR ACTION. Whenever, by the terms of this Lease,
notice shall or may be given either to Landlord or to Tenant, such
notices shall be in writing and shall be sent by hand, registered or
certified mail, or overnight or other commercial courier, postage or
delivery charges, as the case may be, prepaid as follows:
If intended for Landlord, addressed to Landlord at the address
set forth on the first page of this Lease (or to such other
address or addresses as may from time to time hereafter be
designated by Landlord by like notice).
If intended for Tenant, addressed to Tenant at the address set
forth on the first page of this Lease except that from and
after the Commencement Date the address of Tenant shall be the
Premises (or to such other address or addresses as may from
time to time hereafter be designated by Tenant by like
notice).
Except as otherwise provided herein, all such notices shall be
effective when received; provided, that (i) if receipt is refused,
notice shall be effective upon the first occasion that such receipt is
refused or (ii) if the notice is unable to be delivered due to a change
of address of which no notice was given, notice shall be effective upon
the date such delivery was attempted.
Where provision is made for the attention of an individual or
department, the notice shall be effective only if the wrapper in which
such notice is sent is addressed to the attention of such individual or
department.
Time is of the essence with respect to any and all notices and periods
for giving of notice or taking any action thereto under this Lease.
17.10 WHEN LEASE BECOMES BINDING. Employees or agents of Landlord have no
authority to make or agree to make a lease or any other agreement or
undertaking in connection herewith. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or option for, the Premises, and this document shall
become effective and binding only upon the execution and delivery
hereof by both Landlord and Tenant. All negotiations, considerations,
representations and understandings between Landlord and Tenant are
incorporated herein and may be modified or altered only by written
agreement between Landlord and Tenant, and no act or omission of any
employee or agent of Landlord shall alter, change or modify any of the
provisions hereof.
17.11 PARAGRAPH HEADINGS. The paragraph headings throughout this instrument
are for convenience and reference only, and the words contained
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therein shall in no way be held to explain, modify, amplify or aid in
the interpretation, construction or meaning of the provisions of this
Lease.
17.12 RIGHTS OF MORTGAGEE. This Lease shall be subject and subordinate to any
mortgage now or hereafter on the Site or the Building, or both, and to
all renewals, modifications, consolidations, replacements and
extensions thereof and all substitutions therefor, provided that the
holder of such mortgage agrees to recognize the right of Tenant to use
and occupy the Premises upon the payment of rent and other charges
payable by Tenant under this Lease and the performance by Tenant of
Tenant's obligations hereunder. In confirmation of such subordination
and recognition, Tenant shall execute and deliver promptly such
instruments of subordination as such mortgagee may reasonably request,
subject to receipt of such instruments of recognition from such
mortgagee as Tenant may reasonably request. In the event that any
mortgagee or its respective successor in title shall succeed to the
interest of Landlord, then this Lease shall nevertheless continue in
full force and effect and Tenant shall and does hereby agree to attorn
to such mortgagee or successor and to recognize such mortgagee or
successor as its landlord. If any holder of a mortgage which includes
the Premises, executed and recorded prior to the Date of this Lease,
shall so elect this Lease, and the rights of Tenant hereunder, shall be
superior in right to the rights of such holder, with the same force and
effect as if this Lease had been executed, delivered and recorded, or a
statutory Notice hereof recorded, prior to the execution, delivery and
recording of any such mortgage. The election of any such holder shall
become effective upon either notice from such holder to Tenant in the
same fashion as notices from Landlord to Tenant are to be given
hereunder or by the recording in the appropriate registry or recorder's
office of an instrument in which such holder subordinates its rights
under such mortgage to this Lease.
If in connection with obtaining financing for the Demised Premises a
bank, insurance company, pension trust or other institutional lender
shall request reasonable modifications in this Lease as a condition to
such financing, Tenant will not unreasonably withhold, delay or
condition its consent thereto, provided that such modifications do not
increase the monetary obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created or Tenant's
rights hereunder.
17.13 RIGHTS OF GROUND LESSOR. If Landlord's interest in property (whether
land only or land and buildings) which includes the Premises is
acquired by another party and simultaneously leased back to Landlord
herein, the holder of the ground lessor's interest in such lease shall
enter into a recognition agreement with Tenant simultaneously with the
sale and leaseback, wherein the ground lessor will agree to recognize
the right of Tenant to use and occupy the Premises upon the payment of
Annual Fixed Rent, Additional Rent and other charges payable by Tenant
under this Lease and the performance by Tenant of Tenant's obligations
hereunder, and wherein Tenant shall agree to attorn to such ground
lessor as its Landlord and to
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perform and observe all of the tenant obligations hereunder, in the
event such ground lessor succeeds to the interest of Landlord hereunder
under such ground lease.
17.14 NOTICE TO MORTGAGEE AND GROUND LESSOR. After receiving notice from any
person, firm or other entity that it holds a mortgage which includes
the Premises as part of the mortgaged premises, or that it is the
ground lessor under a lease with Landlord as ground lessee, which
includes the Premises as a part of the Premises, no notice from Tenant
to Landlord shall be effective unless and until a copy of the same is
given to such holder or ground lessor at the address as specified in
said notice (as it may from time to time be changed), and the curing of
any of Landlord's defaults by such holder or ground lessor within a
reasonable time after such notice (including a reasonable time to
obtain possession of the premises if the mortgagee or ground lessor
elects to do so) shall be treated as performance by Landlord. For the
purposes of this Section 17.14, the term "mortgage" includes a mortgage
on a leasehold interest of Landlord (but not one on Tenant's leasehold
interest).
17.15 ASSIGNMENT OF RENTS. With reference to any assignment by Landlord of
Landlord's interest in this Lease, or the rents payable hereunder,
conditional in nature or otherwise, which assignment is made to the
holder of a mortgage or ground lease on property which includes the
Premises, Tenant agrees:
(a) That the execution thereof by Landlord, and the
acceptance thereof by the holder of such mortgage, or
the ground lessor, shall never be treated as an
assumption by such holder or ground lessor of any of
the obligations of Landlord hereunder, unless such
holder, or ground lessor, shall, by notice sent to
Tenant, specifically otherwise elect; and
(b) That, except as aforesaid, such holder or ground
lessor shall be treated as having assumed Landlord's
obligations hereunder only upon foreclosure of such
holder's mortgage and the taking of possession of the
Premises, or, in the case of a ground lessor, the
assumption of Landlord's position hereunder by such
ground lessor. In no event shall the acquisition of
title to the Building and the land on which the same
is located by a purchaser which, simultaneously
therewith, leases the entire Building or such land
back to the Seller thereof be treated as an
assumption, by operation of law or otherwise, of
Landlord's obligations hereunder, but Tenant shall
look solely to such seller-lessee, and its successors
from time to time in title, for performance of
Landlord's obligations hereunder. In any such event,
this Lease shall be subject and subordinate to the
lease to such purchaser provided that such
purchaser-lessor agrees to recognize the right of
Tenant to use and occupy the Demised Premises upon
the payment of rent and all other charges
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payable by Tenant under this Lease and the
performance by Tenant of Tenant's obligations under
this Lease. For all purposes, such seller-lessee, and
its successors in title, shall be the landlord
hereunder unless and until Landlord's position shall
have been assumed by such purchaser-lessor.
17.16 STATUS REPORT. Recognizing that both parties may find it necessary to
establish to third parties, such as accountants, banks, mortgagees or
the like, the then current status of performance hereunder, either
party, on the request of the other made from time to time, will
promptly furnish to Landlord, or the holder of any mortgage encumbering
the Premises, or to Tenant, as the case may be, a statement of the
status of any matter pertaining to this Lease, including, without
limitation, acknowledgments that (or the extent to which) each party is
in compliance with its obligations under the terms of this Lease. Any
such statement delivered by Tenant or Landlord pursuant to this Section
17.16 may be relied upon by any prospective purchaser or mortgagee of
the Premises or any prospective assignee of any mortgagee of the
Premises or by any other party f6r whom Landlord or Tenant may require
such statement.
17.17 LANDLORD'S SELF-HELP. (A) If Tenant shall at any time fail to make any
payment or perform any act which Tenant is obligated to make or perform
under this Lease and (except in the case of emergency) if the same
continues unpaid or unperformed beyond applicable grace periods, then
Landlord may, but shall not be obligated so to do, after ten (10) days'
notice to and demand upon Tenant, or without notice to or demand upon
Tenant in the case of any emergency, and without waiving, or releasing
Tenant from, any obligations of Tenant in this Lease contained, make
such payment or perform such act which Tenant is obligated to perform
under this Lease in such manner and to such extent as may be reasonably
necessary, and, in exercising any such rights, pay any costs and
expenses, employ counsel and incur and pay reasonable attorneys' fees.
All sums so paid by Landlord and all reasonable and necessary costs and
expenses of Landlord incidental thereto, together with interest thereon
at the annual rate equal to the sum of (a) the Base Rate from time to
time announced by Bank of Boston as its Base Rate and (b) two percent
(2%), from the date of the making of such expenditures by Landlord,
shall be deemed to be Additional Rent and, except as otherwise in this
Lease expressly provided, shall be payable to the Landlord on demand,
and if not promptly paid shall be added to any rent then due or
thereafter becoming due under this Lease, and Tenant covenants to pay
any such sum or sums with interest as aforesaid, and Landlord shall
have (in addition to any other right or remedy of Landlord) the same
rights and remedies in the event of the non-payment thereof by Tenant
as in the case of default by Tenant in the payment of Annual Fixed
Rent.
(B) TENANT'S SELF-HELP. In the event Landlord fails to make such
repairs as are required of Landlord under Sections 7.1 or 7.2 or to
perform any other obligations of Landlord hereunder within thirty (30)
days after
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written notice from Tenant to Landlord and to the holder of any
mortgage on the Property of which Tenant has been given written notice
by Landlord specifying the nature of such repairs or other obligations
or if such repairs or other obligations are of the type which cannot be
made or performed within such thirty (30) days, then if Landlord or the
holder of any such mortgage (at the option of such mortgagee) fails to
(i) commence making such repairs within thirty (30) days after such
written notice from Tenant and (ii) thereafter prosecute such repairs
or other obligations to completion with due diligence given the nature
of such repairs or other obligations, then thereafter at any time prior
to Landlord's commencing such repairs or other obligations, Tenant may,
but need not, make such repairs or perform such other obligations and
may make a demand on Landlord for payment of the reasonable cost
thereof. If within thirty (30) days after receipt of such demand,
Landlord shall not have paid same, then Tenant shall have the right to
bring suit in a court of competent jurisdiction in the Commonwealth of
Massachusetts seeking payment of the sum so claimed in Tenant's demand.
However, in no event shall Tenant have the right to offset against,
withhold or deduct from Annual Fixed Rent, or any Additional Rent or
other charges payable under this Lease nor shall Landlord's failure to
pay Tenant's demand be a default of Landlord or give Tenant the right
to terminate this Lease, Tenant's right being to bring suit as
aforesaid.
17.18 HOLDING OVER. Any holding over by Tenant after the expiration of the
term of this Lease shall be treated as a tenancy at sufferance at one
hundred fifty percent (150%) of the rents and other charges herein
(prorated on a daily basis) and shall otherwise be on the terms and
conditions set forth in this Lease, as far as applicable; provided,
however, that neither the foregoing nor any other term or provision of
this Lease shall be deemed to permit Tenant to retain possession of the
Premises or hold over in the Premises after the expiration or earlier
termination of the Lease Term.
17.19 ENTRY BY LANDLORD. Landlord, and its duly authorized representatives,
shall, upon reasonable prior notice (except in the case of emergency),
have the right to enter the Premises at all reasonable times (except at
any time in the case of emergency) for the purposes of inspecting the
condition of same and making such repairs, alterations, additions or
improvements thereto as may be necessary if Tenant fails to do so as
required hereunder (but the Landlord shall have no duty whatsoever to
make any such inspections, repairs, alterations, additions or
improvements except as otherwise provided in Sections 4.2, 4.3, 7.1 and
7.2), and to show the Premises to prospective tenants during the twelve
(12) months preceding expiration of the term of this Lease as it may
have been extended and at any reasonable time during the Lease Term to
show the Premises to prospective purchasers and mortgagees.
17.20 TENANT'S PAYMENTS. Each and every payment and expenditure, other than
Annual Fixed Rent, shall be deemed to be Additional Rent hereunder,
whether or not the provisions requiring payment of such amounts
specifically
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so state, and shall be payable, unless otherwise provided in this
Lease, within ten (10) days after written demand by Landlord, and in
the case of the non-payment of any such amount, Landlord shall have, in
addition to all of its other rights and remedies, all the rights and
remedies available to Landlord hereunder or by law in the case of
non-payment of Annual Fixed Rent. Unless expressly otherwise provided
in this Lease, the performance and observance by Tenant of all the
terms, covenants and conditions of this Lease to be performed and
observed by Tenant shall be at Tenant's sole cost and expense.
17.21 LATE PAYMENT. If Landlord shall not have received any payment or
installment of rent on or before that date which is five (5) days
following the date on which the same first becomes payable under this
Lease (the "Due Date"), the amount of such payment or installment shall
bear interest from the Due Date through and including the date such
payment or installment is received by Landlord, at a rate equal to the
lesser of (i) the rate announced by The First National Bank of Boston
from time to time as its prime or base rate (or if such rate is no
longer available, a comparable rate reasonably selected by Landlord),
plus two percent (20/o), or (ii) the maximum applicable legal rate, if
any. Such interest shall be deemed Additional Rent and shall be paid by
Tenant to Landlord upon demand.
17.22 COUNTERPARTS. This Lease may be executed in several counterparts, each
of which shall be deemed an original, and such counterparts shall
constitute but one and the same instrument.
17.23 ENTIRE AGREEMENT. This Lease constitutes the entire agreement between
the parties hereto and affiliates of Landlord with respect to the
subject matter hereof and thereof and supersedes all prior dealings
between them with respect to such subject matter, and there are no
verbal or collateral understandings, agreements, representations or
warranties not expressly set forth in this Lease and such Agreement to
Lease. No subsequent alteration, amendment, change or addition to this
Lease shall be binding upon Landlord or Tenant, unless reduced to
writing and signed by the party or parties to be charged therewith.
17.24 LANDLORD LIABILITY. Tenant shall neither assert nor seek to enforce any
claim for breach of this Lease against any of Landlord's assets or the
assets of Landlord's beneficiary other than Landlord's interest in the
Property, and Tenant agrees to look solely to such interest in the
Property for the satisfaction of any liability of Landlord (or
Landlord's beneficiary) under this Lease, it being specifically agreed
that neither Landlord, nor any successor holder of Landlord's interest
hereunder, nor any beneficiary of any Trust of which any person from
time to time holding Landlord's interest is Trustee, nor any such
Trustee, shall ever be personally liable for any such liability. This
paragraph shall not limit any right that Tenant might otherwise have to
obtain injunctive relief against Landlord or Landlord's
successors-in-interest, or to take any other action which shall not
involve the personal liability of
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Landlord, or of any successor holder of Landlord's interest hereunder,
or of any beneficiary of any trust of which any person from time to
time holding Landlord's interest is Trustee, or of any such Trustee, to
respond in monetary damages from Landlord's assets other than
Landlord's interest in said Building, as aforesaid. In no event shall
Landlord ever be liable for any indirect or consequential damages.
17.25 NO PARTNERSHIP. The relationship of the parties hereto is that of
landlord and tenant and no partnership, joint venture or participation
is hereby created.
17.26 SECURITY DEPOSIT. Tenant shall deposit with Landlord upon the execution
of this Lease a total security deposit (herein sometimes called the
"Security Deposit") in the amount of Sixty Thousand Dollars
($60,000.00). The Security Deposit shall be paid (i) in cash or by wire
transfer to the account of Landlord (herein sometimes called the "Cash
Security Deposit") and/or (ii) by an irrevocable, unconditional
negotiable letter of credit (the "Letter of Credit") issued by and
drawn on a bank, and in a form acceptable to Landlord, for the account
of and payable to Landlord in such amount, which Letter of Credit shall
permit one or more draws thereunder to be made accompanied only by
certification by Landlord that pursuant to the terms of this Lease,
Landlord is entitled to apply such Letter of Credit and the proceeds
thereof to a default of Tenant or is otherwise entitled to the proceeds
thereof pursuant to the provisions of this Lease (herein sometimes
called the "Letter of Credit Security Deposit"). If the Letter of
Credit Security Deposit shall be utilized, the Letter of Credit shall
be for a term of two (2) years (or for one (1) year if the issuer
thereof regularly and customarily only issues letters of credit for a
maximum term of one (1) year) and shall in either case be renewed by
Tenant each year thereafter and each renewal shall be delivered to and
received by Landlord not later than thirty (30) days before the
expiration of the then current Letter of Credit (herein called a
"Renewal Presentation Date"). In the event of a failure to so deliver
such renewal Letter of Credit on or before the applicable Renewal
Presentation Date, Landlord shall be entitled to present the then
existing Letter of Credit for payment and to receive the proceeds
thereof. In the event of such a drawing under the Letter of Credit, the
proceeds thereof shall be added to and shall become a part of the Cash
Security Deposit.
The Cash Security Deposit (as it may be increased by the proceeds of
the Letter of Credit if drawn on as provided in the preceding
paragraph) and the Letter of Credit Security Deposit shall be held by
Landlord throughout the Term of this Lease (as it may be extended) as
security for the performance by Tenant of all obligations on the part
of Tenant to be performed under this Lease (which remain uncured
following applicable notice and cure periods) and may be applied by
Landlord on account of any defaults of Tenant under this Lease.
Landlord shall have the right from time to time without prejudice to
any other remedy Landlord may have on account thereof, to apply the
Cash Security Deposit and to draw upon and apply the proceeds of the
Letter
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of Credit Security Deposit (or any part thereof) to Landlord's damages
arising from any default on the part of Tenant.
Provided that Tenant is not then in default (without benefit of any
grace periods), on the expiration or earlier termination of the Lease
Term and on the surrender of possession of the Premises by Tenant to
Landlord at such time in the condition and manner provided for in this
Lease and by law, Landlord shall return to Tenant the Security Deposit
or so much thereof as shall not have theretofore been applied in
accordance with the terms of this Section 17.26.
While Landlord holds the Cash Security Deposit (or any other form or
type of the Security Deposit), Landlord shall have no obligation to pay
interest on the same and shall have the right to commingle the same
with Landlord's other funds. If Landlord conveys Landlord's interest
under this Lease, the Security Deposit, or any part thereof not
previously applied, shall be turned over by Landlord to Landlord's
grantee for proper application of the Security Deposit in accordance
with the terms of this Section 17.26 and the return thereof in
accordance herewith and said transferee shall acknowledge receipt of
the same in a writing delivered to Tenant.
Neither the holder of a mortgage nor the landlord in a ground lease on
property which includes the Premises shall ever be responsible to
Tenant for the return or application of any Security Deposit, whether
or not it succeeds to the position of Landlord hereunder, unless the
Security Deposit shall have been received in hand by such holder or
ground lessor.
If the Landlord uses or applies all or any portion of the Security
Deposit, Tenant shall within ten (10) days after written demand
therefor deposit cash with Landlord in an amount sufficient to restore
the Security. Deposit to the full amount required to be maintained by
Tenant under this Section 17.26.
17.27 Based on and except as set forth in the "Report" (hereinafter defined),
Landlord represents to Tenant that to the best of Landlord's actual
knowledge, as of the date of the Report there were no "Hazardous
Substances" (as defined in Section 11.2) on the Site which were
required to be removed therefrom or otherwise abated by "Hazardous
Substances Laws" (as defined in Section 11.2). The Report is that
certain "Report On Oil And Hazardous Material Site Evaluation, Cullinet
Software Inc., 25 to 31 Dartmouth Street, Westwood, Massachusetts" by
Haley & Aldrich, Inc., dated May, 1990 (File No. 10532-40). Landlord
has received no notices of violations of any Hazardous Substances Laws
from any governmental authority and Landlord has no actual knowledge of
any such violations.
17.28 Landlord warrants that Tenant's Premises in the Building and the
appurtenances thereto are subject to and with the benefit of the title
matters set forth in Exhibit F attached hereto. Further, Landlord
represents that the
<PAGE>
-58-
building systems serving the Premises are in good working order and
condition on the date of this Lease.
17.29 GOVERNING LAW. This Lease shall be governed exclusively by the
provisions hereof and by the law of The Commonwealth of Massachusetts,
as the same may from time to time exist.
EXECUTED as a sealed instrument in two or more counterparts by persons
or officers hereunto duly authorized on the Date set forth in Section 1.2 above.
WITNESS: LANDLORD:
/s/ C.W. PROBET /s/ MORTIMER B. ZUCKERMAN
- -------------------------------- -------------------------------------------
MORTIMER B. ZUCKERMAN, AS
TRUSTEE OF BEE EM ZEE TRUST,
BUT
NOT INDIVIDUALLY
TENANT:
SKY ROCK SERVICES CORPORATION
By: /s/ TIMOTHY A. DEMELLO
-------------------------------------------
Name: Timothy A. DeMello
Title: PRESIDENT (OR VICE PRESIDENT
ATTEST:
By. /s/ TIMOTHY A. DEMELLO By: /s/ TIMOTHY A. DEMELLO
- -------------------------------- -------------------------------------------
Name: Timothy A. DeMello Name: Timothy A. DeMello
Title: SECRETARY(OR ASSISTANT Title: TREASURER (OR ASSISTANT
SECRETARY TREASURER
HEREUNTO DULY AUTHORIZED
(CORPORATE SEAL)
<PAGE>
EXHIBIT A
That certain parcel of land situate in Westwood in the County of Norfolk and
said Commonwealth (with the building and improvements thereon) bounded and
described as follows:
SOUTHWESTERLY by Dartmouth Street, as shown on plan hereinafter referred to,
one hundred thirty (130) feet;
NORTHWESTERLY two hundred thirty four and 59/100 (234.59) feet, and
SOUTHWESTERLY ten (10) feet, by lot numbered 40, as indicated on said plan;
NORTHWESTERLY by lot numbered 36, as indicated on said plan, five hundred
twenty 520) feet;
NORTHEASTERLY by lot numbered 47, as indicated on said plan, three hundred
sixty (360) feet;
SOUTHEASTERLY by land now or formerly of Boston & Providence Railroad
Corporation, eight hundred sixteen and 65/100 (816.65) feet;
SOUTHWESTERLY by lot numbered 57, as shown on said plan, twenty (20) feet; and
NORTHWESTERLY two hundred (200) feet,
SOUTHWESTERLY two hundred (200) feet, and
SOUTHERLY one hundred thirty seven and 94/100 (137.94) feet, by land now or
formerly of Dedham Water Company.
Said parcel is shown as lot numbered 58 on a plan drawn by Pilling Engineering
Company Inc., surveyors, dated April 1, 1966, as approved by the Land Court,
filed in the Land Registration Office as No. 262940, a copy of a portion of
which is filed in Norfolk Registry District with Certificate No. 80244,
Book 402.
<PAGE>
EXHIBIT E
BROKER DETERMINATION OF PREVAILING MARKET RENT
Where in the Lease to which this Exhibit is attached provision is made for
a Broker Determination of Prevailing Market Rent, the following procedures and
requirements shall apply:
1 TENANT'S REQUEST. Tenant shall send a notice to Landlord by the time set
for such notice in the applicable section of the Lease, requesting a Broker
Determination of the Prevailing Market Rent, which notice to be effective
must (i) make explicit reference to the Lease and to the specific section
of the Lease pursuant to which said request is being made, (ii) include the
name of a broker selected by Tenant to act for Tenant, which broker shall
be affiliated with a major Boston commercial real estate brokerage firm
selected by Tenant and which broker shall have at least ten (10) years
experience dealing in properties of a nature and type generally similar to
the Building located in the Boston West Suburban Market, and (iii)
explicitly state that Landlord is required to notify Tenant within thirty
(30) days of an additional broker selected by Landlord.
2. LANDLORD'S RESPONSE. Within thirty (30) days after Landlord's receipt of
Tenant's notice requesting the Broker Determination and stating the name of
the broker selected by Tenant, Landlord shall give written notice to Tenant
of Landlord's selection of a broker having at least the affiliation and
experience referred to above.
3. SELECTION OF THIRD BROKER. Within ten (10) days thereafter the two (2)
brokers so selected shall select a third such broker also having at least
the affiliation and experience referred to above.
4. RENTAL VALUE DETERMINATION. Within thirty (30) days after the selection of
the third broker, the three (3) brokers so selected, by majority opinion,
shall make a determination of the annual fair market rental value of the
Premises for the period referred to in the Lease. Such annual fair market
rental value determination (x) may include provision for annual increases
in rent during said term if so determined, (y) shall take into account the
as-is condition of the Premises and (z) shall take account of, and be
expressed in relation to, the tax and operating cost provisions of the
Lease and provisions for paying electricity as contained in the Lease. The
brokers shall advise Landlord and Tenant in writing by the expiration of
said thirty (30) day period of the annual fair market rental value which as
so determined shall be referred to as the Prevailing Market Rent.
5. RESOLUTION OF BROKER DEADLOCK. If the Brokers are unable to agree at least
by majority on a determination of annual fair market rental value, then the
brokers shall send a notice to Landlord and Tenant by the end of the thirty
(30) day period for making said determination setting forth their
individual
<PAGE>
-2-
determinations of annual fair market rental value, and the highest such
determination and the lowest such determination shall be disregarded and
the remaining determination shall be deemed to be the determination of
annual fair market rental value and shall be referred to as the Prevailing
Market Rent.
6. COSTS. Each party shall pay the costs and expenses of the broker selected
by it and each shall pay one half (1/2) of the costs and expenses of the
Third Broker.
7. FAILURE TO SELECT BROKER OR FAILURE OF BROKER TO SERVE. If Tenant shall
have requested a Broker Determination and Landlord shall not have
designated a broker within the time period provided therefor above, then
Tenant's Broker shall alone make the determination of Prevailing Market
Rent in writing to Landlord and Tenant within thirty (30) days after the
expiration of Landlord's right to designate a broker hereunder. If Tenant
and Landlord have both designated brokers but the two brokers so designated
do not, within a period of fifteen (15) days after the appointment of the
second broker, agree upon and designate the Third Broker willing so to act,
the Tenant, the Landlord or either broker previously designated may request
the Greater Boston Real Estate Board, Inc. to designate the Third Broker
willing so to act and a broker so appointed shall, for all purposes, have
the same standing and powers as though he had been seasonably appointed by
the brokers first appointed. In case of the inability or refusal to serve
of any person designated as a broker, or in case any broker for any reason
ceases to be such, a broker to fill such vacancy shall be appointed by the
Tenant, the Landlord, the brokers first appointed or the said Greater
Boston Real Estate Board, Inc., as the case may be, whichever made the
original appointment, or if the person who made the original appointment
fails to fill such vacancy, upon application of any broker who continues to
act or by the Landlord or Tenant such vacancy may be filled by the said
Greater Boston Real Estate Board, Inc. Any broker appointed by the Greater
Boston Real Estate Board, Inc., pursuant to the provisions hereof shall,
for all purposes, have the same standing and powers as though originally
appointed by the party originally designated to make such appointment by
the terms hereof.
<PAGE>
EXHIBIT F
The title matters are those matters (and the terms and conditions thereof)
to which the Site is subject to and have the benefit of asset forth or referred
to in the Owner's Certificate of Title, a copy of which is attached hereto.
<PAGE>
FIRST AMENDMENT TO LEASE
FIRSTAMENDMENT TO LEASE dated as of the 8th day of May, 1996, by and
between 25-31 DARTMOUTH STREET ASSOCIATES LIMITED PARTNERSHIP ("Landlord") and
STREAMLINE, INC. (formerly known as Sky Rock Services Corporation) ("Tenant").
RECITALS
By Lease dated August 18,1995 (the "Lease"), MORTIMER B. ZUCKERMAN, TRUSTEE
OF BEE EM ZEE TRUST u/d/t dated May 10, 1976 (the "Trust"), being a predecessor
in title to Landlord, did lease to Tenant and Tenant did lease from said
landlord 36,636 square feet of rentable floor area in the building (the
"Building") known as and numbered 25-31 Dartmouth Street, Westwood,
Massachusetts (referred to in the Lease as the "Initial Premises") and
hereinafter sometimes referred to as the "Initial Premises". Landlord is a
successor in tide to the Trust and the beneficiary under the Trust.
Tenant has determined to lease from Landlord an additional 20,111 square
feet of rentable floor area (the "Rentable Floor Area of the Additional
Premises") in the Building, which space is shown on Exhibit A attached hereto
(hereinafter sometimes referred to as the "Additional Premises").
Landlord and Tenant are entering into this instrument to set forth said
leasing of the Additional Premises, to integrate the Additional Premises into
the Lease, and to amend the Lease.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration in hand this date paid by each of the parties to the
other, the receipt and sufficiency of which are hereby severally acknowledged,
and in further consideration of the mutual promises herein contained, Landlord
and Tenant hereby agree to and with each other as follows:
1. Effective May 1, 1996 (the "Additional Premises Commencement Date") the
Additional Premises shall constitute a part of the "Premises" demised to
Tenant under the Lease, so that the "Premises" (as defined and used in the
Lease), shall include both the Initial Premises and the Additional
Premises. Except only as specifically set forth in this Amendment, all
references in the Lease (as herein
<PAGE>
-2-
amended) to the "Premises" shall mean all of the Initial Premises and the
Additional Premises.
2. (A) Landlord and Tenant acknowledge and agree that the Original Term of the
Lease for the Initial Premises commenced as set forth in Section 1.2 of the
Lease and expires on October 31, 2000 (being the last day of the sixtieth
(60th) full calendar month following the October 2, 1995 "Warehouse
Premises Commencement Date" as defined in said Section 1.2) unless extended
or sooner terminated as provided in the Lease as herein amended.
(B) The Original Term of the Lease for both the Initial Premises and the
Additional Premises shall be coterminous. Accordingly, the definition of
the "Original Term" of the Lease as set forth in Section 1.2 of the Lease
is hereby amended by adding thereto the following:
As to the Additional Premises, a period be inning on the Additional
Premises Commencement Date and ending on October 31, 2000 (being the
last day of the sixtieth (60th) full calendar month following the
October 2, 1995 "Warehouse Premises Commencement Date", as defined in
Section 1.2 of the Lease) unless extended or sooner terminated as
provided in the Lease as herein amended.
3. The extension option set forth in Section 3.2 of the Lease must be
exercised as to the entire Premises but not as to either the Initial
Premises or the Additional Premises separately.
4. The "Rentable Floor Area of the Premises" as defined and used in the Lease
as herein amended shall be 56,747 square feet (being the sum of the 36,636
square feet of Rentable Floor Area of the Initial Premises and the 20,111
square feet of Rentable Floor Area of the Additional Premises). In the
definition of "Rentable Floor Area of the Premises" and the definition of
"Premises", the words "or otherwise" shall be added at the end of each such
definition.
5. (a) Annual Fixed Rent for the Initial Premises at the annual rates set
forth in Section 1.2 of the Lease shall continue to be paid during the
Original Lease Term.
(b) Annual Fixed Rent for the Additional Premises during the Original
Term shall be payable as follows:
(i) for the calendar month of May, 1996, the monthly fixed rent shall
be $3,631.15; and
<PAGE>
-3-
(ii) for the calendar month of June, 1996, the monthly fixed rent
shall be $7,262.30; and
(iii) for the period beginning on July 1, 1996 and continuing for the
balance of the Original Term, Annual Fixed Rent shall be payable
at the annual rate of $130,721.50 (being the product of (x) $6.50
and (y) the 20,111 square feet of rentable floor area of the
Additional Premises), Such Annual Fixed Rent shall be payable in
the manner and at the times provided in the Lease.
(c) Annual Fixed Rent for the entire Premises (consisting of both the
Initial Premises and the Additional Premises) during the Extended Term
shall be payable as determined pursuant to Section 3.2 of the Lease (as
amended by this Amendment).
6. For the purposes of computing Tenants payments for Operating Expenses
pursuant to Sections 7.4 and 7.5 of the Lease and Tenant's payments for
real estate taxes pursuant to Article VI of the Lease, for the portion of
the Lease Term on and after the Additional Premises Commencement Date, the
"Rentable Floor Area of the Premises" shall comprise a total of 56,747
square feet (being the sum of the 36,636 square feet of Rentable Floor Area
of the Initial Premises and the 20,111 square feet of Rentable Floor Area
of the Additional Premises). For the portion of the Lease Term prior to the
Additional Premises Commencement Date, the Rentable Floor Area of the
Premises shall be the Rentable Floor Area of the Initial Premises for such
purposes.
7. The provisions of Article IV shall not apply to the Additional Premises.
Landlord shall replace the existing windows in the Building with new
thermopane, insulating glass windows as selected by Landlord. Landlord
agrees to use reasonable efforts to complete such work. The failure of
Landlord to complete such work on or prior to any particular date shall not
postpone, defer or otherwise affect the Additional Premises Commencement
Date or the Lease Term and shall not entitle Tenant to any abatement or
reduction of Annual Fixed Rent or additional rent or the right to withhold
or set off against Annual Fixed Rent or additional rent nor give rise to
any right to terminate the Lease.
8. (A) Tenant warrants and represents that Tenant has not dealt with any
broker in connection with the consummation of this First Amendment other
than the "Recognized Brokers" (defined in Section 1.2 of the Lease) and in
the event any claim is made against Landlord
<PAGE>
-4-
relative to dealings by Tenant with brokers (other than the "Recognized
Brokers"), Tenant shall defend the claim against Landlord with counsel of
Tenant's selection first approved by Landlord (which approval will not be
unreasonably withheld) and save harmless and indemnify Landlord on account
of loss, cost or damage which may arise by reason of such claim.
(B) Landlord warrants and represents that Landlord has not dealt with any
broker in connection with the consummation of this First Amendment other
than the Recognized Brokers and in the event any claim is made against
Tenant relative to dealings by Landlord with brokers (other than the
"Recognized Brokers"), Landlord shall defend the claim against Tenant with
counsel of Landlord's selection and save harmless and indemnify Tenant on
account of loss, cost or damage which may arise by reason of such claim.
Landlord shall be responsible for such commission, if any, as may be due to
the Recognized Brokers.
(c) The provisions of this Section 8 shall survive the expiration or
termination of the Lease as herein amended.
9. Except as otherwise expressly provided herein, all capitalized terms used
herein without definition shall have the same meanings as are set forth in
the Lease.
10. Landlord and Tenant ratify and confirm the Lease (as herein amended) in all
respects and covenant and agree that except as herein amended the Lease is
and shall remain unchanged and in full force and effect. All references to
the "Lease" shall be deemed to be references to the Lease as herein
amended.
<PAGE>
-5-
EXECUTED as a sealed instrument as of the date and year first above
written.
LANDLORD:
25-31 DARTMOUTH STREET
ASSOCIATES LIMITED
PARTNERSHIP
BY: BP DARTMOUTH STREET, INC.
WITNESS:
By: /s/ EDWARD H. LINDE
------------------------------
Name: EDWARD H. LINDE
----------------------------
/s/ [WITNESS] Title: PRESIDENT
- -------------------- ---------------------------
HEREUNTO DULY AUTHORIZED
ATTEST: TENANT:
STREAMLINE, INC.
By: DAVID K. BLAKELOCK
--------------------
Name: DAVID K. BLAKELOCK By: /s/ TIMOTHY A. DEMELLO
-------------------- ------------------------------
Title: SECRETARY-ASSISTANT Name: TIMOTHY A. DEMELLO
---------------------- -----------------------------
Title: PRESIDENT & TREASURER
-----------------------------
HEREUNTO DULY AUTHORIZED
(CORPPRATE SEAL)
<PAGE>
-1-
SECOND AMENDMENT TO LEASE
SECOND AMENDMENT TO LEASE dated as of the 14th day of May, 1997, by and
between 25-31 DARTMOUTH STREET ASSOCIATES LIMITED PARTNERSHIP ("Landlord") and
STREAMLINE, INC. (formerly known as Sky Rock Services Corporation) ("Tenant").
RECITALS
By Lease dated August 18, 1995 (the "Lease"), MORTIMER B. ZUCKERMAN,
TRUSTEE OF BEE EM ZEE TRUST u/d/t dated May 10, 1976 (the
"Trust"), being a predecessor in title to Landlord, did lease to
Tenant and Tenant did lease from said landlord 36,636 square feet
of rentable floor area in the building (the "Building") known as
and numbered 25-31 Dartmouth Street, Westwood, Massachusetts
(referred to in the Lease as the "Initial Premises") and
hereinafter sometimes referred to as the "Initial Premises."
Landlord is a successor in title to the Trust and the beneficiary
under the Trust.
By First Amendment to Lease dated May 8, 1996 (the "First Amendment")
Tenant leased from Landlord an additional 20,111 square feet of rentable floor
area (the "Rentable Floor Area of the Additional Premises") in the Building,
which space is shown on Exhibit A attached to such First Amendment (hereinafter
sometimes referred to as the "Additional Premises").
Tenant has determined to lease from Landlord an additional 10,469
square feet of rentable floor area (the "Rentable Floor Area of the
Second Additional Premises") in the Building, which space is shown on
Exhibit A attached hereto (hereinafter sometimes referred to as the
"Second Additional Premises").
Landlord and Tenant are entering into this instrument to set forth said
leasing of the Second Additional Premises, to integrate the Second
Additional Premises into the Lease, and to amend the Lease.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration in hand this date paid by each of the parties to the
other, the receipt and sufficiency of which are hereby severally acknowledged,
and in further consideration of the mutual promises herein contained, Landlord
and Tenant hereby agree to and with each other as follows:
1. Effective May 1, 1997 (the "Second Additional Premises Commencement Date")
the Second Additional Premises shall constitute a part of the "Premises"
demised to Tenant under the Lease, so that the "Premises" (as defined and
used in the Lease), shall include the Initial Premises, the Additional
Premises and the Second Additional Premises. Except only as
<PAGE>
-2-
specifically set forth in this Second Amendment to Lease (the "Second
Amendment"), all references in the Lease to the "Premises" shall mean all
of the Initial Premises, the Additional Premises and the Second Additional
Premises.
2. The Original Term of the Lease for the Initial Premises, the Additional
Premises and the Second Additional Premises shall be coterminous.
Accordingly, the definition of the "Original Term" of the Lease as set
forth in Section 1.2 of the Lease as amended by Section 2 of the First
Amendment is hereby further amended by adding thereto the following:
As to the Second Additional Premises, a period beginning on the Second
Additional Premises Commencement Date and ending on October 31, 2000 unless
extended or sooner terminated as provided in the Lease as herein amended.
3. The extension option set forth in Section 3.2 of the Lease must be
exercised as to the Initial Premises, the Additional Premises and the
Second Additional Premises collectively but not as to any of such spaces
independently.
4. On and after the Second Additional Premises Commencement Date, the
"Rentable Floor Area of the Premises" as defined and used in the Lease
shall be 67,216 square feet (being the sum of the 36,636 square feet of
Rentable Floor Area of the Initial Premises, the 20,111 square feet of
Rentable Floor Area of the Additional Premises and the 10,469 square feet
of Rentable Floor Area of the Second Additional Premises).
5. (A) Annual Fixed Rent for the Initial Premises at the annual rates set
forth in Section 1.2 of the Lease shall continue to be paid during the
Original Lease Term.
(B) Annual Fixed Rent for the Additional Premises at the annual rates set
forth in Section 5 of the First Amendment, shall continue to be paid during
the Original Lease Term.
(C) Annual Fixed Rent for the Second Additional Premises during the
Original Term shall be payable at the annual rate of $68,049.00 (being the
product of (x) $6.50 and (y) the 10,469 square feet of rentable floor area
of the Second Additional Premises); provided, however, that Tenant shall
not be required to make payments of Annual Fixed Rent for the period from
the Second Additional Premises Commencement Date through August 31, 1997.
Notwithstanding that the payment of Annual Fixed Rent payable by Tenant for
the Second Additional Premises shall not commence until September 1, 1997
Tenant shall be
<PAGE>
-3-
subject to and shall comply with, all other provisions of the Lease (as
amended) with respect to the Second Additional Premises as and of the times
provided in the Lease as amended.
(D) Annual Fixed Rent for the entire Premises (consisting of the Initial
Premises, the Additional Premises and the Second Additional Premises)
during the Extended Term shall be payable as determined pursuant to Section
3.2 of the Lease.
6. For the purposes of computing Tenant's payments for Operating Expenses
pursuant to Sections 7.4 and 7.5 of the Lease as amended by Section 6 of
the First Amendment and Tenant's payments for real estate taxes pursuant to
Article VI of the Lease as amended by Section 6 of the First Amendment, for
the portion of the Lease Term on and after the Second Additional Premises
Commencement Date, the "Rentable Floor Area of the Premises" shall comprise
a total of 67,216 square feet (being the sum of the 36,636 square feet of
Rentable Floor Area of the Initial Premises, the 20,111 square feet of
Rentable Floor Area of the Additional Premises and the 10,469 square feet
of Rentable Floor Area of the Second Additional Premises). For the portion
of the Lease Term prior to the Second Additional Premises Commencement
Date, the Rentable Floor Area of the Premises shall be as provided in the
Lease as amended by the First Amendment.
7. The provisions of Article IV shall not apply to the Second Additional
Premises. Landlord shall provide a handicap accessible bathroom and a
handicap accessible ramp to the main entrance of the Premises as more
particularly described on Exhibit B attached hereto. Landlord agrees to use
due diligence to complete such work on or before June 15, 1997, however,
the failure of Landlord to complete such work on or prior to June 15, 1997
shall not affect the Second Additional Premises Commencement Date or the
Lease Term and shall not entitle Tenant to any abatement or reduction of
Annual Fixed Rent or additional rent or the right to withhold or set off
against Annual Fixed Rent or additional rent nor give rise to any right to
terminate the Lease.
8. The Termination Option contained in Section 3.1.1 the Lease shall apply to
the Initial Premises, the Additional Premises and the Second Additional
Premises collectively and not to any of such spaces independently. Landlord
and Tenant hereby acknowledge and agree that the amount of "Tenant's
Termination Payment" (as defined in Section 3.1.1 of the Lease) shall be
$436,904.00 (being the product of (x) $6.50 and (y) the Rentable Floor Area
of the Premises (being 67,216 square feet)).
<PAGE>
-4-
9. Sections 2.4 and 2.5 of the Lease are hereby deleted in their entirety and
Landlord and Tenant acknowledge and agree that Tenant has no further rights
thereunder.
10. (A) Tenant warrants and represents that Tenant has not dealt with any
broker in connection with the consummation of this Second Amendment other
than Meredith & Grew, Incorporated (the "Broker") and in the event any
claim is made against Landlord relative to dealings by Tenant with brokers
(other than the Broker), Tenant shall defend the claim against Landlord
with counsel of Tenant's selection first approved by Landlord (which
approval will not be unreasonably withheld) and save harmless and indemnify
Landlord on account of loss, cost or damage which may arise by reason of
such claim.
(B) Landlord warrants and represents that Landlord has not dealt with any
broker in connection with the consummation of this Second Amendment other
than the Broker and in the event any claim is made against Tenant relative
to dealings by Landlord with brokers (other than the Broker), Landlord
shall defend the claim against Tenant with counsel of Landlord's selection
and save harmless and indemnify Tenant on account of loss, cost or damage
which may arise by reason of such claim. Landlord shall be responsible for
such commission, if any, as may be due to the Broker.
(C) The provisions of this Section 10 shall survive the expiration or
termination of the Lease as herein amended.
11. Except as otherwise expressly provided herein, all capitalized terms used
herein without definition shall have the same meanings as are set forth in
the Lease.
12. Landlord and Tenant ratify and confirm the Lease (as herein amended) in all
respects and covenant and agree that except as herein amended the Lease is
and shall remain unchanged and in full force and effect. All references to
the "Lease" shall be deemed to be references to the Lease as amended by the
First Amendment and as herein amended.
<PAGE>
EXECUTED as a sealed instrument as of the date and year first above
written.
LANDLORD:
25-31 DARTMOUTH STREET ASSOCIATES
LIMITED PARTNERSHIP
BY: BP DARTMOUTH STREET, INC.
WITNESS: By: /s/ EDWARD H. LINDE
------------------------------------
Name: EDWARD H. LINDE
------------------------------------
/s/ [WITNESS] Title: PRESIDENT
- ------------------------ -----------------------------------
HEREUNTO DULY AUTHORIZED
[SIGNATURES CONTINUED ON NEXT PAGE]
<PAGE>
-6-
ATTEST: TENANT:
STREAMLINE, INC.
By: /s/ DAVID A. BLAKELOCK By: TIMOTHY A. DEMELLO
---------------------- ---------------------
Name: DAVID A. BLAKELOCK Name: TIMOTHY A. DEMELLO
---------------------- ---------------------
Title: SECRETARY Title: PRESIDENT AND TREASURER
---------------------- -----------------------
HEREUNTO DULY AUTHORIZED
(Corporate Seal)
<PAGE>
Exhibit 10.33
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the April 9, 1999, is made by and between
Streamline, Inc., a Delaware corporation (the "Employer"), and Timothy A.
DeMello (the "Employee").
Section 1. FREEDOM TO CONTRACT.
The Employee represents that he is free to enter into this Agreement,
and that he has not made and will not make any agreements in conflict with this
Agreement. The Employee will not, and the Employer will not require the Employee
to, disclose to the Employer, or use for the Employer's benefit, any trade
secrets or confidential information now or hereafter in the Employee's
possession which is the property of any other party.
Section 2. EMPLOYMENT.
The Employer hereby employs the Employee, and the Employee hereby
accepts his employment by the Employer, upon the terms and conditions set forth
herein.
Section 3. EFFECTIVE DATE AND TERM.
This Agreement shall take effect as of April 1, 1999 (the "Effective
Date"), and shall continue in full force and effect until terminated in
accordance with Section 6 herein.
Section 4. TITLE AND DUTIES; EXTENT OF SERVICES.
The Employee shall promote the business and affairs of the Employer as
President and Chief Executive Officer of the Employer, with responsibility for
performing such duties consistent with such position as the Board of Directors
of the Employer or the Compensation Committee thereof (each of the foregoing
being referred to herein as the "Board") may from time to time designate. Except
as otherwise provided in this Agreement and except for vacations and absences
due to temporary illness, the Employee shall devote his full time and efforts to
the business and affairs of the Employer, provided that, with the Employer's
prior written consent the Employee may engage in such other business activities
outside the scope of his employment hereunder as in the reasonable judgment of
the Employer will not materially adversely affect the Employee's ability to
perform his obligations under this Agreement.
<PAGE>
-2-
Section 5. COMPENSATION AND FRINGE BENEFITS.
Section 5.1. Base Salary. In consideration of the services rendered by
the Employee under this Agreement, the Employer shall pay the Employee an
initial base salary (the "Base Salary") at an annual rate of Two Hundred
Thousand Dollars ($200,000), payable in arrears bi-weekly (or on such other
payment schedule as the Employer shall have reasonably implemented with respect
to the payment of its other salaried employees), such Base Salary being subject
to increase at the discretion of the Board.
Section 5.2. Bonus. The Employer may pay the Employee such bonus, if
any, with respect to any fiscal year as the Board may determine from time to
time, provided that such bonus not exceed 50% of the Employee's Base Salary for
such year.
Section 5.3. Fringe Benefits. The Employee shall be entitled to such
life insurance, health insurance and other employee fringe benefits as may be
offered or generally made available by the Employer to its executive officers.
Section 5.4. Stock Options. Effective as of the closing of the
Employer's initial public offering of Common Stock (the "IPO"), the Employee
shall be granted stock options, pursuant to the Employer's 1993 Employee
Stock Option Plan, as amended, to purchase 500,000 shares of common stock of
Employer ("Common Stock") at an exercise price per share equal to the price
per share at which the Employer first sells shares of Common Stock to the
underwriters in connection with the IPO, prior to underwriting discounts and
commissions. Such stock options shall vest at the rate of 20% per year on
each of the first five anniversaries of the Effective Date. Promptly
following execution of this Agreement, the parties shall execute a stock
option agreement reflecting the provisions of this Section 5.4, which stock
option agreement shall be substantially in the form generally used by the
Employer in connection with the granting of nonqualified stock options.
Section 6. TERMINATION; CHANGE OF CONTROL.
Section 6.1. Termination of Employment. The Employee's employment
hereunder shall terminate upon the Employee's death or Permanent Disability. For
purposes of this Agreement, "Permanent Disability" shall mean the Employee's
inability to perform his duties hereunder for a continuous period of six (6)
months by reason of his physical or mental illness or incapacity. In the event
of any dispute concerning the existence of a Permanent Disability, such question
shall be determined by a licensed physician selected by the Employer and
reasonably acceptable to the Employee, whose determination shall be final and
binding upon the parties. The Employee shall submit to such examinations
<PAGE>
-3-
and furnish such information as such physician may reasonably request. The
Employee's employment hereunder may also be terminated:
(a) By the Employee at any time upon at least thirty (30) days
prior written notice to the Employer; or
(b) By the Employer at any time upon at least thirty (30) days
prior written notice to the Employee; or
(c) By the Employee at any time for good reason, including but
not limited to:
(i) failure of the Employer to continue to employ the
Employee as President and Chief Executive Officer of the
Employer; or
(ii) material diminution of the Employee's
responsibilities, duties or authorities as President and Chief
Executive Officer of the Employer, or assignment to the
Employee of any responsibilities or duties inconsistent with
such positions; or
(iii) failure of the Employer to pay and provide to
the Employee the compensation provided for herein; or
(iv) requiring the Employee to be permanently based
anywhere other than the principal executive offices of the
Employer (excluding business-related travel to an extent
reasonably consistent with past practice); or
(d) By the Employer at any time for cause, including but not
limited to:
(i) the Employee's gross negligence or willful
misconduct with respect to the business and affairs of the
Employer; or
(ii) the Employee's material breach of this
Agreement; or
(iii) the commission by the Employee of an act
involving moral turpitude or fraud; or
(iv) the Employee's conviction of any felony.
The provisions of Sections 6.2, 6.3, 7, 8, 9 and 10 shall survive any
termination of the Employee's employment hereunder and shall continue in effect
until such time as all obligations of the parties described therein have been
satisfied.
<PAGE>
-4-
Section 6.2. Compensation Following Termination; Severance Pay.
(a) If the Employee terminates his employment pursuant to
Section 6.1(a) hereof, or if such employment is terminated by the death
or Permanent Disability of the Employee, the Employee shall not be
entitled to compensation, severance pay or fringe benefits beyond the
date upon which he ceases to be employed hereunder (the "Employment
Termination Date") except as may be otherwise provided in any then
existing insurance or health benefit programs of the Employer.
(b) If the Employer terminates the employment of the Employee
pursuant to Section 6.1(b) hereof or if the Employee terminates his
employment pursuant to Section 6.1(c) hereof, the Employer shall be
entitled for a period of two years (the "Severance Period") to continue
to receive payment of his Base Salary (as in effect on the Employment
Termination Date) at the same rate and on the same schedule as if the
Employee were still employed by the Employer during such period. During
the Severance Period, the Employer shall also continue to provide the
Employee with such health benefits as were provided to the Employee
immediately prior to the Employment Termination Date (or substantially
comparable benefits if a continuation of benefits is not permitted
under then existing insurance or health benefit programs of the
Employer), such benefits to be provided to the same extent and under
the same terms and conditions as if the Employee were still employed by
the Employer during such period. Except as specifically provided in
this Section 6.2(b), the Employee shall not be entitled to any fringe
benefits following the Employment Termination Date.
(c) If the Employer terminates the employment of the Employee
for cause pursuant to Section 6.1(d) hereof, the Employee shall not be
entitled to compensation, performance bonus or fringe benefits
hereunder beyond the Employment Termination Date.
Section 6.3. Acceleration of Stock Options and Restricted Stock.
(a) Immediately prior to the occurrence of an Acquisition or
Change in Control (each as defined below) or upon the termination of
the Employee's employment pursuant to Section 6.1(b) or 6.1(c) hereof,
each option to acquire shares of capital stock of the Employer and each
share of restricted capital stock of the Employer then held by the
Employee, if any, shall automatically and without further action become
fully vested, and each such option shall remain exercisable until the
expiration of such option or until it sooner terminates in accordance
with its terms.
<PAGE>
-5-
(b) For purposes of Section 6.3(a), the term "Acquisition"
shall mean:
(i) a merger, consolidation or similar transaction in
which securities possessing more than 50% of the total
combined voting power of the Employer's outstanding securities
are transferred to a person or persons different from the
persons who held those securities immediately prior to such
transaction, or
(ii) the sale, transfer, or other disposition of all
or substantially all of the Employer's assets to one or more
persons (other than any wholly owned subsidiary of the
Employer) in a single transaction or series of related
transactions.
(c) For purposes of Section 6.3(a), the term "Change in
Control" shall mean a change in ownership or control of the Employer
effected through either of the following transactions:
(i) any person or related group of persons (other
than the Employer or a person that directly or indirectly
controls, is controlled by, or is under common control with
the Employer) directly or indirectly acquires beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under
the Securities Exchange Act 1934, as amended) of securities
possessing more than 50% of the total combined voting power of
the Company's outstanding securities pursuant to a tender or
exchange offer made directly to the Employer's stockholders,
(ii) over a period of 36 consecutive months or less,
there is a change in the composition of the Board such that a
majority of the Board members (rounded up to the next whole
number, if a fraction) ceases, by reason of one or more proxy
contests for the election of Board members, to be composed of
individuals who either (A) have been Board members
continuously since the beginning of such period, or (B) have
been elected or nominated for election as Board members during
such period by at least a majority of the Board members
described in the preceding clause (A) who were still in office
at the time such election or nomination was approved by the
Board, or
Section 7. PROVISIONS OF GENERAL APPLICATION.
Section 7.1. Disputes. In the event of any dispute touching or
concerning this Agreement, the parties will submit to the exclusive jurisdiction
and venue of any court of competent jurisdiction sitting in Suffolk County,
Massachusetts, and the parties agree to comply with all requirements necessary
to give such court
<PAGE>
-6-
jurisdiction over the parties and the controversy. EACH PARTY HEREBY WAIVES ANY
RIGHT TO A JURY TRIAL AND TO CLAIM OR RECOVER PUNITIVE DAMAGES.
Section 7.2. Governing Law. This Agreement and the rights and
obligations of the parties hereunder shall be construed, interpreted and
determined in accordance with the internal substantive laws of the Commonwealth
of Massachusetts (excluding choice of law or conflict of law provisions).
Section 7.3. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original and all of which, taken
together, shall constitute one and the same document. In making proof of this
Agreement it shall not be necessary to produce or account for more than one such
counterpart.
Section 7.4. Other Agreements. This Agreement represents the entire
understanding and agreement between the parties as to the subject matter hereof
and supersedes all prior or concurrent oral or written agreements relating
thereto except for the Invention and Non-Disclosure Agreement and the
Non-Competition and Non-Disclosure Agreement between the Employer and the
Employee.
Section 7.5. Amendment. This Agreement may be amended only by a written
document executed in one or more counterparts by each of the parties hereto.
Section 7.6. Waiver. No consent to or waiver of any breach or default
in the performance of any obligation hereunder shall be deemed or construed to
be a consent to or waiver of any other breach or default in the performance of
any of the same or any other obligation hereunder. Failure on the part of either
party to complain of any act or failure to act of the other party or to declare
the other party in default, irrespective of the duration of such failure, shall
not constitute a waiver of rights hereunder and no waiver hereunder shall be
effective unless it is in writing, executed by the party waiving the breach or
default hereunder.
Section 7.7. Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their successors and assigns. This
Agreement may be assigned by the Employer to any Affiliate (as hereinafter
defined) or to a successor to the portion of its business to which this
Agreement relates (whether by purchase or otherwise). For purposes of this
Agreement, "Affiliate" shall mean any person or entity which, directly or
indirectly, controls or is controlled by or is under common control with the
Employer and, for the purposes of this definition, "control" (including the
terms "controlled by" and "under common control with"), shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of another, whether through the
ownership of voting securities or holding of office
<PAGE>
-7-
in another, by contract or otherwise. The Employee may not assign or transfer
any of his rights or obligations under this Agreement.
Section 7.8. Headings. The headings of sections and subsections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement or to affect the meaning of any of its
provisions.
Section 7.9. Severability. If any provision of this Agreement shall, in
whole or in part, prove to be invalid for any reason, such invalidity shall
affect only the portion of such provision which shall be invalid, and in all
other respects this Agreement shall stand as if such invalid provisions, or the
invalid portion thereof, had not been a part hereof.
IN WITNESS WHEREOF, this Agreement has been executed by the Employer,
by its duly authorized officer, and by the Employee, as of the Effective Date.
STREAMLINE, INC.
By: /s/ Mark Cohn
--------------------------------
Mark Cohn, Chairman of
the Compensation Committee
EMPLOYEE
/s/ Timothy A. Demello
--------------------------------
Timothy A. DeMello
<PAGE>
Exhibit 10.34
April 13, 1999
Michael A. Stein
Nordstroms, Inc.
1617 Sixth Avenue
Seattle, WA 98101
Re: Streamline, Inc.
Dear Mr. Stein:
As we have discussed, we are in the process of filing for
our initial public offering ("IPO") of Streamline common stock. This offering
is expected to provide gross proceeds of $60 million and provide sufficient
capital for operations and expansion. However, our underwriters have informed
us that in order to file a successful IPO we must have an unqualified or
"clean" opinion on our audited financial statements. To do so, we must
combine our existing capital of approximately $10 million with a secured
means of financing operations for the next twelve months in case we are
unable to access the public markets as planned.
This letter is to confirm the understanding between Streamline.com, Inc.
("Streamline") and Nordstrom, Inc. ("Nordstrom") concerning Nordstrom's
agreement to provide Streamline with additional financing of up to $10
million, subject to the terms and conditions specified below.
At any time from the date hereof through April 2000, provided Streamline
has not effected an offering of common stock to the public or obtained
private financing from other investors, should Streamline notify Nordstrom in
writing that Streamline requires additional financing to support its
operations, Nordstrom agrees to purchase from Streamline such number of
additional shares of Streamline's Series D Convertible Preferred Stock
("Series D Shares") as Streamline may request not to exceed an aggregate
purchase price of $10 million. The terms and conditions of such purchase
would be the same as the terms and conditions of Nordstrom's purchase of
Series D Shares in September 1998 except, that the Company shall redeem such
shares, two years from the date of issuance, for the aggregate purchase price
plus secured dividends at a rate of 6% per annum. In addition, the total fair
market value of the preferred stock less the redemption paid will remain
outstanding as preferred stock.
In consideration for this financing commitments. Streamline agrees to
issue to Nordstrom a three year warrant to purchase 150,000 shares of common
stock at an exercise price of $3.50 per share (75,000 shares and $7.00 after
a 1 for 2 reverse stock split.)
Please sign this letter where indicated below to indicate your agreement
to the financing commitment described above.
STREAMLINE, INC.
By: /s/ Timothy A. DeMello
----------------------
Timothy A. DeMello
President
Agreed:
NORDSTROM, INC.
By: /s/ Michael A. Stein
--------------------
Michael A. Stein
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1, of
our report dated April 13, 1999, on our audits of the consolidated financial
statements of Streamline.com, Inc. as of December 31, 1997 and 1998 and for
each of the three years in the period ended December 31, 1998. We also
consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data."
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
April 15, 1999
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<PAGE>
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<NAME> STREAMLINE, INC.
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<PERIOD-END> DEC-31-1998
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<RECEIVABLES> 87,779
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<INVENTORY> 323,656
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37,185,765
0
<COMMON> 36,995
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<TOTAL-LIABILITY-AND-EQUITY> 20,065,818
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<TOTAL-REVENUES> 6,946,290
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