<PAGE> 1
As filed with the Securities and Exchange Commission on October 21, 1999
Registration No. 333-84703
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 5
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WEBVAN GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<TABLE>
<S> <C> <C>
DELAWARE 7389 77-0446411
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
1241 EAST HILLSDALE BOULEVARD, SUITE 210
FOSTER CITY, CALIFORNIA 94404
(650) 524-2200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
GEORGE T. SHAHEEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WEBVAN GROUP, INC.
1241 EAST HILLSDALE BOULEVARD, SUITE 210
FOSTER CITY, CALIFORNIA 94404
(650) 524-2200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JEFFREY D. SAPER, ESQ. WILLIAM H. HINMAN, ESQ.
J. ROBERT SUFFOLETTA, ESQ. DANIELLE CARBONE, ESQ.
ROBERT G. DAY, ESQ. SHEARMAN & STERLING
ANIL P. PATEL, ESQ. 1550 EL CAMINO REAL, SUITE 100
WILSON SONSINI GOODRICH & ROSATI MENLO PARK, CALIFORNIA 94025
PROFESSIONAL CORPORATION (650) 330-2200
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is to register additional securities for an offering pursuant
to rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If 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 number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION. DATED OCTOBER , 1999.
25,000,000 SHARES
WEBVAN GROUP, INC.
Common Stock
[LOGO]
-------------------------
This is an initial public offering of shares of common stock of Webvan
Group, Inc. All of the 25,000,000 shares of common stock are being sold by
Webvan.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $11.00 and $13.00. Application has been made for quotation
of the common stock on the Nasdaq National Market under the symbol "WBVN".
See "Risk Factors" beginning on page 5 to read about factors you should
consider before buying shares of the common stock.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to Webvan........................ $ $
</TABLE>
To the extent that the underwriters sell more than 25,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
3,750,000 shares from Webvan at the initial public offering price, less the
underwriting discount.
The underwriters expect to deliver the shares on , 1999.
-------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
-------------------------
Prospectus dated , 1999.
<PAGE> 3
PROSPECTUS SUMMARY
This summary does not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, especially "Risk Factors" beginning on page 4.
WEBVAN GROUP, INC.
Webvan is an Internet retailer offering same-day delivery of consumer
products through an innovative proprietary business design that integrates our
Webstore, distribution center and delivery system. Our current product offerings
are principally focused on food, non-prescription drug products and general
merchandise.
Webvan offers a personalized shopping experience that provides customers
with:
- the convenience of same-day direct home delivery within a
customer-selected 30-minute window;
- a broad selection of high quality fresh foods including produce, hand-cut
meats, fresh fish and live lobsters, as well as non-perishable grocery
items, chef-prepared meals, fine wines, premium quality cigars and
non-prescription drug products;
- prices that are generally at or below everyday supermarket prices;
- reliable and friendly delivery service by Webvan employees, free of
charge for orders over $50; and
- an easy-to-navigate Webstore offering user-friendly features including
the ability to create personalized shopping lists.
Consumers are increasingly seeking a grocery shopping solution which will
allow them to save time and effort without sacrificing the wide selection, high
quality and low cost they have come to expect from supermarkets. While a number
of retailers have attempted to address this opportunity by offering grocery
items online, we believe that their lack of a highly automated distribution
system and inability to realize cost efficiencies has made it difficult for
these online grocers to deliver a high quality, low cost shopping solution in an
efficient manner.
Our interactive Webstore and highly automated distribution center were
designed to operate efficiently at high volumes, enabling us to operate with
much lower overhead and reduced headcount compared to traditional supermarkets.
Our initial distribution center, which serves the San Francisco Bay Area, was
designed to process product volumes equivalent to approximately 18 supermarkets
with substantially lower labor and real estate costs than these stores would
typically require. To date, we have only been operating at less than 20% of such
designed capacity. We do not expect any of our distribution centers to operate
at designed capacity for several years following their commercial launch, and we
cannot assure you that any distribution center will ever operate at or near its
designed capacity. Since the commercial launch of our Webstore on June 2, 1999,
we have delivered orders to over 21,000 separate customers which generated
approximately $4.3 million in net sales through September 30, 1999. During that
period, over 62% of our orders were from customers who had previously used our
service. During the month of September 1999, approximately 70% of our orders
were from repeat customers. The daily volume of orders that we have had to
fulfill to date has been significantly below our designed capacity and the
levels that are necessary for us to achieve profitability. It is not practicable
to test our system at high volumes except by processing commercial orders. As a
result, the success of our system in a high order volume environment has yet to
be proven.
Our proprietary distribution system and enabling software were designed to
optimize our inbound and outbound delivery operations and were created to be
readily replicated to facilitate our expansion into multiple geographic markets.
We commenced the commercial launch of our operations in the San Francisco Bay
Area in June 1999 and plan to open a second distribution center in Atlanta,
Georgia in the second quarter of 2000. We also plan to open two additional
distribution centers in 2000 in the Chicago and Seattle markets and seven
additional distribution centers in 2001 in Dallas, Washington, D.C. and five
other
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<PAGE> 4
markets. In July 1999, we entered into an agreement with Bechtel Corporation for
the construction of up to 26 additional distribution centers over the next three
years. These distribution centers may not necessarily be in 26 different
markets, and if the level of demand in a particular market is sufficiently high,
we may construct up to four to six distribution centers in that market over a
period of several years.
We believe that our business design provides an innovative solution to the
challenge of e-commerce fulfillment by integrating a retail web site with a
highly automated distribution center and advanced delivery system which provide
a highly efficient means of delivering goods directly and rapidly to consumers.
WEBVAN'S OPERATING HISTORY
Webvan was incorporated in December 1996. From 1997 through May 1999, we
were focused on developing our Webstore and constructing and equipping our first
distribution center serving the San Francisco Bay Area. We did not begin
commercial operations until June 1999. Our operating history and revenues
derived from operations are therefore limited, and we have incurred significant
net losses since our inception. As of June 30, 1999, we had an accumulated
deficit of $50.0 million. We incurred net losses of $12.0 million for the fiscal
year ended December 31, 1998 and $35.1 million for the six months ended June 30,
1999. We will continue to incur significant capital and operating expenses over
the next several years in connection with our planned expansion, and we expect
to continue to have operating losses for the foreseeable future.
2
<PAGE> 5
THE OFFERING
Common stock offered by Webvan........ 25,000,000 shares
Common stock to be outstanding after
this offering......................... 321,845,386 shares
Proposed Nasdaq National Market
symbol................................ "WBVN"
Use of proceeds....................... Funding construction of and equipment
for distribution centers and for general
corporate purposes, including working
capital. See "Use of Proceeds".
The shares of common stock to be outstanding after the offering are stated
as of October 20, 1999 and include 205,910,277 shares of common stock to be
issued upon automatic conversion of all outstanding shares of our preferred
stock upon completion of this offering. The shares of common stock to be
outstanding exclude:
- 102,500,000 shares of common stock authorized for issuance under our
stock option plans, of which 67,657,816 shares at a weighted average
exercise price of $3.53 were subject to outstanding options as of October
20, 1999; and
- 4,059,804 shares of common stock issuable upon exercise of outstanding
warrants as of October 20, 1999 at a weighted average exercise price of
$1.49.
All of the information in this prospectus reflects a three-for-two split of
our outstanding shares of common stock and preferred stock on September 21, 1999
and assumes:
- the conversion of all outstanding shares of preferred stock into shares
of common stock prior to the closing of this offering; and
- no exercise of the underwriters' overallotment option.
-------------------------
CORPORATE INFORMATION
We were incorporated in California in December 1996 as Intelligent Systems
for Retail, Inc. and changed our state of incorporation to Delaware in October
1999. Our principal executive offices are located at 1241 East Hillsdale
Boulevard, Suite 210, Foster City, California 94404, and our telephone number at
that address is (650) 524-2200. Our address on the World Wide Web is
http://www.webvan.com. References to our web site do not incorporate by
reference the information contained at our web site into this prospectus.
3
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17,
1996 SIX MONTHS
(INCEPTION) TO YEAR ENDED ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, -------------------------
CONSOLIDATED STATEMENTS OF 1997 1998 1998 1999
OPERATIONS DATA: -------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales.............................. $ -- $ -- $ -- $ 395
Cost of goods sold..................... -- -- -- 419
----------- ----------- ----------- -----------
Gross profit......................... -- -- -- (24)
Operating expenses:
Software development................. 244 3,010 765 6,308
General and administrative........... 2,612 8,825 2,739 25,296
Amortization of deferred stock
compensation...................... -- 1,060 43 3,953
----------- ----------- ----------- -----------
Total operating expenses.......... 2,856 12,895 3,547 35,557
----------- ----------- ----------- -----------
Interest income........................ 85 923 285 1,641
Interest expense....................... 69 32 -- 1,194
----------- ----------- ----------- -----------
Net interest income.................. 16 891 285 447
----------- ----------- ----------- -----------
Net loss............................... $ (2,840) $ (12,004) $ (3,262) $ (35,134)
=========== =========== =========== ===========
Basic and diluted net loss per share... $ (0.08) $ (0.18) $ (0.05) $ (0.48)
=========== =========== =========== ===========
Shares used in calculating basic and
diluted net loss per share........... 37,406,785 67,114,048 65,075,326 73,280,388
=========== =========== =========== ===========
Pro forma basic and diluted net loss
per share(1)......................... $ (0.06) $ (0.14)
=========== ===========
Shares used in computing pro forma
basic and diluted net loss per
share(1)............................. 201,978,419 253,743,194
=========== ===========
OTHER OPERATING DATA:
Capital expenditures................... $ 265 $ 32,669 $ 4,283 $ 25,948
Depreciation and amortization.......... 57 1,323 93 6,626
</TABLE>
- -------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements.
The following table provides a consolidated summary of our balance sheets.
The Pro Forma column reflects the closing of the sale of an aggregate of
21,670,605 shares of our Series D preferred stock in July and August 1999 for
approximately $275.0 million and the conversion of all outstanding shares of
preferred stock into common stock immediately prior to the closing of this
offering. The Pro Forma As Adjusted column also reflects the issuance of the
shares of common stock in this offering at an assumed initial public offering
price of $12.00 per share.
<TABLE>
<CAPTION>
JUNE 30, 1999
DECEMBER 31, ----------------------------------
---------------- PRO FORMA
1997 1998 ACTUAL PRO FORMA AS ADJUSTED
------ ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents...................... $2,935 $13,839 $ 21,836 $296,736 $577,336
Working capital........................... 7,693 10,923 31,773 306,673 587,273
Total assets.............................. 8,279 60,009 112,429 387,329 667,929
Long-term liabilities..................... 17 14,337 14,216 14,216 14,216
Total shareholders' equity................ 7,972 33,612 79,626 354,526 635,126
</TABLE>
4
<PAGE> 7
RISK FACTORS
You should carefully consider the risks and uncertainties described below
before purchasing our common stock. If any of the following risks actually
occur, our business, financial condition or results of operations could be
harmed. In that case, the trading price of our common stock could decline, and
you could lose all or part of your investment.
WE ARE AN EARLY-STAGE COMPANY OPERATING IN A NEW AND RAPIDLY EVOLVING MARKET.
We were incorporated in December 1996. From 1997 through May 1999, we were
focused on developing our Webstore and constructing and equipping our first
distribution center serving the San Francisco Bay Area. We did not begin
commercial operations until June 1999. Our limited operating history makes an
evaluation of our business and prospects very difficult. You must consider our
business and prospects in light of the risks and difficulties we encounter as an
early stage company in the new and rapidly evolving market of e-commerce. These
risks and difficulties include, but are not limited to:
- a complex and unproven business system;
- lack of sufficient customers, orders, net sales or cash flow;
- difficulties in managing rapid growth in personnel and operations;
- high capital expenditures associated with our distribution centers,
systems and technologies; and
- lack of widespread acceptance of the Internet as a means of purchasing
groceries and other consumer products.
We cannot be certain that our business strategy will be successful or that
we will successfully address these risks. Our failure to address any of the
risks described above could have a material adverse effect on our business.
OUR BUSINESS SYSTEM IS NEW AND UNPROVEN AT HIGH VOLUMES, AND THE ACTUAL CAPACITY
OF OUR SYSTEM MAY BE LESS THAN ITS DESIGNED CAPACITY.
We have designed a new business system which integrates our Webstore,
highly automated distribution centers and complex order fulfillment and delivery
operations. We have only been delivering products to customers commercially
since we launched our Webstore on June 2, 1999 and the average daily volume of
orders that we have had to fulfill to date has been significantly below our
designed capacity of 8,000 orders per day and the levels that are necessary for
us to achieve profitability. Although our initial distribution center was
designed to process product volumes equivalent to approximately 18 supermarkets,
we have only been operating at less than 20% of such designed capacity.
We do not expect our distribution centers to operate at designed capacity
for several years following their commercial launch, and we cannot assure you
that any distribution center will ever operate at or near its designed capacity.
If a distribution center is able to operate at its designed capacity seven days
per week, we estimate that it would generate annual revenue of approximately
$300 million assuming an average order size of approximately $103.00. We
sometimes may refer to a distribution center operating at its designed capacity
seven days per week as operating at a "steady state." Our existing distribution
center currently operates five days per week and we do not plan to attempt to
commercially operate it at seven days per week for several months. We cannot
assure you that we can effectively operate any of our distribution centers more
than five days per week. Additionally, our average order size from our
commercial launch on June 2, 1999 through September 30, 1999 was approximately
$71.00. Thus, our average order size will have to increase by over $30.00 for
the distribution center to be able to generate annual revenue of $300 million at
its designed capacity. We cannot assure you that our average order size will
remain at current levels or increase in the future. If our average order size
does not increase substantially or if a distribution
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<PAGE> 8
center is not able to operate at designed capacity seven days per week, our
annual revenue at that distribution center will be substantially less than $300
million.
It is not practicable to test our system at high volumes except by
processing commercial orders. As part of our testing process, we have
voluntarily limited the number of customer orders accepted in any given delivery
window in an effort to ensure that our systems and technologies function
properly while maintaining a high level of customer service. We plan to
incrementally increase our voluntary limit on orders as our systems and
technologies are proven at each incremental volume level. As a result, the
success of our system in a high order volume environment has yet to be proven.
Based on our operational experiences, refinements or modifications to our
business systems and technologies may be necessary or advisable. We cannot
assure you that our business system will be able to accommodate a significant
increase in the number of customers and orders, or that our initial distribution
center or other distribution centers will in fact operate at or near designed
capacity. If we are unable to effectively accommodate substantial increases in
customer orders, we may lose existing customers or fail to add new customers,
which would adversely affect our business, net sales and operating margins.
OUR BUSINESS SYSTEM IS COMPLEX, AND WE ARE PERIODICALLY AFFECTED BY OPERATIONAL
DIFFICULTIES.
Our business system relies on the complex integration of numerous software
and hardware subsystems that utilize advanced algorithms to manage the entire
process from the receipt and processing of goods at our distribution center to
the picking, packing and delivery of these goods to customers in a 30-minute
delivery window. We have, from time to time, experienced operational "bugs" in
our systems and technologies which have resulted in order errors such as missing
items and delays in deliveries. Operational bugs may arise from one or more
factors including electro-mechanical equipment failures, computer server or
system failures, network outages, software performance problems or power
failures. We expect bugs to continue to occur from time to time, and we cannot
assure you that our operations will not be adversely affected. The efficient
operation of our business system is critical to consumer acceptance of our
service. If we are unable to meet customer demand or service expectations as a
result of operational issues, we may be unable to develop customer relationships
that result in repeat orders, which would adversely affect our business and net
sales.
OUR BUSINESS SYSTEM MAY NOT BE READILY OR COST-EFFECTIVELY REPLICABLE IN
ADDITIONAL GEOGRAPHIC MARKETS.
A critical part of our business strategy is to expand our business by
opening additional distribution centers in new and existing markets to achieve
economies of scale and leverage our significant and ongoing capital investment
in our proprietary business system. While we currently plan to open three
additional distribution centers in 2000 in the Atlanta, Chicago and Seattle
markets, and seven additional distribution centers in 2001, our expansion
strategy is dependent upon the ability of our proprietary business system and
enabling software to be readily replicated to facilitate our expansion into
additional geographic markets on a timely and cost-effective basis. Because our
business system is extremely complex and we currently have only one distribution
center, we have not demonstrated whether our proprietary business system is in
fact readily and cost-effectively replicable.
Our ability to successfully and cost-effectively replicate our business
system in additional geographic markets will also depend upon a number of
factors, including:
- the availability of appropriate and affordable sites that can accommodate
our distribution centers;
- our ability to successfully and cost-effectively hire and train qualified
employees to operate new distribution centers;
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<PAGE> 9
- our ability to develop relationships with local and regional
distributors, vendors and other product providers;
- acceptance of our product and service offerings; and
- competition.
The number and timing of opening of new distribution centers are dependent
on these factors and are therefore subject to considerable uncertainty. If the
replication element of our expansion strategy fails, we could incur substantial
additional operating costs and be forced to delay our entrance into other
markets.
In addition, we currently obtain all of our carousels for our distribution
centers from Diamond Phoenix Corporation. In the event that the supply of
carousels from Diamond Phoenix was delayed or terminated for any reason, we
believe that we could obtain similar carousels from other sources; however, the
integration of other carousels into the complex systems of our distribution
centers could result in construction delays and could require modifications to
our software systems. Accordingly, any delay or termination of our relationship
with Diamond Phoenix could cause a material delay and increased cost in our
planned expansion program.
OUR EXPANSION PLANS ARE DEPENDENT ON THE PERFORMANCE OF, AND OUR RELATIONSHIP
WITH, BECHTEL CORPORATION.
In July 1999, we entered into an agreement with Bechtel for the
construction of up to 26 additional distribution centers over the next three
years. We expect that our next 26 distribution centers following our Atlanta,
Georgia distribution center will be constructed by Bechtel pursuant to this
agreement. These distribution centers may not necessarily be in 26 different
markets. The success of our expansion program is highly dependent on the success
of our relationship with Bechtel and Bechtel's ability to perform its
obligations under the contract. We have no prior working relationship with
Bechtel and we cannot assure you that we will not encounter unexpected delays or
design problems in connection with the build-out of our distribution centers. If
our relationship with Bechtel fails for any reason, we would be forced to engage
another contractor, which would likely result in a significant delay in our
expansion plans.
WE HAVE NO EXPERIENCE IN MANAGING GEOGRAPHICALLY DIVERSE OPERATIONS.
Although we plan to expand geographically, we have no experience operating
in any other regions or in managing multiple distribution centers. Accordingly,
the success of our planned expansion will depend upon a number of factors,
including:
- our ability to integrate the operations of new distribution centers into
our existing operations;
- our ability to coordinate and manage distribution operations in multiple,
geographically distant locations; and
- our ability to establish and maintain adequate management and information
systems and financial controls.
Our failure to successfully address these factors could have a material
adverse effect on our ability to expand and on our results of operations.
WE ANTICIPATE FUTURE LOSSES AND NEGATIVE CASH FLOW.
We have experienced significant net losses and negative cash flow since our
inception. As of June 30, 1999, we had an accumulated deficit of $50.0 million.
We incurred net losses of $12.0 million for the fiscal year ended December 31,
1998 and $35.1 million for the six months ended
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<PAGE> 10
June 30, 1999. We will continue to incur significant capital and operating
expenses over the next several years in connection with our planned expansion,
including:
- the construction of and equipment for new distribution centers in
additional geographic markets at an estimated cost of $25.0 million to
$35.0 million per distribution center;
- the continued expansion and development of operations at our existing
distribution center;
- increases in personnel at our current and future distribution centers;
- brand development, marketing and other promotional activities;
- the continued development of our computer network, Webstore, warehouse
management and order fulfillment systems and delivery infrastructure; and
- the development of strategic business relationships.
As a result, we expect to continue to have operating losses and negative cash
flow on a quarterly and annual basis for the foreseeable future. To achieve
profitability, we must accomplish the following objectives:
- substantially increase our number of customers and the number of orders
placed by our customers;
- generate a sufficient average order size;
- realize repeat orders from a significant number of customers; and
- achieve favorable gross and operating margins.
We cannot assure you that we will be able to achieve these objectives. In
addition, because of the significant capital and operating expenses associated
with our expansion plan, our overall losses will increase significantly from
current levels. If we do achieve profitability, we cannot be certain that we
would be able to sustain or increase such profitability on a quarterly or annual
basis in the future. If we cannot achieve or sustain profitability, we may not
be able to meet our working capital requirements, which would have a material
adverse effect on our business.
THE SIGNIFICANT CAPITAL INVESTMENT REQUIRED BY OUR BUSINESS DESIGN MAY ADVERSELY
AFFECT OUR ABILITY TO ENTER ADDITIONAL MARKETS IN A TIMELY AND EFFECTIVE MANNER
AND COULD HARM OUR COMPETITIVE POSITION.
Our business design requires a significant capital investment to build,
equip and launch distribution centers and local stations in the markets in which
we seek to operate. Our competitors have developed or may develop systems that
are not as highly automated or capital-intensive as ours. This could enable them
to commence operations in a particular geographic market before we are able to
do so, which could harm our competitive position. In addition, because of the
substantial capital costs associated with the development of our distribution
centers, we will be unable to achieve profitability or reduce our operating
losses if we do not process sufficient order volumes.
WE FACE INTENSE COMPETITION FROM TRADITIONAL AND ONLINE RETAILERS OF GROCERY
PRODUCTS.
The grocery retailing market is extremely competitive. Local, regional, and
national food chains, independent food stores and markets, as well as online
grocery retailers comprise our principal competition, although we also face
substantial competition from convenience stores, liquor retailers, membership
warehouse clubs, specialty retailers, supercenters, and drugstore chains. Many
of our existing and potential competitors, particularly traditional grocers and
retailers, are larger and have substantially greater resources than we do. We
expect this competition will intensify as more traditional and online grocery
retailers offer competitive services.
Our initial distribution center in Oakland, California operates in the San
Francisco Bay Area market. In this market, we compete primarily with traditional
grocery retailers and with online grocers NetGrocer and Peapod. The number and
nature of competitors and the amount of competition we will experience will vary
by market area. In other markets, we expect to compete with these and other
online grocers, including HomeGrocer, HomeRuns and Streamline. The principal
competitive factors that affect our
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<PAGE> 11
business are location, breadth of product selection, quality, service, price and
consumer loyalty to traditional and online grocery retailers. If we fail to
effectively compete in any one of these areas, we may lose existing and
potential customers which would have a material adverse effect on our business,
net sales and operating margins.
IF WE FAIL TO GENERATE SUFFICIENT LEVELS OF REPEAT ORDERS AND MARKET
PENETRATION, OUR BUSINESS AND NET SALES WILL BE ADVERSELY AFFECTED.
In the online retail industry, customer attrition rates, or the rates at
which subscribers cancel a service, are generally high. Although we do not
charge on a subscription basis for our service, we do depend upon customers to
continue to order from us after their initial order is placed, and we compete to
retain customers once they have used our service.
In addition, the success of our business depends on our ability to
establish sufficient levels of market penetration in each market in which we
operate. For instance, we believe that if approximately 1% of the households in
the San Francisco Bay Area use our service on a consistent basis, we can achieve
positive earnings before interest, taxes, depreciation and amortization, for the
distribution center serving that area viewed as a stand-alone business unit. In
general, in most other markets, we believe we will need to achieve penetration
levels of approximately 1% to 3% in order to achieve positive earnings on a
similar basis. However, we cannot assure you as to the levels of penetration we
will achieve in the San Francisco Bay Area or in other markets, and even if we
do achieve these levels of penetration, we cannot assure you that we will
achieve positive earnings.
If we experience significant decreases in repeat customer orders as a
percentage of orders delivered, or if we are unable to establish sufficient
market penetration levels, our business and net sales could be materially
adversely affected.
THE INTERNET MAY FAIL TO BECOME A WIDELY ACCEPTED MEDIUM FOR GROCERY SHOPPING.
We rely solely on product orders received through our Webstore for sales.
The market for e-commerce is new and rapidly evolving, and it is uncertain
whether e-commerce will achieve and sustain high levels of demand and market
acceptance, particularly with respect to the grocery industry. Our success will
depend to a substantial extent on the willingness of consumers to increase their
use of online services as a method to buy groceries and other products and
services. Our success will also depend upon our vendors' acceptance of our
online service as a significant means to market and sell their products.
Moreover, our growth will depend on the extent to which an increasing number of
consumers own or have access to personal computers or other systems that can
access the Internet. If e-commerce in the grocery industry does not achieve high
levels of demand and market acceptance, our business will be materially
adversely affected.
OUR EFFORTS TO BUILD STRONG BRAND IDENTITY AND CUSTOMER LOYALTY MAY NOT BE
SUCCESSFUL.
Since we only recently launched the Webvan brand, we currently do not have
strong brand identity or brand loyalty. We believe that establishing and
maintaining brand identity and brand loyalty is critical to attracting consumers
and vendors. Furthermore, we believe that the importance of brand loyalty will
increase with the proliferation of Internet retailers. In order to attract and
retain consumers and vendors, and respond to competitive pressures, we intend to
increase spending substantially to create and maintain brand loyalty among these
groups. We plan to accomplish this goal by expanding our current radio and
newspaper advertising campaigns and by conducting online and television
advertising campaigns. We believe that advertising rates, and the cost of our
advertising campaigns in particular, could increase substantially in the future.
If our branding efforts are not successful, our net sales and ability to attract
customers will be materially and adversely affected.
Promotion and enhancement of the Webvan brand will also depend on our
success in consistently providing a high-quality consumer experience for
purchasing groceries and other products. If consumers, other Internet users and
vendors do not perceive our service offerings to be of high
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quality, or if we introduce new services that are not favorably received by
these groups, the value of the Webvan brand could be harmed. Any brand
impairment or dilution could decrease the attractiveness of Webvan to one or
more of these groups, which could harm our reputation, reduce our net sales and
cause us to lose customers.
IF WE ARE UNABLE TO OBTAIN SUFFICIENT QUANTITIES OF PRODUCTS FROM OUR KEY
VENDORS, OUR NET SALES WOULD BE ADVERSELY AFFECTED.
We expect to derive a significant percentage of our net sales from
high-volume items, well-known brand name products and fresh foods. We source
products from a network of manufacturers, wholesalers and distributors. We
currently rely on national and regional distributors for a substantial portion
of our items. We also utilize premium specialty suppliers or local sources for
gourmet foods, farm fresh produce, fresh fish and meats. From time to time, we
may experience difficulty in obtaining sufficient product allocations from a key
vendor. In addition, our key vendors may establish their own online retailing
efforts, which may impact our ability to get sufficient product allocations from
these vendors. Many of our key vendors also supply products to the retail
grocery industry and our online competitors. If we are unable to obtain
sufficient quantities of products from our key vendors to meet customer demand,
our net sales and results of operations would be materially adversely affected.
WE CURRENTLY OPERATE ONLY ONE DISTRIBUTION CENTER WHICH IS LOCATED IN THE SAN
FRANCISCO BAY AREA.
We currently operate only one distribution center, which is located in
Oakland, California and serves the San Francisco Bay Area. We do not expect to
begin operating a second distribution center until the second quarter of 2000.
Therefore, our business and operations would be materially adversely affected if
any of the following events affected our current distribution center or the San
Francisco Bay Area:
- prolonged power or equipment failures;
- disruptions in our web site, computer network, software and our order
fulfillment and delivery systems;
- disruptions in the transportation infrastructure including bridges,
tunnels and roads;
- refrigeration failures; or
- fires, floods, earthquakes or other disasters.
Since the San Francisco Bay Area is located in an earthquake-sensitive
area, we are particularly susceptible to the risk of damage to, or total
destruction of, our distribution center and the surrounding transportation
infrastructure caused by earthquakes. We cannot assure you that we are
adequately insured to cover the total amount of any losses caused by any of the
above events. In addition, we are not insured against any losses due to
interruptions in our business due to damage to or destruction of our
distribution center caused by earthquakes or to major transportation
infrastructure disruptions or other events that do not occur on our premises.
WE WILL NEED SUBSTANTIAL ADDITIONAL CAPITAL TO FUND OUR PLANNED EXPANSION, AND
WE CANNOT BE SURE THAT ADDITIONAL FINANCING WILL BE AVAILABLE.
We require substantial amounts of working capital to fund our business. In
addition, the opening of new distribution centers and the continued development
of our order fulfillment and delivery systems requires significant amounts of
capital. Since our inception, we have experienced negative cash flow from
operations and expect to experience significant negative cash flow from
operations for the foreseeable future. In the past, we have funded our operating
losses and capital expenditures through proceeds from equity offerings, debt
financing and equipment leases. In addition to the proceeds from this offering,
we expect to require substantial additional capital to fund our expansion
program and operating expenses. We currently anticipate that the net proceeds of
this offering,
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together with our available funds, will be sufficient to meet our anticipated
needs for working capital and capital expenditures through the next 12 to 24
months. In July 1999, we entered into an agreement with Bechtel for the
construction of up to 26 additional distribution centers over the next three
years. Although the Company has no specific capital commitment under this
agreement, our expenditures under the contract are estimated to be approximately
$1.0 billion. Our future capital needs will be highly dependent on the number of
additional distribution centers we open, the timing of openings and the success
of our facilities once they are launched. Therefore, we will need to raise
additional capital to fund our planned expansion. We cannot be certain that
additional financing will be available to us on favorable terms when required,
or at all. If we are unable to obtain sufficient additional capital when needed,
we could be forced to alter our business strategy, delay or abandon some of our
expansion plans or sell assets. Any of these events would have a material
adverse effect on our business, financial condition and our ability to reduce
losses or generate profits. In addition, if we raise additional funds through
the issuance of equity, equity-linked or debt securities, those securities may
have rights, preferences or privileges senior to those of the rights of our
common stock and our stockholders may experience additional dilution.
OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING DIFFICULT FOR US AND
FOR FINANCIAL ANALYSTS THAT MAY PUBLISH ESTIMATES OF OUR FINANCIAL RESULTS.
As a result of our limited operating history, it is difficult to accurately
forecast our total revenue, revenue per distribution center, gross and operating
margins, real estate and labor costs, average order size, number of orders per
day and other financial and operating data. We have a limited amount of
meaningful historical financial data upon which to base planned operating
expenses. We base our current and future expense levels on our operating plans
and estimates of future revenue, and our expenses are dependent in large part
upon our facilities and product costs. Sales and operating results are difficult
to forecast because they generally depend on the growth of our customer base and
the volume of the orders we receive, as well as the mix of products sold. As a
result, we may be unable to make accurate financial forecasts and adjust our
spending in a timely manner to compensate for any unexpected revenue shortfall.
We believe that these difficulties also apply to financial analysts that may
publish estimates of our financial results, including the estimates of a
representative of Goldman, Sachs & Co. set forth under the heading "Risk
Factors -- You should read the entire prospectus carefully and should not
consider any particular statement herein or in published news reports or any
published financial projections without carefully considering the risks and
other information contained herein". This inability to accurately forecast our
results could cause our net losses in a given quarter to be greater than
expected and could cause a decline in the trading price of our common stock.
OUR QUARTERLY OPERATING RESULTS ARE EXPECTED TO BE VOLATILE AND DIFFICULT TO
PREDICT BASED ON A NUMBER OF FACTORS THAT WILL ALSO AFFECT OUR LONG-TERM
PERFORMANCE.
We expect our quarterly operating results to fluctuate significantly in the
future based on a variety of factors. These factors are also expected to affect
our long-term performance. Some of these factors include the following:
- the timing of our expansion plans as we construct and begin to operate
new distribution centers in additional geographic markets;
- changes in pricing policies or our product and service offerings;
- increases in personnel, marketing and other operating expenses to support
our anticipated growth;
- our inability to obtain new customers or retain existing customers at
reasonable cost;
- our inability to manage our distribution and delivery operations to
handle significant increases in the number of customers and orders or to
overcome system or technology difficulties associated with these
increases;
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- our inability to adequately maintain, upgrade and develop our Webstore,
our computer network or the systems that we use to process customer
orders and payments;
- competitive factors; and
- technical difficulties, system or web site downtime or Internet
brownouts.
In addition to these factors, our quarterly operating results are expected to
fluctuate based upon seasonal purchasing patterns of our customers and the mix
of groceries and other products sold by us.
Due to all of these factors, we expect our operating results to be volatile
and difficult to predict. As a result, quarter-to-quarter comparisons of our
operating results may not be good indicators of our future performance. In
addition, it is possible that in any future quarter our operating results could
be below the expectations of investors generally and any published reports or
analyses of Webvan. In that event, the price of our common stock could decline,
perhaps substantially.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY AND SHOULD NOT CONSIDER ANY
PARTICULAR STATEMENT HEREIN OR IN PUBLISHED NEWS REPORTS OR ANY PUBLISHED
FINANCIAL PROJECTIONS WITHOUT CAREFULLY CONSIDERING THE RISKS AND OTHER
INFORMATION CONTAINED HEREIN.
In an article in a securities industry Internet periodical dated October 6,
1999, information regarding this offering and Webvan was published. This article
was published without our consent. Some of the information in the article was
attributed to oral statements made by members of our management team during a
conference call held for prospective investors. The author of the article was
not invited to participate in the conference call. While the factual statements
about Webvan in the article are disclosed in this prospectus, the article
presented these statements in isolation and did not disclose the related risks
and uncertainties described in this prospectus. As a result, these statements
should not be considered in isolation and you should make your investment
decision only after reading this entire prospectus carefully.
The article also referred to a projected loss of over $300 million for the
year 2001 stated during the call by a representative of Goldman, Sachs & Co. The
representative of Goldman, Sachs & Co. stated during the call that its financial
projections for our company were: $11.9 million of revenue and a $73.8 million
net loss for the year 1999, $120.0 million of revenue and a $154.3 million net
loss for the year 2000 and $518.2 million of revenue and a $302 million net loss
for the year 2001. These projections are based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and
contingencies, including the timing and cost of our distribution center roll-
out, the volume and size of customer orders, market penetration and competition.
These projections were not prepared with a view toward compliance with published
guidelines of the Securities and Exchange Commission, the American Institute of
Certified Public Accountants or generally accepted accounting principles. For
example, the projections do not take into account any amortization related to
stock-based compensation. No independent accountants have expressed an opinion
or any other form of assurance on these projections. Projections are necessarily
speculative in nature, and it can be expected that one or more of the estimates
on which the projections were based will not materialize or will vary
significantly from actual results, and such variances will likely increase over
time. We also have a very limited operating history from which to derive
financial projections. Accordingly, actual results during the periods covered
will vary from the financial projections, which variations may be material and
adverse. For these reasons, you should only consider these projections after
carefully evaluating all of the information in this prospectus including the
risks described in this section and throughout this prospectus. Furthermore, we
do not make, and in the future do not intend to make, public financial
projections.
In addition the October 18, 1999 issue of Forbes magazine contained an
article regarding George Shaheen leaving Andersen Consulting to become the Chief
Executive Officer of Webvan. The Forbes article attributed the following
statements to Mr. Shaheen: "Webvan was all about leveraging technology and
reinventing the grocery business, just as Andersen had reinvented consulting",
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Webvan will "set the rules for the largest consumer sector in the economy. The
creation of 26 distribution centers -- each one bigger than 18 conventional
supermarkets -- will take costs out of the equation", and "The key to e-commerce
is all about the last mile to the customer". You should only consider these
statements after carefully evaluating all of the information in this prospectus
including the risks described in this section and throughout this prospectus. In
particular, Andersen Consulting and Webvan are vastly different businesses and
you should not make any comparison between the two companies.
The Company has received, and may continue to receive, a high degree of
media coverage, including coverage that it not directly attributable to
statements made by Webvan's officers and employees. Neither we nor any of the
underwriters in this offering have confirmed, endorsed or adopted any statements
that were not made by us for utilization by, or distribution to, prospective
purchasers in this offering. To the extent any such statements are inconsistent
with, or conflict with, the information contained in this prospectus, or relate
to information not contained in this prospectus, they are disclaimed by us and
the underwriters. Accordingly, prospective investors should not rely on such
statements that were not made by us.
IF WE EXPERIENCE PROBLEMS IN OUR DELIVERY OPERATIONS, OUR BUSINESS COULD BE
SERIOUSLY HARMED.
We use our own couriers to deliver products from our distribution center to
our local stations, and from the local stations to our customers. We are
therefore subject to the risks associated with our ability to provide delivery
services to meet our shipping needs, including potential labor activism or
employee strikes, inclement weather, disruptions in the transportation
infrastructure, including bridges, roads and traffic congestion. In addition,
our failure to deliver products to our customers in a timely and accurate manner
or to meet our targeted delivery times would harm our reputation and brand,
which would have a material adverse effect on our business and net sales.
OUR NET SALES WOULD BE HARMED IF OUR ONLINE SECURITY MEASURES FAIL.
Our relationships with our customers may be adversely affected if the
security measures that we use to protect their personal information, such as
credit card numbers, are ineffective. If, as a result, we lose many customers,
our net sales and results of operations would be harmed. We rely on security and
authentication technology to perform real-time credit card authorization and
verification with our bank. We cannot predict whether events or developments
will result in a compromise or breach of the technology we use to protect a
customer's personal information.
Furthermore, our computer servers may be vulnerable to computer viruses,
physical or electronic break-ins and similar disruptions. We may need to expend
significant additional capital and other resources to protect against a security
breach or to alleviate problems caused by any breaches. We cannot assure you
that we can prevent all security breaches, and any failure to do so could have a
material adverse effect on our reputation and results of operations.
THE LOSS OF THE SERVICES OF ONE OR MORE OF OUR KEY PERSONNEL, OR OUR FAILURE TO
ATTRACT, ASSIMILATE AND RETAIN OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE
WOULD SERIOUSLY HARM OUR BUSINESS.
The loss of the services of one or more of our key personnel could
seriously harm our business. We depend on the continued services and performance
of our senior management and other key personnel, particularly Louis H. Borders,
our founder and Chairman of the Board. Our future success also depends upon the
continued service of our executive officers and other key software development,
merchandising, marketing and support personnel. None of our officers or key
employees are bound by an employment agreement and our relationships with these
officers and key employees are at will. The "key person" life insurance policy
we currently hold for Mr. Borders expires in January 2000 and would not be
sufficient to compensate for the loss of his services. Additionally, there are
low levels of unemployment in the San Francisco Bay Area and in many of the
regions in which we
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plan to operate. These low levels of unemployment have led to pressure on wage
rates, which can make it more difficult and costly for us to attract and retain
qualified employees. The loss of key personnel, or the failure to attract
additional personnel, could have a material adverse effect on our business,
results of operations and performance in specific geographic markets.
SEVERAL KEY MEMBERS OF OUR MANAGEMENT TEAM HAVE ONLY RECENTLY JOINED US AND IF
THEY ARE NOT SUCCESSFULLY INTEGRATED INTO OUR BUSINESS OR FAIL TO WORK TOGETHER
AS A MANAGEMENT TEAM, OUR BUSINESS WILL SUFFER.
Several key members of our management team have joined us since August 1,
1999, including George T. Shaheen, our President and Chief Executive Officer,
and we expect to hire additional key personnel. If we do not effectively
integrate these employees into our business, or if they do not work together as
a management team to enable us to implement our business strategy, our business
will suffer.
WE MAY NEED TO CHANGE THE MANNER IN WHICH WE CONDUCT OUR BUSINESS IF GOVERNMENT
REGULATION OF THE INTERNET INCREASES OR IF REGULATION DIRECTED AT LARGE-SCALE
RETAIL OPERATIONS IS DEEMED APPLICABLE TO US.
The adoption or modification of laws or regulations relating to the
Internet and large-scale retail store operations could adversely affect the
manner in which we currently conduct our business. In addition, the growth and
development of the market for online commerce may lead to more stringent
consumer protection laws which may impose additional burdens on us. Laws and
regulations directly applicable to communications or commerce over the Internet
are becoming more prevalent. The United States government recently enacted
Internet laws regarding privacy, copyrights, taxation and the transmission of
sexually explicit material. The law of the Internet, however, remains largely
unsettled, even in areas where there has been some legislative action. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet. In
addition, the Governor of California recently vetoed legislation which would
have prohibited a public agency from authorizing retail store developments
exceeding 100,000 square feet if more than a small portion of the store were
devoted to the sale of non-taxable items, such as groceries. While it is not
clear whether our operations would be considered a retail store for purposes of
this kind of legislation, we cannot assure you that other state or local
governments will not seek to enact similar laws or that we would be successful
if forced to challenge the applicability of this kind of legislation to our
distribution facilities. The expenses associated with any challenge to this kind
of legislation could be material. If we are required to comply with new
regulations or legislation or new interpretations of existing regulations or
legislation, this compliance could cause us to incur additional expenses or
alter our business model.
WE MAY INCUR SIGNIFICANT COSTS OR EXPERIENCE PRODUCT AVAILABILITY DELAYS IN
COMPLYING WITH REGULATIONS APPLICABLE TO THE SALE OF FOOD PRODUCTS.
As of the date of this prospectus, we are not subject to regulation by the
United States Department of Agriculture, or USDA. Whether the handling of food
items in our distribution facility, such as meat and fish, will subject us to
USDA regulation in the future will depend on several factors, including whether
we sell food products on a wholesale basis or whether we obtain food products
from non-USDA inspected facilities. Although we have designed our food handling
operations to comply with USDA regulations, we cannot assure you that the USDA
will not require changes to our food handling operations. We will also be
required to comply with local health regulations concerning the preparation and
packaging of our prepared meals and other food items. Any applicable federal,
state or local regulations may cause us to incur substantial compliance costs or
delay the availability of a number of items at one or more of our distribution
centers. In addition, any inquiry or investigation from a food regulatory
authority could have a negative impact on our reputation. Any of these events
could have a material adverse effect on our business and expansion plans and
could cause us to lose customers.
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WE MAY NOT BE ABLE TO OBTAIN REQUIRED LICENSES OR PERMITS FOR THE SALE OF
ALCOHOL AND TOBACCO PRODUCTS IN A COST-EFFECTIVE MANNER OR AT ALL.
We will be required to obtain state licenses and permits for the sale of
alcohol and tobacco products in each location in which we seek to open a
distribution center. We cannot assure you that we will be able to obtain any
required permits or licenses in a timely manner, or at all. We may be forced to
incur substantial costs and experience significant delays in obtaining these
permits or licenses. In addition, the United States Congress is considering
enacting legislation which would restrict the interstate sale of alcoholic
beverages over the Internet. Changes to existing laws or our inability to obtain
required permits or licenses could prevent us from selling alcohol or tobacco
products in one or more of our geographic markets. Any of these events could
substantially harm our net sales, gross profit and ability to attract and retain
customers.
IN THE FUTURE WE MAY 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 storage or
handling. If any of the products that we sell 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 required to defend
ourselves against such a claim, our reputation could suffer and customers may
substantially reduce their orders or stop ordering from us.
OUR NET SALES WOULD BE HARMED IF WE EXPERIENCE SIGNIFICANT CREDIT CARD FRAUD.
A failure to adequately control fraudulent credit card transactions would
harm our net sales and results of operations because we do not carry insurance
against this risk. We may suffer losses as a result of orders placed with
fraudulent credit card data even though the associated financial institution
approved payment of the orders. Under current credit card practices, we are
liable for fraudulent credit card transactions because we do not obtain a
cardholder's signature. Because we have had an extremely short operating
history, we cannot predict our future levels of bad debt expense.
IF THE PROTECTION OF OUR TRADEMARKS AND PROPRIETARY RIGHTS IS INADEQUATE, OUR
BUSINESS MAY BE SERIOUSLY HARMED.
We regard patent rights, copyrights, service marks, trademarks, trade
secrets and similar intellectual property as important to our success. We rely
on patent, trademark and copyright law, trade secret protection and
confidentiality or license agreements with our employees, customers, partners
and others to protect our proprietary rights; however, the steps we take to
protect our proprietary rights may be inadequate. We currently have no patents.
We have filed, and from time to time expect to file, patent applications
directed to aspects of our proprietary technology. We cannot assure you that any
of these applications will be approved, that any issued patents will protect our
intellectual property or that any issued patents will not be challenged by third
parties. In addition, other parties may independently develop similar or
competing technology or design around any patents that may be issued to us. Our
failure to protect our proprietary rights could materially adversely affect our
business and competitive position.
INTELLECTUAL PROPERTY CLAIMS AGAINST US CAN BE COSTLY AND COULD RESULT IN THE
LOSS OF SIGNIFICANT RIGHTS.
Patent, trademark and other intellectual property rights are becoming
increasingly important to us and other e-commerce vendors. Many companies are
devoting significant resources to developing patents that could affect many
aspects of our business. Other parties may assert infringement or unfair
competition claims against us that could relate to any aspect of our
technologies, business processes or other intellectual property. We cannot
predict whether third parties will assert claims of infringement against us, the
subject matter of any of these claims, or whether these assertions or
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prosecutions will harm our business. If we are forced to defend ourselves
against any of these claims, whether they are with or without merit or are
determined in our favor, then we may face costly litigation, diversion of
technical and management personnel, inability to use our current web site
technology, or product shipment delays. As a result of a dispute, we may have to
develop non-infringing technology or enter into royalty or licensing agreements.
These royalty or licensing agreements, if required, may be unavailable on terms
acceptable to us, or at all. If there is a successful claim of patent
infringement against us and we are unable to develop non-infringing technology
or license the infringed or similar technology on a timely basis, our business
and competitive position may be materially adversely affected.
ANY DEFICIENCIES IN OUR SYSTEMS OR THE SYSTEMS OF THIRD PARTIES ON WHICH WE RELY
COULD ADVERSELY AFFECT OUR BUSINESS AND RESULT IN A LOSS OF CUSTOMERS.
Our Webstore has experienced in the past and may experience in the future
slower response times or disruptions in service for a variety of reasons
including failures or interruptions in our systems. In addition, our users
depend on Internet service providers, online service providers and other web
site operators for access to our Webstore. Many of them have experienced
significant outages in the past and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. Moreover, the
Internet infrastructure may not be able to support continued growth in its use.
Any of these problems could have a material adverse effect on our business and
could result in a loss of customers.
Our communications hardware and certain of our other computer hardware
operations are located at the facilities of Exodus Communications, Inc. in Santa
Clara, California. The hardware for our warehouse management and materials
handling systems is maintained in our Oakland, California distribution center.
Fires, floods, earthquakes, power losses, telecommunications failures, break-ins
and similar events could damage these systems or cause them to fail completely.
For instance, a power failure in October 1999 at the facilities of Exodus caused
our Webstore to be inaccessible for approximately two hours. Computer viruses,
electronic break-ins or other similar disruptive problems could also adversely
affect our Webstore. Our business could be adversely affected if our systems
were affected by any of these occurrences. Problems faced by Exodus, with the
telecommunications network providers with whom it contracts or with the systems
by which it allocates capacity among its customers, including Webvan, could
adversely impact the customer shopping experience and consequently, our
business. Our insurance policies may not adequately compensate us for any losses
that may occur due to any failures or interruptions in our systems.
WE MAY BE ADVERSELY IMPACTED IF THE SOFTWARE, COMPUTER TECHNOLOGY AND OTHER
SYSTEMS WE USE ARE NOT YEAR 2000 COMPLIANT.
Any failure of our material systems, our vendors' material systems or the
Internet to be year 2000 compliant would have material adverse consequences for
us. These consequences would include difficulties in operating our Webstore
effectively, taking product orders, making product deliveries or conducting
other fundamental parts of our business. We also depend on the year 2000
compliance of the computer systems and financial services used by consumers. We
are in the process of developing remediation and contingency plans as part of
our year 2000 initiative program, based on an inventory and risk assessment of
our critical assets and third party systems. We expect to complete this
assessment and the development of these plans by the end of October 1999. Exodus
Communications, which hosts our web servers, has informed us that their internal
systems are year 2000 compliant. However, Exodus has not assured us as to the
year 2000 compliance of the third party systems and software upon which they
depend. We have not yet determined the costs of developing and implementing
these plans, and these costs may be material. A significant disruption in the
ability of consumers to reliably access the Internet, especially our Webstore,
or to use their credit cards would have an adverse effect on our operations and
demand for our services.
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WE MAY BE SUBJECT TO LIABILITY FOR THE INTERNET CONTENT THAT WE PUBLISH.
As a publisher of online content, we face potential liability for
negligence, copyright, patent or trademark infringement, or other claims based
on the nature and content of materials that we publish or distribute. If we face
liability, particularly liability that is not covered by our insurance or is in
excess of our insurance coverage, then our reputation and our business may
suffer. In the past, plaintiffs have brought these types of claims and sometimes
successfully litigated them against online services. We cannot assure you that
we are adequately insured to cover claims of these types or to indemnify us for
all liability that may be imposed on us.
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL EXERCISE SIGNIFICANT
CONTROL OVER WEBVAN.
As of October 20, 1999, our executive officers and directors and their
immediate family members and affiliated venture capital funds beneficially
owned, in the aggregate, approximately 60.5% of our outstanding common stock,
assuming conversion of all preferred stock into common stock. As a result, these
stockholders are able to exercise significant control over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions, which could delay or prevent someone from
acquiring or merging with us. See "Principal Stockholders".
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE US DUE TO ANTI-TAKEOVER
PROVISIONS.
Our charter documents authorize 10,000,000 shares of undesignated preferred
stock, create a classified board of directors, eliminate the right of
stockholders to call a special meeting of stockholders, require stockholders to
comply with advance notice requirements before raising a matter at a meeting of
stockholders, eliminate the ability of stockholders to take action by written
consent and eliminate the ability of stockholders to cumulate votes in the
election of directors. As a Delaware corporation, we are also subject to the
Delaware antitakeover statute contained in Section 203 of the Delaware General
Corporation Law. These provisions could make it more difficult for a third party
to acquire us, even if doing so would be beneficial to our stockholders. See
"Description of Capital Stock".
OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE FOLLOWING THIS OFFERING.
The stock market has experienced significant price and volume fluctuations,
and the market prices of technology companies, particularly consumer-oriented
Internet-related companies, have been highly volatile. You may not be able to
resell your shares at or above the initial public offering price. The price at
which our common stock will trade after this offering is likely to be volatile
and may fluctuate substantially due to factors such as:
- our historical and anticipated quarterly and annual operating results;
- variations between our actual results and the expectations of investors
or published reports or analyses of Webvan;
- announcements by us or others and developments affecting our business,
systems or expansion plans; and
- conditions and trends in e-commerce industries, particularly the online
grocery industry.
In the past, securities class action litigation has often been instituted
against companies following periods of volatility in the market price of their
securities. This type of litigation could result in substantial costs and a
diversion of management's attention and resources.
FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.
If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could decline. Based on shares outstanding as of October 20, 1999, upon
completion of this offering we will have outstanding 321,845,386 shares of
common stock, assuming no exercise of the underwriters' over-allotment option.
Of these shares, the 25,000,000 shares of our common stock sold in this offering
will be freely tradeable, without
17
<PAGE> 20
restriction, in the public market. Our directors, officers and stockholders have
entered into lock-up agreements in connection with this offering generally
providing that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of our common stock or any securities
exercisable for or convertible into our common stock without the prior written
consent of Goldman, Sachs & Co. According to the lock-up agreements, at any time
beginning on the third day following the public release of our earnings for the
year ended December 31, 1999, each stockholder may offer, sell, transfer,
assign, pledge or otherwise dispose of up to 15% of his or her shares owned as
of December 31, 1999; and at any time beginning on the 48th day following the
public release of our earnings for the year ended December 31, 1999, each
stockholder may offer, sell, transfer, assign, pledge or otherwise dispose of an
additional 25% of his or her shares owned as of December 31, 1999. The lock-up
restrictions will expire as to the remaining shares on the date which is 180
days after the date of this prospectus. As a result, a substantial number of
shares of our common stock will be eligible for sale in the public market prior
to the expiration of the customary 180-day lock-up period following an initial
public offering.
In addition, approximately 70.7 million shares under outstanding options
and warrants and approximately 10.0 million shares reserved for future issuance
under our stock option plans as of October 20, 1999 will be eligible for sale in
the public market subject to vesting, the expiration of lock-up agreements and
restrictions imposed under Rules 144 and 701 under the Securities Act. See
"Shares Eligible for Future Sale".
18
<PAGE> 21
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are subject to a
number of risks and uncertainties, many of which are beyond our control. All
statements, other than statements of historical facts included in this
prospectus, regarding our strategy, future operations, financial position,
estimated revenues or losses, projected costs, prospects, plans and objectives
of management are forward-looking statements. When used in this prospectus, the
words "will", "believe", "anticipate", "intend", "estimate", "expect", "project"
and similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such identifying words. All
forward-looking statements speak only as of the date of this prospectus. You
should not place undue reliance on these forward-looking statements. Although we
believe that our plans, intentions and expectations reflected in or suggested by
the forward-looking statements we make in this prospectus are reasonable, we can
give no assurance that these plans, intentions or expectations will be achieved.
We disclose important factors that could cause our actual results to differ
materially from our expectations under "Risk Factors" and elsewhere in this
prospectus. These cautionary statements qualify all forward-looking statements
attributable to us or persons acting on our behalf.
19
<PAGE> 22
USE OF PROCEEDS
The net proceeds we receive from the sale of the common stock offered
hereby will be approximately $280.6 million, based on an assumed initial public
offering price of $12.00 per share and after deducting the underwriters'
discounts and commissions and expenses payable by us estimated at $1.4 million.
We expect to use the net proceeds from this offering principally to fund the
construction of and equipment for distribution centers in other geographic
markets at an estimated cost of $25.0 million to $35.0 million per distribution
center. Our contract with Bechtel Corporation contemplates the construction of
up to 26 additional distribution centers over the next three years. The cost of
constructing and equipping 26 additional distribution centers is currently
estimated at from $650 million to over $900 million. At June 30, 1999, our cash
and cash equivalents were approximately $577.3 million after including the
expected net proceeds from the shares sold in this offering. Thus, the
completion of 26 additional distribution centers would require us to generate
cash flow from operations or to sell additional debt or equity securities or
obtain a line of credit. If such funds are not available when needed or if the
cost of these distribution centers exceeds our current estimates, we could also
be forced to curtail our expansion plans. The number and timing of opening of
new distribution centers are subject to considerable uncertainty due to a number
of factors, including the following:
- the availability of appropriate and affordable sites that can accommodate
our distribution centers;
- our ability to successfully and cost-effectively hire and train qualified
employees to operate new distribution centers;
- our ability to develop relationships with local and regional
distributors, vendors and other product providers;
- acceptance of our product and service offerings; and
- competition.
We also expect to use the proceeds for general corporate purposes,
including working capital and funding of our expected operating losses. We may
use a portion of the net proceeds to pursue possible acquisitions of
complementary businesses, technologies or products; however, we have no present
understandings, commitments or agreements with respect to any such transactions,
and we have not identified the nature of any such businesses, technologies or
products. Pending use of such net proceeds for the above purposes, we intend to
invest such funds in short-term interest-bearing investment-grade securities.
DIVIDEND POLICY
We have not paid any dividends since our inception and do not intend to pay
any dividends on our capital stock in the foreseeable future.
20
<PAGE> 23
CAPITALIZATION
The following table sets forth our cash and equivalents and capitalization
as of June 30, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to the closing of the sale of an
aggregate of 21,670,605 shares of our Series D-2 preferred stock in July
and August 1999 for approximately $275.0 million and the conversion of
each outstanding share of preferred stock into one share of common stock
upon the closing of this offering; and
- on a pro forma basis as adjusted for this offering at an assumed initial
public offering price of $12.00 per share and application of the net
proceeds therefrom. You should read this table in conjunction with our
consolidated financial statements and the notes to those statements
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash and equivalents........................................ $ 21,836 $296,736 $577,336
======== ======== ========
Capital lease obligations, net of current portion........... 2,137 2,137 2,137
-------- -------- --------
Long term debt, net of current portion...................... 11,811 11,811 11,811
-------- -------- --------
Redeemable common stock..................................... 1,556 1,556 1,556
Shareholders' equity:
Convertible preferred stock:
Series A preferred stock, no par value; 112,635,168
shares authorized actual, no shares authorized pro
forma and pro forma as adjusted; 112,635,168 shares
issued and outstanding actual, no shares issued and
outstanding pro forma and pro forma as adjusted...... 10,759 -- --
Series B preferred stock, no par value; 41,814,000
shares authorized actual, 2,700,696 shares authorized
pro forma, no shares authorized pro forma as
adjusted; 39,113,304 shares issued and outstanding
actual, no shares issued and outstanding pro forma
and pro forma as adjusted(1)......................... 34,834 -- --
Series C preferred stock, no par value; 34,601,616
shares authorized actual, 2,260,416 shares authorized
pro forma, no shares authorized pro forma as
adjusted; 32,341,200 shares issued and outstanding
actual, no shares issued and outstanding pro forma
and pro forma as adjusted(2)......................... 72,776 -- --
Series D preferred stock, no par value; no shares
authorized actual, 29,550,831 shares authorized, pro
forma, no shares authorized pro forma as adjusted; no
shares issued and outstanding actual, pro forma and
pro forma as adjusted(3)............................. -- -- --
Preferred stock; no shares authorized actual and pro
forma, 10,000,000 shares authorized pro forma as
adjusted; no shares issued and outstanding actual, pro
forma and pro forma as adjusted........................ -- -- --
Common stock; 450,000,000 shares authorized actual and pro
forma, 800,000,000 shares authorized pro forma as
adjusted; 81,908,562 shares issued and outstanding
actual, 287,668,839 shares issued and outstanding pro
forma, 312,668,839 shares issued and outstanding pro
forma as adjusted(4)................................... 31,251 424,520 705,120
Additional paid-in capital................................ 3,829 3,829 3,829
Deferred compensation....................................... (23,790) (23,790) (23,790)
Accumulated deficit......................................... (49,978) (49,978) (49,978)
Accumulated other comprehensive income (loss)............... (55) (55) (55)
-------- -------- --------
Total shareholders' equity........................ 79,626 354,526 635,126
-------- -------- --------
Total capitalization.............................. $ 95,130 $370,030 $650,630
======== ======== ========
</TABLE>
21
<PAGE> 24
- -------------------------
(1) Excludes warrants to purchase an aggregate of 2,397,804 shares of Series B
preferred stock at a weighted average exercise price of $0.91 per share.
(2) Excludes (a) options to purchase 430,416 shares of Series C preferred stock
at an exercise price of $2.32 per share as of March 31, 1999, (b) a warrant
to purchase up to 1,650,000 shares of our Series C preferred stock at an
exercise price of $2.32 per share issued in June 1999 and (c) 150,000 shares
of our Series C preferred stock issued upon exercise of warrants in
September 1999.
(3) On July 19, 1999, we authorized 25,610,718 shares of Series D-1 preferred
stock and 25,610,718 shares of Series D-2 preferred stock. In July and
August 1999, we issued 21,670,605 shares of Series D-2 preferred stock. Each
of these shares will automatically convert into one share of common stock
immediately prior to the closing of this offering. No shares of Series D-1
preferred stock are issued and outstanding, actual, pro forma and pro forma
as adjusted.
(4) Excludes 102,500,000 shares of common stock authorized for issuance under
our stock option plans, of which 67,657,816 shares at a weighted average
exercise price of $3.53 per share were subject to outstanding options as of
October 20, 1999.
22
<PAGE> 25
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$354.4 million or $1.21 per share. Our pro forma net tangible book value per
share as of June 30, 1999 represents the amount of our total tangible assets
reduced by the amount of our total liabilities and divided by the total number
of shares of common stock outstanding including redeemable common stock and
after giving effect to the issuance of 21,670,605 shares of Series D preferred
stock in July and August 1999 and the automatic conversion of all outstanding
shares of our preferred stock. Dilution per share represents the difference
between the amount per share paid by investors of shares of common stock in this
offering and the pro forma net tangible book value per share of common stock
immediately after the completion of this offering. After giving effect to the
sale of the 25,000,000 shares of common stock offered by us at an assumed
initial public offering price of $12.00 per share, and after deducting the
underwriting discount and estimated offering expenses payable by us, our pro
forma as adjusted net tangible book value at June 30, 1999 would have been
approximately $635.0 million or $2.03 per share of common stock. This represents
an immediate increase in net tangible book value of $0.82 per share to existing
stockholders and an immediate dilution of $9.97 per share to new investors of
common stock. The following table illustrates this dilution on a per share
basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $12.00
Pro forma net tangible book value per share as of June 30,
1999................................................... $1.21
Increase per share attributable to new investors.......... 0.82
-----
Pro forma as adjusted net tangible book value per share
after the offering........................................ 2.03
------
Dilution per share to new investors......................... $ 9.97
======
</TABLE>
The following table summarizes on a pro forma as adjusted basis after
giving effect to the offering, as of June 30, 1999, the differences between the
existing stockholders and new investors with respect to the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid at an assumed initial public offering price of
$12.00 per share, and after deducting the underwriting discount and estimated
offering expenses payable by us:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 292,453,839 92.1% $429,464,000 58.9% $ 1.47
New investors................. 25,000,000 7.9 300,000,000 41.1 $12.00
----------- ----- ------------ -----
Totals........................ 317,453,839 100.0% $729,464,000 100.0%
=========== ===== ============ =====
</TABLE>
In the preceding tables, the shares of common stock outstanding exclude:
- 102,500,000 shares of common stock authorized for issuance under our
stock option plans, of which 67,657,816 shares at a weighted average
exercise price of $3.53 were subject to outstanding options as of
October 20, 1999; and
- 4,059,804 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $1.49 as of October
20, 1999.
To the extent outstanding options and warrants are exercised, there will be
further dilution to new investors.
23
<PAGE> 26
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial data in
conjunction with our consolidated financial statements and the notes to those
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing elsewhere in this prospectus. The consolidated
statement of operations data for the period from inception through December 31,
1997 and for the year ended December 31, 1998, and the consolidated balance
sheet data as of December 31, 1997 and 1998 are derived from, and are qualified
by reference to, the audited consolidated financial statements and the notes to
those statements included in this prospectus that have been audited by Deloitte
& Touche LLP. The consolidated statement of operations data for the six months
ended June 30, 1998 and 1999, and the consolidated balance sheet data at June
30, 1999 are derived from unaudited consolidated financial statements that
include, in the opinion of our management, all adjustments, consisting of only
normal, recurring adjustments, necessary for a fair presentation of the
information set forth therein. The consolidated results of operations for the
six months ended June 30, 1999 are not necessarily indicative of future results.
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 17,
1996 SIX MONTHS
(INCEPTION) TO YEAR ENDED ENDED JUNE 30,
DECEMBER 31, DECEMBER 31, ---------------------------
1997 1998 1998 1999
CONSOLIDATED STATEMENTS OF --------------- ------------ ----------- ------------
OPERATIONS DATA: (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales.......................................... $ -- $ -- $ -- $ 395
Cost of goods sold................................. -- -- -- 419
----------- ------------ ----------- ------------
Gross profit (loss).............................. -- -- -- (24)
Operating expenses:
Software development............................. 244 3,010 765 6,308
General and administrative....................... 2,612 8,825 2,739 25,296
Amortization of deferred stock compensation...... -- 1,060 43 3,953
----------- ------------ ----------- ------------
Total operating expenses....................... 2,856 12,895 3,547 35,557
----------- ------------ ----------- ------------
Interest income.................................... 85 923 285 1,641
Interest expense................................... 69 32 -- 1,194
----------- ------------ ----------- ------------
Net interest income.............................. 16 891 285 447
----------- ------------ ----------- ------------
Net loss........................................... $ (2,840) $ (12,004) $ (3,262) $ (35,134)
=========== ============ =========== ============
Basic and diluted net loss per share............... $ (0.08) $ (0.18) $ (0.05) $ (0.48)
=========== ============ =========== ============
Shares used in calculating basic and diluted net
loss per share................................... 37,406,785 67,114,048 65,075,326 73,280,388
=========== ============ =========== ============
Pro forma basic and diluted net loss per
share(1)......................................... $ (0.06) $ (0.14)
============ ============
Shares used in calculating pro forma basic and
diluted net loss per share(1).................... 201,978,419 253,743,194
============ ============
OTHER OPERATING DATA:
Capital expenditures............................... $ 265 $ 32,669 $ 4,283 $ 25,948
Depreciation and amortization...................... 57 1,323 93 6,626
</TABLE>
- ------------------------
(1) See Note 1 of Notes to Consolidated Financial Statements.
The following table provides a consolidated summary of our balance sheet.
The Pro Forma column reflects the closing of the sale of 21,670,605 shares of
our Series D-2 preferred stock in July and August 1999 for approximately $275.0
million and the conversion of all outstanding shares of preferred stock into
common stock immediately prior to the closing of this offering. The Pro Forma As
Adjusted column reflects the Pro Forma adjustments as well as the issuance of
the common stock in this offering at an assumed initial public offering price of
$12.00 per share.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1999
---------------- ------------------------------------
PRO FORMA
1997 1998 ACTUAL PRO FORMA AS ADJUSTED
------ ------- -------- --------- -----------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and equivalents....................................... $2,935 $13,839 $ 21,836 $296,736 $577,336
Working capital............................................ 7,693 10,923 31,773 306,673 587,273
Total assets............................................... 8,279 60,009 112,429 387,329 667,929
Long-term liabilities...................................... 17 14,337 14,216 14,216 14,216
Total shareholder's equity................................. 7,972 33,612 79,626 354,526 635,126
</TABLE>
24
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for historical information, the discussion in this prospectus
contains forward-looking statements that involve risks and uncertainties.
Webvan's actual results could differ materially from those discussed in this
prospectus. Factors that could cause or contribute to these differences include,
but are not limited to, the risks discussed in the section entitled "Risk
Factors" in this prospectus.
OVERVIEW
Webvan is an Internet retailer offering same-day delivery of consumer
products through an innovative proprietary business design which integrates our
Webstore, distribution center and delivery system. Our current product offerings
are principally focused on food, non-prescription drug products and general
merchandise.
We were incorporated in December 1996 as Intelligent Systems for Retail,
Inc. In April 1999, we changed our name to Webvan Group, Inc. We commenced our
grocery delivery service in May 1999 on a test basis to approximately 1,100
persons and commercially launched our Webstore on June 2, 1999. For the period
from inception to June 1999, our primary activities consisted of raising
capital, recruiting and training employees, developing our business strategy,
designing a business system to implement our strategy, constructing and
equipping our first distribution center and developing relationships with
vendors. Since launching our service, we have continued these operating
activities and have also focused on building sales momentum, establishing
additional vendor relationships, promoting our brand name and enhancing our
distribution, delivery and customer service operations. Our cost of sales and
operating expenses have increased significantly since inception and are expected
to continue to increase. This trend reflects the costs associated with our
formation as well as increased efforts to promote the Webvan brand, build market
awareness, attract new customers, recruit personnel, build our operating systems
and develop our Webstore and associated systems that we use to process
customers' orders and payments.
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets. These
risks for Webvan include an unproven business system and our ability to
successfully manage our growth. To address these risks, we must:
- develop and increase our customer base;
- implement and successfully execute our business and marketing strategy;
- continue to develop, test, increase the capacity of and enhance our
Webstore, order fulfillment, transaction processing and delivery systems;
- respond to competitive developments; and
- attract, retain and motivate quality personnel.
Since our inception, we have incurred significant losses, and as of June
30, 1999, we had an accumulated deficit of $50.0 million. Our initial
distribution center in Oakland, California is currently operating at less than
20% of the capacity for which it was designed. We do not expect any of our
distribution centers to operate at designed capacity for several years following
their commercial launch, and we cannot assure you that any distribution center
will ever operate at or near its designed capacity. Since the commercial launch
of our Webstore on June 2, 1999, we have delivered orders to over 21,000
separate customers which generated approximately $4.3 million in net sales
through September 30, 1999. During that period, over 62% of our orders were from
customers who had previously used our service and our average order size was
approximately $71.00. From August 31, 1999 through September 17, 1999, our
average order size was approximately $80.00. We expect our average order size
and number of orders processed to fluctuate from time to time and there can be
no assurance that it will not decline significantly in future periods. Based on
an average order size of $80.00 and an average of 1,200 orders per day, our
distribution center would generate annual
25
<PAGE> 28
revenues of approximately $35 million if it operated seven days per week. Our
distribution center currently operates five days per week. During June and July
1999, our repeat customers ordered on average every 6 days, and from our
commercial launch through September 30, 1999, our repeat customers ordered on
average every 10 days. As a result of the potential advantages of our business
model compared to traditional supermarkets, we estimate that if our distribution
center is able to operate at its designed capacity of 8,000 orders per day seven
days per week and at an average order size of $103.00 per order, we can achieve
an operating margin of 12% compared to a 4% operating margin for a traditional
supermarket based on our analysis of publicly available data. However, we cannot
assure you that we will be able to achieve 8,000 orders per day at an average
order size of $103.00 or that we will be able to operate seven days per week,
and any failure to do so will result in lower operating margins. From our
commercial launch on June 2, 1999 through September 30, 1999, our average
customer order included over 20 items. In light of our extremely limited
operating history, and the daily and weekly fluctuations in our operating data
since our commercial launch, we believe the most meaningful operating data,
including data for average order size, is the cumulative data since our
commercial launch.
If a distribution center is able to successfully operate at the volume and
cost levels expected to be reached by a distribution center at the end of the
first year of operation, we expect that our annualized earnings before interest,
taxes, depreciation and amortization for that distribution center, viewed as a
stand-alone business unit without regard to headquarters' costs, would be
positive and the distribution center would start to generate significant cash
flow beginning in the fifth quarter of operations. As a result, we believe that
our core business of operating distribution centers is highly cash generative.
If a distribution center is able to generate positive cash flow from operations,
we plan to use the cash flow to fund capital expenditures for other distribution
centers. If a distribution center is able to operate successfully at volumes and
costs expected to be reached through the end of the third year of operation, we
expect that the annualized earnings before interest, taxes, depreciation and
amortization for that distribution center, viewed as a stand-alone business unit
without regard to headquarters' costs, from its launch through the end of that
three-year period, would approximate the expected costs of constructing and
equipping such distribution center. We cannot assure you that our distribution
centers will be able to successfully operate at expected volume or cost levels.
We believe that our success and our ability to achieve profitability at a
distribution center will depend on our ability to:
- substantially increase the number of customers and our average order
size;
- ensure that our technologies and systems function properly at increased
order volumes;
- realize repeat orders from a significant number of customers;
- achieve favorable gross and operating margins; and
- rapidly expand and build out distribution centers in new markets.
To meet these challenges, we intend to continue to invest heavily in
marketing and promotion, distribution facilities and equipment, technology and
personnel. As a result, we expect to incur substantial operating losses for the
foreseeable future and the rate at which such losses will be incurred may
increase significantly from current levels. In addition, our limited operating
history makes the prediction of future results of operations difficult, and
accordingly, we cannot assure you that we will achieve or sustain revenue growth
or profitability.
In connection with the grant of stock options during 1998 and the first six
months of 1999, we recorded deferred compensation of $11.8 million and $17.0
million and compensation expense of $1.1 million and $4.0 million, respectively,
representing the difference between the deemed fair value and the option
exercise price as determined by our Board of Directors on the date of grant. In
connection with the grant of options in the third quarter of 1999, we recorded
additional deferred compensation of $46.6 million. Additionally, in connection
with the terms of employment entered into with George T. Shaheen, in September
1999 we will record immediate compensation for stock and
26
<PAGE> 29
options grants of approximately $27.0 million and deferred compensation of
approximately $48.0 million. The aggregate deferred compensation of $123.7
million is being amortized over the four-year vesting period of the underlying
options and will result in compensation expense of approximately $9.7 million in
the quarter ended September 30, 1999.
In connection with the issuance of an option to purchase 150,000 shares of
common stock to Yahoo! Inc. in July 1999 at a price of $3.33 per share, we will
record expense based on changes in the fair value of the stock using an option
pricing model and such expense will be charged as Mr. Koogle serves as a
director of Webvan.
In connection with the warrant issued to Bechtel to purchase 1,800,000
shares of Series C preferred stock at an exercise price of $2.32 per share, the
cost of services provided by Bechtel will include recognition of the changes in
the fair value of the warrant using an option pricing model and following the
applicable accounting guidelines in Emerging Issues Task Force Issue No. 96-18,
or EITF 96-18, "Accounting for Equity Instruments That are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services".
Under EITF 96-18, the measurement date for the warrant is July 8, 1999 as that
is the performance commitment date. As of July 8, 1999, we will capitalize the
fair value of the warrant related to 150,000 exercisable shares as deferred
stock-based compensation and will amortize such amount over a five-year period
corresponding to the exclusivity clause of the agreement with Bechtel. No amount
will be capitalized as of that date for the fair value of the warrant related to
the non-exercisable shares, as eventual exercisability is dependent on Bechtel's
performance. Any amounts capitalized based on Bechtel's future performance will
be amortized over the useful life of the distribution centers developed by
Bechtel. If and when the warrant becomes exercisable as to additional shares,
based on Bechtel's performance, we will capitalize additional cost based on the
then fair value of the warrant related to the additional exercisable shares.
RESULTS OF OPERATIONS
FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1998
NET SALES
Net sales are comprised of the price of groceries and other products we
sell, net of returns and credits. We commenced our grocery delivery service in
May 1999 and commercially launched our Webstore in June 1999. We therefore did
not generate any net sales in 1997 or 1998. We recognize revenue at the time our
products are delivered to customers.
COST OF GOODS SOLD
Cost of goods sold includes the cost of the groceries and other products we
sell as well as payroll and related expenses for the preparation of our home
replacement meals. We did not have any cost of goods sold in 1997 or 1998.
OPERATING EXPENSES
SOFTWARE DEVELOPMENT. Software development expenses include the payroll and
related costs for the team of software developers directly involved in
programming our computer systems. Software development expenses increased to
$3.0 million in 1998 from $0.2 million for the period from inception through
1997. This increase was primarily attributable to increased staffing,
consultants and associated costs related to creating and enhancing the features
and functionality of our Webstore, and implementing our order fulfillment,
inventory, distribution, accounting and delivery systems used to process
customer orders. Costs have been capitalized in accordance with Statement of
Position 98-1 "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" where appropriate. We believe that continued
investment in software development is critical to
27
<PAGE> 30
attaining our strategic objectives and, as a result, expect software development
expenses to increase significantly in future quarters.
GENERAL AND ADMINISTRATIVE. General and administrative expenses include
costs related to fulfillment and delivery of products, real estate, technology
operations, equipment leases, merchandising, finance, marketing, and
professional services. General and administrative expenses increased to $8.8
million in 1998 from $2.6 million for the period from inception through 1997.
The payroll expense for general and administrative functions increased by $3.2
million due to an increase in headcount. Consulting and professional expenses
increased by $0.8 million, primarily related to marketing. In addition, rent and
facility charges increased by $1.1 million due to the addition of corporate
office space and the distribution center in Oakland, California. We expect
general and administrative expenses to increase as we expand our staff and incur
additional costs to support the expected growth of our business.
INTEREST INCOME (EXPENSE), NET
Interest income (expense), net consists of earnings on our cash and cash
equivalents and interest payments on our loan and lease agreements. Net interest
income increased to $891,000 in 1998 from $16,000 in the period from inception
through 1997. This increase was primarily attributable to earnings on higher
average cash and cash equivalent balances during 1998.
SIX MONTHS ENDED JUNE 30, 1998 AND 1999
NET SALES
We commenced our grocery delivery service in May 1999 on a test basis to
approximately 1,100 customers and commercially launched our Webstore in June
1999. We did not have any net sales in the six months ended June 30, 1998. We
had net sales of $395,000 in the six months ended June 30, 1999.
COST OF GOODS SOLD
We did not have any cost of goods sold in the six months ended June 30,
1998. Our cost of goods sold was $419,000 in the six months ended June 30, 1999.
OPERATING EXPENSES
SOFTWARE DEVELOPMENT. Software development expenses increased to $6.3
million in the six months ended June 30, 1999 from $0.8 million in the six
months ended June 30, 1998. This increase was primarily attributable to $1.9
million for increased staffing and $3.4 million for consultants related to
enhancing the features, content and functionality of our Webstore and increasing
the capacity of our order processing, distribution center and delivery systems.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
to $25.3 million for the six months ended June 30, 1999 from $2.7 million for
the six months ended June 30, 1998. General and administrative expenses
pertaining to our distribution center in the six months ended June 30, 1999
totalled $9.9 million, as compared to zero in the six months ended June 30,
1998. Payroll and related expenses increased by $7.2 million due to increased
staffing at headquarters. Consulting and professional fees related to logistical
and marketing development increased by $1.3 million. Rent and facility charges
increased by $0.8 million due to additional corporate office space.
INTEREST INCOME (EXPENSE) NET
Net interest income increased to $447,000 in the six months ended June 30,
1999 from $285,000 in the six months ended June 30, 1998 primarily due to
earnings on higher average cash and cash equivalent balances.
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LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of preferred stock which through June 30, 1999 totaled $118.3 million (net
of issuance costs). Net cash used in operating activities was $22.6 million in
the six months ended June 30, 1999, $2.2 million in the year ended December 31,
1998, and $2.4 million in the period from inception through 1997. Net cash used
in operating activities for each of these periods primarily consisted of net
losses as well as increases in prepaid expenses, partially offset by increases
in accounts payable, accrued liabilities and depreciation and amortization. The
significant increase in working capital during 1998 was primarily due to
proceeds from the sale of our preferred stock. Net cash used in investing
activities was $42.7 million in the six months ended June 30, 1999, $39.0
million in the year ended December 31, 1998, and $5.3 million in the period from
inception through December 31, 1997. Net cash used in investing activities for
each of these periods primarily consisted of leasehold improvements and
purchases of equipment and systems, including computer equipment and fixtures
and furniture. Net cash provided by financing activities was $73.3 million in
the six months ended June 30, 1999, $52.1 million in the year ended December 31,
1998, and $10.7 million in the period from inception through 1997. Net cash
provided by financing activities during the six months ended June 30, 1999 and
the year ended December 31, 1998 primarily consisted of proceeds from the
issuance of preferred stock of $72.8 million and $34.8 million, respectively. As
of June 30, 1999, we had $21.8 million of cash and equivalents.
In July 1999, we entered into a preferred stock purchase agreement whereby
we sold an aggregate of 21,670,605 shares of our Series D-2 preferred stock to
investors at a price of $12.69 per share for an aggregate purchase price of
approximately $275.0 million.
As of June 30, 1999, our principal commitments consisted of obligations of
approximately $18.2 million outstanding under capital leases and loans. As of
June 30, 1999, we had capital commitments of approximately $20.0 million
principally related to the construction of and equipment for our Atlanta,
Georgia distribution center. We anticipate capital expenditures of up to $150
million for the 12 months ending June 30, 2000. We anticipate a substantial
increase in our capital expenditures and lease commitments to support our
anticipated growth in operations, systems and personnel. The launch of each
distribution center will require us to commit to additional lease obligations
and to purchase equipment and install leasehold improvements.
In July 1999, we entered into an agreement with Bechtel for the
construction of up to 26 additional distribution centers over the next three
years. Although the Company has no specific capital commitment under this
agreement, our expenditures under the contract are estimated to be approximately
$1.0 billion.
We currently anticipate that the net proceeds of this offering, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital and capital expenditures through the next 12 to 24 months. We
believe that without the proceeds from this offering, we could continue to fund
our operations for the next 12 months, although our expansion plans would have
to be slowed down or scaled back. Our future long-term capital needs will be
highly dependent on the number of additional distribution centers we open, the
timing of these openings and the success of these facilities once they are
launched. Thus, any projections of future long-term cash needs and cash flows
are subject to substantial uncertainty. If the net proceeds of this offering,
together with our available funds and cash generated from operations are
insufficient to satisfy our long-term liquidity requirements, we may seek to
sell additional equity or debt securities, obtain a line of credit or curtail
our expansion plans. However, the terms of our guaranty of our subsidiary's
credit facility contain restrictions on our ability to incur debt or issue
equity securities. In addition, if we issue additional securities to raise
funds, those securities may have rights, preferences or privileges senior to
those of the rights of our common stock and our stockholders may experience
additional dilution. We cannot be certain that additional financing will be
available to us on favorable terms when required, or at all.
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YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year.
These programs were designed and developed without addressing the impact of the
upcoming change in the century. If not corrected, many computer software
applications could fail or create erroneous results by, at or beyond the year
2000. We use software, computer technology and other services internally
developed and provided by third-party vendors that may fail due to the year 2000
phenomenon. For example, we are dependent on the financial institutions involved
in processing our customers' credit card payments for Internet services and a
third party that hosts our servers. We are also dependent on telecommunications
vendors to maintain our communications network and suppliers to deliver products
to us.
Since inception, we have internally developed substantially all of the
systems for the operation of our web site. These systems include the software
used to provide our Webstore's search, customer interaction, and
transaction-processing and distribution functions, as well as monitoring and
back-up capabilities. Based upon our assessment to date, we believe that our
internally developed proprietary software is year 2000 compliant, but we cannot
assure you that unanticipated year 2000 problems will not occur.
We are currently assessing the year 2000 readiness of our third-party
supplied software, computer technology and other services, which include
software for use in our accounting, database and security systems. The failure
of any software or systems upon which we rely to be year 2000 compliant could
have a material negative impact on our corporate accounting functions and the
operation of our web site and distribution system. As part of the assessment of
the year 2000 compliance of these systems, we have sought assurances from these
vendors that their software, computer technology and other services are year
2000 compliant. Because this process was begun recently, we have not yet
received a material number of responses from these vendors. We intend to follow
up with any vendors who have not responded to our request in a timely manner. We
have also engaged consulting firms to assess the year 2000 compliance of two of
our critical systems at a cost estimated at $1.1 million, of which approximately
$300,000 was incurred as of September 23, 1999. Based upon the results of all of
our assessments, we are developing a remediation plan with respect to
third-party software, third-party vendors and computer technology and services
that may fail to be year 2000 compliant. We expect to complete any required
remediation for issues currently identified by the end of October 1999. Based
upon our experience to date, we estimate that the total costs associated with
our Year 2000 compliance efforts will be up to approximately $3.0 million.
The failure of our software and computer systems and of our third-party
suppliers to be year 2000 compliant would have a material adverse effect on us.
The year 2000 readiness of the general system necessary to support our
operations is difficult to assess. For instance, we depend on the integrity and
stability of the Internet to provide our services. We also depend on the year
2000 compliance of the computer systems and financial services used by
consumers. Thus, the system necessary to support our operations consists of a
network of computers and telecommunications systems located throughout the world
and operated by numerous unrelated entities and individuals, none of which has
the ability to control or manage the potential year 2000 issues that may impact
the entire system. Our ability to assess the reliability of this system is
limited and relies solely on generally available news reports, surveys and
comparable industry data. Based on these sources, we believe most entities and
individuals that rely significantly on the Internet are reviewing and attempting
to remediate issues relating to year 2000 compliance, but it is not possible to
predict whether these efforts will be successful in reducing or eliminating the
potential negative impact of year 2000 issues.
A significant disruption in the ability of consumers to reliably access the
Internet or portions of it or to use their credit cards would have an adverse
effect on demand for our services and would have a material adverse effect on
us. We will be developing a contingency plan based on the results of our year
2000 assessment and remediation efforts. We estimate that the cost of developing
and implementing this plan could be up to an additional $500,000. A reasonable
worst case year 2000 scenario would involve a major failure of our material
systems, our vendors' material systems or the
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Internet to be year 2000 compliant, any of which could have material adverse
consequences for us. These consequences could include refrigeration failures
resulting in spoilage of perishable products and difficulties or interruptions
in operating our web site effectively, taking customer orders, processing orders
in our distribution center, making deliveries or conducting other fundamental
parts of our business.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which defines derivatives, requires that all
derivatives be carried at fair value, and describes the applicability of and
methods for hedge accounting. Webvan will adopt this statement for its fiscal
year ending December 31, 2001. Management has not fully assessed the
implications of adopting this new standard.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Webvan maintains a short-term investment portfolio primarily consisting of
corporate debt securities with maturities of thirteen months or less. These
available-for-sale securities are subject to interest rate risk and will rise
and fall in value if market interest rates change. The extent of this risk is
not quantifiable or predictable due to the variability of future interest rates.
Webvan does not expect any material loss with respect to its investment
portfolio.
Webvan's restricted cash balance is invested in certificates of deposit.
Accordingly, changes in market interest rates have no material effect on
Webvan's operating results, financial condition and cash flows. There is
inherent roll over risk on these certificates of deposit as they mature and are
renewed at current market rates. The extent of this risk is not quantifiable or
predictable due to the variability of future interest rates.
The following table provides information about Webvan's investment
portfolio, restricted cash, capital lease obligations and long-term debt as of
June 30, 1999, and presents principal cash flows and related weighted averages
interest rates by expected maturity dates.
<TABLE>
<CAPTION>
YEAR OF MATURITY
--------------------------------------------------------- TOTAL
AFTER CARRYING
1999 2000 2001 2002 2003 2003 VALUE
------- ------ ------ ------ ------ ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and Equivalents........... $21,836 -- -- -- -- -- $21,836
Average interest rate........ 4.95% -- -- -- -- -- 4.95%
Corporate Debt Securities...... $14,289 $7,942 -- -- -- -- $22,231
Average interest rate........ 4.81% 5.29% -- -- -- -- 4.98%
Restricted Cash -- Certificates
of Deposit................... $ 3,453 -- -- -- -- -- $ 3,453
Average interest rate........ 4.52% -- -- -- -- -- 4.52%
Capital Lease Obligations...... $ 299 $ 669 $ 773 $ 734 $ 283 -- $ 2,758
Average fixed interest
rate....................... 15.75% 15.77% 15.81% 15.28% 13.81% -- 15.45%
Long-term Debt................. $ 1,476 $3,931 $4,570 $5,140 $ 55 $ 6 $15,178
Average fixed interest
rate....................... 16.22% 16.24% 16.24% 16.25% 9.68% 8.57% 16.21%
</TABLE>
Fair value approximates carrying value for the above financial instruments.
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BUSINESS
Webvan is an Internet retailer offering same-day delivery of consumer
products through an innovative proprietary business design that integrates our
Webstore, distribution center and delivery system. Our current product offerings
are principally focused on food, non-prescription drug products and general
merchandise.
INDUSTRY BACKGROUND
GROWTH OF THE INTERNET AND E-COMMERCE
The rapid growth of the Internet and e-commerce is revolutionizing the way
in which businesses and consumers communicate, share information and conduct
business. International Data Corporation estimates that there were 63 million
web users in the United States at the end of 1998 and anticipates this number
will grow to approximately 177 million users by the end of 2003. This growth in
Internet usage is being fueled by a number of factors, including:
- a large and growing installed base of personal computers in the workplace
and at home;
- advances in the performance and speed of personal computers and modems;
- improvements in network security, system and bandwidth;
- faster, easier and cheaper access to the Internet;
- proliferation of content and services being provided on the Internet; and
- consumers' growing level of comfort and experience with e-commerce.
The unique characteristics of the Internet create a number of advantages
for online retailers and have dramatically affected the manner in which
companies distribute goods and services. Specifically, online retailers use the
Internet to:
- provide consumers with a broad selection of products and services,
increased information and enhanced convenience;
- operate with reduced overhead costs and greater economies of scale;
- frequently adjust featured selections, editorial content and pricing,
providing significant merchandising flexibility;
- "display" a larger number of products than traditional retailers at lower
cost; and
- obtain demographic and behavioral data about customers, increasing
opportunities for direct marketing and personalized services.
The Internet provides a powerful and convenient means for consumers to
order products and services. As a result of the increased use of the Internet
and the benefits of online retailing, consumer spending on the Internet is
growing rapidly. International Data Corporation estimates that consumer
purchases of goods and services over the Internet in the U.S. will increase from
$12.4 billion in 1998 to $75.0 billion in 2003. In addition, Forrester Research
estimates that online grocery spending in the U.S. will grow from $235 million
in 1998 to $10.8 billion by 2003 which will represent only 2% of the total
market for grocery products in 2003.
TRADITIONAL GROCERY RETAILING
The U.S. grocery market is large, with retail supermarket sales equal to
approximately $449 billion in 1998, according to Progressive Grocer. In
addition, the market for prepared meals or "home meal replacements" is growing
rapidly and, according to ACNielsen, comprises an incremental $100 billion
segment of the food industry. According to the National Association of Chain
Drugstores, traditional drugstore sales, including prescription drugs, were
approximately $106 billion in 1998. Based on this
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industry data, the combined market for groceries, drugstore merchandise and
prepared meals was over $650 billion in 1998, which we believe is the largest
opportunity in the e-commerce consumer category.
Many consumers find supermarket shopping to be a time-consuming and
inconvenient experience. Traditional store-based supermarkets face many
challenges in providing a satisfying shopping experience for consumers. Physical
space availability in stores limits the number of products supermarkets can
offer and reduces merchandising flexibility. This forces traditional store-based
supermarkets to limit their product selection to the most popular products,
further impairing customer selection. Traditional grocery retailers also face
significant costs associated with building and operating large brick and mortar
stores, including costs associated with personnel, real estate, construction,
store set-up, inventory and fixed assets. The challenges facing these
traditional retailers have created an opportunity for online grocery retailers
to provide a more compelling and cost-effective solution.
The Internet provides a medium that could significantly improve the
consumer grocery shopping experience. The Internet provides 24-hour shopping
convenience and the ability to monitor order and information accuracy, and
eliminates the need to wait in line. With an efficient business model, online
retailers will also be able to reduce labor, real estate and other operating
costs.
ONLINE GROCERY RETAILING
Consumers are increasingly seeking a grocery shopping solution which will
allow them to save time and effort without sacrificing the wide selection, high
quality and low cost they have come to expect from traditional supermarkets. We
believe that market demand for high-quality reliable grocery services is
enormous and is very much like the pent-up demand for high-quality
wide-bandwidth communication. However, we cannot assure you that our assessment
of the demand for online grocery services will prove to be accurate or that such
market demand will emerge in the short-term or at all. Attempting to capitalize
on the benefits of the Internet, several companies, including NetGrocer and
Peapod, have begun offering a variety of grocery products online. Many of these
services charge membership, delivery or service fees and often offer many of
their goods at prices higher than those of traditional supermarkets. In
addition, many of these online grocery efforts only offer a limited selection of
products, do not offer frozen foods or perishables and do not stock a wide range
of high-end items such as wine, prepared meals and specialty products. These
online grocers generally do not offer same-day delivery and guarantee delivery
within narrow time parameters. Many of these early online grocers currently lack
a highly automated distribution and delivery model which would enable rapid and
efficient expansion on a national level. As a result, these companies rely on
manual systems to fill the orders they receive over the Internet and often rely
on third parties to deliver orders to their customers.
THE WEBVAN SOLUTION
Our online shopping experience offers customers a broad selection of
high-quality, competitively priced grocery and related product offerings
delivered directly and conveniently to their homes. Our Webstore is designed to
create a user-friendly, informative and personalized shopping experience for
customers while providing them with the time savings and convenience of shopping
online. We believe that our innovative business design addresses the challenge
of e-commerce fulfillment by integrating a retail web site with an advanced
distribution center and delivery system which enable us to efficiently fill a
high volume of orders and deliver products to our customers on the same day. Our
delivery channel also enables us to create brand awareness and customer loyalty
that we believe will help to strengthen our market position.
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Our solution provides customers with the following key benefits:
- prices that are generally at or below everyday supermarket prices;
- a broad selection of high quality products;
- no membership or service fees and no delivery fees for orders over $50;
and
- same-day home delivery within a customer-selected 30-minute window.
The principal components of our solution include our:
BROAD SELECTION OF HIGH QUALITY PRODUCTS AT COMPETITIVE PRICES. Our
scalable Webstore and distribution system are designed to enable us to offer
over 50,000 different items to our customers. As of September 30, 1999, we were
offering consumers a broad selection of approximately 18,000 grocery and
specialty items including:
- farm fresh produce;
- premium meats hand cut in our butcher shop;
- fresh fish and other seafood including live lobsters;
- a variety of chef-prepared meals;
- bakery items including specialty breads, bagels and pastries;
- non-perishable grocery items typically found in large supermarkets;
- non-prescription drug products and health and beauty items;
- specialty items including fine wines and premium quality cigars; and
- general merchandise such as office products and small appliances.
From July 10, 1999 through September 18, 1999, produce represented
approximately 17% of our revenue. According to Progressive Grocer, in 1998,
produce represented approximately 10% of revenue of traditional grocers. Since
we only commenced operations on June 2, 1999, the percentage of our revenue from
produce is derived from very limited data and is expected to fluctuate from
period to period. As a result, we cannot assure you that the percentage of our
revenue from produce will remain at approximately 17% in the future.
INTERACTIVE AND PERSONALIZED WEBSTORE. Our Webstore is an easy-to-use
online alternative to the traditional supermarket providing customers with
significant time savings and convenience. The Webstore is organized to provide
information about the products we sell as well as interesting generalized
content. We believe our Webstore promotes customer loyalty by making the grocery
shopping experience easier for the consumer. Through our Webstore, consumers can
personalize their shopping experience by creating their own shopping lists and
by spending as much or as little time browsing and selecting products as is
appropriate for their specific needs. Customers may shop for products by:
- browsing clearly organized categories such as Produce, Meat and Seafood,
Prepared Food or Health and Beauty;
- going directly to a specific product by using our keyword search
technology; or
- accessing one of their personal shopping lists for immediate purchase or
editing.
Our Webstore utilizes a proprietary logistics technology to offer a
delivery window to the customer. A point-and-click time schedule will indicate
to the customer the 30-minute delivery slots which are currently available in
their specific location, based on the time of day, location and items purchased.
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HIGHLY AUTOMATED DISTRIBUTION CENTER. Our technologically advanced
distribution center is highly automated and is designed to provide economies of
scale and create significant cost savings compared to traditional supermarkets
and existing online grocers. Our distribution center is designed to process
product volumes equivalent to approximately 18 supermarkets and allow for a
highly flexible inventory selection of over 50,000 SKUs. The distribution center
is designed to fill customer orders using proprietary software and labor-saving
automation technology such as carousels and conveyors which bring individual
products directly to the worker, compared to traditional warehouse designs which
require the worker to move throughout rows of products to fill individual
orders. Our first distribution center is located in Oakland, California and
serves the San Francisco Bay Area. We plan to open a second distribution center
in Atlanta, Georgia in the second quarter of 2000 and to further expand with
distribution centers in other key geographic markets.
Our distribution center is designed to accommodate both a wide product
selection as well the finest in product quality. The design allows for
appropriate storage temperatures for individual product categories including
produce, meats and frozen foods and enables us to offer specialty products such
as premium wines and cigars. In addition to product storage, our distribution
center is designed with food preparation facilities which allow us to offer
chef-prepared meals, individually cut meats and fish and made-to-order fruit
baskets.
We have designed our initial distribution center in Oakland, California to
be a prototype that we can readily replicate in other locations. In July 1999,
we entered into an agreement with Bechtel Corporation for the construction of up
to 26 additional distribution centers for us over the next three years. These
distribution centers may not necessarily be in 26 different markets.
EFFICIENT DELIVERY PROCESS. To facilitate rapid and predictable product
delivery to the customer's home, we utilize a hub-and-spoke fulfillment model
that is designed to minimize product and order handling. Customer orders are
packaged in individual plastic containers or "totes" at the distribution center,
or hub, and are transferred by temperature-controlled trucks to local stations,
or spokes. At the local stations, the totes are transferred to smaller
temperature-controlled vans for delivery to the home. Each distribution center
will supply shipments to up to 10 - 12 stations, varying by market, which will
be strategically positioned throughout a particular delivery region within an
approximate 50 mile radius of each distribution center. Our hub-and-spoke model,
centralized order fulfillment and decentralized delivery, combined with our
proprietary route and load planning technology allows for a highly efficient,
low cost fulfillment solution. As a result of our automated distribution center
and efficient delivery process, our produce and other grocery products are
handled an average of eight times compared to an average of 14 times for a
traditional supermarket that utilizes typical distribution channels. We believe
that reduced handling enables us to deliver better quality produce to the
consumer than traditional grocery retailers.
SUPERIOR CUSTOMER SERVICE. Our home delivery model also provides us with an
important opportunity to interact with our customers. Because of the high
frequency of grocery purchases, our couriers will be able to help continually
reinforce our brand with the customer. Our couriers are valued employees and are
incentivized with competitive salaries and stock options. Our couriers have also
been trained to answer questions about the service and handle routine service
issues directly and promptly at the customer residence. Each courier
communicates with the route planning and delivery scheduling systems throughout
the delivery process through the use of a wireless mobile field device. If the
customer is not satisfied with the products received, the courier is able to
initiate a transaction to replace items or credit the customer's bill. We
believe this approach helps develop couriers who are highly focused on customer
service and on creating long-term consumer relationships.
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STRATEGY
Our objective is to be the leading online retailer offering same-day
delivery of consumer products. Our current product offerings are principally
focused on food, non-prescription drug products and general merchandise. The key
elements of our strategy are as follows:
BUILD BRAND AWARENESS AND MARKET SHARE. We intend to establish Webvan as
the leading brand for buying groceries and consumer goods over the Internet for
home delivery. Through our public relations programs, advertising campaigns,
promotional activities and media relationships, we plan to generate brand
awareness and drive customer trials of our services. Our efforts will focus on
building credibility with customers and achieving market acceptance for our
services. We will pursue online and traditional media marketing strategies on a
regional basis to achieve these results.
DELIVER SUPERIOR CUSTOMER SERVICE AND OPERATING PERFORMANCE. We intend to
offer our customers a compelling shopping experience by delivering orders on an
accurate, timely and reliable basis. We will strive to continuously improve our
delivery and service performance to enhance the customer experience. We are
focused on building strong, lasting customer relationships which will drive
repeat purchases and higher average order sizes. By interacting directly with
customers on a regular basis and providing high quality service, we believe we
will promote customer loyalty and establish Webvan as the leading online
retailer and distribution company providing same-day delivery direct to the
customer.
LEVERAGE EFFICIENT BUSINESS DESIGN. We have designed a proprietary business
system which integrates our interactive Webstore, distribution center and
delivery system. This design addresses the challenge of Internet commerce
fulfillment by providing a highly efficient means of delivering goods directly
to the homes of consumers on the same day that an online order is placed. Our
software, automated distribution center and hub and spoke delivery system were
designed to accommodate a high volume of orders and to enable us to offer over
50,000 different items to our customers. We believe that our highly automated
order fulfillment systems provide us with an advantage compared to our online
competitors which generally rely on manual order fulfillment systems.
REPLICATE DISTRIBUTION CENTER AND DELIVERY SYSTEM IN ADDITIONAL GEOGRAPHIC
MARKETS. We believe that our compelling product and service offerings combined
with the broad scope of the Internet present opportunities to expand to
additional locations in major cities in the U.S. Our distribution center and
delivery system are designed to be readily replicated and we plan to pursue an
aggressive expansion strategy by opening additional distribution centers in key
geographic markets beginning in the second quarter of 2000. In July 1999, we
entered into an agreement with Bechtel Corporation for the construction of up to
26 additional distribution centers over the next three years. These distribution
centers may not necessarily be in 26 different markets. We believe that our
alliance with Bechtel will enable us to more aggressively roll out distribution
centers in other markets by utilizing Bechtel's engineering, design, procurement
and construction expertise. After we have begun operating in additional markets,
we may eventually construct additional distribution centers in some of our
existing markets if there is sufficient demand for our service. In selected
large markets, we may construct up to four to six distribution centers over a
period of several years if there is sufficiently high demand for our service in
those markets.
LEVERAGE DISTRIBUTION SYSTEM TO ENTER ADDITIONAL CONSUMER PRODUCT
CATEGORIES. We intend to use our distribution system to sell products in other
consumer product categories to achieve additional revenue opportunities. While
our initial product focus is on groceries, non-prescription drugs and general
merchandise, we plan to identify and pursue new product category opportunities.
We believe that our same-day distribution system can position us as a preferred
online provider for many consumer products that can be delivered to the home.
THE WEBVAN WEBSTORE
Our Webstore is a user-friendly, informative and personalized web site
which enables users to quickly and easily navigate and purchase from a wide
selection of items. The Webstore makes the
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shopping experience easy for the customer by offering them multiple methods for
shopping the site. The store directory is divided into eleven intuitively
organized categories and allows the customer to quickly and efficiently find
items. Once customers find the item they want, they may add it to the shopping
cart or may save it to a shopping list. The shopping cart is always visible on
the screen and instantly updates and calculates the order total while the
customer shops. Our Webstore promotes brand loyalty and repeat purchases by
providing a convenient, easy-to-use experience that encourages customers to
return frequently.
HOME PAGE. Our home page serves as the entry point and gives visitors a
glimpse of the wide selection available on the site. On our home page, customers
find weekly specials on brand name products, a clearly defined directory
structure and links that showcase specific products and areas of the site.
BROWSING. Our Webstore displays a store directory which allows visitors to
browse through all the categories of products Webvan offers. The categories are
intuitively organized by type of product and enable the user to drill down from
general to more specific categories, such as moving from produce to fruits to
bananas. The browsing tool also enables customers to see all products in a
particular category before making a selection, similar to scanning the shelves
of a neighborhood store. In addition, each item on the site has an image and
some have nutritional information attached, which further enhances the user
experience.
SEARCHING. Our Webstore contains an interactive, searchable database of
over 15,000 SKUs. The customer can search based on product type, brand name or
category. The search results page displays each relevant item, along with the
product category and subcategories.
CONTENT AND FEATURES. Webvan offers an array of content on the site to
enhance the user experience and encourage visitors to try new items. Our weekly
electronic magazine, Sensations, features special recipes, cooking tips,
features authored by food and health experts, and the opportunity to interact
with culinary professionals. As we accumulate data, our Webstore can be
personalized to appeal to individual customer preferences and buying habits.
PERSONALIZATION AND LISTS. Our Webstore enables a customer to personalize
their shopping experience. The site's shopping list feature allows customers to
create and retain personal shopping lists in their profiles. Multiple lists can
be saved for weekly shopping, specific events or special occasions. Once a list
has been created and saved, it can be retrieved and modified at any time,
enabling customers to shop and check out in a few minutes. We believe that the
personalization of a customer's shopping experience is an important element of
our value proposition and we intend to continue to enhance our personalization
services.
DELIVERY. Customers schedule their delivery by selecting a time from a grid
of 30-minute alternatives. Our real-time inventory tracking and delivery route
software systems are designed to help ensure that the groceries a customer
orders will be available so that they can be delivered at the delivery time
window selected by the customer. Using this system, the customer is able to
select and schedule a delivery to occur within an available specific 30-minute
window, on the same day or up to four days after the order is placed. Deliveries
are currently made from 2:00 p.m. to 10:00 p.m. on Tuesday through Friday and
from 9:00 a.m. to 5:00 p.m. on Saturday. As we increase the number of orders we
process per day, we expect to make deliveries on Tuesday through Friday from
9:00 a.m. to 10:00 p.m. and maintain our current Saturday delivery times. Our
customers must be at home to accept delivery of perishable or frozen items or
regulated products such as alcohol and tobacco. Non-perishable items may be
delivered when the customer is not home.
Since our commercial launch through September 30, 1999, approximately 92%
of our orders have been delivered on time during the customer-selected delivery
window. While approximately 99% of our orders were delivered on time from August
18, 1999 through September 17, 1999, our on-time delivery rate has fluctuated
significantly since our commercial launch, and we expect it to fluctuate in the
future on a daily basis. For example, during the month of September 1999,
approximately 93% of
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our orders were delivered on time. In addition, during the month of September
1999, approximately 99% of items ordered were filled accurately by our system,
while from our commercial launch through September 30, 1999, our accuracy rate
was approximately 98%. The accuracy of this system has fluctuated from time to
time and there can be no assurance that this system will continue to operate at
or near 99% efficiency. Any material decrease in our on-time delivery rate or in
order fulfillment accuracy would likely have an adverse impact on our consumer
acceptance of our service, and a prolonged decline in our on-time delivery rate
or in order fulfillment accuracy would have an adverse impact on our financial
results. On occasion, we have experienced operational "bugs" that have resulted
in a high proportion of late deliveries or order fulfillment inaccuracies on
particular days. Operational bugs may arise from one or more factors including
electro-mechanical equipment failures, computer server or system failures,
network outages, software performance problems or power failures. To date, these
bugs have been corrected in a short period of time by Webvan employees and have
not resulted in any long term impact on our operations.
TECHNOLOGY
We have developed a technologically advanced systems platform, which
integrates our entire business process from end to end. We have built an array
of proprietary advanced inventory management, warehouse management, route
management and materials handling systems and software to manage the entire
customer ordering and delivery flow process. Our proprietary automated materials
handling controller communicates with the Webstore and warehouse management
system and issues instructions to the various mechanized areas of the
distribution center to ensure the proper fulfillment of orders. We designed the
system to utilize automated conveyors and carousels to transport items to a few
centrally located employees. As a result, the system allows us to increase
volume without a proportionate increase in human resources.
Once a delivery is scheduled, a route planning feature of the system
determines the most efficient route to deliver goods to the customer's home. The
courier communicates with the route planner and delivery scheduler modules
throughout the delivery process through the use of a wireless mobile field
device. Each aspect of this process is tightly integrated and enables us to
provide high quality service to our customers.
We have devoted over 50 person years of effort to our software development
effort. Our software development expenses were $244,000 in 1997, $3,010,000 in
1998 and $6,308,000 for the six months ended June 30, 1999.
We outsource most of our network operations functions and employ our own
customer services personnel. The continued uninterrupted operation of our
Webstore and transaction-processing systems is essential to our business, and it
is the job of the site operations staff to ensure, to the greatest extent
possible, the reliability of our Webstore and transaction-processing systems.
Webvan's web and database servers are hosted at Exodus Communications, Inc. in
Santa Clara, California.
DISTRIBUTION CENTER ROLL OUT
We currently operate a 336,000 square foot distribution center facility in
Oakland, California. The distribution center was designed to process product
volumes equivalent to approximately 18 supermarkets and is the hub for the
receipt and distribution of products and allows for efficient sorting and
distribution of products. The distribution center is a clean, climate-controlled
facility segmented into separate ambient, refrigerated and frozen areas that
store grocery items at optimal temperatures. Identical software systems will be
implemented at each distribution center, enabling the easy replication of the
distribution center model across multiple locations and allowing for central
management of the entire system. Each distribution center, together with the
related stations and delivery infrastructure, is expected to be staffed with
approximately 900 employees when operating near its designed capacity. Based on
our analysis of publicly available data from traditional supermarkets, the
operation of 18 supermarkets would require up to 2,700 employees.
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We intend to pursue a roll out of distribution centers into various
locations in the U.S. to capitalize on what we view as a substantial market
opportunity. Our first facility in Oakland, California was commercially launched
in June 1999. We currently plan to open an additional distribution center in the
Atlanta market in the second quarter of 2000 and in the Chicago and Seattle
markets later in 2000, as well as seven additional distribution centers in 2001.
The cost of the construction of and equipment for each additional distribution
center is estimated at $25.0 million to $35.0 million. Based on our analysis of
public information, we believe that if our distribution center can generate
annual revenue of approximately $300 million, our revenue to capital expenditure
ratio will be approximately three times that of a traditional supermarket. We
plan to locate our distribution centers in industrially zoned areas, which
generally have lower real estate costs than traditional supermarkets located in
commercial areas. Specifically, when our distribution center is operating at its
designed capacity, we currently estimate that our real estate rental costs
related to such distribution center and related stations will be less than 1% of
the revenue from such distribution center. This compares to real estate rental
costs of approximately 4% to 6% of revenue for traditional supermarkets based on
our analysis of current real estate costs in the San Francisco Bay area. If our
distribution center does not operate at its designed capacity or if our average
order size is less than expected, our real estate costs as a percentage of
revenue could be substantially higher than 1%, which could have a material
adverse effect on our results of operations. Additionally, our real estate
rental costs will likely vary as a percentage of revenue based on geographic
location.
In July 1999, we entered into an agreement with Bechtel Corporation for the
construction of up to 26 additional distribution centers over the next three
years in various locations that we designate. We believe that our alliance with
Bechtel will enable us to more aggressively roll out distribution centers in
other markets by utilizing their engineering, design, procurement and
construction expertise. Bechtel will be responsible for substantially all
aspects of the build-out program and will deliver completed distribution centers
to Webvan. Bechtel will also leverage its strengths in engineering management to
incorporate improvements to the design of our distribution centers. Bechtel is
to perform such services within schedule and budgetary parameters determined by
Webvan, and will be eligible to receive cash incentive payments to the extent
distribution centers are completed within the preestablished parameters. Under
our agreement with Bechtel, Bechtel has agreed not to provide substantially
similar services to any other entity operating in a number of Internet retail
segments. We also issued Bechtel a warrant to purchase up to 1,800,000 shares of
our stock. The warrant has been exercised as to 150,000 shares and becomes
exercisable as to 150,000 additional shares when the first six distribution
centers are completed and as to an additional 57,690 shares upon the completion
of each distribution center within agreed upon schedule and budgetary
parameters.
We currently obtain all of our carousels for our distribution centers from
Diamond Phoenix Corporation. Under our agreement with Diamond Phoenix, Diamond
Phoenix has agreed not to sell carousels to any other entity operating in a
number of Internet retail segments. In the event that the supply of carousels
from Diamond Phoenix were delayed or terminated for any reason, the Company
believes that it could obtain similar carousels from other sources; however, the
integration of such other carousels into our distribution centers could result
in construction delays and could require modifications to our software systems.
Accordingly, any such delay or termination of our relationship with Diamond
Phoenix could cause a material delay in our planned expansion program. In
addition, in connection with this arrangement, we made a minority equity
investment in Diamond Phoenix.
DELIVERY OPERATIONS
The distribution center will serve as the center of our hub-and-spoke
delivery system. Orders are collected from the Webstore, routed and managed by
the distribution center, transferred to stations and delivered from the stations
to customers' homes. This model enables us to efficiently and cost effectively
deliver consumer goods to the home by combining centralized order fulfillment
with decentralized delivery. We use temperature-controlled trucks to deliver
from the distribution center to the station and smaller vans to deliver from the
station to the home. The stations are strategically
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positioned throughout a delivery region within approximately 50 miles of a
distribution center and typically within approximately 10 miles of target
customer residences. In our initial market in the San Francisco Bay Area, we
have 12 stations and expect future distribution centers to support from 12 to 15
stations. We deliver to the customer's door in a smaller van complete with
refrigeration equipment to keep chilled and frozen items at temperatures that
insure their quality and freshness. Each customer's order is delivered in
environmentally-friendly reusable containers, called totes.
All of our couriers are Webvan employees. We utilize strict hiring
standards in choosing couriers and require each new employee to complete an
intensive training program. The courier training lasts three weeks and includes
32 hours of classroom training, 24 hours of driving training and 16 hours of on
the job training. Couriers are trained in responsible driving practices,
courtesy and the proper handling of totes and products. Our couriers receive a
competitive compensation package, including cash and stock options, and are
incentivized to reinforce our brand and help to create a lasting one-to-one
relationship with our customers. In addition, couriers have been trained to
answer questions about the service and handle service issues directly and
promptly at the customer residence. If the customer is not satisfied with the
products received, the courier is able to initiate a transaction to replace
items or credit the customer's bill.
CUSTOMER SERVICE
We believe that our ability to establish and maintain long-term
relationships with our customers and to encourage repeat visits and purchases
depends on the strength of our customer support and service operations and
staff. We seek to achieve frequent communication with and feedback from our
customers to continually improve the Webvan service. Webvan offers a number of
automated help options on the website and an easy-to-use direct email service to
enable customers to ask questions and to encourage feedback and suggestions. We
plan to respond to customer email inquiries within 12 hours of the submission
and allow for a maximum response time of 24 hours. Our team of customer support
and service personnel are responsible for handling general customer inquiries,
answering customer questions about the ordering process, and investigating the
status of orders, deliveries and payments. Users can contact customer service
representatives via our toll free telephone number to ask questions or pay bills
if customers are reluctant to enter their credit card number over the Internet.
Our automated customer service function distributes emails to customers after
registration and after each order is placed. We plan to enhance the automation
of the tools used by our customer support and service staff in the future.
MARKETING AND PROMOTION
Our marketing and promotion program is designed to strengthen the Webvan
brand name, drive trials of our service in our target markets, build strong
customer loyalty and maximize repeat usage and purchases. We intend to build our
brand name and customer loyalty through our public relations programs,
advertising campaigns and promotional activities. Our efforts will focus on
building credibility with customers and achieving market acceptance for our
services. We expect to advertise locally in our initial launch markets and plan
to tailor our advertising to each specific market. In addition, we plan to
leverage our relationships with our media investors, including CBS and Knight-
Ridder, for television, online and print advertising opportunities.
In the future, Webvan expects to be able to provide increasingly targeted
and customized services by using the customer purchasing, preference and
behavioral data obtained through the traffic and purchases generated at the
Webstore. We also build brand loyalty though personalized interaction with
customers through prompt, professional delivery persons and through use of
Webvan delivery vehicles. By offering customers a compelling and personalized
value proposition, our goal is to increase the number of visitors that make a
purchase, to encourage repeat visits and purchases and to extend customer
retention. In addition, loyal, satisfied customers generate strong word-of-mouth
support and awareness which drive new customer acquisitions and increased order
volumes.
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MERCHANTS AND VENDORS
Webvan sources products from a network of food and drug manufacturers,
wholesalers and distributors. We currently rely on rapid fulfillment from
national and regional distributors for a substantial portion of our items. We
purchase a number of top brands and high volume items directly from
manufacturers and may increase our use of direct suppliers as our product
volumes increase with additional distribution centers. We also utilize premium
specialty suppliers or local sources for gourmet foods, farm fresh produce,
fresh fish and meats. Because we cover a broad area and service high volumes
from a single point of distribution, we offer our suppliers a very efficient
product supply model which is reflected in the discounts and pricing we receive.
When we select a new product for purchase, it is entered into the inventory
management system and our Webstore. We employ advanced replenishment and
expiration date controls to manage our inventory and maintain product freshness.
We estimate that a distribution center operating at its designed capacity would
turn inventory 24 times annually, compared to the 9 to 11 times of traditional
supermarkets based on our analysis of publicly available data for such
supermarkets. Due to our limited operating history, we cannot assure you that
our distribution center will ever operate at or near its designed capacity or
that our inventory will turn at or near 24 times annually. As of June 30, 1999,
we were purchasing products from 10 distributors and directly from over 160
vendors.
COMPETITION
We believe that our business design currently provides us with a two-year
head start compared to our potential competitors which may seek to replicate our
business design of a retail website integrated with a highly automated
distribution center and a hub and spoke delivery system. However, the grocery
retailing market is extremely competitive, and we expect our competitive
advantage to erode rapidly. Local, regional, and national food chains,
independent food stores and markets, as well as online grocery retailers
comprise our principal competition, although we also face substantial
competition from convenience stores, liquor retailers, membership warehouse
clubs, specialty retailers, supercenters, and drugstore chains. Many of our
existing and potential competitors, particularly traditional grocers and
retailers, are larger and have substantially greater resources than we do. We
expect this competition will intensify as more traditional and online grocery
retailers offer competitive services. In addition, although no traditional
supermarket chain has introduced an Internet based service on a large scale, we
expect competition from such retailers to intensify in the near future.
Our initial distribution center in Oakland, California, operates in the San
Francisco Bay Area market. In this market, we compete primarily with traditional
grocery retailers and with online grocers NetGrocer and Peapod. We estimate that
as of the date of this prospectus, our potential competitors in markets other
than the San Francisco Bay Area include between five and ten full-service
grocery retailers operating exclusively online. The number and nature of
competitors and the amount of competition we will experience will vary over time
and by market area. In other markets, we expect to compete with current online
offerings from these companies and others, including HomeGrocer, HomeRuns and
Streamline. Many of these services charge membership, delivery or service fees,
and often offer their goods at a premium to traditional supermarkets. In
addition, most competing online retailers, including Peapod, currently use
manual shopping and retrieval systems which we believe lack the capability to
process a large number of orders for a large number of customers in a cost
efficient manner.
The principal competitive factors that affect our business are location,
breadth of product selection, quality, service, price and consumer loyalty to
traditional and online grocery retailers. We believe that we compete favorably
with respect to each of these factors as compared to other online grocery
retailers. However, many traditional grocery retailers may have substantially
greater levels of consumer loyalty and serve many more locations than we
currently do. If we fail to effectively compete in any one of these areas, we
may lose existing and potential customers which would have a material adverse
effect on our business, net sales and operating margins.
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We also compete to retain customers once they have registered for Webvan's
services. Generally, online subscriber attrition rates, or the rates at which
subscribers cancel an online service, are high. High rates of member attrition
could have a material adverse effect on our net sales and business.
GOVERNMENT REGULATION
In addition to regulations applicable to businesses generally or directly
applicable to electronic commerce, we are subject to a variety of regulations
concerning the handling, sale and delivery of food, alcohol and tobacco
products. As of the date of this prospectus, we are not subject to regulation by
the United States Department of Agriculture, or USDA. Whether the handling of
certain food items in our distribution facility, such as meat and fish, will
subject us to USDA regulation in the future will depend on several factors,
including whether we sell food products on a wholesale basis or whether we
obtain food products from non-USDA inspected facilities. Although we have
designed our food handling operations to comply with USDA regulations, we cannot
assure you that the USDA will not require changes to our food handling
operations. We will also be required to comply with local health regulations
concerning the preparation and packaging of our prepared meals and other food
items. Any applicable federal, state or local regulations may cause us to incur
substantial compliance costs or delay the availability of a number of items at
one or more of our distribution centers. In addition, any inquiry or
investigation from a food regulatory authority could have a negative impact on
our reputation. Any of these events could have a material adverse effect on our
business and expansion plans and could cause us to lose customers.
We will be required to obtain state licenses and permits for the sale of
alcohol and tobacco products in each location in which we seek to open a
distribution center. We cannot assure you that we will be able to obtain any
required permits or licenses in a timely manner, or at all. We may be forced to
incur substantial costs and experience significant delays in obtaining these
permits or licenses. In addition, the United States Congress is considering
enacting legislation which would restrict the interstate sale of alcoholic
beverages over the Internet. Changes to existing laws or our inability to obtain
required permits or licenses could prevent us from selling alcohol or tobacco
products in one or more of our geographic markets. Any of these events could
substantially harm our net sales, gross profit and ability to attract and retain
customers.
The adoption of laws or regulations relating to large-scale retail store
operations could adversely affect the manner in which we currently conduct our
business. For example, the Governor of California recently vetoed legislation
which would have prohibited a public agency from authorizing retail store
developments exceeding 100,000 square feet if more than a small portion of the
store were devoted to the sale of non-taxable items, such as groceries. While it
is not clear whether our operations would be considered a retail store for
purposes of this kind of legislation, we cannot assure you that other state or
local governments will not seek to enact similar laws or that we would be
successful if forced to challenge the applicability of this kind of legislation
to our distribution facilities. The expenses associated with any challenge to
this kind of legislation could be material. If we are required to comply with
new regulations or legislation or new interpretations of existing regulations or
legislation, this compliance could cause us to incur additional expenses or
alter our business model.
In addition, because of the increasing popularity of the Internet, it is
possible that a number of laws and regulations may be adopted with respect to
the Internet. These laws may cover issues such as user privacy, freedom of
expression, pricing, content and quality of products and services, taxation,
advertising, intellectual property rights and information security. Furthermore,
the growth of electronic commerce may prompt calls for more stringent consumer
protection laws. Several states have proposed legislation to limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also initiated
action against at least one online service regarding the manner in which
personal information is collected from users and provided to third parties. We
do not currently provide personal information regarding our users to third
parties. However, the adoption of such consumer protection laws could create
uncertainty in web usage and reduce the demand for our products and services.
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We are not certain how our business may be affected by the application of
existing laws governing issues such as property ownership, copyrights,
encryption and other intellectual property issues, taxation, libel, obscenity
and export or import matters. The vast majority of these laws were adopted prior
to the wide use of the Internet. As a result, they do not contemplate or address
the unique issues of the Internet and related technologies. Changes in laws
intended to address these issues could create uncertainty in the Internet market
place. This uncertainty could reduce demand for our services or increase the
cost of doing business as a result of litigation costs or increased service
delivery costs.
INTELLECTUAL PROPERTY
We regard patent rights, copyrights, service marks, trademarks, trade
secrets and similar intellectual property as important to our success. We rely
on patent, trademark and copyright law, trade secret protection and
confidentiality or license agreements with our employees, customers, partners
and others to protect our proprietary rights; however, the steps we take to
protect our proprietary rights may be inadequate. We have filed trademark
registration applications for the marks "WEBVAN", "WEBVAN.COM", the Webvan logo
and "THE ONLY .COM YOU REALLY NEED". We currently have no patents protecting our
technology. From time to time, we have filed and expect to file patent
applications directed to aspects of our proprietary technology. We cannot assure
you that any of these applications will be approved, that any issued patents
will protect our intellectual property or that any issued patents or trademark
registrations will not be challenged by third parties. In addition, other
parties may independently develop similar or competing technology or design
around any patents that may be issued to us.
EMPLOYEES
As of September 30, 1999, we had 630 full-time employees consisting of 71
in software development, 128 in operations and administration, 29 in
merchandising, 16 in marketing and 386 at our distribution center in Oakland. We
expect to hire additional personnel at our Oakland facility and to staff our
other distribution centers as they are opened. None of our employees are
represented by a labor union. We have not experienced any work stoppages and
consider our employee relations to be good.
DEVELOPMENT OF OUR BUSINESS
We believe that due to our current cash position, which includes the
proceeds from the sale of our preferred stock in July and August 1999, and our
flexibility with respect to the number and timing of additional distribution
centers we open, the net proceeds of this offering, together with our available
funds, will be sufficient to meet our anticipated needs for working capital and
capital expenditures through the next 12 months. Our future long-term capital
needs will be highly dependent on the number of additional distribution centers
we open, the timing of these openings and the success of these facilities once
they are launched. During this time, we expect to incur product development
costs related to the continued development of our software systems, including
enhancements to our order fulfillment, distribution, inventory and delivery
systems and to the features and functionality of our Webstore. We also plan to
undertake the construction and equipping of up to 26 distribution centers over
the next 3 years pursuant to our agreement with Bechtel Corporation. This
expansion program will result in a material increase in our number of employees
as we staff our new distribution centers and add personnel engaged in software
development, operations and administration, marketing and merchandising.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation relating to claims
arising out of our ordinary course of business. We are not currently a party to
any material litigation.
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FACILITIES
Our corporate offices are located in Foster City, California, where we
lease a total of approximately 7,400 square feet under leases that expire in May
2002. We recently signed a lease for approximately 55,000 square feet of office
space in Foster City, California that expires in November 2011, and we will be
relocating our corporate offices to this facility in the fourth quarter of 1999.
In addition, we recently signed two leases, which expire in August 2001 and
November 2012 for an aggregate of approximately 108,000 square feet of office
space in Foster City, California which we anticipate will satisfy our corporate
office space needs for the foreseeable future.
We lease approximately 336,000 square feet in Oakland, California for our
distribution center under a lease that expires in June 2008, with an option to
extend the lease for an additional five years. We also lease an aggregate of
approximately 106,000 square feet for 16 local facilities for distribution in
the San Francisco Bay Area under leases that expire from June 2001 to May 2009.
We have signed a lease for a site of approximately 350,000 square feet for our
second distribution center site in Atlanta, Georgia. This lease expires in July
2009, with two options to extend the lease for additional five year periods. We
recently signed leases for sites in Springfield, Virginia; Grapevine, Texas;
Carol Stream, Illinois and Kent, Washington on which we plan to construct
distribution centers that will serve the metropolitan areas of the District of
Columbia, Dallas, Chicago and Seattle, respectively. We are evaluating sites and
negotiating leases for additional distribution centers in other markets.
Although we expect those sites to be available, we cannot assure you that
suitable sites will be available on commercially reasonable terms. We do not own
any real estate and expect to lease distribution center and station locations in
the other markets we enter.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information regarding the executive officers
and directors of Webvan as of October 20, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Louis H. Borders................... 51 Chairman of the Board
George T. Shaheen.................. 55 President, Chief Executive Officer and Director
Kevin R. Czinger................... 40 Senior Vice President, Corporate Operations and
Finance
Arvind Peter Relan................. 37 Senior Vice President, Technology
Mark X. Zaleski.................... 36 Senior Vice President, Area Operations
Gregory Beutler.................... 39 Vice President, Merchandising
Gary B. Dahl....................... 46 Vice President, Distribution
Leo L. Farley...................... 46 Vice President, Food Production
Mark J. Holtzman................... 39 Vice President and Controller
Vivek M. Joshi..................... 36 Vice President, Program Management
Christian T. Mannella.............. 37 Vice President, Marketing
David S. Rock...................... 50 Vice President, Real Estate
Robert H. Swan..................... 39 Vice President, Finance
David M. Beirne(1)(2).............. 36 Director
Christos M. Cotsakos(2)............ 50 Director
Tim Koogle(1)...................... 47 Director
Michael J. Moritz(1)(2)............ 45 Director
</TABLE>
- -------------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
LOUIS H. BORDERS has served as our Chairman of the Board since founding
Webvan in December 1996. Mr. Borders served as President and Chief Executive
Officer of Webvan from December 1996 to September 1999. Mr. Borders co-founded
Synergy Software, a software consulting company, in November 1989 and served on
its board of directors from November 1989 to November 1997. Mr. Borders founded
Borders Books, a retail bookstore chain, in 1971 and served as President and
Chief Executive Officer until 1983 and as Chairman from 1983 to 1992. He also
developed the advanced information systems used by Borders Books to manage
inventory across diverse geographic and demographic regions. In addition, Mr.
Borders is chairman of Mercury Capital Management, an investment firm he founded
in 1995. Mr. Borders holds a B.A. in Mathematics from the University of
Michigan.
GEORGE T. SHAHEEN has served as President and Chief Executive Officer and
as a member of the Board of Webvan since September 1999. Prior to joining
Webvan, he had been the managing partner and chief executive officer of Andersen
Consulting, a global consulting firm, since the firm became an independent unit
in 1989. He joined Andersen Consulting in 1967 and became a partner in 1977.
From 1980 to 1985, he oversaw the consulting practice for North and South
Carolina before heading the Northern California Consulting practice based in San
Francisco. Prior to becoming managing partner and chief executive officer of
Andersen Consulting, Mr. Shaheen was managing partner of the Southeast U.S.
Region and North American practices. In addition, he was the practice director
for Japan and the Pacific Northwest. Mr. Shaheen is also a director of Siebel
Systems, Inc., a software company. He is on the Board of Trustees at Bradley
University and is a member of the Board of Advisors for the Northwestern
University J.L. Kellogg Graduate School of Business. Mr. Shaheen received a
bachelor's degree in marketing and a master's degree in finance from Bradley
University.
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KEVIN R. CZINGER has served as Senior Vice President, Corporate Operations
and Finance of Webvan since July 1999. From March 1999 to July 1999, he was
Chief Financial Officer of Webvan. From 1998 to 1999, Mr. Czinger served as a
managing director in the media and telecommunications group at Merrill Lynch &
Co., Inc. From 1996 to 1998, Mr. Czinger served as Chief Executive Officer of
Volcano Entertainment L.L.C., a record and music publishing company he founded.
From 1994 to 1996, Mr. Czinger served as Executive Vice President, Chief
Financial Officer and then Chief Operating Officer of the North America
media/entertainment operations of Bertelsmann AG, a diversified media company.
From 1991 to 1994, Mr. Czinger was executive director and head of media banking
group at Goldman Sachs International, an investment banking firm. Mr. Czinger
holds a B.A. from Yale College and a J.D. from Yale Law School.
ARVIND PETER RELAN has served as Senior Vice President, Technology of
Webvan since February 1998. From May 1994 to February 1998, Mr. Relan served in
various management positions at Oracle Corporation, a software company, most
recently as Vice President of Internet Server Products in its Application Server
Division. In 1995, Mr. Relan founded Oracle's Internet Server Division,
including Oracle's patented Web Request Broker technology, Oracle Application
Server and Oracle Internet Commerce Server. From 1988 to 1994, Mr. Relan held
various positions at Hewlett-Packard, a computer systems, equipment and services
company, including principal technologist for the HP Openview Platform. Mr.
Relan holds a B.S. in Computer Engineering from the University of California,
Los Angeles and a M.S. in Engineering Management from Stanford University.
MARK X. ZALESKI has served as Senior Vice President, Area Operations of
Webvan since July 1999. From December 1998 to July 1999, he served as Chief
Operating Officer of Webvan. From 1994 to 1998, Mr. Zaleski served in various
executive management positions for ACNielsen, a market research company, most
recently as Senior Vice President and Group Managing Director of Central Europe.
From 1985 to 1994, Mr. Zaleski held several positions at Federal Express, most
recently as a Managing Director for Federal Express, Europe. From 1985 to 1988,
Mr. Zaleski held various management positions in hub, ground operation and sales
for Federal Express. Mr. Zaleski holds a B.S. in Business Administration and an
M.B.A. from the European University in Antwerp, Belgium.
GREGORY BEUTLER has served as Vice President, Merchandising since August
1999. From September 1996 to August 1999, Mr. Beutler held several positions at
the General Electric Company, most recently as General Manager, Worldwide
Sourcing for GE Lighting. From September 1996 to December 1998, Mr. Beutler was
Director, Corporate Initiatives Group in Europe and at GE Corporate. From June
1990 to August 1996, Mr. Beutler was a Management Consultant at Symmetrix, Inc.,
a management consulting firm, most recently as Vice President. Mr. Beutler holds
a B.S. in Chemical Engineering from Rensselaer Polytechnic Institute and a
Master of Engineering in Chemical Engineering from Cornell University and a
M.B.A. from Harvard Business School.
GARY B. DAHL has served as Vice President, Distribution of Webvan since
April 1997. From March 1993 to April 1997, Mr. Dahl served as Senior Vice
President, Logistics of American Stores Company, a retail food and drug company.
From 1990 to 1993, Mr. Dahl was employed with Lucky Stores, a retail grocery
company, as a Vice President of Warehousing and Distribution. Mr. Dahl received
his B.A. in Biology from California State University, Long Beach and his M.P.H.
in Public Health from the University of California, Berkeley.
LEO L. FARLEY has served as Vice President, Food Production of Webvan since
July 1999. From 1998 to 1999, Mr. Farley was Vice President of Culinary Research
and Development for Sodexho Marriott Services, a food services company. In this
capacity, Mr. Farley was responsible for menu and recipe development, culinary
research and development and food safety and quality assurance. From 1986 to
1998, Mr. Farley held several executive management positions in finance,
strategic planning, project management and marketing with Marriott Management
Services, the contract food service division of Marriott International. Mr.
Farley holds a B.A. in Political Science from Drew University, an A.O.S. in
culinary arts from the Culinary Institute of America and an M.B.A. in finance
from New York University.
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<PAGE> 49
MARK J. HOLTZMAN has served as Vice President and Controller of Webvan
since March 1999. Mr. Holtzman also serves as Chief Financial Officer of
Webvan -- Bay Area. From July 1997 to March 1999, Mr. Holtzman served as Chief
Financial Officer of Webvan. From December 1994 to July of 1997, Mr. Holtzman
served as Group Controller of MicroAge, a distributor and reseller of computer
products and services. From December 1989 to December 1994, Mr. Holtzman was
employed by Kenfil, Inc., a computer software distributor, becoming Chief
Financial Officer in 1993. Mr. Holtzman received his B.A. in Political Science
and Economics from University of California, Berkeley and his M.B.A. from the
University of Michigan. Mr. Holtzman is a Certified Public Accountant.
VIVEK M. JOSHI has served as Vice President, Program Management of Webvan
since August 1999. From May 1996 to August 1999, Mr. Joshi held several
positions at General Electric Company, most recently as General Manager,
Off-Highway/Transit Operations at GE Transportation Systems. From May 1996 to
June 1998, Mr. Joshi was Manager, Corporate Initiatives Group at GE Corporate.
From October 1993 to May 1996, Mr. Joshi was a management consultant at Booz
Allen & Hamilton, a global management consulting company. From July 1992 to
October 1993, Mr. Joshi was a Manufacturing Team Leader at Johnson & Johnson
Advanced Materials Company. Mr. Joshi holds a B.Tech in Chemical Engineering
from the Indian Institute of Technology, Bombay, and an M.S. in Chemical
Engineering and an M.B.A. from the University of Virginia.
CHRISTIAN T. MANNELLA has served as Vice President, Marketing of Webvan
since December 1998. From July 1990 to November 1998, Mr. Mannella held several
positions at MCI WorldCom, most recently as Vice President of Sales & Service
Operations. From December 1995 to March 1998, Mr. Mannella was Vice President of
Brand Marketing for MCI WorldCom. From September 1989 to June of 1990, Mr.
Mannella was employed by Credit Card Service Corporation as Group Product
Manager. From January 1986 to September 1989, Mr. Mannella was employed as a
Marketing Manager by Marriott International. From July 1984 to January 1986, Mr.
Mannella was a Management Consultant with Laventhol & Horwath, CPAs. Mr.
Mannella holds a B.A. in Hotel, Restaurant and Institutional Management from
Michigan State University.
DAVID S. ROCK has served as Vice President, Real Estate of Webvan since May
1999. From January 1997 to May 1999, Mr. Rock served as Webvan's Vice President,
Retail. From 1987 to 1996, Mr. Rock owned and operated a business brokerage firm
specializing in the sale and acquisition of food and beverage retail businesses.
ROBERT H. SWAN has served as Vice President, Finance of Webvan since
October 1999. From September 1985 to October 1999, Mr. Swan held a variety of
positions at General Electric Company, most recently as Vice President, Finance
and Chief Financial Officer of GE Lighting. From January 1997 to June 1998, Mr.
Swan served as Vice President, Finance of GE Medical Systems in Europe. From
October 1994 to January 1997, Mr. Swan served as Chief Financial Officer of GE
Transportation Systems. From May 1988 to October 1994, Mr. Swan held several
assignments with GE's Corporate Audit Staff. Mr. Swan holds a B.S. in Management
from the State University of New York at Buffalo and an M.B.A. from the State
University of New York at Binghamton.
DAVID M. BEIRNE has served as a member of the Board since October 1997. Mr.
Beirne has been a Managing Member of Benchmark Capital, a venture capital firm,
since June 1997. Prior to joining Benchmark Capital, Mr. Beirne founded
Ramsey/Beirne Associates, an executive search firm, and served as its Chief
Executive Officer from October 1987 to June 1997. Mr. Beirne serves as a
director of Scient Corporation, Kana Communications, Inc. and 1-800-FLOWERS.COM,
Inc. Mr. Beirne received a B.S. in Management from Bryant College.
CHRISTOS M. COTSAKOS has served as a member of the Board since May 1998.
Mr. Cotsakos has been the Chief Executive Officer and Chairman of the Board of
E*TRADE Group, Inc. since December 1998. He joined E*TRADE in March 1996 as
President and Chief Executive Officer. Prior to joining E*TRADE, he served as
President, Co-Chief Executive Officer, Chief Operating Officer and a director of
ACNielsen, Inc. from March 1992 to January 1996. From March 1973 to March 1992,
he held a number of senior executive positions at FedEx Corporation. Mr.
Cotsakos serves as a director of
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<PAGE> 50
National Processing Company, Inc., Digital Island, Inc., Critical Path, Inc.,
and FOX Entertainment Group, Inc. Mr. Cotsakos received a B.A. from William
Paterson College, an M.B.A. from Pepperdine University and is currently pursuing
a Ph.D. in economics at the Management School, University of London.
TIM KOOGLE has served as a member of the Board since July 1999. Mr. Koogle
has been the Chief Executive Officer of Yahoo!, Inc. and a member of Yahoo!'s
Board of Directors since August 1995. He has also been Yahoo!'s Chairman since
January 1999 and was its President from August 1995 until January 1999. Prior to
joining Yahoo!, Mr. Koogle was President of Intermec Corporation, a manufacturer
of data collection and data communication products, from 1992 to 1995. During
that time, he also served as a corporate Vice President of Intermec's parent
company, Western Atlas. Mr. Koogle also serves as a director of E-LOAN, Inc. Mr.
Koogle holds a B.S. degree from the University of Virginia and an M.S. degree
from Stanford University.
MICHAEL J. MORITZ has served as a member of the Board since October 1997.
Mr. Moritz has been a general partner of Sequoia Capital, a venture capital
firm, since 1988. Between 1979 and 1984, Mr. Moritz was employed in a variety of
positions by Time, Inc. Mr. Moritz also serves as a director of Yahoo!,
Flextronics International, eToys Inc. and Agile Software Corporation. Mr. Moritz
holds an M.A. degree in history from Oxford University and an M.B.A. from the
Wharton Business School of the University of Pennsylvania.
Officers serve at the discretion of the Board and are appointed annually.
The employment of each of our officers is at will and may be terminated at any
time, with or without cause. There are no family relationships between any of
the directors or executive officers of Webvan.
BOARD COMPOSITION
Webvan currently has authorized six directors. Webvan's Restated
Certificate of Incorporation will provide that, effective upon the closing of
this offering, the terms of office of the members of the Board of Directors will
be divided into three classes: Class I, whose term will expire at the annual
meeting of stockholders to be held in 2000, Class II, whose term will expire at
the annual meeting of stockholders to be held in 2001, and Class III, whose term
will expire at the annual meeting of stockholders to be held in 2002. The Class
I directors are Messrs. Cotsakos and Koogle, the Class II directors are Messrs.
Beirne and Moritz and the Class III directors are Messrs. Borders and Shaheen.
At each annual meeting of stockholders after the initial classification, the
successors to directors whose term will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. Any additional directorships resulting from an increase in
the number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the total number of
directors. This classification of the Board of Directors may have the effect of
delaying or preventing changes in control or management of Webvan.
Messrs. Beirne and Moritz are currently serving on the Board as
representatives of the holders of our Series A preferred stock and Mr. Cotsakos
is currently serving on the Board as a representative of the holders of our
Series C preferred stock. The holders of our Series A preferred stock and Series
C preferred stock are entitled to elect these directors pursuant to the terms of
the preferred stock as set forth in our Restated Certificate of Incorporation.
Upon the closing of this offering, the outstanding shares of preferred stock
will convert into shares of common stock and the holders of the preferred stock
will no longer have the right to appoint any directors.
BOARD COMMITTEES
The Audit Committee of the Board of Directors reviews our internal
accounting procedures and consults with and reviews the services provided by our
independent accountants. The Audit Committee currently consists of Messrs.
Beirne, Koogle and Moritz.
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<PAGE> 51
The Compensation Committee of the Board of Directors reviews and recommends
to the Board the compensation and benefits of all of our executive officers,
administers our stock option plan and employee stock purchase plan and
establishes and reviews general policies relating to compensation and benefits
of our employees. The Compensation Committee currently consists of Messrs.
Beirne, Cotsakos and Moritz. No interlocking relationships exist between our
Board of Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any interlocking
relationship existed in the past.
DIRECTOR COMPENSATION
Our directors do not receive cash for services they provide as directors.
In July 1998, Mr. Cotsakos was granted an option to purchase 2,190,276 shares of
common stock at an exercise price of $0.10 per share. The option granted to Mr.
Cotsakos vests at the rate of one-sixteenth ( 1/16th) of the shares subject to
the option per quarter.
COMPENSATION COMMITTEE INTERLOCKS
No executive officer of Webvan serves as a member of the board of directors
or compensation committee of any entity that has one or more executive officers
serving as a member of Webvan's Board of Directors.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
Mr. Shaheen is a party to an agreement with us effective as of September
19, 1999. As contemplated by this agreement, Mr. Shaheen will serve as our Chief
Executive Officer and President and a member of our Board of Directors. Under
the agreement, we agreed to pay Mr. Shaheen a base salary of $500,000, subject
to annual adjustment, and a target bonus of $250,000. In connection with this
agreement, Mr. Shaheen was granted 1,250,000 shares of fully vested common stock
and was granted an option to purchase an additional 15,000,000 shares of common
stock at an exercise price of $8.00 per share. The option is immediately vested
as to 3,000,000 shares and the remaining shares will vest monthly over a four
year period, subject to Mr. Shaheen's continued service. Our Chairman, Louis
Borders, also granted Webvan an option to purchase up to 4,250,000 shares of
common stock beneficially owned by Mr. Borders at an exercise price of $8.00 per
share. This option vests monthly over a four year period, subject to Mr.
Shaheen's continued service to Webvan. We also loaned Mr. Shaheen $6.7 million
at an annual interest rate of 6.2% with the loan to be repaid with a portion of
the gain realized by Mr. Shaheen upon the sale of his shares of Webvan common
stock or upon exercise of his Webvan stock options. In connection with the terms
of employment with Mr. Shaheen, in September 1999 we will record immediate
compensation for stock and option grants of approximately $27.0 million and
deferred compensation of approximately $48.0 million.
We also agreed to provide Mr. Shaheen a supplemental retirement benefit
equal to 50% of his base compensation plus target bonus upon his retirement for
any reason after June 30, 2000. In the event that Mr. Shaheen is terminated
without cause or resigns for good reason, he is entitled to severance equal to
two years of base salary plus target bonus and two years additional vesting on
his stock options. In addition, if Mr. Shaheen is terminated without cause or
resigns for good reason within 12 months following a change in control of
Webvan, he shall be entitled to severance equal to three years of base salary
plus target bonus, full vesting as to all of his unvested stock options and
payment of any excise taxes payable by Mr. Shaheen in connection with the
receipt of such compensation. In the event of Mr. Shaheen's death or permanent
disability, he shall be entitled to accelerated vesting as to 50% of his
unvested stock options and he or his estate shall have 12 months to exercise any
vested options.
Mr. Dahl is a party to an offer letter, dated March 31, 1997. Under the
offer letter, we agreed to pay Mr. Dahl a base salary of $200,000, subject to
annual adjustment.
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<PAGE> 52
Mr. S. Coppy Holzman, our Vice President, Merchandising until August 1999,
is a party to an offer letter, dated September 2, 1997. Under the offer letter,
we agreed to pay Mr. Holzman a base salary of $250,000, subject to annual
adjustment. The offer letter provides that, in the event that Mr. Holzman's
employment is terminated for other than cause, we are obligated to pay him a six
month salary severance. This provision expires on October 1, 1999.
Mr. Holtzman is a party to an offer letter, dated June 5, 1997. Under the
offer letter, we agreed to pay Mr. Holtzman a base salary of $175,000, subject
to annual adjustment. The offer letter provides that in the event that Mr.
Holtzman's employment is terminated for other than cause, we are obligated to
pay him a monthly salary severance and option vesting for up to six months until
he is employed elsewhere at a comparable salary.
Mr. Relan is a party to an offer letter, dated February 2, 1998. Under the
offer letter, we agreed to pay Mr. Relan a base salary of $200,000, subject to
annual adjustment. The offer letter provides that in the event that Mr. Relan's
employment is terminated for any reason following the second anniversary of his
employment, we are obligated to, at our option, either pay to Mr. Relan the sum
of $3.0 million or accelerate the vesting of all of Mr. Relan's options to
purchase our common stock. The offer letter further provides that, in the event
that Mr. Relan's employment is terminated without cause, we are obligated to pay
him six months of salary and benefits as severance. Under Mr. Relan's offer
letter, he has the right, expiring in March 2000, to cause Webvan to repurchase
up to 1,914,000 shares of common stock beginning on the first anniversary of his
employment and an additional 1,914,000 shares of common stock beginning on the
second anniversary of his employment, in each case at a price of $0.37 per
share. Mr. Relan also has the right to participate in sales of our preferred
stock prior to the initial public offering of our common stock up to a maximum
amount of $200,000 for each round of financing.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation paid by Webvan
during the fiscal year ended December 31, 1998 to our Chief Executive Officer
and our four other most highly compensated executive officers whose salary and
bonus exceeds $100,000 (collectively, the "Named Executive Officers") for
services rendered in all capacities to Webvan.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM
----------------------------------- COMPENSATION
OTHER ANNUAL AWARDS OF ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY BONUS COMPENSATION(2) STOCK OPTIONS COMPENSATION(3)
---------------------------- -------- ------ --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Louis H. Borders............... $ -- $ -- $ -- -- $ --
Chairman, President and Chief
Executive Officer(4)
Gary B. Dahl................... 178,600 8,750 -- 600,000 2,000
Vice President, Distribution
Mark J. Holtzman............... 150,000 7,500 13,835 1,200,000 2,000
Controller
S. Coppy Holzman(5)............ 219,431 -- -- 900,000 1,491
Vice President, Merchandising
Arvind Peter Relan(6).......... 142,974 7,692 -- 7,956,000 2,000
Senior Vice President,
Technology
</TABLE>
- -------------------------
(1) Other compensation in the form of perquisites and other personal benefits
has been omitted in those cases where the aggregate amount of such
perquisites and other personal benefits
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constituted less than the lesser of $50,000 or 10% of the total annual
salary and bonus for the Named Executive Officer for such year.
(2) Represents a payment for a relocation allowance.
(3) Represents 401(k) plan matching by Webvan.
(4) Mr. Borders served as President and Chief Executive Officer of Webvan from
December 1996 to September 1999.
(5) Mr. Holzman was Vice President, Merchandising of Webvan from September 1997
through August 1999.
(6) Mr. Relan joined Webvan in February 1998.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information for the fiscal year ended
December 31, 1998 with respect to each grant of stock options to the Named
Executive Officers:
OPTION GRANTS DURING YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
------------------------------------ VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(3)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------------
NAME GRANTED IN 1998(2) SHARE DATE 5% 10%
---- --------- ----------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Louis H. Borders............. -- --% $ -- -- $ -- $ --
Gary B. Dahl................. 600,000 1.3 0.0125 1/06/2008 4,717 11,953
Mark J. Holtzman............. 1,200,000 2.6 0.0125 1/06/2008 9,433 23,906
S. Coppy Holzman............. 900,000 2.0 0.0125 1/06/2008 7,075 17,930
Arvind Peter Relan........... 7,656,000 16.5 0.0125 3/06/2008 60,185 152,521
Arvind Peter Relan........... 300,000 0.6 0.0125 5/13/2008 2,358 5,977
</TABLE>
- -------------------------
(1) Each of these options was granted pursuant to the Stock Plan and is subject
to the terms of such plan. These options were granted at an exercise price
equal to the fair market value of our common stock as determined by our
Board of Directors on the date of grant and, as long as the optionee
maintains continuous employment with Webvan, vest over a four year period at
the rate of one-fourth ( 1/4th) of the shares subject to the option on the
first anniversary of the date of grant and one-sixteenth ( 1/16th) of the
shares subject to the option per quarter thereafter.
(2) In 1998, we granted employees and consultants options to purchase an
aggregate of 46,436,478 shares of common stock.
(3) The gains shown are "option spreads" that would exist for the respective
options granted. These gains are based on the assumed rates of annual
compound stock price appreciation of 5% and 10% from the date the option was
granted over the full option term. These assumed annual compound rates of
stock price appreciation do not represent our estimate or projection of
future common stock prices.
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<PAGE> 54
AGGREGATED OPTION EXERCISES IN 1998 AND DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AT
SHARES DECEMBER 31, VALUE OF IN-THE-MONEY
ACQUIRED VALUE 1998(2) OPTIONS(3)
ON OPTIONS REALIZED --------------------- -------------------------
NAME EXERCISE (1) VESTED UNVESTED VESTED UNVESTED
---- ---------- -------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Louis H. Borders....... -- $ -- -- -- $ -- $ --
Gary B. Dahl........... 2,250,000 26,250 1,068,750 1,781,250 12,821,487 21,369,145
Mark J. Holtzman....... 1,860,000 14,700 768,750 1,691,250 9,219,986 20,283,969
S. Coppy Holzman....... 2,250,000 26,250 984,375 2,165,625 11,808,401 25,978,482
Arvind Peter Relan..... 3,828,000 -- -- 7,956,000 -- 95,372,550
</TABLE>
- -------------------------
(1) Equal to the fair market value of the purchased shares on the option
exercise date, less the exercise price paid for such shares.
(2) The options are immediately exercisable for all of the option shares, but
any shares purchased under those options will be subject to repurchase by
Webvan at the original exercise price paid per share, if the optionee ceases
service with Webvan before vesting in those shares. The heading "Vested"
refers to shares that are no longer subject to repurchase and the heading
"Unvested" refers to shares subject to repurchase as of December 31, 1998.
(3) Based upon an assumed initial public offering price of $12.00 per share less
the exercise price per share.
COMPENSATION PLANS
1997 Stock Plan
Webvan's Stock Plan was approved by the Board of Directors and the
stockholders in September 1997 and was amended in March 1998, July 1998, October
1998, December 1998, January 1999 and August 1999. The Stock Plan provides for
the grant to employees of Webvan, including officers and employee directors, of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and for the grant of nonstatutory stock
options to employees, directors and consultants of Webvan. The Stock Plan is
currently administered by the Board of Directors which selects the optionees,
determines the number of shares to be subject to each option and determines the
exercise price of each option. The Stock Plan authorizes the issuance of an
aggregate of up to 79,500,000 shares of common stock. The maximum number of
shares that may be granted to any individual under the Stock Plan in any year is
2,000,000, except that an individual may be granted up to an additional
2,000,000 shares in connection with his or her initial service. As of October
20, 1999, options to purchase an aggregate of 51,547,816 shares of common stock
were outstanding under the Stock Plan, and an aggregate of 3,192,047 shares of
common stock remained available for future grants. The number of shares of
common stock reserved for issuance under this plan will be subject to an annual
increase on each anniversary beginning January 1, 2000 equal to the lesser of:
- 16,000,000 shares;
- 4% of the outstanding shares on such date; or
- an amount determined by the Board.
The exercise price of all incentive stock options granted under the Stock
Plan must be at least equal to the fair market value of the common stock on the
date of grant. The exercise price of all nonstatutory stock options granted
under the Stock Plan shall be determined by the administrator, but in no event
may be less than 85% of the fair market value on the date of grant. With respect
to any participant who owns stock possessing more than 10% of the voting power
of all classes of stock of Webvan, the exercise price of any incentive or
nonstatutory option granted must equal at least 110%
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<PAGE> 55
of the fair market value on the grant date and the maximum term of any such
option must not exceed five years. The term of all other options granted under
the Stock Plan may not exceed ten years.
In the event a participant in the Stock Plan ceases to be an employee,
director or consultant of Webvan, other than upon the participant's death or
disability, the participant may exercise his or her vested options for a period
of three months following such termination, unless a different exercise period
is specified in his or her option agreement.
In the event of a merger of Webvan with or into another corporation or a
sale of substantially all of our assets, the Stock Plan requires that each
outstanding option be assumed or an equivalent option substituted by the
successor corporation; provided, however, that in the event the successor
corporation refuses to assume or substitute for the outstanding options, such
options will become fully vested and exercisable for a period of fifteen days
after notice from the administrator. Unless terminated sooner, the Stock Plan
will terminate ten years from its effective date. The Board has authority to
amend or terminate the Stock Plan, provided that no such action may impair the
rights of the holder of any outstanding options without the written consent of
that holder.
1999 Nonstatutory Stock Option Plan
Our 1999 Nonstatutory Stock Option Plan was approved by the Board of
Directors in September 1999. The Nonstatutory Plan provides for the grant of
nonstatutory stock options to employees, directors and consultants of Webvan.
Executive officers are only eligible to receive options under the Nonstatutory
Plan in connection with their initial employment by Webvan. The Nonstatutory
Plan is currently administered by the Board of Directors which selects the
optionees, determines the number of shares to be subject to each option and
determines the exercise price of each option. The Nonstatutory Plan authorizes
the issuance of an aggregate of up to 23,000,000 shares of common stock. As of
October 20, 1999 options to purchase an aggregate of 16,110,000 shares of common
stock were outstanding under the Nonstatutory Plan, and an aggregate of
6,875,000 shares of common stock remained available for future grants.
The exercise price of all stock options granted under the Nonstatutory Plan
shall be determined by the administrator and the maximum term of an option may
not exceed ten years.
In the event a participant in the Nonstatutory Plan ceases to be an
employee, director or consultant of Webvan, other than upon the participant's
death or disability, the participant may exercise his or her vested options for
a period of three months following such termination, unless a different exercise
period is specified in his or her option agreement.
In the event of a merger of Webvan with or into another corporation or a
sale of substantially all of our assets, the Nonstatutory Plan requires that
each outstanding option be assumed or an equivalent option substituted by the
successor corporation; provided, however, that in the event the successor
corporation refuses to assume or substitute for the outstanding options, such
options will become fully vested and exercisable for a period of fifteen days
after notice from the administrator. Unless terminated sooner, the Nonstatutory
Plan will terminate ten years from its effective date. The Board has authority
to amend or terminate the Nonstatutory Plan, provided that no such action may
impair the rights of the holder of any outstanding options without the written
consent of that holder.
1999 Employee Stock Purchase Plan
Our 1999 Employee Stock Purchase Plan, or the Purchase Plan, provides our
employees with an opportunity to purchase our common stock through accumulated
payroll deductions. This plan will become effective upon the closing of this
offering. A total of 5,000,000 shares of common stock have been reserved for
issuance under the Purchase Plan, none of which have been issued. The number of
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shares reserved for issuance under the Purchase Plan will be subject to an
annual increase on each anniversary beginning January 1, 2000 equal to the
lesser of:
- the number of shares issued under the Purchase Plan in the prior year; or
- an amount determined by the Board.
The Purchase Plan will be administered by the Board of Directors or by a
committee appointed by the Board. The Purchase Plan permits eligible employees
to purchase common stock through payroll deductions up to a maximum of $25,000
for all purchases ending within the same calendar year and up to a maximum of
1,000 shares for each purchase period. Employees are eligible to participate if
they are employed by us for at least 20 hours per week and more than five months
in any calendar year. Unless the Board of Directors or its committee determines
otherwise, each offering period will run for six months. The first offering
period will commence on the date of this prospectus and end on or about August
14, 2000, and new offering periods will commence every six months thereafter. In
the event we are acquired, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation. In the event that
the successor corporation refuses to assume or substitute for the option, the
offering period then in progress will be shortened by setting a new exercise
date. The price at which common stock will be purchased under the Purchase Plan
is equal to 85% of the fair market value of the common stock on the first or
last day of the applicable offering period, whichever is lower. Employees may
end their participation in the offering period at any time, and participation
automatically ends on termination of employment. Generally, the Board of
Directors may amend, modify or terminate the Purchase Plan at any time as long
as such amendment, modification or termination does not impair the rights of
plan participants. The Purchase Plan will terminate at 2009, unless terminated
earlier in accordance with its provisions.
401(k) Plan
Webvan adopted a retirement savings plan, or 401(k) Plan, that covers all
of our employees. An employee may elect to defer, in the form of contributions
to the 401(k) Plan, up to 15% of the total annual compensation that would
otherwise be paid to the employee, subject to statutory limitations. Employee
contributions are invested in selected mutual funds or money market funds
according to the directions of the employee. Webvan makes matching contributions
as a percentage of employee contributions, subject to established limits. The
employees' contributions are fully vested and nonforfeitable at all times.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our Certificate of Incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemption; or
- any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our Certificate of Incorporation and Bylaws provide that we shall indemnify
our directors and executive officers and may indemnify other officers and
employees and our agents to the fullest extent permitted by law. We believe that
indemnification under our Bylaws covers at least negligence and gross negligence
on the part of indemnified parties. Our Bylaws also permit us to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions
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<PAGE> 57
in that capacity, regardless of whether the Bylaws would permit indemnification.
We have director and officer liability insurance that covers matters, including
matters arising under the Securities Act.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our Bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for judgments, fines, settlement amounts and expenses,
including attorneys' fees, incurred by any of these persons in any action or
proceeding, including any action by or in the right of Webvan, arising out of
that person's services as a director or executive officer of ours, any
subsidiary of ours or any other company or enterprise to which the person
provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
There is no pending litigation or proceeding involving any director,
officer, employee or agent of Webvan where indemnification will be required or
permitted. We are not aware of any pending or threatened litigation or
proceeding that might result in a claim for such indemnification.
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RELATED PARTY TRANSACTIONS
SALES OF STOCK TO INSIDERS
In April 1997, we issued 27,038,856 shares of common stock to the Louis H.
Borders Amended and Restated Revocable Trust dated December 4, 1987, and
17,361,144 shares of common stock to ISR GRAT I, a trust affiliated with Mr.
Borders, for an aggregate purchase price of $37,000. Louis H. Borders is our
Chairman and former President and Chief Executive Officer.
In October 1997, we issued an aggregate of 111,643,872 shares of Series A
preferred stock to investors for an aggregate purchase price of approximately
$10.7 million. The following directors, executive officers, holders of more than
5% of a class of voting securities and members of such person's immediate
families purchased shares of Series A preferred stock:
<TABLE>
<CAPTION>
SHARES OF
SERIES A
PURCHASER PREFERRED STOCK
--------- ---------------
<S> <C>
Louis H. Borders Amended and Restated Revocable Trust dated
December 4, 1987.......................................... 22,240,896
ISR GRAT I.................................................. 14,281,080
Benchmark Capital........................................... 36,521,976
Sequoia Capital............................................. 36,521,976
</TABLE>
In May and June 1998, we issued an aggregate of 38,612,184 shares of Series
B preferred stock to investors for an aggregate purchase price of approximately
$35.3 million. SOFTBANK America Inc., a holder of more than 5% of our voting
securities, purchased 36,521,976 shares of Series B preferred stock in such
transaction.
In January and April 1999, we issued an aggregate of 32,341,200 shares of
Series C preferred stock to investors for an aggregate purchase price of
approximately $75.1 million. E*TRADE Group, Inc. and Yahoo! Inc. each purchased
4,304,100 shares of Series C preferred stock in such transaction. Christos M.
Cotsakos, a director of Webvan, is the President and CEO of E*TRADE Group, Inc.,
and Tim Koogle, a director of Webvan, is the Chief Executive Officer and
Chairman of Yahoo! Inc.
In June 1999, as contemplated by his offer letter, Kevin R. Czinger
purchased 450,000 shares of our common stock at a price of $1.35 per share.
In July 1999, we entered into an agreement to issue an aggregate of
21,670,605 shares of Series D-2 preferred stock to investors at an aggregate
purchase price of approximately $275.0 million. Entities affiliated with
SOFTBANK America Inc. purchased 9,850,275 shares of Series D-2 preferred stock
and entities affiliated with Sequoia Investors Group purchased 3,940,110 shares
of Series D-2 preferred stock transaction.
In July 1999, we issued an option to purchase 150,000 shares of common
stock to Yahoo! Inc. at a price of $3.33 per share under our 1997 Stock Plan.
The option granted to Yahoo! Inc. vests at the rate of one-sixteenth ( 1/16th)
of the shares subject to the agreement per quarter as long as Mr. Koogle remains
on our Board of Directors.
Each share of Series A preferred stock, Series B preferred stock, Series C
preferred stock and Series D preferred stock will convert into one share of
common stock immediately prior to the closing of this offering.
OTHER AGREEMENTS WITH INSIDERS
We are a party to a voting agreement executed in September 1997, as amended
in December 1998, with the Louis H. Borders Amended and Restated Revocable Trust
dated December 4, 1987, and a number of our shareholders affiliated with or
related to Mr. Borders. Such shareholders each executed an irrevocable proxy
appointing the trustee of the trust as their proxy and attorney-in-fact. The
voting agreement and irrevocable proxy will terminate immediately prior to the
closing of this offering.
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<PAGE> 59
Mark Zaleski, our Senior Vice President, Area Operations, is a party to an
offer letter, dated December 14, 1998. In March 1999, Webvan loaned Mr. Zaleski
$200,000 to be used towards the purchase of a house in the San Francisco Bay
Area. This loan was made as an interest-free employee relocation bridge loan, as
contemplated by his offer letter, and is repayable upon the first to occur of
March 1, 2000 or 15 days after the sale of his previous residence. The offer
letter also provides that in the event that Mr. Zaleski's employment is
terminated for other than cause, we are obligated to pay him a severance of six
months of salary and benefits as well as continued salary and benefits for up to
12 months until he obtains subsequent employment. In the event of such a
termination, the unvested portion of Mr. Zaleski's options will become
exercisable to the extent of an additional 12 months of vesting.
Mr. Czinger is a party to an offer letter dated March 17, 1999. The offer
letter provides that, in the event that Mr. Czinger's employment is terminated
for other than cause, we are obligated to pay him a lump sum severance of six
months of salary and benefits as well as continued salary and benefits for up to
six months until Mr. Czinger obtains subsequent employment. Mr. Czinger also has
the option to purchase 430,416 shares of our Series C preferred stock at an
exercise price of $2.32 per share by January 1, 2000. The offer letter further
provides that, if Mr. Czinger is involuntarily terminated by Webvan or a
successor company, the unvested portion of his options will become exercisable
to the extent of an additional 12 months of vesting.
Gregory Beutler, our Vice President, Merchandising, and Vivek M. Joshi, our
Vice President, Program Management are each party to offer letters, dated August
19, 1999 and July 25, 1999, respectively. Each of the offer letters provide
that, in the event such person's employment is terminated for other than cause,
we are obligated to pay him a six month salary and benefits severance as well as
continued salary and benefits for up to six additional months until he obtains
subsequent employment.
In connection with the recruiting of some of our executive officers and
employees, we engaged the services of Ramsey/Beirne Associates, an executive
search firm. Mr. Beirne, one of our directors, is the chairman of Ramsey/Beirne
and owns more than 5% of the stock of Ramsey/Beirne. As consideration for these
services, we paid Ramsey/Beirne an aggregate of $185,000 in cash, 382,500 shares
of our common stock and options to purchase up to 159,840 shares of our common
stock, all of which have been exercised.
Robert H. Swan, our Vice President, Finance, is a party of an offer letter
dated October 2, 1999. The offer letter provides that in the event Mr. Swan's
employment is terminated for other than cause, we are obligated to pay him a six
month salary and benefits severance as well as continued salary and benefits for
up to six additional months until he obtains subsequent employment. The offer
letter further provides that if Mr. Swan is terminated for other than cause, the
unvested portion of his options will become exercisable to the extent of an
additional six months of vesting.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of October 20, 1999 with respect to
- each person or group of affiliated persons known by Webvan to own
beneficially more than 5% of the outstanding shares of common stock;
- each of our directors;
- each of the Named Executive Officers; and
- all directors and executive officers as a group.
The address for each listed director and officer is c/o Webvan Group, Inc.,
1241 East Hillsdale Boulevard, Suite 210, Foster City, California 94404. Except
as otherwise indicated in the footnotes to the table, each of the stockholders
has sole voting and investment power with respect to the shares of beneficially
owned by such stockholders, subject to community property laws where applicable.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNED(1)
------------------------ ------------------ -------------------
<S> <C> <C>
Louis H. Borders(2)....................................... 83,872,776 28.3%
SOFTBANK America Inc.(3).................................. 46,372,251 15.6
300 Delaware Avenue, Suite 900
Wilmington, Delaware 19801
Sequoia Capital(4)........................................ 40,462,086 13.6
Michael J. Moritz
Benchmark Capital(5)...................................... 36,521,976 12.3
David M. Beirne
Arvind Peter Relan(6)..................................... 3,940,500 1.3
S. Coppy Holzman(7)....................................... 2,700,000 *
Gary B. Dahl(8)........................................... 2,625,000 *
Mark J. Holtzman(9)....................................... 1,926,000 *
Christos Cotsakos(10)..................................... 821,354 *
Tim Koogle(11)............................................ -- --
All directors and officers as a group (17 persons)(12).... 183,363,882 60.5
</TABLE>
- -------------------------
* Less than 1%
(1) Applicable percentage ownership is based on 296,845,386 shares of common
stock outstanding as of October 20, 1999. Shares of common stock that a
person has the right to acquire within 60 days of October 20, 1999 are
deemed outstanding for purposes of computing the percentage ownership of
the person holding such rights, but are not deemed outstanding for purposes
of computing the percentage ownership of any other person, except with
respect to the percentage ownership of all directors and executive officers
as a group.
(2) Includes 36,313,224 shares held by Louis H. Borders, Trustee of the Louis
H. Borders Amended and Restated Revocable Trust dated December 4, 1987, or
the Trust; 31,642,224 shares held by ISR GRAT I; 12,917,328 shares held by
ISR GRAT II and 3,000,000 shares held by Louis H. Borders as trustee of a
trust for the benefit of a member of his family. ISR GRAT I holds shares
for the benefit of the Trust and will expire in February 2000. ISR GRAT II
holds shares for the benefit of a member of Mr. Borders' family and will
expire in December 2002. Mr. Borders is Chairman of Webvan. Certain
employees of Mercury Capital Management held options to purchase 195,000
shares of common stock held by the Trust, and Webvan holds an option to
purchase up to 4,250,000 shares of common stock held by the Trust at an
exercise price of $8.00 per share.
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<PAGE> 61
(3) Includes 9,717,243 shares held by SOFTBANK Capital Partners LP and 133,032
shares held by SOFTBANK Capital Advisors Fund LLP.
(4) Includes 33,417,612 shares held by Sequoia Capital VII, or Sequoia Capital;
3,940,110 shares held by Sequoia Capital Franchise Fund, or Sequoia Fund
and Sequoia Capital Franchise Partners, or Sequoia Partners; 1,460,880
shares held by Sequoia Technology Partners VII; 677,844 shares held by SQP
1997; 584,352 shares held by Sequoia International Partners and 381,288
shares held by Sequoia 1997 LLC. Mr. Moritz, one of our directors, is a
general partner of Sequoia Capital, Sequoia Fund, Sequoia Partners, Sequoia
Technology, SQP, Sequoia International and Sequoia LLC. Mr. Moritz
disclaims beneficial ownership of such shares held by Sequoia Capital,
Sequoia Fund, Sequoia Partners, Sequoia Technology, SQP, Sequoia
International and Sequoia LLC, except to the extent of his pecuniary
interest therein.
(5) Includes 32,043,432 shares held by Benchmark Capital Partners, L.P., or
Benchmark Capital, and 4,478,544 shares held by Benchmark Founders' Fund,
L.P., or Benchmark Founders. Mr. Beirne, one of our directors, is a
Managing Member of Benchmark Capital Management Co., LLC, the general
partner of Benchmark Capital and Benchmark Founders. Mr. Beirne disclaims
beneficial ownership of such shares held by Benchmark Capital and Benchmark
Founders, except to the extent of his pecuniary interest therein.
(6) Includes an aggregate of 55,000 shares held in trusts for the benefit of
Mr. Relan's relatives, 37,500 shares held by Renuka Prasad Relan, Trustee
of the Renuka Prasad Relan 1999 Grantor Trust, 37,500 shares held by Arvind
Peter Relan, Trustee of the Arvind Peter Relan 1999 Grantor Trust and
75,000 shares held by Arvind Peter Relan and Renuka Prasad Relan, Trustees
of the Relan Family 1999 Trust. Includes 112,500 shares subject to an
option exercisable within 60 days of October 20, 1999. Of the shares
included in the table, 957,000 shares are subject to a right of repurchase
in favor of Webvan in the event that Mr. Relan's employment with Webvan
terminates. Such repurchase right expired as to 25% of the shares in
February 1999 and will expire as to 1/16 of the shares on a quarterly basis
thereafter through February 2002.
(7) Includes 450,000 shares subject to an option exercisable within 60 days of
October 20, 1999. Of the shares included in the table, 1,125,000 shares are
subject to a right of repurchase in favor of Webvan in the event that Mr.
Holzman's employment with Webvan terminates. Such repurchase right expired
as to 25% of the shares in September 1998 and will expire as to 1/16th of
the shares on a quarterly basis thereafter through September 2001.
(8) Includes 375,000 shares subject to an option exercisable within 60 days of
October 20, 1999. Includes 525,000 shares held by Gary B. Dahl, Trustee of
the Double D Trust Number One and 525,000 shares held by Gary B. Dahl,
Trustee of the Double D Trust Number Two. Of the shares included in the
table, 984,375 shares are subject to a right of repurchase in favor of
Webvan in the event that Mr. Dahl's employment with Webvan terminates. Such
repurchase right expired as to 25% of the shares in April 1998 and will
expire as to 1/16th of the shares on a quarterly basis thereafter through
April 2001.
(9) Includes 74,070 shares subject to an option exercisable within 60 days of
October 20, 1999. Includes 225,000 shares held by Mark Jeffrey Holtzman,
Trustee of the Mark Holtzman 1999 Children's Trust and 225,000 shares held
by Mark Jeffrey Holtzman, Trustee of the Marla Holtzman 1999 Children's
Trust. Of the shares included in the table, 551,250 shares are subject to a
right of repurchase in favor of Webvan in the event that Mr. Holtzman's
employment with Webvan terminates. Such repurchase right expired as to 25%
of the shares in July 1998 and will expire as to 1/16th of the shares on a
quarterly basis thereafter through July 2001.
(10) Represents 136,892 shares issuable upon the exercise of options which are
exercisable within 60 days of October 20, 1999. Does not include 4,304,100
shares held by E*TRADE
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E-Commerce Fund LLC. Mr. Cotsakos is the Chairman of the Board, President
and Chief Executive Officer of E*TRADE Group, Inc. and disclaims beneficial
ownership of such shares.
(11) Does not include 4,304,100 shares held by Yahoo!, Inc. Mr. Koogle is the
Chairman of the Board and Chief Executive Officer of Yahoo!, Inc. and
disclaims beneficial ownership of such shares.
(12) Includes an aggregate of 6,098,302 shares subject to an option exercisable
within 60 days of October 20, 1999.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Restated Certificate of Incorporation, which will be filed prior to the
closing of this offering, authorizes the issuance of up to 800,000,000 shares of
common stock, par value $0.0001 per share, and 10,000,000 shares of preferred
stock, par value $0.0001 per share, the rights and preferences of which may be
established by our Board of Directors. As of October 20, 1999, after giving
effect to the conversion of all outstanding shares of Series A, B, C and D
preferred stock prior to the closing of this offering, 296,845,386 shares of
common stock were issued and outstanding and held by approximately 310
stockholders.
COMMON STOCK
The holders of common stock are entitled to one vote for each share held of
record upon such matters and in such manner as may be provided by law. Subject
to preferences applicable to any outstanding shares of preferred stock, the
holders of common stock are entitled to receive ratably dividends, if any, as
may be declared by the Board of Directors out of funds legally available for
dividend payments. In the event we liquidate, dissolve or wind up, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares of
the preferred stock. Holders of common stock have no preemptive rights or rights
to convert their common stock into any other securities. There are no redemption
or sinking fund provisions applicable to the common stock. All outstanding
shares of common stock are fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, the Board of Directors will be
authorized, absent any limitations prescribed by law, without stockholder
approval, to issue up to an aggregate of 10,000,000 shares of preferred stock,
in one or more series, each of the series to have rights and preferences,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be determined by the Board of
Directors. The rights of the holders of common stock will be subject to, and may
be adversely affected by, the rights of holders of any preferred stock that may
be issued in the future. Issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, a majority
of our outstanding voting stock. We have no present plans to issue any shares of
preferred stock.
REGISTRATION RIGHTS
Set forth below is a summary of the registration rights of the holders of
our Series A preferred stock, Series B preferred stock, Series C preferred stock
and Series D preferred stock each of which will convert into common stock
immediately prior to the consummation of this offering.
Demand Registrations. At any time on or after the first to occur of October
29, 2000 or six months following the closing date of the initial public offering
of our common stock, the holders of registration rights may request us to
register shares of common stock having a gross offering price of at least $25
million subject to our right, upon advice of our underwriters, to reduce the
number of shares proposed to be registered. We will be obligated to effect only
three registrations pursuant to such a request by holders of registration
rights. If shares requested to be included in a registration must be excluded
due to limitations on the number of shares to be registered on behalf of the
selling shareholders pursuant to the underwriters' advice, the shares registered
on behalf of the selling shareholders will be allocated among all holders of
shares with rights to be included in the registration on the basis of the number
of shares with such rights held by such shareholders.
Piggyback Registration Rights. The holders who have registration rights
have unlimited rights to request that shares be included in any
company-initiated registration of common stock other than registrations of
employee benefit plans or business combinations subject to Rule 145 under the
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<PAGE> 64
Securities Act. In our initial registration, the underwriters may, for marketing
reasons, exclude all or part of the shares requested to be registered on behalf
of all shareholders having the right to request inclusion in such registration.
In our subsequent registrations, the underwriters may, for marketing reasons,
limit the shares requested to be registered on behalf of all shareholders having
the right to request inclusion in such registration to not less than 30%. In
addition, we have the right to terminate any registration we initiated prior to
its effectiveness regardless of any request for inclusion by any stockholders.
Form S-3 Registrations. After we have qualified for registration on Form
S-3 which will not be available until at least 12 months after we become a
publicly reporting company, holders of registration rights may request in
writing that we effect an unlimited number of registrations of such shares on
Form S-3 provided that the gross offering price of the shares to be so
registered in each such registration exceeds $1,000,000. If such registration is
to be an underwritten public offering, the underwriters may reduce for marketing
reasons the number of shares to be registered on behalf of all shareholders
having the right to request inclusion in such registration. We are not obligated
to effect a registration on Form S-3 prior to expiration of 180 days following
effectiveness of the most recent registration requested by the holders.
Future Grants of Registration Rights. We cannot grant further registration
rights without the prior written consent of current stockholders owning at least
a majority of the then outstanding registrable securities, including grants to
any holder or prospective holder of any registration rights which would:
- be on equal or more favorable terms than the existing registration
rights;
- cause a reduction in the amount of registrable securities held by current
holders that would be registrable in a registration statement; or
- require us to effect a registration earlier than the date current holders
can first require a registration.
Transferability. The registration rights are transferable upon notice by
the holder to us of the transfer, provided that the transferee or assignee is
not deemed by the Board of Directors to be a competitor of ours and assumes the
rights and obligations of the transferor for such shares.
Termination. The registration rights will terminate on the first to occur
of five years after the date of our initial public offering or the date on which
the holder may sell the share pursuant to Rule 144, provided that the aggregate
of the shares held by the holder represent less than 1% of our then outstanding
equity securities.
WARRANTS
At October 20, 1999, we had outstanding warrants to purchase an aggregate
of 2,397,804 shares of our Series B preferred stock, which is convertible into
an equivalent number of shares of common stock. The weighted average exercise
price of the warrants is $0.91 per share. Any warrant may be exercised by
applying the value of a portion of the warrant, which is equal to the number of
shares issuable under the warrant being exercised multiplied by the fair market
value of the security receivable upon exercise of the warrant, less the per
share exercise price, in lieu of payment of the exercise price per share. The
warrants to purchase an aggregate of 2,233,572 shares expire in November 2005.
The warrant to purchase 164,232 shares expires in May 2008 or five years from
effective date of our initial public offering, whichever occurs first.
In connection with our agreement with Bechtel Corporation, we issued to
Bechtel a warrant to purchase up to 1,800,000 shares at an exercise price of
$2.32 per share. The warrant expires in July 2004 and became exercisable as to
150,000 shares as of July 31, 1999. Bechtel exercised the warrant as to 150,000
shares in September 1999. The warrant generally becomes exercisable as to the
remaining shares as distribution centers are completed by Bechtel within agreed
upon schedule and budgetary parameters.
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DELAWARE ANTI-TAKEOVER LAW AND OUR CERTIFICATE OF INCORPORATION AND BYLAW
PROVISIONS
Provisions of Delaware law and our Certificate of Incorporation and Bylaws
could make more difficult our acquisition by a third party and the removal of
our incumbent officers and directors. These provisions, summarized below, are
expected to discourage coercive takeover practices and inadequate takeover bids
and to encourage persons seeking to acquire control of Webvan to first negotiate
with us. We believe that the benefits of increased protection of our ability to
negotiate with the proponent of an unfriendly or unsolicited acquisition
proposal outweigh the disadvantages of discouraging such proposals because,
among other things, negotiation could result in an improvement of their terms.
We are subject to Section 203 of the Delaware General Corporation Law,
which regulates corporate acquisitions. In general, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
the person became an interested stockholder, unless:
- the Board of Directors approved the transaction in which such stockholder
became an interested stockholder prior to the date the interested
stockholder attained such status;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
- on or subsequent to such date the business combination is approved by the
Board of Directors and authorized at an annual or special meeting of
stockholders.
A "business combination" generally includes a merger, asset or stock sale,
or other transaction resulting in a financial benefit to the interested
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
Our Certificate of Incorporation and Bylaws do not provide for the right of
stockholders to act by written consent without a meeting or for cumulative
voting in the election of directors. In addition, our Certificate of
Incorporation permits the Board of Directors to issue preferred stock with
voting or other rights without any stockholder action. Our Certificate of
Incorporation provides for the Board of Directors to be divided into three
classes, with staggered three-year terms. As a result, only one class of
directors will be elected at each annual meeting of stockholders. Each of the
two other classes of directors will continue to serve for the remainder of its
respective three-year term. These provisions, which require the vote of
stockholders holding at least a majority of the outstanding common stock to
amend, may have the effect of deterring hostile takeovers or delaying changes in
our management.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C. The transfer agent's address and telephone number
is 235 Montgomery Street, 23rd Floor, San Francisco, California 94104 and (415)
743-1423.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. As described below, no shares
currently outstanding will be available for sale immediately after this offering
because of contractual restrictions on resale. Sales of substantial amounts of
our common stock in the public market after the restrictions lapse or are
released could adversely affect the prevailing market price and impair our
ability to raise equity capital in the future.
Upon completion of the offering, we will have 321,845,386 outstanding
shares of common stock. Of these shares, the 25,000,000 shares sold in the
offering, plus any shares issued upon exercise of the underwriters'
over-allotment option, will be freely tradable without restriction under the
Securities Act, unless purchased by our "affiliates" as that term is defined in
Rule 144 under the Securities Act. In general, affiliates include officers,
directors or 10% stockholders.
The remaining 296,845,386 shares outstanding are "restricted securities"
within the meaning of Rule 144. Restricted securities may be sold in the public
market only if registered or if they qualify for an exemption from registration
under Rules 144, 144(k) or 701 promulgated under the Securities Act, which are
summarized below. Sales of the restricted securities in the public market, or
the availability of such shares for sale, could adversely affect the market
price of the common stock.
Our directors, officers and stockholders have entered into lock-up
agreements in connection with this offering generally providing that they will
not offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of our common stock or any securities exercisable for or convertible
into our common stock without the prior written consent of Goldman, Sachs & Co.
According to the lock-up agreements, at any time beginning on the third day
following the public release of our earnings for the year ended December 31,
1999, each stockholder may offer, sell, transfer, assign, pledge or otherwise
dispose of up to 15% of his or her shares owned as of December 31, 1999; and at
any time beginning on the 48th day following the public release of our earnings
for the year ended December 31, 1999, each stockholder may offer, sell,
transfer, assign, pledge or otherwise dispose of an additional 25% of his or her
shares owned as of December 31, 1999. The lock-up restrictions will expire as to
the remaining shares on the date which is 180 days after the date of this
prospectus. Notwithstanding possible earlier eligibility for sale under the
provisions of Rules 144, 144(k) and 701, shares subject to lock-up agreements
will not be salable until such agreements expire or are waived by Goldman, Sachs
& Co. Taking into account the lock-up agreements, and assuming Goldman, Sachs &
Co. does not release stockholders from these agreements, the following shares
will be eligible for sale in the public market at the following times:
- Beginning on the date of this prospectus, only the shares sold in the
offering will be immediately available for sale in the public market.
- Beginning on or about February 1, 2000 (the third business day following
the public release of Webvan's earnings for the year ended December 31,
1999), approximately 2.9 million shares will be freely tradeable pursuant
to Rule 144(k), and an additional 38.1 million shares will be eligible
for sale subject to volume limitations, as explained below, pursuant to
Rules 144 and 701.
- Beginning on or about March 16, 2000 (45 days following the initial
lock-up expiration period), an additional 4.8 million shares will be
freely tradeable pursuant to Rule 144(k), and an additional 63.5 million
shares will be eligible for sale subject to volume limitations, as
explained below, pursuant to Rules 144 and 701.
- Beginning 180 days after the date of this prospectus, an additional 11.6
million shares will be freely tradeable pursuant to Rule 144(k), and an
additional 142.6 million shares will be eligible for sale subject to
volume limitations, as explained below, pursuant to Rules 144 and 701.
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In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding
which will equal approximately 3,218,453 shares immediately after the
offering; or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to
manner of sale, notice, and the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been our affiliate and
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, is entitled to sell
such shares without complying with the manner of sale, public information,
volume limitation or notice provisions of Rule 144.
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares pursuant to a written compensatory
plan or contract to resell such shares in reliance upon Rule 144 but without
compliance with specific restrictions. Rule 701 provides that affiliates may
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirement and that non-affiliates may sell such shares in reliance on
Rule 144 without complying with the holding period, public information, volume
limitation or notice provisions of Rule 144.
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act within 180 days following the date of this prospectus to
register shares to be issued pursuant to our employee benefit plans. As a
result, any options or rights exercised under the 1997 Stock Plan, the 1999
Employee Stock Purchase Plan or any other benefit plan after the effectiveness
of the registration statement will also be freely tradable in the public market.
However, such shares held by affiliates will still be subject to the volume
limitation, manner of sale, notice and public information requirements of Rule
144 unless otherwise resalable under Rule 701. As of October 20, 1999 there were
outstanding options for the purchase of approximately 67.7 million shares of
common stock, of which options to purchase approximately 6.2 million shares were
vested and exercisable.
LEGAL MATTERS
Legal matters in connection with this offering will be passed upon on
behalf of Webvan by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. Jeffrey D. Saper, a member of Wilson Sonsini Goodrich &
Rosati, serves as our Secretary. Legal matters in connection with this offering
will be passed upon for the underwriters by Shearman & Sterling, Menlo Park,
California. As of the date of this prospectus, members of Wilson Sonsini
Goodrich & Rosati, P.C. and an investment partnership composed of current and
former members of and persons associated with Wilson Sonsini Goodrich & Rosati,
P.C. beneficially owned an aggregate of 2,068,944 shares of common stock.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for the period from December 17, 1996 (date of inception) to December 31, 1997
and for the year ended December 31, 1998 included in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and have been so included in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
65
<PAGE> 68
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedule thereto. For further information with respect to Webvan and the common
stock offered in this offering, we refer you to the registration statement and
to the attached exhibits and schedules. Statements made in this prospectus
concerning the contents of any document referred to in this prospectus are not
necessarily complete. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete
description of the matter involved.
The reports and other information we file with the SEC can be inspected and
copied at the public reference facilities that the SEC maintains at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 1400, Northwestern Atrium Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of these materials can be obtained at prescribed rates
from the Public Reference Section of the SEC at the principal offices of the
SEC, 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information
regarding the operation of the public reference room by calling 1(800) SEC-0330.
The SEC also maintains a web site (http://www.sec.gov) that makes available the
reports and other information we have filed with the SEC.
66
<PAGE> 69
WEBVAN GROUP, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998,
THE PERIOD FROM DECEMBER 17, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1997 AND CUMULATIVE FROM
DECEMBER 17, 1996 (DATE OF INCEPTION) TO MARCH 31, 1999
AND INDEPENDENT AUDITORS' REPORT
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations and Comprehensive
Loss...................................................... F-4
Consolidated Statements of Shareholders' Equity............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 70
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Webvan Group, Inc.:
We have audited the accompanying consolidated balance sheets of Webvan
Group, Inc. (formerly Intelligent Systems for Retail, Inc.) and subsidiary
(collectively, "Webvan") (a development stage company) as of December 31, 1998
and 1997, and the related consolidated statements of operations and
comprehensive loss, shareholders' equity and cash flows for the year ended
December 31, 1998 and for the period from December 17, 1996 (date of inception)
to December 31, 1997. These financial statements are the responsibility of
Webvan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Webvan at December 31, 1998 and
1997, and the results of its operations and its cash flows for periods stated
above, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
San Jose, California
March 5, 1999
(August 5, 1999 as to the second sentence of Note 1 and as to Note 15 and
September 21, 1999 as to the first paragraph of Note 7)
F-2
<PAGE> 71
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------ JUNE 30, JUNE 30,
1997 1998 1999 1999
------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and equivalents...................................... $ 2,935 $ 13,839 $ 21,836
Marketable securities..................................... 5,043 7,728 22,231
Inventories............................................... -- -- 596
Related party receivable.................................. -- -- 847
Prepaid expenses and other current assets................. 5 114 3,294
------- -------- --------
Total current assets............................... 7,983 21,681 48,804
Property, Equipment and Leasehold Improvements, Net......... 208 32,624 56,186
Loan Fees, Net.............................................. -- 2,000 1,713
Investments................................................. -- 518 1,018
Deposits.................................................... 88 1,418 1,255
Restricted Cash............................................. -- 1,768 3,453
------- -------- --------
Total Assets................................................ $ 8,279 $ 60,009 $112,429
======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 172 $ 6,815 $ 7,230
Accrued liabilities....................................... 118 706 5,813
Current portion capital lease obligations................. -- 133 621
Current portion long-term debt............................ -- 3,104 3,367
------- -------- --------
Total current liabilities.......................... 290 10,758 17,031
------- -------- --------
Deferred Rent............................................... 17 107 268
Capital Lease Obligations................................... -- 637 2,137
Long-Term Debt.............................................. -- 13,593 11,811
------- -------- --------
Commitments and Contingencies (Notes 6 and 11).............. -- -- --
Redeemable Common Stock..................................... -- 1,302 1,556
Shareholders' Equity
Series A preferred stock, no par value; 112,635 shares
authorized; 112,583, 112,635, 112,635 shares and none
issued and outstanding at December 31, 1997, 1998, June
30, 1999 and pro forma, respectively; (liquidation
preferences of $10,789, $10,794 and $10,794 at December
31, 1997, 1998 and June 30, 1999, respectively)......... 10,754 10,759 10,759 $ --
Series B preferred stock, no par value; 41,814 shares
authorized; 39,101 and 39,113 shares and none issued and
outstanding; liquidation preference of $35,713 and
$35,724 at December 31, 1998, June 30, 1999 and pro
forma, respectively..................................... -- 34,823 34,834 --
Series C preferred stock, no par value; 32,341 shares
authorized; 32,341 shares and none issued and
outstanding June 30, 1999 and pro forma; liquidation
preference of $75,000................................... -- -- 72,776 --
Restricted common stock, no par value; 360,000 shares
authorized; 64,394, 78,590, 81,909 and 265,998 issued
and outstanding at December 31, 1997, 1998, June 30,
1999 and pro forma, respectively........................ 58 11,921 31,251 149,620
Additional paid-in capital................................ -- 1,686 3,829 3,829
Deferred compensation..................................... -- (10,737) (23,790) (23,790)
Deficit accumulated during the development stage.......... (2,840) (14,844) (49,978) (49,978)
Accumulated other comprehensive income (loss)............. -- 4 (55) (55)
------- -------- -------- --------
Total shareholders' equity......................... 7,972 33,612 79,626 $ 79,626
------- -------- -------- ========
Total.............................................. $ 8,279 $ 60,009 $112,429
======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 72
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE
DECEMBER 17, FROM
1996 (DATE OF DECEMBER 17,
INCORPORATION) SIX MONTHS 1996 (DATE OF
TO YEAR ENDED ENDED JUNE 30, INCORPORATION)
DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
-------------- ------------ ----------- ----------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net Sales.................. $ -- $ -- $ -- $ 395 $ 395
Cost of Goods Sold......... -- -- -- 419 419
------- -------- ------- -------- --------
Gross Profit (Loss)........ -- -- -- (24) (24)
------- -------- ------- -------- --------
Software Development
Expenses................. 244 3,010 765 6,308 9,562
General and Administrative
Expenses................. 2,612 8,825 2,739 25,296 36,733
Amortization of Deferred
Stock Compensation....... -- 1,060 43 3,953 5,013
------- -------- ------- -------- --------
Total Expenses... 2,856 12,895 3,547 35,557 51,038
------- -------- ------- -------- --------
Interest Income............ 85 923 285 1,641 2,649
Interest Expense........... 69 32 -- 1,194 1,295
------- -------- ------- -------- --------
Net Interest Income........ 16 891 285 447 1,354
------- -------- ------- -------- --------
Net Loss................... (2,840) (12,004) (3,262) (35,134) (49,978)
Unrealized Gain (Loss) on
Marketable Securities.... -- 4 (2) (59) (55)
------- -------- ------- -------- --------
Comprehensive Loss......... $(2,840) $(12,000) $(3,264) $(35,193) $(50,033)
======= ======== ======= ======== ========
Basic and Diluted Net Loss
Per Share (Note 10)...... $ (0.08) $ (0.18) $ (0.05) $ (0.48) $ (0.89)
======= ======== ======= ======== ========
Shares Used in Calculating
Basic and Diluted Net
Loss Per Share (Note
10)...................... 37,407 67,114 65,075 73,280 56,221
======= ======== ======= ======== ========
Pro Forma Basic and Diluted
Net Loss Per Share....... $ (0.06) $ (0.14)
======== ========
Shares Used in Calculating
Pro Forma Basic and
Diluted Net Loss Per
Share.................... 201,978 253,743
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 73
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE CONVERTIBLE CONVERTIBLE
SERIES A SERIES B SERIES C RESTRICTED
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
--------------------- -------------------- -------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------- ---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A preferred, net
of $35 issuance costs, October
1997................................ 112,582,992 $10,754 -- $ -- -- $ -- -- $ --
Issuance of restricted common stock,
April through September 1997........ 64,380,972 53
Common stock issued for services,
December 1997....................... 13,500 5
Net loss.............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, December 31, 1997.......... 112,582,992 10,754 -- -- -- -- 64,394,472 58
Issuance of Series A preferred,
January 1998........................ 52,176 5
Issuance of Series B preferred, net
of $890 issuance costs, May through
September 1998...................... 39,101,304 34,823
Series B preferred warrants granted
for debt, May 1998..................
Exercise of options during 1998...... 14,195,250 66
Options granted for services,
September and November 1998.........
Deferred Compensation................ 11,797
Amortization of deferred
compensation........................
Accumulated other comprehensive
income..............................
Net loss.............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, December 31, 1998.......... 112,635,168 10,759 39,101,304 34,823 -- -- 78,589,722 11,921
Issuance of Series B preferred,
January 1999*....................... 12,000 11
Issuance of Series C preferred, net
of issuance costs of $2,363, January
through April 1999*................. 32,341,200 72,776
Exercise of stock options during
1999*............................... 2,868,840 76
Issuance of restricted common stock,
June 1999*.......................... 450,000 2,248
Issuance of warrant, June 1999*......
Deferred Compensation*............... 17,006
Amortization of deferred
compensation*.......................
Accumulated other comprehensive
loss*...............................
Net loss*............................
----------- ------- ---------- ------- ---------- ------- ---------- -------
BALANCES, June 30, 1999 *............ 112,635,168 $10,759 39,113,304 $34,834 32,341,200 $72,776 81,908,562 $31,251
=========== ======= ========== ======= ========== ======= ========== =======
<CAPTION>
DEFICIT
ACCUMULATED ACCUMULATED
ADDITIONAL DURING THE OTHER TOTAL
PAID-IN DEFERRED DEVELOPMENT COMPREHENSIVE SHAREHOLDERS'
CAPITAL COMPENSATION STAGE INCOME (LOSS) EQUITY
---------- ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of Series A preferred, net
of $35 issuance costs, October
1997................................ $ -- $ -- $ -- $ -- $ 10,754
Issuance of restricted common stock,
April through September 1997........ 53
Common stock issued for services,
December 1997....................... 5
Net loss............................. (2,840) (2,840)
------ -------- -------- ---- --------
BALANCES, December 31, 1997.......... -- -- (2,840) -- 7,972
Issuance of Series A preferred,
January 1998........................ 5
Issuance of Series B preferred, net
of $890 issuance costs, May through
September 1998...................... 34,823
Series B preferred warrants granted
for debt, May 1998.................. 1,679 1,679
Exercise of options during 1998...... 66
Options granted for services,
September and November 1998......... 7 7
Deferred Compensation................ (11,797) --
Amortization of deferred
compensation........................ 1,060 1,060
Accumulated other comprehensive
income.............................. 4 4
Net loss............................. (12,004) (12,004)
------ -------- -------- ---- --------
BALANCES, December 31, 1998.......... 1,686 (10,737) (14,844) 4 33,612
Issuance of Series B preferred,
January 1999*....................... 11
Issuance of Series C preferred, net
of issuance costs of $2,363, January
through April 1999*................. 72,776
Exercise of stock options during
1999*............................... 76
Issuance of restricted common stock,
June 1999*.......................... 2,248
Issuance of warrant, June 1999*...... 2,143 2,143
Deferred Compensation*............... (17,006) --
Amortization of deferred
compensation*....................... 3,953 3,953
Accumulated other comprehensive
loss*............................... (59) (59)
Net loss*............................ (35,134) (35,134)
------ -------- -------- ---- --------
BALANCES, June 30, 1999 *............ $3,829 $(23,790) $(49,978) $(55) $ 79,626
====== ======== ======== ==== ========
</TABLE>
- ---------------
* Unaudited
See notes to consolidated financial statements.
F-5
<PAGE> 74
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) TO YEAR ENDED JUNE 30, INCORPORATION)
DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
----------------- ------------ ----------- ----------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net loss....................................... $(2,840) $(12,004) $ (3,262) $(35,134) $(49,978)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................ 57 263 50 2,673 2,993
Accretion on redeemable common stock......... -- 1,242 564 254 1,496
Amortization of deferred stock
compensation............................... -- 1,060 43 3,953 5,013
Stock and stock options issued for
services................................... 95 7 -- -- 102
Noncash stock compensation................... -- -- -- 1,640 1,640
Issuance of warrant.......................... -- -- -- 2,143 2,143
Undistributed income on short-term
investments................................ (47) -- -- -- (47)
Changes in operating assets and liabilities:
Inventories................................ -- -- -- (596) (596)
Prepaid expenses and other current
assets................................... (5) (109) (1,671) (3,180) (3,294)
Accounts payable........................... 172 6,643 1,942 415 7,230
Accrued liabilities........................ 118 588 1,162 5,107 5,813
Deferred rent.............................. 17 90 3 161 268
------- -------- -------- -------- --------
Net cash used in operating activities.... (2,433) (2,220) (1,169) (22,564) (27,217)
------- -------- -------- -------- --------
Cash Flows From Investing Activities:
Purchases of property, equipment and leasehold
improvements................................. (265) (32,669) (4,283) (25,948) (58,882)
(Purchases) sale of marketable securities...... (4,996) (2,681) 992 (14,562) (22,239)
Purchase of investments........................ -- (518) -- (500) (1,018)
Related party receivable....................... -- -- -- (200) (200)
Deposits....................................... (88) (1,330) (212) 163 (1,255)
Restricted cash................................ -- (1,768) (950) (1,685) (3,453)
------- -------- -------- -------- --------
Net cash used in investing activities.... (5,349) (38,966) (4,453) (42,732) (87,047)
------- -------- -------- -------- --------
Cash Flows From Financing Activities:
Proceeds from shareholder loans................ 2,038 -- -- -- 2,038
Repayment of shareholder loans................. (2,038) -- -- -- (2,038)
Proceeds from long-term debt................... -- 17,168 -- -- 17,168
Repayment of long-term debt.................... -- (471) -- (1,519) (1,990)
Proceeds from capital lease financing.......... -- 794 50 2,200 2,994
Repayment of capital lease obligations......... -- (32) -- (212) (244)
Loan fees capitalized.......................... -- (323) -- -- (323)
Net proceeds from Series A preferred stock..... 10,664 5 -- -- 10,669
Net proceeds from Series B preferred stock..... -- 34,823 34,328 11 34,834
Net proceeds from Series C preferred stock..... -- -- -- 72,776 72,776
Proceeds from restricted common stock issued... 53 78 161 37 168
Proceeds from redeemable common stock issued... -- 48 -- -- 48
------- -------- -------- -------- --------
Net cash provided by financing
activities............................. 10,717 52,090 34,539 73,293 136,100
------- -------- -------- -------- --------
Net Increase in Cash and Equivalents............. 2,935 10,904 28,917 7,997 21,836
Cash and Equivalents, Beginning of period........ -- 2,935 2,935 13,839 --
------- -------- -------- -------- --------
Cash and Equivalents, End of period.............. $ 2,935 $ 13,839 $ 31,852 $ 21,836 $ 21,836
======= ======== ======== ======== ========
Supplemental Cash Flow Information:
Interest paid.................................. $ 69 $ 32 $ -- $ 28 $ 129
======= ======== ======== ======== ========
Income taxes paid.............................. $ 1 $ 1 $ -- $ -- $ 2
======= ======== ======== ======== ========
Restricted common stock issued for short-term
receivables.................................. $ -- $ -- $ -- $ 647 $ 647
======= ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 75
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- Webvan Group, Inc., formerly Intelligent Systems for
Retail, Inc., and subsidiary (a development stage company) (collectively,
"Webvan") was incorporated in California on December 17, 1996. On April 21,
1999, Intelligent Systems for Retail, Inc. changed its name to Webvan Group,
Inc. Webvan will be an Internet-based service provider offering an array of
groceries, home meal replacements, drugstore items and other merchandise.
Presently, Webvan continues in the process of developing its system software,
the completion of its initial distribution center, and its internet "Webstore".
Webvan began selling and delivering products on an initial test basis during the
first quarter of 1999.
On March 26, 1998, Webvan formed a wholly-owned subsidiary Webvan -- Bay
Area, Inc. ("WBA"). WBA represents Webvan's distribution center and cross
docking stations that will provide the internet-based retail service and home
delivery.
As of June 30, 1999, Webvan was a development stage company. Successful
completion of the Company's development program and, ultimately, the attainment
of profitable operations is dependent upon future events, including obtaining
adequate financing to fulfill its development activities, increasing its
customer base, implementing and successfully executing its business and
marketing strategy, continuing to develop and enhance its Webstore fulfillment
transactions and hiring quality personnel.
CONSOLIDATION -- The accompanying consolidated financial statements include
the accounts of Webvan and its wholly-owned subsidiary, WBA. All significant
intercompany balances and transactions have been eliminated in the consolidated
financial statements.
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 assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS -- Webvan considers all highly liquid instruments acquired
with an original maturity of three months or less when purchased to be cash
equivalents. The recorded carrying amounts of the Company's cash equivalents
approximate to their fair market value due to their highly liquid nature.
MARKETABLE SECURITIES -- Webvan considers all investments with a maturity
of more than three months but less than one year when purchased and investments
to be sold within one year to be short-term and available for sale.
RELATED PARTY RECEIVABLE -- In March 1999, the Company loaned an officer
$200,000 to be used towards the purchase of a house. The loan is interest free
and is due on the earlier of 15 days after the sale of the officer's previous
residence or March 1, 2000.
RESTRICTED CASH -- During 1998, Webvan entered into lease and credit card
merchant bank service agreements which required Webvan to hold three standby
letters of credit. The letters of credit require Webvan to maintain certain
balances on deposit which restricts the use of cash and equivalents. See Note 5
for the amounts of these deposits. These agreements expire at various dates
ranging from 1999 through 2007.
F-7
<PAGE> 76
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially
subject Webvan to concentrations of credit risk consist principally of cash,
cash equivalents and short-term investments to the extent these exceed federal
insurance limits. Risks associated with cash, cash equivalents and marketable
securities are mitigated by banking with and purchasing commercial paper, market
auction preferred stock, corporate notes, and corporate bonds from credit-worthy
institutions.
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS -- Property, equipment and
leasehold improvements are stated at cost less accumulated depreciation and
amortization. Depreciation is taken on assets placed into service using the
straight-line method over estimated useful lives of three to five years.
Leasehold improvements are amortized, using the straight-line method, over the
shorter of the lease term or the useful lives of the improvements.
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of". The Company assesses the impairment of long-lived assets
whenever events and circumstances indicate that the carrying value of an asset
may not be recoverable. No such impairments have been identified to date.
LONG-TERM INVESTMENTS -- are recorded under the cost method of accounting
(Note 2).
LOAN FEES -- Webvan capitalizes loan and capital lease origination fees,
including the fair value of warrants and amortizes them over the life of the
related obligations.
REDEEMABLE COMMON STOCK -- Redeemable common stock represents common stock
sold to employees who have put rights. The put rights allow the shareholders to
sell to the Company, at a price of $0.3658 per share, 2,871,000 shares of common
stock after February 1999, and an additional 1,914,000 shares of common stock
after February 2000. Redeemable common stock was originally recorded at its
$0.0125 fair value as determined by the board of directors, and is being
accreted to the redemption amounts as compensation expense over the period the
put rights become exercisable. These rights expire in March 2000.
INCOME TAXES -- Income taxes are provided at current rates. Deferred income
taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and amounts
used for income tax purposes.
STOCK OPTIONS -- As permitted by SFAS No. 123, Webvan accounts for stock
options to employees using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." As required by SFAS No. 123, the pro forma impact on earnings and
earnings per share resulting from the fair value method is disclosed in Note 8.
REVENUE RECOGNITION -- The Company recognizes revenues from product sales
and delivery, net of returns and discounts, when the products are delivered to
customers.
NET LOSS PER SHARE -- Basic net loss per share excludes dilution and is
computed by dividing net loss by the weighted average number of common shares
outstanding for the period (excluding shares subject to repurchase). Diluted net
loss per common share was the same as basic net loss per common share for all
periods presented since the effect of any potentially dilutive securities is
excluded as they are anti-dilutive because of Webvan's net losses.
UNAUDITED INTERIM FINANCIAL INFORMATION -- The interim financial
information as of June 30, 1999 and for the six months ended June 30, 1998 and
1999 and for the cumulative period from
F-8
<PAGE> 77
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
December 17, 1996 (date of inception) through June 30, 1999 is unaudited and has
been prepared on the same basis as the audited financial statements. In the
opinion of management, such unaudited financial information includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the interim information. Operating results for the six
months ended June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999.
PRO FORMA NET LOSS PER COMMON SHARE -- Pro forma basic and diluted net loss
per common share is computed by dividing net loss by the weighted average number
of common shares outstanding for the period (excluding shares subject to
repurchase) plus the weighted average number of common shares resulting from the
automatic conversion of outstanding shares of convertible preferred stock, which
will occur upon the closing of the planned initial public offering.
UNAUDITED PRO FORMA INFORMATION -- Upon the closing of the planned initial
public offering, each of the outstanding shares of convertible preferred stock
will convert into one share of common stock. The pro forma balance sheet
presents Webvan's balance sheet as if this had occurred at June 30, 1999.
RECENTLY ISSUED ACCOUNTING STANDARDS -- In June 1997, the Financial
Accounting Standards Board ("FASB") adopted SFAS No. 130 "Reporting
Comprehensive Income," which requires an enterprise to report, by major
components and as a single total, the change in net assets during the period
from non owner sources. Webvan adopted this statement during the year ended
December 31, 1998.
In February 1998, the FASB adopted SFAS No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits, an Amendment of FASB
Statements No. 87, 88, and 106," which revises employers' disclosures about
pension and other postretirement benefit plans. This statement does not change
the measurement or recognition of those plans, but standardizes the disclosure
requirements for pensions and other postretirement benefits to the extent
practicable, requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis, and eliminates certain disclosures. Webvan adopted this statement
during the year ended December 31, 1998.
In March 1998, the Accounting Standards Committee of the American Institute
of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP")
98-1, "Accounting for Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance for an enterprise on accounting for
the costs of computer software developed or obtained for internal use. Webvan
adopted this statement during the year ended December 31, 1998 and has
capitalized software costs according to the provisions of the standard. These
costs are amortized on a straight-line basis over the useful life of the
software once it is placed into service.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities", which requires companies to expense the costs of start-up
activities and organization costs as incurred. Webvan adopted this statement
during the year ended December 31, 1998, and such adoption did not affect the
accompanying financial statements.
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" which defines derivatives, requires that all
derivatives be carried at fair value, and provides for hedging accounting when
certain conditions are met. Webvan will adopt this statement
F-9
<PAGE> 78
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
for its fiscal year ending December 31, 2000. Management has not fully assessed
the implications of adopting this new standard.
2. INVESTMENTS
On November 24, 1998, an agreement was signed between an equipment
manufacturer and Webvan. The agreement set out the terms for Webvan to acquire
1,000 shares of such equipment manufacturer for a total amount of $1,000,000
which represents a less than 10% interest in the manufacturer. Investments are
recorded at cost as fair market value is not readily determinable. Long-term
investments principally include $500,000 paid for such shares in December 1998.
Webvan paid the additional $500,000 for such shares in January 1999 to complete
this transaction.
3. MARKETABLE SECURITIES
The fair value of marketable securities at June 30, 1999 (unaudited), and
at December 31, 1998 and 1997 are presented below. Fair values are based on
quoted market prices. The Company's marketable securities are classified as
available-for-sale, as the Company intends to sell them as needed for
operations. Balances at year-end consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999
(UNAUDITED)
-------------------------------------
UNREALIZED
AMORTIZED GAIN (LOSS) MARKET
COST ON INVESTMENT VALUE
--------- ------------- -------
<S> <C> <C> <C>
Money market funds................................. $ 8 $ -- $ 8
Commercial paper................................... 36,129 (12) 36,117
Foreign debt securities............................ 1,638 (6) 1,632
Corporate notes.................................... 6,346 (36) 6,310
------- ---- -------
Total.................................... 44,121 (54) 44,067
Less amounts included in cash and equivalents...... 21,843 (7) 21,836
------- ---- -------
$22,278 $(47) $22,231
======= ==== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------
UNREALIZED
AMORTIZED GAIN ON MARKET
COST INVESTMENT VALUE
--------- ---------- -------
<S> <C> <C> <C>
Money market funds.................................... $ 27 $-- $ 27
Commercial paper...................................... 9,781 3 9,784
Commercial notes...................................... 3,164 1 3,165
Commercial bonds...................................... 1,285 -- 1,285
Market auction preferred.............................. 7,306 -- 7,306
------- -- -------
Total....................................... 21,563 4 21,567
Less amounts included in cash and equivalents......... 13,837 2 13,839
------- -- -------
$ 7,726 $2 $ 7,728
======= == =======
</TABLE>
F-10
<PAGE> 79
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Money market funds.......................................... $ 44
Commercial paper............................................ 7,859
------
Total at cost which approximates market........... 7,903
Less amounts included in cash and equivalents............... 2,860
------
$5,043
======
</TABLE>
4. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements at December 31, 1997, 1998
and June 30, 1999 consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1997 1998 1999
---- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment and software........................... $121 $ 2,284 $ 8,917
Machinery and equipment................................... 3 2,026 18,742
Leasehold improvements.................................... 32 407 19,195
Furniture and fixtures.................................... 109 287 625
---- ------- -------
265 5,004 47,479
Accumulated depreciation and amortization................. (57) (310) (2,696)
---- ------- -------
208 4,694 44,783
Construction in progress.................................. -- 27,930 11,403
---- ------- -------
Property, equipment and leasehold improvements, net....... $208 $32,624 $56,186
==== ======= =======
</TABLE>
Equipment under capital leases amounted to $794,000 at 1998. Accumulated
amortization on capital leases as of December 31, 1998 was $72,155.
Construction in progress includes costs incurred in the construction of
Webvan's distribution center located in Oakland. Such costs include the purchase
and installation of materials handling equipment, refrigeration and freezer
storage units. Webvan retains up to ten percent on all construction contracts in
process until final settlement of such contracts.
During the first six months of 1999, $2.2 million of computer equipment and
software was financed with capital leases.
F-11
<PAGE> 80
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
5. DEPOSITS
Deposits consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
Software licenses........................................... $ 899 $ --
Payroll service provider.................................... 329 436
Real property leases........................................ 178 807
Other....................................................... 12 12
------ ------
$1,418 $1,255
====== ======
</TABLE>
6. BORROWING ARRANGEMENTS
In December 1998, WBA entered into a $17,000,000 loan and security
agreement. The loan is payable in $472,000 monthly installments from January
1999 through June 2002 with an additional $2,550,000 payment of the remaining
balance payable in June 2002. Based upon this repayment schedule, the imputed
interest on this loan is 16.33%. The loan is secured by substantially all the
assets of Webvan.
Related to the above financing, Webvan issued warrants to the lenders to
purchase an aggregate of 2,233,578 shares of Series B preferred stock at an
exercise price of $0.91 per share. The fair value of the warrants at the date
granted was $1,564,000 and was capitalized with loan fees (see Note 9). Webvan
also paid $323,000 in loan fees. The loan fees are being amortized over the 42
month term of the loan.
As part of an operating lease the landlord agreed to finance $168,340 of
improvements. The loan is payable in monthly installments including interest at
11% from January 1, 1999 through July 2003.
Future principal maturities under loan agreements as of December 31, 1998
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999...................................................... $ 3,104
2000...................................................... 3,909
2001...................................................... 4,545
2002...................................................... 5,113
2003...................................................... 26
-------
16,697
Less current maturities..................................... 3,104
-------
$13,593
=======
</TABLE>
CAPITAL LEASE OBLIGATIONS
In March 1998, Webvan entered into a $3,000,000 nonrevolving master lease
agreement. The agreement specifies equipment which Webvan can purchase prior to
March 23, 1999 under the lease agreement. As of December 31, 1998, $2,230,000
was available for future financing, and obligations
F-12
<PAGE> 81
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
outstanding totaled $770,000. As part of the leasing arrangement, warrants for
164,226 shares of Series B preferred stock were granted to the provider at an
exercise price of $0.91 per share. The $115,000 fair value of the warrants at
the date granted has been capitalized with loan fees and is being amortized over
the 60 month term of the leases (see Note 9).
Future lease payments under the lease agreement as of December 31, 1998 are
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999...................................................... $ 241
2000...................................................... 241
2001...................................................... 240
2002...................................................... 232
2003...................................................... 59
------
Total future lease payments................................. 1,013
Less portion relating to interest........................... 243
------
Total capital lease obligations............................. 770
Less current portion........................................ 133
------
Total long-term portion..................................... $ 637
======
</TABLE>
7. SHAREHOLDERS' EQUITY
STOCK SPLITS
In March 1998, January 1999, July 1999 and September 1999, the Company
effected two-for-one, two-for-one, two-for-one and three-for-two stock splits,
respectively, on the then outstanding shares, warrants and options. The splits
have been retroactively reflected in the financial statements and notes to the
financial statements.
CONVERTIBLE PREFERRED STOCK
Significant terms of outstanding Series A and B preferred stock are as
follows:
- In the event of liquidation, dissolution, or winding up of Webvan, the
holders of Series A and Series B preferred stock are entitled to receive
$0.0958 and $0.91 per share (subject to adjustment for stock splits and
like events), respectively, plus any declared but unpaid dividends prior
to any distribution to the common shareholders. After the preferred
shareholders have received payment, any remaining assets would be shared
by all preferred and common shareholders on a pro rata basis.
- Each share of preferred stock is convertible at the option of the holder
into one share of common stock (subject to adjustments for stock splits
and like events). Shares will automatically be converted upon an
underwritten initial public offering (IPO) of Webvan's common shares
meeting certain criteria.
- Each share of preferred stock has voting rights equivalent to the number
of shares of common stock into which it is convertible. In addition, for
so long as there are outstanding at least 12,000,000 shares in the case
of the Series A preferred stock, and 12,000,000 shares in the
F-13
<PAGE> 82
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
case of the Series B preferred stock, the holders of each of the Series A
preferred stock and Series B preferred stock shall be entitled to approve
amendments to the articles of incorporation, approve the payment or
declaration of dividends, approve the merger or consolidation of Webvan,
approve the sale of all or substantially all of the assets of the
Company, and approve other actions specified in the articles of
incorporation. In addition, for so long as there are at least 12,000,000
shares of Series A preferred stock outstanding, the holders of the Series
A preferred stock shall be entitled to nominate and elect two directors.
- Dividends may be declared at the discretion of the Board of Directors and
are non-cumulative. Dividends of $0.0067 per share on Series A preferred
stock and $0.0617 on Series B preferred stock (as adjusted for any stock
splits or like events) must be declared and paid before payment of any
common stock dividends.
- Prior to the sale of any shares in a subsequent stock offering, the
existing preferred shareholders shall have a right of first refusal to
purchase the shares, subject to certain exceptions. In addition, upon
written notice of a sale of preferred shares by Webvan's founder, each
shareholder has the right to sell its co-sale pro rata share of the
shares proposed to be sold. These provisions expire upon an initial
public offering.
PREFERRED STOCK -- SERIES C
On January 21, 1999, Webvan authorized the sale and issuance of up to
32,341,200 shares of its Series C preferred stock at a purchase price of $2.32
per share. As of June 30, 1999, Webvan had issued 32,341,200 shares of Series C
preferred stock. The actual cash proceeds, net of $2 million of issuance costs,
amounted to $73 million.
RESTRICTED COMMON STOCK
At December 31, 1998, Webvan had 360,000,000 authorized shares of common
stock of which 78,589,722 were issued and outstanding. At December 31, 1998,
Webvan had reserved shares of common stock for issuance as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Issuance under stock options plan........................... 46,010
Issuance upon conversion of Series A preferred stock........ 112,635
Issuance upon conversion of Series B preferred stock........ 41,814
-------
Total shares reserved....................................... 200,459
=======
</TABLE>
Significant terms of the restricted common stock are as follows:
- In the event that the continuous status of an employee, consultant or
director of Webvan terminates for any reason, Webvan shall upon the date
of such termination have an irrevocable right for a period of 90 days
from such termination date to repurchase any unreleased (unvested) shares
at the original purchase price.
- The shares shall be released from the repurchase option immediately
(i.e., fully vested) or over a three-year period depending on the
specific terms of the agreement and the parties involved. As of December
31, 1998, 66,000,000 shares (see Note 8) were subject to repurchase under
the applicable restricted stock purchase agreements.
F-14
<PAGE> 83
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
- Prior to the sale of any common shares owned by certain shareholders,
Webvan shall have a right of first refusal to purchase the shares. These
rights shall terminate upon the closing of an IPO, a sale of all or
substantially all the assets of Webvan, or a merger.
- In connection with a possible IPO, the shareholders agree not to sell any
shares without the prior written consent of Webvan or the underwriters
managing the IPO for up to 180 days from the effective date of such
registration.
- Each share of common stock issued and outstanding shall have one vote.
8. STOCK OPTION PLAN
On September 17, 1997, Webvan adopted the 1997 Stock Plan (the Plan) and
reserved 30,000,000 shares of Webvan's common stock for issuance under the Plan,
which expires on September 17, 2007. Options are granted at fair market value at
the date of grant as determined by the Board of Directors. As provided for in
the Plan, incentive and non-statutory stock options may be granted to employees,
officers, directors or consultants. Incentive options may only be granted to
employees and at an exercise price of no less than fair value on the date of
grant. Non-statutory options may be granted at an exercise price of no less than
85% of fair value. For owners of more than 10% of Webvan's stock, options may
only be granted for an exercise price of no less than 110% of fair value.
Options generally become exercisable at a rate of 25% on the one year
anniversary of the vesting commencing date, which may precede the grant date,
with an additional 6.25% exercisable at the end of each quarter thereafter until
fully vested at the end of the fourth year. Vesting may not exceed five years
for grants to owners of more than 10% of Webvan's voting power, nor exceed ten
years for all other option holders.
Stock option activity under the 1997 Stock Plan is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE
(IN THOUSANDS) PRICE
-------------- --------
<S> <C> <C>
Options granted during 1997 (weighted average fair value of
$0.00016)................................................. 12,588 $0.00081
Options canceled during 1997................................ (108) 0.00081
-------
Balance, December 31, 1997 (none exercisable)............... 12,480 0.00081
Options granted during 1998 (weighted average fair value of
$0.01740)................................................. 46,437 0.10206
Options exercised during 1998............................... (18,981) 0.00645
Options canceled during 1998................................ (3,210) 0.02735
-------
Balance, December 31, 1998.................................. 36,726 0.12361
Options granted during 1999 (unaudited)..................... 6,990 1.90332
Options exercised during 1999 (unaudited)................... (2,869) 0.02554
Options canceled during 1999 (unaudited).................... (413) 0.12429
-------
Balance, June 30, 1999 (unaudited).......................... 40,434 $0.26546
=======
</TABLE>
F-15
<PAGE> 84
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
Additional information regarding options outstanding as of December 31,
1998 is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- ---------------------
NUMBER WEIGHTED NUMBER
OF AVERAGE WEIGHTED OF WEIGHTED
SHARES REMAINING AVERAGE SHARES AVERAGE
EXERCISE (IN CONTRACTUAL EXERCISE (IN EXERCISE
PRICES THOUSANDS) LIFE (YEARS) PRICE THOUSANDS) PRICE
- ------------------- ---------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C>
$0.00081 2,163 8.09 $0.00081 924 $0.00081
$0.01250 13,062 9.07 $0.01250 6,741 $0.01250
$0.10000 13,998 9.60 $0.10000 -- --
$0.41667 7,503 9.94 $0.41667 -- --
------ -----
$0.00081 - $0.41667 36,726 9.39 $0.12773 7,665 $0.00650
====== =====
</TABLE>
At December 31, 1998, shares of common stock available for future option
grants totaled 16,293,522. During 1998 and in January 1999, Webvan's Board of
Directors increased the 30,000,000 shares of common stock reserved under the
plan as follows: 12,000,000 in May 1998; 6,000,000 in July 1998; 6,000,000 in
October 1998; 12,000,000 in December 1998 and 6,000,000 in January 1999. As a
result, 50,150,910 shares are reserved in the option pool as of June 30, 1999.
ADDITIONAL STOCK PLAN INFORMATION
As discussed in Note 1, Webvan accounts for its stock-based awards using
the intrinsic value method in accordance with APB 25. Based on the stock value
and exercise prices, during the year ended December 31, 1998, $1,060,00 of
compensation expense has been recognized in the financial statements for
employee stock arrangements.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", (SFAS 123) requires the disclosure of pro forma net
income and earnings per share as if Webvan had adopted the fair value method as
of the beginning of the period ended December 31, 1997. Webvan's calculations
were made using the minimum value method with the following weighted average
assumptions: expected life of 60 months following the grant date; risk free
interest rates of 6% in 1998; and no dividends during the expected term.
Webvan's calculations are based on a single option valuation approach and
forfeitures are recognized as they occur. If the computed fair value of 1998 and
1997 awards had been charged to compensation over the vesting period of the
awards, the net loss would have been $12,028,000 ($(0.18) per share, basic and
diluted) in 1998 and $2,841,000 ($(0.08) per share, basic and diluted) in 1997.
F-16
<PAGE> 85
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
9. NONCASH FINANCING ACTIVITIES
STOCK AND OPTIONS FOR RECRUITING
Webvan issued the following shares and options for recruiting services that
represent noncash operating expenses (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FAIR
NUMBER FAIR VALUE AT
DATE OF VALUE ISSUANCE
ISSUED SHARES PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Stock:
Series A preferred stock................ 1997 939 $0.09583 $90
Restricted common....................... 1997 360 0.01250 5
Series A preferred stock................ 1998 51 0.09583 5
</TABLE>
<TABLE>
<CAPTION>
FAIR
SHARES EXERCISE VALUE
DATE COVERED BY PRICE AT GRANT
ISSUED OPTIONS PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Stock options --
Restricted common....................... 1998 160 $0.10000 $7
</TABLE>
DEFERRED COMPENSATION
In connection with the grant of certain stock options in 1998 and 1999, the
Company recorded deferred compensation of $11,797,000 and $17,006,000 and
compensation expense of $1,060,000 and $3,953,000, respectively, representing
the difference between the deemed fair value and the option exercise price as
determined by the Board of Directors on the date of grant. The deferred
compensation is being amortized over the four-year vesting period of the
underlying options.
WARRANTS FOR DEBT
Webvan issued the following warrants in connection with its long-term debt
and capital lease arrangements (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FAIR
SHARES EXERCISE VALUE
DATE COVERED BY PRICE AT GRANT
ISSUED WARRANTS PER SHARE DATE
------ ---------- --------- --------
<S> <C> <C> <C> <C>
Series B preferred stock warrants......... 1998 2,398 $ 0.91 $1,679
</TABLE>
The above shares and shares covered by options and warrants reflect the
two-for-one stock splits in March 1998, January 1999 and July 1999 and the
three-for-two stock split in August 1999. The fair value of the options and
warrants was determined using the Black-Scholes option pricing model with the
following assumptions: expected life of seven years; risk-free interest rate of
6% in 1998 and 1997; no dividends during the expected term and volatility of
80%. The calculations are based on a single option valuation approach and
forfeitures are recognized as they occur. The warrants expire November 2005.
F-17
<PAGE> 86
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
10. NET LOSS PER SHARE
The following is a reconciliation of the numerators and denominators used
in computing basic and diluted net loss per share (in thousands except per share
amounts):
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF YEAR SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) ENDED JUNE 30, INCORPORATION)
TO DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
--------------- ------------ ----------- ----------- --------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss (numerator),
basic and
diluted............ $(2,840) $(12,004) $(3,262) $(35,134) $(49,978)
------- -------- ------- -------- --------
Shares (denominator):
Weighted average
common shares
outstanding..... 37,407 76,934 70,518 84,689 62,322
Weighted average
common shares
outstanding and
subject to
repurchase...... -- (9,820) (5,443) (11,409) (6,101)
------- -------- ------- -------- --------
Shares used in
computation, basic
and diluted........ 37,407 67,114 65,075 73,280 56,221
======= ======== ======= ======== ========
Net loss per share,
basic and
diluted............ $ (0.08) $ (0.18) $ (0.05) $ (0.48) $ (0.89)
======= ======== ======= ======== ========
</TABLE>
F-18
<PAGE> 87
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
For the above-mentioned periods, the Company had securities outstanding
which could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share in the periods
presented, as their effect would have been antidilutive. Such outstanding
securities consist of the following (in thousands, except per share amounts):
<TABLE>
<CAPTION>
CUMULATIVE
PERIOD FROM FROM
DECEMBER 17, DECEMBER 17,
1996 (DATE OF YEAR SIX MONTHS ENDED 1996 (DATE OF
INCORPORATION) ENDED JUNE 30, INCORPORATION)
TO DECEMBER 31, DECEMBER 31, ------------------------- TO JUNE 30,
1997 1998 1998 1999 1999
--------------- ------------ ----------- ----------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Convertible preferred
stock.............. 112,583 151,736 151,163 184,090 184,090
Shares of common
stock subject to
repurchase......... -- 14,456 16,629 9,345 9,345
Outstanding options.. 12,480 36,726 15,870 40,434 40,434
Warrants............. -- 2,398 -- 2,398 2,398
-------- -------- -------- -------- --------
Total...... 125,063 205,316 183,662 236,267 236,267
======== ======== ======== ======== ========
Weighted average
exercise price of
options............ $0.00083 $0.12773 $0.01043 $0.27431 $0.27431
======== ======== ======== ======== ========
Weighted average
exercise price of
warrants........... $ -- $ 0.91 $ -- $ 0.91 $ 0.91
======== ======== ======== ======== ========
</TABLE>
11. INCOME TAXES
While Webvan is in the development stage, substantially all losses incurred
for financial statements purposes will be deferred for income tax purposes. In
the year that Webvan first generates revenues from operations, expenditures
accumulated during the development stage will start being amortized for income
tax purposes over a five-year period. The deduction of these expenses for
financial statement purposes in years preceding the deduction for income tax
purposes is a temporary difference that creates a deferred tax asset. At
statutory rates, the deferred tax asset amounts to approximately $5.5 million
which has been offset by a valuation allowance of the same amount due to lack of
operating history combined with risks and uncertainties surrounding Webvan's
ability to generate future taxable income.
F-19
<PAGE> 88
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
Significant components of the Company's deferred tax assets and liabilities
are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 101 $ 101
Start-up costs capitalized for tax purposes............... 1,000 5,384
Other..................................................... 15 34
------- -------
Total deferred tax assets................................... 1,116 5,519
Valuation allowance......................................... (1,116) (5,519)
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
At December 31, 1998 the Company has federal net operating loss
carryforwards of approximately $227,000, expiring in 2012. The Company has
research tax credit carryforwards available to offset future federal taxes of
$45,000, expiring from 2012 to 2013. The Company has state net operating loss
carryforwards of approximately $235,000, expiring in 2002. The Company also has
state tax credit carryforwards of approximately $25,000, which do not expire.
Utilization of the net operating losses and credits may be subject to an
annual limitation due to ownership change limitations provided by the Internal
Revenue Code and similar state provisions. The annual limitation may result in
the expiration of net operating losses and credits before utilization.
12. LEASES
Webvan leases facilities under noncancelable operating lease agreements
which expire at various dates through 2008.
Future lease payments under the lease agreements as of December 31, 1998
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1999................................................... $ 1,790
2000................................................... 1,834
2001................................................... 1,900
2002................................................... 1,665
2003................................................... 1,577
Thereafter.................................................. 7,070
-------
Total future lease payments....................... $15,836
=======
</TABLE>
Facilities rent expense was $1,026 and $123 for the periods ended December
31, 1998 and 1997, respectively.
13. EMPLOYEE BENEFIT PLAN
Webvan has a 401(k) profit-sharing plan (the 401(k) Plan) that covers
substantially all employees. The 401(k) Plan provides for voluntary salary
reduction contributions of up to 15% of
F-20
<PAGE> 89
WEBVAN GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 30, 1999 IS UNAUDITED)
eligible participants' annual compensation subject to Internal Revenue Code
limitations. Under the terms of the 401(k) Plan, Webvan will match 100% of
employees' contributions for the first $500 and 25% thereafter to a maximum of
$2,000 per year. Matching contributions made during the period ended December
31, 1997 and 1998 were $17,000 and $81,000, respectively.
14. RELATED PARTY TRANSACTIONS
From inception through October 1997, Webvan's founder advanced $2,037,679
to the Company in exchange for notes payable bearing 8% interest payable. The
notes were due on demand or upon Webvan's obtaining equity financing. The notes
were fully repaid with interest of $68,709 on October 30, 1997 after issuance of
Series A preferred stock on October 29, 1997.
A general contractor of Webvan has subcontracted with an equipment
manufacturer (see Note 2) to install equipment in Webvan's distribution center.
A total of $4.9 million of this work was completed by December 31, 1998 and is
included in construction in progress within property, equipment and leasehold
improvements.
15. SUBSEQUENT EVENTS
On July 8, 1999, the Company signed an agreement (the "Agreement") with a
contractor to design, develop and construct up to 26 distribution center
warehouse facilities ("Distribution Centers") in the United States. The
Agreement includes a five year exclusivity clause. The Agreement expires July 8,
2002, unless extended by written agreement. As part of the Agreement, the
contractor was granted a warrant to purchase up to 1,800,000 shares of the
Company's Series C preferred stock at $2.32 per share (the "Warrant"). The
Warrant is exercisable as to 150,000 shares on July 8, 1999 and generally
becomes exercisable as to the remaining shares as Distribution Centers are
completed by the contractor within agreed upon schedule and budgetary
parameters. A portion of the Warrant shares will be forfeited if the schedule
and budgetary parameters are not met for any Distribution Center.
Under the applicable accounting guidelines in Emerging Issues Task Force
Issue No. 96-18, "Accounting for Equity Instruments That are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services", the measurement date for the Warrant is July 8, 1999 as that is the
performance commitment date. As of July 8, 1999, the Company will capitalize
approximately $1.3 million, the fair value of the warrant related to the 150,000
exercisable shares, as determined by the board of directors and will amortize
that amount over the five year exclusivity period. No amount will be capitalized
as of that date for the fair value of the Warrant related to the non-exercisable
shares as eventual exercisability is dependent on counterparty performance. Any
amounts capitalized based on Bechtel's future performance will be amortized over
the useful life of the Distribution Centers. If and when the Warrant becomes
exercisable as to additional shares, based on counterparty performance, the
Company will capitalize additional cost based on the then fair value of the
Warrant related to such additional exercisable shares.
On July 15, 1999, Webvan entered into an agreement that provided for the
sale of 21,670,605 shares of its Series D-2 preferred stock at a price of $12.69
per share totaling approximately $275 million.
F-21
<PAGE> 90
UNDERWRITING
Webvan and the underwriters named below have entered into an underwriting
agreement with respect to the shares being offered. Subject to certain
conditions, each underwriter has severally agreed to purchase the number of
shares indicated in the following table. Goldman, Sachs & Co., Donaldson, Lufkin
& Jenrette Securities Corporation, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BancBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc.,
Deutsche Bank Securities Inc. and Thomas Weisel Partners LLC are the
representatives of the underwriters.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Merrill Lynch, Pierce, Fenner & Smith Incorporated..........
BancBoston Robertson Stephens Inc...........................
Bear, Stearns & Co. Inc.....................................
Deutsche Bank Securities Inc................................
Thomas Weisel Partners LLC..................................
----------
Total..................................................... 25,000,000
==========
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
3,750,000 shares from Webvan to cover such sales. They may exercise that option
for 30 days. If any shares are purchased pursuant to this option, the
underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
Webvan will sell the shares to the underwriters at a price of $ per
share, which represents a $ (or %) discount from the initial public
offering price set forth on the cover page of this prospectus. This discount is
the underwriters' compensation. The following table shows the per share and
total underwriting discounts and commissions to be paid to the underwriters by
Webvan. Such amounts are shown assuming both no exercise and full exercise of
the underwriters' option to purchase 3,750,000 additional shares.
<TABLE>
<CAPTION>
PAID BY WEBVAN
--------------
NO EXERCISE FULL EXERCISE
----------- -------------
<S> <C> <C>
Per share................................................... $ $
Total....................................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.
Pursuant to lock-up agreements, Webvan and its directors, officers,
employees and other securityholders have agreed not to offer, sell, transfer or
otherwise dispose of or hedge any of their common stock or securities
convertible into or exchangeable for shares of common stock during the lock-up
period, except with the prior written consent of Goldman, Sachs & Co. According
to the lock-up agreements, at any time beginning on the third day following the
public release of our earnings for the year ended December 31, 1999, each
stockholder may dispose of or hedge up to 15% of his or her shares owned as of
December 31, 1999; at any time beginning on the 48th day following the public
release of our earnings for the year ended December 31, 1999, each stockholder
may dispose of or hedge up to an additional 25% of his or her shares owned as of
December 31, 1999; and each
U-1
<PAGE> 91
such stockholder may dispose of or hedge his or her remaining shares at any time
on or following the date which is 180 days after the date of this prospectus.
This agreement does not apply to any existing employee benefit plan. See "Shares
Eligible for Future Sale" for a discussion of transfer restrictions.
Prior to the offering, there has been no public market for the shares. The
initial public offering price for the common stock will be negotiated among
Webvan and the representatives of the underwriters. Among the factors to be
considered in determining the initial public offering price of the shares, in
addition to prevailing market conditions, will be Webvan's historical
performance, estimates of Webvan's business potential and earnings prospects, an
assessment of Webvan's management and the consideration of the above factors in
relation to market valuation of companies in related businesses.
Webvan has applied to have the common stock listed on the Nasdaq National
Market under the symbol "WBVN".
In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the 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 the offering
is in progress.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect that market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
The underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
Webvan currently anticipates that it will request the underwriters to
reserve up to 500,000 shares of its common stock for sale at the initial public
offering price to persons designated by Webvan, substantially all of whom have
been or are expected to be vendors or service providers to Webvan, through a
directed share program. The number of shares available for sale to the general
public will be reduced to the extent such persons purchase such reserved shares.
Any reserved shares not so purchased will be offered by the underwriters to the
general public on the same basis as other shares offered hereby.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998 Thomas Weisel Partners has been named as a lead or co-manager of 54 filed
public offerings of equity securities, of which 31 have been completed, and has
acted as a syndicate member in an additional 27 public offerings of equity
securities. Thomas Weisel Partners does not have any material relationship with
Webvan or any of Webvan's officers, directors or other controlling persons,
except for its contractual relationship with Webvan under the terms of the
underwriting agreement entered into in connection with this offering.
In July 1999, entities affiliated with Goldman, Sachs & Co. purchased an
aggregate of 7,880,220 shares of Webvan's Series D-2 preferred stock for an
aggregate purchase price of approximately $100.0 million.
U-2
<PAGE> 92
Webvan estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $1.4
million.
Webvan has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act.
U-3
<PAGE> 93
Inside Front Cover Graphics
[artwork consists of the Webvan logo and
website address and pictures of food products]
<PAGE> 94
Inside Gatefold Graphics
[artwork which depicts the Webvan solution, illustrated by pictures of the
Company's Webstore, delivery service, distribution center and food products
together with captions explaining the pictures and diagram]
<PAGE> 95
Inside Back Cover Graphics
[artwork consists of an arrow pointing to "webvan.com"]
<PAGE> 96
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or represent anything not contained in this prospectus. You must not
rely on any unauthorized information or representations. This prospectus is an
offer to sell only the shares offered hereby, but only under circumstances where
it is lawful to do so. The information contained in this prospectus is current
only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Summary Consolidated Financial Data... 4
Risk Factors.......................... 5
Special Note Regarding Forward-Looking
Statements.......................... 19
Use of Proceeds....................... 20
Dividend Policy....................... 20
Capitalization........................ 21
Dilution.............................. 23
Selected Consolidated Financial
Data................................ 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 32
Management............................ 45
Related Party Transactions............ 56
Principal Stockholders................ 58
Description of Capital Stock.......... 61
Shares Eligible for Future Sale....... 64
Legal Matters......................... 65
Experts............................... 65
Available Information................. 66
Index to Financial Statements......... F-1
Underwriting.......................... U-1
</TABLE>
-------------------------
Through and including November , 1999 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
25,000,000 Shares
WEBVAN GROUP, INC.
Common Stock
-------------------------
LOGO
-------------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
MERRILL LYNCH & CO.
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
DEUTSCHE BANC ALEX. BROWN
THOMAS WEISEL PARTNERS LLC
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 97
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the securities being registered. All amounts shown are estimates except for
the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee....................................... $ 103,903
NASD filing fee............................................ 30,500
Nasdaq National Market Fees................................ 80,000
Blue Sky qualification fees and expenses................... 10,000
Printing and engraving expenses............................ 200,000
Accountant's fees and expenses............................. 300,000
Legal fees and expenses.................................... 600,000
Miscellaneous.............................................. 75,597
----------
Total............................................ $1,400,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by such section.
The Registrant's Restated Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's Bylaws provides for the indemnification of officers,
directors and third parties acting on behalf of the Registrant if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to the best interest of the Registrant, and, with respect to any criminal action
or proceeding, the indemnified party had no reason to believe his or her conduct
was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
The Registrant has director and officer liability insurance that covers
matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since the Registrant's inception in December 1996, the Registrant has
issued and sold the following unregistered securities:
1. Between April and September 1997, the Registrant issued an aggregate of
64,034,472 shares of Common Stock of the Registrant to Louis H. Borders
and his family members, David Rock and entities and persons affiliated
with Wilson Sonsini Goodrich & Rosati, P.C. pursuant to restricted
stock purchase agreements for an aggregate amount of $53,362.06.
2. Between September 1997 and October 1999, the Registrant granted and
issued options to purchase an aggregate of 80,869,003 shares of Common
Stock of the Registrant to executive officers, employees, Ramsey Beirne
Associates, Inc., Christos Cotsakos and Yahoo! Inc. pursuant to the
Registrant's 1997 Stock Plan with an aggregate exercise price of
$114,255,343.58. The executive officers include Kevin R. Czinger,
Arvind Peter Relan,
II-1
<PAGE> 98
S. Coppy Holzman, Gary B. Dahl, Mark J. Holtzman, Christian T.
Mannella, David S. Rock, Robert H. Swan and Mark X. Zaleski.
3. In October 1997, the Registrant issued an aggregate of 111,643,872
shares of Series A Preferred Stock of the Registrant to entities
affiliated with Sequoia Capital, entities associated with Benchmark
Capital Partners, entities and persons affiliated with Wilson Sonsini
Goodrich & Rosati, P.C., unaffiliated investors and Louis H. Borders
for an aggregate amount of $10,699,204.40.
4. From December 1997 to February 1998, the Registrant issued an aggregate
of 991,296 shares of Series A Preferred Stock of the Registrant to
consultants for an aggregate amount of $94,999.20. The consultants
include DHR International, Inc., Information Technology Partners, Inc.
and Daniel P. Bowman.
5. From April 1998 to October 1999, the Registrant issued an aggregate of
24,760,137 shares of Common Stock of the Registrant to executive
officers, employees, Christos Cotsakos and Ramsey Beirne Associates,
Inc. pursuant to the Registrant's 1997 Stock Plan with an aggregate
exercise price of $1,114,661.71. The executive officers include Arvind
Peter Relan, S. Coppy Holzman, Gary B. Dahl, Mark J. Holtzman, Vivek
Joshi, Christian T. Mannella and David S. Rock.
6. In May 1998, the Registrant issued 16,380,000 shares of Series B
Preferred Stock of the Registrant to SOFTBANK Holdings, Inc. for an
amount of $14,960,400.
7. In May 1998, the Registrant granted and issued a warrant to purchase
164,232 shares of Series B Preferred Stock of the Registrant to
Comdisco for an exercise price of $149,998.56.
8. In June 1998, the Registrant issued an aggregate of 21,341,976 shares
of Series B Preferred Stock of the Registrant to SOFTBANK Holdings,
Inc. and Raj Vattikuti for an aggregate amount $19,492,338.08.
9. From June 1998 to September 1998, the Registrant issued an aggregate of
1,379,328 shares of Series B Preferred Stock of the Registrant to
consultants and individual investors for an aggregate amount of
$1,259,786.24. The consultants include Harbor Belmont Associates,
Distribution Planning, Inc. and individuals associated with
Distribution Planning, Inc.
10. In June 1998, the Registrant granted and issued an aggregate of 18,000
shares of Series B Preferred Stock of the Registrant to employees for
an aggregate amount of $16,440.
11. In November 1998, the Registrant granted and issued warrants to
purchase an aggregate of 2,233,572 shares of Series B Preferred Stock
of the Registrant to equipment lessors for an aggregate exercise price
of $2,039,995.76. The equipment lessors include Lighthouse Capital
Partners II, L.P., Dominion Capital Management, LLC, Imperial Bank,
MMC/GATX Partnership No. 1 and Venture Lending & Leasing, Inc.
12. In January 1999, the Registrant issued an aggregate of 12,000 shares of
Series B Preferred Stock of the Registrant to employees for an
aggregate amount of $10,960.
13. In January 1999, the Registrant issued an aggregate of 32,281,200
shares of Series C Preferred Stock of the Registrant to venture
investors for an aggregate amount of $74,999,988. The venture investors
include Yahoo! Inc. and E*TRADE Group, Inc.
14. In April 1999, the Registrant issued an aggregate of 60,000 shares of
Series C Preferred Stock of the Registrant to individual investors for
an aggregate amount of $139,400.
15. In June 1999, the Registrant issued 450,000 shares of Common Stock of
the Registrant to Kevin R. Czinger for an amount of $607,500.
II-2
<PAGE> 99
16. In July and August 1999, the Registrant issued an aggregate of
21,670,605 shares of Series D-2 Preferred Stock of the Registrant to
SOFTBANK Holdings, Inc., Goldman, Sachs & Co. and Sequoia Capital and
their affiliates for an aggregate amount of $274,999,997.40.
17. In July 1999, the Registrant granted and issued warrants to purchase an
aggregate of 1,812,000 shares of Series C Preferred Stock of the
Registrant to Vintage Island Partners and Bechtel Corporation for an
aggregate exercise price of $4,209,880.
18. In August, September and October 1999, the Registrant issued 22,500
shares of common stock of the Registrant to Ramsey Beirne Associates,
Inc. for services provided.
19. In September 1999, the Registrant issued 150,000 shares of Series C
Preferred Stock of the Registrant to Bechtel Corporation for $348,500.
20. In October 1999, the Registrant issued 1,250,000 shares of common stock
of the Registrant to George T. Shaheen in connection with his
employment.
21. In October 1999, the Registrant issued 2,500 shares of common stock of
the Registrant to Cooley Godward LLP for services provided and 40,500
shares of common stock of the Registrant to a consultant for services
being provided.
22. In September and October 1999, the Registrant granted and issued
options to purchase an aggregate of 16,125,000 shares of common stock
of the Registrant to employees, a consultant, Gregory Beutler, Robert
H. Swan and George T. Shaheen pursuant to the Registrant's 1999
Nonstatutory Stock Option Plan with an aggregate exercise price of
$126,304,860.
23. In October 1999, the Registrant issued 15,000 shares of common stock of
the Registrant to an employee pursuant to the Registrant's 1999
Nonstatutory Stock Option Plan with an exercise price of $49,999.50.
There were no underwriters involved in connection with any transaction set
forth above. The issuances of the securities in paragraphs 2, 5 and 15 of this
Item 15 were deemed to be exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated thereunder as grants of options pursuant to
written compensatory benefit plans approved by the Registrant's Board of
Directors. The other issuances set forth in this Item 15 were deemed to be
exempt from registration pursuant to Section 4(2) of the Securities Act and
Regulation D promulgated thereunder as a transaction by an issuer not involving
a public offering.
In all of such transactions, the recipients of securities represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and appropriate legends
were affixed to the securities issued.
II-3
<PAGE> 100
The following table summarizes the benefits to the executive officers and
directors in connection with the above issuances, based upon an assumed initial
public offering price of $12.00 per share, as compared to the price at which
such parties purchased the Registrant's securities.
<TABLE>
<CAPTION>
PRICE PAID
EXECUTIVE OFFICER OR DIRECTOR NUMBER OF SHARES PER SHARE VALUE OF BENEFIT
----------------------------- ---------------- ---------- ----------------
<S> <C> <C> <C>
Louis H. Borders.......................... 14,117,328 $0.00083 $169,396,218.62
22,240,896 0.09587 264,759,406.94
George T. Shaheen......................... 1,250,000 0.00000 15,000,000.00
Kevin R. Czinger.......................... 450,000 1.35000 4,792,500.00
Arvind Peter Relan........................ 3,828,000 0.01250 45,888,150.00
Gary B. Dahl.............................. 2,250,000 0.00083 26,998,132.50
Mark J. Holtzman.......................... 1,260,000 0.00083 15,118,954.20
Mark J. Holtzman.......................... 600,930 0.01250 7,203,648.38
S. Coppy Holzman.......................... 2,250,000 0.00083 26,998,132.50
Vivek Joshi............................... 30,000 3.33333 260,000.10
Christian T. Mannella..................... 78,000 0.41667 903,499.74
David S. Rock............................. 3,600,000 0.00083 43,197,012.00
360,000 0.01250 4,315,500.00
Christos Cotsakos......................... 684,462 0.10000 8,145,097.80
</TABLE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1# Form of Underwriting Agreement
3.1# Certificate of Incorporation of the Registrant
3.2# Restated Certificate of Incorporation of the Registrant
3.3# Bylaws of the Registrant
3.4 Restated Certificate of Incorporation of the Registrant to
be filed following the closing of the offering.
4.1# Specimen Common Stock Certificate
4.2# Registration Rights Agreement dated October 29, 1997, as
amended
5.1# Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1# Form of Indemnification Agreement between the Registrant and
each of its directors and officers
10.2# 1997 Stock Plan and form of agreements thereunder
10.3# 1999 Employee Stock Purchase Plan
10.4# Lease Agreement dated April 1, 1998 between the Registrant
and Lincoln Coliseum Distribution Center for premises in
Oakland, California
10.5# Lease Agreement dated March 4, 1999 between the Registrant
and AMB Property, LP for premises in Atlanta, Georgia
10.6# Lease Agreement dated January 21, 1997 between the
Registrant and Dove Holdings, Inc. for premises in Foster
City, California
10.7# Lease and Security Agreement dated November 18, 1998 between
the Registrant and Lighthouse Capital Partners and other
lenders
10.8# Offer Letter dated March 18, 1999 between the Registrant and
Kevin R. Czinger
10.9# Offer Letter dated February 2, 1998 between the Registrant
and Arvind Peter Relan
10.10# Offer Letter dated December 14, 1998 between the Registrant
and Mark X. Zaleski
10.11# Offer Letter dated March 31, 1997 between the Registrant and
Gary B. Dahl
10.12# Offer Letter dated June 5, 1997 between the Registrant and
Mark J. Holtzman
10.13# Offer Letter dated September 3, 1997 between the Registrant
and S. Coppy Holzman
10.14+ Contract dated July 8, 1999 for turnkey design/build
construction and related services between the Registrant and
Bechtel Corporation
10.15 Warrant dated July 8, 1999 issued to Bechtel Corporation
10.16# Warrant dated May 27, 1998 issued to Comdisco Ventures
10.17# Warrant dated November 18, 1998 issued to Lighthouse Capital
Partners
</TABLE>
II-4
<PAGE> 101
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
10.18# Internet Data Services Agreement dated January 21, 1999
between the Registrant and Exodus Communications, Inc.
10.19# 1999 Nonstatutory Stock Option Plan and form of agreements
thereunder
10.20 Employment Agreement between the Registrant and George T.
Shaheen
10.21# Offer Letter dated August 19, 1999 between the Registrant
and Gregory Beutler
10.22# Offer Letter dated July 25, 1999 between the Registrant and
Vivek M. Joshi
10.23# Offer Letter dated October 2, 1999 between the Registrant
and Robert H. Swan
10.24+ Exclusive Supply and Sole Source Agreement between the
Registrant and Diamond Phoenix Corporation
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2# Consent of Counsel (see Exhibit 5.1)
24.1# Power of Attorney
24.2# Power of Attorney
24.3# Power of Attorney for George T. Shaheen
27.1# Financial Data Schedule
</TABLE>
- -------------------------
# Previously filed
+ Confidential treatment has been requested for certain portions of this
exhibit.
(b) Financial Statement Schedules
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
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 foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) 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.
(2) 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 the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 102
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 5 to Registration Statement to be signed on
its behalf by the undersigned, thereunto, duly authorized in Foster City,
California, on October 21, 1999.
Webvan Group, Inc.
By: /s/ KEVIN R. CZINGER
------------------------------------
Kevin R. Czinger
Senior Vice President,
Corporate Operations and Finance
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on October 21, 1999 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
* Chairman of the Board of Directors
- -----------------------------------------------------
Louis H. Borders
* President,
- ----------------------------------------------------- Chief Executive Officer and Director
George T. Shaheen (Principal Executive Officer)
/s/ KEVIN R. CZINGER Senior Vice President,
- ----------------------------------------------------- Corporate Operations
Kevin R. Czinger and Finance
(Principal Financial and Accounting Officer)
* Director
- -----------------------------------------------------
David M. Beirne
* Director
- -----------------------------------------------------
Christos M. Cotsakos
* Director
- -----------------------------------------------------
Tim Koogle
* Director
- -----------------------------------------------------
Michael J. Moritz
*By: /s/ KEVIN R. CZINGER
- -----------------------------------------------------
Kevin R. Czinger
Attorney-In-Fact
</TABLE>
II-6
<PAGE> 103
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<S> <C> <C>
1.1# Form of Underwriting Agreement..............................
3.1# Certificate of Incorporation of the Registrant..............
3.2# Restated Certificate of Incorporation of the Registrant.....
3.3# Bylaws of the Registrant....................................
3.4 Restated Certificate of Incorporation of the Registrant to
be filed following the closing of the offering..............
4.1# Specimen Common Stock Certificate...........................
4.2# Registration Rights Agreement dated October 29, 1997, as
amended.....................................................
5.1# Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.................................................
10.1# Form of Indemnification Agreement between the Registrant and
each of its directors and officers..........................
10.2# 1997 Stock Plan and form of agreements thereunder...........
10.3# 1999 Employee Stock Purchase Plan...........................
10.4# Lease Agreement dated April 1, 1998 between the Registrant
and Lincoln Coliseum Distribution Center for premises in
Oakland, California.........................................
10.5# Lease Agreement dated March 4, 1999 between the Registrant
and AMB Property, LP for premises in Atlanta, Georgia.......
10.6# Lease Agreement dated January 21, 1997 between the
Registrant and Dove Holdings, Inc. for premises in Foster
City, California............................................
10.7# Lease and Security Agreement dated November 18, 1998 between
the Registrant and Lighthouse Capital Partners and other
lenders.....................................................
10.8# Offer Letter dated March 18, 1999 between the Registrant and
Kevin R. Czinger............................................
10.9# Offer Letter dated February 2, 1998 between the Registrant
and Arvind Peter Relan......................................
10.10# Offer Letter dated December 14, 1998 between the Registrant
and Mark X. Zaleski.........................................
10.11# Offer Letter dated March 31, 1997 between the Registrant and
Gary B. Dahl................................................
10.12# Offer Letter dated June 5, 1997 between the Registrant and
Mark J. Holtzman............................................
10.13# Offer Letter dated September 3, 1997 between the Registrant
and S. Coppy Holzman........................................
10.14+ Contract dated July 8, 1999 for turnkey design/build
construction and related services between the Registrant and
Bechtel Corporation.........................................
10.15 Warrant dated July 8, 1999 issued to Bechtel Corporation....
10.16# Warrant dated May 27, 1998 issued to Comdisco Ventures......
10.17# Warrant dated November 18, 1998 issued to Lighthouse Capital
Partners....................................................
10.18# Internet Data Services Agreement dated January 21, 1999
between the Registrant and Exodus Communications, Inc. .....
10.19# Nonstatutory Stock Option Plan and form of agreements
thereunder..................................................
10.20 Employment Agreement between the Registrant and George T.
Shaheen.....................................................
10.21# Offer Letter dated August 19, 1999 between the Registrant
and Gregory Beutler.........................................
10.22# Offer Letter dated July 25, 1999 between the Registrant and
Vivek M. Joshi..............................................
10.23# Offer Letter dated October 2, 1999 between the Registrant
and Robert H. Swan..........................................
10.24+ Exclusive Supply and Sole Source Agreement between the
Registrant and Diamond Phoenix Corporation
23.1 Consent of Deloitte & Touche LLP, Independent Auditors......
23.2# Consent of Counsel (see Exhibit 5.1)........................
24.1# Power of Attorney...........................................
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGE
- ------- ----------------------- ------------
<S> <C> <C>
24.2# Power of Attorney...........................................
24.3# Power of Attorney for George T. Shaheen.....................
27.1# Financial Data Schedule.....................................
</TABLE>
- -------------------------
# Previously filed
+ Confidential treatment has been requested for certain portions of this
exhibit.
<PAGE> 1
EXHIBIT 3.4
RESTATED CERTIFICATE OF INCORPORATION
OF
WEBVAN GROUP, INC.
a Delaware corporation
Webvan Group, Inc., a corporation organized and existing under the laws of
the State of Delaware, does hereby certify:
1. The name of the corporation is Webvan Group, Inc. (the "Corporation").
The original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on August 17, 1999.
2. The amendment and restatement herein set forth has been duly approved
by the Board of Directors of the Corporation and by the stockholders of the
Corporation pursuant to Sections 141, 228 and 242 of the General Corporation Law
of the State of Delaware ("Delaware Law"). Approval of this amendment and
restatement was approved by a written consent signed by less than all of the
stockholders of the Corporation pursuant to Section 228 of the Delaware Law, and
notice has been given in accordance with Section 228(d) of the Delaware Law to
those stockholders not signing such written consent.
3. The restatement herein set forth has been duly adopted pursuant to
Section 245 of the Delaware Law. This Amended and Restated Certificate of
Incorporation restates and integrates and amends the provisions of the
Corporation's Certificate of Incorporation.
4. The text of the Certificate of Incorporation is hereby amended and
restated to read in its entirety as follows:
"ARTICLE I
The name of this corporation is Webvan Group, Inc. (hereinafter, the
"Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
This Corporation is authorized to issue two classes of shares to be
designated, respectively, Common Stock and Preferred Stock. Each share of Common
Stock shall have a par value of $0.0001 and each share of
-1-
<PAGE> 2
Preferred Stock shall have a par value of $0.0001. The total number of shares of
Common Stock this Corporation shall have authority to issue is 800,000,000, and
the total number of shares of Preferred Stock this Corporation shall have
authority to issue is 10,000,000.
The Preferred Stock initially shall be undesignated as to series. Any
Preferred Stock not previously designated as to series may be issued from time
to time in one or more series pursuant to a resolution or resolutions providing
for such issue duly adopted by the Board of Directors (authority to do so being
hereby expressly vested in the Board), and such resolution or resolutions shall
also set forth the voting powers, full or limited or none, of each such series
of Preferred Stock and shall fix the designations, preferences and relative,
participating, optional or other special rights of each such series of Preferred
Stock and the qualifications, limitations or restrictions of such powers,
designations, preferences or rights. The Board of Directors is also authorized
to fix the number of shares of each such series of Preferred Stock. The Board of
Directors is authorized to alter the powers, designation, preferences, rights,
qualifications, limitations and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of Preferred
Stock, to increase or decrease (but not below the number of shares of any such
series then outstanding) the number of shares of any such series subsequent to
the issue of shares of that series.
Each share of Preferred Stock issued by the Corporation, if reacquired by
the Corporation (whether by redemption, repurchase, conversion to Common Stock
or other means), shall upon such reacquisition resume the status of authorized
and unissued shares of Preferred Stock, undesignated as to series and available
for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion, if applicable, of the
Preferred Stock.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
The Board of Directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Board of
Directors. At the first annual meeting of stockholders following the date
hereof, the term of office of the Class I directors shall expire and Class I
directors shall be elected for a full term of three years. At the second annual
meeting of stockholders following the date hereof, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the date hereof, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose term expire at
such annual meeting. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional director
of any class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall
-2-
<PAGE> 3
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director.
ARTICLE VII
Section 1. The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
Section 2. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, alter, amend
or repeal the Bylaws of the Corporation. The affirmative vote of at least a
majority of the Board of Directors then in office shall be required to adopt,
amend, alter or repeal the Corporation's Bylaws. The Corporation's Bylaws also
may be adopted, amended, altered or repealed by the affirmative vote of the
holders of at least a majority of the voting power of the shares entitled to
vote at an election of directors. No Bylaw hereafter legally adopted, amended,
altered or repealed by the stockholders of the Corporation shall invalidate any
prior act of the directors or officers of the Corporation which would have been
valid if such Bylaw had not been adopted, amended, altered or repealed.
Section 3. Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
Section 4. At the election of directors of the Corporation, each holder of
Common Stock shall be entitled to one vote for each share held. No stockholder
will be permitted to cumulate votes at any election of directors.
Section 5. The number of directors which constitute the whole Board of
Directors shall be fixed exclusively in the manner designated in the Bylaws of
the Corporation.
ARTICLE VIII
Section 1. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as may hereafter be amended, a director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Section 2. The Corporation shall indemnify to the fullest extent permitted
by law, as now or hereinafter in effect, any person made or threatened to be
made a party to an action or proceeding, whether criminal, civil, administrative
or investigative, by reason of the fact that he, his testator or intestate is or
was a director or officer of the Corporation or any predecessor of the
Corporation or serves or served at any other enterprise as a director, officer,
employee or agent at the request of the Corporation or any predecessor to the
Corporation and such right to indemnification shall continue as to a person who
has ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
PROVIDED, HOWEVER, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Corporation. The right to indemnification
conferred by this Section 2 shall include the right to be paid by the
Corporation the expenses incurred in defending or otherwise participating in any
proceeding in advance of its final disposition. The Corporation may indemnify to
the fullest extent permitted by law, as now or hereinafter in effect, any person
made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was
-3-
<PAGE> 4
an employee or agent of the Corporation or any predecessor of the Corporation or
serves or served at any other enterprise as a director, officer, employee or
agent at the request of the Corporation or any predecessor to the Corporation.
The rights to indemnification and to the advancement of expenses conferred in
this Section 2 shall not be exclusive of any other right which any person may
have or hereafter acquire under this Restated Certificate Incorporation (as
amended and restated from time to time, the "Restated Certificate of
Incorporation"), the Bylaws of the Corporation, any statute, agreement, vote of
the stockholders of the Corporation or disinterested directors of the
Corporation or otherwise.
Section 3. Neither any amendment nor repeal of any Section of this Article
VIII, nor the adoption of any provision of the Restated Certificate of
Incorporation inconsistent with this Article VIII, shall adversely affect any
right or protection of any director or officer established pursuant to this
Article VIII existing at the time of such amendment, repeal or adoption of an
inconsistent provision, including without limitation by eliminating or reducing
the effect of this Article VIII, for or in respect of any act, omission or other
matter occurring, or any action or proceeding accruing or arising (or that, but
for this Article VIII, would accrue or arise) prior to such amendment, repeal or
adoption of an inconsistent provision.
ARTICLE IX
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE X
Section 1. Except as otherwise provided for or fixed by or pursuant to the
provisions of Article IV hereof in relation to the rights of the holders of
Preferred Stock to elect directors under specified circumstances, newly-created
directorships resulting from any increase in the number of directors, created in
accordance with the Bylaws of the Corporation, and any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining director. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full term
of the class of directors in which the new directorship was created or the
vacancy occurred and until such director's successor shall have been elected and
qualified, or until such director's earlier death, resignation or removal. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Section 2. Any director or the entire Board of Directors may be removed
from office at any time, but only for cause, and only by the affirmative vote of
the holders of at least a majority of the voting power of the issued and
outstanding capital stock of the Corporation entitled to vote in the election of
directors.
ARTICLE XI
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
-4-
<PAGE> 5
ARTICLE XII
Section 1. Stockholders of the Corporation may not take action by written
consent in lieu of a meeting but must take any actions at a duly called annual
or special meeting.
Section 2. Unless otherwise required by law, special meetings of the
stockholders of the Corporation, for any purpose or purposes, may be called only
by either (i) the Board of Directors of the Corporation, (ii) the Chairman of
the Board of Directors of the Corporation, if there be one, (iii) the Chief
Executive Officer of the Corporation or (iv) the President of the Corporation.
ARTICLE XIII
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation."
IN WITNESS WHEREOF, Webvan Group, Inc. has caused this Restated Certificate
of Incorporation to be signed by Kevin R. Czinger and attested to by J. Robert
Suffoletta, its Assistant Secretary, on October _____, 1999.
Webvan Group, Inc.
a Delaware Corporation
By:
--------------------------------
Kevin R. Czinger,
Senior Vice President, Corporate
Operations and Finance
ATTEST:
By:
-------------------------------------
J. Robert Suffoletta,
Assistant Secretary
-5-
<PAGE> 1
EXHIBIT 10.14
CONTRACT
FOR
TURNKEY DESIGN/BUILD
CONSTRUCTION AND RELATED SERVICES
between
WEBVAN GROUP, INC.
and
BECHTEL CORPORATION
<PAGE> 2
CONTRACT
FOR
TURNKEY DESIGN/BUILD
CONSTRUCTION AND RELATED SERVICES
THIS CONTRACT ("CONTRACT") is dated the 8th day of July, 1999, for reference
purposes only, by and between Webvan Group, Inc. (formerly known as Intelligent
Systems for Retail, Inc.), a California corporation ("WEBVAN"), and Bechtel
Corporation, a Nevada corporation ("BECHTEL").
1.0 THE PROJECT
1.1 The project ("PROJECT") consists of the location, selection,
evaluation, design, development, construction, start-up and testing of up to
twenty-six (26) distribution center warehouse facilities ("DC'S") to be located
in various cities to be determined by Webvan throughout the United States and
the design, engineering, procurement, assembly, installation, start-up, testing
and calibration of materials handling and distribution equipment and systems and
all other materials, equipment and systems (including, without limitation, food
production, refrigeration and specialized heating, ventilation and air
conditioning equipment and systems) necessary for the operation of each DC in
the manner specified in the applicable Contract Documents (defined in Section
2.5) (collectively, the "OPERATING EQUIPMENT"). The provision of all such
services with respect to any DC is referred to herein as the "DEVELOPMENT" of a
DC. The Development of any particular DC is referred to herein as a "DC
PROJECT".
1.2 Each DC Project will be described more particularly in the
drawings, plans and specifications to be prepared by Bechtel. Webvan, however,
shall be solely responsible for the design and installation of each DC's local
area network, conveyor software and associated server systems (excluding
programmable logic controllers and conveyor scanning hardware embedded in
conveyor and related Operating Equipment), radio frequency scanners and
"Fill-To-Order" computing systems and software (collectively, the "WEBVAN
Systems"). Prior to Substantial Completion (defined in Section 2.5), but after
Bechtel has assembled and installed all Operating Equipment for a DC Project,
Bechtel shall notify Webvan that the materials handling and distribution system
at such DC is ready for start-up testing. No later than ten (10) days after
Webvan's receipt of such notice, Webvan shall install the Webvan Systems and
Webvan's "Order Fulfillment System" server and software at such DC and shall
conduct such testing as reasonably required to confirm that each item (both
individually and in concert with other items) of the materials handling and
distribution equipment and systems installed at the DC meets the applicable
functionality specifications provided in the Contract Documents for such DC
Project and to confirm that such materials handling and distribution system
properly operates at the volume and through-puts specified in the Notice to
Proceed for such DC Project (collectively, the "PERFORMANCE STANDARDS").
1.3 The term of this Contract shall commence as of the Effective Date
(defined in Section 8.12) and shall expire on the third (3rd) anniversary of the
Effective Date, unless extended by the written agreement of Webvan and Bechtel.
Notwithstanding the expiration of the term of this Contract, Bechtel shall
continue thereafter to perform all Services (defined in Section 2.0) to achieve
Final Completion (defined in Section 3.2) of all DC Projects for which a Notice
to Proceed (defined in Section 2.0) has been executed in accordance with the
applicable Contract Documents (defined in Section 2.5).
1
<PAGE> 3
2.0 BECHTEL'S SERVICES
When requested by Webvan, Bechtel shall perform or cause to be performed for the
Project the services and items generally described below (collectively, the
"SERVICES"). Notwithstanding anything to the contrary in this Contract, Bechtel
shall not perform any of the Services unless and until a fully executed notice
to proceed ("NOTICE TO PROCEED") for specified Services in the form attached
hereto as Appendix 2.0 has been entered by Webvan and Bechtel, and Webvan shall
have no obligation to pay for any Services performed by Bechtel which are not
specifically authorized in a Notice to Proceed executed by Webvan. All Services
performed by Bechtel for the Project shall be classified as within one or more
of Sections 2.1 through 2.7 of this Section 2.0.
2.1 Program Management.
Based on Webvan's program and criteria for the Project, Bechtel shall prepare
and submit for Webvan's approval a "DEVELOPMENT PLAN" (which shall initially be
based upon Webvan's existing DCs located in Oakland, California and Atlanta,
Georgia) of preliminary proposals and recommendations regarding Project concept,
development strategy, architectural and design concepts, space requirements and
adjacency relationships, number and functional responsibilities of personnel,
special equipment and systems, human and material flow patterns, governmental
approval strategies, construction schedule requirements, construction budget
requirements, and other matters regarding the Development of the DC Projects,
including, but not limited to:
2.1.1 Preparation of a preliminary assessment of the Project budget
taking into account the activities contemplated for the Project.
2.1.2 Consultation with Webvan's independent consultants and Webvan
concerning the Project and development of Project plans, drawings and
specifications.
2.1.3 Assistance with utility optimization and sourcing, as requested,
to develop alternative methods to reduce utility costs and ongoing operation of
DC's.
2.1.4 Development of cost control systems for the Project, including
regular monitoring of actual costs for activities in progress and estimates for
uncompleted tasks.
2.1.5 Development of milestone completion dates for the Project.
2.2 Site Evaluation and Selection. As and when requested by Webvan:
2.2.1 Provide building and site evaluation to review physical plants and
properties and to assess and compare alternative DC sites.
2.2.2 Ascertain as to a proposed DC Project whether there are any
significant zoning, building code, entitlement or other governmental compliance
issues (including transportation issues), prepare a plan for addressing any such
issues, and assist Webvan in addressing such issues, including, without
limitation, Bechtel's development of an entitlement strategy for obtaining such
approvals as are required from governmental authorities to develop each DC
Project within the time frame and costs contemplated by the Project Schedule and
Project Budget (as each is defined below) for a DC Project, coordination of all
development requirements of applicable governmental authorities, and making such
appearances and attending such meetings as are necessary or appropriate in
connection with obtaining required permits and approvals.
2
<PAGE> 4
2.2.3 Assist Webvan in conducting inspections, evaluations, surveys and
tests as may be necessary or appropriate in connection with any DC Project,
including, without limitation, such engineering and geotechnical studies,
seismic tests, and inspections and reviews of all buildings and related
operating systems to determine the feasibility of a DC Project. Bechtel shall
not be required, however, to perform any testing or analysis to determine the
presence or extent of any hazardous materials at the DC Projects.
2.2.4 Bechtel's liability for any deficient Services provided under this
Section 2.2 shall be limited to the reperformance of such Services during the
term of this Contract at no additional charge to Webvan.
2.3 Design.
2.3.1 Schematic Design Services.
2.3.1.1 Based on the approved Development Plan for each of the DC
Projects and any adjustments authorized by Webvan in such Development Plan,
Bechtel shall prepare for Webvan's review and approval schematic drawings,
descriptive specifications and other documents appropriate to the size of each
of the DC Projects illustrating and describing the concept, quality, layout,
scale and relationship of the DC Project components (including, without
limitation, the Operating Equipment), which documents are collectively referred
to as the "SCHEMATIC DESIGN DOCUMENTS". Webvan acknowledges that the conceptual
design of the DC Projects shall initially be based upon Webvan's existing DCs
located in Oakland, California and Atlanta, Georgia. Bechtel shall, however,
review with Webvan alternative designs and construction methods relating to each
DC Project.
2.3.1.2 Upon completion of the Schematic Design Documents for a DC
Project, Bechtel shall prepare and submit to Webvan a comprehensive, detailed
preliminary budget for such DC Project and for all costs to be incurred as part
of the DC Project, which budget shall at all times be subject to Webvan's
approval both as to form and content. The parties acknowledge that such DC
Project budgets will be critical in allowing the parties to conceptualize and
monitor the Development of the Project, and Bechtel shall use its best efforts
to prepare and update each such DC Project budget so as to be as detailed and
realistic as possible. Each such DC Project budget, as revised from time to time
and approved by Webvan, is referred to herein as a "PROJECT BUDGET". Bechtel
shall design each DC Project in accordance with its Project Budget.
2.3.2 Design Development Services.
2.3.2.1 Based on the approved Schematic Design Documents for each
DC Project and any adjustments authorized by Webvan in the Development Plan or
the Project Budget for such DC Project, Bechtel shall prepare for Webvan's
review and approval drawings of sufficient detail to describe the size, shape,
configuration, and quantity of typical and non-typical elements of each such DC
Project (including, without limitation, the Operating Equipment), outline
specifications and other documents which fix and describe the size and character
of the DC Project as to architecture, engineering, structure, layout, electrical
systems, mechanical systems, plumbing systems, materials and equipment
(including the Operating Equipment), all of which documents are collectively
referred to herein as the "DESIGN DEVELOPMENT DOCUMENTS".
2.3.2.2 Bechtel shall refine the Project Budget for each DC
Project based on the Design Development Documents for such DC Project. Bechtel
shall revise the Design Development
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Documents as required by Webvan to make them acceptable to Webvan and shall
adjust the Project Budget for such DC Project accordingly.
2.3.3 Construction Documents Services.
2.3.3.1 Based on the Design Development Documents approved by
Webvan for each DC Project and the approved Project Budget for each such DC
Project, Bechtel shall prepare the final drawings, plans and specifications
setting forth in detail the requirements for Development of each such DC
Project, collectively referred to herein as the "CONSTRUCTION DOCUMENTS". The
Construction Documents shall include the detailed Performance Standards for the
operation of the materials handling and distribution system and equipment
included within such DC Project.
2.3.3.2 Bechtel shall revise the Construction Documents as
required by Webvan to make them acceptable to Webvan and shall adjust the
Project Budget for each such DC Project accordingly.
2.3.3.3 Bechtel shall complete the Construction Documents for each
DC Project, including Bechtel's coordination of all documents and corrections
based on such coordination, prior to preparing and issuing bid documents for
each such DC Project.
2.3.3.4 Bechtel shall submit all necessary Construction Documents
approved by Webvan and applications for all necessary permits and approvals for
the Development of each DC Project to the appropriate governmental authorities
and shall process such Construction Documents, subject to the terms of this
Contract, as required by such governmental authorities to secure the issuance of
such permits and approvals for the use and occupancy of each DC Project.
2.3.4 General.
2.3.4.1 The Design Services and Construction Documents provided
and/or prepared by Bechtel for each DC Project shall comply with (i) all
applicable federal, state and local laws, ordinances, building and other codes,
rules and regulations (collectively, "LAWS"), (ii) all covenants, conditions,
restrictions, easements and leases affecting the applicable DC Project sites,
copies of which have been provided to Bechtel by Webvan (collectively "PRIVATE
RESTRICTIONS"), (iii) all applicable manufacturers' and vendors' instructions
and specifications, and (iv) sound design and construction practices. Bechtel
shall make recommendations regarding alternative solutions whenever design
details appear to affect adversely the Development of any DC Project, the
Project Budget, or the Project Schedule. If Webvan or Bechtel determines that
modifications are necessary to any such Construction Documents to comply with
Laws which were in effect at the time each Construction Document is issued to
Webvan or if Webvan or Bechtel determines that modifications are necessary to
any Construction Documents to comply with any Private Restriction at the time
such Construction Documents were issued to Webvan, Bechtel, at its sole cost and
expense, shall immediately modify the Construction Documents as necessary to
bring the Construction Documents into compliance with such Laws and Private
Restrictions which were in effect at the time of issuing the Construction
Documents and shall notify Webvan in writing of such modifications.
2.3.4.2 Bechtel shall provide all design services for the
Development of the DC Projects requested by Webvan and shall employ the services
of reputable, licensed and well-qualified professional architects, engineers and
other design consultants in connection with the Project (collectively
"SUBCONSULTANTS") only with Webvan's prior written consent. After Webvan has
approved
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any particular Subconsultant, Bechtel shall contract, solely in its own name and
behalf and not in the name or behalf of Webvan, with such Subconsultant.
Bechtel's form of agreement with Subconsultants shall be subject to the prior
approval of Webvan and shall provide that the Subconsultants shall perform their
respective portions of the DC Project work in accordance with all applicable
provisions of this Contract and the other Contract Documents. Webvan's approvals
shall not, however, make Webvan a party to any such agreement. Bechtel shall
direct and coordinate the work of its Subconsultants and shall be responsible
for the work performed by its Subconsultants and the compensation payable to its
Subconsultants. Notwithstanding anything to the contrary in this Contract,
Webvan's consent to any Subconsultant shall not in any way relieve Bechtel of
any duty, liability or responsibility to Webvan for the Design Services (defined
in Section 3.1) provided by Bechtel or any of its Subconsultants.
2.3.4.3 Bechtel and the applicable Subconsultants shall sign all
Construction Documents and other design documents prepared by or caused to be
prepared by Bechtel under this Contract.
2.3.4.4 Bechtel shall cooperate with Webvan during Development of
the DC Projects to effect cost savings as deemed appropriate by Webvan without
unnecessarily altering established Project scope or quality. Bechtel shall
perform value-engineering concurrent with the design process to ensure that
building systems, materials, construction methods, Operating Equipment and
costing are properly considered. Bechtel shall seek to achieve construction
efficiency during the design process and capture savings for Webvan to the
extent reasonably possible.
2.3.4.5 Bechtel shall prepare and submit a critical path or
network construction schedule in form and substance satisfactory to Webvan for
the timing of the various components of the Development of each DC Project,
which shall show in detail the various major activities to be undertaken in
connection with each such DC Project (including demolition, design, bidding,
construction, assembly, installation, start-up and testing phases of the DC
Project, including the obtaining of all governmental approvals and permits for
use and occupancy) and the approximate timing of the commencement and completion
of such activities. Each such DC Project schedule shall also include at least a
general indication of the various activities that Bechtel expects to undertake
in connection with the DC Project and the approximate timing of the commencement
and completion of such activities. The parties acknowledge that each such DC
Project schedule will be critical in allowing the parties to conceptualize and
monitor the Development of the Project, and Bechtel shall use its best efforts
to prepare and regularly update each DC Project schedule so as to be as detailed
and accurate as possible. Each such DC Project schedule, as revised from time to
time and approved by Webvan, is referred to herein as a "PROJECT SCHEDULE".
2.3.4.6 All design approvals required by Webvan shall be in
writing. The approval by Webvan of any design document required by this Contract
(including, without limitation, the Schematic Design Documents, the Design
Development Documents, and the Construction Documents) shall not constitute a
waiver by Webvan or require Webvan to relinquish any of its rights under this
Contract, nor shall it relieve Bechtel of any of its obligations or liabilities
for the technical or professional adequacy of its services as described in this
Contract.
2.3.4.7 If any defect in any DC Project work arises on or before
the [*] anniversary of the date of Substantial Completion of the DC Project as a
result of any error or omission in the performance of Design Services, then
(provided that Webvan gives Bechtel notice of such defect on or before such [*]
anniversary) Bechtel shall, within ten (10) business days after receipt of such
written notice (or such longer time as may reasonably be necessary to correct
such defect) and at no cost
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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to Webvan, (i) perform all Design Services to remedy such errors and omissions,
including, without limitation, the development and preparation of additional
Construction Documents in accordance with this Contract to correct such errors
and omissions, and (ii) provide all Construction Services (including, without
limitation, all labor, equipment and materials at the applicable DC Property)
necessary (a) to cause the DC Project to comply in all respects with such
corrective Construction Documents and (b) to alter, repair, replace and/or
restore DC Project work (including, without limitation, Operating Equipment) and
the applicable DC Property damaged, destroyed or rendered unusable (in Webvan's
reasonable judgment) as a result of any such errors or omissions in the
performance of Design Services under this Contract. If Bechtel is required to
remedy any such defects, errors and omissions under the foregoing sentence, then
all Design Services and Construction Services provided by Bechtel to remedy such
defects, errors and omissions shall themselves be subject to the foregoing
remedial obligation. If, therefore, any defect in such corrective Design
Services and/or Construction Services arises within the earlier to expire of (1)
[*] after the date such corrective work has been completed or (2) the [*]
anniversary of the date of Substantial Completion of the applicable DC Project
then provided that Webvan gives Bechtel prompt notice of such defect and in no
event later than such [*] anniversary) Bechtel shall, within ten (10) business
days after receipt of a written notice of such further defect (or such longer
time as may reasonably be necessary to correct such defect) perform such
additional Design Services and provide such additional Construction Services as
may be necessary to correct such further defect as provided in the foregoing
provisions of this Section 2.3.4.7. If Bechtel fails promptly to correct any
such defects within the foregoing time periods, then Webvan may (without
affecting Bechtel's obligations or liability hereunder) correct, or cause to be
corrected, such defects and charge all related costs to Bechtel, together with
interest (accruing from the date fifteen (15) days following the date of
Webvan's invoice to Bechtel for such costs) at a rate (the "DEFAULT RATE") equal
to the lesser of (A) a simple per annum interest rate equal to four percent (4%)
above the prime lending rate quoted from time to time to substantial and
responsible commercial borrowers on 90-day loans by the Bank of America,
N.T.&S.A., San Francisco, California, or (B) the maximum rate permitted by
applicable Law, until Bechtel has paid such costs.
2.4 Reserved.
2.5 Construction Services. Bechtel shall provide all work and furnish all
labor, services, materials and equipment necessary to construct and complete, in
a good and workmanlike manner, each of the DC Projects (including, without
limitation, the procurement, assembly, installation, testing and calibration of
all Operating Equipment), as described and reasonably inferable from the
approved Construction Documents for such DC Projects. Bechtel shall also assist
Webvan with (i) planning and coordinating building systems and equipment and
Operating Equipment pre-operational tests, start-up performance tests, on-site
observation and troubleshooting, (ii) notifying vendors regarding necessary
modifications, if any, to equipment, and (iii) coordinating the services to be
provided by manufacturers in adjusting, calibrating and verifying the correct
installation of their equipment. Upon Bechtel's receipt, after completion of the
Construction Documents and Webvan's approval of the Project Schedule and Project
Budget for a DC Project, of a written request by Webvan substantially in the
form of Appendix 2.5A attached hereto and made a part hereof (a "REQUEST TO
SOLICIT BIDS"), Bechtel shall solicit bids for such work from Subcontractors (as
defined in Section 2.5.8) pursuant to the bidding and approval process more
particularly described in Section 2.5.8. Based on Subcontractor bids approved
pursuant to Section 2.5.8, Bechtel shall deliver to Webvan for Webvan's approval
a completed Notice to Proceed for such DC Project. If Webvan and Bechtel are
unable to agree upon the terms of a Notice to Proceed or if Bechtel fails to
deliver to Webvan a completed Notice to Proceed within thirty (30) days after
the date of Webvan's Request to Solicit Bids, then Webvan may, at Webvan's
election and in Webvan's sole discretion, rescind its request for such work and
obtain performance of such work by others. Bechtel
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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shall undertake the construction of only those DC Projects authorized in writing
by Webvan in a Notice to Proceed. Bechtel shall perform all Construction
Services (as defined in Section 3.1) specified in a Notice to Proceed in
accordance with this Contract (including the General Conditions for Construction
attached hereto as Appendix 2.5 and made a part hereof (the "GENERAL
CONDITIONS") and all other appendices attached hereto), the applicable approved
Construction Documents and all applicable Change Orders (as defined below in
Section 2.5.4) executed by Webvan and Bechtel. Bechtel shall achieve Substantial
Completion of such work on or before the date specified in such Notice to
Proceed, at a cost not exceeding the Budgeted Cost (defined in Section 2.5.1)
stated in such Notice to Proceed, subject to adjustment by Change Orders
executed by Webvan in accordance with Section 2.5.4.1. The "CONTRACT DOCUMENTS"
for a DC Project shall consist of this Contract, the applicable approved
Construction Documents, and Change Orders thereto executed by Webvan, and the
Notice to Proceed. As used herein, the term "SUBSTANTIAL COMPLETION" of a DC
Project shall mean that (i) the Development of the DC Project has been completed
in accordance with the applicable Contract Documents (including, without
limitation, the procurement, assembly, installation, calibration and testing of
all Operating Equipment and the confirmation that the materials handling and
distribution Operating Equipment meets the Performance Standards as provided in
Section 1.2) to the extent sufficient for Webvan to occupy and utilize the DC
Project in a manner consistent with the Contract Documents, (ii) Bechtel has
issued and Webvan has approved (such approval not to be unreasonably withheld) a
certificate of Substantial Completion for the DC Project, and (iii) Bechtel has
delivered to Webvan all required permits and approvals with respect to the DC
Project from the appropriate governmental authorities, including all
certificates and approvals (including food, health and safety permits and
approvals) necessary for Webvan to use and occupy the DC Project in a manner
consistent with the Contract Documents.
2.5.1 Budgeted Cost. The "BUDGETED COST" for the Development of a DC
Project shall equal the sum of (i) the Approved Cost of the Work for such DC
Project, plus (ii) the Contingency Amount (defined in Section 2.5.1.2 below)
based on such Approved Cost of the Work. Bechtel shall specify Bechtel's
proposed Budgeted Cost, estimated Cost of the Work (defined in Section 2.5.5
below), Base Contingency (defined in Section 2.5.1.2) and any requested Excess
Contingency (also defined in Section 2.5.1.2) for the Development of a
particular DC Project in Bechtel's Notice to Proceed for such DC Project. The
estimated Cost of the Work for a DC Project shall be determined by adding (a)
the sum of all accepted Subcontractor bids for the Cost of the Work and (b) the
General Work Requirements Amount (defined in Section 2.5.3 below). The estimated
Cost of the Work for a DC Project specified in the Notice to Proceed approved
and executed by Webvan for such DC Project is referred to herein as the
"APPROVED COST OF THE WORK".
2.5.1.1 If the actual Cost of the Work is less than the Budgeted
Cost, then (except as otherwise expressly provided in Section 5.6) all savings
shall benefit Webvan. If the actual Cost of the Work is more than the Budgeted
Cost, then Bechtel shall pay such excess from its own funds, Webvan shall not be
required to pay any part of such excess, and Bechtel shall have no claim against
Webvan on account thereof. Without limiting the generality of the foregoing, the
Budgeted Cost for a particular DC Project shall apply only with respect to the
DC Project in question. Any savings of the Cost of the Work for a given DC
Project under the applicable Budgeted Cost shall not be offset or credited to
reduce the Budgeted Cost of any other DC Project, and any excess of the Cost of
the Work for a given DC Project over the applicable Budgeted Cost shall not be
applied to increase the Budgeted Cost of any other DC Project. The Approved Cost
of the Work and the Budgeted Cost for a DC Project may be modified only as
expressly provided in Change Orders executed by Webvan for such DC Project in
accordance with Section 2.5.4.1, 2.5.11 or 2.5.13.
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2.5.1.2 The "CONTINGENCY AMOUNT" for a DC Project shall equal the
sum of the Base Contingency for such DC Project plus any Excess Contingency
specified in the Notice to Proceed for such DC Project executed by Webvan. The
"BASE CONTINGENCY" for a DC Project shall equal (i) [*] percent ([*]%) of the
Approved Cost of the Work for each of the first six (6) DC Projects for which
Webvan has executed a Notice to Proceed and (ii) [*] percent ([*]%)of the
Approved Cost of the Work for each additional DC Project. In addition to the
Base Contingency, Bechtel may request that Webvan approve an additional
contingency amount (the "EXCESS CONTINGENCY") for a particular DC Project.
Notwithstanding anything to the contrary in any Contract Document (including,
without limitation, any Notice to Proceed), the Excess Contingency for any DC
Project shall in no event exceed [*] percent ([*]%) of the Approved Cost of the
Work for such DC Project. An Excess Contingency may only be requested by Bechtel
and shall only be deemed approved by Webvan if such Excess Contingency is
expressly identified in the Notice to Proceed executed both by Bechtel and by
Webvan for a DC Project. Webvan shall not unreasonably withhold its approval of
any Excess Contingency requested by Bechtel.
2.5.2 Bechtel Fee. As used herein, the "BECHTEL FEE" is defined to be
the amount equal to [*] percent ([*]%) of the actual Cost of the Work of a given
DC Project (except as provided in the following sentence), subject to the
applicable Budgeted Cost (as adjusted by Change Orders executed by Webvan in
accordance with Section 2.5.4.1). Notwithstanding the foregoing, for purposes of
calculating the Bechtel Fee, the costs described in Section 2.5.5.15 shall be
excluded from the Cost of the Work of any DC Project, it being the intent of
both Bechtel and Webvan that no Bechtel Fee shall be payable on any costs
described in Section 2.5.5.15 for any DC Project.
2.5.3 General Work Requirements Amount. Appendix 2.5.3 to this Contract
describes the general categories of Bechtel's General Work Requirements. Prior
to establishing the Budgeted Cost for a DC Project, Webvan and Bechtel shall
agree upon a schedule setting forth a more detailed, line item description of
each of such categories and an estimated amount that may be charged for General
Work Requirements (the "GENERAL WORK REQUIREMENTS AMOUNT").
2.5.4 Change in the Work. Without invalidating this Contract, Webvan may
from time to time order a change in the work described in the Contract Documents
for any given DC Project. The Cost of the Work shall be adjusted accordingly
based on the additive or deductive nature of any such change in the work in
accordance with this Section 2.5.4.
2.5.4.1 Webvan shall initiate a change in the work described in
the Contract Documents by preparing a written change order request ("CHANGE
ORDER REQUEST") setting forth in detail the nature of the requested change. On
or before the twenty-first (21st) day following Bechtel's receipt of a Change
Order Request, Bechtel shall (a) complete the Change Order Request setting forth
in detail, with a suitable breakdown, (i) the increase or decrease in the Cost
of the Work as a consequence of the change, (ii) the revised time for the
completion of all other affected work, and (iii) any adjustment in the date of
Substantial Completion or the amount of the Budgeted Cost of the DC Project
attributable to the change in the work, and (b) submit the completed Change
Order Request to Webvan for Webvan's written approval and execution. When Webvan
has approved in writing and executed such a completed Change Order Request, such
Change Order Request shall constitute a "CHANGE ORDER", and Bechtel shall
undertake the change in the work described therein. Bechtel shall prepare a
Change Order summary each month, incorporating all Change Orders that Webvan has
approved in writing and executed during that month. Each Change Order summary
shall include all changes in the Budgeted Cost, if any, and revisions to the
date of Substantial Completion, if applicable. The Budgeted Cost and the date of
Substantial Completion for a DC Project shall not be adjusted except by a
written Change
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Order executed by Webvan in accordance with this Section 2.5.4.1.
Notwithstanding anything to the contrary in any Contract Documents, however, in
no event shall the Budgeted Cost for any DC Project be increased, nor shall the
date of Substantial Completion for any DC Project be extended, on account of
Change Orders to correct errors or omissions in the Construction Documents for
such DC Project.
2.5.4.2 Bechtel shall submit all Subcontractor breakdowns for any
fixed overhead, labor and profit rates related to that portion of the DC Project
work covered by any Change Order ("CHANGE ORDER WORK") which has been included
in the Subcontractor's Subcontract. The cost for any Change Order Work shall not
exceed the applicable fixed rates, overhead and fees listed in any such
Subcontracts.
2.5.4.3 If Webvan and Bechtel are unable to agree (i) on a
proposed Change Order cost or (ii) whether work required by Webvan constitutes
part of the DC Project work or Change Order Work, then Bechtel shall submit a
Change Order Request which sets forth a "not-to-exceed" cost for the proposed
change in the DC Project work, as well as the information required by clauses
(i), (ii) and (iii) in Section 2.5.4.1, above. Webvan may then direct Bechtel to
proceed with such portion of the DC Project work or such Change Order Work on
such "not-to-exceed" cost basis with Bechtel accounting for the DC Project work
on a time and material basis. If the dispute over such Change Order Work
concerns cost (and not whether the work requested by Webvan already constitutes
part of the DC Project work), then, promptly following completion of such Change
Order Work, Webvan and Bechtel shall execute a Change Order which sets forth the
cost of the Change Order Work as the lesser of (x) such not-to-exceed cost or
(y) the actual cost computed on a time and material basis, and the Budgeted Cost
shall be adjusted accordingly. Webvan reserves the right to audit all Bechtel
and Subcontractor records regarding such Change Orders. If Bechtel submitted a
Change Order Request because Webvan and Bechtel could not agree on whether or
not certain work required by Webvan constituted part of the DC Project work or
constituted Change Order Work, then Webvan and Bechtel shall attempt to resolve
that issue as set forth in Section 2.5.12 within twenty-one (21) days after the
commencement of such disputed work. If Webvan and Bechtel are unable to agree on
a change in the date of Substantial Completion for any portion of the DC Project
work, but the Change Order is otherwise acceptable to Webvan and Bechtel, then
Bechtel shall commence the Change Order Work as directed by Webvan. If, within
twenty-one (21) days following such commencement, Webvan and Bechtel have not
agreed on a change in the applicable date of Substantial Completion, then Webvan
and Bechtel shall submit that issue to dispute resolution as set forth in
Section 2.5.12.
2.5.4.4 Notwithstanding anything in any Contract Document to the
contrary, no action, conduct, omission, prior failure or course of dealing by
Webvan shall act to waive, modify, or alter the requirement that Change Orders
must be in writing signed by Webvan, and that such written Change Orders are the
exclusive method for effecting any change to DC Project work, the Cost of the
Work, date of Substantial Completion of the DC Project or the Budgeted Cost;
provided, however, that Webvan's Vice President of Distribution, or any Webvan
personnel specifically designated by Webvan's Vice President of Distribution in
a written notice to Bechtel with respect to a particular DC Project, shall have
the right to enter into oral Change Orders with Bechtel for such DC Project so
long as (i) any such Change Order does not increase the Budgeted Cost for the DC
Project by more than Thirty Thousand Dollars ($30,000) and does not extend the
date for Substantial Completion of the DC Project, and (ii) within forty-eight
(48) hours after the parties have entered into such an oral Change Order, the
terms of such Change Order are confirmed in a written Change Order executed by
Bechtel and Webvan. Bechtel understands and agrees that the Cost of the Work,
date of Substantial Completion of the DC Project, and the Budgeted Cost cannot
be changed by implication, oral agreements (except as specified in the preceding
sentence), actions, inactions, course of conduct, or constructive change order.
Bechtel shall
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have no obligation to comply with any oral Change Order Request that Bechtel in
good faith believes does not comply with the requirements of the foregoing
clause (i) or that Bechtel cannot readily determine complies with such
requirements.
2.5.5 Costs to be Reimbursed. The term "COST OF THE WORK" shall mean
reasonable costs necessarily incurred in the proper performance of Construction
Services for the DC Project work which are actually incurred by Bechtel. Such
costs shall include the items set forth in this Section 2.5.5, subject to
Section 2.5.6:
2.5.5.1 The reasonable relocation, travel (coach or equivalent
class only) and subsistence expenses (or per diem as applicable) that Bechtel
employees incur in performing Construction Services for the DC Project work, in
accordance with reasonable policies and procedures established by Bechtel.
2.5.5.2 Cost of all materials, supplies and equipment (including
Operating Equipment) incorporated in the DC Project work, including costs of
transportation thereof, excess materials and supplies, and a reasonable
allowance for waste and spoilage.
2.5.5.3 Payments made by Bechtel to Subcontractors providing
Construction Services for DC Project work performed pursuant to written
Subcontracts entered into pursuant to this Contract.
2.5.5.4 Cost, including transportation and maintenance, of all
materials, supplies, equipment (including, without limitation, any computers and
other office equipment), temporary facilities and hand tools purchased by
Bechtel to perform the DC Project work which are consumed in the performance of
the DC Project work, and the cost (less salvage value) of such items used to
perform the DC Project work, but not consumed in the performance of the DC
Project work. In the latter of the two situations described in the immediately
preceding sentence, Bechtel shall become the owner of such items upon completion
or termination of the DC Project work. Webvan may, at its discretion, retain
ownership of those items not consumed in the performance of the DC Project work
or may direct Bechtel to sell or buy such items and credit the Cost of the Work
by the amount of the proceeds which would then determine the salvage value
described above. Bechtel shall provide Webvan with a schedule indicating the
then current inventory of all construction equipment, hand tools, and temporary
facilities, showing original cost (as amended from time to time, the "EQUIPMENT
SCHEDULE"). Bechtel shall amend the Equipment Schedule by deleting all items
consumed and adding all items purchased during the course of the DC Project
work. Bechtel shall maintain a current Equipment Schedule located at each DC
Project office for review by Webvan for equipment whose individual cost is One
Thousand Dollars ($1,000) or more.
2.5.5.5 Rental charges for all necessary machinery and equipment,
exclusive of hand tools, used at the site of the DC Project work, whether rented
from Bechtel or others, including installation, minor repairs and replacements,
dismantling, removal, transportation and delivery costs thereof.
2.5.5.6 Costs of premiums for insurance that Bechtel is required
to maintain pursuant to Section 7 hereof, deductibles thereunder not exceeding
Ten Thousand Dollars ($10,000) per occurrence, and costs of Subcontract bonds.
Bechtel shall have the right to require that any Subcontractor be bonded if such
requirement is commercially reasonable under the circumstances. With respect,
however, to any Subcontractor that Webvan has specified as the only
subcontractor that Bechtel is authorized to engage to perform particular
Services, Bechtel shall not have the right to require bonding
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of such Subcontractor if Webvan agrees that any delay in the performance of such
Services by such Subcontractor will constitute an Excusable Delay (as defined in
Section 2.5.13).
2.5.5.7 Sales, use or similar taxes imposed by any governmental
authority which are related to the DC Project work and for which Bechtel is
liable.
2.5.5.8 Permit fees, royalties approved in advance by Webvan, and
deposits lost for causes other than Bechtel's fault or negligence .
2.5.5.9 Construction temporary utilities costs, including, but not
limited to, the cost of water, gas and electricity consumed in construction of
the DC Project.
2.5.5.10 Minor expenses such as telegrams, long distance telephone
calls, telephone service at the site, overnight courier service, and similar
petty cash items in connection with the DC Project work.
2.5.5.11 The cost of removal of all debris from the site of the DC
Project work, unless such cost is otherwise included in the Cost of the Work
hereunder.
2.5.5.12 Costs incurred due to an emergency affecting the safety
of persons and property, unless arising out of the fault or negligence of
Bechtel or its Subcontractors, employees or agents.
2.5.5.13 The cost of on-site security necessary to protect the
materials, supplies, equipment and DC Project improvements at the DC Project
site, including any watchmen, temporary fencing, or other security services
reasonably required to protect the DC Project work.
2.5.5.14 Other costs incurred in the performance of the DC Project
work, if and to the extent approved in advance in writing by Webvan.
2.5.5.15 Unit Rates as set forth in Appendix 5.1.2 for Bechtel
employees performing Construction Services for DC Projects, it being understood
that such rates are deemed to include all benefits and other payroll burden and
overhead.
2.5.6 Costs Not to be Reimbursed. The term "COST OF THE WORK" shall not
include any of the items set forth in this Section 2.5.6.
2.5.6.1 Salaries, bonuses, benefits and other compensation of any
Bechtel employees or personnel, other than as expressly provided in Section
2.5.5.15.
2.5.6.2 Expenses of Bechtel's principal and branch offices other
than the DC Project field office.
2.5.6.3 Any part of Bechtel's capital expenses, including interest
on Bechtel's capital employed for the DC Project work.
2.5.6.4 Except as specifically provided in Section 2.5.5.5, rental
cost of machinery and equipment.
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2.5.6.5 Overhead or general expenses of any kind, unless expressly
included in Section 2.5.5.
2.5.6.6 Costs incurred by Bechtel, any Subcontractor,
Subconsultant, or anyone directly or indirectly engaged by any of them, as a
result of the negligence of any such parties or of anyone for whose acts any of
them may be liable, including but not limited to, the costs of correction of
defective or non-conforming DC Project work, disposal of materials and equipment
wrongly supplied, or making good any damage to property, subject to Section
7.2.5 hereof concerning waiver of subrogation rights.
2.5.6.7 The cost of any item not specifically and expressly
included in the items described in Section 2.5.5, unless previously specifically
approved in writing by Webvan.
2.5.6.8 Losses and expenses sustained by Bechtel, Subcontractors
or Subconsultants, not compensated by insurance or otherwise, if such losses or
expenses arise out of the infidelity or dishonesty on the part of an employee of
Bechtel or a Subcontractor or Subconsultant.
2.5.6.9 Losses and expenses not covered by insurance, if Bechtel
shall fail to obtain and/or maintain in effect the insurance required by the
Contract Documents, insurance deductibles in excess of Ten Thousand Dollars
($10,000) per occurrence, and coinsurance amounts.
2.5.6.10 Costs, losses, expenses, bonds and/or insurance incurred
by reason of Bechtel's general operations which Bechtel would customarily incur
or carry without reference to Bechtel's obligations under this Contract; and,
except as otherwise agreed to in writing by Webvan, insurance costs for any type
or amount of insurance other than the insurance Bechtel is required to carry
pursuant to Section 7 hereof.
2.5.6.11 Costs in excess of the Budgeted Cost, as it may be
adjusted pursuant to Section 2.5.4.
2.5.6.12 Intentionally omitted.
2.5.6.13 Provided that Webvan has paid Bechtel all amounts then
properly due and payable under this Contract, the Cost of the Work shall not
include any sums spent or costs incurred by Bechtel, or for which Bechtel is
liable or obligated, with respect to any Mechanics' Liens (defined in Section
4.2.2) filed or served by any Subcontractor or Subconsultant because of
Bechtel's failure or refusal to pay any such Subcontractor or Subconsultant,
whether or not any such failure or refusal is wrongful or as a result of a bona
fide dispute between Bechtel and any such Subcontractor or Subconsultant,
including, without limitation, any amounts paid or incurred to discharge or
release such Mechanics' Liens (whether paid to such claimant or other party, or
as attorneys' fees or otherwise), and all costs of any bonds obtained to clear
any such Mechanics' Liens.
2.5.6.14 Fees, compensation, costs or expenses of any
Subconsultant or any other person or entity providing Consultant Services or
Design Services (defined in Section 3.1), it being the intention of Webvan and
Bechtel that all such fees, compensation, costs and expenses for Consultant
Services and Design Services shall be paid only as provided in Section 5.1 and
Section 5.3, respectively.
2.5.6.15 Costs resulting from any errors or omissions in the
Construction Documents for any DC Project.
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2.5.7 Discounts, Rebates and Refunds. Bechtel shall use best efforts to
purchase all materials and equipment (including, without limitation, Operating
Equipment) to be included in the Cost of the Work for any DC Project at the
lowest prices commercially available to Bechtel given Bechtel's position as a
bulk purchaser of such materials and equipment. All trade discounts, rebates and
refunds, and all returns from sale of surplus materials and equipment, shall
accrue to Webvan.
2.5.8 Subcontracts and Other Agreements. All portions of the DC Project
work that Bechtel does not perform with its employees shall be performed
pursuant to written subcontracts and, where applicable, sub-subcontracts or
material purchase orders (collectively, "SUBCONTRACTS") with licensed or
otherwise properly qualified subcontractors, sub-subcontractors, laborers,
architects, design professionals, engineers, surveyors, consultants, equipment
lessors, and material suppliers (collectively, "SUBCONTRACTORS"). It is the
intention of the parties hereto that Bechtel shall act as a general contractor
in connection with Bechtel's performance of the Construction Services hereunder.
Bechtel shall secure at least three (3) qualified bids from Subcontractors on
each item in the construction of a DC Project (excluding those included in the
General Work Requirements), including, without limitation, those performed by
Bechtel, unless otherwise agreed to by Webvan. Bechtel shall promptly deliver to
Webvan for each DC Project a summary of all bids received, together with
Bechtel's analysis and recommendations for awards. In addition, upon Webvan's
request from time to time, Bechtel shall deliver to Webvan complete copies of
all bids received and all other pertinent data. Webvan may attend all bid
openings. Bechtel shall keep all bid results confidential. Bechtel shall certify
that, to the best of Bechtel's knowledge, each bid is bona fide, complete and
reasonable. As part of its bid analysis, Bechtel shall notify Webvan of any bid
that deviates from the Contract Documents. Webvan's approval of a bid on a
Subcontract shall not constitute approval of a deviation or omission from the
Contract Documents. Any approved deviation or omission from the Contract
Documents shall occur only by means of a Change Order.
2.5.8.1 All Subcontractors and Subcontracts for the procurement,
assembly, installation, start-up, testing and calibration of Operating Equipment
and any additional refrigeration systems or equipment shall be subject to
Webvan's prior written approval. In addition, Webvan reserves the right to
reject any Subcontractor or any bid of a Subcontractor at any time prior to
award. Webvan shall have five (5) business days after it receives Bechtel's
written recommendations to approve or disapprove Bechtel's recommendations for
all Subcontractors and Subcontracts for the procurement, assembly, installation,
start-up, testing and calibration of Operating Equipment and other refrigeration
systems and equipment and to reject Bechtel's recommendations for any other
Subcontractors or bids. After Webvan has approved or not rejected (as
applicable) the award of any such Subcontract, Bechtel shall contract, solely in
its own name and behalf, and not in the name or behalf of Webvan, with the
specified Subcontractor. Bechtel's Subcontract form shall provide that the
Subcontractor shall perform its portion of the DC Project work in accordance
with all applicable provisions of this Contract and the other Contract
Documents. In addition, all Subcontracts relating to any Operating Equipment or
refrigeration system or equipment shall be submitted to Webvan for approval
prior to execution by Bechtel. Webvan's approval shall not make Webvan a party
to any Subcontract.
2.5.8.2 All Subcontracts shall, so far as practicable, contain
unit prices, markups for overhead and profit, and any other feasible formula for
use in the determination of the cost of changes in the DC Project work and shall
contain (where applicable) warranties, conditions and covenants which are
substantively similar to the Contract Documents. Upon request by Webvan, Bechtel
shall furnish Webvan with copies of all warranties provided by vendors,
manufacturers, laborers and material suppliers relating to the Subcontracts and
will deliver all warranties at Substantial Completion. Bechtel shall hold all
Subcontractors, including all persons directly or indirectly employed by them,
responsible
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for any damages due to breach of contract, negligence and willful misconduct and
shall use reasonable efforts diligently to recover such damages. All
Subcontracts shall contain a clause approved by Webvan allowing for the direct
assignment of each Subcontract to Webvan upon termination or full performance of
this Contract. Each Subcontract may then be further assigned to a new general
contractor if Webvan so elects. Notwithstanding any such delivery of warranties
or assignment of Subcontracts, however, Bechtel shall reserve rights of recourse
thereunder to the extent necessary to permit Bechtel to enforce such warranties
and Subcontracts in the event that Webvan makes any claim against Bechtel with
respect to goods or services that are the subject of such warranties and
Subcontracts. The foregoing reservation of rights by Bechtel shall not, however,
in any way impair Webvan's right to pursue direct recourse against the makers of
such warranties and the Subcontractors under such Subcontracts.
2.5.9 Schedule of Values. Subject to the approval of Webvan, Bechtel
shall prepare (at such time as Bechtel has sufficient information) a schedule of
values which divides the Cost of the Work for the various trades, Subcontracts,
suppliers, materials, equipment (including Operating Equipment), labor or other
recognized industry trade breakdowns ("SCHEDULE OF VALUES"). Bechtel warrants
that the breakdowns so prepared will be accurate breakdowns of Bechtel's
estimated costs used to determine the Budgeted Cost. The Schedule of Values, as
approved by Webvan, shall be used as the basis for Bechtel's applications for
payment.
2.5.10 Warranty. Bechtel warrants to Webvan that (a) materials and
equipment (including Operating Equipment) furnished under this Contract will be
of good quality and new (unless otherwise required or permitted by the Contract
Documents) and will be assembled and installed in accordance with all vendors'
and manufacturers' instructions and specifications, (b) each DC Project will be
free from defects, and (c) each DC Project will conform with the requirements of
the applicable Contract Documents. DC Project work not conforming to these
requirements, including substitutions not properly approved and authorized,
shall be considered defective. All guaranties and warranties of materials and
equipment (including Operating Equipment) used or incorporated into the DC
Projects shall be assigned and delivered by Bechtel to Webvan upon demand, or
without demand upon Final Completion of each DC Project. The warranties in
Contract Documents or assigned to Webvan (i) shall survive the completion of the
Services for each DC Project and the termination of the Contract Documents, and
(ii) shall inure to the benefit of Webvan's successors and assigns. Without
limiting any other rights or remedies of Webvan under this Contract, if Webvan
provides written notice of any defect in a DC Project in violation of the
foregoing within [*] after the date of Substantial Completion of the DC Project,
Bechtel shall, within ten (10) business days after receipt of such written
notice of such defect (or such longer time as may reasonably be necessary to
correct such defect), furnish, at no cost to Webvan, all labor, equipment and
materials at the applicable DC Property (as defined in Section 5.2.2.8)
necessary to correct such defect and cause the DC Project to comply fully with
the foregoing warranties. If Bechtel is required to remedy any such defect under
the foregoing sentence, then all labor, equipment and materials provided by
Bechtel to remedy such defect shall themselves be subject to the foregoing
warranties. If, therefore, Webvan provides written notice of any defect in such
corrective labor, equipment, or materials within the earlier to expire of (a)
[*] after the date such corrective work has been completed, or (b) [*] after the
date of Substantial Completion of the applicable DC Project, then Bechtel shall,
within ten (10) business days after receipt of such written notice of such
further defect (or such longer time as may reasonably be necessary to correct
such defect), furnish, at no cost to Webvan, all labor, equipment and materials
at the applicable DC Property necessary to correct such further defect and cause
the DC Project to comply fully with the warranties provided in this Section
2.5.10. If Bechtel fails to promptly correct any such defects within the
foregoing time periods, then Webvan may (without voiding Bechtel's warranties)
correct, or cause to be corrected, such defects and
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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charge all related costs to Bechtel, together with interest at the Default Rate
until Bechtel has paid such costs.
2.5.11 Claims.
2.5.11.1 Bechtel must give notice of any claim on or before the
earlier of (i) the twenty-first (21st) day after Bechtel first recognizes the
condition giving rise to the claim, or (ii) the delivery to Webvan of Bechtel's
Final Application for Payment. Claims must be made by written notice. Failure to
deliver any such notice or request within the required period shall constitute
an irrevocable waiver of any such claim. If a claim has been implemented by
Change Order, no further consideration will be given to such claim.
2.5.11.2 Pending final resolution of a claim (whether by
mediation, arbitration, or litigation), unless otherwise agreed in writing,
Bechtel shall proceed diligently with performance of this Contract and Webvan
shall continue to make payments in accordance with the Contract Documents.
2.5.11.3 If conditions are encountered at a DC Property which are
(i) subsurface or otherwise concealed physical conditions which differ
materially from those indicated in the Contract Documents or (ii) unknown
physical conditions of an unusual nature which differ materially from those
ordinarily found to exist and generally recognized as inherent in construction
activities of the character provided for in the Contract Documents, then notice
by the observing party shall be given to the other party promptly, before such
conditions are disturbed, and in no event later than twenty-one (21) days after
first observance of the conditions. Webvan will promptly investigate such
conditions and make its determination. If Bechtel is opposed to such
determination, Bechtel must make a claim within twenty-one (21) days after
notice of Webvan's decision.
2.5.11.4 If Bechtel wishes to make a claim for an increase in the
applicable Budgeted Cost, Bechtel shall give written notice within the 21-day
time period set forth Section 2.5.11.1 above to Webvan, and Webvan shall be
given reasonable time to evaluate the condition giving rise to such claim prior
to the time Bechtel proceeds to execute the applicable DC Project work. Prior
notice is not required for claims relating to an emergency endangering life or
property. If Bechtel believes additional cost is involved for reasons including
but not limited to (i) an order by Webvan to stop the DC Project work where
Bechtel was not at fault, (ii) failure of payment by Webvan, (iii) termination
of this Contract by Webvan, (iv) Webvan's suspension of DC Project work, or (v)
other reasonable grounds, such claim shall be filed in accordance with the
procedure established herein.
2.5.11.5 If Bechtel wishes to make a claim for an increase in the
Contract Time, written notice shall be given to Webvan within the time period
set forth above in Section 2.5.11.1. Bechtel's claim shall include an estimate
of cost and the probable effect of delay on progress of the DC Project work. In
the case of a continuing delay, only one claim is necessary.
2.5.12 Resolution of Claims and Disputes. If a claim by either party
against the other has not been resolved, the party making the claim shall,
within ten (10) days after the other party's preliminary response, take one or
more of the following actions: (i) submit additional supporting data, (ii)
modify the initial claim or (iii) notify the other party that the initial claim
stands.
2.5.12.1 Continued Performance. Notwithstanding any provisions to
the contrary in this Section 2.5.12, if any dispute arises between Webvan and
Bechtel which relates to the Contract Documents or any DC Project work, Bechtel
shall not interrupt the progress of the work or the
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performance of Services regarding any of the Project during the pendency of any
such dispute, unless ordered to do so by Webvan in writing and Webvan shall make
all progress payments for the Cost of the Work incurred by Bechtel other than
disputed amounts. Bechtel must submit claims on or before the earlier of (i) the
twenty-first (21st) day after Bechtel first recognizes the condition giving rise
to such claim, or (ii) the delivery to Webvan of Bechtel's Final Application for
Payment; no additional claim made by Bechtel after an initial claim on the same
matter has been implemented by a Change Order will be considered. Except to the
extent such costs are incurred with respect to the resolution of claims pursuant
to Sections 2.5.11 and 2.5.12 hereof, if either party brings any action or legal
proceeding for an alleged breach of any provision of this Contract, to terminate
this Contract or otherwise to enforce, protect or establish any term or covenant
of this Contract, the prevailing party shall be entitled to recover as a part of
such action or proceeding, or in a separate action brought for that purpose,
reasonable attorneys' fees, court costs, and expert fees as may be fixed by the
court.
2.5.12.2 Mediation of Disputes. All claims between the parties
shall be handled as follows: (i) the parties shall endeavor, in good faith, to
settle a claim in an amicable fashion pursuant to Section 2.5.11 hereof, and
(ii) if the parties are unable to resolve a claim pursuant to Section 2.5.11
within a reasonable period (but in no event longer than forty-five (45) days)
after the claim is submitted to the other party, then the parties shall submit
the claim to non-binding mediation with Jams/Endispute or its successor ("JAMS")
in San Francisco County, California, before having recourse to a judicial forum.
Mediation shall be initiated by the written request of either party and shall be
commenced within five (5) days after delivery of such notice. The mediator shall
be a neutral third party affiliated with and selected by JAMS. Upon request of
the initiating party or JAMS, the other party shall promptly evidence its
consent to the mediation if such consent is required to proceed.
2.5.12.3 Resolution. The resolution of any claim for adjustment to
the applicable Budgeted Cost or Contract Time for a DC Project shall be
documented, promptly after resolution of such claim, in a Change Order executed
by Bechtel and Webvan.
2.5.13 Delays and Extensions of Time. If Bechtel is delayed in the
performance of Construction Services for any DC Project by an Excusable Delay,
then the applicable Contract Time (defined in Section 3.2.2) and Budgeted Cost
shall be adjusted by Change Order for such time and in such amount as is
reasonable and appropriate under the circumstances, as approved by Webvan and
Bechtel, which approvals shall not be unreasonably withheld. No event of
Excusable Delay shall be deemed to have occurred unless Bechtel delivers notice
of a claim of justifiable delay to Webvan within twenty-one (21) days following
the commencement of the delay. Immediately upon commencement of a delay, Bechtel
shall take all steps reasonably available to Bechtel to lessen the adverse
impact of such delay. As used herein, "EXCUSABLE DELAY" means an actual delay in
the performance of Construction Services for any DC Project by Bechtel which is
caused by events beyond the reasonable control of Bechtel despite having made
all reasonable attempts to avoid such delay and to prevent and mitigate the
effects thereof. Such events may include, without limitation, the following:
2.5.13.1 Actions or inactions of Webvan, or of any employee,
agent, representative or separate contractor of Webvan (other than by reason of
the proper and timely exercise of their respective rights, duties and
obligations under the Contract Documents); or
2.5.13.2 Fire, flood, war, embargo, sabotage, earthquake, or by
injunction (not the fault of Bechtel) or other unavoidable damage to the
applicable DC Project not the fault of Bechtel; or
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2.5.13.3 Adverse weather conditions documented by data
substantiating that such weather conditions were abnormal for the period of time
and could not have been reasonably anticipated and had an adverse effect on the
scheduled construction; or
2.5.13.4 General strike, delays (not caused by Bechtel) in
obtaining required governmental permits and approvals, strikes and/or losses
during transportation.
Notwithstanding the foregoing, the financial inability or unwillingness of
Bechtel or any Subcontractor, Subconsultant, vendor or supplier to pay or
perform any obligation shall not be grounds for an Excusable Delay, unless the
Subcontractor, Subconsultant, vendor or supplier asserting such financial
inability was previously designated by Webvan as the sole provider that Webvan
would authorize Bechtel to engage to provide the applicable goods or services.
Claims arising from any Excusable Delay relating to Contract Time, Budgeted Cost
and the Bechtel Fee shall be made in accordance with applicable provisions of
Section 2.5.11; provided, however, that in no event will Bechtel be entitled to
recover from Webvan any damages resulting from such Excusable Delay.
Notwithstanding anything to the contrary contained herein or in any other
Contract Document, Bechtel shall have no remedy for, and shall be responsible
for, any delay in the Development of a DC Project other than an Excusable Delay.
2.6 Procurement
As and when requested by Webvan, Bechtel shall procure furniture, fixtures,
equipment and other personal property (collectively, "FF&E") for the DC Projects
which are not specified in the Construction Documents, the parties acknowledging
that procurement of all Operating Equipment and other goods, materials and
equipment described in any Construction Documents shall be included within
Construction Services and shall not be subject to this Section 2.6. Procurement
of FF&E shall include, without limitation, (a) Bechtel's best efforts to
purchase such FF&E at the lowest prices commercially available to Bechtel, (b)
Bechtel's assembly and installation of FF&E, at Webvan's request, in accordance
with all applicable Laws and manufacturers' and vendors' instructions and
specifications, and (c) Bechtel's transfer to Webvan of title to all FF&E free
and clear of any liens, security interests, claims or encumbrances of any kind.
Bechtel shall execute and deliver to Webvan such bills of sale and other
documents as Webvan may reasonably request to effect such transfers. In
connection with such procurement Bechtel shall also (i) identify and recommend
potential vendors for approval by Webvan, (ii) identify FF&E bulk pricing
strategies and purchase discount, rebate and refund opportunities, (iii) prepare
bid packages, contracts and purchase orders for approval by Webvan and enter
such contracts and execute purchase orders approved by Webvan, and (iii)
schedule, coordinate and supervise the delivery, storage and installation of
such FF&E. Bechtel shall assign to Webvan all warranties, guaranties and
indemnities and shall deliver to Webvan all instructions, operating manuals and
other materials in connection with such FF&E. If Bechtel fails to procure FF&E
in accordance with this Section 2.6, then Bechtel shall correct such improper
procurement at Bechtel's sole cost and expense. Correction of such procurement
shall include, without limitation, Bechtel's purchase, assembly, installation
and transfer, at no cost to Webvan, of replacement FF&E in the manner provided
in the foregoing clauses (a), (b) and (c) of this Section 2.6.
2.7 Training
As and when requested by Webvan, Bechtel shall provide skilled and competent
personnel to assist Webvan with the training of Webvan's operation and
maintenance personnel in proper operations, schedules and procedures for the
maintenance, repair and operation of DCs (including, without limitation, all
building systems and equipment and all Operating Equipment). Bechtel's liability
for any
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deficient Services provided under this Section 2.7 shall be limited to the
re-performance of such Services during the term of this Contract at no
additional charge to Webvan.
3.0 CONTRACT TIME
3.1 Generally. Time is of the essence for Bechtel's performance of Services
under this Contract. Bechtel shall perform all Services as expeditiously as is
consistent with the professional skill and care and the orderly progress of the
Project and shall complete performance as set forth in the executed Notices to
Proceed and approved Project Schedules. All Services described in Section 2.1
regarding program management and Section 2.3 regarding design are referred to
herein collectively as "DESIGN SERVICES". All Services described in Section 2.2
regarding site evaluation and selection, Section 2.6 regarding procurement, and
Section 2.7 regarding training are referred to herein collectively as
"CONSULTANT SERVICES". All Services described in Section 2.5 regarding
construction services are referred to herein collectively as "CONSTRUCTION
SERVICES".
3.2 Construction Services. The time allowed for Substantial Completion of the
Construction Services and all important construction milestones shall be set
forth in the Project Schedules and Notices to Proceed. Final Completion of a
given DC Project shall occur within forty-five (45) days following Substantial
Completion and agreement upon the Punch List. As used herein, "FINAL COMPLETION"
of a DC Project shall occur only when all of the following have occurred: (i)
the performance of the DC Project work has been fully completed (including,
without limitation, all Punch List items), (ii) all final releases, documents
and manuals required by the Contract Documents have been delivered to Webvan,
(iii) all start-up testing, inspection and calibration of building systems and
equipment and Operating Equipment have been completed, and (iv) all other
conditions have been satisfied for making the Final Payment to Bechtel for such
DC Project under Section 5.2.2.9. As used herein, "PUNCH LIST", shall mean a
comprehensive list of minor items to be completed or corrected following
Substantial Completion of the DC Project work, which items shall not materially
affect the use, occupancy or operation of the DC Project (including, without
limitation, the Operating Equipment).
3.2.1 Bechtel shall achieve Substantial Completion of each DC Project
within the time specified therefor in the corresponding Notice to Proceed for
such DC Project.
3.2.2 For purposes of this Contract, "CONTRACT TIME" shall mean the
period of time, including adjustments authorized by approved Change Orders,
allotted in the Contract Documents for the Substantial Completion of a DC
Project. If Bechtel is delayed on the critical path, then the provisions of
Section 2.5.13 shall apply. Bechtel shall advise Webvan of any delay in the
Substantial Completion of the DC Project work and the cause of such delay,
pursuant to Section 2.5.11.5. Bechtel shall take all prudent steps necessary to
minimize the delay and shall diligently proceed to complete the DC Project work
as required by the Contract Documents.
4.0 BECHTEL'S DUTIES AND STATUS
4.1 Standard of Care. Bechtel represents that it is skilled in the
professional callings necessary to perform the Services and acknowledges that
Webvan, not being skilled in such matters, is relying upon the skill and
knowledge of Bechtel. Bechtel accepts the relationship of trust and confidence
established by this Contract and shall exercise its best skill and judgment and
shall cooperate with Webvan to further the interests of Webvan. Bechtel shall
perform the Services under this Contract in accordance with the professional
standard and quality which prevails among reputable, well-qualified, nationally
recognized, licensed design/build general contracting, architectural and
engineering firms performing services of the
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nature and in the locations encompassed within this Contract. All Services shall
be performed by well-qualified, efficient, properly-trained and adequately
supervised Subcontractors, Subconsultants and employees of Bechtel in accordance
with the foregoing professional standards. Nothing contained in this Contract
shall create a contractual relationship between Webvan and such Subconsultants,
Subcontractors, suppliers or third parties. Webvan, however, shall be an express
third party beneficiary of any and all agreements between Bechtel and any such
Subconsultants, Subcontractors, suppliers and third parties entered into with
respect to the Project, and the Subconsultants, Subcontractors, suppliers and
third parties entering into such contractual relationships with Bechtel shall
expressly acknowledge Webvan as such third party beneficiary and shall have,
among other obligations, a professional responsibility and liability to Webvan
as such third party beneficiary.
4.2 Bechtel's Performance of the Contract.
4.2.1 Bechtel shall provide a sufficient and competent organization,
including a Program Director, a Deputy Program Director, Project Managers,
Construction Managers, Project Contracts Managers, Project Engineers, Site
Managers, Construction Superintendents, Construction Supervisors, engineers,
cost and schedule engineers, administrative and clerical personnel, and others,
as the Services may require. The Program Director and the Deputy Program
Director shall represent Bechtel, and communications given by or to either the
Program Director or the Deputy Program Director shall be as binding as if given
by or to Bechtel. Webvan shall have the right to approve of Bechtel's Program
Director, Deputy Program Director, Project Managers, Construction Managers, and
Site Managers for each of the DC Projects. Webvan may require Bechtel to dismiss
from the Project any of Bechtel's personnel whose performance is not
satisfactory, at Webvan's reasonable discretion. Any such dismissed personnel
shall be replaced with personnel reasonably satisfactory to Webvan. Bechtel
shall not replace any of Bechtel's Program Director, Deputy Program Director,
Project Managers, Construction Managers or Site Managers without Webvan's prior
written consent, which consent shall not be unreasonably withheld. If any
personnel engaged in the Project die, become disabled or voluntarily terminate
their employment with Bechtel, then such persons shall be replaced with persons
of equal or better skill and experience. Bechtel shall furnish efficient
business administration and superintendence, and shall use its best efforts to
furnish at all times an adequate supply of workers and materials and to perform
the Services in the best, most expeditious and most economical manner consistent
with the interests of Webvan.
4.2.2 Bechtel shall provide or cause to be provided all design services,
labor, materials, equipment, tools, construction equipment and machinery, water,
heat, utilities, transportation and other facilities and services necessary for
the Development and completion of the DC Projects, whether temporary or
permanent and whether or not incorporated or to be incorporated into the DC
Projects. Bechtel shall perform and complete the Services as described in this
Contract in a good and workmanlike manner, in accordance with the Contract
Documents, and free of any and all mechanics' liens, materialmen's liens, other
liens, encumbrances, stop notices, charges, impositions, garnishments and
attachments upon or against the real property upon which the DC Projects will be
located (collectively, "MECHANICS' LIENS"), the Project, any equipment or
materials (including, without limitation, Operating Equipment), or Webvan.
4.2.3 The design and construction of the DC Projects by Bechtel or any
of its Subconsultants or Subcontractors shall be in conformity in all respects
with all Laws. As of the time that Webvan and Bechtel agree upon the Budgeted
Cost for a DC Project, Bechtel shall have satisfied itself with respect to
visible conditions, then-current public knowledge, matters of record, and all
other then-existing information relevant to the DC Project and available to
Bechtel through the exercise of reasonable
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diligence. Bechtel's agreement to the Budgeted Cost for a DC Project shall be
deemed conclusively to be an acceptance by Bechtel of the foregoing information
and a determination by Bechtel that the Budgeted Cost is just and reasonable
compensation for the Construction Services.
4.2.4 If any disputed claim should arise between Webvan and Bechtel
under this Contract or otherwise concerning the DC Projects (including, without
limitation, any claim under Section 2.5.11), Bechtel shall proceed to perform
the Services as directed by Webvan pending resolution of the dispute. Until any
such disputed claim is resolved, Webvan shall continue to pay Bechtel all sums
due Bechtel which are not in dispute and/or are not directly related to Services
which are in dispute.
5.0 COMPENSATION
5.1 Consultant Services.
5.1.1 Payment.
5.1.1.1 For Consultant Services performed by Bechtel in accordance
with an approved Notice to Proceed, Webvan shall pay Recoverable Costs (defined
in Section 5.1.2 below) to Bechtel on a monthly basis, it being understood that
(i) Webvan shall have no obligation to pay for Recoverable Costs for Consultant
Services which have not been approved in advance by Webvan in a written Notice
to Proceed, and (ii) the maximum amount of Recoverable Costs payable by Webvan
to Bechtel for Consultant Services shall not exceed the stated "not to exceed"
amounts set forth in the approved Notice to Proceed; any charges by Bechtel in
excess of such amounts shall be at no cost to Webvan.
5.1.1.2 On or before the tenth (10th) day of the first month in
which Bechtel is to provide Consultant Services for particular DC Projects,
Bechtel shall submit to Webvan an invoice for each such DC Project of the amount
of Recoverable Costs for Consultant Services that Bechtel reasonably estimates
that it will incur during such first month for such DC Project. On or before the
tenth (10th) day of the second month in which Bechtel is to provide Consultant
Services for each such DC Project and continuing each month thereafter until the
month following the last month in which Consultant Services are provided by
Bechtel for each such DC Project, Bechtel shall submit to Webvan an invoice that
states (a) the estimated amount of Recoverable Costs paid in advance by Webvan
for the prior month, (b) the actual amount of Recoverable Costs incurred by
Bechtel during the prior month, and (c) the amount of Recoverable Costs that
Bechtel reasonably estimates that it will incur during the current month. Each
such invoice shall (1) be in a form reasonably acceptable to Webvan, (2) provide
in reasonable detail the actual amount of time spent daily by each Bechtel
employee, and the total Unit Rate costs allocable to such employee's work for
each day during the prior month, and a reasonable estimate of the work to be
provided by Bechtel employees during the current month, (3) describe in detail
the Recoverable Costs actually incurred by Bechtel during the prior month (and
shall include copies of invoices from the applicable vendors of any FF&E
procured by Bechtel), and a reasonable estimate of the type and amount of
Recoverable Costs that Bechtel will incur during the current month, and (4)
provide a reconciliation of the actual Recoverable Costs incurred by Bechtel
during the prior month against the estimate of the Recoverable Costs paid by
Webvan for such prior month.
5.1.1.3 Notwithstanding anything contained in any invoice
submitted by Bechtel, (a) if the amount of estimated Recoverable Costs paid by
Webvan for any month is greater than the amount of actual Recoverable Costs
incurred by Bechtel during such month (which amount shall be reduced by any
amounts offset or credited by Webvan against such Recoverable Costs on account
of Webvan's prior overpayments, as hereinafter provided), then Webvan shall have
the right either to offset and credit the
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amount of such overpayment against Bechtel's estimate of Recoverable Costs to be
provided during the current month or to require that Bechtel promptly refund to
Webvan the amount of such overpayment; and (b) if the amount of estimated
Recoverable Costs paid by Webvan for any month is less than the amount of actual
Recoverable Costs incurred by Bechtel during such month, then the amount of such
shortfall shall be paid by Webvan to Bechtel at the same time that Webvan pays
Bechtel's reasonable estimate of Recoverable Costs for Consultant Services to be
provided during the following month.
5.1.1.4 Webvan shall pay Bechtel for each monthly invoice
submitted to Webvan within fifteen (15) days after Webvan's receipt of such
invoice, unless prior to the expiration of such fifteen (15)-day period, Webvan
advises Bechtel that Webvan disagrees with the invoice submitted or disapproves
the Consultant Services performed. If an invoice is in question, Bechtel and
Webvan shall forthwith attempt to resolve the issue. Webvan shall pay the
undisputed portion of each invoice within fifteen (15) days after receipt
thereof. Undisputed amounts due and payable to Bechtel shall bear interest, from
thirty (30) days after the applicable invoice was received until paid by Webvan,
at the Default Rate. When requested by Webvan, Bechtel shall submit applicable
lien waivers with its invoices stating that for that specific portion of
Consultant Services for which Webvan has paid all labor, material and
subcontractor and subconsultant accounts have been duly paid. All such lien
waivers (other than lien waivers to be provided promptly following final
payments to Subconsultants and Subcontractors) may be conditioned upon receipt
of payment for the invoiced labor and materials. Upon completion of the
Consultant Services set forth in a Notice to Proceed and promptly after
receiving final payment for such Services, Bechtel shall submit such
unconditional lien waivers and payment affidavits as Webvan may reasonably
require.
5.1.2 Recoverable Costs. Bechtel shall be entitled to reimbursement for
the following costs and expenses (collectively, the "RECOVERABLE COSTS"): (i)
the cost of Bechtel employees performing Consulting Services as provided in the
Unit Rate Schedule attached hereto as Appendix 5.1.2 and made a part hereof,
(ii) ordinary and reasonable expenses of relocation, transportation (coach or
equivalent class only), and subsistence (or per diem, as applicable) in
connection with such Consultant Services (excluding travel within the San
Francisco Bay Area or within the other localities in which the DC Projects are
located), in accordance with reasonable policies and procedures established by
Bechtel; (iii) long-distance communications, facsimile communications (long
distance only), courier services, and express mail; (iv) ordinary and reasonable
expenses of reproduction, postage and handling of drawings, specifications and
other documents (not for internal use); (v) if authorized in advance in writing
by Webvan, expense of overtime work by non-exempt employees requiring higher
than regular rates; (vi) ordinary and reasonable expenses of renderings, models
and mock-ups requested in writing by Webvan; (vii) ordinary and reasonable
expenses of photographic production techniques and photography and photo prints
used for a DC Project; (viii) the purchase prices actually paid by Bechtel for
FF&E title to which has been transferred to Webvan in accordance with Section
2.6; and (ix) ordinary and reasonable fees and costs incurred by Bechtel's
approved Subconsultants in performing Consultant Services, which fees and costs
of Subconsultants shall be evidenced by invoices (copies of which are provided
to Webvan) providing in reasonable detail the actual amount of time billed by
the employees of such Subconsultants, a description of the work performed, and a
detailed description of any and all approved Recoverable Costs incurred by such
Subconsultants. Any and all other costs and expenses incurred by Bechtel in
performing the Consultant Services which are not covered in the preceding
sentence shall require the prior written approval of Webvan and unless such
prior approval is given, Webvan shall not reimburse Bechtel for such costs and
expenses. Bechtel shall review all accounts for reimbursables of its
Subconsultants and Subcontractors before submitting the same to Webvan for
payment and confirm to Webvan if so requested, in writing, that such
reimbursables are reasonable and necessary and were
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incurred by Subconsultants and Subcontractors in the performance of their duties
on behalf of the Project.
5.2 Construction Services.
5.2.1 Applications for Payment. Not later than the first (1st) business
day of each calendar month, Bechtel shall submit to Webvan a separate
application for payment for the prior month ("APPLICATION FOR PAYMENT") for each
DC Project for which Bechtel is then rendering Construction Services, which
application shall also include any portions of the DC Project work completed
during periods of time covered by previously submitted Applications for Payment
to the extent such portions of the DC Project work were not shown on any such
previous applications. Each Application for Payment shall be for a sum equal to:
(i) that portion of the Cost of the Work incurred during the period covered by
the particular application, determined in accordance with the Schedule of
Values, calculated on the basis of the percentage of the DC Project work
completed during such month, provided that no payment to Bechtel for DC Project
work performed shall exceed the actual Cost of the Work performed (together with
any items applicable to the period covered by any preceding Application for
Payment to the extent such items were not reflected in any such Application for
Payment); and (ii) that portion of the Bechtel Fee applicable to the percentage
of the DC Project work completed during the prior month. In no event, however,
shall the Cost of the Work set forth in any Application for Payment for a DC
Project, when added to all amounts previously invoiced for the Cost of the Work
for the DC Project, represent a percentage of the Budgeted Cost greater than the
completed percentage of the total DC Project work to be performed under the
Contract Documents.
5.2.1.1 Bechtel shall include with each Application for Payment
back-up material satisfactory to Webvan to support all components of the
application, including, without limitation, verifiable Subcontractor payment
applications, current month as-built information, and actual Cost of the Work,
indicating in detail all monies paid out or to be paid out for costs incurred on
account of the Cost of the Work.
5.2.1.2 In each Application for Payment, including the Final
Application for Payment upon the Final Completion of the DC Project, Bechtel
shall certify that: (i) the Application for Payment represents a just estimate
of the costs then due Bechtel under the terms of this Contract; (ii) all DC
Project work covered by the Application for Payment has been completed in
accordance with the applicable Contract Documents; (iii) there are no known
unbonded Mechanics' Liens outstanding at the date of the Application for
Payment; (iv) all due and payable bills (except for amounts in dispute with
Subcontractors) with respect to the DC Project work have been paid to date or
are included in the amount requested in the Application for Payment; (v) there
is no known basis for the filing of any Mechanics' Liens for or relating to the
DC Project work except for (a) unpaid bills included in the Application for
Payment, all of which will be paid from the amount due to Bechtel with respect
to the Application for Payment, or (b) amounts in dispute with Subcontractors;
(vi) subject to receipt of payment, Bechtel waives any Mechanics' Lien rights to
the extent of such payments; (vii) there is no default, or event which with the
passage of time or giving of notice, or both, could constitute a default under
this Contract or under any Subcontract; (viii) the remaining balance of the
applicable Budgeted Cost is sufficient, in Bechtel's reasonable estimation, to
complete construction of the remaining portion of the applicable DC Project
work; and (ix) the DC Project work which is the subject of the Application for
Payment has been performed in accordance with the Contract Documents and all
applicable Laws.
5.2.1.3 Each Application for Payment shall include conditional
lien releases from Bechtel and all Subcontractors for all DC Project work which
is the subject of the Application for
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Payment in the form required by applicable Law. Promptly after Webvan's payment
pursuant to each Application for Payment that includes any final amount to be
paid to a Subcontractor, Bechtel shall deliver to Webvan an unconditional
Mechanics' Lien release from such Subcontractor in the form required by
applicable Law for all DC Project work performed by such Subcontractor.
5.2.1.4 Requests for payment for materials stored on-site or
off-site shall be limited to materials on a list approved by Webvan. Webvan will
not pay for on-site materials such as drywall or any other commodity-like
material until it is in place as a part of the DC Project work.
5.2.1.5 As a condition of payment, Bechtel shall submit a detailed
construction report to Webvan each month, in a form satisfactory to Webvan and
together with the Application for Payment a separate, detailed construction
report for each DC Project for which Webvan is then rendering Construction
Services. The report shall contain pertinent information on the following
aspects of the DC Project: (i) past month's activities; (ii) current month's
activities; (iii) current problems; (iv) Webvan action required; (v) progress
billing which shall include actual expenditures to date in reasonable detail;
(vi) updated Project Schedule; (vii) Change Order log and (viii) projected
monthly cash expenditures for the remainder of the applicable DC Project.
5.2.1.6 Bechtel warrants that title to all DC Project work and
materials covered by an Application for Payment (including, without limitation,
all Operating Equipment) will pass to Webvan either by incorporation in the
construction or upon the receipt of payment by Bechtel, whichever occurs later,
free and clear of all Mechanics' Liens, claims, charges, liens, security
interests or encumbrances of any kind. As a condition to Webvan's obligation to
make any payment pursuant to an Application for Payment, Bechtel shall execute
and deliver to Webvan bills of sale and other documents reasonably requested by
Webvan transferring to Webvan such title to all materials and equipment
(including, without limitation, Operating Equipment) the cost of which is
included in such Application for Payment.
5.2.2 Payments to Bechtel.
5.2.2.1 Webvan will review each Application for Payment and will
promptly take appropriate action thereon as provided in the applicable Contract
Documents. The amount agreed upon for payment shall be payable by Webvan no
later than fifteen (15) days after Webvan's receipt of a complete and accurate
Application for Payment, but no sooner than the tenth (10th) day of the month.
5.2.2.2 Payment by Webvan with respect to any Application for
Payment shall not constitute Webvan's approval or acceptance of any item or cost
in such Application for Payment, nor shall it be construed to be final
acceptance or approval of that part of the DC Project work to which the payment
relates, nor shall it relieve Bechtel of any of its obligations under this
Contract.
5.2.2.3 Except as otherwise provided in Section 2.5.1, with
respect to each Application for Payment, Webvan shall pay Bechtel an amount
equal to the Cost of the Work and the Bechtel Fee then payable according to the
Schedule of Values. Any provision to the contrary in this Contract or any other
Contract Documents notwithstanding, in the event of a disputed claim between
Webvan and Bechtel with respect to any amount or circumstance covered by any
Application for Payment, Webvan may withhold from the payment in question an
amount sufficient to reimburse Webvan for its expenditures and to secure (i)
correction or re-execution of DC Project work which is defective or has not been
performed in accordance with the Contract Documents; (ii) past due payments to
Subcontractors; (iii) Webvan's remedies in consequence of any default by Bechtel
under this Contract; and (iv) any costs incurred by Webvan as a result of
claims, liabilities, losses and other damages covered
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by Bechtel's indemnification obligations pursuant to Section 8.16. If Webvan, in
its good faith judgment, determines that the portion of the Budgeted Cost then
remaining unpaid will not be sufficient to complete the applicable DC Project
work in accordance with this Contract, then no additional payments, including
any payments in respect of the Bechtel Fee, will be due Bechtel hereunder unless
and until Bechtel performs a sufficient portion of the work so that such portion
of the Budgeted Cost then remaining unpaid is determined by Webvan to be
sufficient to complete the DC Project work.
5.2.2.4 In no event shall any interest be due and payable by
Webvan to Bechtel, any Subcontractor, Subconsultant or any other party on any of
the sums properly retained by Webvan pursuant to any of the terms or provisions
of any of the Contract Documents.
5.2.2.5 In taking action on each Application for Payment, Webvan
shall have the right to rely on the accuracy and completeness of the information
furnished by Bechtel. Webvan shall not be deemed to have made audits of the
supporting data or exhaustive or continuous on-site inspections or any other
examination to ascertain how or for what purposes Bechtel has used the monies
previously paid on account of this Contract.
5.2.2.6 Except for the Bechtel Fee and any amounts payable to
Bechtel under Section 5.6 or Section 5.7, all sums paid to Bechtel pursuant to
this Contract shall be used for the performance of the DC Project work and for
no other purpose whatsoever. To the extent applicable, all sums paid to Bechtel
in turn shall be paid promptly (but in no event later than the time period
permitted under applicable Law) to the respective Subcontractors and
Subconsultants.
5.2.2.7 Subject to Subparagraph 5.2.2.4, payments due and unpaid
under any Application for Payment for fifteen (15) days shall bear interest,
from thirty (30) days after the particular Application for Payment in question
was received until paid, at the Default Rate.
5.2.2.8 If, in connection with any DC Project work for which
Webvan has paid Bechtel as required by this Contract, any Mechanics' Lien is
filed or served on Webvan or on any lender or landlord with respect to the DC
Project or the applicable DC Property, then Webvan shall have the right to
withhold from any sums otherwise payable to Bechtel, an amount sufficient to
discharge any or all such Mechanics' Liens. Releases or receipted vouchers in
settlement of such Mechanics' Liens, or other security satisfactory to Webvan,
must be furnished to Webvan by Bechtel before the withheld sums will be paid to
Bechtel. If Bechtel has not settled or provided acceptable security for any such
Mechanics' Liens within a reasonable time, not to exceed fifteen (15) days after
the date on which such Mechanics' Lien is asserted, then Webvan shall have the
right, but not the obligation, to discharge any or all such Mechanics' Liens out
of the withheld sums. Notwithstanding the foregoing, Bechtel shall have the
right to bond over the Mechanics' Lien, in an amount not less than one hundred
fifty percent (150%) of the Mechanics' Lien, and receive payment if the effect
of such bonding under applicable Law is to release the Mechanics' Lien from the
real property at which the DC Project is located (the "DC PROPERTY").
5.2.2.9 Except as otherwise set forth below, the entire unpaid
balance due Bechtel on account of the Cost of the Work and the Bechtel Fee, with
respect to the applicable DC Project (the "FINAL PAYMENT"), shall be due to
Bechtel within fifteen (15) days after the date on which the final approvals
from the appropriate governmental authorities of satisfaction of all terms and
conditions and other provisions of all necessary permits and approvals
(including, without limitation, all food, health and safety permits and
approvals) authorizing the full use and occupancy of the DC Project (including
the Operating Equipment) as contemplated by the Contract Documents
(collectively, a "CERTIFICATE OF
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OCCUPANCY") are issued for the DC Project, provided that all of the following
have occurred: (i) a copy of such final approvals from the appropriate
governmental authorities shall have been delivered to Webvan; (ii) Bechtel shall
have certified, in writing, that the Development of the DC Project and
performance of all of the DC Project work and Services has been completed in
accordance with the Contract Documents, subject only to minor, corrective Punch
List items which do not in any way interfere with Webvan's use, operation or
occupancy of the DC Project, which shall be noted on such certification (an
amount equal to one hundred fifty percent (150%) of the cost to complete such
items may be withheld by Webvan); (iii) Bechtel's certificate described in the
foregoing clause (ii) shall in fact be true, complete and correct; (iv) the
applicable requirements of Section 5.2.1 (regarding Applications for Payment)
shall have been met (including, without limitation, Bechtel's delivery to Webvan
of all bills of sale and other documents described in Section 5.2.1.6); (v)
Bechtel shall have delivered to Webvan a waiver of Mechanics' Lien rights,
complying with applicable Law, conditioned only upon receipt of the funds
requested in the Final Application for Payment, and executed by Bechtel and by
each person or entity entitled to record a Mechanics' Lien against the DC
Project or the DC Property (or, if any Subcontractor refuses to furnish such
waiver, then a lien bond in form, substance and amount satisfactory to Webvan,
protecting Webvan any lender or landlord and the DC Project and the DC Property
from Mechanics' Liens by such persons); (vi) Bechtel shall have delivered to
Webvan (a) an affidavit in a form satisfactory to Webvan stating that the Final
Payment is being requested and that the Mechanics' Lien releases and/or bonds
delivered to Webvan include and cover all materials, labor, and services for
which a Mechanics' Lien could be filed against the DC Project or the DC Property
and (b) such other affidavits and agreements reasonably required by Webvan's
and/or Webvan's landlord's title insurers as a condition to insuring Webvan's
and/or Webvan's landlord's title to the DC Project and the DC Property free and
clear of any Mechanics' Liens; and (vii) Bechtel shall have delivered to Webvan
one complete set of "as built" drawings and one electronic copy, which shall be
furnished in AutoCAD for Windows, or a similar format reasonably acceptable to
Webvan, and all guaranties, warranties, operating and maintenance manuals
applicable to the portion of the work in question and/or required by the
Construction Documents.
5.2.2.10 In the event of a disputed claim between Webvan and
Bechtel with respect to any amount or circumstance covered by any Final
Application for Payment, Webvan may withhold from the Final Payment in question
an amount not to exceed one hundred fifty percent (150%) of the disputed claim.
5.2.2.11 Bechtel shall file all notices of completion or notices
or filings of similar import for the applicable DC Project work within ten (10)
days of the issuance of a Certificate of Occupancy for the DC Project work in
question in accordance with applicable Law and local custom and practice.
5.3 Design Services.
5.3.1 Payment.
5.3.1.1 Bechtel shall prepare and attach to any Notice to Proceed
executed by Bechtel for Design Services a comprehensive, line-item budget
describing in reasonable detail each Design Service to be provided by Bechtel
(including, without limitation, Schematic Design Services, Design Development
Services and Construction Documents Services) and specifying Bechtel's
reasonable estimate of the Recoverable Costs (as described in Section 5.3.2
below) that will be incurred for each such Design Service. For Design Services
performed by Bechtel in accordance with such a Notice to Proceed executed by
Webvan, Webvan shall pay Recoverable Costs (as described in Section 5.3.2
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below) to Bechtel on a monthly basis. Webvan shall not, however, have any
obligation to pay for any Recoverable Costs for Design Services in excess of the
Recoverable Costs estimated by Bechtel in the budget for such Design Services
attached to the Notice to Proceed executed by Webvan, unless Webvan has
previously agreed in writing to pay such excess Recoverable Costs. Similarly,
Bechtel shall have no obligation to perform Design Services to the extent the
Recoverable Costs therefor exceed the total amount of Recoverable Costs
specified in such budget, unless Webvan agrees in writing to pay such additional
Recoverable Costs. If, in the course of performing Design Services, Bechtel
determines that the amount of Recoverable Costs that will be incurred for such
Design Services exceeds the total amount of such Recoverable Costs provided in
such budget, then Bechtel shall give Webvan written notice thereof as soon as
reasonably possible and shall deliver to Webvan a revised budget for such Design
Services.
5.3.1.2 On or before the tenth (10th) day of the first month in
which Bechtel is to provide Design Services for a particular DC Project, Bechtel
shall submit to Webvan an invoice of the amount of Recoverable Costs for Design
Services that Bechtel reasonably estimates that it will incur during such first
month. On or before the tenth (10th) day of the second month in which Bechtel is
to provide Design Services for such DC Project and continuing each month
thereafter until the month following the last month in which Design Services are
provided by Bechtel for such DC Project, Bechtel shall submit to Webvan an
invoice that states (a) the estimated amount of Recoverable Costs paid in
advance by Webvan for the prior month, (b) the actual amount of Recoverable
Costs incurred by Bechtel during the prior month, and (c) the amount of
Recoverable Costs that Bechtel reasonably estimates that it will incur during
the current month. Each such invoice shall (1) be in a form reasonably
acceptable to Webvan, (2) provide in reasonable detail the actual amount of time
spent daily by each Bechtel employee, a description of work performed, and the
total Unit Rate costs allocable to such employee's work for each day during the
prior month, and a reasonable estimate of the work to be provided by Bechtel
employees during the current month, (3) describe in detail the Recoverable Costs
actually incurred by Bechtel during the prior month, and a reasonable estimate
of the type and amount of Recoverable Costs that Bechtel will incur during the
current month, and (4) provide a reconciliation of the actual Recoverable Costs
incurred by Bechtel during the prior month against the estimate of the
Recoverable Costs paid by Webvan for such prior month.
5.3.1.3 Notwithstanding anything contained in any invoice
submitted by Bechtel, (a) if the amount of estimated Recoverable Costs paid by
Webvan for any month is greater than the amount of actual Recoverable Costs
incurred by Bechtel during such month (which amount shall be reduced by any
amounts offset or credited by Webvan against such Recoverable Costs on account
of Webvan's prior overpayments, as hereinafter provided), then Webvan shall have
the right either to offset and credit the amount of such overpayment against
Bechtel's estimate of Recoverable Costs to be provided during the current month
or to require that Bechtel promptly refund to Webvan the amount of such
overpayment; and (b) if the amount of estimated Recoverable Costs paid by Webvan
for any month is less than the amount of actual Recoverable Costs incurred by
Bechtel during such month, then the amount of such shortfall shall be paid by
Webvan to Bechtel at the same time that Webvan pays Bechtel's reasonable
estimate of Recoverable Costs for Design Services to be provided during the
following month.
5.3.1.4 Webvan shall pay Bechtel for each monthly invoice
submitted to Webvan within fifteen (15) days after Webvan's receipt of such
invoice, unless prior to the expiration of such fifteen (15)-day period, Webvan
advises Bechtel that Webvan disagrees with the invoice submitted or disapproves
the Design Services performed. If an invoice is in question, Bechtel and Webvan
shall forthwith attempt to resolve the issue. Webvan shall pay the undisputed
portion of each invoice within fifteen (15) days after receipt thereof.
Undisputed amounts due and payable to Bechtel shall bear interest,
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from thirty (30) days after the applicable invoice was received until paid by
Webvan, at the Default Rate. When requested by Webvan, Bechtel shall submit
applicable lien waivers with its invoices stating that for that specific portion
of Design Services for which Webvan has paid all labor, material and
subcontractor and subconsultant accounts have been duly paid. All such lien
waivers (other than lien waivers to be provided promptly following final
payments to Subconsultants and Subcontractors) may be conditioned upon receipt
of payment for the invoiced labor and materials. Upon completion of the Design
Services set forth in a Notice to Proceed and promptly after receiving final
payment for such Services, Bechtel shall submit such unconditional lien waivers
and payment affidavits as Webvan may reasonably require.
5.3.2 Recoverable Costs. Bechtel shall be entitled to reimbursement for
the following Recoverable Costs for Design Services: (i) the cost of Bechtel
employees performing Design Services as provided in the Unit Rate Schedule
attached hereto as Appendix 5.1.2, (ii) ordinary and reasonable expenses of
relocation, transportation (coach or equivalent class only) and subsistence (or
per diem, if applicable) in connection with such Design Services (excluding
travel within the San Francisco Bay Area or within the other localities in which
the DC Projects are located) in accordance with reasonable policies and
procedures established by Bechtel; (iii) long-distance communications, facsimile
communications (long distance only), courier services, and express mail; (iv)
ordinary and reasonable expenses of reproduction, postage and handling of
drawings, specifications and other documents (not for internal use); (v) if
authorized in advance in writing by Webvan, expense of overtime work by
non-exempt employees of Bechtel or any approved Subconsultants requiring higher
than regular rates; (vi) ordinary and reasonable expenses of renderings, models
and mock-ups requested in writing by Webvan; (vii) ordinary and reasonable
expenses of photographic production techniques and photography and photo prints
used for a DC Project; and (viii) ordinary and reasonable fees and costs
incurred by Bechtel's approved Subconsultants in performing Design Services,
which fees and costs of Subconsultants shall be evidenced by invoices (copies of
which are provided to Webvan) providing in reasonable detail the actual amount
of time billed by the employees of any such Subconsultants, a description of the
work performed, and a detailed description of any and all approved Recoverable
Costs incurred by such Subconsultant. Any and all other costs and expenses
incurred by Bechtel in performing the Design Services which are not covered in
the preceding sentence shall require the prior written approval of Webvan and
unless such prior approval is given, Webvan shall not reimburse Bechtel for such
costs and expenses.
5.4 Entire Compensation. Bechtel specifically understands that the
compensation set forth in this Section 5 and the Notices to Proceed is the sole
compensation payable to Bechtel by Webvan for all Services and no work
undertaken by Bechtel or its agents, employees, Subcontractors or Subconsultants
will result in any obligation of Webvan to pay any additional compensation or
any additional expense reimbursement not expressly authorized in this Section 5,
in the absence of a formal, duly authorized and executed written Notice to
Proceed for such services and Webvan's approval of the maximum cost payable for
such additional services. Bechtel, for itself and its employees, agents,
Subcontractors and Subconsultants hereby (i) waives any right to compensation or
reimbursement for services performed or expenses incurred (a) without written
authorization pursuant to an approved Notice to Proceed or (b) in excess of the
amounts set forth in an approved Notice to Proceed, and (ii) covenants not to
sue for amounts which might otherwise be payable under the theory of quantum
meruit, or under any other legal theory, except to the extent Bechtel is
expressly entitled to payment under Section 5 of this Contract.
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5.5 Books and Records.
5.5.1 Bechtel shall check all materials, equipment and labor being
incorporated into Project work and shall keep such full and detailed accounts as
may be necessary for proper financial management under this Contract. Webvan
shall have access to all Bechtel's records, books, correspondence, instructions,
drawings, receipts, vouchers, memoranda and similar data relating to this
Contract and/or Project work or Services, and Bechtel shall preserve (either in
hard copy or on electronic storage) all such records for a period of four (4)
years following Final Payment for each DC Project, or for any longer period
required by Law. Webvan shall have the right to copy all or any part of
Bechtel's job records.
5.5.2 All Services shall be performed by Bechtel on an "open book"
basis. Webvan shall have the right, during the performance of the Services and
for a period of four (4) years after Final Payment for each DC Project has been
made, to inspect and audit Bechtel's books and records regarding the Project,
except that Webvan shall not have the right to audit the basis for the Unit
Rates described in Appendix 5.1.2 or any other fixed rates or fixed prices that
Bechtel and Webvan may agree to as the basis for compensation. Bechtel shall
have the opportunity to audit itself prior to any audit by Webvan. Should any
overcharge be found by Bechtel's audit, Bechtel shall pay Webvan an amount equal
to the amount overcharged plus interest at the Default Rate (including any part
of the Bechtel Fee based on such overcharge). After Bechtel's audit, if any such
audit by Webvan reveals that the amounts charged to Webvan by Bechtel exceeded
the actual compensation to which Bechtel was entitled for Services, then Bechtel
shall pay Webvan an amount equal to the amount overcharged plus interest at the
Default Rate (including any part of the Bechtel Fee based on such overcharge)
and shall pay for the cost of the audit if the net amount overcharged exceeds
Ten Thousand Dollars ($10,000) per occurrence.
5.6 Cost Incentive.
5.6.1 For purposes of this Contract, (a) the "Cost Incentive Cap" for a
DC Project shall equal the sum of the Approved Cost of the Work plus the Base
Contingency specified in the Notice to Proceed executed by Webvan for such DC
Project as such amount may be adjusted pursuant to Change Order, executed by
Webvan for such DC Project in accordance with Section 2.5.4 (the parties
specifically intending that any Excess Contingency be excluded from such
calculation), and (b) the "Cost Savings" for a DC Project shall equal the
amount, if any, by which the Cost Incentive Cap for such DC Project exceeds the
actual aggregate Cost of the Work for such DC Project through its Final
Completion. If at the time of Final Completion of a DC Project there exists no
event of Default (defined in Section 6.3) by Bechtel under the Contract
Documents, nor has any event or condition been identified which (with the giving
of notice or the passage of time or both) could constitute such an Event of
Default, then Webvan shall pay Bechtel, concurrently with the Final Payment for
such DC Project, a portion of the Cost Savings, if any, regarding such DC
Project equal to the sum of the following (the "Cost Incentive Amount"): First,
for that portion of the Cost Savings up to One Hundred Thousand Dollars
($100,000), Webvan shall pay Bechtel [*] percent ([*]%) of such Cost Savings;
second, for that portion of cost Savings greater than One Hundred Thousand
Dollars ($100,000) and up to and including Five Hundred Thousand Dollars
($500,000), Webvan shall pay Bechtel [*] percent ([*]%) of such Cost Savings,
third, for that portion of Cost Savings greater than Five Hundred Thousand
Dollars ($500,000) and up to and including One Million ($1,000,000), Webvan
shall pay Bechtel [*] percent ([*]%) of such Cost Savings; and, fourth, for that
portion of cost Savings exceeding One Million Dollars ($1,000,000), Webvan shall
pay Bechtel [*] percent ([*]%) of such Cost Savings. Notwithstanding anything in
this Section 5.6 to the contrary, however, the aggregate amount payable to
Bechtel under this
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Section 5.6 for any particular DC Project shall in no event exceed [*] percent
([*]%) of the Approved Cost of the Work for such DC Project.
5.6.2. By way of example only assume that the Approved Cost of the Work
for the third DC Project equals $28,000,000. The Base Contingency for such DC
Project therefore equals $[*] and the Cost Incentive Cap equals $[*]. If the
actual aggregate Cost of te Work for such DC Project through its Final
Completion equals $28,200,000, then the Cost Incentive Amount for such DC
Project will equal $[*] (i.e., [*]% of $100,000, plus [*]% of $400,000,plus
[*]% of $500,000, plus [*]% of $200,000). If, however, the actual aggregate Cost
of the Work for such DC Project through its Final Completion equaled
$26,500,000, then the Cost Incentive Amount would equal $[*] (i.e., [*]% of the
$28,000,000 Approved Cost of the Work) because [*]% of $100,000, plus [*]% of
$400,000, plus [*]% of $500,000, plus [*]% of $1,900,000 equals $[*], which
exceeds the maximum Cost Incentive Amount payable for such DC Project.
5.7 Time Incentive. If the Substantial Completion of a particular DC Project
occurs before the date (the "SCHEDULED DATE") specified for Substantial
Completion in the then-current Project Schedule approved by Webvan and the
Notice to Proceed executed by Webvan for such DC Project (as such date may be
adjusted pursuant to Change Orders executed by Webvan for such DC Project in
accordance with Section 2.5.4.1), and if at the time of such Substantial
Completion no Event of Default by Bechtel exists under the Contract Documents
nor has any event or condition been identified which (with the giving of notice
or the passage of time or both) could constitute such an Event of Default, then
Webvan shall pay Bechtel, concurrently with the Final Payment for such DC
Project, an amount (the "TIME INCENTIVE AMOUNT") equal to the sum of the
following: Webvan shall pay Bechtel [*] Dollars ($[*]) for each of the first ten
(10) days that Substantial Completion occurs prior to the Scheduled Date; Webvan
shall pay Bechtel [*] Dollars ($[*]) for each day from the eleventh (11th)
through and including the thirtieth (30th) days that Substantial Completion
occurs prior to the Scheduled Date; Webvan shall pay Bechtel [*] Dollars ($[*])
for each day from the thirty-first (31st) through and including the fiftieth
(50th) days that Substantial Completion occurs prior to the Scheduled Date; and
Webvan shall pay Bechtel [*] Dollars ($[*]) for each day from and after the
fifty-first (51st) day that Substantial Completion occurs prior to the Scheduled
Date. Notwithstanding anything in this Section 5.7, however, in no event shall
the aggregate Time Incentive Amount payable for any DC Project exceed [*]
percent ([*]%) of the Approved Cost of the Work for such DC Project. By way of
example only, if Substantial Completion occurs sixty (60) days before the
applicable Scheduled Date for a DC Project, then the Time Incentive Amount will
equal $[*] (i.e., 10 x $[*], plus 20 x $[*], plus 20 x $[*], plus 10 x $[*],
subject to the limit on the maximum Time Incentive Amount provided in this
Section 5.7.
5.8 Incentive Warrant. Concurrently with Bechtel's and Webvan's
execution and delivery of this Contract, Webvan has delivered to Bechtel a
warrant (the "WARRANT") in the form of Appendix 5.8 attached hereto and made a
part hereof for the purchase of up to six hundred thousand (600,000) shares of
preferred stock of Webvan. As provided in the Warrant, Bechtel's rights under
the Warrant shall vest with respect to certain shares of preferred stock of
Webvan only when the DC Project has been completed On Time/On Budget. For
purposes of the Warrant, "ON TIME/ON BUDGET" shall mean, with respect to any
particular DC Project, that (i) Substantial Completion of the DC Project has
actually occurred on or before the Scheduled Date for such DC Project, and (ii)
the actual aggregate Cost of the Work of the DC Project through its Final
Completion does not exceed the Cost Incentive Cap for the DC Project, as such
Cost Incentive Cap may have been adjusted by Change Orders executed by Webvan
for such DC Project in accordance with Section 2.5.4.1, and (iii) at the time of
such Final Completion no
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Event of Default by Bechtel exists under the Contract Documents nor has any
event or condition been identified which (with the giving of notice or the
passage of time or both) could constitute such an Event of Default. Except as
expressly provided in this Section 5.8, under no circumstance shall a DC Project
be deemed to have been completed On Time/On Budget if any portion of any
applicable Excess Contingency has been applied to the Cost of the Work for such
DC Project. Notwithstanding the foregoing clause (ii), if the actual aggregate
Cost of the Work for a DC Project through its Final Completion exceeds the Cost
Incentive Cap for such DC Project, then (rather than applying to Webvan for
payment of any such excess as part of any applicable Excess Contingency) Bechtel
shall have the right to pay and be solely responsible for all amounts by which
such actual aggregate Cost of the Work exceeds the Cost Incentive Cap. If
Bechtel in fact pays all such amounts and if Bechtel also agrees in writing to
waive (and Webvan shall not be required to pay) any Bechtel Fee on any Excess
Contingency for such DC Project, then Bechtel shall be deemed to have satisfied
the requirement of clause (ii) of this Section 5.8 for purposes of determining
whether such DC Project has been completed On Time/On Budget.
6.0 TERMINATION OF CONTRACT
6.1 Bechtel's Termination Rights.
6.1.1 Bechtel may suspend the Services for a particular DC Project (i)
if Webvan fails to pay or to object to an Application for Payment or invoice for
Consulting Services or Design Services for such DC Project within thirty (30)
days after written notice of delinquency is received by Webvan from Bechtel,
(ii) pursuant to an order of any court or other public authority having
jurisdiction, or (iii) as a result of an act of government, such as a
declaration of a national emergency, making materials unavailable.
6.1.2 For purposes of this Section 6.1.2, (a) the "OUTSTANDING AMOUNT"
shall equal the sum of all amounts (without duplication) both (i) that are
specified as due and payable in all Applications for Payment for Construction
Services and all invoices for Consultant Services and Design Services that
Bechtel has properly completed and submitted (including all related
documentation required under the Contract Documents) and (ii) that Webvan has
not paid; and (b) the "PAST-DUE AMOUNT" shall equal that portion of the
Outstanding Amount as to which Webvan has neither objected nor made payment
within fifteen (15) days after Webvan's receipt of the Applications for Payment
and invoices therefor. If at any time during the term of this Contract the
Past-Due Amount exceeds Ten Million Dollars ($10,000,000) for a period of five
(5) consecutive days, then Bechtel shall have the right to give Webvan written
notice (a "PAST-DUE NOTICE") of such event. Bechtel shall specify in any
Past-Due Notice the Past-Due Amount as of the date of such Past-Due Notice, and
Bechtel shall attach to any Past-Due Notice copies of all Applications for
Payment for Construction Services and copies of all invoices for Consultant
Services and Design Services evidencing the unpaid amounts which, when added
together, constitute the Past-Due Amount specified in Bechtel's Past-Due Notice.
Webvan shall have five (5) days after Webvan's receipt of a Past-Due Notice
within which either to pay the Past-Due Amount specified by Bechtel or to give
Bechtel written notice that Webvan objects to Bechtel's calculation of such
Past-Due Amount. Any such objection to Bechtel's calculation of such Past-Due
Amount may be based only upon Webvan's assertion (1) that Bechtel's calculation
includes an arithmetic error or (2) that Bechtel has included in such
calculation amounts that Webvan either paid or objected to within fifteen (15)
days after Webvan's receipt of the applicable Applications for Payment and
invoices. If Webvan has not paid or so objected to such Past-Due Amount on or
before the fifth (5th) day after Webvan's receipt of such Past-Due Notice, then
Bechtel shall have the right (by giving Webvan written notice thereof) to
suspend performance of any or all Services. If both (a) Webvan has not timely
objected to Bechtel's calculation of
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such Past-Due Amount in the manner hereinabove provided, and (b) on or before
the thirty-fifth (35th) day after Webvan's receipt of such Past-Due Notice,
Webvan has not paid such Past-Due-Amount, then Bechtel shall have the right to
terminate this Contract by giving Webvan written notice of such termination.
Following any such termination of this Contract by Bechtel, Bechtel shall have
the right to recover from Webvan payment for all Services completed for the
Project as of the date of such termination. If Webvan objects to Bechtel's
calculation of the Past-Due Amount specified in any Past-Due Notice, the dispute
shall be resolved in accordance with Section 2.5.12. Any period during which
Bechtel has properly suspended performance of Services pursuant to this Section
6.1.2 shall constitute an Excusable Delay with respect to each DC Project as to
which Bechtel has properly suspended performance.
6.1.3 Webvan may, at any time and without cause, order Bechtel, in
writing, to suspend the Services in whole or in part for such period of time as
Webvan may determine. If Bechtel's work as to a particular DC Project is
suspended pursuant to any such written order of Webvan for a period of thirty
(30) consecutive days or more, then Bechtel shall have the right to terminate
this Contract as to such DC Project only and to recover from Webvan payment for
all Services completed for such DC Project as of the date of termination.
6.1.4 Bechtel shall have the further right to terminate this Contract,
in whole, by giving Webvan at least thirty (30) days' prior written notice
thereof if both (i) Webvan terminates Bechtel's Construction Services without
cause pursuant to Section 6.2 for more than one-third (1/3) of all DC Projects
for which Webvan has executed a Notice to Proceed in any twelve (12) month
period, and (ii) within six (6) months of each such termination, Webvan executes
a contract with a contractor other than Bechtel to provide such Construction
Services for such terminated DC Projects.
6.1.5 Upon any termination of this Contract by Bechtel pursuant to this
Section 6.1, Webvan and Bechtel shall have the same rights and obligations as if
Webvan had terminated this Contract under Section 6.2.
6.2 Webvan's Right to Terminate Without Cause. The following provisions of
this Section 6.2 shall govern Webvan's right to terminate this Contract without
cause.
6.2.1 In addition to Webvan's right to terminate on account of Bechtel's
default, as set forth in Section 6.4, Webvan may terminate this Contract and/or
the Services, in whole or in part, at any time and from time to time without
cause, by giving Bechtel at least ten (10) days' prior written notice. Upon
receipt of any such notice, Bechtel shall, unless the notice directs otherwise:
(i) immediately discontinue the Services on that date and to the extent
specified in the notice; (ii) enter into no further Subcontracts or
Subconsultant agreements, except as may be necessary for completion of such
portion of the DC Project work or Services as is not discontinued; (iii)
promptly make every reasonable effort to procure cancellation, or assignment,
upon terms satisfactory to Webvan, of all Subcontracts and all Subconsultant
agreements to the extent they relate to the performance of the discontinued
portion of the DC Project work and other Services; and (iv) thereafter, with
respect to the DC Project(s) as to which Webvan has terminated this Contract, do
only such DC Project work as may be necessary to preserve and protect the DC
Project work already in progress and to protect materials, landscaping materials
and equipment on the DC Property(ies) or in transit thereto. Upon such
termination, the obligations of the parties under this Contract shall continue
as to DC Projects and/or Services as to which Webvan has not terminated this
Contract and, with respect to the DC Project(s) as to which Webvan has
terminated this Contract, those portions of the Services already performed by
Bechtel prior to the date of termination. In addition, Bechtel shall take all
steps, including the legal assignment of its contractual rights with respect to
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terminated Project work, which Webvan may require for the purpose of fully
vesting in Webvan such contractual rights. Notwithstanding any such assignment
of contractual rights, however, Bechtel shall reserve rights of recourse
thereunder to the extent necessary to permit Bechtel to enforce such contracts
in the event that Webvan makes any claim against Bechtel with respect to goods
or services that are the subject of such contracts. The foregoing reservation of
rights by Bechtel shall not, however, in any way impair Webvan's right to pursue
direct recourse against the parties to such contracts.
6.2.2 In the event of such termination by Webvan, Webvan shall reimburse
Bechtel for any unpaid Consultant Services, Design Services or Cost of the Work
due under Section 5, plus, in the case of Construction Services, an amount which
will increase the payments already made on account of the Bechtel Fee to a sum
which bears the same ratio to such fixed sum as the actual Cost of the Work at
the time of termination bears to the Budgeted Cost. In addition, in the event of
any such termination by Webvan of Construction Services, Webvan shall also pay
to Bechtel (i) fair compensation, either by purchase or rental, at the election
of Webvan, for any equipment Webvan wishes to continue to use, and (ii)
reasonable and necessary costs actually incurred by Bechtel to relocate Bechtel
employees to their points of origin and to dispose of materials and equipment
located at the applicable DC Property that Webvan does not purchase and other
reasonable costs of termination actually incurred by Bechtel with Webvan's prior
written approval. If, at the date of such termination, Bechtel has properly
prepared or fabricated off the applicable site any goods for subsequent
incorporation into DC Project work, and if Bechtel delivers such goods to the
applicable site or to such other place as Webvan shall reasonably direct, then
Bechtel shall be paid for such goods or materials. Bechtel shall, as a condition
to receiving the payments described in this Section 6, execute and deliver to
Webvan such documents as may be reasonably acceptable to Webvan releasing Webvan
and the applicable DC Properties from all liability to Bechtel under this
Contract, including, without limitation, the waiver of Mechanics' Lien rights
and the affidavit described in clauses (v) and (vi) of Section 5.2.2.9.
6.2.3 Bechtel hereby waives all claims for damages and loss of
anticipated profits on account of any termination by Webvan pursuant to this
Section 6.2 and, as the sole right or remedy of Bechtel on account of such
termination, Bechtel shall have the right to receive the amounts payable to
Bechtel under this Section 6.2.
6.3 Bechtel Default. Any of the following events shall be deemed to be a
material default by Bechtel under the Contract Documents (an "EVENT OF
DEFAULT"): (i) failure by Bechtel to perform any material contractual obligation
under this Contract or the Contract Documents, which failure by its nature
Bechtel has no capacity to cure; (ii) failure by Bechtel to pay any monetary
obligation under the Contract Documents for a period of five (5) days following
receipt of written notice of such failure from Webvan; (iii) failure by Bechtel
to perform any other obligation under, or to comply with any term, provision or
condition of, the Contract Documents for a period of ten (10) days following
receipt of written notice of such failure from Webvan, or such longer period
(but in no event exceeding forty-five (45) days following receipt of Webvan's
notice) as reasonably required to remedy such failure provided that Bechtel
commences such remedy within such ten (10)-day period and thereafter uses its
best efforts to complete such remedy at the earliest date reasonably possible;
(iv) the occurrence of any of the following: (a) the making by Bechtel of any
general arrangement or assignment for the benefit of creditors; (b) Bechtel
becomes a "debtor" as defined in 11 USC Section 101 or any successor statute
(unless, in the case of a petition filed against Bechtel, the same is dismissed
within sixty (60) days); (c) the appointment of a trustee or receiver to take
possession of substantially all of Bechtel's assets or of any asset used in
connection with the Project, where possession is not restored to Bechtel within
thirty (30) days; or (d) the attachment, execution or other judicial seizure of
substantially all of Bechtel's assets or of any asset used in connection with
the Project, where such seizure is not discharged within thirty (30)
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days; and (v) repeated failure (defined as a failure for which Webvan has given
more than one (1) notice) by Bechtel to perform its obligations under this
Contract or the Contract Documents in a timely fashion, which failure materially
interferes with Webvan's scheduled completion of any DC Project within the
Contract Time provided in the Contract Documents.
6.4 Webvan Remedies.
6.4.1 Upon the occurrence of an Event of Default, Webvan shall have the
right (subject to Sections 6.4.2 and 8.17) to pursue any and all remedies
available at law and in equity including, without limitation, the following: (i)
the right to keep this Contract in effect and sue Bechtel for all damages caused
by the default and recover the cost thereof; (ii) the right to cure any such
default by Bechtel and to recover any damages caused thereby; and (iii) the
right to terminate this Contract either as to the entire Project or as to any or
all Services with respect to any DC Project as to which an Event of Default has
occurred, in either case by giving Bechtel written notice of such termination.
Upon such termination, Webvan shall have the right to complete the Services or
to contract with others for completion of the Services and, in either event, to
charge the cost of completion to Bechtel. Webvan may deduct, offset and credit
such costs of completion and all other damages incurred by Webvan as a
consequence of Bechtel's default from and against any amounts that may at any
time be payable to Bechtel under this Contract. If the cost of completion
exceeds the amount that would have been payable under this Contract had Bechtel
completely performed the Services pursuant to the terms of this Contract,
Bechtel shall immediately pay the amount of such excess to Webvan. Upon
termination, Bechtel shall be deemed to have waived all claims against Webvan
for profits, loss or damage on or with respect to the uncompleted Services.
6.4.2 If the Substantial Completion of any particular DC Project occurs
after the Scheduled Date for such DC Project, then Bechtel shall pay Webvan, no
later than the time Final Payment is payable to Bechtel, an amount (the
"LIQUIDATED DAMAGES AMOUNT") equal to sum of the following: Bechtel shall pay
Webvan [*] Dollars ($[*]) for each of the first ten (10) days that Substantial
Completion occurs after the Scheduled Date; Bechtel shall pay Webvan [*] Dollars
($[*]) for each day from the eleventh (11th) through and including the thirtieth
(30th) days that Substantial Completion occurs after the Scheduled Date;
Bechtel shall pay Webvan [*] Dollars ($[*]) for each day from the eleventh
(11th) through and including the thirtieth (30th) days that Substantial
Completion occurs after the Scheduled Date; Bechtel shall pay Webvan [*] Dollars
($[*]) for each day from the thirty-first (31st) through and including the
fiftieth (50th) days that Substantial Completion occurs after the Scheduled
Date; and Bechtel shall pay Webvan [*] Dollars ($[*]) for each day from the
fiftieth (50th) day that Substantial Completion occurs after the Scheduled Date.
In no event, however, shall the aggregate Liquidated Damages Amount payable for
any particular DC Project exceed [*] Dollars ($[*]). By way of example only, if
Substantial Completion occurs fifty-five (55) days after he applicable Scheduled
Date for a DC Project, then the Liquidated Damages Amount will equal $[*] (i.e.,
10 x $[*], plus 20 x $[*], plus 20 x $[*], plus 5 x $[*]. If however,
Substantial Completion occurs sixty-five (65) days after the applicable
Scheduled Date for a DC Project, then the Liquidated Damages Amount will equal
$[*] (i.e., 10 x $[*], plus 20 x $[*], plus 20 x $[*], plus 15 x $[*], which
equals $[*], which exceeds the $[*] maximum Liquidated Damages Amount). Webvan's
recovery of the Liquidated Damages Amount under this Section 6.4.2 shall
constitute Webvan's sole damages that may be recovered from Bechtel due to
Bechtel's failure to achieve Substantial Completion of a particular DC Project
by the Scheduled Date for such DC Project. Nothing contained in this Section
6.4.2, however, shall restrict Webvan from exercising any other right or remedy
or from seeking or recovering any and all damages directly or indirectly
resulting from any default of Bechtel under this Contract other than Bechtel's
failure to achieve Substantial Completion of a particular DC Project by the
Scheduled Date for such DC Project. Webvan may deduct, offset and credit the
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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Liquidated Damages Amount for any DC Project from and against any amounts that
may at any time be payable to Bechtel under this Contract, whether or not
payable to Bechtel with respect to the same DC Project as to which the
Liquidated Damages Amount has been incurred.
6.5 Possession. If Webvan terminates this Contract with respect to
Construction Services for any DC Project on account of Bechtel's default as
provided in Section 6.4, then in addition to its obligations under Section 6.2,
Bechtel shall promptly and peaceably vacate all applicable DC Property and, at
Webvan's election, Webvan may (i) take possession of such DC Property and of all
materials, equipment, tools, construction equipment and machinery thereon owned
by Bechtel and Webvan may finish the DC Project work by whatever method it may
deem expedient, or (ii) cease construction and require Bechtel promptly to
remove from the DC Property, at Bechtel's expense, all materials, equipment,
tools, and construction equipment owned by Bechtel. Webvan shall pay to Bechtel
fair compensation (at the election of Webvan either by purchase at fair market
value or by rental at the prevailing rate of the locale) for any equipment owned
by Bechtel and used by Webvan during the completion of the DC Project. Upon
demand, (a) Bechtel shall assign and deliver to Webvan all Construction
Documents, Subcontracts, documents, tangible and intangible property, and
contractual rights as Webvan may demand for the purpose of completing the DC
Project work, and (b) Bechtel shall execute and deliver to Webvan such written
documentation as Webvan may request for the purpose of evidencing the vesting in
Webvan of the rights and benefits of Bechtel with respect to the documents and
rights so delivered and assigned.
6.6 Compensation. If Webvan terminates this Contract with respect to
Construction Services for any DC Project as provided herein on account of
Bechtel's default, and Webvan then elects to complete the DC Project work,
Bechtel shall not be entitled to receive any further payments under this
Contract until the DC Project work is fully completed. Upon completion of the DC
Project work, if the expenses reasonably incurred by Webvan in completing the DC
Project work (including, without limitation, (a) payments made by Webvan to any
party supplying labor, materials, equipment, services and the like for the DC
Project work, and (b) all costs incurred by Webvan for managerial,
administrative or supervisory services in excess of such costs that Webvan would
have incurred but for Bechtel's default), plus the amounts previously paid by
Webvan to Bechtel, exceed any applicable Budgeted Cost and Bechtel Fee, then
Bechtel shall pay Webvan, upon demand, the amount of such excess, plus interest
thereon at the Default Rate. In all other cases of termination for Bechtel's
default, Webvan's liability to Bechtel shall be limited to reimbursement to
Bechtel of that portion of the applicable Budgeted Cost and Bechtel Fee which is
earned, due and payable to Bechtel as of the date of the termination, less the
sum of (i) any amounts owing to Webvan by Bechtel under the terms of the
applicable Contract Documents, and (ii) all other amounts to which Webvan is
entitled under the terms of this Contract as a result of Bechtel's default.
7.0 INSURANCE
7.1 Liability Insurance.
7.1.1 Bechtel shall purchase and maintain insurance which will protect
Bechtel and Webvan from the following types of claims that may arise out of or
result from Services under this Contract and for which Bechtel may be legally
liable, whether such operations are by Bechtel or by a Subcontractor or
Subconsultant or by anyone directly or indirectly employed by any of them, or by
anyone for whose acts any of them may be liable: (i) claims under workers' or
workmen's compensation, disability benefit and other similar employee benefit
acts which are applicable to the Services to be performed; (ii) claims for
damages because of bodily injury, sickness or disease, or death; (iii) claims
ordinarily covered by
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commercial general liability insurance; (iv) claims for damages because of
injury to or destruction of tangible property, including loss of use by third
parties other than Webvan resulting therefrom (whether resulting from operations
of Bechtel, any Subcontractor or Subconsultant, or anyone directly or indirectly
employed by any of them); (v) claims for damages because of bodily injury, death
of a person or property damage arising out of ownership, maintenance or use of a
motor vehicle; and (vi) claims involving contractual liability for Bechtel's
indemnity obligations, if insurable, under this Contract. All insurance coverage
required to be obtained and maintained by Bechtel pursuant to the terms of this
Contract and the Contract Documents shall be primary in the event of any loss,
with any insurance carried by Webvan to be excess capacity to Bechtel's
coverage. All insurance policies required of Bechtel by this Contract and any
modifications thereto shall be subject to Webvan's reasonable approval as to
form, insurer, and adequacy of protection. Bechtel shall carry insurance with
coverage and limits of liability as specified in Appendix 7.1.1 to this
Contract, entitled "Insurance Requirements." All insurance required by this
Section 7.1.1 shall be purchased from and maintained with a company or companies
lawfully authorized to do business in the State of California, who are
incorporated admitted insurance companies in such State, and who have an A.M.
Best Rating of at least A IX.
7.1.2 Bechtel shall require that each of its Subcontractors and
Subconsultants obtain and maintain, at all times during the period such
Subcontractor or Subconsultant is performing Services, the insurance described
in Appendix 7.1.1.
7.1.3 All coverages shall be written on an occurrence basis and
maintained without interruption from date of commencement of the Services until
the date of completion of all Services and termination of any coverage required
to be maintained after the completion of all Services; provided, however, that,
subject to Section 7.1.6, Bechtel shall only be required to maintain in force
the site-specific policies described in Appendix 7.1.1 through the Final
Completion of each DC Project. All coverages shall be maintained by insurance
carriers acceptable to Webvan and Webvan's lenders and landlords in all
respects. The insurance referenced in clause (iii) of Section 7.1.1 shall
contain no exclusion which denies coverage for third party bodily injury or
property damage arising out of errors or omissions in maps, plans, drawings,
designs, or inspection or construction management services.
7.1.4 Certificates of insurance acceptable to Webvan shall be filed with
Webvan prior to commencement of the Services for each DC Project. These
certificates and the insurance policies required by Section 7.1 shall contain a
provision that coverages afforded under the policies will not be modified,
canceled or allowed to expire until at least thirty (30) days' prior written
notice has been given to Webvan. If any of the foregoing insurance coverages are
required to remain in force after the completion of all Services, an additional
certificate evidencing continuation of such coverage shall be submitted upon
completion and final payment for all Services as required by this Contract.
7.1.5 Webvan and Bechtel each acknowledge that Webvan's insurance
carrier may require that those provisions of the Contract Documents setting
forth the respective insurance coverages required of Webvan and Bechtel,
respectively, be varied. In such event, Bechtel and each Subcontractor and
Subconsultant shall, upon the request of Webvan, obtain any other or additional
insurance coverage so required, provided Webvan bears any additional costs
occasioned thereby. All policies of insurance shall name Webvan, its employees,
officers, directors, shareholders, and agents, and, at Webvan's option, any
landlord or lender for the applicable DC Property and any other person(s) Webvan
deems to have an insurable interest in the DC Property and/or the DC Project
work, as additional insured(s) under the policy. Upon request by Webvan, Bechtel
shall furnish each of its Subcontractor's and Subconsultant's policies (or
certificates thereof) to Webvan before commencement of the Services, evidencing
all coverage required hereunder. In addition, Bechtel shall promptly furnish to
Webvan copies of all
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endorsements both with respect to its own insurance and that of its
Subcontractors and Subconsultants which are subsequently issued and which amend
coverage, but delivery of such endorsements will not release such parties from
their obligation to obtain the insurance required by this Contract. The
requirements for the foregoing insurance shall not diminish or limit Bechtel's
obligations to indemnify Webvan under this Contract.
7.1.6 Notwithstanding any provision in any of the Contract Documents to
the contrary, Bechtel shall obtain products and completed operations coverage
required under this Contract, which coverage shall be maintained in force for
four (4) years after Substantial Completion of each DC Project for claims for
damages to tangible property resulting from defects (latent or otherwise) in
construction of improvements to real property or in the assembly and
installation of the Operating Equipment.
7.1.7 If Bechtel fails to secure and maintain the required insurance,
Webvan shall have the right (without the obligation to do so) to secure same in
the name and for the account of Bechtel, in which event Bechtel shall pay the
cost thereof and shall furnish upon demand all information that may be required
in connection therewith.
7.2 Property Insurance.
7.2.1 With respect to each DC Project and unless otherwise provided in
any provision of the Contract Documents, Bechtel shall purchase and maintain
"builder's risk" property insurance in the amount of the Budgeted Cost plus the
Bechtel Fee (as they may be modified pursuant to this Contract) and the
applicable DC Property, as appropriate, on a replacement cost basis and with
such deductible amounts as Webvan may approve. Bechtel's insurance (i) shall be
placed in the name of Bechtel and its Subcontractors and, at Webvan's option,
shall name Webvan and any other person(s) whom Webvan deems to have an insurable
interest in the applicable DC Property and/or the DC Project work, or any part
thereof, as named insureds, and (ii) shall be payable to Bechtel for the
insureds as the respective interests of such named insureds may appear. Such
insurance shall not insure against loss, damage, or destruction of any
contractor equipment, materials and supplies or temporary buildings or other
such property located in, on or about the DC Property, which are the property of
Bechtel, or any Subcontractor or Subconsultant, or any person directly or
indirectly employed by or under contract with Bechtel or its Subcontractors or
Subconsultants, all of which shall be insured by Bechtel under a separate
policy. The policy shall be retained and held by Bechtel. A copy of each policy
required of Bechtel by the Contract Documents shall be delivered to Webvan upon
demand. Bechtel shall be responsible for the payment of all costs not covered
because of deductibles in excess of $10,000 per occurrence under Bechtel's
property insurance.
7.2.2 Intentionally omitted.
7.2.3 Property insurance shall be on a "Special Form" policy form, and
shall insure against the perils of fire and extended coverage and physical loss
or damage, including theft, vandalism, malicious mischief, collapse, false-work,
temporary buildings and debris removal, including demolition occasioned by
enforcement of any applicable legal requirements. Coverage shall also be
provided, as needed, for earthquake and flood, for inland transit of permanent
plant equipment and offsite storage exposures for materials to be incorporated
into a DC Project, and for physical damage to DC Project work resulting from
faulty workmanship, materials or design.
7.2.4 If requested by Webvan, Bechtel shall obtain and provide Webvan
with a certificate (or certificates) of any insurance carried by Bechtel
covering the DC Project work during the course of
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construction, to the extent any such insurance affects or covers any interest of
Webvan in the DC Project work.
7.2.5 Webvan and Bechtel, by their execution of this Contract, each
hereby waives all rights against each other and any of their Subconsultants,
Subcontractors, agents and employees, each of the other, for damages to property
caused by fire or other perils to the extent such damages are covered by
property insurance obtained pursuant to this Section 7.2 or any other provision
of the Contract Documents, or any other property insurance maintained by Webvan
or Bechtel applicable to the DC Project work or the applicable DC Property,
regardless of the negligence of the entity so released; provided, however, that
such waivers are effective only if the applicable insurance policies of both
parties contain a clause to the effect that such release shall not affect the
right of the insured to recover under such policy. Each party shall cause each
property insurance policy obtained by it to provide that the insurer waives all
right of recovery by way of subrogation against the other party in connection
with any injury or damage covered by such policy. Bechtel shall also require of
all Subcontractors and Subconsultants similar waivers in favor of Webvan and
Bechtel. In addition, as to any DC Property for which Webvan's landlord is
required to maintain property insurance under Webvan's lease, Webvan shall
request such landlord to obtain from its property insurer a waiver of
subrogation for the benefit of Bechtel. Bechtel shall similarly obtain from
Bechtel's property insurer of any DC Project work a waiver of subrogation for
the benefit of Webvan's landlord at the applicable DC Property, if such
landlord's insurer provides Bechtel with a waiver of subrogation.
7.2.6 A loss covered under Bechtel's property insurance shall be
adjusted reasonably by Bechtel and shall be made payable to Bechtel for the
insureds, as their interests may appear. Bechtel shall pay Subcontractors their
just portion of any insurance proceeds received by Bechtel and, by appropriate
written agreements, shall require Subcontractors to make payments to their
sub-subcontractors in a similar manner. Bechtel shall deposit in a separate
account any insurance proceeds actually received by Bechtel under any of the
applicable policies. Bechtel shall apply such proceeds only toward the repair,
restoration and performance of DC Project work and shall distribute such
proceeds in accordance with such agreement as the parties in interest may reach.
If, after such loss, no other special agreement is made, replacement of damaged
property shall be covered by appropriate Change Order. Notwithstanding the
foregoing provisions of this Section 7.2.6, if following any such loss Webvan
elects to terminate this Contract with respect to the DC Project affected by
such loss, then all proceeds of Bechtel's property insurance for such DC Project
shall be paid to Webvan.
7.3 Risk of Loss. From the date that a Notice to Proceed for a DC Project is
first executed by Webvan through and including the date of Substantial
Completion of such DC Project, Bechtel shall bear all risk of loss, casualty,
damage, destruction, theft, vandalism and malicious mischief (collectively,
"RISK OF LOSS") to and for such DC Project work and the applicable DC Property.
After the date of Substantial Completion of a DC Project, Webvan shall bear all
Risk of Loss to such DC Project and the applicable DC Property. Bechtel and
Webvan acknowledge, however, that the foregoing allocation of Risk of Loss is
made solely for the purpose of allocating responsibilities between Bechtel and
Webvan for the repair, replacement and restoration of DC Project work and the
applicable DC Properties following any loss, casualty, damage, destruction,
theft, vandalism or malicious mischief of or to such DC Project work and/or the
applicable DC Properties. Nothing contained in this Section 7.3, therefore,
shall release Bechtel or any of its Subcontractors or Subconsultants from, or
waive or modify the liability and responsibility of Bechtel and its
Subcontractors and Subconsultants for, any of their respective obligations
otherwise provided under this Contract or the applicable Contract Documents,
including, without limitation, Section 2.3.4.7, Section 2.5.10, Section 2.6, and
Section 8.16.
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8.0 MISCELLANEOUS PROVISIONS
8.1 Year 2000 Compliance Warranty. Bechtel warrants that any computer
product, application or system developed by Bechtel hereunder ("PRODUCT"), if
any, will be Year 2000 Compliant in all material respects at the time of
turnover of a DC Project. As used in this warranty, the term "YEAR 2000
COMPLIANT" means that the Product, when configured and used according to the
documented instructions on the Project, will, without manual intervention or
interruption, either meet the Year 2000 compliance standard set by a recognized
industry association or code (such as the American Society for Testing and
Materials, the American Standard Code for Information Interchange, or the
Institute of Electrical and Electronics Engineers, Inc.) or will: (i) correctly
handle and process date information before, during and after January 1, 2000,
accepting date input, providing date output and performing calculations,
including but not limited to sorting and sequencing, on dates or portions of
dates; (ii) function according to the documentation before, during and after
January 1, 2000 without changes in operation resulting from the advent of the
new century; (iii) when appropriate, respond to two-digit date input in a way
that resolves any ambiguity as to century in a disclosed, defined and
predetermined manner; (iv) store and provide output of date information in ways
that are unambiguous as to century; and (v) manage the leap year occurring in
the year 2000, following the quad-centennial rule. The "quad-centennial rule"
means (a) if the year is divisible by 4, it is a leap year, unless (b) the year
is also divisible by 100, then it is not a leap year, unless (c) the year is
also divisible by 400, then it is a leap year. Bechtel will require all
Subcontractors to warrant Year 2000 Compliance in respect of services and
products they supply to the Project.
8.2 Ownership of Data.
8.2.1 Data Defined. For the purposes of this Section 8.2, " DATA" means
all designs, plans, models, drawings, prints, samples, transparencies,
specifications, reports, manuscripts, working notes, documentation, manuals,
photographs, negatives, tapes, discs, databases, software, works of art,
inventions, discoveries, components and any Contract Documents or similar items.
8.2.2 Ownership and Use of Background Data.
8.2.2.1 All intellectual property rights, copyrights, design
rights, patents, and other similar invention rights, trademarks, trade names,
service marks, trade secrets, all applications for and rights in or to any of
the foregoing (collectively "IP RIGHTS") in or to all Data now or hereafter
owned or prepared by Webvan ("WEBVAN DATA") shall be owned solely by Webvan.
Without limiting the generality of the foregoing sentence, Webvan Data shall
include, without limitation, all Webvan Systems and Webvan's "Order Fulfillment
System" server and software, all Operating Equipment systems and designs, all
material handling, integration, measurement and control systems, all food
production and processing systems and designs, all information technology
systems and software, and DC general arrangement drawings for the Project, all
inventions, discoveries and improvements relating to Webvan's business
(including, without limitation, any information relating to manufacturing
techniques, processes, formulas, designs, "look and feel," logos, developments
and experimental work or work in progress), and all formulas, patterns, devices
and compilations of information including customer lists) which are used in or
related to Webvan's business. Bechtel shall have no ownership or other rights or
interest in any Webvan Data or any of Webvan's IP Rights. Any Webvan Data and
Webvan IP Rights disclosed to Bechtel shall be used by Bechtel solely in the
performance of Services on behalf of Webvan hereunder and shall be subject to
the obligation to keep same strictly confidential as provided in Section 8.10.
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8.2.2.2 All IP Rights in or to all construction and program
management systems and designs, construction estimating, measurement and
procurement control systems, plot plan processor software, and construction and
program management information technology systems and software which Bechtel
owns or has prepared prior to the date hereof (collectively, "BECHTEL BACKGROUND
DATA") shall remain the property of Bechtel. Bechtel Background Data shall not,
however, include any Webvan Data or Developed Data. Bechtel hereby grants to
Webvan a perpetual, non-exclusive, irrevocable, royalty-free license to use,
copy and modify the Bechtel Background Data to the extent necessary to operate,
use or maintain any DC Project work, but solely in connection with DC Projects
for which Bechtel has provided Services under this Contract. Except as provided
herein, Webvan shall have no ownership or other rights or interest in any
Bechtel Background Data.
8.2.3 Developed Data. All IP Rights in all Data prepared or developed by
or for Bechtel or any of its Subcontractors or Subconsultants hereunder,
including, without limitation, all Contract Documents (collectively, "DEVELOPED
DATA") shall vest in and become the sole property of Webvan, shall be treated by
Bechtel (and Bechtel shall require that all of its Subcontractors and
Subconsultants treat it) as strictly confidential, and shall at all times remain
the property of Webvan, and all works of art which constitute copyrightable
subject matter shall be considered "works made for hire" to the fullest extent
allowable under the United States Copyright Act. All such Developed Data shall
automatically and immediately constitute Webvan Data and shall be clearly
marked, where possible, as Webvan's property, and Bechtel agrees to assign and
does hereby assign all right, title and interest in, under and to the Developed
Data to Webvan. Each party agrees to perform any further acts and execute and
deliver any and all further documents and/or instruments which are considered
necessary or appropriate by Webvan to ensure that the Developed Data vests in
Webvan, including but not limited to executing assignments, oaths and
declarations for IP Rights on a country by country basis as deemed advisable by
Webvan and any other action for perfecting in Webvan all right, title and
interest in, under and to the Developed Data. At Webvan's request from time to
time, Bechtel shall furnish a copy of all such Developed Data to Webvan and
copies of designs, drawings, plans, specifications, databases and reports (in
electronic format, to the extent available). Bechtel shall maintain in good
order at each DC Project site one record copy of the drawings, Change Orders and
other modifications, specifications, product data, samples, and shop drawings
marked currently to record changes made during Development. Each of the items
specified in the foregoing sentence shall be delivered to Webvan upon completion
of the Development of the DC Project and prior to Final Payment. Bechtel shall,
however, have the right to retain one copy of each such item for Bechtel's
archive records, subject to the provisions of this Section 8.2, Section 8.10 and
any confidentiality covenant executed pursuant to Section 8.10.
8.2.4 Equitable Relief. Bechtel acknowledges that the damages that
Webvan will incur as a consequence of any breach by Bechtel or any Subcontractor
or Subconsultant of the provisions of this Section 8.2, of Section 8.10 or of
any confidentiality covenant executed pursuant to Section 8.10 of this Agreement
will be irreparable and may not readily be capable of calculation. Accordingly,
to the fullest extent permissible by Law and without limiting any other rights
or remedies that may be available to Webvan pursuant to this Contract, Webvan
shall be entitled, as a matter of right, to specific performance and other
injunctive relief to protect Webvan's interests, including but not limited to
preliminary and permanent injunctive relief. Bechtel hereby consents to the
issuance by any court of competent jurisdiction of both temporary and permanent
injunctions restraining and prohibiting Bechtel and its agents and
representatives, from violating any of the provisions of this Section 8.2, of
Section 8.10 or of any other confidentiality covenant executed pursuant to
Section 8.10. Bechtel shall cause each of its Subcontractors and Subconsultants
to consent to the foregoing injunctive relief and shall provide Webvan with
copies of such consents upon Webvan's request.
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8.3 Public Releases. Bechtel shall not make public announcements or publicity
releases related to the Project without Webvan's prior written approval,
including, without limitation, Webvan's prior written approval of the form and
content of any such announcements or releases, in both cases such approval not
to be unreasonably withheld.
8.4 Time of Performance. If the date for any payment under this Contract
falls on a Saturday, Sunday or legal holiday, payment shall be made as specified
on the next following business day.
8.5 Independent Contractor. Bechtel is and at all times shall be an
independent contractor with respect to the Services and the Project. Neither
this Contract nor any of the Contract Documents nor any course of dealing or
practice shall be interpreted as creating, or shall be deemed to create, any
employer-employee, principal-agent, partnership, joint venture or other
relationship between Webvan and Bechtel. Bechtel has and hereby retains the
right to exercise full control over the employment, direction and discharge of
all persons assisting it in the execution of the Services. Bechtel shall be
solely responsible for all matters relating to payment of its employees,
including compliance with Social Security, withholding and all other regulations
governing such matters. Bechtel shall be solely and fully responsible for its
own acts and those of its subordinates, employees, Subconsultants and
Subcontractors during the term of this Contract.
8.6 Prior Work. Any Services, including all engineering and design work
performed by Bechtel or its Subconsultants and Subcontractors for the Project
prior to the Effective Date shall be and hereby are incorporated into this
Contract and covered by the conditions and requirements set forth herein.
8.7 Notices. All notices required or permitted to be given hereunder shall be
in writing, and shall be deemed duly delivered, received and given, (i) upon
personal delivery to the address set forth below, or to such other address
designated by five (5) days' prior written notice to the other party, (ii) one
(1) business day following delivery to an overnight courier guaranteeing next
business day delivery to the address set forth below, or to such other address
designated by five (5) days' prior written notice to the other party, or (iii)
immediately upon the next business day after confirmation of facsimile receipt
at the fax number set forth below or to such other fax number designated by five
(5) days' written notice to the other party. The address of the parties for the
purpose hereof shall respectively be:
For Webvan: Webvan Group, Inc.
1241 E. Hillsdale Boulevard, Suite 210
Foster City, California 94404
Attention: Gary B. Dahl
Facsimile: 650-524-4801
For Bechtel: Bechtel Corporation
50 Beale Street
San Francisco, California 94119-3965
Attention: Thomas R. McKinney
Facsimile: 415-768-5253
8.8 Successors and Assigns. This Contract calls for the personal services of
Bechtel and, therefore, Bechtel has no right to assign, delegate or transfer,
and shall not assign, delegate or transfer, any right or obligation under this
Contract (including Bechtel's right to payments). Webvan may assign this
Contract to any person or entity controlled by, under common control with, or
which controls Webvan or to any
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lender on all or any portion of the Project, or to any entity or entities which
succeed to Webvan's interest in any of the Project, without Bechtel's consent,
or to any other persons or entities with Bechtel's consent, which consent shall
not be unreasonably withheld. Webvan shall promptly notify Bechtel of any such
assignment or transfer. Subject to the foregoing, this Contract shall extend to,
be binding upon and inure to the benefit of, the respective heirs, executors,
administrators, successors and assigns of Webvan and Bechtel.
8.9 Occupancy and Use of DC Project Work Prior to Completion. Webvan shall
have the right to occupy any DC Property or use any portion of the DC Project
work prior to Substantial Completion thereof. Unless otherwise agreed upon,
partial occupancy or use of a portion or portions of the DC Project work shall
not constitute acceptance of work not complying with the requirements of the
Contract Documents.
8.10 Confidentiality. Bechtel shall keep, and shall require all Subcontractors
and Subconsultants to keep, confidential all "Confidential Information" as
defined in and subject to the terms of the Confidentiality and Nondisclosure
Agreement attached hereto as Appendix 8.10 and made a part hereof.
8.11 Entire Agreement; Amendments; Survival of Provisions. This Contract
constitutes the entire agreement between the parties hereto relating to the
subject matter hereof and supersedes any previous agreements or understandings.
This Contract may be amended only by a written instrument signed by both Webvan
and Bechtel. All provisions of this Contract shall survive the termination or
expiration of this Contract.
8.12 Effective Date. The "EFFECTIVE DATE" of this Contract shall be the date
by which this Contract has been executed by the parties, as indicated opposite
each party's respective signature at the end of this Contract, provided that the
executed Contract has been mutually delivered. If the parties do not execute
this Contract on the same date, the Effective Date shall be the date on which
the second party delivers the fully executed Contract to the other party.
8.13 No Waiver. No term or condition of this Contract may be waived except by
an instrument duly executed by the waiving party. No delay or failure by any
party in exercising any of its rights, remedies, powers or privileges under this
Contract and no custom, practice or course of dealing between or among any of
such parties or any other person shall be deemed a waiver by such party of any
such rights, remedies, powers or privileges, even if such delay or failure is
continuous or repeated. No single or partial exercise of any right, remedy,
power or privilege shall preclude any other or further exercise thereof by any
such party or the exercise of any other right, remedy, power or privilege by
such party, including, without limitation, the right of such party subsequently
to demand strict compliance with the terms and conditions of this Contract.
8.14 Bechtel's Representations and Warranties. Bechtel hereby represents and
warrants to Webvan that it is legally empowered to provide all of the Services
required by this Contract in the states in which the DC Projects are and will be
located and the states in which all Services will be performed. At all times
during the term of this Contract, Bechtel shall, at its sole cost and expense,
keep in full force and effect all professional and business permits, licenses
and approvals affecting Bechtel's ability to perform the Services and otherwise
necessary and appropriate to enable Bechtel to perform this Contract, including,
without limitation, all professional licenses and qualifications of any
individual employees of Bechtel providing services under this Contract or any
other Contract Documents. The person executing this Contract on behalf of
Bechtel represents that this Contract is binding and enforceable against Bechtel
in accordance with its terms, and that no other signature of any party is
necessary to make this Contract
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binding on and enforceable against Bechtel. Bechtel has made these
representations and warranties to Webvan knowing that Webvan is relying to a
material extent on said representations and warranties in entering into this
Contract.
8.15 Exposure to Hazardous Materials. Webvan shall have no liability to
Bechtel, its Subcontractors or Subconsultants or any of their respective
employees or agents with respect to any exposure to asbestos, PCB's or hazardous
materials on any DC Property or elsewhere. Bechtel shall cause its
Subcontractors and Subconsultants, and the respective employees and agents of
Bechtel and all Subcontractors and Subconsultants, to take all reasonable
precautions necessary to prevent their exposure to any asbestos, PCB's and other
hazardous materials disclosed by Webvan or otherwise known by Bechtel as being
present at a DC Property. In addition, Webvan and Bechtel shall each have the
rights and obligations set forth in Section 8.1 of the General Conditions.
8.16 Indemnification. To the fullest extent permitted by Law, Bechtel shall
indemnify, defend (with counsel reasonably acceptable to Webvan) upon demand,
protect and hold harmless Webvan, its subsidiaries and affiliates and their
respective officers, directors, shareholders, agents, consultants and employees
from and against any and all causes of action, demands, losses, violations,
infringements of Law, patent, license or trademark, costs, attorneys' and
experts' fees, claims, damages, and liabilities of every kind and nature arising
out of, alleged to have arisen out of, or resulting in any way from, the
Services to be performed under this Contract by Bechtel and its Subcontractors
and Subconsultants which are the result of any willful misconduct, negligent act
or omission, or breach of any obligation or representation under this Contract
or any of the other Contract Documents, by Bechtel or any of its Subcontractors
or Subconsultants or material suppliers, or by the respective agents, officers,
employees, representatives, contractors or subconsultants of any of them. The
foregoing notwithstanding: (i) Bechtel's obligations to indemnify and hold
Webvan and its employees harmless shall in no event apply to the portion of any
claim which is due to the negligence or willful misconduct of Webvan, its
subsidiaries or affiliates or their respective officers, directors,
shareholders, agents or employees; (ii) Bechtel shall have no obligation to
protect, indemnify, defend or hold harmless any consultant of Webvan if any
claim is due in part to the negligence or willful misconduct of such consultant;
and (iii) Bechtel's foregoing indemnity obligation shall not apply with respect
to infringements of patents by any Subcontractor that Webvan has specified as
the only subcontractor that Bechtel is authorized to engage to perform
particular Services. Acceptance of any Services by Webvan shall not operate as a
waiver of the foregoing indemnification, and the foregoing indemnification shall
survive the completion of the Project and the termination of this Contract. All
of the foregoing indemnification shall (a) be in full force and effect and apply
at all times during the progress of the Services and notwithstanding the
Substantial Completion of any DC Project, and the filing of a notice of
completion or notice of similar import, or the termination of this Contract, and
at all times thereafter, (b) not be deemed limited in any way by the amount or
type of any insurance coverage that the Bechtel is required to maintain
hereunder, (c) not be limited by any limitation on amount or type of damages,
compensation or benefits payable by or for Bechtel or a Subcontractor or
Subconsultant under workers' or workmen's compensation acts, disability benefit
acts or other employee benefit acts, and (d) shall be subject to the express
limitations of liability and releases from liability set forth elsewhere in this
Contract. Any claim by Webvan for indemnification under this Section 8.16 with
respect to any particular DC Project must be brought within [*] years after the
date of Substantial Completion of such DC Project.
8.17 Limitation of Rights and Remedies.
8.17.1 Notwithstanding Section 6.4 and Section 8.16, (a) the aggregate
monetary liability of Bechtel arising from Bechtel's performance or
non-performance of Services under this Contract shall not
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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exceed the sum of (i) [*] Dollars $([*]) plus (ii) all amounts recoverable under
policies of insurance required to be maintained by Bechtel under this Contract
and all amounts that would have been recoverable under such policies of
insurance if they had been maintained by Bechtel as required under this contract
and (b) neither Bechtel nor any of its Subconsultants or Subcontractors shall be
liable to Webvan, and Webvan hereby releases Bechtel and its Subconsultants and
Subcontractors from any liability, for consequential loss or damages, which
shall include Webvan's loss of use, loss of profits or revenues, cost of
capital, loss of goodwill, or claims of Webvan's customers as a result of
Bechtel's failure to perform in accordance with this Contract.
8.17.2 The limitations of liability and releases from liability under
Section 8.17.1 shall not apply to any losses, costs, claims, liabilities or
damages incurred by Webvan or any of its subsidiaries or affiliates or any of
their respective officers, directors, agents, shareholders or representatives
arising from or relating in any manner to (i) any intentional violation of
Section 8.2 (entitled "Ownership of Data"), Section 8.10 (entitled
"Confidentiality" or any confidentiality agreement executed thereunder), or
Section 8.25 (entitled "Bechtel Exclusivity") by any corporate officer of
Bechtel or any of its subsidiaries or affiliates, or by Bechtel's Program
Director for the Project or any of his direct reports, or (ii) any claims
brought by third parties.
8.17.3 The foregoing limitations of liability and releases from liability
are personal to Bechtel and its Subcontractors and Subconsultants and any of its
or their subsidiaries or affiliates and their respective officers, directors,
shareholders and agents and shall not apply to any other person or entity. No
acts, omissions, reviews, approvals or other actions hereunder by Bechtel shall
give rise to any claim by any other party against Webvan or limit the liability
of any party to Webvan. Except as expressly provided to the contrary in this
Contract, no provision of this Contract is intended to, and no provision of this
Contract shall, limit the rights or remedies of Webvan pursuant to any other
provisions of this Contract. To the maximum extent permitted by law, however,
but no further, the limitations on damages, the releases from liability, the
limitations of liability, and the exclusive remedies provisions expressly
provided in this Contract shall apply even in the event of the fault, negligence
(in whole or in part), strict liability or breach of contract of the party who
is released or whose liability is limited by such provisions of this Contract
and shall extend to such party's officers, directors, employees and agents. The
remedies provided in this Contract are exclusive, except that Webvan shall in
addition have the right to obtain specific performance and all other injunctive
relief that may be available. Bechtel disclaims, and Webvan waives, any implied
warranties of merchantability or fitness for a particular purpose with respect
to any equipment or other personal property procured by Bechtel and provided to
Webvan as part of any DC Project.
8.18 Governing Law. The validity, effect, construction, performance and
enforcement of this Contract and the rights and obligations of the parties
hereunder shall be governed in all respects by the laws of the State of
California without reference to conflicts of law, except that the enforcement of
remedies against any DC Property shall be governed by the law of the state where
the DC Property is located. Venue for the resolution of any disputes between
Bechtel and Webvan regarding the Project shall be within the courts of the State
of California.
8.19 Counterparts. This Contract may be executed in one or more counterparts.
All counterparts so executed shall constitute one agreement, binding on all
parties, even though all parties are not signatory to the same counterpart.
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
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<PAGE> 45
8.20 Construction. Each party has reviewed and revised this Contract. The
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not apply to the interpretation of
this Contract.
8.21 Severability. If all of any portion of any provision of this Contract as
applied to either party or to any circumstance shall be ruled by a court of
competent jurisdiction to be void or unenforceable for any reason, the same
shall in no way affect (to the maximum extent permissible by Law) that provision
or the remaining portions of that provision as applied to any parties or
circumstances or any other provision of this Contract or the validity or
enforceability of this Contract as a whole, all of which shall be enforced to
the greatest extent permitted by Law.
8.22 Headings. The headings used herein are for purposes of convenience only
and shall not be used in construing the provisions hereof.
8.23 Cooperation with Lender and Landlords. Bechtel shall at all times
cooperate with any lender and/or landlord on the Project, any DC Property, any
DC Project, or any portion thereof, including, without limitation, executing any
agreements, documents, acknowledgments, certificates and/or amendments to this
Contract as Webvan and/or such lender or landlord may reasonably require in
connection with any sale or financing, whether construction or permanent, for
the Project, any DC Property, or any portion thereof, as further provided in the
General Conditions. In no event, however, shall Bechtel be required to execute
any such document or amendment which would adversely affect Bechtel's
limitations of liability or other rights under this Contract, unless agreed to
by Bechtel in its sole discretion.
8.24 Attorneys' Fees and Costs. In any action arising under or in connection
with this Contract, the prevailing party in such action shall be awarded, in
addition to other legal or equitable relief, its reasonable costs and expenses
and reasonable attorneys' fees.
8.25 Bechtel Exclusivity.
8.25.1 Notwithstanding any term or condition of this Contract or any
Contract Documents to the contrary, neither Bechtel nor any entity controlling,
controlled by, or under common control with Bechtel shall, for the Exclusive
Period, provide any goods or services substantially similar to the Services
described in this Contract for distribution or delivery facilities of any person
or entity in the business (a "RELEVANT BUSINESS") of either (a) soliciting and
transacting direct consumer sales via the Internet and delivering (whether using
its own transportation or via outsourcing to a third party) grocery, drugstore,
books, music and/or general merchandise to customers or (b) delivering (whether
using its own transportation or via outsourcing to a third party) grocery,
drugstore, books, music and/or general merchandise to customers fulfilling
orders or sales generated over the Internet. For purposes of this Section 8.25,
the "EXCLUSIVE PERIOD" shall commence on the Effective Date and shall continue
through and including the fifth (5th) anniversary of the Effective Date;
provided, however, that (i) if Webvan terminates this Contract in its entirety
pursuant to Section 6.2 before Bechtel provides Construction Services for ten
(10) DC Projects, then the Exclusive Period shall commence on the Effective Date
and shall continue until fifteen (15) months after the date of such termination,
(ii) if Webvan executes contracts with one or more contractors other than
Bechtel to develop seventeen (17) or more of the first twenty-six (26) DCs
(excluding the existing Oakland, California and Atlanta, Georgia DCs) to be
developed after the Effective Date, then the Exclusive Period shall commence on
the Effective Date and shall continue until fifteen (15) months after the date
that Webvan executes such a contract for the development of such seventeenth
(17th) DC by a contractor other than Bechtel; and (iii) if Webvan and
44
<PAGE> 46
its successors and assigns voluntarily cease for more than three (3) months to
conduct any Relevant Business, then the Exclusive Period shall commence on the
Effective Date and shall continue through and including the date that Webvan
and such successors and assigns have all voluntarily ceased to conduct any
Relevant Business for such period.
8.25.2 Webvan acknowledges Webvan's intent to engage Bechtel in the
future to provide Services similar to those described in this Contract for
Webvan DC's outside the United States of America ("USA"). Bechtel acknowledges,
however, that this Contract creates no obligation of Webvan to engage Bechtel
for such services outside the USA. If, therefore, Webvan has not, by the third
(3rd) anniversary of the Effective Date, executed a contract with Bechtel to
provide services similar to the Services described herein for the development
of a Webvan DC outside the USA, then, after such third (3rd) anniversary of the
Effective Date, Bechtel's obligations under Section 8.25.1 shall only apply
with respect to Bechtel's provision of goods or services within the USA. In
addition, if during the three (3)-year term of this contract Webvan executes a
contract with a contractor other than Bechtel for the development of a DC
outside the USA, then, as of the date that Webvan executes such a contract,
Bechtel's obligations under Section 8.25.1 shall no longer apply with respect
to Bechtel's provision of goods or services in the country where such DC is
located.
8.25.3 Bechtel acknowledges that the damages that Webvan will incur as a
consequence of any breach by Bechtel of the provisions of this Section 8.25 will
be irreparable and may not readily be capable of calculation. Accordingly, to
the fullest extent permissible by Law and without limiting any other rights or
remedies that may be available to Webvan pursuant to this Contract, Bechtel
hereby consents to the issuance by any court of competent jurisdiction following
any breach of this Section 8.25 by Bechtel of both temporary and permanent
injunctions restraining and prohibiting Bechtel and its agents and
representatives from violating any of the provisions of this Section 8.25.
8.26 Days. Whenever used in this Contract, the word "days" shall refer to
calendar days except where otherwise expressly provided to the contrary.
9.0 APPENDICES
9.1 The following Appendices are incorporated into this Contract by this
reference:
<TABLE>
<S> <C>
Appendix 2.0 Notice to Proceed
Appendix 2.5A Request to Solicit Bids
Appendix 2.5 General Conditions
Appendix 2.5.3 General Work Requirements
Appendix 5.1.2 Unit Rate Schedule
Appendix 5.8 Warrant
Appendix 7.1.1 Insurance Requirements
Appendix 8.10 Confidentiality and Nondisclosure Agreement
</TABLE>
45
<PAGE> 47
In the event of any conflict or inconsistency between the terms
and conditions of this Contract form and the terms and conditions of any of the
appendices attached hereto, the terms and conditions of this Contract form shall
govern and control.
IN WITNESS WHEREOF, the parties hereto have executed this Contract to be
effective on the Effective Date provided in Section 8.12.
WEBVAN GROUP, INC.
By:/S/ LOUIS H. BORDERS
---------------------------------------
Print
Name:/S/ LOUIS BORDERS
-------------------------------------
Title: CHAIRMAN & CEO
------------------------------------
Date: 7/8/99
-------------------------------------
BECHTEL CORPORATION
By: /S/ D. DONLY
---------------------------------------
Print
Name: D. DONLY
-------------------------------------
Title: PRES - N.A. REGION
------------------------------------
Date: 8 JULY 99
-------------------------------------
46
<PAGE> 48
SCHEDULE OF DEFINITIONS
<TABLE>
<CAPTION>
Defined Term Section in Which Defined
- ------------ ------------------------
<S> <C>
APPLICATION FOR PAYMENT..............................................Section 5.2.1
APPROVED COST OF THE WORK............................................Section 2.5.1
BASE CONTINGENCY.....................................................Section 2.5.1.2
BECHTEL BACKGROUND DATA..............................................Section 8.2.2.2
BECHTEL FEE..........................................................Section 2.5.2
BUDGETED COST........................................................Section 2.5.1
CERTIFICATE OF OCCUPANCY.............................................Section 5.2.2.9
CHANGE ORDER.........................................................Section 2.5.4.1
CHANGE ORDER REQUEST.................................................Section 2.5.4.1
CHANGE ORDER WORK....................................................Section 2.5.4.2
CONSTRUCTION DOCUMENTS...............................................Section 2.3.3.1
CONSTRUCTION SERVICES................................................Section 3.1
CONSULTANT SERVICES..................................................Section 3.1
CONTINGENCY AMOUNT...................................................Section 2.5.1.2
CONTRACT DOCUMENTS...................................................Section 2.5
CONTRACT TIME........................................................Section 3.2.2
COST INCENTIVE AMOUNT................................................Section 5.6.1
COST INCENTIVE CAP...................................................Section 5.6.1
COST OF THE WORK.....................................................Section 2.5.5
COST SAVINGS.........................................................Section 5.6.1
</TABLE>
-i-
<PAGE> 49
<TABLE>
<CAPTION>
Defined Term Section in Which Defined
- ------------ ------------------------
<S> <C>
DC PROJECT...........................................................Section 1.1
DC PROPERTY..........................................................Section 5.2.2.8
DC'S.................................................................Section 1.1
DATA.................................................................Section 8.2.1
DEFAULT RATE.........................................................Section 2.3.4.7
DESIGN DEVELOPMENT DOCUMENTS.........................................Section 2.3.2.1
DESIGN SERVICES......................................................Section 3.1
DEVELOPED DATA.......................................................Section 8.2.3
DEVELOPMENT..........................................................Section 1.1
DEVELOPMENT PLAN.....................................................Section 2.1
EFFECTIVE DATE.......................................................Section 8.12
EQUIPMENT SCHEDULE...................................................Section 2.5.5.4
EVENT OF DEFAULT.....................................................Section 6.3
EXCESS CONTINGENCY...................................................Section 2.5.1.2
EXCLUSIVE PERIOD.....................................................Section 8.25.1
EXCUSABLE DELAY......................................................Section 2.5.13
FF&E.................................................................Section 2.6
FINAL COMPLETION.....................................................Section 3.2
FINAL PAYMENT........................................................Section 5.2.2.9
GENERAL CONDITIONS...................................................Section 2.5
GENERAL WORK REQUIREMENTS AMOUNT.....................................Section 2.5.3
</TABLE>
-ii-
<PAGE> 50
<TABLE>
<CAPTION>
Defined Term Section in Which Defined
- ------------ ------------------------
<S> <C>
IP RIGHTS............................................................Section 8.2.2.1
JAMS.................................................................Section 2.5.12.2
LAWS.................................................................Section 2.3.4.1
LIQUIDATED DAMAGES AMOUNT............................................Section 6.4.2
MECHANICS' LIENS.....................................................Section 4.2.2
NOTICE TO PROCEED....................................................Section 2.0
ON TIME/ON BUDGET....................................................Section 5.8
OPERATING EQUIPMENT..................................................Section 1.1
OUTSTANDING AMOUNT...................................................Section 6.1.2
PAST-DUE AMOUNT......................................................Section 6.1.2
PAST-DUE NOTICE......................................................Section 6.1.2
PERFORMANCE STANDARDS................................................Section 1.2
PRIVATE RESTRICTIONS.................................................Section 2.3.4.1
PRODUCT..............................................................Section 8.1
PROJECT..............................................................Section 1.1
PROJECT BUDGET.......................................................Section 2.3.1.2
PROJECT SCHEDULE.....................................................Section 2.3.4.5
PUNCH LIST...........................................................Section 3.2
RECOVERABLE COSTS....................................................Section 5.1.2
RELEVANT BUSINESS....................................................Section 8.25.1
REQUEST TO SOLICIT BIDS..............................................Section 2.5
</TABLE>
-iii-
<PAGE> 51
<TABLE>
<CAPTION>
Defined Term Section in Which Defined
- ------------ ------------------------
<S> <C>
RISK OF LOSS.........................................................Section 7.3
SCHEDULED DATE.......................................................Section 5.7
SCHEDULE OF VALUES...................................................Section 2.5.9
SCHEMATIC DESIGN DOCUMENTS...........................................Section 2.3.1.1
SERVICES.............................................................Section 2.0
SUBCONSULTANTS.......................................................Section 2.3.4.2
SUBCONTRACTORS.......................................................Section 2.5.8
SUBCONTRACTS.........................................................Section 2.5.8
SUBSTANTIAL COMPLETION...............................................Section 2.5
TIME INCENTIVE AMOUNT................................................Section 5.7
USA..................................................................Section 8.25.2
WARRANT..............................................................Section 5.8
WEBVAN DATA..........................................................Section 8.2.2.1
WEBVAN SYSTEMS.......................................................Section 1.2
YEAR 2000 COMPLIANT..................................................Section 8.1
</TABLE>
-iv-
<PAGE> 52
APPENDIX 2.0
NOTICE TO PROCEED
This "Notice to Proceed" is made and entered into as of this ___
day of ___________, _______, pursuant to the provisions of the Contract for
Turnkey Design/Build Construction and Related Services (the "Contract") between
WEBVAN GROUP, INC. ("Webvan") and BECHTEL CORPORATION ("Bechtel") dated as of
July 8, 1999, concerning the DC Project located at
__________________________________ _______________________________(the "DC
Project"). All capitalized terms used, but not defined herein shall have the
meanings given to them in the Contract.
Bechtel is hereby directed to furnish all labor, materials,
supervision, tools, equipment and supplies necessary to perform, and Bechtel
hereby agrees to perform, all of the Services selected below for the DC Project
in accordance with the terms and conditions of the Contract and this Notice to
Proceed.
___ I. Work Authorization for Consultant Services.
___ A. Site Evaluation and Selection.
1. Description of Services:
-------------------------------
-------------------------------------------------------------
2. Total not-to-exceed Recoverable Costs: $ .
------------
3. Target completion date: .
----------------
___ B. Procurement.
1. Description of FF&E:
--------------------------------------
-------------------------------------------------------------
2. Total not-to-exceed Recoverable Costs: $ .
------------
3. Target completion date: .
------------------
___ C. Training.
1. Description of Services:
----------------------------------
-------------------------------------------------------------
2. Total not-to-exceed Recoverable Costs: $ .
------------
3. Target completion date: .
------------------
___ II. Work Authorization for Design Services.
Bechtel shall provide the following Design Services in accordance with
the Design Services Budget attached hereto as Exhibit A and made a part hereof:
___ A. Program Management.
<PAGE> 53
1. Estimated Recoverable Costs: $____________.
(per attached Design Services Budget)
2. Target completion date: ______________.
___ B. Schematic Design Services.
1. Estimated Recoverable Costs: $____________.
(per attached Design Services Budget)
2. Target completion date: ______________.
___ C. Design Development Services.
1. Estimated Recoverable Costs: $____________.
(per attached Design Services Budget)
2. Target completion date: ______________.
___ D. Construction Documents Services.
1. Estimated Recoverable Costs: $____________.
(per attached Design Services Budget)
2. Target completion date: ______________.
___ III. Work Authorization for Construction Services.
A. Scope of Work. All work (the "Work") shown on, described in or
reasonably inferable from the following documents: the Construction Documents
for the DC Project, including the drawings and specifications (including,
without limitation, those relating to Operating Equipment), dated ____________,
prepared by ________________________________.
B. Completion of the Work. Bechtel shall complete the Work in
accordance with the approved Project Schedule attached hereto as Exhibit B and
made a part hereof.
C. Budgeted Cost. The Budgeted Cost for the Work is the sum of the
following:
1. Approved Cost of the Work:
(a) Subcontractor Bids: $__________
(b) General Work
Requirements Amount: $__________
Total Approved Cost of the Work $_____________
2. Contingency Amount:
(a) Base Contingency: $___________
(b) Excess Contingency: $___________
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<PAGE> 54
Total Contingency Amount $______________
3. Total Budgeted Cost $______________
(Approved Cost of the Work plus Contingency Amount)
Any costs incurred by Bechtel in performing the Work in excess of the Total
Budgeted Cost shall be paid out of the Bechtel's own funds, and Bechtel shall
have no claim against Webvan on account thereof.
D. Scheduled Date for Substantial Completion: _____________________
(per attached Project Schedule)
E. Target Date for Final Completion: _______________________________.
(per attached Project Schedule)
THIS NOTICE TO PROCEED is made and entered into as of the date first
above written.
WEBVAN GROUP, INC.
By:_____________________________________
Print
Name:___________________________________
Title:__________________________________
Date:___________________________________
BECHTEL CORPORATION
By:______________________________________
Print
Name:____________________________________
Title:___________________________________
Date:____________________________________
3
<PAGE> 55
EXHIBIT A
Design Services Budget
[To be attached]
4
<PAGE> 56
EXHIBIT B
Project Schedule
[To be attached]
5
<PAGE> 57
APPENDIX 2.5A
REQUEST TO SOLICIT BIDS
This "Request to Solicit Bids" is made pursuant to Section 2.5 of that
certain Contract for Turnkey Design/Build Construction and Related Services (the
"Contract") dated July 8, 1999, between WEBVAN GROUP, INC. ("Webvan") and
BECHTEL CORPORATION ("Bechtel"). All capitalized terms used, but not defined,
herein shall have the meanings given to them in the Contract.
Webvan hereby requests Bechtel to solicit bids from Subcontractors to
perform, in accordance with the Contract, all work shown on, described in, or
reasonably inferable from the Construction Documents for the DC Project located
at ______________________________________, including the drawings and
specifications (including, without limitation, those relating to Operating
Equipment), dated ______________, prepared by
_______________________________________.
This Request to Solicit Bids has been executed as of the date indicated
below.
WEBVAN GROUP, INC.
By:_____________________________________
Print
Name:___________________________________
Title:__________________________________
Date:___________________________________
<PAGE> 58
APPENDIX 2.5
GENERAL CONDITIONS FOR CONSTRUCTION SERVICES
ARTICLE 1
GENERAL PROVISIONS
1.1 BASIC DEFINITIONS. Unless otherwise provided in these "GENERAL
CONDITIONS", the capitalized terms used herein shall have the meanings ascribed
to them in Contract for Turnkey Design/Build Construction and Related Services
to which this appendix is attached.
1.2 EXECUTION, CORRELATION AND INTENT.
1.2.1 The Contract Documents for a DC Project shall not be
construed to create a contractual relationship of any kind (i) for the DC
Project between Webvan and any Subcontractor or Subconsultant, or (ii) between
any persons or entities other than Webvan and Bechtel. Bechtel is an independent
contractor of Webvan. Bechtel is not the employee, agent, joint venturer, or
partner of Webvan. Bechtel shall have the sole responsibility for performance
under any Subcontract or Subconsultant agreement entered into by Bechtel with
respect to a DC Project.
1.2.2 Intentionally omitted.
1.2.3 The intent of the Contract Documents is to include all
items necessary for the proper execution and completion of the DC Project work
by Bechtel. The Contract Documents are complementary, and what is required by
one shall be as binding as if required by all. Conflicts or discrepancies among
the Contract Documents shall be resolved in the following order of priority:
1.2.3.1 Contract;
1.2.3.2 Notices to Proceed;
1.2.3.3 Supplementary Conditions, if any;
1.2.3.4 The General Conditions;
1.2.3.5 Construction Documents, including all applicable
drawings and specifications (drawings govern specifications for quantity and
location, and specifications govern drawings for quality and performance; in the
event of ambiguity in quantity or quality, the greater quantity and the better
quality shall govern);
1.2.3.6 Figured dimensions govern scale dimensions, and
large scale drawings govern small scale drawings; and
1.2.3.7 Approved revisions and addenda take precedence over
the original documents, and those of later date take precedence over those of
earlier date.
1.2.4 Organization of the specifications into divisions, sections
and articles, and arrangement of drawings, shall not control Bechtel in dividing
any DC Project work among
1
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Subcontractors or Subconsultants or in establishing the extent of any DC Project
work to be performed by any trade. Bechtel represents that the Subcontractors
and Subconsultants engaged or to be engaged by it are and will be familiar with
the requirements for performance by them of their obligations.
1.2.5 Unless otherwise defined in the Contract Documents for a DC
Project, words which have well-known technical or construction industry meanings
are used in the Contract Documents in accordance with such recognized meanings.
1.3 OWNERSHIP AND USE OF DRAWINGS AND SPECIFICATIONS AND OTHER
DOCUMENTS. Webvan shall be deemed the owner of all Construction Documents,
drawings and specifications and other documents (including any and all copies
thereof, except that Bechtel may retain one copy for its archive records,
subject to Bechtel's confidentiality and non-disclosure obligations under the
Contract) furnished to Webvan. However, submittal or distribution to meet
official regulatory requirements or for other purposes in connection with a DC
Project is not and shall not be construed as a publication in derogation of
Webvan's copyright or other reserved rights.
ARTICLE 2
OWNER
2.1 DEFINITION. Webvan is the person or entity identified as such in
the Contract. The term "WEBVAN" means Webvan or Webvan's authorized
representative designated by Webvan in writing.
2.2 INFORMATION REQUIRED OF WEBVAN.
2.2.1 Upon receipt of a written request therefor from Bechtel,
information under Webvan's control shall be furnished by Webvan with reasonable
promptness to avoid delay in orderly progress of DC Project work.
2.2.2 Webvan will not have control over or charge of, and will
not be responsible for, the design, construction means, methods, techniques,
sequences or procedures, or for safety precautions and programs in connection
with a DC Project, since those are solely Bechtel's responsibility as provided
in the Contract Documents for such DC Project. Webvan will not be responsible
for Bechtel's failure to carry out any DC Project work in accordance with the
Contract Documents for such DC Project. Webvan will not have control over or
charge of, and will not be responsible for, negligent acts or omissions of
Bechtel, Subcontractors, Subconsultants or their respective agents or employees.
2.3 WEBVAN'S RIGHT TO STOP THE WORK.
2.3.1 If suspension of any DC Project work is warranted by
reason of unforeseen conditions which may adversely affect the quality and/or
progress of such DC Project work if such DC Project work were continued, Webvan
by written notice to Bechtel may do either or both of the following, to the
extent necessary to address such unforeseen conditions: (i) entirely suspend
such DC Project work; or (ii) cause such DC Project work, or portions thereof,
to be partially suspended or delayed, while other portions of such DC Project
work continue on the same or a different schedule as determined by Webvan and
Bechtel. In such event, the Contract Time for the DC Project shall be extended
by such reasonable amount of time as is appropriate as a consequence of the
delay caused by the exercise by Webvan of such remedies. Bechtel shall take all
reasonable steps to mitigate the effects of such suspension. Any claim by
Bechtel to adjust the Budgeted Cost for such DC Project shall be
2
<PAGE> 60
made in accordance with the applicable provisions of Section 2.5.11 of the
Contract; provided, however, that in no event will Bechtel be entitled to
recover any damages resulting from such a suspension. If Bechtel reasonably
believes that a suspension of any DC Project work is warranted by reason of
unforeseen circumstances which may adversely affect the quality of the DC
Project work if the DC Project work were continued, Bechtel shall immediately
notify Webvan of such belief, but Bechtel shall have no right to suspend such DC
Project work, except with the written consent of Webvan or in the case of an
emergency (in which event Bechtel shall resume work upon cessation of the
emergency).
2.3.2 Notwithstanding any provision of the Contract Documents for
a DC Project to the contrary, if Bechtel fails to correct defective DC Project
work, fails to complete any DC Project work on time, or is in default of its
obligations hereunder or under any other Contract Documents, Webvan may order
Bechtel to stop the DC Project work, or any portion thereof, until the cause for
such order has been eliminated and/or Webvan may pursue its remedies as set
forth in the Contract.
ARTICLE 3
CONTRACTOR
3.1 DEFINITION. Bechtel is the person or entity identified as such in
the Contract and is referred to throughout the Contract Documents as if singular
in number. The term "BECHTEL" means Bechtel or Bechtel's authorized
representative.
3.2 REVIEW OF FIELD CONDITIONS BY BECHTEL.
3.2.1 By its execution of a Notice to Proceed for a DC Project,
Bechtel acknowledges, agrees and represents to Webvan that:
3.2.1.1 Intentionally omitted;
3.2.1.2 Bechtel has inspected the DC Property and has
satisfied itself as to the condition thereof, including, without limitation, all
structural, surface and subsurface conditions which (a) are visible or (b)
reasonably should be known to Bechtel following such review of records, files
and documents relevant to the DC Project in local building, planning and/or
public works departments, and/or the recorder's or other public offices which
Bechtel deems prudent and reasonable in the circumstances, including a review of
all reasonably accessible records, files and documents; provided, however, that
Webvan shall (i) provide Bechtel with a copy of a current title report on the DC
Property (including copies of all matters described therein as exceptions to
title), (ii) satisfy itself to the availability of zoning and land use
entitlements for the DC Project, and (iii) furnish Bechtel with copies of any
inspection and test reports, analyses and studies (including environmental
audits) obtained by Webvan or otherwise in Webvan's possession regarding the DC
Property; and
3.2.1.3 Intentionally omitted.
3.2.2 Bechtel shall exercise special care in executing subsurface
work in proximity of known subsurface utilities, improvements and easements. At
Webvan's request, Bechtel shall make available to Webvan the results of any DC
Property investigation, test borings, analyses, studies or other tests conducted
by or in the possession of Bechtel or any of its agents.
3
<PAGE> 61
3.2.3 For each of the DC Projects, Bechtel shall take field
measurements and verify field conditions and shall carefully compare such field
measurements and conditions and other information known to Bechtel with the
Contract Documents before commencing activities.
3.2.4 Bechtel shall perform all DC Project work in accordance
with the Contract Documents.
3.3 SUPERVISION AND CONSTRUCTION PROCEDURES.
3.3.1 Bechtel shall supervise and direct all DC Project work,
using Bechtel's best skill and attention. Bechtel shall be solely responsible
for and have control over construction means, methods, techniques, sequences and
procedures, and for the design and coordination of all portions of the DC
Project work under each of the Notices to Proceed, including coordination of the
duties of all trades.
3.3.2 Bechtel shall be responsible to Webvan for acts and
omissions of Bechtel's employees, Subcontractors, Subconsultants and their
agents and employees, and other persons performing any portion of the DC Project
work under contracts with Bechtel, in accordance with the terms of the Contract.
3.3.3 Bechtel shall not be relieved of its obligation to perform
any DC Project work in accordance with the applicable Contract Documents either
by tests, inspections or approvals required or performed by persons other than
Bechtel.
3.3.4 Intentionally omitted.
3.3.5 If any DC Project work is required to be inspected or
approved by any public authority, or if Webvan requires as an express
requirement in the Contract Documents or as a Change Order Request that any DC
Project work be inspected or approved, then Bechtel shall cause such inspection
or approval to be performed. No inspection performed or failed to be performed
by Webvan hereunder shall be a waiver of any of Bechtel's obligations hereunder,
or be construed as an approval or acceptance of any DC Project work or any part
thereof.
3.3.6 Bechtel acknowledges that it is Bechtel's responsibility to
hire all personnel for the proper and diligent prosecution of all DC Project
work, and Bechtel shall use its best efforts to maintain labor peace for the
duration of all DC Projects. If a labor dispute occurs on a DC Project that is
within Bechtel's control, then Bechtel shall not be entitled to any increase in
the Budgeted Cost for such DC Project.
3.3.7 Bechtel shall require that all of Bechtel's employees,
Subcontractors, Subconsultants and their agents and employees, and other persons
performing portions of any DC Project work under a contract with Bechtel,
perform the DC Project work in a safe manner and in compliance with all
applicable Laws and Contract Documents.
3.4 LABOR AND MATERIALS.
3.4.1 Bechtel shall provide all labor, materials, equipment,
tools, construction equipment and machinery, water, heat, utilities,
transportation, and other facilities and services necessary for proper execution
and completion of a DC Project, whether temporary or permanent, and whether or
4
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not incorporated or to be incorporated into the DC Project. Bechtel shall check
all materials and labor entering into a DC Project and shall keep full detailed
accounts thereof.
3.4.2 Bechtel shall enforce strict discipline and good order
among Bechtel's employees, Subcontractors, Subconsultants and other persons
carrying out the Contract. Bechtel shall not permit employment of unfit persons
or persons not skilled in tasks assigned to them.
3.4.3 Neither Bechtel nor any Subcontractor or Subconsultant
shall incorporate into a DC Project any materials (i) to which it does not hold
sole and exclusive title, (ii) against which there is any claim by a
manufacturer or other entity, or (iii) which are encumbered by any lien, charge
or security interest other than vendor's liens incurred in the ordinary course
of business prior to Webvan's payment for the materials involved. Bechtel shall
be solely responsible for all materials specified by the Contract Documents
which are delivered to a DC Property. Any materials delivered to a DC Property,
which are not to be used in or incorporated into the DC Project work under the
Contract Documents, shall be forthwith removed from the DC Property and Bechtel
shall be solely responsible for all costs incurred with respect to such
materials.
3.4.4 After a Notice to Proceed for a DC Project has been
executed, Bechtel shall not substitute products in place of those specified in
the Contract Documents for such DC Project without Webvan's prior written
approval, it being understood that any such substitution requests are required
to be submitted by Bechtel prior to the execution of a Notice to Proceed.
3.4.5 By making requests for substitutions based on Subparagraph
3.4.4 above, Bechtel:
3.4.5.1 Represents that Bechtel has personally investigated
the proposed substitute product and determined that it is equal or superior in
all respects to that specified;
3.4.5.2 Represents that Bechtel will provide the same
warranty for the substitute product that Bechtel would for the product
originally specified;
3.4.5.3 Certifies that the cost data presented is complete
and includes all related costs and/or savings under the Notice to Proceed, and
waives all claims for additional costs related to the substitution; and
3.4.5.4 Will coordinate the installation of the accepted
substitute to ensure that the DC Project work will be complete in all respects.
3.5 TAXES. For each of the DC Projects, Bechtel shall pay, subject to
reimbursement under Section 2.5.5.7 of the Contract, sales, use and similar
taxes for any DC Project work or portions thereof provided by Bechtel.
3.6 PERMITS, FEES AND NOTICES.
3.6.1 Bechtel shall obtain all permits, licenses and certificates
of inspection, use and occupancy required for each DC Project. Bechtel shall
furnish Webvan with copies of all permits, licenses and certificates of
inspection, use and occupancy obtained during the course of all DC Project work.
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3.6.2 Bechtel shall comply with and give all notices required by
any Laws bearing on performance of any DC Project work.
3.6.3 Bechtel shall comply with all Laws applicable to the
performance of all DC Project work, including, without limitation, the
employment of labor.
3.6.4 Bechtel shall send all notices, make all necessary
arrangements, and provide all labor and materials, required to protect and
maintain in operation all public utilities serving a DC Property as required for
or affected by DC Project work.
3.7 RESERVED.
3.8 RESERVED.
3.9 BECHTEL'S CONSTRUCTION SCHEDULES.
3.9.1 Bechtel shall include as an exhibit to each Notice to
Proceed for a DC Project a construction schedule for such DC Project work (the
"CONSTRUCTION SCHEDULE") which shall be prepared in consultation with Webvan.
The Construction Schedule shall be updated and revised at appropriate intervals
as required by the DC Project, shall be related to the entire DC Project to the
extent required by the Contract Documents for such DC Project, shall provide for
expeditious and practicable execution of the DC Project work, and shall not
modify or extend critical dates (milestones) without the prior approval of
Webvan in each instance.
3.9.2 Bechtel shall prepare, not later than twenty (20) days
after each date of Subcontractor award for a trade, a shop drawing schedule
which shall include a complete list of suppliers and fabricators, under contract
items to be purchased from the suppliers or fabricators, time required for
fabrication and the scheduled delivery dates for each item to be purchased. As
soon as available, Bechtel shall furnish copies of purchase orders to Webvan.
3.9.3 Bechtel shall prepare any additional reports that Webvan
may reasonably request considering the size, type and complexity of such DC
Project and the DC Project work.
3.9.4 Bechtel shall prepare and keep current a schedule of
submittals which shall be coordinated with Bechtel's Construction Schedule and
allows Webvan reasonable time to review submittals.
3.9.5 Bechtel shall hold weekly progress meetings at the
applicable DC Property, or at such other time and frequency as Webvan reasonably
requests, and Bechtel shall keep written minutes of each such meeting, and
distribute true and correct copies of the same to Webvan promptly following each
such meeting. At each such meeting, progress of the DC Project work shall be
reported in detail with reference to the Construction Schedule.
3.9.6 Bechtel acknowledges that, independent of Bechtel's
schedule requirements, Webvan may retain the services of a scheduling consultant
at Webvan's expense. Bechtel shall cooperate with any such scheduling consultant
at Webvan's direction with regard to the preparation of any DC Project schedule.
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3.10 DOCUMENTS AND SAMPLES AT THE DC PROPERTY.
3.10.1 Bechtel shall maintain at each DC Property, for Webvan, one
(1) record copy of the Construction Documents, drawings and specifications,
addenda, Change Orders and other modifications, in good order and marked
currently to record changes and selections made during construction, and in
addition approved shop drawings, product data, samples and similar required
submittals. These shall be delivered to Webvan upon completion of the DC Project
work. They shall be signed by Bechtel, certifying that they show complete and
accurate "as-built" conditions, stating sizes, kind of materials, vital piping,
conduit locations and similar matters.
3.10.2 Bechtel shall maintain all approved permit drawings in a
manner which allows access to governmental inspectors and other authorized
agencies.
3.1 SHOP DRAWINGS, PRODUCT DATA AND SAMPLES.
3.1.1 Shop drawings are drawings, diagrams, schedules and other
data specially prepared for DC Project work by a Subcontractor to illustrate
some portion of a DC Project.
3.1.2 Product data are illustrations, standard schedules,
performance charts, instructions, brochures, diagrams and other information
furnished by Bechtel to illustrate materials or equipment for some portion of a
DC Project.
3.1.3 Samples are physical examples which illustrate materials,
equipment or workmanship and establish standards by which a DC Project will be
judged.
3.1.4 Shop drawings, product data, samples and similar submittals
are not Contract Documents. The purpose of their submittal is to demonstrate,
for those portions of a DC Project for which submittals are required, the way
Bechtel proposes to conform to the information given and the design concept
expressed in the Contract Documents.
3.1.5 Bechtel shall review and approve and submit to Webvan, if
and when requested by Webvan, shop drawings, product data, samples and similar
submittals required by the Contract Documents with reasonable promptness and in
such sequence as to cause no delay in any DC Project work or in the activities
of Webvan or of separate contractors.
3.1.6 Bechtel shall perform no portion of any DC Project work
requiring submittal and review of shop drawings, product data, samples or
similar submittals until the respective submittal has been approved by Webvan,
if such approval right is provided in any Contract Document or has been
requested by Webvan through a Change Order Request. Such DC Project work shall
be in accordance with approved submittals.
3.1.7 By approving and submitting shop drawings, product data,
samples and similar submittals, Bechtel represents that Bechtel has determined
and verified materials, field measurements and field construction criteria
related thereto, or will do so, and has checked and coordinated the information
contained within such submittals with the requirements of the applicable DC
Project work and Contract Documents.
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3.1.8 Bechtel shall not be relieved of responsibility for
deviations from requirements of the Contract Documents by Bechtel's or Webvan's
approval of shop drawings, product data, samples or similar submittals.
3.1.9 Bechtel shall assemble for Webvan's approval three (3)
complete copies, in loose-leaf binders, of all operating and maintenance data
from all manufacturers whose equipment is or will be installed in each DC
Project. Bechtel shall also prepare a checklist or schedule showing the type of
lubricant to be used at each point of application, and the intervals between
lubrication for each item of equipment.
3.2 USE OF PROPERTY.
3.2.1 Bechtel shall confine operations at each DC Property to
areas permitted by Laws, permits and the Contract Documents and any applicable
lease of such DC Property, and shall not unreasonably burden any DC Property
with materials. In performing any DC Project work, Bechtel shall not cause or
allow water, dust, noxious vapors, noise, or other intrusions to go beyond the
boundaries of the applicable DC Property in any manner that would constitute a
nuisance or a violation of Law.
3.2.2 Bechtel shall assure free, convenient, unencumbered and
direct access to properties neighboring a DC Property for the owners of such
properties and their respective tenants, agents, invitees and guests.
3.3 CUTTING AND PATCHING.
3.3.1 Bechtel shall be responsible for cutting, fitting or
patching required to complete all DC Project work or to make its parts fit
together properly.
3.3.2 Bechtel shall not damage or endanger a portion of any DC
Project work, or fully or partially completed construction of Webvan or separate
contractors, by cutting, patching or otherwise altering such construction, or by
excavation. Bechtel shall not cut or otherwise alter such construction by Webvan
or a separate contractor except with written consent of Webvan and of such
separate contractor, such consent to be timely and not to be unreasonably
withheld. Bechtel shall not unreasonably withhold from Webvan or a separate
contractor consent to cutting or otherwise altering any DC Project work.
3.4 CLEANING UP.
3.4.1 Bechtel shall keep each DC Property and surrounding area
free from accumulation of waste materials or rubbish caused by operations under
the Contract. At completion of a DC Project, Bechtel shall remove from and about
the DC Property waste materials, rubbish, Bechtel's tools, construction
equipment, machinery and surplus materials. Bechtel shall maintain streets and
sidewalks around each DC Property in a clean condition. Bechtel shall remove all
spillage and tracking arising from the performance of the DC Projects from such
areas, and shall establish a regular maintenance program of sweeping and hosing
to minimize accumulation of dirt and dust upon such areas.
3.4.2 If Bechtel fails to clean up as provided in any of the
Contract Documents, Webvan may do so and the cost thereof shall be charged to
Bechtel.
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3.4.3 Bechtel shall be responsible for broken glass, and at the
completion of a DC Project shall replace such damaged or broken glass. Bechtel
shall remove all labels and shall wash and polish both sides of all glass.
3.14.4 In addition to general broom cleaning, Bechtel shall
perform the following final cleaning for all trades:
3.14.4.1 Remove temporary protections;
3.14.4.2 Remove marks, stains, fingerprints and other soil
or dirt from painted, decorated and natural-finished woodwork and other DC
Project work;
3.14.4.3 Remove spots, plaster, soil and paint from ceramic
tile, marble and other finished materials, and wash or wipe clean;
3.14.4.4 Clean fixtures, cabinet work and equipment and
remove stains, paint, dirt and dust, and leave same in undamaged, new condition;
3.14.4.5 Clean aluminum in accordance with recommendations
of the manufacturer; and
3.14.4.6 Clean resilient floors thoroughly with a
well-rinsed mop containing only enough moisture to clean off any surface dirt or
dust, and buff dry by machine to bring the surfaces to sheen.
3.5 ACCESS TO WORK. Bechtel shall provide Webvan access to all DC
Project work in preparation and progress wherever located.
3.6 ROYALTIES AND PATENTS. Bechtel shall pay, subject to reimbursement
under Section 2.5.5.8 of the Contract, all royalties and license fees. Bechtel
shall defend suits or claims for infringement of patent rights (except as
regards Webvan's property IP Rights or infringements by any Subcontractor that
Webvan has specified as the only subcontractor that Bechtel is authorized to
engage to provide the particular services, material or equipment) and shall, in
accordance with Section 8.16 of the Contract, indemnify, defend, protect and
hold harmless Webvan from any claim, damage, loss, cause of action or liability
on account thereof, and shall be responsible for the same when a particular
design, process or product of a particular manufacturer or manufacturers is
required by any of the Contract Documents.
3.7 RESERVED.
3.8 LENDER AND LANDLORD REQUIREMENTS.
3.8.1 Intentionally omitted.
3.8.2 If Webvan's landlord or lender (if any) for a DC Project
shall designate an inspecting architect or other representative, Bechtel shall
cooperate with such inspecting architect or representative to the fullest extent
possible.
3.9 LABOR RELATIONS.
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3.9.1 If Bechtel has entered into any labor agreements covering
work at any DC Property, Bechtel shall comply with all of the terms and
conditions of those labor agreements, including, without limitation, the
procedure contained therein for resolution of jurisdictional disputes. Should
there be picketing on any DC Property and if it becomes necessary for Webvan to
establish a reserved gate for Bechtel's purposes, and Webvan establishes such
gate, Bechtel shall continue the proper performance of the DC Project work,
without interruption or delay, using such gate.
3.9.2 By its execution of the Contract, Bechtel acknowledges that
Webvan has reserved the right to contract with non-union contractors for work on
each of the DC Projects. If Webvan elects to contract with any non-union
contractors for any DC Project work which is not part of the Contract, Bechtel
shall cooperate reasonably with Webvan.
3.9.3 If, notwithstanding the foregoing, it becomes necessary to
establish a separate gate because of labor problems related to Webvan's use of
non-union labor, Webvan shall bear the direct cost of such gate, and any delay
related to the same which is not reasonably within the control of Bechtel shall
be treated as an Excusable Delay in accordance with Section 2.5.13 of the
Contract.
ARTICLE 4
RESERVED
ARTICLE 5
SUBCONTRACTORS
5.1 DEFINITIONS.
5.1.1 The term "SUBCONTRACTOR" is defined in the Contract and is
referred to throughout the Contract Documents as if singular in number and means
a Subcontractor or an authorized representative of the Subcontractor. The term
"Subcontractor" does not include a separate contractor or subcontractors of a
separate contractor. As used herein, a "SEPARATE CONTRACTOR" shall mean a
third-party contractor hired directly by Webvan.
5.1.2 A subcontractor to a Subcontractor (or "SUB-SUBCONTRACTOR")
is included within the definition of "Subcontractor" for purposes of the
Contract Documents.
5.2 AWARD OF SUBCONTRACTS FOR PORTIONS OF THE WORK. Webvan may require
Bechtel to change any Subcontractor, whether or not such Subcontractor was
previously approved by Webvan, for a DC Project and, if at such time Bechtel is
not in default under the Contract, the Budgeted Cost for such DC Project shall
be increased or decreased by the difference in cost, and the Project Schedule
shall be adjusted, if necessary, to take into account any delay, occasioned by
such change.
5.3 SUBCONTRACTUAL RELATIONS.
5.3.1 Each Subcontract shall preserve and protect the rights of
Webvan under the Contract Documents with respect to all DC Project work to be
performed by the Subcontractor so that subcontracting thereof will not prejudice
such rights. Where appropriate, Bechtel shall require each Subcontractor to
enter into similar agreements with its respective Sub-Subcontractors. Bechtel
shall
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make available to each proposed Subcontractor, prior to the execution of
the Subcontract, copies of any Contract Documents to which the Subcontractor
will be bound.
5.3.2 Notwithstanding any provision of Subparagraph 5.3.1, any
part of any DC Project work performed for Bechtel by a Subcontractor shall be
pursuant to a written Subcontract between Bechtel and such Subcontractor (or the
Subcontractor and its sub-subcontractor at any tier), which shall, in addition
to the applicable requirements set forth in the Contract, contain provisions
that:
5.3.2.1 Require that such DC Project work be performed in
strict accordance with the requirements of the Contract Documents, including,
without limitation, the labor and employment provisions thereof;
5.3.2.2 Waive all rights the contracting parties may have
against one another or that the Subcontractor may have against Webvan for
damages caused by fire or other perils covered by the insurance described in the
Contract Documents or which is otherwise covered by property insurance;
5.3.2.3 Require the Subcontractor to carry and maintain
insurance coverage in accordance with the Contract Documents, and to file
certificates of such coverage with Bechtel;
5.3.2.4 Require the Subcontractor to submit certificates
and unconditional waivers of Mechanics' Liens for the DC Project work completed
by it and by its Sub-Subcontractors to the extent included in the current and in
any previous progress payments as a condition to the disbursement of the
progress payment next due and owing;
5.3.2.5 Require submission to Bechtel or Subcontractor, as
the case may be, of Applications for Payment, together with clearly defined
invoices and billings supporting all such applications under each Subcontract to
which Bechtel is a party;
5.3.2.6 Report, as far as practicable, unit prices,
mark-ups for overhead and profit, and any other feasible formula for use in the
determination of costs of changes in the DC Project work;
5.3.2.7 Require each Subcontractor to furnish to Bechtel in
a timely fashion all information necessary for the preparation and submission of
the reports required herein;
5.3.2.8 Require that each Subcontractor continue to perform
under its Subcontract if the Contract is terminated, and permit Webvan to take
an assignment of such Subcontract and request such Subcontractor to continue
such performance;
5.3.2.9 Require each Subcontractor to remove all debris
created by its activities (unless Bechtel has otherwise made reasonable
arrangements for the removal of such debris);
5.3.2.10 Require that each Subcontractor warrant the DC
Project work and materials supplied and/or installed by them in the same manner
and for the same period as is required of Bechtel under the Contract and other
Contract Documents or in such broader manner and for such longer period as may
be required by the Construction Documents, drawings and specifications, in
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which case the additional warranties obtained from such Subcontractor shall be
passed through to Webvan for Webvan's benefit;
5.3.2.11 Require each Subcontractor to coordinate its
respective DC Project work with all adjacent work and all other trades so as to
facilitate the general progress of the overall DC Project, and require each
Subcontractor to afford all other contractors every reasonable opportunity to
install other work and materials; and
5.3.2.12 Require each Subcontractor to perform its portion
of the DC Project work in a safer manner and in compliance with all applicable
Laws.
ARTICLE 6
CONSTRUCTION BY WEBVAN OR BY
SEPARATE CONTRACTORS
6.1 WEBVAN'S RIGHT TO PERFORM CONSTRUCTION AND TO AWARD SEPARATE
CONTRACTS.
6.1.1 During the performance of any DC Project work, Webvan
reserves the right to perform construction or operations related to such DC
Project with Webvan's own forces, and to award separate contracts in connection
with other portions of a DC Project or other construction or operations on any
DC Property under conditions of contract identical or substantially similar to
these General Conditions. If Bechtel claims that delay or additional costs have
been incurred by Bechtel as a result of actions by Webvan's separate
contractors, Bechtel shall make such claims as provided elsewhere in the
Contract Documents for such DC Project.
6.1.2 Webvan, at its option, either (i) shall provide for
coordination of the activities of Webvan's own forces and of each separate
contractor with the DC Project work of Bechtel, who shall cooperate with them,
or (ii) shall require that Bechtel provide for such coordination, which Bechtel
shall perform when directed by Webvan to do so. Bechtel shall participate with
other separate contractors and Webvan in reviewing their respective construction
schedules when directed by Webvan to do so.
6.2 MUTUAL RESPONSIBILITY.
6.2.1 Bechtel shall afford Webvan and separate contractors
reasonable opportunity for introduction and storage of their materials and
equipment and performance of their activities, and shall connect and coordinate
Bechtel's construction and operations with theirs as required by the Contract
Documents.
6.2.2 If any part of Bechtel's DC Project work depends for proper
execution or results upon construction by Webvan or a separate contractor,
Bechtel shall, prior to proceeding with that portion of such DC Project work,
promptly inspect such construction and report to Webvan apparent discrepancies
or defects detected by Bechtel in such other construction that would render it
unsuitable for such proper execution and results. Failure of Bechtel to so
report any detected discrepancies or defects shall preclude Bechtel from making
claims for adjustment to cost or schedule resulting from such discrepancies or
defects.
6.2.3 Intentionally omitted.
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6.2.4 Intentionally omitted.
6.3 WEBVAN'S RIGHT TO CLEAN UP. If a dispute arises among Bechtel,
separate contractors and Webvan as to the responsibility under their respective
contracts for maintaining the applicable DC Property and surrounding area free
from waste materials and rubbish as described in Paragraph 3.14, Webvan may
clean up and allocate the cost among those responsible in Webvan's reasonable
discretion.
ARTICLE 7
PAYMENTS AND COMPLETION
7.1 SUBSTANTIAL COMPLETION.
7.1.1 Intentionally omitted.
7.1.2 When Bechtel considers that a DC Project, or any portion
thereof which Webvan agrees to accept separately, is Substantially Complete,
Bechtel shall prepare and submit to Webvan a comprehensive proposed "PUNCH LIST"
of items to be completed or corrected. Bechtel shall proceed promptly to
complete and correct all items on the Punch List. Webvan's acceptance of such
proposed Punch List or any failure to include an item on such Punch List will
not alter the responsibility of Bechtel to complete all DC Project work in
accordance with the Contract Documents. Upon receipt of Bechtel?s Punch List,
Webvan will make an inspection to determine whether the DC Project work or
designated portion thereof is Substantially Complete. When a DC Project or
designated portion thereof is Substantially Complete, Bechtel shall prepare a
Certificate of Substantial Completion which shall (i) establish the date of
Substantial Completion, and (ii) fix the time within which Bechtel shall finish
all items on the Punch List accompanying the Certificate of Substantial
Completion. Warranties required by the Contract Documents shall commence on the
date of Substantial Completion of the DC Project work or designated portion
thereof unless otherwise provided in the Contract Documents.
7.2 PARTIAL OCCUPANCY OR USE. Immediately prior to partial occupancy
or use of a DC Project, Webvan and Bechtel shall jointly inspect the area to be
occupied in order to determine and record the condition of the DC Project work.
7.3 FINAL COMPLETION AND FINAL PAYMENT.
7.3.1 Upon receipt of written notice that a DC Project is ready
for final inspection and acceptance, and upon receipt of a Final Application for
Payment, Webvan will promptly make such inspection.
7.3.2 Acceptance of Final Payment by Bechtel or a Subcontractor
shall constitute a waiver of claims by that payee except those previously made
in writing and identified by that payee as unsettled at the time of Final
Application for Payment.
7.3.3 Webvan may withhold a reasonable sum from payments
otherwise payable to Bechtel until Bechtel delivers to Webvan record
Construction Documents, drawings and specifications, addenda, Change Orders and
other modifications maintained at the DC Property pursuant to Subparagraph
3.10.1, and the warranties, instructions and maintenance manuals required to be
furnished pursuant to Subparagraph 3.11.9, and a final statement of the Cost of
the Work for the DC
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Project allocated in accordance with the Budgeted Cost for such DC Project and
in a form approved by Webvan's lender, if any.
ARTICLE 8
PROTECTION OF PERSONS AND PROPERTY
8.1 HAZARDOUS MATERIALS.
8.1.1 If there is any conflict between the provisions of this
Paragraph 8.1 and the provisions of Section 8.15 of the Contract, then the
provisions of the Contract shall control.
8.1.2 If during the course of the work Bechtel encounters on any
DC Property material reasonably believed to be a hazardous material not placed
at the DC Property by Bechtel or by any Subcontractor or by any person under the
control of either of them, Bechtel shall immediately stop DC Project work in the
area affected and report the condition to Webvan in writing. The DC Project work
in the affected area shall not thereafter be resumed except by written agreement
of Webvan and Bechtel.
8.1.3 Bechtel shall not be required to perform, without Bechtel's
consent, any DC Project work relating to hazardous materials not placed at the
DC Property by Bechtel or any Subconsultant or Subcontractor or any person under
the control of any of them.
8.1.4 Neither Bechtel nor any Subconsultant or Subcontractor
shall cause or permit, without the prior written consent of Webvan, any
hazardous material to be brought upon any DC Property or used in any DC Project
work, other than reasonable amounts of such materials as are necessary for the
performance of Construction Services. Bechtel and each Subconsultant and
Subcontractor shall comply with all Laws regarding the use, storage,
transportation, exposure of employees to, and disposal of, hazardous materials
brought onto any DC Property by them or any of them. If the foregoing
obligations are breached, or if the presence of a hazardous material brought on
any DC Property by Bechtel or its Subconsultants or Subcontractors results in
contamination of any DC Property, which contamination has not been caused by
Webvan or its separate subcontractors or landlords, then, without limiting any
of Bechtel's other indemnity obligations, Bechtel shall indemnify, defend,
protect and hold Webvan, and it employees, agents, and landlords harmless from
any and all claims which arise as a result of the breach of such obligation or
such contamination. This indemnification of Webvan by Bechtel includes, without
limitation, costs incurred by Webvan in connection with any investigation of any
DC Property, or any clean-up, remedial, removal, or restoration work required by
any federal, state or local governmental authority because of hazardous
materials present in the soil or ground water on or under any DC Property. Any
claim by Webvan for indemnification under this provision shall be subject to the
express limitations of liability set forth in the Contract and must be brought
within four (4) years after the date of Substantial Completion of the applicable
DC Project, and in any event no later than four (4) years after the date of
termination of this Contract.
8.1.5 As used in this Paragraph 8.1 and in the Contract, the term
"HAZARDOUS MATERIAL" shall mean any hazardous or toxic substance or material or
radioactive material which is or becomes regulated by any local, state or
federal governmental authority.
8.2 SAFETY OF PERSONS AND PROPERTY.
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8.2.1 Bechtel shall be responsible for initiating, maintaining,
supervising and enforcing all safety precautions and programs in connection with
the performance of all of the DC Project work, and prior to performing any of
the Construction Services for a DC Project, Bechtel shall prepare a written
safety program manual for each such DC Project (the "BECHTEL SAFETY MANUAL").
Bechtel shall take reasonable precautions, and shall similarly require its
Subcontractors and Subconsultants to take reasonable precautions, for safety of,
and shall provide reasonable protection to prevent damage, injury or loss to:
8.2.1.1 Employees on any DC Project and other persons who
may be affected thereby;
8.2.1.2 Each of the DC Projects and materials and equipment
to be incorporated therein or used in connection therewith, whether in storage
on or off a DC Property, under care, custody or control of Bechtel or the
Subcontractors; and
8.2.1.3 Other property at a DC Property or adjacent
thereto, such as trees, shrubs, lawns, walks, pavements, roadways, structures
and utilities not designated for removal, relocation or replacement in the
course of construction.
8.2.2 Bechtel shall give all notices required by and shall comply
with all applicable Laws bearing on safety of persons or property or their
protection from damage, injury or loss.
8.2.3 Bechtel shall erect and maintain, as required by existing
conditions and performance of a DC Project, reasonable safeguards for safety and
protection of persons and property, including posting danger signs and other
warnings against hazards, promulgating safety regulations and notifying the
owners and users of adjacent sites and utilities.
8.2.4 When use or storage of explosives or other hazardous
materials or equipment or unusual methods are necessary for execution of any DC
Project work, Bechtel shall exercise utmost care and carry on such activities
under supervision of properly qualified personnel.
8.2.5 Intentionally omitted.
8.2.6 Bechtel shall designate responsible and qualified members
of Bechtel's organization whose duties shall include the maintenance of site
health and safety.
8.2.7 Bechtel shall not load or permit any part of the
construction or any DC Property to be loaded so as to endanger its safety.
8.2.8 Bechtel assumes all risk of loss of, or damage to, its
materials or equipment and the materials and equipment of its Subcontractors and
employees due to theft or vandalism regardless of any available insurance. Until
incorporated into a DC Project, all materials ordered by Bechtel or any of its
Subcontractors which are delivered to a DC Property shall be the responsibility
of Bechtel, who shall provide for the care, protection and security of such
materials. Bechtel shall bear the risk of loss with respect to such materials
until they are incorporated into the DC Project work. Bechtel shall furnish any
watchman or other security services reasonably required to protect the DC
Project work.
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8.2.9 Bechtel shall maintain all DC Project work, materials and
equipment free from injury or damage from rain, wind, storms, frost or heat. If
adverse weather makes it impossible to continue operations safely in spite of
weather precautions, Bechtel shall cease such DC Project work and notify Webvan
of such cessation. Bechtel shall not permit open fires on any DC Property.
8.2.10 On each DC Property, Bechtel shall protect adjoining
private or municipal property and shall provide barricades, temporary fences,
and covered walkways required to protect the safety of passers-by, as required
by prudent construction practices, Laws, or the Contract Documents.
8.2.11 In addition to its other obligations pursuant to this
Article 8, Bechtel shall, at its sole cost and expense, promptly repair any
damage or disturbance to walls, utilities, sidewalks, curbs and the property of
third parties (including municipalities) caused by Bechtel or any of its
Subcontractors.
8.3 EMERGENCIES. In an emergency affecting safety of persons or
property, Bechtel shall act, at Bechtel's reasonable discretion, to prevent
threatened damage, injury or loss.
ARTICLE 9
UNCOVERING AND ACCEPTANCE OF WORK
9.1 UNCOVERING OF WORK.
9.1.1 If a portion of any DC Project work is covered contrary to
requirements specifically expressed in the Contract Documents, it must, if
required in writing by Webvan or any governmental authority, be uncovered for
their observation and be replaced, at Bechtel's expense, without change in the
applicable Contract Time. Bechtel will establish a mutually acceptable procedure
for inspection of all DC Project work which will be covered by other DC Project
work.
9.1.2 If a portion of any DC Project work has been covered which
Webvan or any governmental authority has not specifically requested to observe
prior to its being covered, Webvan may request to see such DC Project work and
it shall be uncovered by Bechtel. If such DC Project work is in accordance with
the Contract Documents, costs of uncovering and replacement shall, by
appropriate Change Order, be charged to Webvan. If such DC Project work is not
in accordance with the Contract Documents, Bechtel shall pay such costs if the
condition was caused by Bechtel's failure to perform the work in accordance with
the Contract Documents; if caused by Webvan or a separate contractor of Webvan,
then Webvan shall be responsible for payment of such costs.
9.2 RESERVED.
9.3 ACCEPTANCE OF NONCONFORMING WORK. If Webvan, in its sole
discretion, elects to accept any completed portion of DC Project work which is
not in accordance with the requirements of the Contract Documents for such DC
Project, Webvan may do so instead of requiring its removal and correction, in
which case the Approved Cost of the Work for such DC Project will be reduced as
appropriate and equitable.
ARTICLE 10
MISCELLANEOUS PROVISIONS
10.1 COMPLIANCE WITH LOCAL LAWS.
16
<PAGE> 74
10.1.1 Historical lack of enforcement of any local Law shall not
constitute a waiver of Bechtel's responsibility for compliance with such Law in
a manner consistent with the Contract Documents for a DC Project unless and
until Bechtel has received written consent for the waiver of such compliance
from Webvan and the agency responsible for the local Law enforcement.
10.2 TESTS AND INSPECTIONS.
10.2.1 Tests, inspections and approvals of portions of any DC
Project work required by Contract Documents or by Laws shall be made at an
appropriate time. At Webvan's election, Webvan shall contract with one or more
independent testing or laboratory entities to conduct inspections and/or tests
of the DC Project work. Bechtel shall give Webvan timely notice of when and
where tests and inspections are to be made so Webvan (if so requested by Webvan)
may observe such procedures.
10.2.2 If Webvan or public authorities having jurisdiction
determine that portions of any DC Project work require additional testing,
inspection or approval not included under Subparagraph 10.2.1, Webvan will
instruct Bechtel to make arrangements for such additional testing, inspection or
approval by an entity acceptable to Webvan, and Bechtel shall give timely notice
to Webvan of when and where tests and inspections are to be made so Webvan (if
so requested by Webvan) may observe such procedures.
10.2.3 If such procedures for testing, inspection or approval
under Subparagraphs 10.2.1 and 10.2.2 reveal failure of the portions of any DC
Project work to comply with requirements established by the applicable Contract
Documents, Bechtel shall bear all costs made necessary by such failure including
those of repeated procedures and compensation for any necessary third party
services and expenses, including the cost of re-testing for verification of
compliance if necessary, until the DC Project work in question complies with the
requirements of the Contract Documents.
10.2.4 Required certificates of testing, inspection or approval
shall, unless otherwise required by the Contract Documents, be secured by
Bechtel and promptly delivered to Webvan.
10.2.5 Tests or inspections conducted pursuant to any of the
Contract Documents shall be made promptly to avoid unreasonable delay in the DC
Project work.
10.2.6 Bechtel shall furnish, promptly, all facilities, labor and
materials necessary to permit safe, thorough and convenient inspection and
testing as required in the Contract Documents. Bechtel shall pay any costs of
inspection or testing when material and workmanship is not ready for such
inspection or testing at the time specified in the Contract Documents or
mutually agreed to in advance, unless otherwise agreed to by the parties.
17
<PAGE> 75
APPENDIX 2.5.3
GENERAL WORK REQUIREMENTS
(CATEGORIES)
<TABLE>
<S> <C>
I. JOBSITE ADMINISTRATION
II. SURVEY/LAYOUT
III. TEMPORARY FACILITIES
IV. TEMPORARY UTILITIES
V. SAFETY AND HEALTH
VI. CLEAN-UP
VII. MISCELLANEOUS EQUIPMENT
VIII. SITE CONDITIONS
IX. PERMITS, TAXES, INSURANCE
X. OTHER
</TABLE>
The above list describes only the general categories of the General Work
Requirements. Prior to establishing the Budgeted Cost for a DC Project, Webvan
and Bechtel shall agree upon a schedule setting forth a more detailed, line item
description of each of the above categories and the estimated General Work
Requirements Amount. Once such schedule and the estimated General Work
Requirements Amount have been signed by both Webvan and Bechtel, they shall be
deemed to be incorporated into this Appendix 2.5.3 and shall become a part of
this Contract to the same extent as if they had been originally set forth
herein.
<PAGE> 76
APPENDIX 5.1.2
UNIT RATE SCHEDULE
<TABLE>
<CAPTION>
PAYROLL SAN FRANCISCO HOME OFFICE ALL OTHER OFFICES
CLASSIFICATION UNIT RATES UNIT RATES
<C> <C> <C>
31 $[*] $[*]
30 $[*] $[*]
29 $[*] $[*]
28 $[*] $[*]
27 $[*] $[*]
26 $[*] $[*]
25 $[*] $[*]
24 $[*] $[*]
23 $[*] $[*]
22 $[*] $[*]
21 $[*] $[*]
H $[*] $[*]
</TABLE>
The Program Director, Deputy Program Director, Program Contracts Manager, and
Project Managers will typically have payroll classifications of 29, 30 or 31.
Construction Managers will typically have payroll classifications of 28, 29 or
30.
Site Managers and Design Managers will typically have payroll classifications of
27, 28 or 29.
Project Engineers will typically have payroll classifications of 26, 27, 28 or
29.
Construction Superintendents and Project Contracts Managers will typically have
payroll classifications of 26, 27 or 28.
Construction Supervisors will typically have payroll classifications of 26 or
27.
Cost and Schedule Engineers will typically have payroll classifications of 24,
25, 26 or 27.
Administration and clerical personnel will typically have payroll
classifications of 21, 22, 23 or 24.
*Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
<PAGE> 77
APPENDIX 5.8
Form of Warrant
<PAGE> 78
APPENDIX 7.1.1
INSURANCE REQUIREMENTS
1. Amounts of Coverage. As a material part of the consideration for
this Contract, Bechtel agrees, for Webvan's benefit, that Bechtel shall maintain
amounts and types of insurance coverages as follows and that Webvan shall be
named as an additional insured thereunder:
1.1 Commercial General Liability. Commercial General Liability
insurance with respect to or in any way related to the Project. Such insurance
shall contain all coverage customarily found in such policies of insurance,
including, endorsements or other provisions covering products and completed
operations, covering the contractual liabilities contained in this Contract (if
insurable), and including employees as additional insureds. This coverage should
be at least as broad as the Insurance Service Office ("ISO") occurrence form CG
000110 1993 or 1996 edition. Such insurance shall have a per occurrence limit of
Two Million Dollars ($2,000,000) for all damages arising out of the bodily
and/or personal injuries to or death of one or more persons, and for all damages
to or destruction of tangible property, including loss of use resulting
therefrom, in any one occurrence, and subject to that limit, where applicable,
an annual aggregate limit of Two Million Dollars ($2,000,000). The limits of
such insurance shall apply on a per-site basis. Each Subcontractor and
Subconsultant shall also be required to maintain the coverage described in this
Section 1.1.
1.2 Umbrella Liability. Umbrella liability insurance including
the coverages required in Paragraph 1.1 above and Paragraphs 1.3 and 1.5 below,
with limits of Twenty Million Dollars ($20,000,000) per site.
1.3 Commercial Auto Liability. Auto Liability, comprehensive or
business automobile form at least as broad as ISO form CA 0001, covering "any
auto" (hired, owned or non-owned) of One Million Dollars ($1,000,000) per
accident. Each Subcontractor and Subconsultant shall also be required to
maintain the coverage described in this Section 1.3.
1.4 Worker's Compensation. Worker's Compensation covering all
employees of Bechtel performing services under this Contract and complying with
all laws of the state in which each of the DC Projects is located. Each
Subcontractor and Subconsultant shall also be required to maintain the coverage
described in this Section 1.4.
1.5 Employer's Liability. Employers' Liability covering
employees of Bechtel performing services under this Contract providing a limit
of One Million Dollars ($1,000,000). Each Subcontractor and Subconsultant shall
also be required to maintain the coverage described in this Section 1.5.
1.6 Valuable Papers and Records. Property insurance covering
valuable papers that will insure all documentation produced or used in
connection with the Project in an amount of One Million Dollars ($1,000,000),
with coverage provided against "Special Form" perils.
2. Additional Insurance. In addition to the insurance policies
required above, Webvan shall have the right to require additional insurance
policies, additional or increased
1
<PAGE> 79
limits of coverage in existing policies of insurance, and additional
endorsements, including, without limitation, project-specific liability
insurance, builder's risk and property damage insurance, and contractor's bonds.
Such additional insurance shall be in such amounts, on such policy forms, and
with such carriers as Webvan may reasonably require. Within five (5) days after
written request by Webvan at any time after the execution of this Contract,
Bechtel shall procure and deliver to Webvan, at Webvan's expense, one or more
commitments or binders for insurance, in form and content satisfactory to
Webvan, issued by insurance carrier(s) satisfactory to Webvan, assuring that
such carrier(s) will be obligated, upon payment of the required premium, to
issue for Webvan's benefit such additional insurance as may be requested by
Webvan. The premiums and all other costs to obtain any such additional insurance
requested by Webvan shall be reimbursed by Webvan to Bechtel at cost.
2
<PAGE> 80
APPENDIX 8.10
CONFIDENTIALITY AND
NONDISCLOSURE AGREEMENT
THIS CONFIDENTIALITY AND NONDISCLOSURE AGREEMENT (this "Agreement") is
made and entered into as of July 8, 1999, by and between WEBVAN GROUP, INC.
(formerly known as Intelligent Systems for Retail, Inc.), a California
corporation ("WEBVAN"), and BECHTEL CORPORATION, a Nevada corporation
("BECHTEL").
1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "CONFIDENTIAL INFORMATION" shall mean [*]. Confidential
Information shall not, however, include any information which (i) was publicly
known and made generally available in the public domain prior to the time of
disclosure to Bechtel by Webvan; (ii) becomes publicly known and made generally
available after disclosure to Bechtel by Webvan through no action or inaction of
Bechtel or any of its Subcontractors or Subconsultants (as defined in the
Contract); or (iii) was independently developed by Bechtel or by third parties
without reliance upon any information or Data that would otherwise constitute
Confidential Information hereunder.
1.2. "CONTRACT" shall mean that certain Contract for Turnkey
Design/Build Construction and Related Services dated July 8, 1999, by Webvan and
Bechtel.
1.3. "DATA" shall mean all designs, plans, models, drawings,
prints, samples, transparencies, specifications, reports, manuscripts, working
notes, documentation, manuals, photographs, negatives, tapes, disks, databases,
software, works of art, inventions, discoveries, components, and any Contract
Documents (as defined in the Contract), or similar items.
1.4 "DEVELOPED DATA" shall mean all Data prepared or developed
by or for Bechtel or any of its Subcontractors or Subconsultants pursuant to the
Contract, including, without limitation, all Contract Documents (as defined in
the Contract).
1.5 "IP RIGHTS" shall mean all intellectual property rights,
copyrights, design rights, patents, and other similar invention rights,
trademarks, trade names, service marks, trade secrets, and all applications for
and rights in or to any of the foregoing.
1.6 "WEBVAN DATA" shall mean all information and all Data now
or hereafter owned or prepared by or for Webvan, including, without limitation,
all Developed Data, relating to Operating Equipment (as defined in the Contract)
systems and designs, material handling, integration, measurement and control
systems, food production and processing systems and designs, information
technology systems and software, and/or general arrangement drawings for
Webvan's distribution centers, and all inventions, discoveries and improvements
relating to Webvan's business (including, without limitation, any information
relating to the manufacturing techniques, processes, formulas, designs, "look
and feel", logos, developments and experimental work or work-in-progress), and
all formulas, devices and compilations of information
<PAGE> 81
(including customer lists), which are used in or related to Webvan's business.
Without limiting the generality of the foregoing, Webvan Data shall include all
information and Data now or hereafter owned or prepared by or for Webvan
relating to Webvan's local area networks, conveyor software and associated
server systems, radio frequency scanners, "Fill-To-Order" computing systems and
software, and "Order Fulfillment System" server and software.
2. Limited Use Bechtel shall not use any Confidential Information for
any purpose except as expressly authorized in the Contract. Bechtel shall not
disclose any Confidential Information to third parties or to employees of
Bechtel, except to (i) those employees, Subcontractors, or Subconsultants who
are required to have the Confidential Information to perform services expressly
authorized under the Contract and then only to the extent reasonably necessary
to permit such employees, Subcontractors, and Subconsultants to perform such
services, and (ii) those government officials, Webvan landlords and bidders for
Subcontracts to whom Bechtel is required to disclose such Confidential
Information to enable Bechtel to perform such services and then only to the
extent reasonably necessary to enable Bechtel to perform such services. Bechtel
shall not reverse engineer, disassemble or decompile any prototypes, software,
data or other tangible objects which embody any Confidential Information and
which are provided to Bechtel under the Contract.
3. Maintenance of Confidentiality. Bechtel shall hold and keep all
Confidential Information strictly confidential. Bechtel shall take all
reasonable measures to protect the secrecy, and avoid disclosure and
unauthorized use, of all Confidential Information. Without limiting the
foregoing, Bechtel shall develop and strictly adhere to secrecy and security
protocols and procedures reasonably acceptable to Webvan. Bechtel shall use its
best efforts to ensure that all employees having access to Confidential
Information comply with the terms of this Agreement; Bechtel shall cause all
such employees, Subcontractors, and Subconsultants to sign a non-disclosure
agreement reasonably acceptable to Webvan prior to any disclosure of
Confidential Information to such employees, Subcontractors, or Subconsultants.
Bechtel shall reproduce Webvan's proprietary rights notices on any copies of
Confidential Information, in the same manner in which such notices were set
forth in or on the original. Bechtel shall immediately notify Webvan in the
event of any unauthorized use or disclosure of any Confidential Information of
which Bechtel becomes aware. In the event Bechtel is compelled to disclose
Confidential Information pursuant to the order or requirement of a court,
administrative agency, or other governmental body, Bechtel shall provide prompt
notice thereof to Webvan and shall use best efforts to obtain a protective order
or otherwise prevent public disclosure of such information, and in any event
shall disclose only that portion of the Confidential Information that is
required to be disclosed pursuant to such order or requirement.
4. Notification of Disclosure. Bechtel shall immediately notify Webvan
of any unauthorized disclosure of Confidential Information of which Bechtel
becomes aware. Bechtel shall, at Bechtel's sole cost and expense, take all
reasonable steps necessary to recover any Confidential Information improperly
disclosed by Bechtel or its employees, and Bechtel shall use its best efforts to
minimize any further dissemination of such Confidential Information and any
damages to Webvan resulting from such improper disclosure.
5. Return of Materials. All documents, Data, and other tangible objects
containing or representing Confidential Information and all copies thereof shall
be and remain at all times the property of Webvan and shall promptly be returned
to Webvan or destroyed by Bechtel upon termination or expiration of the Contract
or upon Webvan's request. Bechtel shall, however, have the right to maintain one
copy of the
-2-
<PAGE> 82
foregoing solely for Bechtel's archive files, subject to the terms, restrictions
and conditions of this Agreement.
6. No License. Nothing in this Agreement is intended to grant any
rights to Bechtel or any Subcontractor or Subconsultant under any IP Rights of
Webvan, nor shall this Agreement grant Bechtel any rights in or to Confidential
Information except as expressly set forth herein.
7. Equitable Relief. Bechtel acknowledges that the damages that Webvan
will incur as a consequence of any breach by Bechtel or any of its employees,
Subcontractors, or Subconsultants of this Agreement will be irreparable and may
not readily be capable of calculation. Accordingly, to the fullest extent
permissible by law and without limiting any other rights or remedies that may be
available to Webvan, Webvan shall be entitled, as a matter of right, to
equitable relief to protect Webvan's interests, including, but not limited to,
preliminary and permanent injunctive relief. Bechtel hereby consents to, and
shall require that its Subcontractors and Subconsultants consent to, the
issuance by any court of competent jurisdiction of both temporary and permanent
injunctions in the event of such breach or threatened breach restraining and
prohibiting Bechtel and its Subcontractors and Subconsultants, and their
respective agents and representatives, from violating any of the provisions of
this Agreement.
8. Miscellaneous. This Agreement shall survive the expiration or
earlier termination of the Contract until the later of (i) the seventh (7th)
anniversary of the date of this Agreement, or (ii) the fifth (5th) anniversary
of the date the Contract is terminated in its entirety. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their successors
and assigns. This Agreement shall be governed by the laws of the State of
California, without reference to conflict of laws principles. Any failure to
enforce any provision of this Agreement shall not constitute a waiver thereof or
of any other provision hereof. This Agreement may not be amended, nor any term
or condition hereof waived, except by a writing signed by both parties hereto.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which taken together shall constitute one
agreement. In any action arising under or in connection with this Agreement, the
prevailing party in such action shall be awarded, in addition to other legal or
equitable relief, its reasonable costs and expenses and reasonable attorneys'
fees. If all or any portion of any provision of this Agreement as applied to any
party or any circumstance shall be ruled by a court of competent jurisdiction to
be void or unenforceable for any reason, the same shall in no way affect (to the
maximum extent permissible by law) that provision or the remaining portions of
that provision as applied to any parties or circumstances or any other provision
of this Agreement or the validity or enforceability of this Agreement as a
whole, all of which shall be enforced to the fullest extent permitted by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
WEBVAN GROUP, INC. BECHTEL CORPORATION
By: /S/ LOUIS H. BORDERS By: /S/ D. DONLY
--------------------------------- ---------------------------------
Name: LOUIS BORDERS Name: D. DONLY
------------------------------- -------------------------------
Title: CHAIRMAN & CEO Title: PRESIDENT N.A. REGION
------------------------------ ------------------------------
-3-
<PAGE> 1
EXHIBIT 10.15
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i)
EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL
FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS
ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF
SECTION 7 OF THIS WARRANT.
WEBVAN GROUP, INC.
WARRANT TO PURCHASE UP TO 600,000 SHARES
OF SERIES C PREFERRED STOCK
THIS CERTIFIES THAT, for value received, Bechtel Corporation, a Nevada
corporation, is entitled to purchase up to 600,000 shares of Series C Preferred
Stock, no par value (as adjusted pursuant to Section 4 hereof, the "Shares"), of
Webvan Group, Inc., a California corporation (the "Company"), at a price of Six
Dollars and Ninety-Seven Cents ($6.97) per share (such price and such other
price as shall result, from time to time, from the adjustments specified in
Section 4 hereof is herein referred to as the "Warrant Price"), subject to the
provisions and upon the terms and conditions hereinafter set forth. As used
herein, (a) the term "Series C Preferred" shall mean the Company's presently
authorized Series C Preferred Stock, and any stock into or for which such Series
C Preferred Stock may hereafter be converted or exchanged, and (b) the term
"Date of Grant" shall mean July 8, 1999.
1. Vesting; Term. The purchase right represented by this Warrant shall
be exercisable in accordance with the following vesting schedule:
(a) This Warrant shall first be exercisable as to 50,000 Shares
beginning on the date hereof.
(b) This Warrant shall first be exercisable as to an additional
50,000 Shares at such time as six (6) DC Projects (as defined in that certain
Contract for Turnkey Design/Build Construction and Related Services by and
between the Company and Bechtel Corporation dated as of July 8, 1999 (the
"Construction Contract")) for which Bechtel Corporation has performed
Construction Services under the Construction Contract have achieved Final
Completion (as defined in the Construction Contract).
<PAGE> 2
(c) This Warrant shall first be exercisable as to an additional
19,230 Shares at such time as each DC Project (including the DC projects
referred to in Section 1(b) hereof) for which Bechtel Corporation has performed
Construction Services under the Construction Contract achieves Final Completion
(as defined in the Construction Contract) and is completed On Time/On Budget (as
defined in the Construction Contract).
The holder of this Warrant understands that except as set forth in Sections 1(a)
and 1(b) hereof, this Warrant shall only become exercisable at such time as each
individual DC Project for which Bechtel Corporation has performed Construction
Services under the Construction Contract achieves Final Completion and is
completed On Time/On Budget (each as defined in the Construction Contract) and
that under no circumstances shall this Warrant be exercisable as a result of any
lapse of time or in connection with any other services provided by Bechtel
Corporation to the Company, whether under the Construction Contract or
otherwise.
Notwithstanding anything to the contrary in this Warrant, this Warrant
shall immediately terminate and expire unless exercised on or prior to 5:00 p.m.
(California Time) on July 8, 2004, and this Warrant shall be of no further force
or effect on and after such date.
2. Method of Exercise: Payment. Subject to Section 1 hereof, the
purchase right represented by this Warrant may be exercised by the holder
hereof, in whole or in part, at any time, by either, at the election of the
holder hereof, (a) the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A duly executed) at the principal office of the
Company and by the payment to the Company, by check or wire transfer to an
account designated by the Company, of an amount equal to the then applicable
Warrant Price multiplied by the number of Shares then being purchased, or (b)
pursuant to the provisions of Section 9 hereof. The person in whose name any
certificate representing shares of Series C Preferred shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder of record of,
and shall be treated for all purposes as the record holder of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as reasonably practicable and in any
event within thirty (30) days after such exercise. If such exercise is in part
only, a notation shall be made on this Warrant indicating the number of shares
as to which the Warrant has been exercised.
3. Stock Fully Paid: Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series C
Preferred to provide for the exercise of the rights represented by this Warrant
and a sufficient number of shares of its Common Stock to provide for the
conversion of the Series C Preferred into Common Stock.
2
<PAGE> 3
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than (i) a merger effected for the principal purpose of changing the Company's
state of incorporation, (ii) a merger in which the shareholders of the Company
prior to the transaction continue to hold at least fifty percent (50%) of the
voting power of the successor corporation following the transaction, or (iii) a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance reasonably satisfactory to the holder of this Warrant), so that
the holder of this Warrant shall have the right to receive, at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion of
this Warrant, and in lieu of the shares of Series C Preferred theretofore
issuable upon exercise of this Warrant, the kind and amount of shares of stock,
other securities, money and property receivable upon such reclassification,
change or merger by a holder of the number of shares of Series C Preferred then
purchasable under this Warrant. Such new Warrant shall provide for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4. The provisions of this subparagraph (a) shall
similarly apply to successive reclassifications, changes, mergers,
consolidations and transfers.
(b) Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide, by
split or otherwise, or combine its outstanding shares of Series C Preferred, the
Warrant Price shall be proportionately decreased in the case of a subdivision or
increased in the case of a combination, effective at the close of business on
the date the subdivision or combination becomes effective. When any adjustment
is required to be made to the Warrant Price, the number of shares issuable upon
the exercise of this Warrant shall be changed to the number determined by
dividing (i) an amount equal to the number of shares issuable upon the exercise
of this Warrant immediately prior to such adjustment, multiplied by the Warrant
Price in effect immediately prior to such adjustment, by (ii) the Warrant Price
in effect immediately after such adjustment, such that the aggregate purchase
price payable for the total number of shares purchasable under this Warrant (as
adjusted) shall remain the same.
(c) Stock Dividends and Other Distributions. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Series C Preferred payable in Series C Preferred, or
(ii) make any other distribution with respect to Series C Preferred (except any
distribution specifically provided for in the foregoing subparagraphs (a) and
(b)) then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
shall
3
<PAGE> 4
be the total number of shares of Series C Preferred outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Series C Preferred outstanding immediately
after such dividend or distribution. When any adjustment is required to be made
to the Warrant Price, the number of shares issuable upon the exercise of this
Warrant shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Warrant Price in effect
immediately prior to such adjustment, by (ii) the Warrant Price in effect
immediately after such adjustment, such that the aggregate purchase price
payable for the total number of shares purchasable under this Warrant (as
adjusted) shall remain the same.
(d) Conversion Ratio. Each share of Series C Preferred is
convertible into one (1) share of the Company's Common Stock as of the date
hereof. The number of shares of the Company's Common Stock issuable upon the
conversion of the Series C Preferred shall be adjusted from time to time
pursuant to the Company's Restated Articles of Incorporation.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the Warrant Price and the number of Shares
purchasable hereunder after giving effect to such adjustment, which shall be
mailed (without regard to Section 12 hereof, by first class mail, postage
prepaid) to the holder of this Warrant. In addition, whenever the conversion
price or conversion ratio of the Series C Preferred shall be adjusted, the
Company shall make a certificate setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the conversion price or ratio of the Series C
Preferred after giving effect to such adjustment, and shall cause a copy of such
certificate to be mailed (without regard to Section 12 hereof, by first class
mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Series C Preferred will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares, the Company shall make a cash payment therefor based on the fair market
value of the Series C Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares.
(a) Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant, and the shares of Series C
Preferred to be issued upon exercise hereof and any Common Stock issued upon
conversion thereof are being acquired for investment and that such holder will
not offer, sell or otherwise dispose of this Warrant, or any shares of Series C
Preferred to be issued upon exercise hereof or any Common Stock issued upon
conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act"). Upon exercise
of this Warrant, unless the Shares being acquired are registered under the Act
or an exemption from such registration is available, the holder hereof shall
confirm in writing, by executing the form attached as Schedule 1 to Exhibit A
hereto, that the shares of Series C Preferred so purchased (and any shares of
Common Stock issued upon conversion thereof) are being acquired for investment
and not with a view toward distribution or resale. This
4
<PAGE> 5
Warrant and all shares of Series C Preferred issued upon exercise of this
Warrant and all shares of Common Stock issued upon conversion thereof (unless
registered under the Act) shall be stamped or imprinted with a legend in
substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION
STATEMENTS RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER,
REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT
REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE
GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE
ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
for purposes of the Act.
(2) The holder understands that this Warrant and any securities issuable
upon the exercise hereof have not been registered under the Act in reliance upon
a specific exemption therefrom, which exemption depends upon, among other
things, the bona fide nature of the holder's investment intent as expressed
herein. In this connection, the holder understands that, in the view of the
Securities and Exchange Commission (the "SEC"), the statutory basis for such
exemption may be unavailable if the holder's representation was predicated
solely upon a present intention to hold the Warrant for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Warrant, or for a period of one
year or any other fixed period in the future.
(3) The holder further understands that this Warrant and any securities
issuable upon the exercise hereof must be held indefinitely unless subsequently
registered under the Act and any applicable state securities laws, or unless
exemptions from registration are otherwise available. Moreover, the holder
understands that the Company is under no obligation to register this Warrant and
any securities issuable upon the exercise hereof; provided however, that the
Company will use its good faith efforts to permit the holder to become a party
to the Registration Rights Agreement dated October 29, 1997, as amended, by and
among the Company and certain shareholders of the Company.
5
<PAGE> 6
(4) The holder is aware of the provisions of Rule 144, promulgated under
the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell
this Warrant and any securities issuable upon the exercise hereof there may be
no public market upon which to make such a sale, and that, even if such a public
market then exists, the Company may not be satisfying the current public
information requirements of Rule 144, and that, in such event, the holder may be
precluded from selling this Warrant and any securities issuable upon the
exercise hereof under Rule 144 even if the one-year minimum holding period had
been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
(b) Disposition of Warrant or Shares. With respect to any offer,
sale or other disposition of this Warrant or any shares of Series C Preferred
acquired pursuant to the exercise of this Warrant or any shares of Common Stock
issued upon conversion of the Series C Preferred, in each case prior to
registration of such Warrant or shares, the holder hereof and each subsequent
holder of this Warrant agrees to give written notice to the Company prior
thereto, describing in sufficient detail the manner thereof, together with a
written opinion of such holder's counsel, if reasonably requested by the
Company, to the effect that such offer, sale or other disposition may be
effected without registration or qualification (under the Act as then in effect
or any federal or state law then in effect) of this Warrant or such shares of
Series C Preferred or Common Stock and indicating whether or not under the Act
certificates for this Warrant or such shares of Series C Preferred to be sold or
otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with such laws.
Promptly upon receiving such written notice and reasonably satisfactory opinion,
if so requested, the Company, as promptly as practicable, shall notify such
holder that such holder may sell or otherwise dispose of this Warrant or such
shares of Series C Preferred or Common Stock, all in accordance with the terms
of the notice delivered to the Company. Notwithstanding the foregoing, at any
time that the Common Stock is publicly traded, such Common Stock may, as to such
federal laws, be offered, sold or otherwise disposed of in accordance with Rule
144 under the Act, provided that the
6
<PAGE> 7
Company shall have been furnished with such information as the Company and its
counsel may reasonably request to provide assurance that the provisions of Rule
144 have been satisfied. Each certificate representing this Warrant or the
shares of Series C Preferred or Common Stock transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with such laws, unless in the aforesaid opinion of counsel for the holder, such
legend is not required in order to ensure compliance with such laws. The Company
may issue stop transfer instructions to its transfer agent in connection with
such restrictions.
8. No Rights as a Shareholder. No holder of this Warrant, as such, shall
be entitled to vote or receive dividends or be deemed the holder of Series C
Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
9. Conversion Right.
9.1 Right to Convert Warrant into Common Stock: Net Issuance.
(a) Right to Convert. In addition to and without
limiting the rights of the holder under the terms of this Warrant, but only to
the extent this Warrant has not otherwise been exercised, the holder shall have
the right to convert this Warrant or any portion thereof (the "Conversion
Right") into shares of Series C Preferred (or Common Stock if the Series C
Preferred has been automatically converted into Common Stock) as provided in
this Section 9.1(a) at any time or from time to time during the term of this
Warrant. Upon exercise of the Conversion Right with respect to a particular
number of shares subject to this Warrant (the "Converted Warrant Shares"), the
Company shall deliver to the holder (without payment by the holder of any
exercise price or any cash or other consideration) (X) that number of shares of
fully paid and nonassessable Series C Preferred (or Common Stock if the Series C
Preferred has been automatically converted into Common Stock) equal to the
quotient obtained by dividing the value of this Warrant (or the specified
portion hereof) on the Conversion Date (as defined in subsection (b) hereof),
which value shall be determined by subtracting (A) the aggregate Warrant Price
of the Converted Warrant Shares immediately prior to the exercise of the
Conversion Right from (B) the aggregate fair market value of the Converted
Warrant Shares issuable upon exercise of this Warrant (or the specified portion
hereof) on the Conversion Date (as herein defined) by (Y) the fair market value
of one share of Series C Preferred (or Common Stock if the Series C Preferred
has been automatically converted into Common Stock) on the Conversion Date (as
herein defined).
Expressed as a formula, such conversion shall be computed as follows:
7
<PAGE> 8
X= B - A
------
Y
Where: X = the number of shares of Series C Preferred
(or Common Stock) that may be issued to holder
Y = the fair market value (FMV) of one share of
Series C Preferred (or Common Stock)
A = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant
Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be
exercised by the holder by the surrender of this Warrant at the principal office
of the Company together with a written statement specifying that the holder
thereby intends to exercise the Conversion Right and indicating the number of
shares subject to this Warrant which are being surrendered (referred to in
subsection (a) hereof as the Converted Warrant Shares) in exercise of the
Conversion Right. Such conversion shall be effective upon receipt by the Company
of this Warrant together with the aforesaid written statement (the "Conversion
Date"). Certificates for the shares issuable upon exercise of the Conversion
Right shall be issued as of the Conversion Date and shall be delivered to the
holder within thirty (30) days following the Conversion Date.
(c) Determination of Fair Market Value. For purposes of
this Section 9.1, "fair market value" of a share of Series C Preferred (or
Common Stock if the Series C Preferred has been automatically converted into
Common Stock) as of a particular date (the "Determination Date") shall mean:
(i) If traded on a securities exchange, the fair
market value per share of the Common Stock shall be deemed to be the average of
the closing prices of the Common Stock on such exchange over the five (5) day
period ending one (1) business day prior to the Determination Date, and the fair
market value of the Series C Preferred shall be deemed to be such fair market
value of the Common Stock multiplied by the number of shares of Common Stock
into which each share of Series C Preferred is then convertible;
(ii) If traded over-the-counter, the fair market
value per share of the Common Stock shall be deemed to be the average of the
closing bid prices of the Common Stock over the five (5) day period ending one
(1) business day prior to the Determination Date, and the fair market value of
the Series C Preferred shall be deemed to be such fair market value of the
Common
8
<PAGE> 9
Stock multiplied by the number of shares of Common Stock into which each share
of Series C Preferred is then convertible; and
(iii) If there is no public market for the
Common Stock, then fair market value per share shall be determined by mutual
agreement of the holder of this Warrant and the Company (by action of its Board
of Directors), and if the holder and the Company are unable to so agree, by an
appraiser approved by both the Company (by action of its Board of Directors) and
the holder of this Warrant, such approvals not to be unreasonably withheld. The
fees and expenses of such appraiser shall be borne equally by the parties.
10. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and nonassessable;
(c) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Company's Restated Articles of Incorporation, as amended,
will be validly issued, fully paid and nonassessable; and
(d) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Restated Articles of
Incorporation or by-laws, do not and will not contravene any material law,
governmental rule or regulation, judgment or order applicable to the Company,
and do not and will not conflict with or contravene any provision of, or
constitute a default under, any material indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration or filing
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby.
11. Modification and Waiver. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the Company and the registered holder of this Warrant.
9
<PAGE> 10
12. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to the holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
13. Market Stand-off Agreement. The holder of this Warrant agrees not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of the Company held by such holder during a period of time determined by the
Company and its underwriters (not to exceed 180 days) following the effective
date of the registration statement of the Company filed under the Act with
respect to the Company's initial public offering. The holder of this Warrant
further agrees to execute any standard lock-up agreement that the underwriters
require in connection with such offering. The Company may impose stop-transfer
instructions with respect to the Common Stock (or securities) subject to the
foregoing restriction until the end of said period.
14. Binding Effect on Successors. Except as otherwise set forth herein,
this Warrant shall be binding upon any corporation succeeding the Company by
merger, consolidation or acquisition of all or substantially all of the
Company's assets and shall be binding upon any holder of this Warrant.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company and its transfer agent, or in the case of
any such mutilation upon surrender and cancellation of such Warrant, the Company
will make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
[Remainder of page intentionally left blank]
10
<PAGE> 11
This Warrant was issued by the Company and the terms hereof were
accepted by the holder of this Warrant on July 8, 1999.
WEBVAN GROUP, INC.
By: /S/ LOUIS H. BORDERS
---------------------------------------------
Title: CHAIRMAN & CEO
------------------------------------------
Address: 1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404-1214
BECHTEL CORPORATION
By:/S/ D. DONLY
----------------------------------------------
Title: PRESIDENT N.A. REGION
-----------------------------------------
Address: 50 Beale Street
San Francisco, CA 94105
11
<PAGE> 12
EXHIBIT A
NOTICE OF EXERCISE
To: Webvan Group, Inc.
1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404-1214
1. The undersigned hereby elects to exercise this Warrant as to
__________ shares of Series C Preferred Stock (or Common Stock issuable upon the
conversion thereof) of Webvan Group, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full. The purchase price is being paid by (check one):
___ (i) check;
___ (ii) wire transfer;
___ (iii) exercise of the Conversion Right (as defined in Section
9 of the Warrant).
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned.
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
--------------------------------------------
(Signature)
- ---------------------
(Date)
<PAGE> 13
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser: Bechtel Corporation
Company: Webvan Group, Inc.
Security: Series C Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities and
underlying Common Stock issuable upon conversion of the securities
(collectively, the "Securities"), the undersigned (the "Purchaser") represents
to the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
Purchaser is purchasing the Securities for its own account for investment
purposes only and not with a view to, or for the resale in connection with, any
"distribution" thereof for purposes of the Securities Act of 1933, as amended
(the "Act").
(b) The Purchaser understands that the Securities have not been
registered under the Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. Moreover, the Purchaser understands
that the Company is under no obligation to register the Securities. In addition,
the Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144, promulgated
under the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: The
<PAGE> 14
availability of certain public information about the Company, the resale
occurring not less than one year after the party has purchased and paid for the
securities to be sold; the sale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934, as amended) and the
amount of securities being sold during any three-month period not exceeding the
specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144, and that, in
such event, the Purchaser may be precluded from selling the Securities under
Rule 144 even if the one-year minimum holding period had been satisfied.
(f) The Purchaser agrees not to sell or otherwise transfer or dispose of
any Common Stock (or other securities) of the Company held by such Purchaser
during a period of time determined by the Company and its underwriters (not to
exceed 180 days) following the effective date of the registration statement of
the Company filed under the Act with respect to the Company's initial public
offering. The Purchaser further agrees to execute any standard lock-up agreement
that the underwriters require in connection with such offering. The Company may
impose stop-transfer instructions with respect to the Common Stock (or
securities) subject to the foregoing restriction until the end of said period.
(g) The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
-------------------------------------------
Date: ________________, 199__
<PAGE> 1
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of the 19th day of September 1999, by and
between Webvan Group, Inc., (the "Company"), and George T. Shaheen, the
undersigned executive (the "Executive").
Recital
The Company desires to retain the services of Executive, and Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing recital and the
respective undertakings of the Company and Executive set forth below, the
Company and Executive agree as follows:
1. Employment.
a. Duties. The Company agrees to employ the Executive as
President and Chief Executive Officer, and the Executive agrees to perform such
reasonable responsibilities and duties as may be required of him by the Company
consistent with that position. Executive's employment with the Company shall
commence on September 19, 1999 ("Employment Commencement Date"). Executive shall
report directly to the Board of Directors of the Company (the "Board").
b. Employment At-Will. The Company and the Executive
acknowledge and agree that the Executive's employment is at-will, as defined
under applicable law and may be terminated at any time, with or without Cause.
If the Executive's employment terminates for any reason, the Executive shall not
be entitled to any payments, benefits, damages, awards or compensation other
than as provided in Sections 3 and 4 of this Agreement.
c. Board Membership. Upon the Employment Commencement Date,
Executive shall be appointed to the Board. Thereafter during the Executive's
employment with the Company, the Company agrees to nominate Executive for Board
membership when Executive's term as a member of the Board is due to expire.
Subject to continued election to the Board by the Company's stockholders,
Executive shall remain a member of the Board during the period of his employment
with the Company.
d. Obligations. During the Executive's employment with the
Company, Executive shall devote his full business efforts and time to the
Company. Executive agrees not to actively engage in any other employment,
occupation or consulting activity for any direct or indirect remuneration
without the prior approval of the Board during his employment with the Company;
provided, however, that Executive may serve in any capacity with the civic,
educational or charitable
<PAGE> 2
organization, or as a member of corporate boards of Directors or committees
thereof upon which Executive currently serves, without the approval of the
Board.
2. Compensation and Benefits.
a. Base Compensation. The Company shall pay the Executive as
compensation for his services an annual base salary of $500,000. Such salary
shall be subject to applicable tax withholding and shall be paid periodically in
accordance with normal Company payroll practices. The annual compensation
specified in this Section 2(a), together with any increases in such compensation
that the Board may, in its sole discretion, approve from time to time, is
referred to in this Agreement as "Base Compensation."
b. Bonus. Executive shall be eligible for an annual target
bonus equal to fifty percent (50%) of his Base Compensation upon attainment of
performance goals as determined by the Board after consultation with Executive
(the "Target Bonus"). For the fiscal year in which Executive commenced
employment with the Company, such Target Bonus shall be prorated. The Board
shall have discretion to pay Executive an amount greater than the Target Bonus
for performance exceeding the performance goals and less than the Target Bonus
for performance failing to reach the performance goals. The Target Bonus shall
be paid within ninety (90) days of the end of the Company's fiscal year subject
to Executive being employed at the end of such fiscal year.
c. Executive Benefits. Executive shall be eligible to
participate in each employee benefit plan, arrangement, fringe benefit or
perquisite, which is currently available or which becomes available, with the
adoption or maintenance of such plans or arrangements to be in the discretion of
the Company, on terms which are at least as favorable as that enjoyed by any
other officer of the Company, subject in each case to the generally applicable
terms and conditions of the plan or arrangement in question and to the
determination of any committee administering such plan or arrangement.
Notwithstanding the foregoing, Executive (and his dependents, if applicable)
shall not participate in any of the Company's group health plans during such
period of time and to the extent that Executive (and his dependents, if
applicable) receives group health coverage through another group health plan. In
addition, during such time that Executive shall not participate in one or more
of the Company's group health plans, the Company shall pay to Executive monthly
a sum equal to the amount paid by the Company for an employee with one dependent
who participates in that group health plan that carries the highest cost to the
Company.
d. Stock Option. The Company shall grant Executive an option
(the "Option") to purchase 15,000,000 shares of the Company's Common Stock
(after adjustment for the September 21, 1999 3 for 2 stock split). The per share
exercise price for the Option shall be equal to $8.00 per share. The term of the
Option shall be ten (10) years. The Option shall be exercisable immediately by
Executive subject to a repurchase right exercisable by the Company at $8 per
share for any unvested shares upon termination of Executive's employment with
the Company, subject to
-2-
<PAGE> 3
the provisions of Sections 3 and 4 of this Agreement. The Option shall vest as
to 3,000,000 shares as of September 19, 1999 and as to 1/48th of the remaining
shares subject to the Option each month thereafter on the 19th of such month
subject to (i) Executive being employed on such dates and (ii) the additional
vesting provisions of Section 3 and 4 of this Agreement. Except as otherwise
provided herein, the Option shall be granted pursuant to, and shall be governed
by, the Company's 1999 Nonstatutory Stock Option Plan and conform to the
Company's standard policies with respect to options.
e. Stock Purchase. Executive shall purchase 1,250,000 shares
(after adjustment for the September 21, 1999 3 for 2 stock split) of the
Company's Common Stock upon the Employment Commencement Date for $13,487,500.00,
the fair market value of the shares (the "Stock Purchase"). The Stock Purchase
shall be fully vested on its grant date. Executive shall make adequate provision
for any federal, state, local or foreign tax withholding obligations of the
Company as soon as possible after the execution of this Agreement.
f. Stock Purchase Loan. The Company shall provide Executive
with a loan of $6,743,750.00 (the "Loan"), which is fifty percent (50%) of the
fair market value of the Stock Purchase on its purchase date, for purposes of
satisfying the withholding tax obligations of the Stock Purchase and the Signing
Bonus, upon Executive entering into a non-recourse promissory note (the "Note")
and security agreement covering the Stock Purchase (attached hereto as Exhibits
B and C). The Note shall bear interest at an annual rate of 6.16% compounded
semiannually and payable upon payment of the principal. The Note shall have a
maximum term of thirty (30) years. Except as otherwise provided herein, the Loan
shall be governed by the Note.
g. Supplemental Retirement Plan.
(i) The Company shall establish a non-discretionary
supplemental retirement arrangement (the "Supplemental Retirement Benefit") to
provide annual cash payments to Executive equal to fifty percent (50%) of the
sum of the (i) annual Base Compensation and (ii) Target Bonus. The Supplemental
Retirement Benefit shall be paid upon Executive's termination of employment for
any reason after June 30, 2000 and shall be paid in equal monthly installments
throughout the year. The Supplemental Retirement Benefit is payable to Executive
for the remainder of his life (or to Executive's spouse if predeceased by
Executive for the remainder of his spouse's life). For the period ending
September 19, 2003, the Supplemental Retirement Benefit shall be calculated as
the Base Compensation and Target Bonus provided for in Sections 2(a) and (b)
herein. After September 19, 2003, Executive's annual benefits shall be equal to
the average of Executive's taxable compensation from the Company for the top
three years in the last five years prior to plus the year of termination of
employment with the Company. The Supplemental Retirement Benefit may be reduced,
in the Company's discretion, to the extent that Executive is entitled to any
social security benefit or any other Company-paid retirement benefit earned
while employed with the Company. For an offset which is defined in terms of an
annual benefit, each offset shall be made in the same year with respect to which
the benefit is paid, and for an offset which is defined in terms of an
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account balance, such offset shall be made in the year following the year in
which the benefit is paid. Except as otherwise provided herein, the Supplemental
Retirement Benefit shall be pursuant to and governed by the Supplemental
Retirement Plan attached hereto as Exhibit D.
(ii) The Company shall use its best efforts to fund the
retirement obligation to the extent that such funding does not have any material
adverse effect to the Company other than the cash cost of such funding. To the
extent that Executive acquires a right to receive payments pursuant to the
Supplemental Retirement Benefit, such right shall be no greater than the right
of an unsecured creditor of the Company.
h. Signing Bonus. The Company shall pay Executive a signing
bonus upon execution of this Agreement and the Stock Purchase Agreement in an
amount equal to Executive's purchase price for the 1,250,000 shares of the
Company's Common Stock pursuant to Section 2(e) of this Agreement.
3. Severance Payments.
a. Payments upon Termination. If the Executive's employment
terminates as a result of an Involuntary Termination other than for Cause and
the Executive signs a Release of Claims, then the Company shall pay to Executive
two (2) years of Executive's Base Compensation and two (2) years of Executive's
Target Bonus. Such payments shall be made in equal semi-monthly installments
over a period of twenty-four (24) months commencing on the date of Executive's
termination of employment (the "Severance Period") with such amounts payable on
the 15th and the last day of each calendar month during the Severance Period.
Notwithstanding the foregoing, in the event Executive breaches Section 8 of this
Agreement, as of the date the Company's notice is given to Executive of
Executive's breach of Section 8, (i) all payments under this Section 3 (except
for any payments under Sections 3(d) and 3(e)) shall cease, and (ii) the
Severance Period shall end.
b. Benefits. In the event the Executive is entitled to
severance benefits pursuant to Section 3(a), then in addition to such severance
benefits, the Executive shall receive continued fringe, pension, welfare and
other benefits coverage as provided to Executive immediately prior to the
Executive's termination to the extent permissible under applicable law (the
"Company-Paid Coverage"). Executive shall not be required to pay any greater
amount to receive such benefits than Executive was paying prior to termination
of employment. If such coverage included the Executive's dependents immediately
prior to the Executive's termination, such dependents shall also be covered to
the extent covered prior to Executive's termination. For this purpose, "welfare
benefits" shall mean benefits providing for coverage or payment in the event of
Executive's death, disability, illness or injury that were provided to Executive
as of the date of Executive's termination of employment, whether taxable or
non-taxable and whether funded through insurance or otherwise. Company-Paid
Coverage shall continue until the earlier of (i) twenty-four (24) months
following the date of the Involuntary Termination, (ii) the end of the Severance
Period or (iii) in the case of continued health coverage, and only to the extent
Executive participates in the Company's group
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health plan or plans immediately prior to the date of his termination of
employment, the date Executive becomes covered under another employer's group
health plan or plans (to the extent covered under such plans). To the extent
permissible under the Company's group health plans in which Executive
participates in prior to his termination of employment, the Executive's rights
under the Consolidated Omnibus Budget Reconciliation Act of 1985 (the "COBRA
Period") shall begin on the earlier of (i) twenty-four (24) months after the
date of Executive's termination of employment with the Company or (ii) the end
of the Severance Period, otherwise the COBRA Period shall begin on the date of
Executive's termination of employment with the Company. The Company shall make a
reasonable effort to structure the delivery of such benefits so that they shall
be non-taxable to Executive to the maximum extent possible under the applicable
tax laws in effect at the time of Executive's termination of employment from the
Company.
c. Stock Options. In the event Executive is entitled to
severance benefits pursuant to Section 3(a), Executive shall continue to vest in
and be entitled to exercise all outstanding options during the Severance Period.
The vested portion of the options shall terminate three (3) months after the end
of the Severance Period or twelve (12) months after the end of the Severance
Period if Executive dies during the Severance Period. Any unvested portion of
any options shall terminate at the end of the Severance Period. In addition, any
repurchase rights in favor of the Company with respect to the purchase of
unvested shares of the Company's Common Stock shall continue to lapse during the
Severance Period in accordance with the respective stock option agreement and
the Company may not exercise its repurchase right until the end of the Severance
Period.
d. Miscellaneous. In addition, (i) the Company shall pay the
Executive any unpaid Base Compensation or annual bonus due for periods prior to
the date of Executive's termination; (ii) the Company shall pay the Executive
all of the Executive's accrued and unused vacation through the date of
Executive's termination; (iii) following submission of proper expense reports by
the Executive, the Company shall reimburse the Executive for all expenses
reasonably and necessarily incurred by the Executive in connection with the
business of the Company prior to termination; (iv) Executive shall still have
the right to receive contributions and earnings from the Company's 401(k) plan;
and (v) Executive shall still have his rights under any of the Company's
employee benefits plans, policies or arrangements in accordance with the terms
of such plans, policies and arrangements. Any payments described above shall be
made promptly upon termination and within the period of time mandated by
applicable law.
e. Voluntary Resignation; Termination for Cause. If the
Executive's employment terminates by reason of Executive's voluntary resignation
which is not treated as an Involuntary Termination or if the Executive is
terminated for Cause, the Executive shall not be entitled to receive severance
payments or other benefits under this Section 3. Notwithstanding any other
provision of this Agreement to the contrary, the Loan for the Stock Purchase and
the Supplemental Retirement Plan pursuant to Sections 2(f) and (g) of this
Agreement shall remain in
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effect pursuant to their terms and shall not be adversely affected by
Executive's termination of employment for any reason or by any other provision
of the Agreement.
f. Death or Disability. If the Executive's employment
terminates as a result of his death or Disability, neither the Executive nor, in
the case of death, Executive's beneficiary or estate, shall be entitled to any
compensation, severance payments, or any other benefits under this Section
except as required by law; provided, however, that Executive shall vest in (and
any repurchase rights shall lapse) as to fifty percent (50%) of the unvested
portion of the Option granted pursuant to Section 2(d) of this Agreement and any
future compensatory stock awards, including stock options, granted by the
Company to Executive. Executive shall have twelve (12) months from the date of
such termination of employment for death or Disability to exercise the vested
portion of such options.
g. Mitigation. Executive shall not be required to mitigate
damages or the amount of any payment provided for under Sections 3 or 4 of this
Agreement by seeking other employment or otherwise. Except as otherwise
specifically provided herein, the receipt of any benefit provided for under
Sections 3 or 4 of this Agreement shall not be reduced by any benefit received
by Executive as a result of employment by another employer or by retirement
after termination of Executive's employment with the Company.
4. Change of Control Provision.
If Executive's employment with the Company is terminated as a result of
an Involuntary Termination other than for Cause upon or within thirteen (13)
months after a Change of Control, then Executive shall be entitled to the
following in addition to the amounts described in Sections 2(f), 2(g) and 3(d):
(i) three (3) years of Executive's Base Compensation and
Target Bonus payable in a lump sum within thirty (30) days of termination of
Executive's employment with the Company;
(ii) any repurchase rights in favor of the Company with
respect to Common Stock of the Company acquired by the Executive shall lapse;
(iii) all outstanding stock options granted by the Company
to Executive shall become fully vested and exercisable for such period of time
as provided for in the respective stock option agreements;
(iv) continued welfare, pension, fringe and other benefits
as provided in Section 3(b) above, except that such coverage shall be for three
(3) years from the date of termination of Executive's employment with the
Company in all cases.
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<PAGE> 7
5. Confidential Information. Executive agrees to sign the Company's
standard Proprietary Information Agreement attached hereto as Exhibit A (as
modified as necessary to avoid a conflict with the provisions of this
Agreement).
6. Definitions. As used herein, the terms have the following
meanings:
a. Cause. "Cause" means the Executive's termination only upon:
(i) the commission of an act of fraud or embezzlement which results in loss,
damage or injury to the Company, whether directly or indirectly; (ii)
Executive's violation of Section 8 of this Agreement; and (iii) the conviction
or plea of nolo contendere by Executive to criminal charges relating to a
felony, in connection with the performance of the Executive's obligations to the
Company which shall materially adversely affect the Executive's ability to
perform such obligations. Executive shall be terminated for Cause pursuant to
Section 6(a)(i) or 6(a)(ii) only following: (i) written notice from the Board
outlining the actions or omissions which allegedly constitute Cause; (ii)
failure to cure such actions or omissions to the reasonable satisfaction of the
Board within thirty (30) days following the receipt of written notice by
Executive; and (iii) if Executive so requests, an opportunity for Executive to
meet with the Board, accompanied by one or more representatives, if Executive so
chooses, to discuss resolution of the situation without necessitating
termination of employment.
b. Change of Control.
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities; or
(ii) A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); or
(iii) The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; provided, however, any person who acquired securities of the
Company prior to the occurrence of a merger or
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consolidation in contemplation of such transaction, and who after such
transaction possesses direct or indirect beneficial ownership of at least ten
percent (10%) of the securities of the Company or the surviving entity
immediately following such transaction shall not be included in the group of
shareholders of the Company immediately prior to such transaction; or
(iv) The consummation of the sale, lease or other
disposition by the Company of all or substantially all the Company's assets.
c. Disability. "Disability" means a mental or physical
impairment which prevents Executive from performing the responsibilities and
duties of his position to the satisfaction of the Board or in the determination
of Executive's physician.
d. Involuntary Termination. "Involuntary Termination" shall
mean: (i) termination by the Company of Executive's employment with the Company
for any reason other than Cause; (ii) a significant reduction in Executive's
title, authority, duties or reporting relationships provided, however, that
after a Change of Control, if Executive is still the Chief Executive Officer and
President of the Company and the Company continues to operate as an independent
subsidiary or independent controlled affiliate, then no Involuntary Termination
shall have occurred; (iii) a five percent (5%) or greater reduction in
Executive's Base Compensation or Target Bonus, other than any such reduction
which is part of, and generally consistent with, a general reduction of officer
salaries or cash incentive compensation; (iv) a material reduction by the
Company in the kind or level of employee benefits (other than salary and bonus)
to which Executive is entitled immediately prior to such reduction with the
result that Executive's overall benefits package (other than salary and bonus)
is substantially reduced (other than any such reduction applicable to officers
of the Company generally); (v) any material breach by the Company of any
material provision of this Agreement which continues uncured for 30 days
following notice thereof; or (vi) any relocation of the Company's offices at
which Executive normally works which increases Executive's commute by more than
thirty-five (35) miles; provided that none of the foregoing shall constitute
Involuntary Termination to the extent Executive has agreed thereto expressly in
writing.
e. Release of Claims. "Release of Claims" shall mean a waiver
by Executive, in a form substantially similar to that attached hereto as Exhibit
E, of all employment related obligations of and claims and causes of actions
against the Company, except for any of the Company's obligations under this
Agreement, especially Sections 3 and 4.
7. Golden Parachute Tax. In the event that the severance and other
benefits provided for in this Agreement or otherwise payable to the Executive
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code") and will be subject to
the excise tax imposed by Section 4999 of the Code, then the Executive shall
receive (i) a payment from the Company sufficient to pay such excise tax, and
(ii) an additional payment from the Company sufficient to pay the income,
employment, excise and any other taxes arising from the payments made by the
Company to or for the benefit of Executive pursuant to Section 7(i) above and
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<PAGE> 9
this Section 7(ii) so that Executive shall be fully reimbursed for any excise
tax and any taxes associated with the payments to reimburse Executive for such
excise tax. Unless the Company and the Executive otherwise agree in writing, the
determination of Executive's excise tax liability and the amount required to be
paid under this Section shall be made in writing by a nationally recognized
accounting firm satisfactory to both parties (the "Accountants"). In the event
that the excise tax incurred by Executive is determined by the Internal Revenue
Service to be greater or lesser than the amount so determined by the
Accountants, the Company and the Executive agree to promptly make such
additional payment, including interest and any tax penalties, to the other party
as the Accountants reasonably determine is appropriate to ensure that the net
economic effect to Executive under this Section, on an after-tax basis, is as if
the Code Section 4999 excise tax did not apply to Executive. For purposes of
making the calculations required by this Section, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on interpretations of the Code for which there is a "substantial authority"
tax reporting position. The Company and the Executive shall furnish to the
Accountants such information and documents the Accountants may reasonably
request in order to make a determination under this Section. The Company shall
bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section.
8. Covenant Not To Compete.
a. For a period beginning on the Employment Commencement Date
and ending twenty-four (24) months after the date on which the Executive ceases
to be employed by the Company for any reason whatsoever, the Executive, directly
or indirectly, whether as owner, sole proprietor, partner, shareholder,
director, member, consultant, agent, founder, co-venturer or otherwise, will not
engage, participate or invest in any business activity anywhere in the world
which develops, manufactures or markets products or performs services which are
competitive with the products or services of the Company at the time of the
Executive's termination, or products or services which the Company has under
development at the time of the Executive's termination; provided, however, that
the Executive, may own as a passive investor, publicly-traded securities of any
corporation which competes with the business of the Company so long as such
securities do not, in the aggregate, constitute more than 2% of any class of
outstanding securities of such corporations.
b. The Executive understands that the restrictions set forth in
this Section 8 are intended to protect the Company's interest in its
"proprietary information" (as defined in the Proprietary Information Agreement
attached hereto as Exhibit A) and establish customer relationships in good will,
and agrees that such restrictions are reasonable and appropriate for this
purpose.
c. The Executive agrees that it would be difficult to measure
any damages caused by the Company which might result from any breach by the
Executive of the promises set forth in this Section 8, and that in any event
money damages would be an inadequate remedy for any such breach. Accordingly,
the Executive agrees that if the Executive breaches, or proposes to
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<PAGE> 10
breach, any portion of this Section 8, the Company shall be entitled, in
addition all other remedies that it may have, to injunction or other appropriate
equitable relief to restrain any such breach without showing or proving any
actual damage to the Company. In addition, if Executive breaches the promises
set forth in this Section 8, after a termination of employment pursuant to
Section 3(a), upon notice to Executive the Company shall (i) cease all payments
pursuant to Section 3(a), (ii) terminate all benefits pursuant to Section 3(b),
(iii) all outstanding options shall terminate, (iv) the Company shall be
entitled to exercise its repurchase right with respect to any unvested shares;
and (v) the Severance Period shall end.
9. Prior Agreements. Executive represents that Executive has not
entered into any agreements, understandings, or arrangements with any person or
entity which would be breached by Executive as a result of, or that would in any
way preclude or prohibit Executive from entering into this Agreement with the
Company or performing any of the duties and responsibilities provided for in
this Agreement.
10. Notices. Any notice, report or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed given
(i) on the date of delivery, if delivered personally or by facsimile, (ii) one
(1) day after being sent by Federal Express or a similar commercial overnight
service or (iii) three (3) days after mailing, if mailed by first-class mail,
postage prepaid, to the following addresses:
If to the Executive, at the address set forth below the
Executive's signature at the end hereof.
If to the Company:
Webvan Group, Inc.
1241 E. Hillsdale Blvd., Suite 210
Foster City, CA 94404-1214
Attn: Chairman of the Board
or to such other address as any party hereto may designate by notice given as
herein provided.
11. Governing Law. This Employment Agreement shall be governed by and
construed and enforced in accordance with the internal substantive laws, and not
the choice of law rules of California.
12. Amendments. This Employment Agreement shall not be changed or
modified in whole or in part except by an instrument in writing signed by each
party hereto.
13. Severability. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.
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<PAGE> 11
14. Successors.
a. Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this
subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.
b. Executive's Successors. The terms of this Agreement and all
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successor, heirs, distributees, devisees or legatees.
15. Entire Agreement. This Agreement, the 1999 Nonstatutory Stock Option Plan,
the stock option agreements for the Option thereunder, the Proprietary
Information Agreement, the promissory note and security agreement for the Loan
and any other documents prepared pursuant to this Employment Agreement represent
the entire agreement and understanding between the Company and Executive
concerning Executive's employment relationship with the Company, and supersede
and replace all prior agreements or understandings relating to the subject
matter hereof, and no agreements, representations or understandings (whether
oral or written or whether express or implied) which are not expressly set forth
in this Agreement have been made or entered into by either party with respect to
the relevant matter hereof. In the event of a conflict between the terms of this
Agreement and any document incorporated herein, the terms of this Agreement
shall prevail.
16. Mediation. The parties shall make a good faith attempt to resolve
any dispute or controversy arising out of, relating to, or in connection with
this Agreement, or the interpretation, validity, construction, performance,
breach or termination thereof, through mediation. The mediation shall be
conducted within 45 days of either party notifying the other of a dispute or
controversy regarding this Agreement or Executive's employment relationship with
the Company. Unless otherwise provided for by law, the Company and Executive
shall each pay half the costs and expenses of the mediation.
17. Arbitration and Equitable Relief.
a. In the event that mediation pursuant to Section 16 fails to
resolve a dispute or controversy, and except as provided in Section 17(d) below,
the Company and Executive agree that any dispute or controversy arising out of,
relating to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof shall be
settled by arbitration to be held in San Mateo County, California, in accordance
with the National Rules for the
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Resolution of Employment Disputes then in effect of the American Arbitration
Association (the "Rules"). The arbitrator may grant injunctions or other relief
in such dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction.
b. The arbitrator[s] shall apply California law to the merits
of any dispute or claim, without reference to rules of conflict of law.
Executive hereby expressly consents to the personal jurisdiction of the state
and federal courts located in California for any action or proceeding arising
from or relating to this Agreement or relating to any arbitration in which the
parties are participants.
c. The Company and Executive shall each pay one-half of the
costs and expenses of such arbitration, and shall separately pay its counsel
fees and expenses unless otherwise required by law or determined by the
arbitrator.
d. The parties may apply to any court of competent jurisdiction
for a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary, without breach of this arbitration agreement
and without abridgment of the powers of the arbitrator.
e. Executive understands that nothing in this Section modifies
Executive's at-will status. Either the Company or Executive can terminate the
employment relationship at any time, with or without cause.
f. EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES, EXCEPT AS PROVIDED IN SECTION 16 AND SECTION 17(d) OF THIS
SECTION, TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY
TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF
THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING
CLAIMS:
(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD
FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL
INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION;
NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC
ADVANTAGE; AND DEFAMATION.
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<PAGE> 13
(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE
OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL
RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN
EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR
LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR
CODE SECTION 201, et seq.;
(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
18. Right to Advice of Counsel. Executive acknowledges that he has
had the opportunity to discuss this matter with and obtain the advice of legal
counsel, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement and the tax consequences
thereof, and is knowingly and voluntarily entering into this Agreement.
Executive shall bear all costs of his counsel.
19. Withholding. The Company shall be entitled to withhold, or cause
to be withheld, from payment any amount of withholding taxes required by law
with respect to payments made to Executive in connection with his employment
hereunder.
20. Counterparts. This Employment Agreement may be executed in
several counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
21. Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the date first written above.
WEBVAN GROUP, INC.
By: ____________________________________
EXECUTIVE:
George T. Shaheen
________________________________________
(Signature)
c/o Webvan Group, Inc.
1241 East Hillsdale Boulevard, Suite 210
Foster City, CA 94404-1214
[SIGNATURE PAGE OF SHAHEEN EMPLOYMENT AGREEMENT]
<PAGE> 15
EXHIBIT B
SECURITY AGREEMENT
This Security Agreement is made as of September ____, 1999 between
Webvan Group, Inc., a California corporation ("Pledgee"), and George T. Shaheen
("Pledgor").
Recitals
Pursuant to Pledgor's receipt of Shares under the Employment Agreement
dated September 19, 1999, between Pledgor and Pledgee (the "Employment
Agreement"), Pledgor has received 1,250,000 shares of Pledgee's Common Stock
(the "Shares"). Pledgor has elected under the terms of the Employment Agreement
to pay the withholding for such shares with a promissory note (the "Note"). The
Note and the obligations thereunder are as set forth in Exhibit C to the
Employment Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration
of the loan of $6,743,750.00 to Pledgor under the terms of the Employment
Agreement and the Note, Pledgor, pursuant to the California Commercial Code,
hereby pledges as collateral for the Note all of the Shares (herein sometimes
referred to as the "Collateral" or "Pledged Shares") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The Pledged Shares (together with an executed blank stock
assignment, attached hereto as Exhibit B-1, for use in transferring all or a
portion of the Pledged Shares to Pledgee if, as and when required pursuant to
this Security Agreement) shall be held by the Pledgeholder as security for the
repayment of the Note, and any extensions or renewals thereof, and the
Pledgeholder shall not encumber or dispose of such Pledged Shares except in
accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to
enter into this Security Agreement, Pledgor represents and covenants to Pledgee,
its successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum
of the Note secured hereby, together with interest thereon, at the time and in
the manner provided in the Note.
<PAGE> 16
(b) Encumbrances. The Pledged Shares are free of all other
encumbrances, defenses and liens, and Pledgor will not further encumber the
Pledged Shares without the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a "lender" within the meaning of the regulations under Part 207
of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees
to cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Pledged Shares.
4. Stock Adjustments. In the event that during the term of the
pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new, substituted and
additional shares or other securities issued by reason of any such change shall
be delivered to and held by the Pledgee under the terms of this Security
Agreement in the same manner as the Pledged Shares. In the event of substitution
of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and
execute such documents as are reasonable so as to provide for the substitution
of such Collateral and, upon such substitution, references to "Pledged Shares"
in this Security Agreement shall include the substituted shares of capital stock
of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the Pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Pledged Shares.
6. Default. Pledgor shall be deemed to be in default of the Note
and of this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be
delinquent for a period of ten (10) days or more; or
(b) Pledgor fails to perform any of the covenants contained in
this Security Agreement or the Employment Agreement for a period of ten (10)
days after written notice thereof from Pledgee.
In the case of Default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
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<PAGE> 17
7. Release of Collateral. Subject to any applicable contrary rules
under Regulation G, there shall be released from this pledge a portion of the
Pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the Pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note. Notwithstanding the foregoing, a portion of the
Pledged Shares may be released for a sale by Pledgor if the Pledgor enters into
an agreement with Pledgee and a broker to ensure that Pledgee receives the
portion of the sale's proceeds it is entitled to under the Note; provided,
however, that in no event shall more Pledged Shares be released than the
principle and interest then due on the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. This pledge shall continue until the payment of all
indebtedness secured hereby, at which time the remaining Pledged Shares shall be
promptly delivered to Pledgor, subject to the provisions for prior release of a
portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of Default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree
that the enforceability or invalidity of any provision or provisions of this
Security Agreement shall not render any other provision or provisions herein
contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" George T. Shaheen
________________________________________
Signature
________________________________________
Address
________________________________________
"PLEDGEE" WEBVAN GROUP, INC.
a California corporation
________________________________________
Signature
________________________________________
Print Name
________________________________________
Title
"PLEDGEHOLDER" ________________________________________
Secretary of WEBVAN GROUP, INC.
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<PAGE> 19
EXHIBIT B-1
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, George T. Shaheen, hereby sell, assign and
transfer unto Webvan Group, Inc. ___________________ (__________) shares of the
Common Stock of Webvan Group, Inc., standing in my name of the books of said
corporation represented by Certificate No. _____ herewith and do hereby
irrevocably constitute and appoint to transfer the said stock on the books of
the within named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Security
Agreement (the "Agreement") between Webvan Group, Inc. and the undersigned dated
September ___, 1999.
Dated: _______________, _____
Signature:_____________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature
line. The purpose of this assignment is to enable Webvan Group, Inc. to exercise
the Repurchase Option, as set forth in the Agreement, without requiring
additional signatures on the part of the Purchaser.
<PAGE> 20
EXHIBIT C
NOTE
$6,743,750 San Mateo, California
September ___, 1999
FOR VALUE RECEIVED, George T. Shaheen (the "Borrower") promises to pay
to Webvan Group, Inc., a California corporation (the "Company"), the principal
sum of Six Million Seven Hundred Forty-Three Thousand, Seven Hundred Fifty
Dollars ($6,743,750.00), together with interest on the unpaid principal hereof
from the date hereof at the rate of six and sixteen one-hundredths percent
(6.16%) per annum, compounded semiannually.
Principal and interest shall be due and payable upon any sale of the
Company's Common stock originally issued to the Borrower regardless of whether
on the date of sale the stock is owned by the Borrower or any person or entity
to whom the Borrower transferred the stock where (i) such transfer was not a
sale at fair market value or (ii) the transferee is affiliated with the Borrower
including, but not limited to, Family Members, (as such term is defined under
Rule 701 promulgated under the Securities and Exchange Act of 1934, as amended),
or any entity, whether a partnership, corporation, limited liability company,
trust, foundation or other entity, controlled by or for the benefit of Family
Members. The amount of the note due and payable upon a stock sale shall equal
ten percent (10%) of the gain from the stock sale computed as follows: (i) in
the case of a sale of stock originally issued upon exercise of an option, the
gain shall equal the sales price of the stock less the exercise price of the
option and (ii) in the case of the stock granted to the Borrower (including the
stock grant pursuant to Section 2(e) of the Employment Agreement between the
Company and Borrower dated September 19, 1999), the gain shall equal the sales
price less the fair market value of such stock on its date of grant. All gains
shall be calculated net of commissions but shall exclude any taxes due on the
sale or the exercise of any option. Payment of principal and interest shall be
made in lawful money of the United States of America.
The Borrower may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Employment Agreement, dated as
of September 19, 1999. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the Borrower,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
<PAGE> 21
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
Borrower.
BORROWER:
George T. Shaheen
________________________________________
Signature
86 Flood Circle
Atherton, California 94027
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<PAGE> 1
EXHIBIT 10.24
EXCLUSIVE SUPPLY AND SOLE SOURCE AGREEMENT
This Exclusive Supply and Sole Source Agreement (the "Agreement"),
entered into as of the Effective Date (the "Effective Date"), is by and between
Intelligent Systems for Retail, Inc. ("ISR"), a California corporation with
offices at 1241 E. Hillsdale Boulevard, Suite 210, Foster City, California
94404, and Diamond Phoenix Corporation ("Diamond "), a Maine corporation with
offices at 167 River Road, Lewiston, Maine 04241.
RECITALS
WHEREAS, ISR is in the business of soliciting direct consumer sales via
the Internet and then selling and delivering grocery, drugstore, and general
merchandise products to general consumers;
WHEREAS, Diamond is in the business of designing, manufacturing,
integrating and installing equipment for automated materials handling, including
Carousel Products;
WHEREAS, the parties desire that Diamond manufacture and sell to ISR
various types of Carousel Products for automated materials handling;
WHEREAS, the parties desire that ISR purchase all of its requirements
for these Carousel Products from Diamond Phoenix; and
WHEREAS, the parties by this Agreement desire to set forth their
various rights and responsibilities regarding the sale and purchase of such
Carousel Products.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto agree as follows:
AGREEMENT
1.0 DEFINITIONS.
1.1 "Affiliate" shall mean (i) a corporation performing activities relating to
ISR's business in which ISR owns and controls, directly or indirectly, at least
fifty percent (50%) of the outstanding shares entitled to vote for the board of
directors; (ii) a franchisee or licensee of ISR; or (iii) a joint venture with a
third party (x) which joint venture performs activities relating to ISR's
business, and (y) in which ISR owns or controls at least twenty percent (20%)
equity interest.
1.2 "Carousel Product" shall mean Diamond's carousel product for automated
materials handling, as more fully described in Exhibit A, including all
equipment and related Carousel Software. The parties agree that, from time to
time and subject to mutual agreement, the parties may amend or add different
configurations of carousel
<PAGE> 2
products to this list. When used without capitalization, the term "carousel
products" shall refer to carousel products generally and not just those
manufactured by Diamond.
1.3 "Carousel Software" shall mean that certain software, in source code and
object code format, which (1) controls the functionality of the Carousel Product
or (2) interfaces with other materials handling systems.
1.4 "Intellectual Property" shall mean all rights of a person or entity in, to,
or arising out of: (i) any U.S. or foreign patent (or any similar right) or any
application therefor and any and all reissues, divisions, continuations,
renewals, extensions and continuations-in part thereof; (ii) inventions (whether
patentable or not in any country), invention disclosures, improvements, trade
secrets, proprietary information, know-how, technology and technical data; (iii)
copyrights and registrations and applications therefor in the U.S. or any
foreign country, and all other rights corresponding thereto throughout the
world; and (iv) any other proprietary rights anywhere in the world.
1.5 "Shareholder Agreement" shall mean that certain Amended and Restated
Shareholder Agreement of even date herewith.
1.6 "Specifications" means the specifications for the Carousel Product, as set
forth in Exhibit A.
1.7 "Purchase Order" means a written order from ISR (or any of its Affiliates)
delivered to Diamond requesting Diamond to manufacture and sell a Carousel
Product and stating the proposed unit numbers and specifications of the Carousel
Product, the location at which the Carousel Product will be installed (the
"Worksite") and any special conditions thereof that might affect the
fabrication, installation or testing of the Carousel Product, shipping
instructions, any request for Diamond to supply labor for installation, a
requested testing schedule and procedure, and the requested delivery date. The
Purchase Order may also include a reference to a "Technical Proposal" sent by
Diamond to ISR, including such information as price, scope of work, system
functionality, delivery schedule, and acceptance test criteria.
2.0 MANUFACTURING AND SALES.
2.1 Manufacturing and Sale.
(a) Manufacturing and Sale. Upon ISR's (as used in this Section 2.0
only, ISR shall also refer to ISR's designated Affiliate(s)) Purchase Orders
therefor and pursuant to the terms and conditions of this Agreement, Diamond
agrees to manufacture and sell all Carousel Products ordered by ISR to ISR or
its designated Affiliates, and, subject to Section 2.1(c), ISR agrees to
purchase such Carousel Products from Diamond.
(b) Diamond Exclusivity. Provided that ISR fulfills its obligations
pursuant to Section 4 or unless ISR provides prior written consent, Diamond
shall not sell any Carousel Products (whether sold by Diamond or sold by a
licensee, distributor, integrator, broker or any other third
2
<PAGE> 3
party authorized by Diamond) to any other entity in the business of soliciting
and transacting direct consumer sales via the Internet and delivering (whether
using its own transportation or via outsourcing to a third party) grocery,
drugstore, and general merchandise to customers.
(c) ISR Exclusivity and Sole Source. For so long as Diamond
manufactures and sells to ISR its required supply of carousel products, ISR
agrees to purchase all of its requirements for carousel products from Diamond.
If Diamond fails to provide ISR with all its required supply of Carousel
Products ordered pursuant to this Agreement on any particular Purchase Order for
a given site on the delivery dates reasonably required by ISR, such failure
shall not be considered a breach of this Agreement but will entitle to ISR to
purchase enough equivalent products from a third party to fulfill such
particular Purchase Order. The foregoing notwithstanding, subject to ISR's
fulfilling its obligations set forth in Section 4 of this Agreement, Diamond's
obligations pursuant to Section 2.1(b) shall remain in full force and effect.
2.2 Orders and Forecasts.
(a) All purchases and sales between ISR (and any of its Affiliates) and
Diamond, whether consummated directly or indirectly through a third party agent
of Diamond, shall be initiated by ISR's issuance of written Purchase Orders sent
via airmail or by telephone or facsimile and then confirmed by written Purchase
Orders. The acceptance by Diamond of a Purchase Order shall be indicated by
written acknowledgment thereof by Diamond. In the event of a conflict between
the terms and conditions of any Purchase Order and the terms and conditions of
this Agreement, the terms and conditions of this Agreement shall control as to
such conflict, unless the parties agree in writing that the terms and conditions
of a particular Purchase Order shall supersede a particular term or condition of
this Agreement.
(b) ISR shall have the right to cancel Purchase Order(s) or any
portions thereof for any reason by notifying Diamond in writing no later than
thirty (30) days after ISR submits its Purchase Order(s) pursuant to Section
2.2(a). Cancellation shall be effective upon Diamond's receipt of the written
cancellation notice from ISR. Diamond shall cease all work on such canceled
purchase order(s) in accordance with the cancellation notice. In the event that
Diamond incurs any costs in connection with preparing for or commencing work on
a Purchase Order that is canceled pursuant to this provision, including without
limitation costs for materials, drawings or labor, ISR shall reimburse Diamond
for such reasonable costs within thirty (30) days of receiving an invoice
therefor.
2.3 Delivery and Shipping. Diamond shall ship the Carousel Products to ISR's
Worksite suitably packaged for shipment in Diamond's standard containers. All
shipping costs shall be prepaid by Diamond but invoiced to ISR.
2.4 Insurance and Risk of Loss. Immediately following delivery of the Carousel
Product to the Worksite, ISR shall be responsible for and shall bear any and all
risk of loss of or damage to the Carousel Product. ISR shall, at its expense,
take out and maintain insurance in an amount at least equal to the Purchase
Price covering all risks of loss or damage to the Carousel Product. Such
insurance shall name Diamond as an insured party and shall provide for an
insurer's waiver of
3
<PAGE> 4
subrogation in favor of all insured parties. Prior to delivery of the Carousel
Product to the Worksite, Diamond shall be responsible for and shall bear any and
all risk of loss of or damage to the Carousel Product. Diamond, at its expense,
shall maintain insurance in an amount equal to or greater than the value of all
Carousel Products that Diamond is manufacturing for or shipping to ISR, such
insurance to cover all risks of loss or damage to the Carousel Products.
2.5 Site Conditions and Provisions by Purchaser. ISR, at its own expense, shall
provide at the Worksite reasonable means of access to a minimum of one dock
door, with the availability of a dock leveler, a completely enclosed building to
protect Diamond's equipment from the elements, completion of water-tight roof
and such electric current, water, heat, ventilation, telephone service, a
temporary office space, light and other utilities and facilities required for
the installation of the Carousel Product. In the event that any elevator or
crane service owned by ISR shall be available at the Worksite, Diamond may,
without charge, use any such service for handling of materials during
installation. ISR shall allow Diamond access to the Worksite for inspection of
compliance to these requirements, prior to commencement of the installation.
Additional provisions and conditions related to Worksite conditions and
installation may be attached to the Purchase Order and acceptance thereof.
2.6 Permits. Prior to the installation of the Carousel Product, ISR shall
procure and pay for all building, erection and other licenses, permits,
authorizations and inspections required in connection with the Carousel Product.
Diamond shall not be responsible for any failure of the Carousel Product or its
installation to comply with building, electrical or other codes or regulations
of local, state or federal agencies or authorities.
2.7 Changes, Delays. At any time prior to delivery, ISR may request in writing
any substitutions, deviations, additions, or deletions (hereinafter referred to
as "Changes") in the Carousel Product and in the specifications or drawings
incorporated in this Agreement or the Purchase Order. All of the terms and
conditions of this Agreement shall apply to such Changes. If Diamond's
performance is delayed by any such Changes or by other causes within control of
ISR, ISR agrees to reimburse Diamond for reasonable and documented expenses
incurred as a result of such delay, including without limitation, the costs of
storing, maintaining, repairing, and refurbishing Carousel Product, demurrage,
labor and material escalation and pull out charges. Upon request by ISR, Diamond
shall provide to ISR an itemized list of all such expenses with supporting
documentation. In such event, ISR also agrees to excuse the delay and accept
Diamond's performance at any appropriately deferred completion date.
2.8 Labor and Personnel. Any request that Diamond supply labor at the Worksite
(other than Diamond's customary installation supervisor) shall be set forth in
the Purchase Order and the cost of such labor, including any premium for
overtime, shall be negotiated for each order.
2.9 Test and Inspection By ISR.
(a) All Carousel Products manufactured and delivered by Diamond may be
subject to incoming receiving inspection by ISR at the Worksite.
4
<PAGE> 5
(b) Within five (5) days of delivery of the Carousel Product to the
Worksite, ISR shall inspect the Carousel Product for damage incurred during
shipping and conformity to the Purchase Order. If ISR determines that the order
it has received does not conform to the Purchase Order, or is damaged during
shipment, ISR shall notify Diamond in writing within ten days of the date of
delivery of the Carousel Product to the Worksite and Diamond shall at its own
expense repair or replace such Carousel Product.
(c) Each Purchase Order and acceptance thereof shall state the
procedure and schedule for testing of the Carousel Product.
3.0 CAROUSEL SOFTWARE.
3.1 Carousel Software. Diamond shall own all right, title and interest in and to
the Carousel Software, including any Intellectual Property rights therein.
3.2 License Grant. Diamond grants to ISR (and its designated Affiliate(s) as
applicable) a nonexclusive, worldwide, perpetual, irrevocable, royalty-free,
fully paid up license to use, display and publicly perform the Carousel Software
in connection with the operation of the Carousel Products; and, for purposes of
executing the Carousel Software, analysis, and running simulations by ISR and
Affiliate(s) only, to copy the Carousel Software. Without limiting the
foregoing, ISR may grant to its designated Affiliate(s) to which it has sold,
leased or otherwise transferred a Carousel Product or which has purchased a
carousel Product directly from Diamond (or any third party agent of Diamond) a
sublicense in and to its rights in the Carousel Software co-extensive with the
rights granted hereunder by Diamond to ISR.
3.3 Ownership of Modifications. As between ISR and Diamond, subject to and with
exception of Diamond's ownership of the Carousel Software as set forth in
section 3.1, ISR shall own all right, title, and interest in and to any
permitted modifications and derivative works made from or to the Carousel
Software on behalf of ISR, including all Intellectual Property rights therein.
ISR grants Diamond a nonexclusive, worldwide, perpetual, irrevocable,
royalty-free, fully paid up license to use and copy any such modifications and
to sub-license any such modifications and derivative works to any licensee other
than a business described in section 2.1(b). Nothing in this section 3.3 should
be construed to allow ISR to modify or make derivative works from the Carousel
Software without the express written consent of Diamond.
3.4. Software Escrow.
3.4.1. Escrow Account.
(a) On the Effective Date, and as a condition precedent to any
obligation of ISR hereunder, Diamond will deposit a copy of all materials
relating to the Carousel Software, including the binary and source code for the
Carousel Software, and all tools used by Diamond to generate such software that
are not generally commercially available, such as Diamond-authored development
tools, etc., such that a reasonably skilled programmer could understand and
modify such Carousel Software (collectively, the "Source Materials") in escrow
with a mutually
5
<PAGE> 6
acceptable escrow agent and the parties will enter into a mutually acceptable
source code escrow agreement on customary terms consistent with the provisions
of this Section 3.5. Diamond will deposit all Source Materials with the escrow
agent in accordance with the escrow agreement, but in no event shall such
deposits occur less frequently than once per calendar quarter. ISR shall have
the right to inspect any deposited Source Materials after delivery to the escrow
agent, but only on the premises of the escrow agent and only as necessary to
verify the nature and completeness of such Source Materials. ISR shall pay the
fees of the escrow agent.
(b) In the event that Diamond ceases to carry on business for thirty
(30) consecutive days, fails or is otherwise unable to provide service and
support which it is contractually obligated to provide for the Carousel
Software, which inability continues for thirty (30) days after ISR notifies
Diamond in writing of the alleged failure in service and support, the deposited
Source Materials shall be delivered to ISR by the escrow agent. Delivery of the
deposited materials will be made to ISR after written request by ISR to the
escrow agent, stating the grounds upon which the request is made. On receipt of
the request from ISR, the escrow agent will mail a copy of the request to
Diamond and will then deliver the deposited Source Materials to ISR forthwith
thirty (30) days after the copy of the request is mailed to Diamond. If Diamond
disputes the occurrence of any default event specified in ISR's request, the
escrow agent will not deliver the requested Source Materials to either party
until directed to do so by ISR and Diamond jointly, or until ordered to do so by
final order of a court of competent jurisdiction or pursuant to an arbitration
proceeding initiated by either of the parties, in accordance with the
then-current rules of the American Arbitration Association. If ISR initiates the
arbitration, it shall be with an arbitrator located in the State of Maine. If
Diamond initiates such arbitration, it shall be with an arbitrator located in
the State of California. If a party initiates such arbitration, the other party
agrees to submit to the jurisdiction thereof, solely for the purpose of
adjudicating release pursuant to this Section 3.4 and to cooperate fully to
complete such proceeding as quickly as possible. The decision of the arbitrator
will be binding and either party will have the right to enter such order in a
court of competent jurisdiction.
3.4.2. Use of Source Materials.
(a) On the occurrence of receipt by ISR of the Source Materials, ISR
may use the Source Materials, either directly or indirectly, through a third
party programmer or analyst engaged by ISR specifically to complete or continue
Diamond's work, solely to modify, enhance, and support the Carousel Product, and
to make a reasonable number of copies of the Source Materials to assist in the
performance of such tasks;
(b) ISR acknowledges and agrees that the Source Materials constitute
confidential proprietary information of Diamond. ISR may disclose the Source
Materials only to those employees of ISR (or Affiliates) required to have
knowledge of such information to perform their duties. ISR shall protect the
Source Materials with the same degree of care as it protects its own
confidential information, and in no event less than a reasonable degree of care.
(c) If a problem that resulted in ISR obtaining the Source Materials is
later cured, ISR shall promptly return the Source Materials to escrow agent.
6
<PAGE> 7
4.0 ISR PERFORMANCE CRITERIA.
4.1 Minimum Order. In order to maintain the exclusivity granted in Section
2.1(b) and the effect of the Standstill Period as defined in the Stock Purchase
Agreement and the Shareholder Agreement, ISR (including all orders from its
Affiliate(s)) shall annually order at least the following amounts of Carousel
Products from Diamond:
(a) From January 1, 1999, through March 31, 2000, ISR shall place
cumulative orders of Carousel Products in an amount of [*] Dollars ($[*]);
(b) From January 1, 1999, through December 31, 2000, ISR shall place
cumulative orders of Carousel Products in an amount of [*] Dollars ($[*]); and
(c) From January 1, 1999, through December 31, 2001, ISR shall place
cumulative orders of Carousel Products in an amount of [*] Dollars ($[*]).
4.2 In the event that ISR fails to order the minimum amounts of Carousel
Products set forth above, but such orders nonetheless total at least
seventy-five percent (75%) of such minimum amounts, such failure shall not be
considered a breach of this Agreement but ISR may only maintain the exclusivity
in 2. 1 (b) and the Standstill Period by placing additional orders to meet the
minimum amounts within the first quarter of the following year.
4.3 In the event that IRS fails to order the minimum number of Carousel Products
set forth above and does not correct any such shortcoming pursuant to section
4.2, such failure shall not be deemed a breach of this Agreement but shall allow
Diamond to terminate the Standstill Period and the restriction that Diamond
limit certain sales to ISR exclusively as set forth in section 2.1(b).
4.4 For the purpose of determining whether ISR has placed sufficient orders to
meet the performance criteria set forth in this section, an "order" shall be
defined to include all of the following:
(a) The receipt by Diamond of a written Purchase Order from ISR:
(b) The receipt by ISR of Diamond's written acceptance of the Purchase
Order;
(c) The receipt by Diamond of ISR's deposit of ten percent (10%) of the
purchase price; and
(d) The receipt by Diamond on a continuing basis of all payments
invoiced with respect to a particular order in a timely manner.
- ---------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
7
<PAGE> 8
For the purposes of this section 4, an order placed by ISR or an Affiliate
directly or indirectly through an authorized agent, licensee, distributor,
integrator or broker of Diamond's shall be considered an order by ISR from
Diamond.
5.0 TECHNICAL SUPPORT.
Within one hundred and twenty (120) days of the Effective Date, the
parties shall negotiate and enter into a Separate Support Agreement, pursuant to
which Diamond would provide technical support to ISR regarding use of the
Carousel Products.
6.0 PRICE AND PAYMENT.
6.1 Price. ISR (as used in this Section 6.0 only, ISR shall also refer to ISR's
Affiliate) will pay to Diamond for Carousel Products as follows:
(a) ISR will pay to Diamond (whether sold by Diamond or sold by a
licensee, distributor, integrator, broker or any other third party authorized by
Diamond) for Carousel Products based on the price list and pricing methodology
set forth in Exhibit B. During the Term (but not extending through any renewal
term), Diamond shall not increase the prices charged to ISR for Carousel
Products by more than [*] of the increase in the Consumer Price
Index ("CPI") over the twelve month period prior to any such increase. As used
herein, CPI means the U.S. Consumer Price Index for all Urban Consumers, U.S.
City Average - All Items 1982-1984 = 100 Base for the applicable twelve (12)
month period as published by the Bureau of Labor Statistics. The price for
Carousel Products sold during any renewal term is set forth in section 7.2.
(b) During the term of this Agreement and any extensions thereof,
Diamond shall provide ISR with a volume discount on Carousel Products ordered,
and such discount shall be set equal as follows:
(i) If during any one (1) calendar year period, ISR places
orders for Carousel Products in an aggregate sum of between Five
Million Dollars ($5,000,000.00) and Ten Million Dollars ($
10,000,000.00), Diamond shall reduce the price, retroactively or
prospectively, as the case may be, of Carousel Products ordered during
the entire calendar year by [*] percent ([*]%).
(ii) If during any one (1) calendar year period, ISR places
orders for Carousel Products in an aggregate sum of more than Ten
Million Dollars ($ 10,000,000.00) but less than Twenty Million Dollars
($20,000,000.00), Diamond shall reduce the price, retroactively or
prospectively, as the case may be, of Carousel Products ordered during
the entire calendar year by [*] percent ([*]%).
(iii) If during any one (1) calendar year period, ISR places
orders for Carousel Products in an aggregate sum of more than Twenty
Million Dollars
- --------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
8
<PAGE> 9
($20,000,000.00), Diamond shall reduce the price, retroactively or
prospectively, as the case may be, of Carousel Products ordered during
the entire calendar year by [*] percent ([*]%).
(iv) For the purpose of determining whether ISR has placed
sufficient orders to qualify for the discounts set forth in this
section and determining whether a particular order is made during a
calendar year when a discount has been earned, the definition of
"order" set forth in Section 4.4. shall apply.
(c) During each Extension Period (as defined in section 7.2 below)
elected by ISR, Diamond may increase the price charged ISR for the Carousel
Product by [*] percent ([*]%) of the increase in the CPI during the twelve month
period prior to any such increase.
6.2 Payment Method.
(a) ISR shall pay Diamond for all Carousel Products ordered by ISR as
follows. Within ten (10) days of Diamond's acceptance of an ISR Purchase Order,
ISR shall pay to Diamond a deposit equal to ten percent (10%) of the Purchase
Price. Diamond shall invoice ISR on the first and fifteenth days of each month
thereafter for progress payments for the cost of materials, fabrication,
installation and other services. Each invoice shall be paid by ISR within
fifteen (15) days of receipt. Ten percent (10%) of the Purchase Price shall be
held by ISR as a retainer, to be paid within fifteen (15) days after the
completion of the installation of the Carousel Product and the completion of the
Scope of Work set forth in the Purchase Order.
(b) In addition to the Purchase Price, ISR shall pay all shipping
costs, taxes (including without limitation, state, federal, local sales or value
added taxes and personal property taxes), import or export duties, and business
license fees. Any of the foregoing for which Diamond has a legal obligation of
payment may be invoiced by Diamond to ISR for payment within fifteen (15) days
unless ISR furnishes Diamond with the applicable tax exemption certificate or
direct payment certificate. ISR hereby indemnifies and holds Diamond harmless
from and against any claims by any third party for payment of any of the
foregoing taxes or fees.
7.0 TERM AND TERMINATION.
7.1 Term of this Agreement. This Agreement shall become effective on the
Effective Date and shall continue in force until December 31, 2001 (such period,
the "Term") unless terminated earlier pursuant to Section 7.3.
7.2 Renewal Option. After the Term and through December 31, 2005, ISR shall have
the option, in its sole discretion, to extend the Term for successive one (1)
year periods (each such period an "Extension Period") based on the following
option price formula and according to the following procedure:
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* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
9
<PAGE> 10
ISR shall exercise its option to extend the Term for one year by giving
Diamond written notice no later than thirty (30) days following the end of the
Term or extension thereof. The price paid by ISR to Diamond for exercising any
renewal option shall be as follows:
(a) If during the immediately preceding calendar year, ISR (including
all orders from its Affiliates) places an order in an aggregate amount of more
than Ten Million Dollars ($10,000,000.00), ISR may exercise the option without
any charge.
(b) If during the immediately preceding calendar year, ISR (including
all orders from its Affiliates) places an order in an aggregate amount of less
than Ten Million Dollars ($10,000,000.00), ISR may exercise the option at a cost
of fifteen percent (15 %) of the difference between the actual annual orders
placed and Ten Million Dollars ($10,000,000.00).
(c) For the purpose of determining whether an order has been placed
during a particular calendar year, "order" shall be defined as in Section 4.4
hereof.
7.3 Termination. This Agreement may be terminated only in accordance with the
following:
(a) Either party hereto may terminate this Agreement for cause if the
other party hereto becomes the subject of a voluntary or involuntary petition in
bankruptcy or any proceeding relating to insolvency, receivership, liquidation,
or composition for the benefit of creditors, which petition or proceeding is not
dismissed with prejudice within sixty (60) days after filing.
(b) Either party hereto may terminate this Agreement for cause if the
other party breaches any express material term or condition of this Agreement
and fails to cure that breach within sixty (60) days after receiving written
notice of the breach. If the nature of the cure for any non-monetary breach is
such that it is reasonably expected to take longer than sixty (60) days, the
breaching party shall be given an additional forty-five (45) calendar days to
cure such breach, provided the cure is commenced during the original sixty (60)
day period and is diligently carried out thereafter. In the event the material
breach is not cured within the periods specified above after delivery of the
notice, the non-breaching party may terminate this Agreement in writing as of a
date specified in the termination notice. The terminating party shall have all
rights and remedies available at law or equity as well as any other rights and
remedies set forth in this Agreement.
7.4 Survival. The provisions of Sections 3.0 (Ownership and License Grant), 5.0
(Technical Support), 7.4 (Survival), 8.0 (Warranties and Indemnification), and
9.0 (Confidentiality), 10.0 (Jurisdiction and Applicable Law), and 11.0
(Miscellaneous) shall survive termination of this Agreement for any reason.
8.0 WARRANTIES AND INDEMNIFICATION.
8.1 Warranties. Diamond represents and warrants as follows:
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<PAGE> 11
(a) That it owns the technology incorporated into or embodied by the
Carousel Product sold to ISR (or its Affiliate) hereunder and that it has full
legal right to sell the Carousel Product and that it has satisfied any and all
applicable conditions precedent to such sale and that the sale by it of the
Carousel Product hereunder does not violate any obligations to third parties to
which it is bound.
(b) That it has full power to enter into this Agreement, to carry out
its respective obligations pursuant to this Agreement, and to grant the rights
granted pursuant to this Agreement. Further, Diamond represents and warrants
that it has obtained all corporate, third party, and governmental approvals
necessary to enter into this Agreement and carry out the transaction
contemplated thereby.
(c) That it is not engaged in nor has it been notified of any potential
claims, suits, actions, investigations, or proceedings relating to any
Intellectual Property rights concerning the Carousel Product. Diamond will
immediately give written notice to ISR of any such event known to it during the
term of this Agreement.
(d) Diamond warrants that (a) the Carousel Product shall be free from
all liens, charges or encumbrances, except any lien of Diamond in respect of any
unpaid portion of the Purchase Price; (b) the Carousel Product shall be free
from defects in material and workmanship and shall conform to the specifications
of the Carousel Product set forth in Exhibit A and also conform to the
functionality defined in the agreed to Technical Proposal attached to the
Purchase Order, if any; and (c) the Carousel Product shall be new and, in the
absence of specification of a nature consistent with Diamond's usual and normal
production. Diamond shall, at its option, repair or replace (at Diamond's
expense) any defective Carousel Product or component thereof, provided however,
that Diamond is given written notice of any defect during the warranty period.
For this purpose the warranty period shall commence on the earlier of the date
of first commercial use or the date on which Diamond tendered the Carousel
Product for commercial use, and the warranty period shall end one year after
such commencement date. When the installation and commissioning of equipment is
not the responsibility of Diamond Phoenix, the date of effective commercial use
shall be thirty (30) days after shipment, unless otherwise specified in writing.
ISR shall give Diamond prompt written notice of any claim under the
foregoing Warranty and permit Diamond to inspect the Carousel Product in order
to verify the defect or nonconformity. Failure of ISR to give Diamond such
notice and opportunity to inspect shall relieve Diamond of all obligations with
respect to such claims.
Subject to Diamond's obligations under section 8.2 of this Agreement,
ISR's remedies and Diamond's obligations in connection with any claim made under
this warranty shall be limited to repair or, at Diamond's option, replacement of
the equipment or part thereof which is found to be defective. Labor performed at
the Worksite with regard to such claims is not included in this warranty. ISR
shall be responsible for the normal maintenance and repair of the Carousel
Product and shall perform the same in accordance with generally accepted
maintenance procedures or such other procedures as are set forth in maintenance
and repair manuals provided by Diamond to ISR.
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<PAGE> 12
Diamond shall not be responsible for and shall not be obligated to pay or to
reimburse Purchaser for (a) any work or repairs performed on the Carousel
Product by third parties except for mutually agreed subcontractors, (b) any
materials furnished by third parties for use in connection with the Carousel
Product if the same was undertaken or furnished without mutual prior written
consent or (c) any loss or damage arising from improper operation or maintenance
of the Equipment or from ordinary wear and tear.
Notwithstanding other provisions of this Article, in instances of a
"major failure" during the warranty period. Diamond will provide all necessary
parts and installation labor to correct the defect. A "major failure" is defined
as failure of the Carousel Product or portion of the Carousel Product, to
operate as described in the Technical Proposal, which ISR, through the diligent
efforts of its maintenance personnel or available contractors, cannot remedy.
Diamond will immediately dispatch a serviceman by commercial air carrier upon
request and notification of a "major failure" by ISR.
Should it later be reasonably determined by Diamond that the necessary
corrective services were within the capabilities of the ISR's maintenance
personnel, ISR will reimburse Diamond for the labor and expenses of the service
trip.
This warranty applies only to products that are manufactured by Diamond
and ISR's sole warranty with respect to items not manufactured by Diamond
(including without limitation the computers that control the Carousel Product)
shall be that of the manufacturer, if any.
THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED
TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OTHER
THAN AS SPECIFICALLY SET FORTH ABOVE.
8.2 Indemnity by Diamond. Diamond agrees to indemnify and hold ISR and its
Affiliates harmless from any and all loss, cost, liability, or expense
(including court costs and reasonable fees of attorneys and other professionals)
arising out of or resulting from the breach or claimed breach of the above
warranties and representations, including but not limited to any such loss,
cost, liability, or expense arising out of or resulting from any claim brought
by a third party against ISR, including any claims that the Carousel Product
infringe the Intellectual Property rights of any third party. In the event of
any such claim, ISR (or its Affiliate) agrees to notify Diamond promptly of the
claim and to permit Diamond, at Diamond's expense, to assume control of the
defense thereof with counsel of Diamond's choosing, and cooperate with Diamond
in such defense at Diamond's expense.
8.3 ISR's Representations, Warranties, and Covenants.
(a) ISR represents and warrants that it has full power to enter into
this Agreement and to carry out its respective obligations pursuant to this
Agreement. ISR also represents and warrants
12
<PAGE> 13
that it has obtained all corporate, third party, and governmental approvals
necessary to enter into this Agreement and carry out the transaction
contemplated thereby.
(b) ISR covenants that it shall not modify the Carousel Product or the
Carousel Software nor create derivative works based on the Carousel Software in
any way without the express written consent of Diamond.
8.4 Indemnity by ISR. ISR agrees to indemnify and hold Diamond harmless from any
and all loss, cost, liability, or expense (including court costs and reasonable
fees of attorneys and other professionals) arising out of or resulting from the
breach or claimed breach of the above warranties and representations, including
but not limited to any such loss, cost, liability, or expense arising out of or
resulting from any claim brought by a third party against Diamond. In the event
of any such claim, Diamond agrees to notify ISR promptly of the claim and to
permit ISR at ISR's expense, to assume control of the defense thereof with
counsel of ISR's choosing, and cooperate with ISR in such defense at ISR's
expense.
9.0 CONFIDENTIAL INFORMATION.
9.1 "Confidential Information" means any information disclosed by one party to
the other party in connection with this Agreement and which the disclosing party
believes to include confidential information, is designated with an appropriate
legend such as "CONFIDENTIAL:" (or other label indicating its confidential
status) at the time of disclosure if in documentary or other tangible form, or
if such disclosure is initially oral or visual and not reduced to written or
documentary form at the time of disclosure, such Confidential Information shall
be identified as confidential at the time of disclosure, summarized or
identified in a written document that is marked with an appropriate legend
indicating its confidential status, and provided to the other party within
twenty (20) days following such oral or visual disclosure. For each item of
Confidential Information, the party disclosing the item shall be called the
"Disclosing Party," and the party receiving the item shall be called the
"Receiving Party."
9.2 Confidentiality Obligations. The Receiving Party shall hold all Confidential
Information of the Disclosing Party in trust and confidence, and protect it as
the Receiving Party would protect its own confidential information (which shall
in any event shall be no less than reasonable protection) and shall not use such
Confidential Information for any purpose other than that contemplated by this
Agreement. Unless agreed by the Disclosing Party in writing, the Receiving Party
shall not disclose any Confidential Information of the Disclosing Party, by
publication or otherwise, to any person other than employees and contractors
(such as contract manufacturers or software developers) bound to written
confidentiality obligations consistent with and at least as stringent as those
set forth herein and who have a need to know such Confidential Information for
purposes of enabling a party hereto to exercise its rights and perform its
obligations pursuant to this Agreement.
9.3 Exceptions. The obligations specified above shall not apply to any
Confidential Information to the extent that (a) it is already known to the
Receiving Party without restriction prior to the time of disclosure pursuant to
this Agreement; (b) it is acquired by the Receiving
13
<PAGE> 14
Party from a third party without confidentiality restriction and does not
originate with the Disclosing Party; (c) it is independently developed or
acquired by the Receiving Party by employees or contractors without access to
such Confidential Information; (d) it is approved for release by written
authorization of the Disclosing Party; (e) it is in the public domain at the
time it is disclosed or subsequently falls within the public domain through no
wrongful action of the Receiving Party; or (f) it is furnished to a third party
by the Disclosing Party without a similar restriction on the third party's
right.
9.4 Compelled Disclosure. A Receiving Party may disclose Confidential
Information if it is disclosed pursuant to the requirement of a court or other
governmental agency or disclosure is permitted or required by operation of law,
provided that the Receiving Party use its best efforts to notify the Disclosing
Party in advance and seeks confidential treatment for such Confidential
Information.
9.5 Return of Confidential Information. Upon written request of the Disclosing
Party, the Receiving Party shall return to the Disclosing Party any Confidential
Information in its possession or shall certify in writing as to its destruction.
In any event, upon termination of this Agreement for any reason, the Receiving
Party shall promptly return all Confidential Information to the Disclosing
Party.
9.6 Confidentiality of Agreement. Each party agrees that the terms and
conditions of this Agreement shall be treated as Confidential Information;
provided that each party may disclose the terms and conditions of this
Agreement: (i) as required by any court or other governmental body or as
otherwise required by law; (ii) to legal counsel; (iii) in confidence, to
accountants, banks, and financing sources and their advisors; and (iv) in
confidence, in connection with the enforcement of this Agreement or rights under
this Agreement.
10.0 JURISDICTION, APPLICABLE LAW, AND DISPUTE RESOLUTION.
10.1 Governing Law and Venue. This Agreement and any matters hereunder shall be
governed by and construed in accordance with the internal laws of the State of
Maine, excluding its conflict of law rules. The parties hereto hereby consent to
the exclusive jurisdiction and venue of the state and federal courts of Maine
and California with respect to the resolution of any suit, action or proceeding
hereunder; provided, however, that only the defendant in any such suit, action
or proceeding shall have the right to select the venue as between the states of
Maine or California with respect to any such suit, action or proceeding. In any
such suit, action or proceeding, the non-prevailing party shall pay to the
prevailing party all reasonable attorneys' and expenses incurred by the
prevailing party in such suit, action or proceeding. For purposes of the
immediately preceding sentence, "attorneys' fees" shall include, without
limitation: fees for services relating to the claim or dispute rendered prior to
litigation (including investigation); at both trial and appellate levels; after
judgment in seeking to obtain any execution or enforcement thereof; and in
connection with any bankruptcy or similar proceeding.
10.2 Dispute Resolution. The parties agree to adopt the following procedures
with respect to the resolution of any disputes or controversies which may arise
during the term of this Agreement:
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<PAGE> 15
In the event that one party believes that the other party has failed to
perform any of its obligations under this Agreement, such party's
nominated representative shall promptly so notify the other party's
nominated representative in writing and request a performance review
meeting. The nominated representatives or their designated
representatives will discuss the problem and negotiate in good faith in
an effort to resolve the dispute without any formal proceeding. No
litigation for the resolution of such disputes may be commenced until
the designated representatives have met and either party has concluded
in good faith that amicable resolution through continued negotiation
does not appear possible.
11.0 MISCELLANEOUS.
11.1 Independent Contractors. Each party acknowledges that the relationship
between the parties pursuant to this Agreement is that of independent
contractors. No provision of this Agreement shall be construed to (i) constitute
the parties as partners, joint venturers or participants in a joint undertaking,
or (ii) give any party the power to direct and control the day-to-day activities
of the other. Further, no employees of any party shall be deemed or treated as
employees of another party, and each party shall be solely responsible for any
and all payroll, employment and related taxes, and withholding applicable to its
own employees.
11.2 Waiver. Any waiver of breach or default pursuant to this Agreement shall
not be a waiver of any other subsequent default. Failure or delay by either
party to enforce any term or condition of this Agreement shall not constitute a
waiver of such term or condition.
11.3 Conflicts in Provisions. In the event of any apparent conflicts or
inconsistencies between this Agreement and any Exhibits hereto, to the extent
possible such provisions shall be interpreted so as to make them consistent, and
if such is not possible, the provisions of this Agreement shall prevail.
11.4 Headings. The Section headings herein are for reference and convenience
only and shall not enter into the interpretation hereof.
11.5 Severability. To the extent than any provision of this Agreement is found
by a court of competent jurisdiction to be invalid or unenforceable, that
provision notwithstanding, the remaining provisions of this Agreement shall
remain in full force and effect and such invalid or unenforceable provision
shall be deleted.
11.6 No Assignment. Neither Diamond nor ISR shall assign this Agreement
(including without limitation by operation of law such as by merger, change of
control, stock or asset sale or stock swap) or assign, transfer, or sublicense
any right arising hereunder without the prior written consent of the other. Any
assignment permitted hereunder shall be subject to the written consent of the
assignee to all the terms and provisions of this Agreement. This provision shall
not be construed to prevent the assignment of this Agreement or any rights
hereunder to a secured lender
15
<PAGE> 16
as collateral for a loan or to prevent the use by either party of independent
contractors in the ordinary course of business.
11.7 Authority. Each party warrants to the other party that it has the authority
to enter into this Agreement and that all necessary corporate or other approvals
have been or will be obtained.
11.8 Notices. Any notice required or permitted pursuant to this Agreement shall
be in writing delivered by hand, overnight courier, telecopy, facsimile, or
certified or registered mail to the address first set forth above and shall be
effective upon receipt
11.9 Amendment. No alternation, waiver, cancellation, or any other change or
modification in any term or condition of this Agreement, or any agreement
contemplated to be negotiated or reached pursuant to the terms of this
Agreement, shall be valid or binding on either party unless made in writing and
signed by duly authorized representatives of both parties.
11.10 Approvals and Similar Actions. Wherever agreement, approval, acceptance,
consent or similar action by either party hereto is required by any provision of
this Agreement, such action shall not be unreasonably delayed or withheld.
11.11 Force Majeure. In the event of any condition or contingency, existing or
future, which is beyond the reasonable control and without the fault or
negligence of either party ("Event of Force Majeure") which prevents or delays,
or materially increases the cost of, the performance under this Agreement, each
party shall be entitled to an appropriate and reasonable extension of time for
performance and an equitable adjustment of the Purchase Price. Events of Force
Majeure shall include, without limitation, Acts of God, fire, floods, transport
delays, labor disputes, and interference by military or civil authorities. If an
Event of Force Majeure occurs, the party whose performance is affected shall
take reasonable measures to mitigate and minimize the effect of such Event and
to continue with the performance of its obligations under this Agreement.
11.12 Limitation of Liability. Notwithstanding any other provision of this
Agreement including Section 8.3, Diamond shall not be liable to ISR or anyone
claiming through ISR for any special, incidental, indirect or consequential
damages of any kind whatsoever, whether such damages arise from the use,
inability to use, failure of, defects in, the conditions of, delay in delivery
of, or nondelivery of, the Carousel Product or otherwise.
11.13 Entire Agreement. The terms and conditions herein contained constitute the
entire agreement between the parties with respect to the subject matter of this
Agreement and supersede any previous agreements and understandings, whether oral
or written, between the parties hereto with respect to the subject matter
hereof; except as stated in this Agreement, there are no other agreements,
understandings, representations, or promises between the parties with respect to
the subject matter of this Agreements.
11.14 Construction. This Agreement is the result of negotiation between the
parties and their respective counsel. This Agreement will be interpreted fairly
in accordance with its terms and
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<PAGE> 17
conditions and without any strict construction in favor of either party. Any
ambiguity shall not be interpreted against the drafting party.
11.15 Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original, but all of which taken together will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized representatives as of the Effective
Date.
Intelligent Systems for Retail, Inc. Diamond Phoenix Corporation
By: By:
---------------------------- -------------------------------
Name: Name:
---------------------------- -------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Date:
---------------------------- -------------------------------
17
<PAGE> 18
LIST OF EXHIBITS
Exhibit A: Carousel Products and Specifications for each Carousel Products
Exhibit B: Price List for Carousel Products
18
<PAGE> 19
[Diamond Phoenix Logo and Artwork depicting carousel] EXHIBIT A
Specification Sheet
Carousel
Overall Height
RUGGED FRAME CONSTRUCTION
All models are constructed of the same high capacity track and frame
size providing the fastest delivery in the industry.
The strongest frame in the industry. Heavy gauge stainless track is
welded to 4" x 3" x 1/4" thick structural steel angle, with 4" x 2" x 1/4" thick
steel tubing cross members.
No frame modifications are necessary for double or triple stacking.
Structural mezzanines and multiple conveyor lines are easily supported
on top of our carousel frames.
Bottom track is adjustable allowing bins to be raised to any required
level.
LOW MAINTENANCE
Drive units are accessible, easier to maintain, and need no periodic
adjustments.
All components are accessible from outside the machine.
Direct drives allow easy and inexpensive replacements.
Optional automatic lubricators.
QUALITY CONTROLS
The CCS keypad controller offers multiple levels of manual and
electronic control and functions as the network interface for software driven
systems.
CCS controllers use human readable messages for mechanical,
communication, and diagnostic functions.
A footswitch is standard for manual or back-up control.
Control panels can be mounted in any location.
Standard control panels meet NEC and NEMA 1 standards.
NEMA 12 panels are optional.
<PAGE> 20
COMMERCIALLY AVAILABLE COMPONENTS
Commercially available AC drive motors, reducers, controls, and all
electrical components throughout.
SAFETY
Emergency stops in any location including panels, workstations, and
light trees.
Vertical and horizontal photo eyes are available.
Optional safety floor mats.
CE configuration available.
BINS AND SHELVES
Custom size bins and shelves.
Optional bins up to 15 feet tall.
Adjustable shelves down to 2 inch centers with no tools required.
Bin capacity: 600, 1000, 1500, 2000 lbs.
Optional shelf adjustability: 2, 2.5, 3, 3.5, 4, 4.5, 5, 5.5, 6 inches.
Solid, wire, and pass-through bin backs are available.
Each bin is supported from four heavy-duty cast aluminum yokes, load
tested to 3,200 pounds each.
Eight 1.5" diameter x .5" precision ground, lifetime lubricated bearings
with hardened races distribute and carry the load for each bin.
Plated bins and shelves are standard.
SUPERIOR INSTALLATION
All bins are pre-assembled in our factory with sides and backs connected
for easy fold-out installation.
Factory match marked frames are shipped with all chains, yokes, and
drive units in place for accurate, simple, and rapid installation.
Diamond Phoenix
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<PAGE> 21
Diamond Phoenix Corporation
167 River Road
PO Box 1608
Lewiston, ME 04241-1608
Phone: (207) 784-1381
Fax: (207) 786-0271
E-mail: [email protected]
http://www.diamondphoenix.com
REGIONAL OFFICES
Cleveland, OH
Cincinnati, OH
Lynchburg, VA
Los Angeles, CA
Dallas, TX
Charlotte, NC
Hartford, CT
FULLY TESTED
All of our carousels are assembled at our factory and tested under power
with complete links, yokes, load bars, and drive units in place. Although it
takes more time, it assures a quality installation.
DIRECT DRIVE
The motor, reducer, and drive sprocket function as a single connected
drive unit producing the highest efficiency, drive speed, and available torque.
CUSTOM BIN DESIGNS
Because we fabricate our own bins, we can offer many application
specific and unique bin designs including:
Custom wire spacing and configurations
Solid steel construction
Peg board
-3-
<PAGE> 22
Rack style
Cantilever shelf
Hopper and enclosed container
Angle forward shelves for consolidation
Dual face configurations
MODULAR FRAME DESIGN
Modular frame sections use standard sizes so the carousel can be easily
extended or reduced in size. Expansion of the carousel is simple and economical.
STRUCTURAL STEEL CONSTRUCTION
All frame components are produced with structural steel, making it the
most rugged carousel in the industry. Diamond Phoenix carousels are constructed
for the heaviest applications and most severe duty cycles.
FLOOR LOADING
Base plates maintain full contact with the floor. Independent adjusting
top and bottom tracks easily level a carousel without messy grouting or floor
shims, even with floor variations of up to 6".
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<PAGE> 23
[Diamond Phoenix Logo and Artwork depicting Light Tree]
Specification Sheet
Light Tree
Housing with power and network wiring
Vertically adjustable display unit
Velcro
No tools are required to add and configure displays
Daisy chain RS485 cable with phone style connectors
Removable plexiglass cover
8 and 12 digit displays are clear, bright and readable at a distance of
20 feet
SIMPLICITY
Displays are added by simply connecting power and ground to the previous
display, and setting the display address.
A single RS-485 line routes communications from one device to the other
in the Diamond Phoenix carousel pod. This simplifies controls wiring, repair and
system debugging.
The same displays are used for both the vertical light trees and
horizontal sort bars.
CONFIGURABILITY
8 and 12 digit alpha-numeric displays are the same size, fit into the
same housing, and can be used together on the same light tree.
Each light tree can house up to 24 displays supported by 1 power supply.
A second power supply can support up to 48 displays on a single tree.
HIGH VISIBILITY
Bright yellow LED (dot matrix) displays for unmatched clarity.
ADJUSTABILITY
Displays are infinitely adjustable and can be mounted as tightly as 3"
centers.
No tools are required to take apart a light tree or to adjust the
position of the displays.
Housings disassemble with hand turned clips in seconds.
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<PAGE> 24
Additional displays can be connected with phone style snap connectors
(by hand).
NETWORK
Each display is individually addressed from 1 to 255 by non-volatile
rotary switches, easily accessed on the back of the display.
24V AC power and RS-485 communications are daisy chained from display to
display using simple snap-in connectors.
LTS-6 light trees can support communications up to 19,200 baud for quick
LAN response.
Input ports located on each display can be customized to add various
inputs and data updates to the pod network.
MAINTENANCE
If a display fails the other displays and addresses are not affected.
Displays can be bypassed electronically in seconds through our software
configuration screen.
Shipped complete with configuration and testing software.
Diamond Phoenix
Diamond Phoenix Corporation
167 River Road
PO Box 1608
Lewiston, ME 014241-1608
Phone: (207) 784-1381
Fax: (207) 786-0271
E-mail: [email protected]
http://www.diamondphoenix.com
REGIONAL OFFICES
Cleveland, OH
Cincinnati, OH
Lynchburg, VA
Los Angeles, CA
Dallas, TX
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<PAGE> 25
Charlotte, NC
Hartford, CT
-7-
<PAGE> 26
Diamond Phoenix Pricing EXHIBIT B
[*]
- ---------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 5 to Registration Statement No.
333-84703 of Webvan Group, Inc. of our report dated March 5, 1999 (August 5,
1999 as to the second sentence of Note 1 and as to Note 15 and September 21,
1999 as to the first paragraph of Note 7) appearing in the Prospectus, which is
a part of such Registration Statement, and to the reference to us under the
headings "Selected Financial Data" and "Experts" in such Prospectus.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
October 20, 1999
